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holding that Second Circuit precedent indicates that a duplicative breach of covenant of good faith and fair dealing claim should be dismissed as redundant and not allowed as an alternative to breach of contract claim
Summary of this case from Usov v. LazarOpinion
No. 12 Civ. 1346.
2012-07-26
BOART LONGYEAR LTD., Boart Longyear Global Holdco, Inc., Longyear Holdings, Inc., Resources Services Holdco, Inc., and Prosonic Corporation, Plaintiffs, v. ALLIANCE INDUSTRIES, INC., Terra Sonic International, LLC, HI–VAC Corporation, Promanco, Inc., Mole Master Services Corp., and Rudolph John Lehman, Defendants.
Alan M. Fisch, Kaye Scholer LLP, Washington, DC, Robert R. Laurenzi, Kaye Scholer LLP, New York, NY, for Plaintiffs. Marc E. Bernstein, Paul Hastings LLP, New York, NY, for Defendants.
Alan M. Fisch, Kaye Scholer LLP, Washington, DC, Robert R. Laurenzi, Kaye Scholer LLP, New York, NY, for Plaintiffs. Marc E. Bernstein, Paul Hastings LLP, New York, NY, for Defendants.
OPINION AND ORDER
SHIRA A. SCHEINDLIN, District Judge.
I. INTRODUCTION
Boart Longyear Ltd., Boart Longyear Global Holdco, Inc., Longyear Holdings, Inc., Resources Services Holdco, Inc., and Prosonic Corporation (collectively, “Boart Longyear”) bring this action against fellow signatories (Alliance Industries, Inc. and Rudolph John Lehman) to a Stock Purchase Agreement (“SPA”), as well as some of the signatories' affiliates (Terra Sonic International, LLC, Hi–Vac Corporation, Promanco, Inc., and Mole Master Services Corp.) (collectively, “the Affiliates”). The defendants now move to dismiss the plaintiffs' claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and indemnification. For the reasons stated below, the defendants' motion is granted in part and denied in part.
II. BACKGROUND
The following facts are drawn from the Complaint and assumed to be true for the purpose of adjudicating this motion to dismiss.
Boart Longyear is a leading provider of mineral exploitation services and drilling to the global market.
In 2006, both Boart Longyear and Prosonic were leaders in sonic drilling services.
See Complaint ¶ 17.
Sonic drills create high frequency vibrations and are highly desirable for use in mineral exploitation and mine development.
See id. ¶ 18.
In order to become the world's leading provider of sonic drilling services, Boart Longyear sought to acquire the capital stock of Prosonic, which had developed a sonic drill that addressed certain durability and technical issues.
See id. ¶¶ 15–16.
See id. ¶¶ 18–20.
A. The SPA
Boart Longyear, Lehman, and Alliance Industries, Inc. (“Alliance”) entered into the SPA, under which Longyear Holdings, Inc. purchased all issued and outstanding capital stock of Prosonic for approximately seventy-two million dollars.
Lehman was the sole shareholder of Alliance, which owned all of the issued and outstanding capital shares of Prosonic.
See id. ¶ 20.
In acquiring all of the capital stock of Prosonic, Boart Longyear acquired all of the corporation's intellectual property, including its proprietary sonic drill head, a drill rig, and tooling technology.
See id.
See id. ¶ 21.
The SPA provides that the agreement is to be construed in accordance with New York law.
The parties agreed that any breach of the SPA would result in “irreparable damage” and that the injured party would be entitled to injunctive relief.
See 12/06/06 Stock Purchase Agreement (“SPA”), Ex. 2 to 4/02/12 Declaration of Marc E. Bernstein, defendants' counsel, at 49.
The SPA also includes an indemnification clause, which provides for the indemnification of an injured party for any breach.
See id. at 48.
Boart Longyear further alleges that it has sustained injuries in the form of damaged customer relationships, business expectations, reputation, and goodwill, as well as lost profits and market share and the replacement cost of employees impermissibly solicited by Lehman or the Affiliates.
See id. at 36.
See Complaint ¶ 46.
1. The Non–Compete Clause
The SPA contains a Non–Compete clause that excluded defendants from engaging in any business that competed with any portion of the worldwide sonic drill business for a five-year Non–Compete Period:
See id. ¶ 45.
During the period from the Closing Date through the five-year anniversary of the Closing Date (the “ Non–Compete Period ”), neither Seller nor its sole stockholder, Lehman, nor any of their respective Affiliates, will engage, directly or indirectly, whether through the ownership of equity securities, the provision of services ... in any business that competes with any portion [of] the Business anywhere in the world ....
The Non–Compete Period expired on December 6, 2011.
SPA at 29–30 (emphasis in original).
The “Business” is defined as “providing Sonic drilling services for environmental site characterization and remediation, mineral, sand and gravel exploration, geoconstruction applications, and water exploration and water supply services.”
See Complaint ¶ 23.
SPA at 2.
2. The Non–Solicitation Clause
The SPA also contains a Non–Solicitation clause that prohibited defendants from hiring any Boart Longyear employees during the Non–Compete Period:
See Complaint ¶ 22.
Each of Seller, its sole stockholder, Lehman ... and Buyer agrees that, during the Non–Compete Period ... none of the Seller Party, Buyer, nor any of their respective Affiliates will, to the extent applicable, directly or indirectly, hire any director, officer, or employee of the other party or any entity that is a direct or indirect subsidiary of the other party as of the Agreement date.
SPA at 30.
A. Alleged Breaches
1. Development of a Lehman Rig
Following the execution of the SPA, Boart Longyear sought to keep secret the sonic drilling technology it had acquired through the SPA and subsequently developed.
It did not sell sonic drills, but only used the drills in the service of its customers.
See Complaint ¶ 27.
Following the execution of the SPA, Boart Longyear added improvements to the sonic drill: a rod hoop designed to prevent unused drill rods from tipping over, a larger grease piston accumulator, and specialized parker motors to drive the oscillator in the sonic drill head.
See id.
See id. ¶ 28.
In September 2010, information circulated among Boart Longyear employees that Lehman was building a sonic drill rig.
On or before that time, both Boart Longyear and the Affiliates operated in a leased facility in Marietta, Ohio.
See id. ¶ 30.
Boart Longyear employees in the Marietta facility noticed a sonic drill (the “Lehman rig”) that appeared to be “virtually identical” to the sonic drilling rigs developed and manufactured by Boart Longyear, employing the technology acquired through the SPA.
See id. ¶ 31.
This Lehman rig also included the developments added by Boart Longyear after the SPA's execution.
See id.
See id. ¶ 36.
In August 2011, a Boart Longyear employee observed the completed Lehman rig in the Marietta facility.
In October 2011, Boart Longyear employees noticed a website for Terra Sonic International (“Terra Sonic”) that advertised the sale of sonic drilling products including the Lehman rig seen at the Marietta facility.
See id. ¶ 32.
In addition to operating its website, Terra Sonic maintained a booth at the National Drillers Association Trade Show, where it displayed a sonic drill rig.
See id. ¶ 33.
Lehman is a founder, director, and managing member of Terra Sonic.
See id. ¶ 40.
Lehman was and is the President and owner of Promanco, Inc. (Promanco), the Chairman of Hi–Vac Corporation (Hi–Vac), and the President of Mole Master Services Corp. (Mole Master).
See id. ¶ 34.
Lehman, possibly in conjunction with the Affiliates, designed and engineered products identical to Boart Longyear's during the Non–Compete Period.
See id. ¶ 35.
See id. ¶ 36.
Alliance and Lehman did not provide Boart Longyear with backup copies of the programs used to create Prosonic's tooling following the execution of the SPA and retained these documents to use in designing the Lehman rig.
Further, Lehman and the Affiliates acquired unique specifications and other proprietary information (including Boart Longyear's market research data, technical blueprints, manufacturing techniques, equipment organization, technician instruction, training materials, strategic design, and manufacturing protocols).
See id. ¶ 39.
See id. ¶ 38.
2. Solicitation of Boart Longyear Employees
Following the execution of the SPA, three former Prosonic employees (James Savinkoff, John Walsh, and Scott Alexander) (“the former employees”) began working for Boart Longyear.
These valuable employees had considerable experience with sonic drilling.
See id. ¶ 25.
Between December 31, 2007 and December 31, 2009, the former employees terminated their employment with Boart Longyear.
See id. ¶ 26
“[T]hey had been solicited” to work for one or more of the defendants.
See id. ¶ 29.
They assisted Lehman or the Affiliates in building the Lehman rig.
Id.
See id. ¶ 30.
III. LEGAL STANDARD
A. Motion to Dismiss
On a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the court must assume “all well-pleaded, nonconclusory factual allegations in the complaint to be true”
and “draw all reasonable inferences in the plaintiff's favor.”
Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 124 (2d Cir.2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678–679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)).
On the other hand, “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”
Ofori Tenkorang v. American Int'l Group, Inc., 460 F.3d 296, 298 (2d Cir.2006).
To survive a motion to dismiss, therefore, the allegations in the complaint must meet a standard of “plausibility.”
Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted).
A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 564, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Accord Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.
Plausibility “is not akin to a probability requirement,” rather, plausibility requires “more than a sheer possibility that a defendant has acted unlawfully.”
Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted).
Id. (quotation marks omitted).
The plaintiff in support of her claim may allege “upon information and belief” facts that are “peculiarly within the possession and control of the defendant.”
Conversely, the plaintiff should not allege upon information and belief matters that are presumptively within her personal knowledge, unless she rebuts the presumption.
Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir.2010).
Such matters include “ ‘matters of public record or matters generally known in the community ... inasmuch as everyone is held to be conversant with them.’ ”
See Sanders v. Grenadier Realty, Inc., 367 Fed.Appx. 173, 177 n. 2 (2d Cir.2010).
Id. (quoting 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1224, at 300–01 (3d ed.2004)).
B. Leave to Replead
Federal Rule of Civil Procedure 15(a)(2) provides that, other than amendments as a matter of course, “a party may amend [its pleading] only by leave of court or by written consent of the adverse party.”
Although “[t]he Court should freely give leave when justice so requires,”
Slayton v. American Express Co., 460 F.3d 215, 226 n. 10 (2d Cir.2006) (citation and quotation marks omitted).
it is “within the sound discretion of the district court to grant or deny leave to amend.”
When a motion to dismiss is granted, “[i]t is the usual practice ... to allow leave to replead.”
McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir.2007) (citation omitted)
Where plaintiff inadequately pleads a claim and cannot offer additional substantive information to cure the deficient pleading, granting leave to replead is futile.
Schindler v. French, 232 Fed.Appx. 17, 18 (2d Cir.2007) (quoting Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir.1991)) (quotation marks omitted).
See Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir.2000).
IV. APPLICABLE LAW
A. Breach of Contract
To make out a breach of contract claim under New York law, a plaintiff must show “ ‘(1) the existence of an agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages.’ ”
A plaintiff alleging a breach of contract claim is required only to provide a defendant with a “short, plain notice” of the claims against it pursuant to Rule 8.
Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 177 (2d Cir.2004) (quoting Harsco Corp. v. Segui, 91 F.3d 337, 348 (2d Cir.1996)).
However, a breach of contract claim “that fails to allege facts sufficient to show that an enforceable contract existed between the parties is subject to dismissal.”
See Contractual Obligation Prods., LLC v. AMC Networks, Inc., No. 04 Civ. 2867, 2006 WL 6217754, at *19 (S.D.N.Y. Mar. 31, 2006) (citing Weiss v. La Suisse, 69 F.Supp.2d 449, 462 (S.D.N.Y.1999)).
Berman v. Sugo LLC, 580 F.Supp.2d 191, 202 (S.D.N.Y.2008) (citation and quotation marks omitted).
B. Breach of the Implied Covenant of Good Faith and Fair Dealing
The covenant of good faith and fair dealing “embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.”
The covenant is implied in every contract governed under New York law.
511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153, 746 N.Y.S.2d 131, 773 N.E.2d 496 (2002) (quotation marks and citation omitted).
Accordingly, a “breach of the implied duty of good faith is considered a breach of the underlying contract.”
See M/A–COM Sec. Corp. v. Galesi, 904 F.2d 134, 136 (2d Cir.1990).
For this reason, “a claim for breach of the implied covenant [of good faith and fair dealing] will be dismissed as redundant where the conduct allegedly violating the implied covenant is also the predicate for breach of covenant of an express provision of the underlying contract.”
Deutsche Bank Secs., Inc. v. Rhodes, 578 F.Supp.2d 652, 664 (S.D.N.Y.2008) (citing Harris v. Provident Life & Acc. Ins. Co., 310 F.3d 73, 80 (2d Cir.2002)).
ICD Holdings S.A. v. Frankel, 976 F.Supp. 234, 243–44 (S.D.N.Y.1997) (quotation marks and citation omitted).
C. Agency
Under common law principles, the establishment of an agency relationship requires facts sufficient to demonstrate two factors: “(1) the principal's manifestation of intent to grant authority to the agent, and (2) agreement by the agent.”
In addition, “the principal must maintain control over key aspects of the undertaking.”
Commercial Union Ins. Co. v. Alitalia Airlines, S.p.A., 347 F.3d 448, 462 (2d Cir.2003) (citations omitted) (citing Restatement (Second) of Agency §§ 15, 26).
The control issue is not critical where a case concerns contractual liability—in that case, “if the agent had the authority to enter into the contract, the principal will be bound.”
Id. (citations omitted).
Id. (citing Restatement (Second) of Agency § 147).
V. DISCUSSION
A. Claims Are Not Properly Pled Against All Defendants
1. Claims Against the Affiliates Are Dismissed
Plaintiffs argue that Lehman had the authority to bind the Affiliates
because he is the Director of Terra Sonic, President and Owner of Promanco, Chairman of Hi–Vac, and President of Mole Master.
See Plaintiffs' Memorandum of Law in Opposition to Motion to Dismiss (“Pl. Mem.”) at 18.
While these facts speak to the control aspect of the agency calculus (which is irrelevant in a contractual liability case), they do not demonstrate either of the required elements of the Affiliates's assent to Lehman's authority or Lehman's agreement.
See Complaint ¶¶ 34–35.
As a result, the plaintiff has failed to plead sufficient facts demonstrating that Lehman had authority to bind the Affiliates to the SPA, and the claims against them are dismissed.
See Commercial Union Ins. Co., 347 F.3d at 462 (citations omitted) (citing Restatement (Second) of Agency §§ 15, 26) (finding that an agency relationship is established when there are facts sufficient to demonstrate both that the principal intended to grant authority to the agent and the agent assented). See also Kirschner v. KPMG LLP, 15 N.Y.3d 446, 483, 912 N.Y.S.2d 508, 938 N.E.2d 941 (2010) (“Whether apparent authority exists is a fact-based determination requiring inquiry into the conduct of the principal.”).
2. The Complaint Is Sufficiently Specific with Regard to the Signatory Defendants
Boart Longyear alleges that Lehman was engaged in the design and development of a sonic drill rig during the Non–Compete Period.
Lehman is the sole shareholder of Alliance, a signatory to the SPA.
See Complaint ¶ 36.
Further, Boart Longyear has alleged that the products produced by Lehman were sold online.
See id. ¶ 20.
These allegations regarding Lehman and Alliance are sufficiently specific under Rule 8.
See id. ¶ 33.
See Contractual Obligation Prods., LLC, 2006 WL 6217754, at *19 (citing Weiss, 69 F.Supp.2d at 462) (holding that under the Rule 8 standard, a short, plain statement is sufficient).
B. Claim I—Breach of Contract
1. Boart Longyear Has Not Stated a Claim for Breach of the Non–Solicitation Clause
Boart Longyear has properly pled the existence of the Non–Solicitation Clause
and its own adequate performance.
See Complaint ¶¶ 22, 43; SPA at 30.
However, Boart Longyear has failed to sufficiently plead facts plausibly indicating that the former employees were solicited while they were still employees at Boart Longyear. The Non–Solicitation clause prevents solicitation of employees “of the other party”
See Complaint ¶ 44.
—not former employees. The complaint states that the former employees terminated their employment between 2007 and 2009, and that these employees “had been” solicited by the defendants.
SPA at 30.
As the defendants correctly argue, it does not allege that the former employees were solicited while current employees of Boart Longyear.
See Complaint ¶ 29.
As a result, Boart Longyear has failed to plead a breach of the Non–Solicitation clause by the defendants.
See Defendants' Memorandum of Law in Support of Motion to Dismiss (“Def. Mem.”) at 10.
Boart Longyear has pled damages in addition to the assumed damages that are triggered by the SPA in the event of a breach, including but not limited to loss of business expectations and goodwill.
See Cenveo Corp. v. Diversapack LLC, No. 09 Civ. 7544, 2009 WL 3169484, at *8 (S.D.N.Y.2009) (holding that where an SPA does not mention former employees, but only current employees, and a complaint only alleges that former employees were solicited, there is no breach of a non-solicitation clause).
However, because Boart Longyear has not alleged a breach, these damages claims also are dismissed.
See Complaint ¶ 46.
See Eternity Global Master Fund Ltd., 375 F.3d at 177 (quoting Harsco Corp., 91 F.3d at 348) (finding that, under New York law, a claim for breach of contract must include a breach by the defendant).
2. Boart Longyear Has Stated a Claim for Breach of the Non–Compete Clause
Boart Longyear has properly pled the existence of the Non–Compete clause,
and its own performance under the SPA.
See Complaint ¶ 22; SPA at 29–30.
It has also pled sufficient facts to support a reasonable inference that the defendants breached the Non–Compete clause. Boart Longyear has alleged that Lehman and the Affiliates have engaged in a business that competes with “a portion”
See Complaint ¶ 44.
of the worldwide sonic drilling services business—namely, the design and sale of sonic drills.
SPA at 30.
Defendants argue that plaintiffs must allege that the defendants were providing drilling services during the Non–Compete period.
See Complaint ¶ 36.
However, the clause is sufficiently broad to encompass “any business” that competes with “any portion” of the provision of those services.
See Def. Mem. at 3.
SPA at 30.
The development and sale of sonic drilling technology is a business that plainly competes with a portion of the sonic drilling services business.
As a result, plaintiffs have sufficiently alleged a breach and the SPA automatically triggers “irreparable damage,”
See White v. Continental Cas. Co., 9 N.Y.3d 264, 267, 848 N.Y.S.2d 603, 878 N.E.2d 1019 (2007) (“[U]nambiguous provisions of [a] contract must be given their plain and ordinary meaning.”). Accord Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569–570, 750 N.Y.S.2d 565, 780 N.E.2d 166 (2002) (citation omitted) (“[I]f the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity.”).
in addition to the separate injuries the plaintiff has alleged.
Def. SPA at 49.
Thus, Boart Longyear has properly pled all the elements of breach of contract under New York law.
See Complaint ¶ 49.
See supra Part IV.A.
C. Claim II—Breach of the Implied Covenant of Good Faith and Fair Dealing
Boart Longyear argues that its breach of the implied covenant of good faith and fair dealing claim is based on a different factual predicate than its breach of contract claim, because Count I is based on competition and Count II is based on “the re-building of a business.”
This argument has little merit as the facts supporting the breach—the competition—describe the same rebuilding process.
See Pl. Mem. at 14.
The claims are based on the same factual elements. Thus, this claim is dismissed as redundant.
See Complaint ¶¶ 36–39, 45, 50.
See Harris v. Provident Life & Accident Ins. Co., 310 F.3d 73, 81 (2d Cir.2002) (“New York law ... does not recognize a separate cause of action for breach of the implied covenant of good faith and fair dealing when a breach of contract claim, based on the same facts, is also pled.”). See also ICD Holdings S.A., 976 F.Supp. at 243–44 (finding that breach of implied covenant of good faith claims will be dismissed as redundant when they share a factual predicate with a breach of contract claim).
D. Claim III—Indemnification
To counter the indemnification claim, the defendants argue only that if the breach of contract claims fail, so too must the indemnification claim.
However, one breach of contract claim survives.
See Def. Mem. at 14.
Boart Longyear has plausibly stated a claim for a breach of the Non–Compete clause.
See supra Part V.B.2.
Due to the indemnification clause in the SPA, which provides for indemnification arising out of any breach of the SPA, the indemnification claim may proceed with regard to the surviving breach of contract claim.
See id.
See Def. SPA at 36.
E. Leave to Replead Is Partially Granted
Leave to replead is granted as to the Non–Solicitation claim and the claims against the Affiliates. Leave to replead is denied with regard to the implied covenant of good faith and fair dealing claim, which is redundant.
See Cuoco, 222 F.3d at 112 (finding that when a party cannot offer additional substantive facts to cure a deficient pleading, amending is futile).
VI. CONCLUSION
For the foregoing reasons, the claims against Terra Sonic International, LLC, Hi–Vac Corporation, Promanco, Inc., and Mole Master Services Corp. are dismissed. The remaining defendants' motion to dismiss the breach of the Non–Solicitation clause and the breach of the implied duty of good faith and fair dealing claims is granted. The breach of the Non–Compete clause and indemnification claims survive. Any amended Complaint must be filed within thirty (30) days of the date of this Order. The Clerk of the Court is directed to close this motion (Docket No. 3). A conference is scheduled for June 30, at 4:30 p.m. in Courtroom 15C.
SO ORDERED:
OPINION AND ORDER
I. INTRODUCTION
Boart Longyear Ltd., Boart Longyear Global Holdco, Inc., Longyear Holdings, Inc., Resources Services Holdco, Inc., and Prosonic Corporation (collectively, “Boart Longyear”) bring this action against fellow signatories (Alliance Industries, Inc. and Rudolph John Lehman) to a Stock Purchase Agreement (“SPA”). The defendants moved to dismiss the plaintiffs' claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and indemnification. I permitted the breach of contract and indemnification claims to proceed (in part), but dismissed the breach of the implied covenant of good faith and fair dealing claim as redundant. Boart Longyear now moves under Local Rule 6.3 for reconsideration of the dismissal of the breach of the implied covenant of good faith and fair dealing claim. For the reasons set forth below, Boart Longyear's motion is denied.
II. BACKGROUND
The background to this motion is set forth in the June Opinion.
I briefly add that, in the SPA, Boart Longyear purchased the proprietary technology and capital stock of Prosonic Corporation, an entity owned by Alliance Industries, Inc., whose sole shareholder is Lehman.
See869 F.Supp.2d at 409–10.
Boart Longyear sought to protect the proprietary technology,
See Complaint ¶¶ 20–21.
but alleges that Lehman kept backup files and used Prosonic documents purchased by Boart Longyear to develop a competing drill in violation of the SPA.
See id. ¶ 27.
Boart Longyear specifies that this information included, inter alia, market research data, testing results and data, technical specifications and blue prints, and manufacturing techniques.
See id. ¶¶ 39–40.
In Count II of the Complaint, Boart Longyear alleged that “[defendants] breached their implied obligation to Boart Longyear of good faith and fair dealing under the Agreement by using the property sold to Boart Longyear ....”
See id. ¶ 38.
Id. ¶ 50.
III. LEGAL STANDARD
A. Motion for Reconsideration
Motions for reconsideration are governed by Local Rule 6.3 and are committed to the sound discretion of the district court.
A motion for reconsideration is appropriate where “ ‘the moving party can point to controlling decisions or data that the court overlooked—matters, in other words, that might reasonably be expected to alter the conclusion reached by the court.’ ”
See Patterson v. U.S., No. 04 Civ. 3140, 2006 WL 2067036, at *1 (S.D.N.Y. July 26, 2006) (“The decision to grant or deny a motion for reconsideration is within the sound discretion of the district court.”) (citing McCarthy v. Manson, 714 F.2d 234, 237 (2d Cir.1983)).
A motion for reconsideration may also be granted to “ ‘correct a clear error or prevent manifest injustice.’ ”
Jowers v. Family Dollar Stores, Inc., 455 Fed.Appx. 100, 101 (2d Cir.2012) (quoting Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir.1995)).
RST (2005) Inc. v. Research in Motion Ltd., 597 F.Supp.2d 362, 365 (S.D.N.Y.2009) (quoting Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir.1992)).
The purpose of Local Rule 6.3 is to “ ‘ensure the finality of decisions and to prevent the practice of a losing party examining a decision and then plugging the gaps of a lost motion with additional matters.’ ”
Local Rule 6.3 must be “narrowly construed and strictly applied so as to avoid repetitive arguments on issues that have been considered fully by the Court.”
Grand Crossing, L.P. v. U.S. Underwriters Ins. Co., No. 03 Civ. 5429, 2008 WL 4525400, at *3 (S.D.N.Y. Oct. 6, 2008) (quoting S.E.C. v. Ashbury Capital Partners, No. 00 Civ. 7898, 2001 WL 604044, at *1 (S.D.N.Y. May 31, 2001)). Accord Commerce Funding Corp. v. Comprehensive Habilitation Servs., Inc., 233 F.R.D. 355, 361 (S.D.N.Y.2005) (“[A] movant may not raise on a motion for reconsideration any matter that it did not raise previously to the court on the underlying motion sought to be reconsidered.”).
Courts have repeatedly been forced to warn litigants that such motions should not be made reflexively to reargue “ ‘those issues already considered when a party does not like the way the original motion was resolved.’ ”
U.S. v. Treacy, No. 08 CR 366, 2009 WL 47496, at *1 (S.D.N.Y. Jan. 8, 2009) (citation and quotation marks omitted). Accord Shrader, 70 F.3d at 257 (holding that a court will deny the motion when the movant “seeks solely to relitigate an issue already decided”).
A motion for reconsideration is not an “opportunity for making new arguments that could have been previously advanced,”
Makas v. Orlando, No. 06 Civ. 14305, 2008 WL 2139131, at *1 (S.D.N.Y. May 19, 2008) (quoting In re Houbigant, Inc., 914 F.Supp. 997, 1001 (S.D.N.Y.1996)).
nor is it a substitute for appeal.
Associated Press v. U.S. Dep't of Defense, 395 F.Supp.2d 17, 19 (S.D.N.Y.2005).
See Grand Crossing, 2008 WL 4525400, at *3.
B. Motion to Dismiss
On a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the court must assume “all well-pleaded, nonconclusory factual allegations in the complaint to be true”
and “draw all reasonable inferences in the plaintiff's favor.”
Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 124 (2d Cir.2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678–679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)).
On the other hand, “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”
Ofori–Tenkorang v. American Int'l Group, Inc., 460 F.3d 296, 298 (2d Cir.2006).
To survive a motion to dismiss, therefore, the allegations in the complaint must meet a standard of “plausibility.”
Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted).
A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 564, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Accord Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.
Plausibility “is not akin to a probability requirement,” rather, plausibility requires “more than a sheer possibility that a defendant has acted unlawfully.”
Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted).
Id. (quotation marks omitted).
In support of her claim, a plaintiff may allege “upon information and belief” facts that are “peculiarly within the possession and control of the defendant.”
Conversely, a plaintiff should not allege upon information and belief matters that are presumptively within her personal knowledge, unless she rebuts the presumption.
Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir.2010).
Such matters include “ ‘matters of public record or matters generally known in the community ... inasmuch as everyone is held to be conversant with them.’ ”
See Sanders v. Grenadier Realty, Inc., 367 Fed.Appx. 173, 177 n. 2 (2d Cir.2010).
Id. (quoting 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1224, at 300–01 (3d ed.2004)).
C. Breach of the Implied Covenant of Good Faith and Fair Dealing
The covenant of good faith and fair dealing “embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.”
The covenant is implied in every contract governed under New York law.
511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153, 746 N.Y.S.2d 131, 773 N.E.2d 496 (2002) (quotation marks and citation omitted).
Accordingly, a “breach of the implied duty of good faith is considered a breach of the underlying contract.”
See M/A–COM Sec. Corp. v. Galesi, 904 F.2d 134, 136 (2d Cir.1990).
For this reason, “a claim for breach of the implied covenant [of good faith and fair dealing] will be dismissed as redundant where the conduct allegedly violating the implied covenant is also the predicate for breach of covenant of an express provision of the underlying contract.”
Deutsche Bank Secs., Inc. v. Rhodes, 578 F.Supp.2d 652, 664 (S.D.N.Y.2008) (citing Harris v. Provident Life & Acc. Ins. Co., 310 F.3d 73, 80 (2d Cir.2002)).
ICD Holdings S.A. v. Frankel, 976 F.Supp. 234, 243–44 (S.D.N.Y.1997) (quotation marks and citation omitted).
IV. DISCUSSION
Boart Longyear asserts that its implied covenant of good faith and fair dealing claim (Count II) rests on a separate factual predicate than its breach of the SPA Non–Compete claim (Count I)—the retention of Boart Longyear's property.
In the June opinion, I found the claims duplicative
See Plaintiffs' Memorandum of Law in Support of Motion for Reconsideration (“Pl. Mem.”), at 4.
because Boart Longyear alleged that the property retained by defendants was used to develop drills that competed with Boart Longyear's.
See869 F.Supp.2d at 414–16.
Defendants argue that allegations describing defendants' use of the retained materials to compete with plaintiffs render the claims duplicative.
See Complaint ¶¶ 39–40, 50.
See Defendants' Opposition to Motion for Reconsideration, at 3.
On reconsideration, I again conclude that defendants' continued possession and use of Boart Longyear's property, which it acquired from defendants in the SPA and which was used to breach the Non–Compete, does not provide an independent factual basis for Count II.
Plaintiffs' distinction between possession and use is not compelling, where plaintiffs allege that the retained documents were used solely to compete with Boart Longyear.
See Fleisher v. Phoenix Life Ins. Co., 858 F.Supp.2d 290, 299–300, No. 11 Civ. 8405, 2012 WL 1538357, at *7 (S.D.N.Y. May 2, 2012) (dismissing an implied covenant of good faith and fair dealing claim where the allegations were “not sufficiently distinct to avoid dismissal for redundancy” because “ the conduct alleged [was] exactly the same as the charge of the express breach of contract claim.”) (emphasis added); BLD Prods., LLC v. Viacom, Inc., No. 10 Civ. 2625, 2011 WL 1327340, at *14 (S.D.N.Y. Mar. 31, 2011) (dismissing an implied covenant of good faith and fair dealing claim, which was based on the same conduct underlying a breach of contract claim).
See Complaint ¶¶ 36–39.
While I have previously held that a duplicative implied covenant of good faith and fair dealing claim may stand as an alternative cause of action,
more recent Second Circuit case law indicates that dismissal for redundancy is the appropriate outcome here.
See Xpedior Creditor Trust v. Credit Suisse First Boston (USA) Inc., 341 F.Supp.2d 258, 272 (S.D.N.Y.2004) (“[T]he Federal Rules explicitly permit a party to plead causes of action in the alternative, ‘regardless of consistency.’ ”) (quoting Fed.R.Civ.P. 8(d)(3)).
See L–7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 434 n. 17 (2d Cir.2011) (finding that a duplicative implied covenant of good faith and fair dealing claim should have been dismissed as redundant under New York law). See also Matsumura v. Benihana Nat'l Corp., 465 Fed.Appx. 23, 29 (2d Cir.2012) (“Plaintiffs based their breach of good faith claim on the same operative facts as their breach of contract claim; accordingly, the District Court did not err in dismissing the former claim as duplicative of the latter.”); Harris v. Provident Life & Accident Ins. Co., 310 F.3d 73, 81 (2d Cir.2002) (“New York law ... does not recognize a separate cause of action for breach of the implied covenant of good faith and fair dealing when a breach of contract claim, based upon the same facts, is also pled.”); Emposimato v. CIFC Acquisition Corp., 30 Misc.3d 1233(A), No. 601728/2008, 2011 WL 833801, at *11 (Sup.Ct.N.Y.Co. Mar. 7, 2011) (“A claim for breach of the implied covenant is, itself, a type of breach of contract claim. The distinguishing characteristic of a claim for breach of the implied covenant is merely that—while a claim for breach of contract may allege the breach of a contract term which is either express or implied—a claim for breach of the implied covenant alleges the breach of a contract term which is not express, but should be implied”).
V. CONCLUSION
For the foregoing reasons, Boart Longyear's motion for reconsideration is denied. The Clerk of the Court is directed to close this motion (Docket No. 19). A conference is scheduled for July 30, 2012, at 4:30 p.m. in Courtroom 15C.
SO ORDERED.