CSX Transportation, Inc. v. Emjay Environmental Recycling, Ltd.
MEMORANDUM & ORDER granting 13 Motion to Dismiss for Failure to State a Claim. Plaintiff's motion to dismiss the counterclaim is GRANTED, and Defendant's counterclaim is DISMISSED. However, the Second Circuit has stated that "the court should not dismiss without granting leave to amend at least once when a liberal reading of the complaint gives any indication that a valid claim might be stated." Accordingly, the Court grants Defendant leave to amend its counterclaim to address the pleading defects articulated herein. If Defendant wishes to file an amended counterclaim, it must do so on or before April 22, 2013. So Ordered by Judge Joanna Seybert on 3/25/2013. C/ECF (Valle, Christine)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
CSX TRANSPORTATION, INC.,
MEMORANDUM & ORDER
-againstEMJAY ENVIRONMENTAL RECYCLING, LTD.,
Christopher Merrick, Esq.
Keenan Cohen & Howard, P.C.
165 Township Line Road, Suite 2400
Jenkintown, PA 19046
John Joseph Morris, Esq.
Kelly, Rode & Kelly, L.L.P.
330 Old Country Road
Mineola, NY 11501
Brian Lee Gardner, Esq.
Sullivan Gardner, P.C.
7 East 20th Street
New York, NY 10003
SEYBERT, District Judge:
Transportation, Inc.’s (“CSX” or “Plaintiff”) motion to dismiss
Plaintiff’s motion is GRANTED.
Plaintiff also has a pending motion to amend the Second Amended
Complaint (Docket Entry 26), which will be decided by Magistrate
Judge A. Kathleen Tomlinson in a separate Order.
thereafter on May 30, 2012.
Plaintiff is an interstate rail
organized under the laws of the State of New York that gains
revenue by taking material onto its premises.
(Ans. ¶¶ 62, 65.)
The Amended Complaint alleges that, at various points during
price lists and contracts (“Price Lists”) pursuant to 49 U.S.C.
(Am. Compl. ¶ 14.)
Under these Price Lists, which
compensate Plaintiff for any freight that Defendant shipped on
Plaintiff’s rail lines.
(Am. Compl. ¶ 18.)
(Am. Compl. ¶¶ 15-16.)
Each time, Defendant or an affiliated entity
acting on Defendant’s behalf entered electronic bill of lading
data for the Shipments using Plaintiff’s “ShipCSX” application.
(Am. Compl. ¶ 19.)
As such, Plaintiff avers, Defendant assumed
responsibility for making payment to Plaintiff.
The following facts are taken from Plaintiff’s Amended
Complaint, Defendant’s Answer to the Amended Complaint and
Counterclaim, and the documents referenced therein and are
presumed to be true for the purposes of this Memorandum and
Such payments were not made, however, and Defendant has
(Am. Comp. ¶ 25.)
Plaintiff agreed to loan Defendant $334,998 to cover some of the
unpaid freight charges that had accrued between November 2010
and April 2011.
(Am. Compl. ¶¶ 6-7.)
The Promissory Note,
however, did not cover the full amount of the freight charges,
Compl. ¶ 22.)
In exchange for the loan, Defendant agreed to
make an initial $50,000 down payment to Plaintiff with weekly
regard to its debt to Plaintiff under the Promissory Note (Am.
Compl. ¶ 9(i)); (2) to pay the entire balance plus interest by
December 14, 2011 (Am. Compl. ¶ 9(ii)); (3) to pay interest at a
rate of 12% per annum (Am. Compl. ¶ 9(iii)); and (4) to pay
Plaintiff a late charge of 10% for any late installment payment
(Am. Compl. ¶ 9(iv)).
Defendant made the initial down payment but thereafter
failed to make any installment payments.
(Am. Compl. ¶¶ 10-11.)
Plaintiff brings claims for breach of contract in connection
failure to pay freight charges under the Price Lists.
failed to provide the “implied and explicit” level of service
(Ans. ¶ 65.)
More specifically, Defendant has
volume restrictions on the amount of material that can be on its
premises, and Plaintiff’s failure to consistently move material
off the premises directly reduced Defendant’s revenue.
The Court will first address the applicable legal
standard on a motion to dismiss before addressing Plaintiff’s
motion more specifically.3
Plaintiff’s motion to dismiss Defendant’s counterclaim relates
to Plaintiff’s Amended Complaint and Defendant’s Answer thereto.
However, since filing its motion to dismiss, Plaintiff has
interposed a Second Amended Complaint (“SAC”) (Docket Entry 14),
and Defendant has again filed an Answer to the Second Amended
Complaint along with a counterclaim (Docket Entry 16).
Defendant’s counterclaim, as alleged in its Answer to the Second
Amended Complaint, is nearly identical to the counterclaim as
alleged in the Answer to the Amended Complaint. Thus,
technically, Plaintiff’s pending motion to dismiss is moot.
However, the Court will construe the motion as a motion to
dismiss the amended counterclaim.
Standard of Review under Rule 12(b)(6)
“[t]wo working principles.”
Ashcroft v. Iqbal, 556 U.S. 662,
678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009); accord Harris v.
Mills, 572 F.3d 66, 71-72 (2d Cir. 2009).
First, although the
recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.”
accord Harris, 572 F.3d at 72.
Iqbal, 556 U.S. at 678;
Second, only complaints that
state a “plausible claim for relief” can survive a Rule 12(b)(6)
motion to dismiss.
Iqbal, 556 U.S. at 679.
a complaint does so is “a context-specific task that requires
Id.; accord Harris, 572 F.3d at 72.
Plaintiff’s Motion to Dismiss Defendant’s Counterclaim
Defendant’s counterclaim alleges that “[p]art of the
understanding between CSX and Emjay, implied and explicit, was
(Ans. ¶ 65.)
According to Defendant, Plaintiff provided “poor
and inconsistent service” to Defendant, resulting in Defendant’s
loss of revenue and income.
(Ans. ¶ 65.)
The counterclaim goes
breached the promissory note claimed to have been entered into
(Ans. ¶ 66 (second).)
counterclaim are apparent.
For instance, Plaintiff argues that
specifying application of Pennsylvania law.
(Docket Entry 13-1
counterclaim seeks damages regarding the poor service provided
by Plaintiff to Defendant.”
(Docket Entry 17 at 3.)
The language Defendant uses in alleging a counterclaim
clearly specifies that it is based upon the Promissory Note.
See Nat’l Gear & Piston, Inc. v. Cummins Power Sys., L.L.C., 861
represented by counsel, “the Court has no obligation to construe
[the] Complaint liberally . . .” (internal quotation marks and
Defendant’s counterclaim also appears to allege a claim for
breach of the implied covenant of good faith and fair dealing.
However, Defendant makes clear that the counterclaim does not
assert an independent claim for such. (Docket Entry 17 at 3
(“To the extent that the counterclaim mentions in a sentence
that Plaintiff’s poor service was also a breach of the covenant
of good faith and fair dealing in the Promissory Note, this is
in the nature of a defense to the Note, not an independent claim
for damages under the Note.”).) Accordingly, the Court presumes
that the counterclaim asserts only one cause of action and does
not include a cause of action for breach of the implied covenant
of good faith and fair dealing.
contract claim as alleged pursuant to the Promissory Note may
through its opposition briefs.
As Defendant correctly notes, there are at least two
sets of contracts involved in the instant action, the Promissory
Note and the Price Lists.
(Docket Entry 17 at 4.)
opposition implies that the counterclaim relies upon the Price
Lists, not the Promissory Note.
However, Defendant cannot use
its opposition brief to amend its allegation.
See Fadem v. Ford
Motor Co., 352 F. Supp. 2d 501, 516 (S.D.N.Y. 2005) (“It is
Supp. 222, 229 (S.D.N.Y. 1989) (“[I]t is axiomatic that the
Complaint cannot be amended by the briefs in opposition to a
motion to dismiss.”).
Furthermore, whether Pennsylvania law or New York law
applies, Defendant ultimately fails to state a claim for breach
To state a breach of contract claim under New York
contract by the [counterclaim plaintiff], (3) breach of contract
by the [counterclaim defendant], and (4) damages.”
Cnty. Emps. Ret. Ass’n v. Maounis, 749 F. Supp. 2d 104, 129 n.7
omitted); accord In re Adelphia Commc’ns Corp., No. 02-41729,
Pennsylvania law, Defendant must allege “(1) the existence of a
valid and binding contract to which the plaintiff and defendant
were parties; (2) the essential terms of the contract; (3) that
[the counterclaim] plaintiff complied with the contract’s terms;
(4) that the [counterclaim] defendant breached a duty imposed by
the contract; and (5) that damages resulted from the breach.”
Tech. Based Solutions, Inc. v. Elecs. Coll., Inc., 168 F. Supp.
2d 375, 381 (E.D. Pa. 2001).
must be some allegation of the contract upon which the claim is
based and an allegation as to the terms of the contract or how
there was a breach.
See In re Hydrogen, L.L.C., 431 B.R. 337,
358 (Bankr. S.D.N.Y. 2010) (dismissing breach of contract claim
agreements in question); Hart v. Univ of Scranton, 838 F. Supp.
2d 324, 327-28 (M.D. Pa. 2011) (dismissing breach of contract
claim because plaintiff failed to plead the terms of contract or
specific breach of those terms); In re Adelphia Commc’ns Corp.,
2007 WL 2403553, at *5 (“To survive a motion to dismiss, the
Equity Committee must, at a minimum, allege the terms of the
contract and elements of the alleged breach with respect to each
counterclaim on the Promissory Note--although this is the only
contract referenced in the counterclaim--or upon the Price Lists
or some verbal contract.
Nor does the counterclaim provide any
Further, the counterclaim fails to provide Plaintiff
with “fair notice of what the . . . claim is and the grounds
upon which it rests.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544,
quotation marks and citation omitted).
Plaintiff was to provide some amorphous level of service falls
significantly short of providing such notice.
See Sosnoway v.
A. Perri Farms, Inc., 764 F. Supp. 2d 457, 472 (E.D.N.Y. 2011)
actual basis for the claim).
pleading requirements in alleging its counterclaim is obvious
from the parties’ briefs and supplemental briefs in connection
with the counterclaim.
For instance, Plaintiff raises a series
counterclaim should be dismissed even if it is considered to be
a claim for promissory estoppel, a claim for set off, or some
dismiss the counterclaim, arguing that if Defendant intends to
assert a claim for “poor rail car service,” this Court does not
have subject matter jurisdiction because the ICC Termination Act
(Docket Entry 25-3.)
counterclaim is subject to various interpretations.
however, the Court cannot address whether it has subject matter
jurisdiction over the counterclaim or whether the counterclaim
is subject to dismissal for some other reason because it is not
clear what Defendant is claiming.
Thus, Plaintiff’s motion to
counterclaim is DISMISSED.
GRANTED, and Defendant’s counterclaim is DISMISSED.
However, the Second Circuit has stated that “the court
should not dismiss without granting leave to amend at least once
when a liberal reading of the complaint gives any indication
that a valid claim might be stated.”
Cuoco v. Mortisugu, 222
citation omitted); see also FED. R. CIV. P. 15(a)(2) (“The court
should freely give leave [to amend] when justice so requires.”).
counterclaim to address the pleading defects articulated above.
If Defendant wishes to file an amended counterclaim, it must do
so on or before April 22, 2013.
/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
25 , 2013
Central Islip, NY
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