Currier, McCabe & Associates, Inc. v. Public Consulting Group, Inc.
Filing
110
MEMORANDUM-DECISION and ORDER - That CMA's motion for summary judgment (Dkt. No. 91) is DENIED. That CMA's motion to preclude expert testimony (Dkt. No. 91) is DENIED with leave to renew. That PCG's motion for summary judgment (Dkt. No. 93) is GRANTED IN PART AND DENIED IN PART as follows: GRANTED with respect to CMA's unjust enrichment claim; and DENIED in all other respects. That PCG's motion to strike (Dkt. No. 104) is DENIED as moot. That this case is deemed trial ready and a scheduling order shall issue in due course. Signed by Senior Judge Gary L. Sharpe on 10/24/2017. (jel, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
________________________________
CURRIER, MCCABE &
ASSOCIATES, INC. d/b/a
CMA CONSULTING SERVICES,
Plaintiff/
Counterdefendant,
1:13-cv-729
(GLS/DJS)
v.
PUBLIC CONSULTING GROUP, INC.,
Defendant/
Counterclaimant.
________________________________
APPEARANCES:
FOR THE PLAINTIFF/
COUNTERDEFENDANT:
Mills Law Firm
1520 Crescent Road
Suite 100
Clifton Park, NY 12065
FOR THE DEFENDANT/
COUNTERCLAIMANT:
Harris, Wiltshire & Grannis LLP
1919 M Street NW, Eighth Floor
Washington, DC 20036
Gary L. Sharpe
Senior District Judge
OF COUNSEL:
CHRISTOPHER K. MILLS, ESQ.
CHARLES T. KIMMETT, ESQ.
VARUN S. GOEL, ESQ.
MARK D. DAVIS, ESQ.
TRACI D. BISWESE, ESQ.
WILLIAM B. SULLIVAN, ESQ.
MEMORANDUM-DECISION AND ORDER
I. Introduction
Plaintiff/counterdefendant Currier, McCabe & Associates, Inc. (CMA)
commenced this diversity action against defendant/counterclaimant Public
Consulting Group, Inc. (PCG) alleging breach of contract and other related
causes of action arising from a business relationship gone awry. (See
generally Compl., Dkt. No. 1.) After the majority of CMA’s claims survived
a motion to dismiss, PCG filed a counterclaim alleging breach of contract
and other related causes of action against CMA. (Dkt. No. 19 at 11-15.)
Pending is CMA’s motion for summary judgment, (Dkt. No. 91), and
PCG’s motion for summary judgment, (Dkt. No. 93). For the following
reasons, CMA’s motion is denied and PCG’s motion is granted in part and
denied in part.
II. Background1
A.
Facts
1.
The Parties
CMA is a provider of information technology services that specializes
1
Unless otherwise noted, the background facts are not in dispute.
2
in the fields of public health and human services. (Pl.’s Statement of
Material Facts (SMF) ¶ 2, Dkt. No. 91, Attach. 2.) CMA has developed
systems integration2 projects for several states and state agencies,
including the New York State Department of Health (DOH). (Id. ¶¶ 9, 11.)
It is certified by the State of New York as a woman-owned business entity
(WBE). (Id. ¶ 1.)
PCG provides management consulting services to state, county, and
municipal governments. (Def.’s Statement of Material Facts (SMF) ¶ 2,
Dkt. No. 93, Attach. 3.)
2.
The New York Early Intervention System
One of the projects that CMA partnered with DOH on, the New York
Early Intervention System (NYEIS), was a centralized management system
that electronically managed DOH’s Early Intervention Program (EIP). (Pl.’s
SMF at ¶¶ 15-16.) DOH’s EIP provides a range of therapeutic and
2
The immediate controversy is centered around systems integration. Systems
integration is a multi-staged process that consists of “designing, developing, testing[,] and
implementing disparate computer systems, hardware[,] and software applications into a single,
coordinated system that supports business processes, information flows, reporting[,] and data
analytics.” (Pl.’s SMF ¶¶ 4, 6.) Such projects generally consist of many components,
including a repository of data received from an operational system known as a “data
warehouse.” (Id. ¶ 7.) Because of their complexity, systems integration projects can cost
upwards of tens of millions of dollars and require years of development and implementation by
highly-skilled experts. (Id. ¶ 5.)
3
supportive services for disabled children and their families. (Id. ¶ 16) In
turn, its underlying integration system supports delivery of essential
services to over 70,000 people annually by coordinating financial,
administration, and management services at the local and state level. (Id.
¶¶ 16-17.)
State agencies often solicit professional expertise in the otherwise
foreign fields of systems integration by promulgating a request for
proposals (RFP). (Def.’s SMF ¶¶ 4, 6.) A prospective contractor’s
response to an RFP is a gateway to securing a state contract. (Id. ¶ 80.)
3.
State Fiscal Agent Request For Proposals
In August 2012, PCG contacted CMA to discuss partnering on an
RFP that DOH would soon release for a new EIP project.3 (Pl.’s SMF
¶ 36.) The RFP sought a state fiscal agent (SFA) to perform the
mechanics of processing payment claims for EIP services. (Def.’s SMF
¶ 4.) The RFP made clear that whoever was awarded the ultimate SFA
contract would be expected to capitalize on DOH’s prior investment in
3
Prior to the immediate controversy, PCG had teamed up with CMA to pursue a
contract with the New York State Department of Education, in which PCG would serve as the
general contractor and CMA as the subcontractor. (Def.’s SMF ¶ 68.) However, for reasons
that remain disputed, CMA eventually withdrew from this prior arrangement. (Id. ¶ 69.)
4
NYEIS. (Id.) Specifically, DOH expected that non-fiscal data already in
NYEIS would be used by the prospective SFA for fiscal processing on the
new project. (Def.’s SMF ¶ 5.) Thus, the RFP made it clear to the parties
that the NYEIS data warehouse was an integral component of the SFA
project. (Id.) The RFP also included a goal of devoting 20% of the SFA’s
full contract value to minority-and-women owned-business enterprises
(MWBE). (Id. ¶ 79; Pl.’s SMF ¶ 45.)
Since there was an incredibly aggressive time frame between the
RFP release and its legislatively-mandated start date, prospective bidders
had to work expeditiously to prepare proposals—especially given the
magnitude of the project. (Pl.’s SMF ¶ 41; Def.’s SMF ¶ 7.) As such, PCG
was particularly interested in leveraging CMA’s data warehouse and call
centers that were already structured for NYEIS. (Def.’s SMF ¶¶ 83, 88.)
On its end, CMA expected that the NYEIS data warehouse and call center
would be part of the SFA solution. (Id. ¶ 86; Pl.’s SMF ¶ 95.) After all,
both parties knew that developing a data warehouse from scratch would be
much more expensive than leveraging CMA’s existing NYEIS data
5
warehouse for use in the SFA project.4 (Def.’s SMF ¶ 93.)
From the onset, PCG informed CMA that it was capable of doing all
of the work on the SFA project itself and “do[es] not typically partner with
other companies unless [it is] forced by the regulations associated with the
project[.]” (Pl.’s SMF ¶¶ 43, 46.) However, PCG identified CMA as a
logical fit to the proposal’s MWBE requirement.5 (Id. ¶ 46.) Noncompliance with the SFA’s MWBE requirement would have jeopardized
PCG’s ability to procure the project. (Id. ¶ 54.)
During the bidding process, there was a blackout in place between
DOH and bidders, except for an official question and answer platform.
(Def.’s SMF ¶¶ 8-9.) DOH incorporated their responses to questions from
potential bidders into the RFP. (Dkt. No. 91, Attach. 55.) One of the
questions asked whether the current NYEIS vendor—CMA—would be
precluded from bidding on the RFP as a subcontractor or if there would be
other limitations placed on such vendor due to its current role on the
4
Both parties dispute what type of data was critical to the SFA project and which
specific aspects of the NYEIS project were going to be used as leverage on the SFA
project. (Def.’s SMF ¶ 88; Dkt. No. 102, Attach. 1 ¶ 88; Dkt. No. 93. Attach 9 at 79, 96, 268.)
5
The MBWE goal was divided into two requirements: 10% WBE and 10% minorityowned business enterprise (MBE). (Def.’s SMF ¶ 79.) Because CMA was not a MBE, PCG
expected that CMA would fulfill 10% of the WBE requirement and use another supplier to fulfill
the requisite MBE percentage. (Id. ¶ 77; Dkt. No. 102, Attach. 1 at ¶ 77.)
6
project. (Id. at 5.) DOH stated that CMA “will not be precluded and there
will be no limitations related to [its] involvement.” (Id.)
4.
February 2013 Teleconference
On February 8, 2013, after the RFP release, CMA and PCG held a
teleconference. (Def.’s SMF ¶ 29.) During the call, “CMA vouched to PCG
that it had the ability to handle certain areas of NYEIS work relevant to the
SFA project.” (Id. ¶ 34.) Both parties knew that the ability to use the
NYEIS data warehouse for the SFA project was a “core assumption” of the
proposal. (Id. ¶ 238.) However, despite being aware that the NYEIS
project was experiencing issues, CMA failed to share those issues with
PCG. (Id. ¶¶ 52-53, 205-09.) In fact, CMA knew that the NYEIS system
faced so many functionality problems that counties were pressuring DOH
to allow them to suspend entry of children into NYEIS altogether. (Id.
¶¶ 167-69.) Additionally, DOH relayed its concerns with the lack of
functionality of the NYEIS data warehouses in various meetings and
communications with CMA before and after the RFP’s release.6 (Id.
¶¶ 155,178-79, 214, 215, 218, 226.) Instead of addressing these concerns
6
CMA maintains that it is not to blame for the NYEIS problems but instead was tasked
with fixing the issues it inherited from another company through bankruptcy proceedings. (Dkt.
No. 102, Attach. 1 ¶ 197.)
7
with PCG, CMA officials pointed out its success in developing data
warehouses. (Def.’s SMF ¶ 40.)
The parties dispute whether CMA made any specific assurances to
PCG regarding the use and functionality of the NYEIS data warehouses
and call centers. (Def.’s SMF ¶ 53; Dkt. No. 102, Attach. 1 at ¶ 53.)
However, it is clear that PCG knew about the problems affecting the NYEIS
data warehouses and call centers; specifically, prior to the February
teleconference, PCG officials reviewed the ongoing NYEIS issues that
were cataloged in release notes. (Pl.’s SMF ¶ 76; Def.’s SMF ¶ 41.) PCG
was also aware of “[NYEIS’] delays in implementation and cost overrun.”
(Dkt. 102, Attach. 29.)
5.
Teaming and Confidentiality Agreement
After the teleconference, CMA and PCG entered a Teaming and
Confidentiality Agreement (TCA), to combine their specialities and respond
to the RFP. (Dkt. No. 91, Attach. 25 (TCA).) The TCA divvied up duties in
pursuit of securing the SFA contract: PCG was primarily “responsible for
the coordination and administration of the [p]roposal effort and for the
physical production and submission of the [p]roposal and for all other
duties in connection with the [p]roposal,” (TCA § 2(a)), while CMA’s
8
primary duty was to “provide such assistance in the preparation and
support of the [p]roposal as may be reasonably requested by PCG,
including, but not limited to, providing price information, resumes, company
background, personnel experience relevant to the RFP, and assistance in
oral presentations,” (Id. § 2(b)). The TCA also placed a duty on each
party to “keep the other party informed concerning all significant aspects of
proposal preparation, submission, and negotiations.” (Id. § 2(c).) If DOH
accepted the proposal and if CMA met subsequent conditions, PCG was to
grant CMA the subcontract on the SFA contract. (Id. § 3(a).)
The TCA guaranteed CMA a subcontract if (1) DOH awarded a
contract to PCG and (2) CMA met “all necessary requirements for a
subcontract.” (Id.) The TCA further specified these necessary
requirements as “including but not limited to satisfying PCG’s standard
requirements for subcontractors and obtaining any necessary approval by
the [p]rospective [c]lient.” (Id.) The TCA required PCG to “exercise
commercially reasonable efforts to secure CMA as a subcontractor,
consistent with the [p]roposal.” (Id.)
After entering the TCA, CMA provided PCG information related to
CMA’s experience developing data warehouses and call centers. (Def.’s
9
SMF ¶ 44.) CMA again touted its success in developing such
infrastructure and did not reference any functionality issues with the NYEIS
data warehouse. (Id. ¶¶ 44-47, 52.) Additionally, CMA revised draft
proposal sections related to the data warehouse and call center and
responded to PCG’s information requests. (Id. ¶¶ 85, 87, 91.) CMA
provided manpower and cost estimates that it deemed necessary to get
the SFA system up and running. (Id. ¶ 107; Dkt. No. 102, Attach. 1 ¶ 85.)
Specifically, CMA provided “a cost worksheet, a data warehouse write-up,
and a call center ticket write-up.”7 (Def.’s SMF ¶ 85.)
6.
The Proposal
PCG included the content it received from CMA in the final proposal
to DOH. (Id. ¶¶ 91, 108.) In the proposal, PCG referenced CMA’s ability
to provide “a call center solution on Day 1 of the” SFA project using the
NYEIS call center, CMA’s “successful user support systems for NYEIS,”
and CMA’s experience in “successfully manag[ing] the transformation of
the state’s data warehouse.” (Id. ¶ 48.) Throughout the proposal, PCG
7
The parties dispute whether these figures were based on a fully-functioning NYEIS
data warehouse. (Def.’s SMF ¶ 85; Dkt. No. 102, Attach. 1 ¶ 85.)
10
clearly expressed its intentions to use CMA as the project’s subcontractor.8
(Dkt. No. 93, Attach. 9 at 3, 7-8, 71, 79-80, 268, 377-78.)
After careful review, DOH picked PCG’s proposal to fulfill the SFA
project’s requirements. (Def.’s SMF ¶ 111.)
7.
PCG and DOH Kickoff Meeting
In April 2013, DOH and PCG officials held a kickoff meeting to
discuss next steps. (Pl.’s SMF ¶ 119.) Although CMA was absent from
this meeting, its reputation was challenged by at least one high-ranking
DOH official. (Def.’s SMF ¶¶ 111-14.) Specifically, Bradley Hutton, the
director of the Center for Community Health who supervised the NYEIS
and SFA projects, shared his view that CMA’s former work was less than
satisfactory. (Id. ¶¶ 11, 116-21.) His negative comments addressed both
the NYEIS system and its systems integrator, CMA. (Id.)
Although DOH never outright expressed its disapproval with PCG
using CMA as a subcontractor—even when requested to do so in writing by
PCG—it certainly worked to envision an SFA contract without CMA. (Id.
¶ 134; Pl.’s SMF ¶¶ 135-36.) Most notably, PCG and DOH worked
8
In fact, PCG referenced CMA no less than sixty times throughout the proposal.
(Def.’s SMF ¶ 110.)
11
together—without CMA—to waive the RFP’s MWBE requirement. (Def.’s
SMF ¶¶ 130-32.) Ultimately, DOH reduced the requirement to 5%. (Id.
¶ 132.) Additionally, DOH reformulated the RFP so that an unrelated thirdparty would provide interim SFA services to meet the mandatory start date.
(Id. ¶ 138.)
In the end, PCG found a third-party vendor to meet the reduced
MBWE requirement and declined to give CMA the SFA subcontract. (Id.
¶ 132; Pl.’s SMF ¶ 143; Dkt. No. 109, Attach. 1 ¶ 132.)
B.
Procedural History
CMA commenced this diversity action against PCG alleging breach of
contract, fraudulent inducement, breach of the implied covenant of good
faith and fair dealing, and unjust enrichment and seeking not less than $1.2
million in damages. (Dkt. No. 1, Compl., ¶¶ 12-34.) Subsequently, the
court dismissed CMA’s fraudulent inducement claim. (Dkt. No. 17.)
Thereafter, PCG filed an answer and counterclaim against CMA
alleging fraudulent inducement, breach of contract, and breach of the
implied covenant of good faith and fair dealing. (Dkt. No. 19.)
Now pending before the court are both parties’ motions for summary
judgment. (Dkt. No. 91; Dkt. No. 93.)
12
III. Standard of Review
The standard of review pursuant to Rule 56 of the Federal Rules of
Civil Procedure is well established and will not be repeated here. For a
full discussion of the standard, the court refers the parties to its decision in
Wagner v. Swarts, 827 F. Supp. 2d 85, 92 (N.D.N.Y. 2011), aff’d sub nom.
Wagner v. Sprague, 489 F. App’x 500 (2d Cir. 2012).
IV. Discussion
A.
Breach of Contract
The elements of a claim for breach of contract under Massachusetts
law9 are: “(1) [a]n agreement was made between the plaintiff[] and the
defendant supported by a valid consideration; (2) the plaintiff[] ha[s] been
ready, willing, and able to perform; (3) the defendant’s breach has
prevented [the plaintiff] from performing; and (4) the plaintiff[] ha[s]
suffered damages.” Gregory v. World Sav. Bank, FSB, Civil Action No.
11-11600, 2012 WL 3686633, at *2 (D. Mass. Aug. 22, 2012) (quoting
Singarella v. City of Boston, 173 N.E.2d 290, 291 (Mass. 1961)).
1.
Existence of an Enforceable Agreement
9
The TCA expressly provides that it “is governed by the laws of the Commonwealth of
Massachusetts.” (TCA § 11.)
13
The parties disagree over whether the TCA is an enforceable
contract. (Dkt. No. 91, Attach. 3 at 1; Dkt. No. 93, Attach. 1 at 5.) As
explained below, the TCA is an enforceable contract.
Under Massachusetts law, “to create an enforceable contract, there
must be agreement between the parties on the material terms of that
contract, and the parties must have a present intention to be bound by
that agreement.” Situation Mgmt. Sys., Inc. v. Malouf, Inc., 724 N.E.2d
699, 703 (Mass. 2000). “It is not required that all terms of the agreement
be precisely specified, and the presence of undefined or unspecified terms
will not necessarily preclude the formation of a binding contract.” Id.
Although “the failure to reduce uncertainties to definite terms is fatal,
particularly where parties have not yet formalized their negotiations or
have left essential terms completely open,” Lafayette Place Associates v.
Boston Redevelopment Authority, 694 N.E.2d 820, 825-26 (Mass. 1998),
cert. denied, 525 U.S. 1177 (1999), “a contract is not necessarily
unenforceable because the parties agree that the details of certain of its
terms shall be left to be fixed at a future time or by the happening of later
events.” George W. Wilcox, Inc. v. Shell E. Petroleum Prods., Inc., 186
N.E. 562, 565 (Mass. 1933).
14
PCG’s argument, that “the parties did not intend the TCA to serve as
their subcontract,” misses the mark. (Dkt. No. 93, Attach. 1 at 8.) Just
because the TCA was not the subcontract, does not mean that it was not
a contract.10 The TCA was supported by valid consideration in the form of
pre-proposal submission duties outlined in TCA § 2 and post-proposal
submission duties outlined in TCA § 3 and attachment A. The parties
progressed beyond the stage of imperfect negotiations when they agreed
on material terms and demonstrated an intention to be bound by them.
See Situation Mgmt. Sys., Inc., 724 N.E. 2d at 703.
Although the court agrees with PCG that the parties have not
“agreed to or contemplated binding arbitration, appraisals, options, or
other automatic or third-party procedures [to further detail the
subcontract’s terms],” the court does not agree that the TCA provided only
for subsequent negotiations. (Dkt. No. 103 at 2.) On the contrary, the
TCA specified adequate formulae and procedures for which a subcontract
would be meted out in the future. See Lafayette Place Assocs., 694
10
Furthermore, PCG’s argument that its actions are justified based on a prior course of
dealing with CMA, specifically where CMA refused to enter a previous subcontract for a
different project after agreeing on similar terms as those in the TCA, is unconvincing. (Dkt.
No. 103 at 3.) CMA’s prior conduct or legal opinion regarding an earlier, unrelated agreement
is not indicative of the validity of the current agreement before the court.
15
N.E.2d at 826-27. In particular, the TCA required “any resulting
subcontract” to include six specified provisions substantially the same as
those in the TCA and “specify a minimum CMA project participation rate of
twenty percent (20%) of the total contract value.” (TCA § 3(b),(c).)
Moreover, the TCA set out a “proposed scope of work,” which, although
the parties agreed “to further detail . . . during the preparation of the
proposal,” included six specific services CMA was to provide. (Id. at 6.)
Even more, the TCA erected sufficient goal posts by specifically
referencing the “services described in the RFP.” (Id.) These mutual
obligations, the procedures identified for determining any remaining terms
and conditions of the subcontract, and the specification of the work to be
performed collectively demonstrate that the parties agreed to essential
terms and intended to be bound by them; thus, the TCA is an enforceable
contract.11 See Lafayette Place Assocs., 694 N.E.2d at 826-27.
2.
Alleged Breaches of the TCA
CMA contends that PCG breached the TCA by failing to award it the
11
The court is mindful of the provision that states, “PCG cannot make any guarantee or
give any assurance that a subcontract will be entered into between PCG and CMA.” (TCA
§ 3(a).) However, the very next sentence of the TCA goes on to state that, if certain conditions
are met, “PCG will enter into a subcontract with CMA.” (Id. (emphasis added).)
16
subcontract. (Dkt. No. 91, Attach. 3 at 8.) Contrastingly, PCG contends
that it was excused from awarding CMA the SFA subcontract because
CMA breached first by not sharing complete and accurate information
regarding its capabilities of maintaining data warehouses and call centers.
(Dkt. No. 93, Attach. 1 at 29-30; Dkt. No. 103 at 4-5.) Additionally, PCG
not only alleges that CMA’s problematic history on the NYEIS project
prevented the conditions precedent from occurring, (Dkt. No. 93, Attach. 1
at 10-21), but also that it prevented CMA from performing and thus
prevailing on its breach of contract claim, (Dkt. No. 103 at 5). For the
foregoing reasons, genuine issues of material fact exist as to both parties’
breach of contract claims.
a.
PCG’s Breach of Contract Claim
TCA § 2(b) required CMA to “exercise commercially reasonable
efforts to provide such assistance in the preparation and support of the
[p]roposal as may be reasonably requested by PCG.” (TCA § 2(b)
(emphasis added).) Additionally, under TCA § 2(c), CMA had to “keep
[PCG] informed concerning all significant aspects of proposal
preparation.” (Id. § 2(c).)
The plain meaning of TCA § 2(b) is that there must first be a request
17
from PCG to trigger CMA’s obligation. See Balles v. Babcock Power Inc.,
70 N.E.3d 905, 911 (Mass. 2017). The record indicates that CMA
complied with all of PCG’s pre-proposal requests, (Dkt. No. 102, Attach. 1
¶ 85; Def.’s SMF ¶¶ 85, 87, 91, 107), and PCG fails to raise the existence
of a genuine dispute over whether CMA’s provided estimates were
inaccurate.12 (Dkt. No. 93, Attach. 1 at 29.)
However, it is disputed whether CMA’s failure to address the NYEIS
problems in its discussions with PCG was a breach of TCA § 2(c). PCG
claims that CMA breached TCA § 2(c) by representing that CMA had a
“very strong” relationship with DOH and for failing to inform PCG that the
NYEIS data warehouse and call centers continued to experience
problems. (Dkt. No. 103 at 4-5; Def.’s SMF ¶¶ 33, 38-43.) CMA counters
that it made no misrepresentations but rather chose to focus on its strong
relationship with DOH as a whole—including other more successful DOH
projects—instead of specifically with reference to NYEIS. (Dkt. No. 102,
Attach. 1 ¶ 33.) CMA further contends it never stated that the NYEIS data
12
Specifically, PCG fails to present sufficient evidence to controvert CMA’s assertion
that the figure CMA provided PCG for inclusion in the proposal was an accurate estimate of
the work necessary to deliver the SFA data warehouse—despite any alleged issues with
NYEIS. (Def.’s SMF ¶¶ 85, 107; Dkt. No. 102, Attach. 1 ¶ 85; Dkt. No. 109, Attach. 1 ¶ 85.)
18
warehouse and call center were in use or without issue, or that DOH was
satisfied with all aspects of their relationship. (Id. ¶ 43.)
Despite the fact that PCG was informed about the problems with the
NYEIS project, (Pl.’s SMF ¶¶ 41, 76; Dkt. No. 102, Attach. 29), whether
any statements made by CMA during the February teleconference
reasonably led PCG to believe that all the issues with the NYEIS project
were solved is in dispute, (Def.’s SMF ¶ 53; Dkt. No. 102, Attach. 1 ¶ 53).
Given these disputed factual issues, neither party has met its burden
to obtain summary judgment as to PCG’s breach of contract claim.
b.
CMA’s Breach of Contract Claim
TCA § 3(a) provided that PCG would enter into a subcontract with
CMA “if CMA can meet all necessary requirements for a subcontract,
including but not limited to satisfying PCG’s standard requirements for
subcontractors and obtaining any necessary approval by [DOH].”13 (TCA
§ 3(a).) CMA claims that DOH approval was unnecessary and PCG does
not have “standard requirements for subcontractors.” (Dkt. No. 91, Attach.
3 at 4.) PCG argues that neither of the specified condition precedents
13
An additional condition precedent—that DOH award the SFA contract to PCG—is not
discussed because the parties agree that the condition was met. (Pl.’s SMF ¶ 118; Def.’s SMF
¶ 24.)
19
were satisfied and, in any event, CMA’s “performance deficiencies” did not
satisfy other necessary requirements not specifically listed in the TCA.
(Dkt. No. 93, Attach. 1 at 16-20.)
(i)
DOH Approval
The first issue is whether DOH’s expressed concerns about CMA’s
proposed role on the SFA project meant that CMA did not have its
approval or whether DOH considered CMA an approved and qualified
subcontractor even in the face of its misgivings. (Dkt. No. 93, Attach. 1 at
17-18; Dkt. No. 91, Attach. 3 at 6.)
“If a contract . . . is unambiguous, its interpretation is a question of
law that is appropriate for a judge to decide on summary judgment.”
Seaco Ins. Co. v. Barbosa, 761 N.E.2d 946, 951 (Mass. 2002). When a
contract’s language is clear, it alone determines the contract’s meaning
and must be construed according to its plain meaning. See Balles, 70
N.E.3d at 911. “Justice, common sense and the probable intention of the
parties are guides to construction of a written instrument.” Stop & Shop,
Inc. v. Ganem, 200 N.E.2d 248, 251 (Mass. 1964). Additionally, the court
must “construe [the] contract as a whole, in a reasonable and practical
way, consistent with its language, background, and purpose.” MCI
20
WorldCom Commc’ns, Inc. v. Dep’t of Telecomms. & Energy, 810 N.E.2d
802, 810 (Mass. 2004).
The meaning of the language “obtaining any necessary approval by
the [p]rospective [c]lient” is unambiguous. (TCA § 3(a).) Therefore, the
court construes that language according to its plain meaning. See Balles,
70 N.E.3d at 911. It is clear that the prospective client was DOH.
“Necessary” means “absolutely needed,” see Necessary,
Merriam–Webster’s Collegiate Dictionary (10th ed.1997), and “approval”
means the act of giving official sanction, see Approval,
Merriam–Webster’s Collegiate Dictionary. The context of the TCA as a
whole also reveals that the contract was designed to insure that the
parties worked together to submit a proposal and, if selected, lay out the
necessary structure for CMA to participate in the project to a tune of at
least 20% of the contract value. (See generally TCA.) DOH’s acceptance
of the SFA proposal was the only “official sanction” that was “absolutely
necessary” to effectuate the intentions of the parties. The parties’
proposal clearly identified CMA as the anticipated subcontractor and
explained the anticipated role that CMA would play if DOH awarded PCG
the project. (Dkt. No. 93, Attach. 9 at 3, 7-8, 71, 79-80, 268, 377-78.)
21
After careful review, DOH chose their proposal. (Def.’s SMF ¶ 111.)
Despite the views expressed by one DOH official, the state agency
affirmatively refused to issue any official statement that it did not sanction
CMA as a subcontractor. (Id. ¶ 134; Pl.’s SMF ¶¶ 135-36.) In fact, DOH
had previously issued an official opinion that CMA would not be limited
from subcontracting on the SFA project. (Pl.’s SMF ¶ 137.)
As such, no reasonable juror could find that CMA did not receive the
“necessary approval” under TCA § 3(a).
(ii)
PCG’s Standard Requirements for Subcontractors
Whether CMA satisfied “PCG’s standard requirements for
subcontractors” under TCA § 3(a) is not as clear.
PCG argues that “[g]iven what []DOH told PCG about CMA’s lack of
reliability, deficient performance, and inability to fix issues, CMA failed to
meet PCG’s standard requirements for contractors.” (Dkt. No. 103 at 9.)
PCG contends that these standard requirements are laid out in a
subcontractor due diligence protocol, and—although not referenced
specifically in the TCA—CMA understood them from the parties’ previous
course of dealings. (Id. at 7.) On its end, CMA argues that PCG’s
22
“standard requirements for contractors” do not exist because there is no
document in existence entitled “standard requirements for
subcontractors.” (Dkt. No. 91, Attach. 3 at 4.) CMA buttresses this stance
by pointing out PCG’s varying definitions of such standards and arguing
that the subcontractor due diligence protocol is a questionnaire incapable
of defining PCG’s standard requirements. (Id.; Dkt. No. 102, Attach. 38 at
17-18.) CMA also argues that this term was never defined during the TCA
negotiations, and thus “the term has no meaning for purposes of this
litigation[.]” (Dkt. No. 91, Attach. 3 at 5.)
Under Massachusetts law, where a contract “has terms that are
ambiguous, uncertain, or equivocal in meaning, the intent of the parties is
a question of fact to be determined at trial.” Seaco Ins. Co, 761 N.E.2d at
951. “Contractual language is ambiguous when it can support a
reasonable difference of opinion as to the meaning of the words employed
and the obligations undertaken.” Balles, 70 N.E.3d at 911 (internal
quotations marks and citation omitted). If a contract’s terms are
ambiguous on their face, a court may consider extrinsic evidence to
extract their meaning. See EventMonitor, Inc. v. Leness, 44 N.E.3d 848,
856 (Mass. 2016). However, if a genuine dispute of material fact remains,
23
the contract’s meaning must be “discerned by the factfinder from the
circumstances surrounding the ambiguity and from such reasonable
inferences as may be available.” Lanier Prof’l Servs., Inc. v. Ricci, 192
F.3d 1, 4 (1st Cir. 1999) (applying Mass. law).
As indicated by both of the parties’ arguments, the “standard
requirements” provision presents a reasonable difference of opinion as to
its meaning.14 See Balles, 70 N.E.3d at 911. PCG’s director of business
strategy, despite being aware of the subcontractor due diligence protocol,
could not even clearly identify what these standard requirements were.
(Dkt. No. 102, Attach. 38 at 18; Dkt. No. 109 at 3, n.17.) Further, any
reference to PCG’s subcontractor due diligence protocol is notably absent
from the TCA. Upon examination of the subcontractor due diligence
protocol, it appears merely to provide guidance to PCG employees when
dealing with potential subcontractors; however, it hardly identifies PCG’s
14
CMA argues that any ambiguous language should be construed against PCG. (Dkt.
No. 108 at 10.) Although uncertainties in an instrument may be construed against the drafter,
such a construction is “a default rule that arguably has more force where the parties differ in
sophistication or where standard forms are used.” Nat’l Tax Inst., Inc. v. Topnotch at Stowe
Resort and Spa, 388 F.3d 15, 18 (1st Cir. 2004) (applying Mass. law); see Boston Ins. Co. v.
Fawcett, 258 N.E.2d 771, 776 (Mass. 1970) (refusing to construe a contract against its drafter
where parties negotiated contractual terms as equals). Here, the record demonstrates that
both parties stand on equal footing in terms of business sophistication and dealt with one
another at arm’s length. Both parties agree that drafting the TCA was a joint endeavor.
(Def.’s SMF ¶ 70.) Therefore, the court declines to construe ambiguous language against
either party.
24
standard requirements with reasonable clarity. (Dkt. No. 93, Attach. 31.)
In particular, the document does not elaborate on what would satisfy
PCG’s standard requirements because there are no answers to the
questions posed or other point scale to aid in determining this standard or
whether it was met. (Id.) Moreover, PCG does not present indisputable
evidence that the subcontractor due diligence protocol was even
completed for CMA. (Dkt. No. 102, Attach. 38 at 18.)
Since the extrinsic evidenced presented by PCG does not resolve
the ambiguity and CMA fails to present a plausible definition of its own, it
is the role of the fact finder to determine what PCG’s “standard
requirements for contractors” actually meant and whether this condition
precedent was satisfied.
(iii)
“Including but not limited to”
On top of its other contentions, PCG argues that—even if the court
determines that the specified conditions precedent were satisfied—PCG
did not breach the TCA because CMA failed to meet other, unlisted
requirements. (Dkt. No. 103 at 11.) It contends that “[t]he examples in
[s]ection 3(a) of the TCA illustrate that PCG had no obligation to negotiate
a subcontract if CMA performed inadequately for, and lacked the
25
confidence of, []DOH[.]” (Id.) CMA counters that the “including but not
limited to” language is ambiguous, and PCG’s interpretation is
unreasonable, because “[a] clause such as the one suggested by PCG
would give PCG an unfettered right to cancel the TCA . . . based on its
own whims and predilections.” (Dkt. No. 102, Attach. 38 at 20-21.)
To be sure, the contractual phrase “including but not limited to”
renders the listed categories illustrative but not exhaustive. See Blais v.
Hartford Fire Ins. Co., Civil Action No. 08-40221-FDS, 2011 WL 1303135,
at *10 (D. Mass. Mar. 30, 2011) (applying Mass. law). It would be
irrational to conclude that the definition of “all necessary requirements”
was intended to cover anything that PCG claimed it required down the
road, but it would contradict the express terms of the TCA to hold that it
covered only the specific types of requirements given as examples. See
id. Thus, the definition of “necessary requirements” must be “somewhere
between the narrowest possible interpretation . . . and the broadest
possible interpretation.” Id. However, there is nothing in the language of
the TCA that adequately describes where that definition lies. As such, the
phrase “including but not limited to” is also ambiguous, and the fact finder
will have to determine its meaning.
26
For the aforementioned reasons, all motions for summary judgment
submitted in regards to an alleged breach of contract are denied.
B.
Implied Covenant of Good Faith and Fair Dealing
Next, both parties argue that the other breached the implied
covenant of good faith and fair dealing.
It is bedrock Massachusetts law that every contract is subject to an
implied covenant of good faith and fair dealing. See Anthony’s Pier Four,
Inc. v. HBC Assocs., 583 N.E.2d 806, 821 (Mass. 1991). “The essential
inquiry is whether the challenged conduct conformed to the parties’
reasonable understanding of performance obligations, as reflected in the
overall spirit of the bargain, not whether the defendant abided by the letter
of the contract in the course of performance.” Speakman v. Allmerica Fin.
Life Ins., 367 F. Supp. 2d 122, 132 (D. Mass. 2005) (applying Mass. law).
A breach of this covenant thus requires a lack of good faith, which can be
inferred based on evidence that a party’s actions are unreasonable under
the circumstances. See Nile v. Nile, 734 N.E.2d 1153, 1160 (Mass.
2000). Where contract terms grant one party discretion, the implied
covenant limits the exercise of that discretion. See McAdams v. Mass.
Mut. Life Ins. Co., 391 F.3d 287, 301 (1st Cir. 2004) (applying Mass. law).
27
1.
CMA’s Claim15
CMA argues that PCG demonstrated a lack of good faith when it
“‘pounced’ at the opportunity to exclude CMA as soon as it learned that
the [MWBE] percentage was a goal and not a requirement[.]” (Dkt. No.
91, Attach. 3 at 9.) PCG responds that it could not have violated the
reasonable expectations of CMA by not entering a subcontract with it
because the TCA’s conditions precedent were not satisfied. (Dkt. No. 103
at 13; Dkt. No. 93, Attach. 1 at 16-20.) As such, PCG opposes CMA’s
motion for summary judgment. (Dkt. No. 103 at 26-29.) However,
although PCG noticed its motion as seeking summary judgment on all
CMA’s claims, it makes no affirmative arguments for summary judgment
on CMA’s implied covenant claim.
A party asserting that a material fact cannot be disputed must cite to
particular parts of the record or show that the materials cited do not
establish the presence of a genuine dispute and that, as such, they are
15
The court considered PCG’s overarching argument that the affidavits of Gary Davis
and John Kazunas are “sham affidavits.” (Dkt. No. 103, Attach. 1 at 1-3; Dkt. No. 109, Attach.
1 at 1-5.) However, after reviewing both documents and comparing them with other materials
in the record, it appears that any discrepancies relate to either inconsequential hair-splitting or
newly-remembered facts pertaining to the February teleconference. Even without the two
affidavits, the record is of enough depth to allow for CMA’s claims to survive summary
judgment. In the event that there are any prior inconsistent statements involved between
depositions and later testimony, the parties can address them at trial.
28
entitled to judgment as a matter of law. See Fed. R. Civ. P. 56; N.D.N.Y.
L.R. 7.1(a)(3). Given that CMA supports its claim only by relying on an
immaterial fact—an internal PCG email that indicates a PCG official
“pounced on” DOH’s unfavorable assessment—CMA fails to sufficiently
demonstrate that PCG’s actions were demonstrative of a lack of good
faith. Examining the evidence in the light most favorable to PCG as the
non-moving party, a sole email indicating that PCG quickly responded to
DOH’s unfavorable review of CMA is not indicative of a lack of good faith.
Assuming that CMA breached its pre-proposal duties under TCA § 2(c) or
failed to satisfy the necessary standards for subcontractors under TCA
§ 3(a), it could be reasonably inferred that PCG exercised good faith when
it declined to enter into a subcontract with CMA after the kickoff meeting.
(Def.’s SMF ¶¶ 111-12, 116-21.)
As such, the court denies both motions for summary judgment on
CMA’s breach of the implied covenant claim.
2.
PCG’s Claim
Along the same lines, PCG does not satisfy the summary judgment
standard regarding its breach of the implied covenant counterclaim. PCG
simply states that “[t]he implied covenant of good faith and fair dealing
29
required CMA to perform its contractual duties, including its duty to
provide PCG with information under § 2(b)—honestly, and without
destroying or injuring the right of [PCG] to receive the fruits of the
contract.” (Dkt. No. 93, Attach. 1 at 29 (footnote omitted) (internal
quotation marks and citation omitted).) For the above-mentioned reasons,
this bare legal assertion is not enough to satisfy the mandates of Rule 56;
thus, PCG’s motion for summary judgment on its counterclaim is denied.
At the same time, CMA moves for summary judgment on PCG’s
counterclaim based on its argument that the implied covenant cannot
create additional rights or duties other than those outlined in the contract
and, because PCG’s allegations mirror its breach of contract claims, there
is “no independent cause of action for a breach of the covenant.”16 (Dkt.
No. 91, Attach. 3 at 28.) For its part, PCG argues that CMA acted in bad
faith when it “lied about its relationship with []DOH and provided bid
content misrepresenting its work and the status of NYEIS.” (Dkt. No. 103
16
Although “claims for breach of the implied covenant of good faith and fair dealing are
distinct from simple breach of contract claims and require additional factual allegations of
unfairly leveraging the contract terms for undue economic advantage,” (Christensen v.
Kingston Sch. Comm., 360 F.Supp. 2d 212, 229 (D. Mass. 2005) (applying Mass. law), viewing
PCG’s assertions in the most favorable light, it can be reasonably inferred that CMA attempted
to mislead PCG into entering a subcontract that would provide CMA with undue economic
advantage.
30
at 15, 26-28.)
It is unnecessary to get into the heart of the parties arguments in
this regard because PCG’s claim rests on reasonable inferences to be
made by the fact finder. For instance, the fact finder may reasonably infer
that CMA’s performance of its obligations under TCA § 2(c) was
unreasonable under the circumstances. See Nile, 734 N.E.2d at 1160.
Therefore, CMA’s motion with respect to PCG’s claim of breach of the
implied covenant of good faith and fair dealing is also denied.
C.
Unjust Enrichment
PCG also moves for summary judgment on CMA’s claim of unjust
enrichment and argues that, if a contract governs the parties’ relationship,
the contract provides an adequate remedy at law. (Dkt. No. 93, Attach. 1
at 21-23.) CMA is silent on this point.
Indeed, it is well-settled that “a claim of unjust enrichment will not lie
where there is a valid contract that defines the obligations of the parties.”
Metro. Life Ins. Co. v. Cotter, 984 N.E.2d 835, 849 (Mass. 2013) (internal
quotation marks and citation omitted). Moreover, “[w]here a properly filed
motion is unopposed and the [c]ourt determines that the moving party has
met its burden to demonstrate entitlement to the relief requested therein,
31
the non-moving party’s failure to file or serve any papers as [the court’s
Local Rules of Practice] require[] shall be deemed as consent to the
granting or denial of the motion, as the case may be, unless good cause is
shown.” N.D.N.Y. L.R. 7.1(b)(3).
Since CMA failed to respond to PCG’s argument and the TCA is a
contract that provides an adequate remedy at law, PCG’s motion for
summary judgment on CMA’s unjust enrichment claim is granted and the
claim is dismissed.
D.
Fraudulent Inducement
1.
Applicable Law
CMA and PCG each claim that they are entitled to summary
judgment on PCG’s fraudulent inducement counterclaim, but argue over
which state’s law applies. PCG contends that Massachusetts law applies
because “the injury was suffered in Massachusetts, most participants to
the February 8, 2013 call were in Massachusetts, and CMA’s proposal
materials were received in Massachusetts.” (Dkt. No. 109 at 10, n.49.)
On the other hand, CMA contends that New York law applies because
“the claim involves a conduct-regulating tort that allegedly occurred in New
32
York and New York has an interest in applying New York law.”17 (Dkt. No.
108 at 9 (footnote omitted).)
Generally, courts will honor a contract’s express choice of law
provision unless there is an allegation of fraud. Aramarine Brokerage, Inc.
v. OneBeacon Ins. Co., 307 F. App’x 562, 564 (2d Cir. 2009). Under New
York law, such tort claims are outside the scope of contractual
choice-of-law provisions that specify what law governs construction of the
terms of the contract. See Fin. One Pub. Co. v. Lehman Bros. Special
Fin., Inc., 414 F.3d 325, 335 (2d Cir. 2005); G.L.M. Sec. & Sound, Inc. v.
LoJack Corp., No. 10-CV-04701, 2011 WL 4594825, at *4 (E.D.N.Y. Sept.
30, 2011), on reconsideration in part, No. 10-CV-4701, 2012 WL 4512499
(E.D.N.Y. Sept. 28, 2012).
New York courts implement an “interest analysis” to determine which
law applies. See GlobalNet Financial.com, Inc. v. Frank Crystal & Co.,
449 F.3d 377, 384 (2d Cir. 2006). “If conflicting conduct-regulating laws
are at issue, the law of the jurisdiction where the tort occurred will
17
It appears that CMA favors New York law because it would preclude PCG from
recovery under the “out-of-pocket” rule, “which bars recovery of profits that would have been
realized in the absence of fraud . . . as inherently speculative and undeterminable.” Geary v.
Hunton & Williams, 257 A.D.2d 482, 482 (1st Dep’t 1999).
33
generally apply because that jurisdiction has the greatest interest in
regulating behavior within its borders.” Cooney v. Osgood Mach., Inc., 81
N.Y.2d 66, 72 (1993). A fraudulent tort “arises where the loss is sustained
and that loss from fraud is deemed to be suffered where its economic
impact is felt, normally, the plaintiff’s residence.” G.L.M., 2011 WL
4594825 at *6 (internal quotation marks and citation omitted).
For the reasons explained in G.L.M.—namely, that an actual conflict
exists, fraudulent inducement is a conduct-regulating tort, and the alleged
injury was felt in Massachusetts where PCG is domiciled—Massachusetts
law applies to PCG’s claim under the appropriate choice of law analysis.
See id. at *5-6.
2.
Analysis
To establish fraud in the inducement, a party must “establish the
elements of common law deceit, . . . which include [1] misrepresentation
of a material fact, [2] made to induce action, and [3] reasonable reliance
on the [4] false statement [5] to the detriment of the person relying.”
Commerce Bank & Tr. Co. v. Hayeck, 709 N.E.2d 1122, 1126 (Mass. App.
Ct. 1999) (internal quotation marks and citation omitted).
34
PCG’s claim centers around the February teleconference held
before the parties entered the TCA. PCG argues that CMA employees
misled PCG into thinking that all the NYEIS data warehouse issues had
been solved, and that DOH was not only using the data warehouse but
was satisfied with its functioning. (Dkt. No. 103 at 16-17.) PCG further
argues that it relied on these misrepresentations when entering the TCA
and later when negotiating “costs and deliverables that were out of step
with the work that would be necessary to complete the project.” (Dkt. No.
93, Attach. 1 at 28.) On its end, CMA denies that any of its employees
made such statements. (Dkt. No. 91, Attach. 3 at 13.) CMA further
disputes whether any of the alleged statements, even if made, were false.
(Id. at 14.)
It is apparent that there are issues of fact, which preclude summary
judgment, namely whether any statements made by CMA were false
misrepresentations of material facts, made to induce action, or reasonably
relied on by PCG. See Commerce Bank & Tr. Co., 709 N.E.2d at 1126.
As such, the court denies both parties’ motions for summary judgment on
this claim.
35
E.
CMA’s Request to Preclude Expert Testimony
Lastly, embedded in its motion for summary judgment, CMA moves
to preclude PCG’s expert witness from testifying at trial pursuant to Rule
702 of the Federal Rules of Evidence. (Dkt. No. 91, Attach. 3 at 29-30.)
CMA relies on the affidavit of Marianne DeMario to support its request.
(Id.) PCG objects to CMA’s “motion to strike” the expert testimony and
requests that the court strike the DeMario affidavit. (Dkt. No. 104 at 1.)
CMA’s motion is denied with leave to renew through an appropriate
motion at a later time.18 PCG’s motion to strike, (Dkt. No. 104), is denied
as moot.
V. Conclusion
WHEREFORE, for the foregoing reasons, it is hereby
ORDERED that CMA’s motion for summary judgment (Dkt. No. 91)
is DENIED; and it is further
18
In any event, since the parties have requested a bench trial, the court is not inclined
to preclude any expert testimony at this stage. See United States v. Am. Express Co., No.
10–CV–4496, 2014 WL 2879811, at *2 (E.D.N.Y. June 24, 2014) (“[T]he Daubert dynamic is
slightly altered in a bench trial as there is little risk that the factfinder will be ‘bamboozled’ by
technical evidence of questionable merit.”) (internal quotation marks and citation omitted); see
also Victoria’s Secret Stores Brand Mgmt., Inc. v. Sexy Hair Concepts, LLC, No. 07 Civ. 5804,
2009 WL 959775, at *6, n.3 (S.D.N.Y. Apr. 8, 2009) (“[W]here a bench trial is in prospect,
resolving Daubert questions at a pretrial stage is generally less efficient than simply hearing
the evidence[.]”).
36
ORDERED that CMA’s motion to preclude expert testimony (Dkt.
No. 91) is DENIED with leave to renew; and it is further
ORDERED that PCG’s motion for summary judgment (Dkt. No. 93)
is GRANTED IN PART AND DENIED IN PART as follows: GRANTED
with respect to CMA’s unjust enrichment claim; and DENIED in all other
respects; and it is further
ORDERED that PCG’s motion to strike (Dkt. No. 104) is DENIED as
moot; and it is further
ORDERED that this case is deemed trial ready and a scheduling
order shall issue in due course; and it is further
ORDERED that the Clerk provide a copy of this MemorandumDecision and Order to the parties.
IT IS SO ORDERED.
October 24, 2017
Albany, New York
37
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