Currier, McCabe & Associates, Inc. v. Public Consulting Group, Inc.
MEMORANDUM-DECISION and ORDER - That PCG's 9 Motion to Dismiss for Failure to State a Claim is GRANTED IN PART and DENIED IN PART as follows: GRANTED with respect to CMA' claim of fraudulent inducement; and DENIED in all other respects. That PCG file the appropriate responsive pleadings within the time alloted by the rules. That the parties notify Magistrate Judge Randolph F. Treece in order to schedule further proceedings in accordance with this order. Signed by Chief Judge Gary L. Sharpe on 3/7/2014. (jel, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
CURRIER, MCCABE &
ASSOCIATES, INC. d/b/a
CMA Consulting Services,
PUBLIC CONSULTING GROUP,
FOR THE PLAINTIFF:
Mills Law Firm
1520 Crescent Road
Clifton Park, NY 12065
FOR THE DEFENDANT:
Wiltshire, Grannis Law Firm
1200 Eighteenth Street, N.W.
Washington, DC 20036
CHRISTOPHER K. MILLS, ESQ.
CHARLES T. KIMMETT, ESQ.
MARK D. DAVIS, ESQ.
MICHAEL J. CARLSON, ESQ.
Gary L. Sharpe
MEMORANDUM-DECISION AND ORDER
Plaintiff Currier, McCabe & Associates, Inc. d/b/a CMA Consulting
Services (CMA), commenced this diversity action against defendant Public
Consulting Group, Inc. (PCG), alleging breach of contract and related
claims, and seeking not less than $1.2 million in damages. (Compl. ¶¶ 1234, Dkt. No. 1.) Pending is PCG’s motion to dismiss for failure to state a
claim. (Dkt. No. 9.) For the reasons that follow, PCG’s motion is granted
in part and denied in part.
On March 5, 2013, CMA, a minority or women-owned business
enterprise (MWBE) and New York corporation, entered into a “Teaming
and Confidentiality Agreement” (TCA) with PCG, a Massachusetts
corporation. (Compl. ¶¶ 3, 4, 6, 19.) The purpose of the TCA was to
“establish a working relationship between PCG and CMA in order to
develop, submit[,] and support a proposal in response to the” request for
proposals (RFP) by New York State Department of Health, Division of
Family Health, Bureau of Early Intervention (DOH) “for certain services,”
“under which PCG will be proposed as the prime contractor and CMAwill
The facts are drawn from the complaint and the Teaming and
Confidentiality Agreement, which, as explained below, see infra Part
IV.A.1, is integral to the complaint.
be proposed as a subcontractor.” (Dkt. No. 9, Attach. 2 at 2, 7; Compl.
¶ 7.) The TCA further provides, among other things, “PCG will exercise
commercially reasonable efforts to secure CMA as a subcontractor,
consistent with the Proposal,” “CMA acknowledges that PCG cannot make
any guarantee or give any assurance that a subcontract will be entered into
between PCG and CMA,” but “[i]f a contract is awarded to PCG, and 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], then PCG will enter into a
subcontract with CMA.” (Dkt. No. 9, Attach. 2 at 3.)
The terms and conditions of the subcontract were to be “negotiated
in good faith by the parties” if the preconditions were met for entering into
one, but, among other things, “[t]he subcontract [was to] specify a
minimum CMA project participation rate of twenty percent (20%) of the
total contract value.” (Id.) While CMA met its obligations under the TCA,
PCG refused to “honor its obligations” under the TCA or “submit a proposal
to DOH including CMA as a subcontractor.” (Compl. ¶¶ 14, 15.)
CMA commenced this action in June 2013, alleging claims of breach
of contract, fraudulent inducement, breach of the implied warranty of good
faith and fair dealing, and unjust enrichment. (Compl. ¶¶ 12-34.) Prior to
any discovery or joinder of issue, PCG moved to dismiss the complaint
pursuant to Fed. R. Civ. P. 12(b)(6). (Dkt. No. 9.)
III. Standard of Review
The standard of review under Fed. R. Civ. P. 12(b)(6) is well settled
and will not be repeated here. For a full discussion of the standard, the
court refers the parties to its prior decision in Ellis v. Cohen & Slamowitz,
LLP, 701 F. Supp. 2d 215, 218 (N.D.N.Y. 2010).
Before delving into the arguments raised in the pending motion to
dismiss, it is helpful to outline CMA’s claims and their factual predicates.
In the complaint, CMA alleges that, despite its full performance and its
willingness to perform subcontractor services as detailed in the TCA, PCG
breached the TCA “by explicitly stating that it does not intend to honor its
obligations under the [TCA], and has otherwise breached the [TCA] by
refusing to submit a proposal to DOH including CMA as a subcontractor.”
(Compl. ¶¶ 14, 15.) CMA further alleges that “PCG’s failure to honor its
obligations under the [TCA]” caused it to sustain money damages. (Id.
With respect to its claim of fraudulent inducement, CMA alleges that,
during the time that the parties were negotiating the TCA, “PCG made
certain factual representations to CMA in an effort to secure CMA’s
participation in PCG’s proposal.” (Id. ¶ 18.) “PCG represented that CMA’s
status as a [MWBE] would assist PCG in obtaining the subject contract as
part of the State of New York’s effort to encourage and assist state
agencies that are engaged in contracting activities to award a fair share of
state contracts to [MWBEs].” (Id. ¶ 19.) PCG made other
“representations” to CMA regarding the ability of it and other prospective
bidders to secure the contract with DOH, (id. ¶ 20), and “additional
representations [and] omissions” and engaged in conduct prior to
execution of the TCA “in an effort to induce CMA to enter into” it, (id. ¶¶ 21,
22). The TCA prohibited CMA from submitting a proposal in response to
the RFP that competed with PCG’s, or from assisting any other party in
obtaining the DOH contract. (Id. ¶ 23.) CMA alleges that PCG made
fraudulent representations to induce it to enter the TCA, prevent it from
submitting its own proposal, and prohibit it from assisting other companies
in obtaining the DOH contract. (Id. ¶ 24.) The foregoing caused damage
to CMA. (Id. ¶ 25.)
As for CMA’s claim of breach of the implied warranty of good faith
and fair dealing, it alleges that PCG failed to act in good faith, preventing
CMA from submitting its own proposal or entering into teaming agreements
with other entities, and inhibited CMA from enjoying the benefits and
privileges of its subcontract agreement with PCG. (Id. ¶¶ 28-29.) PCG’s
breach caused damage to CMA. (Id. ¶ 30.)
Finally, CMA alleges that PCG was unjustly enriched by its provision
of proprietary and confidential information in preparing PCG’s proposal,
which resulted in damage to CMA. (Id. ¶¶ 33-34.)
Turning to PCG’s motion, it argues that CMA has failed to state a
claim with respect to the foregoing causes of action. (Dkt. No. 9, Attach. 1
at 5-23.) It contends first that the court must rely on the TCA itself, and
should not consider CMA’s characterizations of it in its complaint. (Id. at 23.) As for CMA’s breach of contract claim, PCG generally argues that,
under the Rule 8 pleading standard, it should be dismissed as too
conclusory. (Id. at 5-6.) PCG identifies two possible theories of
breach—the first, “based on PCG’s failure to enter into a subcontract with
CMA after being awarded the prime contract by DOH” and, the second,
“based on PCG’s purported failure to include CMA as a proposed
subcontractor in its proposal to DOH”—and argues that both fail. (Id. at 515.) As for the first proposed breach, PCG contends that the TCA, “[w]ith
respect to a future subcontract agreement,” is unenforceable based upon
its plain language and that the TCA as it relates to a future subcontract is,
at most, “an unenforceable ‘agreement to agree.’” (Id. at 6-12.) Regarding
the second theory of breach, PCG argues that CMA’s failure to plead
damage resulting from the alleged failure to include CMA in its proposal to
DOH is fatal to the claim. (Id. at 12-15.)2
PCG argues that CMA’s claim of fraudulent inducement is deficient
because it was not pleaded with sufficient particularity under Fed. R. Civ.
P. 9(b) and CMA failed to allege all of the essential elements for such a
claim. (Id. at 15-19.) Because the TCA is not an enforceable contract,
contends PCG, CMA cannot plead a claim of breach of the implied duty of
good faith and fair dealing; moreover, PCG asserts that the complaint is
PCG also claims that, “[b]ecause CMA cannot allege that PCG’s
failure to include it in a proposal to DOH caused CMA any injury, it lacks
standing.” (Dkt. No. 9, Attach. 1 at 14-15.) The court disagrees.
Because the TCA required PCG to include CMA as the proposed
subcontractor in the proposal, (Dkt. No. 9, Attach. 2 at 2), PCG’s failure to
do so evinces a breach of the TCA, and plainly demonstrates an injury in
fact to CMA’s legally protected contract rights. See Vazquez v. Salomon
Smith Barney Inc., No. 01 CIV 2895, 2002 WL 10493, at * 5 (S.D.N.Y.
Jan. 4, 2002). Accordingly, PCG’s standing argument is rejected.
not sufficiently particularized with respect to this claim. (Id. at 19-21.)
Finally, PCG argues that CMA has failed to state a claim of unjust
enrichment. (Id. at 21-23.) PCG urges the court to disregard CMA’s
“conclusory allegations that it provided” proprietary and confidential
information; it then faults CMA for failing to detail the “nature of the
information that it provided to PCG” so that the court can determine
whether it is “confidential and proprietary,” claims that CMA alleged, at
most, only threadbare recitals of the required elements, and, finally,
asserts that the TCA specifically required the exchange of such
In opposition, CMA argues that PCG improperly relies on the TCA in
support of its motion, which is outside of the pleadings and “must be
excluded from consideration.” (Dkt. No. 14 at 5, 6-7.)3 CMA then
summarily contends that the facts alleged in the complaint are sufficient to
withstand PCG’s motion. (Id. at 8-11.)
It is noted that the first four pages of factual background provided
by CMA in its response, (Dkt. No. 14 at 1-4), are disregarded to the extent
that those facts are outside of the complaint. It is ironic that CMA, who
stringently argues that the TCA should be excluded from consideration as
“outside of the pleadings,” (Dkt. No. 14 at 5, 6-7), provides details in its
response that are not alleged in its pleading either.
Scope of Review
As an initial matter, because the parties disagree about the court’s
consideration of the TCA, (Dkt. No. 9, Attach. 1 at 2-3; Dkt. No. 14 at 6-7;
Dkt. No. 16 at 3-5), the court must ascertain what it may properly consider
in deciding PCG’s motion to dismiss. Simply put, because the TCA is
integral to the complaint, which alleges a breach of the TCA, and closely
related claims, the court considers it in deciding the merits of PCG’s
motion. See Global Network Commc’ns, Inc. v. City of N.Y., 458 F.3d 150,
156-57 (2d Cir. 2006); Chambers v. Time Warner, Inc., 282 F.3d 147, 15354 & 153 n.4 (2d Cir. 2002). The court also notes that the declaration and
addendum submitted by PCG in support of its reply, (Dkt. No. 16, Attach.
1), are excluded from consideration as outside of the pleadings, see Fed.
R. Civ. P. 12(d), and those documents were not considered.
PCG avers that Massachusetts law applies to CMA’s claims, but
recognizes that, if New York and Massachusetts law conflict on the
fraudulent inducement claim—which it contends “there appears to be no
conflict”—New York law applies to only that claim.4 (Dkt. No. 9, Attach. 1
at 6 n.2, 15 n.4.) PCG waffles on this issue and fails to affirmatively argue
which state’s law applies, but it, unlike CMA, at least made some attempt
to identify the law that controls this diversity action. The only hint CMA
gives regarding the choice of laws issue comes from the complaint, where
it prays for relief “as provided by the laws of the State of Massachusetts.”
(Compl. at 7.) For reasons explained below, with the exception of CMA’s
claim of fraudulent inducement, which is governed by New York law,
Massachusetts law applies to claims in this action.
Here, the TCA expressly provides that it “is governed by the laws of
the Commonwealth of Massachusetts.” (Dkt. No. 9, Attach. 2 at 6.)
Accordingly, Massachusetts law controls, consistent with the TCA, as to all
claims with the exception of CMA’s claim of fraudulent inducement, which
It is noteworthy that the case cited by PCG in support of its
assertion, (Dkt. No. 9, Attach. 1 at 15 n.4), directly controverts the
proposition that no conflict is apparent between New York and
Massachusetts law. See G.L.M. Sec. & Sound, Inc. v. LoJack Corp., No.
10-CV-04701, 2011 WL 4594825, at *5 (E.D.N.Y. Sept. 30, 2011) (“[A]s to
a fraudulent inducement claim, New York and Massachusetts law have an
actual conflict.”) As explained in G.L.M., New York law bars claims of
fraudulent inducement where such claims arise out of the same facts that
support a pleaded breach of contract claim, whereas Massachusetts law
is without any such bar. Id.
requires the court to undertake a choice of law analysis. See Aramarine
Brokerage, Inc. v. OneBeacon Ins. Co., 307 F. App’x 562, 564 (2d Cir.
2009) (“Under New York’s choice of law rules, it is clear that in cases
involving a contract with an express choice of law provision . . . a court is to
apply the law selected in the contract as long as the state selected has
sufficient contacts with the transaction, unless there is fraud, violation of
public policy, or no reasonable basis for choosing the law of the jurisdiction
designated by the parties.” (internal quotation marks and citations
omitted)); Fin. One Pub. Co. v. Lehman Bros. Special Fin., Inc., 414 F.3d
325, 335 (2d Cir. 2005) (“Under New York law, . . . tort claims are outside
the scope of contractual choice-of-law provisions that specify what law
governs construction of the terms of the contract, even when the contract
also includes a broader forum-selection clause.” (citation omitted)).
This very issue was addressed by the Eastern District of New York in
G.L.M. Security & Sound, Inc. v. LoJack Corp., No. 10-CV-04701, 2011
WL 4594825, at *4-5 (E.D.N.Y. Sept. 30, 2011). For the reasons explained
in G.L.M.—namely, that an actual conflict exists between New York and
Massachusetts law, fraudulent inducement is a conduct-regulating tort, and
the alleged injury was felt in New York where CMA resides—New York law
applies to CMA’s claim of fraudulent inducement under the appropriate
choice of law analysis and further discussion is not warranted. See
G.L.M., 2011 WL 4594825, at *5-6.
Having resolved the foregoing issues, the court turns to CMA’s
claims. For the reasons explained below, CMA’s claim of fraudulent
inducement is dismissed. PCG’s motion is denied, however, with respect
to the remaining claims.
Breach of Contract
In order to state a claim for breach of contract under Massachusetts
law, the plaintiff must allege that: “(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) (citing
Singarella v. City of Boston, 173 N.E.2d 290, 291 (Mass. 1961)). Going to
the first element,
[a]n agreement to reach an agreement is a
contradiction in terms and imposes no obligation on
the parties thereto, in the circumstances that justify
and gave rise to it: where parties have merely
reached the stage of imperfect negotiation prior to
formalizing a contract, and have not yet reduced their
agreement to terms. When parties have progressed
beyond that stage, however, a competing principle
applies: a contract should be interpreted so as to
make it a valid and enforceable undertaking rather
than one of no force and effect.
Lafayette Place Assocs. v. Boston Redevelopment Auth., 694 N.E.2d 820,
826 (Mass. 1998) (internal quotation marks and citations omitted)). An
indication in the agreement that some terms are to be negotiated at a later
time does not render the agreement per se unenforceable. Id. Indeed
where the “parties specify formulae and procedures that, although
contingent on future events, provide mechanisms to narrow present
uncertainties to rights and obligations, their agreement is binding.” Id.
Here, CMA has plausibly alleged a claim for breach of contract.
(Compl. ¶¶ 12-16.) With respect to PCG’s arguments, while it is true that
the TCA provides that “CMA acknowledges that PCG cannot make any
guarantee or give any assurance that a subcontract will be entered into,” it
clearly sets forth a set of contingencies, the satisfaction of which required
the provision of a subcontract to CMA. (Dkt. No. 9, Attach. 2 at 3.) In
particular, the TCA specifies:
If a contract is awarded [by DOH] to PCG, and 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], then
PCG will enter into a subcontract with CMA. The
terms and conditions of the subcontract will be
negotiated in good faith by the parties.
(Id. (emphasis added).) Despite the pronouncement that terms and
conditions of a subcontract would be negotiated at some future time, in the
two paragraphs that follow the foregoing language some important terms of
such a subcontract were specifically contemplated and agreed to by the
parties. In particular, “any resulting subcontract” was required to include
six identified 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 which can be increased by mutual consent of the
parties.” (Id.) Finally, “Attachment A” sets out a “proposed scope of work,”
which the parties agreed “to further detail . . . during the preparation of the
proposal,” but includes six specific services CMA was to provide in part or
whole. (Id. at 7.) These contingencies, the procedures identified for
determining the 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 that the TCA is an enforceable
contract. See Lafayette, 694 N.E.2d at 826.
CMA’s allegations that: (1) it is willing and able to perform
subcontractor services; (2) PCG has “explicitly stat[ed] that it does not
intend to honor its obligations under the [TCA], and has otherwise
breached the [TCA] by refusing to submit a proposal to DOH including
CMA as a subcontractor”; and (3) “CMA has sustained money damages as
a result of PCG’s failure to honor its obligations” are adequate for stating a
claim of breach. (Compl. ¶¶ 14-16.) As the TCA makes clear, if the
contingencies provided therein were met, PCG was required to award the
subcontract to CMA. (Dkt. No. 9, Attach. 2 at 3.) The complaint alleges
that, despite the fact that DOH awarded PCG the prime contract, PCG “has
explicitly refused to include or utilize CMA as a subcontractor on the
project.”5 (Compl. ¶¶ 10, 14, 15.) Placing the allegations in the context of
the TCA, which is enforceable, PCG’s arguments are unavailing.
CMA was not required to expressly plead that all of the
contingencies were satisfied as argued by PCG. (Dkt. No. 9, Attach. 1 at
7-8.) The nonoccurrence of any of those contingencies is, however,
fodder for a summary judgment motion.
“To maintain a cause of action for fraudulent inducement of contract,
a plaintiff must show ‘a material representation, known to be false, made
with the intention of inducing reliance, upon which [it] actually relie[d],
consequentially sustaining a detriment.’” Frank Crystal & Co. v. Dillmann,
84 A.D.3d 704, 704 (1st Dep’t 2011) (quoting Merrill Lynch, Pierce, Fenner
& Smith, Inc. v. Wise Metals Grp., 19 A.D.3d 273, 275 (1st Dep’t 2005)).
Under the Federal Rules of Civil Procedure, a party alleging a claim of
fraud “must state with particularity the circumstances constituting fraud,”
however, “[m]alice, intent, knowledge, and other conditions of a person’s
mind may be alleged generally.” Fed. R. Civ. P. 9(b). The Second Circuit
has “repeatedly held” that, to satisfy Rule 9(b), the plaintiff must “‘(1)
specify the statements that the plaintiff contends were fraudulent, (2)
identify the speaker, (3) state where and when the statements were made,
and (4) explain why the statements were fraudulent.’” Nakahata v. N.Y.Presbyterian Healthcare Sys., Inc., 723 F.3d 192, 197 (2d Cir. 2013)
(quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993)).
Because CMA has failed to meet the heightened pleading standard
under Rule 9(b), its claim of fraudulent inducement is dismissed. Most
obviously, CMA fails to explain why the identified statements made by PCG
were fraudulent. The complaint alleges that “certain factual
representations” were made by PCG to CMA “in an effort to secure CMA’s
participation in PCG’s proposal.” (Compl. ¶ 18.) The “representations”
recited include PCG’s expression to CMA that its status as a MWBE would
help it obtain the prime contract, and “certain factual representations to
CMA concerning [PCG’s] ability to secure the contract . . . and . . .
concerning other companies that were prospective bidders.” (Id. ¶¶ 19,
20.) CMA also claims, without further elucidation, that “PCG engaged in
other additional representations, omissions and conduct . . . in an effort to
induce CMA to enter into the [TCA].” (Id. ¶ 21.) CMA merely alleges that
these “representations were fraudulent.” (Id. ¶ 24.) These conclusory
allegations do not meet the requirements of Rule 9(b), and dismissal is
Breach of the Implied Covenant of Good Faith and Fair Dealing
“The purpose of the implied covenant is to ensure that neither party
interferes with the ability of the other to enjoy the fruits of the contract and
that, when performing the obligations of the contract, the parties ‘remain
faithful to the intended and agreed expectations’ of the contract.” Chokel
v. Genzyme Corp., 867 N.E.2d 325, 329 (Mass. 2007) (quoting Uno
Rests., Inc. v. Boston Kenmore Realty Corp., 805 N.E.2d 957, 964 (Mass.
2004)) (internal citation omitted). The implied covenant is breached “when
one party violates the reasonable expectations of the other.” Id.
Here, CMA has stated a claim based upon its allegation that PCG,
who “has explicitly refused to include or utilize CMA as a subcontractor,”
prevented it “from enjoying the benefits and privileges of its subcontract” by
failing to act in good faith. (Compl. ¶¶ 10, 28-29.) PCG’s arguments in
support of dismissal, (Dkt. No. 9, Attach. 1 at 19-21), are quickly dispensed
with as the complaint adequately alleges facts to support the claim, and, as
discussed above, see supra Part IV.B.1, the TCA is an enforceable
Finally, under Massachusetts law, a claim of unjust enrichment
requires proof of only the “unjust enrichment of one party and unjust
detriment to the other party.” Salamon v. Terra, 477 N.E.2d 1029, 1031
(Mass. 1985); see Inniss v. Iliev, 970 N.E.2d 813, 2012 WL 2527036, at *3
(Mass. App. Ct. 2012); see also Mass. Eye & Ear Infirmary v. QLT
Phototherapeutics, Inc., 412 F.3d 215, 234 n.7 (1st Cir. 2005). Here, a
claim of unjust enrichment has been stated by CMA. Indeed, CMA avers
that it enriched PCG by providing it with proprietary and confidential
information that it used to secure the DOH contract, PCG was unjustly
enriched by that information, and that CMA suffered resulting harm.
(Compl. ¶¶ 32-34.)
PCG’s arguments that the court should scrutinize CMA’s allegation
that it provided proprietary and confidential information is baseless. (Dkt.
No. 9, Attach. 1 at 21-22.) At this juncture, CMA’s allegations are to be
construed in the light most favorable to it. See Faulkner v. Beer, 463 F.3d
130, 133 (2d Cir. 2006). Moreover, that the TCA provided for the
exchange of proprietary and confidential information does not require
dismissal. CMA’s obvious theory is that it provided proprietary and
confidential information that was useful to PCG and assisted it in securing
the DOH contract, and that PCG’s breach prevented CMA from realizing
any benefit under the TCA despite its provision of that information.
WHEREFORE, for the foregoing reasons, it is hereby
ORDERED that PCG’s motion to dismiss (Dkt. No. 9) is GRANTED
IN PART and DENIED IN PART as follows:
GRANTED with respect to CMA’s claim of fraudulent
DENIED in all other respects; and it is further
ORDERED that PCG file the appropriate responsive pleadings within
the time allotted by the rules; and it is further
ORDERED that the parties notify Magistrate Judge Randolph F.
Treece in order to schedule further proceedings in accordance with this
order; and it is further
ORDERED that the Clerk provide a copy of this MemorandumDecision and Order to the parties.
IT IS SO ORDERED.
March 7, 2014
Albany, New York
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