CSX Transportation, Inc. v. Emjay Environmental Recycling, Ltd.

Filing 32

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
----------------------------------------X
CSX TRANSPORTATION, INC.,
Plaintiff,

MEMORANDUM & ORDER
12-CV-1865(JS)(AKT)

-againstEMJAY ENVIRONMENTAL RECYCLING, LTD.,
Defendant.
----------------------------------------X
APPEARANCES
For Plaintiff:
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
For Defendant:

Brian Lee Gardner, Esq.
Sullivan Gardner, P.C.
7 East 20th Street
New York, NY 10003

SEYBERT, District Judge:
Currently

pending

before

the

Court

is

CSX

Transportation, Inc.’s (“CSX” or “Plaintiff”) motion to dismiss
Defendant

Emjay

“Defendant”)

Environmental

Recycling,

counterclaim.1

For

the

Ltd.’s

(“Emjay”

following

or

reasons,

Plaintiff’s motion is GRANTED.

1

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.
1

BACKGROUND2
Plaintiff
against

Defendant

commenced
and

(Am.

action

an

Amended

filed

thereafter on May 30, 2012.
carrier.

this

Compl.

¶

on

April

16,

Complaint

2012

shortly

Plaintiff is an interstate rail
1.)

Defendant

is

a

corporation

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
2010

and

2011,

Plaintiff

and

Defendant

entered

into

private

price lists and contracts (“Price Lists”) pursuant to 49 U.S.C.
§ 10709.

(Am. Compl. ¶ 14.)

Under these Price Lists, which

Plaintiff

claims

contracts,

were

binding

Defendant

agreed

to

compensate Plaintiff for any freight that Defendant shipped on
Plaintiff’s rail lines.
Between
freight

shipments

(Am. Compl. ¶ 18.)

May

(Am. Compl. ¶¶ 15-16.)
and

(the

July

2011,

“Shipments”)

Plaintiff
at

made

Defendant’s

several
request.

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.
2

(Am. Compl.

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
Order.
2

¶ 21.)
failed

Such payments were not made, however, and Defendant has
or

payment.

refused

pay

even

after

Plaintiff’s

demand

for

19,

2011,

Defendant

executed

and

(Am. Comp. ¶ 25.)
On

delivered

to

a

or

about

July

Promissory

Note

to

Plaintiff,

pursuant

to

which

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,
and

Defendant

Compl. ¶ 22.)

owes

Plaintiff

an

additional

$296,460.

(Am.

In exchange for the loan, Defendant agreed to

make an initial $50,000 down payment to Plaintiff with weekly
installment
(Am.

Compl.

defenses,

payments
¶ 8.)

on

the

balance

Defendant

objections,

also

setoffs,

of

the

agreed:

credits

or

Promissory
(1)

other

to

Note.

waive

claims

any
with

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
3

with

Defendant’s

alleged

breach

of

the

Promissory

Note

failure to pay freight charges under the Price Lists.
17,

2012,

Defendant

counterclaim
Note.

against

(Docket

Entry

filed

an

answer

Plaintiff
8.)

for

and

breach

Defendant

therein
of

alleges

and

On July

asserted

the

a

Promissory

that

Plaintiff

failed to provide the “implied and explicit” level of service
agreed upon.

(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.

(Ans.

¶ 65.)
DISCUSSION
Plaintiff
counterclaim.

now

seeks

to

dismiss

Defendant’s

The Court will first address the applicable legal

standard on a motion to dismiss before addressing Plaintiff’s
motion more specifically.3

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.
4

I.

Standard of Review under Rule 12(b)(6)
In

Court

deciding

applies

a

Rule

12(b)(6)

“plausibility

“[t]wo working principles.”

motions

standard,”

to

which

dismiss,
is

guided

the
by

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).
Court

must

accept

“inapplicable

all

to

allegations

legal

as

First, although the

true,

conclusions;”

this

thus,

“tenet”

is

“[t]hreadbare

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.

Determining whether

a complaint does so is “a context-specific task that requires
the

reviewing

court

common sense.”
II.

to

draw

on

its

judicial

experience

and

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
that

CSX

would

(Ans. ¶ 65.)

provide

a

certain

level

of

service

to

CSX.”

According to Defendant, Plaintiff provided “poor

and inconsistent service” to Defendant, resulting in Defendant’s
loss of revenue and income.
on

to

explicitly

allege

(Ans. ¶ 65.)
that

“[b]y
5

The counterclaim goes

failing

to

provide

the

required

proper

and

consistent

service,

CSX

has

materially

breached the promissory note claimed to have been entered into
with Emjay.”4

(Ans. ¶ 66 (second).)

From

the

outset,

counterclaim are apparent.
the

Promissory

Note

the

deficiencies

6-7.)

contains

Defendant

counterclaim

on

the

Defendant’s

For instance, Plaintiff argues that
a

choice

of

specifying application of Pennsylvania law.
at

in

counters
Promissory

that
Note,

it

law

provision

(Docket Entry 13-1
does

but

not

rather

base
that

the
“the

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
F.

Supp.

2d

344,

370

(S.D.N.Y.

2012)

(Since

Defendant

is

represented by counsel, “the Court has no obligation to construe
[the] Complaint liberally . . .” (internal quotation marks and

4

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.
6

citation

omitted)).

Perhaps

recognizing

that

its

breach

of

contract claim as alleged pursuant to the Promissory Note may
not

succeed,

Defendant

attempts

to

recharacterize

its

claim

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.)

Defendant’s

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
long-standing
amend

their

briefs.”);

precedent
pleadings

O’Brien

v.

in

this

through
Nat’l

circuit

issues

Prop.

that

raised

Analysts

parties
solely

cannot

in

Partners,

their

719

F.

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
of contract.
law,

To state a breach of contract claim under New York

Defendant,

existence

of

an

as

counterclaimant,

agreement,

(2)

must

adequate

allege

“(1)

performance

of

the
the

contract by the [counterclaim plaintiff], (3) breach of contract
by the [counterclaim defendant], and (4) damages.”
7

San Diego

Cnty. Emps. Ret. Ass’n v. Maounis, 749 F. Supp. 2d 104, 129 n.7
(S.D.N.Y.

2010)

(internal

quotation

marks

and

citations

omitted); accord In re Adelphia Commc’ns Corp., No. 02-41729,
2007

WL

2403553,

Similarly,

to

at

state

*4

(Bankr.

S.D.N.Y.

a

breach

of

Aug.

contract

17,

2007).

claim

under

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).
Under

either

state’s

breach

of

contract

law,

there

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
because

Amended

Complaint

did

not

identify

contractual

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
8

Equity Committee must, at a minimum, allege the terms of the
contract and elements of the alleged breach with respect to each
defendant.”).

It

is

not

clear

whether

Defendant

bases

its

counterclaim on the Promissory Note--although this is the only
contract referenced in the counterclaim--or upon the Price Lists
or some verbal contract.
insight

as

to

the

Nor does the counterclaim provide any

“level

of

service”

that

Plaintiff

was

to

supply.
Further, the counterclaim fails to provide Plaintiff
with “fair notice of what the . . . claim is and the grounds
upon which it rests.”
555,

127

S.

Ct.

Bell Atl. Corp. v. Twombly, 550 U.S. 544,

1955,

167

L.

Ed.

2d

quotation marks and citation omitted).
of

“understandings”

between

Plaintiff

929

(2007)

(internal

Defendant’s allegations
and

Defendant

and

that

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)
(vague

allegations

did

not

put

defendants

on

notice

of

the

with

the

actual basis for the claim).
In

fact,

Defendant’s

failure

to

comply

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

of

alternative,

contentions

in

the

9

arguing

that

Defendant’s

counterclaim should be dismissed even if it is considered to be
a claim for promissory estoppel, a claim for set off, or some
other

cause

submitted

a

of

action.

(Docket

supplemental

brief

Entry

in

21.)

support

Plaintiff

of

its

then

motion

to

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
of

1995

(“ICCTA”),

Transportation
claims.

Board

49

U.S.C.

with

§

10101,

exclusive

invests

the

jurisdiction

Surface

over

such

(Docket Entry 25-3.)
Plaintiff’s

confusion

is

understandable,

counterclaim is subject to various interpretations.

as

the

Ultimately,

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

dismiss

GRANTED,

the

counterclaim

is

and

Defendant’s

counterclaim is DISMISSED.
CONCLUSION
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
10

that a valid claim might be stated.”
F.3d

99,

112

(2d

Cir.

2000)

Cuoco v. Mortisugu, 222

(internal

quotation

marks

and

citation omitted); see also FED. R. CIV. P. 15(a)(2) (“The court
should freely give leave [to amend] when justice so requires.”).
Accordingly,

the

Court

grants

Defendant

leave

to

amend

its

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.
SO ORDERED.

Dated:

/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.

March
25 , 2013
Central Islip, NY

11