Opinion
21-CV-09166 (GHW) (RWL)
09-06-2022
MECO ELECTRIC CO., INC., Plaintiff, v. SIEMENS INDUSTRY, INC., Defendant.
REPORT AND RECOMMENDATION TO HON. GREGORY H. WOODS: MOTION TO DISMISS
ROBERT W. LEHRBURGER, UNITED STATES MAGISTRATE JUDGE.
Plaintiff MECO Electric Co., Inc. (“Plaintiff” or “MECO”) filed this action against Defendant Siemens Industry, Inc. (“Defendant” or “Siemens”), alleging breach of contract due to Siemens's failure to act in good faith and, in the alternative, that Siemens has been unjustly enriched by receiving services from MECO without paying for them. Siemens moves to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) (“Rule 12(b)(6)”), arguing that MECO has waived its right to damages by admittedly failing to strictly comply with the conditions precedent set out in the three contracts at issue. Siemens further argues that MECO failed to allege a claim for breach under Illinois law, and that MECO's unjust enrichment claim is barred by the existence of contracts addressing the subject matter at issue. For the reasons set forth below, I recommend that Siemens's motion be GRANTED.
FACTUAL BACKGROUND
As required on a motion to dismiss, the Court accepts as true all well-pled allegations of the Complaint and draws all reasonable inferences in favor of Plaintiff, the non-moving party. The Court also considers documents referenced in the Complaint, including the contracts at issue.
See Lotes Co. v. Hon Hai Precision Industry Co., 753 F.3d 395, 403 (2d Cir. 2014).
See Kleinman v. Elan Corp., 706 F.3d 145, 152 (2d Cir. 2013).
MECO is an electrical subcontractor based and incorporated in New York. (Compl. ¶¶ 1, 5, 21.) Siemens is a Delaware Corporation with principal places of business in New Jersey, Illinois, and Georgia. (Compl. ¶ 2.) MECO contracted with Siemens to provide various electrical services for three construction projects in Manhattan: the expansion of Pennsylvania Station (“Moynihan Project”), the expansion of the Jacob Javits Convention Center (“Javits Project”), and the construction of a transformer building at the Javits Center (“Transformer Project”). (Compl. ¶¶ 6, 12-14.)
“Compl.” refers to the Second Amended Complaint at Dkt. 23.
MECO entered into a written subcontract with Siemens for each project (collectively, the “Subcontracts”). The Subcontract for the Moynihan Project is a fixed price contract for $2,190,950, with $249,065 in approved change orders, effective on September 12, 2018. (Compl. ¶¶ 12(a)-(c)). The Subcontract for the Javits Project is a fixed price contract for $2,380,525, with $997,219.62 in approved change orders, effective on February 28, 2019. (Compl. ¶¶ 13(a)-(c)). The Subcontract for the Transformer Project is a fixed price contract for $425,000, with $260,870 in approved change orders, effective on March 8, 2018. (Compl. ¶¶ 14(a)-(c).)
MECO alleges that, due to Siemens's failure to act in good faith and its abuse of contractual discretion, MECO's “cost to perform the contracted scope of work far exceeded MECO's [fixed] contract price.” (Compl. ¶ 9; see also id. ¶¶ 19, 20.) Specifically, MECO claims that Siemens caused it to “incur excessive mobilizations and de-mobilizations of the lifts and the crews,” during the Moynihan and Javits Projects, thereby causing MECO to “suffer increased costs of performance that was not contemplated when [it] entered into the contract” (Compl. ¶ 19(a)(i); see also id. ¶ 23); that, falling short of expected industry standard, “Siemens never supplied a Critical Path Method (“CPM”) schedule for the work on a start to finish basis ... [and] [a]s a result, MECO did not know what other trades were doing,” resulting in MECO being unable to “perform its work in the most efficient sequence possible” on the Moynihan and Javits Projects (Compl. ¶ 19(a)(ii)); that “MECO worked under conditions that can best be described as chaotic” on these projects (Compl. ¶ 19(a)(iii)); and that “Siemens compelled overtime work that led to losses in productivity.” (Compl. ¶ 19(a)(iv).)
On the Transformer Project, MECO claims that after a “six-month lull,” MECO returned to the work site to find much of the space built out, which “blocked free access to installing electrical conduit runs” and made the work “much more costly,” and was an example of “Siemens' failure to act in good faith” and its “abuse of discretion.” (Compl. ¶ 20.) “Under a ‘total cost' theory of construction contract damages,” MECO “seeks damages in the amount of the difference between MECO's actual cost to perform minus MECO's contract price,” which totals $2,157,132 for the Moynihan Project, $482,772.38 for the Javits Project, and $281,306 for the Transformer Project. (Compl. ¶¶ 9, 12(g), 13(g), 14(j).)
MECO alleges that it “incurred a loss of $481,306.45” on the Javits Transformer Project (Compl. ¶ 14(g)), but at the same time alleges in its accounting of the project that the difference between its actual cost and expected cost to complete the work was $281,306 and identifies the “total cost claim portion” of the Javits Transformer Project Claim as $281,306. (Compl. ¶ 14(j).)
MECO further alleges that the COVID-19 pandemic “exacerbated an already chaotic project” to the extent that MECO needed to “spend additional time cleaning and disinfecting tools and managing safety protocols,” in addition to loss of productivity due to spacing requirements between workers. (Compl. ¶ 19(b).)
Finally, MECO claims that it is owed the remaining balance of the base contract price, as well as “retainage” funds that Siemens agreed to release once the contractually-defined warranty period for the work under the Subcontracts had expired. (Compl. ¶¶ 12(e), 12(j), 13(e), 13(j), 14(e), 14(j).)
Seeking damages based on its “total cost” claim, compensation for extra costs incurred by COVID-19, and payment for the base contract balances - including retainage - due on each Project, MECO claims that it has been damaged in an amount of least $3,468,487. (Compl. ¶ 30.)
PROCEDURAL HISTORY
MECO filed its initial complaint in this action on November 5, 2021. (Dkt. 1.) The case was referred to me for general pretrial purposes and all dispositive motions on November 16, 2021. (Dkt 6.) On February 1, 2022, Siemens filed a letter seeking to file a motion to dismiss the complaint for failure to state a claim. (Dkt. 8.) On February 2, 2022, the Court ordered MECO to file an amended complaint to redress the issues raised by Defendant if there was a good faith basis to do so. (Dkt. 9.) On February 9, 2022, MECO filed its First Amended Complaint. (Dkt. 12.) On March 14, 2022, Siemens moved to dismiss the First Amended Complaint. (Dkts. 14-16.)
On April 13, 2022, MECO moved for leave to file a Second Amended Complaint, claiming that the grounds for dismissal raised by Siemens in its motion were different from those raised in its pre-motion letter at Dkt. 8. (Dkt. 19.) Siemens opposed the motion. (Dkt. 20.) The Court granted MECO's motion on April 19, 2022. (Dkt. 22.)
MECO filed its Second Amended Complaint on April 21, 2022. (Dkt. 23.) On May 9, 2022, Siemens informed the Court that it would like to withdraw its prior motion to dismiss and file a new motion to dismiss the Second Amended Complaint. (Dkt. 24.) Siemens then filed the present motion to dismiss on May 24, 2022. (Dkts. 26-28.) MECO filed its opposition on June 23, 2022. (Dkt. 29.) Siemens filed its reply on July 7, 2022, at which point the motion was fully briefed. (Dkt. 30.)
LEGAL STANDARDS
Under Rule 12(b)(6), a pleading may be dismissed for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). To survive a Rule 12(b)(6) motion, a complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974 (2007). A claim is facially plausible when the factual content pleaded allows a court “to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949 (2009).
“Where a complaint pleads facts that are ‘merely consistent with' a defendant's liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.'” Id. (quoting Twombly, 550 U.S. at 557, 127 S.Ct. at 1966). In considering a motion to dismiss, a district court “accept[s] all factual claims in the complaint as true, and draw[s] all reasonable inferences in the plaintiff's favor.” Lotes, 753 F.3d at 403 (internal quotation marks omitted). However, this tenet is “inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949. “[R]ather, the complaint's factual allegations must be enough to raise a right to relief above the speculative level ... i.e., enough to make the claim plausible.” Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010) (internal quotation marks and brackets omitted). A complaint is properly dismissed where, as a matter of law, “the allegations in [the] complaint, however true, could not raise a claim of entitlement to relief.” Twombly, 550 U.S. at 558, 127 S.Ct at 1966.
For the purposes of considering a motion to dismiss pursuant to Rule 12(b)(6), a court generally is confined to the facts alleged in the complaint. See Cortec Industries v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991). A court may, however, consider additional materials, including documents attached to the complaint, documents incorporated into the complaint by reference, public records, and documents that the plaintiff either possessed or knew about, and relied upon, in bringing the suit. See Kleinman, 706 F.3d at 152 (quoting ATSI Communications, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007)). In that regard, if “a document relied on in the complaint contradicts allegations in the complaint, the document, not the allegations, control, and the court need not accept the allegations in the complaint as true.” Poindexter v. EMI Record Group Inc., No. 11-CV-559, 2012 WL 1027639, at *2 (S.D.N.Y. March 27, 2012) (quoting Barnum v. Millbrook Care Ltd. Partnership, 850 F.Supp. 1227, 1232-33 (S.D.N.Y.1994)).
DISCUSSION
In the following discussion, the Court first determines that dismissal is warranted on all of MECO's breach-of-contract claims because MECO fails to plausibly allege strict compliance with conditions precedent. The Court then finds that MECO's unjust enrichment claim should be dismissed as abandoned, and in any case should be dismissed because it does not plead any facts that suggest the Subcontracts are not valid and controlling. Finally, the Court explains that MECO's claims, except for its claim for contract balances and retainage, should be dismissed with prejudice because MECO has already had two opportunities to amend, and further amendment would be futile.
A. Breach Of Contract
Pursuant to the choice of law clause under Article 1.3 of each Subcontract, the three Subcontracts are all governed by Illinois law; neither party contends otherwise.(Dkt. 28, Exs. A-C.) To prevail on a breach of contract claim under Illinois law, the plaintiff must allege, inter alia, that it performed all applicable conditions precedent. See Redfield v. Continental Casualty Corporation, 818 F.2d 596, 610 (7th Cir.1987) (“An essential allegation of a complaint based on a breach of contract is that the plaintiff performed all contractual conditions required of him”); Pathman Construction Co. v. Hi-Way Electric Co., 65 Ill.App.3d 480, 485-6, 22 Ill.Dec. 133, 138 (1978) (“[I]n an action for breach of contract it is necessary for the plaintiff to plead and prove that he has performed all conditions precedent to the contract”) (citing Ill.Rev.Stat. (1975), ch. 110A, par. 133(c)); see also Wilbur v. Potpora, 123 Ill.App.3d 166, 169, 78 Ill.Dec. 615, 617 (1984) (concluding that “performance of contractual conditions is one of the essential elements of a breach of contract action”) (citing Martin-Trigona v. Bloomington Federal Savings & Loan Association, 101 Ill.App.3d 943, 946, 57 Ill.Dec. 348, 351 (1981)).
The Court may consider the three Subcontracts on Siemens's Motion to Dismiss because MECO incorporated them into its Second Amended Complaint by reference and relied upon them in bringing the suit. See Kleinman, 706 F.3d at 152.
MECO argues that, by pleading that it “satisfied any and all required conditions precedent to payment on MECO's ‘total cost' claim, and for payment of MECO's final contract balance, including retainage” (Compl. ¶ 26), that it has pled sufficiently to survive Siemens' motion to dismiss. (Pl. Mem. at 1-2.) The Court disagrees.
“Pl. Mem.” refers to Plaintiff MECO Electric Co., Inc's Memorandum Of Law In Opposition at Dkt. 29.
1. Pleading Standard For Conditions Precedent
A condition precedent is “one which must be performed either before a contract becomes effective or which is to be performed by one party to an existing contract before the other party is obligated to perform.” Regency Commercial Associates, LLC v. Lopax, Inc., 373 Ill.App.3d 270, 282, 311 Ill.Dec. 636, 647-48 (2007) (citing MXL Industries, Inc. v. Mulder, 252 Ill.App.3d 18, 25, 191 Ill.Dec. 124, 129 (1993)); see also Midwest Builder Distributing, Inc. v. Lord & Essex, Inc., 383 Ill.App.3d 645, 668, 322 Ill.Dec. 371, 393 (2007) (hereinafter “Midwest”).
Federal Rule of Civil Procedure 9(c) states: “In pleading conditions precedent, it suffices to allege generally that all conditions precedent have occurred or been performed.” Fed.R.Civ.P. 9(c). Although “the Court of Appeals [for the Second Circuit] has not interpreted Rule 9(c) in the wake of Twombly and Iqbal,” courts in this district have found that the word “generally” does not “exempt allegations that conditions precedent have been performed ... from the baseline plausibility requirement of Rule 8(a).” Dervan v. Gordian Group LLC, No. 16-CV-1694, 2017 WL 819494, at *5 (S.D.N.Y. Feb. 28, 2017); see also Boustead Securities, LLC v. Leaping Group Co. Ltd., No. 20-CV-3749, 2021 WL 3774116, at *4 (S.D.N.Y. Aug. 25, 2021) (concluding that “this Court and others in this district have held that post-Iqbal, Rule 9(c)'s command that conditions precedent be alleged ‘generally' requires a plaintiff to allege plausibly that they have satisfied the conditions precedent”) (citing O.F.I. Imports Inc. v. General Electric Capital Corporation, No. 15-CV-7231, 2017 WL 3084901, at *5-6 (S.D.N.Y. July 20, 2017)); Comerica Leasing Corporation v. Bombardier Inc., No. 16-CV-614, 2019 WL 11027701, at *8 (S.D.N.Y. Sept. 30, 2019) (concluding that “the occurrence or performance of a condition precedent - to the extent that it need be pled as a required element of a given claim - must be plausibly alleged in accordance with Rule 8(a)”) (citing Dervan, 2017 WL 819494 at *6).
Other courts in this District have taken a more liberal approach. See, e.g., Randolph Equities, LLC v. Carbon Capital, Inc., No. 05-CV-10889, 2007 WL 914234, at *4 (S.D.N.Y. March 26, 2007). “But, as Dervan observed, these cases predate Twombly's and Iqbal's modification of the notice pleading standard.” Ashland Global Holdings Inc. v. Valvoline, Inc., No. 21-CV-00498, 2022 WL 219997, at *6 (S.D.N.Y. Jan. 25, 2022) (following Dervan).
Applying the plausibility standard to allegations regarding conditions precedent, courts have held that “threadbare and, at least in part, conclusory statements do not provide the sufficient factual matter required for the Court to draw the reasonable inference” that all conditions precedent have been satisfied. Dervan, 2017 WL 819494 at *6 (citing Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949); see also Napster, LLC v. Rounder Records Corp., 761 F.Supp.2d 200, 208 (S.D.N.Y. 2011) (dismissing a claim where the plaintiff pleaded its performance of contractual conditions precedent in only conclusory terms); Swan Media Group, Inc. v. Staub, 841 F.Supp.2d 804, 808 (S.D.N.Y. 2012) (same).
2. MECO Insufficiently Pled That It Complied With All Conditions Precedent To A Claim For “Total Cost” Damages
When contracts contain express conditions precedent, Illinois law requires strict compliance with such conditions. Midwest, 383 Ill.App.3d at 668, 322 Ill.Dec. at 393 (citing Regency Commercial Associates, LLC, 373 Ill.App.3d at 282, 311 Ill.Dec. at 647); see also Dodson v. Nink, 72 Ill.App.3d 59, 64, 28 Ill.Dec. 379, 382 (1979) (“It is well established that where a contract contains a condition precedent, the contract does not become enforceable or effective until the condition is performed or the contingency occurs”). “The failure to perform a condition precedent may be construed as a breach of contract.” Cathay Bank v. Accetturo, 2016 IL App (1st) 152783, ¶ 32, 408 Ill.Dec. 675, 685 (2016) (citing Jones v. Seiwert, 164 Ill.App.3d 954, 958-59, 115 Ill.Dec. 869, 872 (1987)); see also Hardin, Rodriguez & Boivin Anesthesiologists, Ltd. v. Paradigm Insurance Co., 962 F.2d 628, 633 (7th Cir. 1992).
“Courts will enforce express conditions precedent despite the potential for harsh results for the noncomplying party,” especially where, as here, the dispute “involves transactions between two sophisticated commercial entities.” Midwest, 383 Ill.App.3d at 668, 322 Ill.Dec. at 393-94; see also Associates Asset Management, LLC v. Cruz, 2019 IL App (1st) 182678, ¶ 34, 437 Ill.Dec. 369, 376 (2019); Cathay Bank, 2016 IL App (1st) 152783, ¶ 32, 408 Ill.Dec. at 685.
Article 16.1 in each of the three Subcontracts constitutes an express condition precedent. Specifically, Article 16.1 provides:
16.1 All questions, claims and disputes (collectively, “Claims”) arising out of or relating to this Subcontract shall be resolved in the first instance by [Siemens's] Project Manager. No Claim for additional compensation or extension of time shall be considered unless presented to [Siemens's] Project Manager in writing within ten (10) calendar days after the occurrence giving rise to the Claim.(Dkt. 28, Exs. A-C) (emphasis added). Expanding on that condition precedent, Article 16.2, 16.3, and 16.4 of each Subcontract requires that if Siemens's Project Manager denies MECO's claim, MECO must appeal in writing “within ten (10) calendar days after the Project Manager's initial decision ... [and] the parties shall meet at a mutually acceptable time and place;” if the parties cannot resolve the claim, “then the parties shall discuss in good faith whether to submit the Claim to mediation;” finally, if mediation fails, “the Claim shall be litigated in the state or federal courts of the State of Illinois.” (Dkt. 28, Exs. A-C).
MECO does not dispute that those conditions precedent exist, and instead argues, with respect to its “total cost” claim, that “MECO substantially complied with the contract, Section 16, and any deviations were not material,” by communicating with Siemens's counsel well after the alleged losses occurred. (Pl. Mem. at 4 (emphasis added).) MECO essentially asks the Court to deviate from the strict compliance standard imposed under Illinois law. The Court may not do so. As MECO “concedes that it did not give Siemens formal notice of a claim each time Siemens' conduct fell below expected industry standards” (Compl. ¶ 27), and that it “submitted its ‘total cost claim' after . complet[ing] the work” (Pl. Mem. at 4), MECO admitted that it failed to strictly comply with the ten-day notice condition under Article 16.1 of each Subcontract.
As to the Transformer Project, MECO also claims that “Siemens . did not provide MECO with a lien release that would have allowed MECO to preserve its ‘total cost' claim.” (Compl. ¶ 18(c).) MECO does not plead any facts to establish the significance of Siemens's alleged failure or how it impeded MECO from preserving its “total cost” claim. That is not surprising. The only reference to a lien release in the Transformer Project Subcontract appears in the portion of the contract defining what MECO's invoices to Siemens must include. (Dkt. 28, Ex. C at Art. 2.2.6 (“SUBCONTRACTOR'S invoices shall... Include Partial Waiver and Release of Lien to date in a form acceptable to CONTRACTOR”).)
MECO next contends that the allegation that Siemens breached “its duty of good faith and fair dealing by frustrating MECO's ability to assert its claim in a timely fashion” in turn “excuses any failure by MECO to comply with Section 16's ten-day notice of occurrence requirement.” (Pl. Mem. at 4, 5.) That argument does not survive scrutiny.
It is true that, “to ameliorate the strict enforcement of conditions precedent, courts have developed the following doctrine: ‘Where the performance of the contingency or condition is within the control of a party to the agreement, the party for whose benefit the condition precedent runs is required to use ‘reasonable efforts' to have it occur.'” Midwest, 383 Ill.App.3d at 671, 322 Ill.Dec. at 396 (quoting Dodson, 72 Ill.App.3d at 64, 28 Ill.Dec. at 382). The Midwest court further noted that “[t]his principle may be seen as an extension of the implied covenant of good faith and fair dealing ... [which] prohibits the parties from exercising their contractual discretion ‘arbitrarily, capriciously, or in a manner inconsistent with the reasonable expectations of the parties.'” Midwest, 383 Ill.App.3d at 671-2, 322 Ill.Dec. at 396 (citing Resolution Trust Corporation v. Holtzman, 248 Ill.App.3d 105, 112, 187 Ill.Dec. 827, 833 (1993)).
Courts have found such abuse of discretion - which renders the conditions precedent unenforceable - where a party takes affirmative steps to make it impossible for the other party to comply with the conditions. See, e.g., Midwest, 383 Ill.App.3d at 672, 322 Ill.Dec. at 397 (“[W]e see that Lord & Essex . actively took steps to prevent the fulfillment of a condition precedent to payment .[,] [and] Midwest's failure to produce signed purchase orders and contractor's job release notices cannot function as a bar to Midwest's recovery when Lord & Essex effectively made it impossible for Midwest to produce such documents”); Cummings v. Beaton & Associates, Inc., 249 Ill.App.3d 287, 303, 187 Ill.Dec. 701, 712 (1992) (concluding that courts have held that “a party who prevents the fulfillment of a condition upon which his own liability rests many not defeat his liability by asserting the failure of the condition he himself has rendered impossible”); Lukasik v. Riddell, Inc., 116 Ill.App.3d 339, 346, 72 Ill.Dec. 123, 127 (1983) (“A party cannot take advantage of a condition precedent which he has rendered impossible or complain of a failure to perform which he himself has prevented”).
But that is not the case here. MECO alleges that, on the Moynihan and Javits Projects, Siemens knowingly caused MECO to “excessively mobilize and demobilize ... caus[ing] MECO to incur additional costs” (Compl. ¶ 19(a)(i)(1)), and that on the Transformer Project, Siemens “had built out much of the space . block[ing] [MECO's] free access to installing electrical conduit runs” and “did not provide MECO with a lien release that would have allowed MECO to preserve its ‘total cost' claim.” (Compl. ¶¶ 18(c), 20.) But MECO does not provide any plausible allegation or explanation as to how these allegedly disruptive actions by Siemens would have rendered it impossible for MECO to present a claim for additional compensation in writing within ten calendar days after each occurrence, pursuant to Article 16.1 in each Subcontract.
Based on its factual allegations, MECO did not even try to satisfy the requisite conditions precedent, despite having the ability to provide a timely notice to Siemens. As a result, MECO's general allegation that it “complied with the intent and purpose behind any condition precedent to a claim for MECO's ‘total cost' damages” (Compl. ¶ 27) is at most a conclusory, threadbare statement, and, particularly in light of facts pled to the contrary, the Court is unable to draw the reasonable inference that any such condition precedent was satisfied or that Siemens impeded MECO from satisfying it. Dervan, 2017 WL 819494 at *6; see also O.F.I. Imports Inc., 2017 WL 3084901, at *6 (concluding that a plaintiff's “threadbare conclusory statement does not provide the sufficient factual matter that would allow the court to draw the reasonable inference that all conditions precedent have been satisfied”) (internal quotation marks omitted); Gordon v. Landfill, LLC, 2021 IL App (5th) 200383-U, ¶ 30 (2021) (because contract at issue had a condition precedent and plaintiff did not strictly comply with the condition, plaintiff “as the noncomplying party ...cannot now complain of an unfavorable result”). MECO thus has failed to state a claim with respect to its claim for “total cost” damages.
3. MECO Insufficiently Pled That It Complied With All Conditions Precedent To Receive Payment For Contract Balance And Retainage
In addition to its demand for compensation for general financial losses under the “total cost” claim, MECO also seeks payment for its purported base contract balance and the release of its retainage balance on each Project. (Compl. ¶¶ 12(e), 12(j), 13(e), 13(j), 14(e), 14(j)); see also Pl. Mem. at 5-6.) These claims similarly are subject to contractual conditions precedent.
Article 3.2 of each Subcontract sets out the express conditions precedent for receiving final payment of the contract balance:
[F]inal payment, constituting the entire unpaid balance of the Contract Amount, shall be made by [Siemens] to [MECO], when the Work is fully performed in accordance with the requirements of the Subcontract Documents and upon delivery of the following items to [Siemens]: [1] Final waiver of Lien; [2] Operation and maintenance manuals, if applicable to the Work; [3] Written warranties for equipment provided, if applicable to the Work; [4] As-built drawings, if applicable to the Work; [5] Consent of surety to final payment, if applicable to the Work.(Dkt. 28, Exs. A-C) (emphasis added). MECO's Second Amended Complaint, however, nowhere alleges that MECO has complied with Article 3.2's conditions precedent. Instead, MECO claims that, on the Moynihan and Javits Projects, it “is ready, willing, and able to comply with the requirements under Article 3 for final payment on this project” (Compl. ¶¶ 18(a)-(b)), implicitly admitting that it has not delivered the required items and therefore has not strictly complied with the conditions precedent under Article 3.2 of each Subcontract.
MECO contends that “an effort [to deliver such items] ... would be futile [because] Siemens has stated that even if MECO delivers the Article 3.2 documents, Siemens will not pay MECO.” (Pl. Mem. at 5-6; see also Compl. ¶¶ 18(b)-(c) (asserting that Siemens had stated by email that it could not pay MECO its final balance because “everything is on ‘hold' at this point because of the lawsuit”).) Nonetheless, just as Siemens's alleged failure to properly manage and coordinate the projects never rendered it impossible for MECO to strictly comply with the ten-day notice requirement under Article 16.1, nothing prevents MECO from submitting all required deliverables under Article 3.2 of each Subcontract despite the purported “futility” of such efforts. See O.F.I. Imports Inc., 2017 WL 3084901 at *6 (finding that the plaintiff's “conclusory and befuddling averment that it has not performed ‘any act which . performance would have been futile'” does not allow the court to “draw the reasonable inference that all conditions precedent have been satisfied”) (internal citation omitted).
With respect to retainage, Article 3.4 of the Moynihan and Javits Subcontracts provides that “[Siemens] may retain five percent (5%) of the retainage until the end of the warranty period,” (Dkt. 28, Ex. A, Ex. B), while Article 3.4 of the Transformer Subcontract allows Siemens to retain “ten percent (10%).” (Dkt. 28, Ex. C.) MECO, however, does not allege that the warranty period has expired. Instead, it merely speculates, alleging that expiration of the warranty period for the Javits Project “may have already occurred” (Compl. ¶ 18(b)) (emphasis added). The Complaint omits any allegation at all as to expiration of the warranty period for the other projects, leaving MECO to merely assert in its briefing that it “believe[s] the other projects have concluded the warranty period.” (Pl. Mem. at 6.) (emphasis added).
The “warranty period” is defined as “a period of one year from the date of acceptance of the Work or such longer period as required by this Subcontract,” pursuant to Article 24.1 of each of the Subcontracts. (Dkt. 28, Exs. A-C..)
Courts have consistently held that mere speculation is insufficient to withstand a motion to dismiss. See, e.g., Yamashita v. Scholastic Inc., 936 F.3d 98, 105 (2d Cir. 2019) (allegation that license limitations “might” have been violated was speculative and insufficient to state a claim); ATSI Communications, 493 F.3d at 98 (“To survive dismissal, the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient ‘to raise a right to relief above the speculative level'”) (citing Twombly, 550 U.S. at 555, 127 S.Ct. at 1965); Elias v. Rolling Stone LLC, 872 F.3d 97, 107 (2d Cir. 2017) (affirming district court's dismissal of a claim where the allegations were “too speculative to withstand Defendants' motion to dismiss”); Ramsaroop v. Department of Education of the City of New York, No. 20-CV-4947, 2022 WL 376029, at *6 (S.D.N.Y. Feb. 8, 2022) (dismissing complaint where “allegations [were] conclusory and too speculative to survive a motion to dismiss”). As a result, MECO's speculative pleading regarding the expiration of the warranty period is insufficient to survive Siemens's motion.
MECO thus has not plausibly pled satisfaction of conditions precedent to its claim for either any outstanding base contract payment or retainage.
4. MECO Insufficiently Pled That It Complied With All Conditions Precedent For Receiving Damages Associated With COVID-19
MECO alleges that it “submitted requests for extra compensation for th[e] impact [of COVID-19], but Siemens never paid MECO any extra money.” (Compl. ¶ 19(b).) Article 7.1 in each Subcontract provides that “[MECO] acknowledges and agrees that it waives all right or claim to compensation for any additional work not specifically authorized in writing by [Siemens's] Designated Representative prior to the commencement of such additional work.” (Dkt. 28, Exs. A- C). As Siemens correctly observes, “MECO does not allege that it obtained a written authorization from Siemens prior to its alleged performance of ‘extra' work due to Covid.” (Def Mem. at 11.)
“Def. Mem.” Refers to Defendant's Memorandum Of Law In Support Of Siemens Industry, Inc.'s Motion To Dismiss at Dkt. 27.
In response, MECO does not dispute that Article 7.1 applies, nor claim that it complied with conditions precedent, but merely contends that “FRCP 9(c) does not require such granular pleadings.” (Pl. Mem. at 6-7.) As set forth above, the plausibility standard applies to Federal Rule of Civil Procedure 9(c); MECO's failure to allege anything of substance regarding satisfaction of conditions precedent for compensation for additional work is fatal to its COVID-19 claim. See Dervan, 2017 WL 819494 at *6; Napster, LLC, 761 F.Supp.2d at 208; Swan Media Group, Inc., 841 F.Supp.2d at 808. To the extent MECO alleges facts related to COVID-19 working conditions as another example of a breach of the covenant of good faith and fair dealing, that argument, too, fails, for the reasons set forth below.
It is not immediately apparent to the Court why Article 7.1 governs MECO's COVID-19 claim. MECO does not allege that it performed additional work so much as that it required more time and labor to do the work it was contracted to do as a result of having to observe COVID-19 protocols and protections, such as disinfecting equipment and maintaining sufficient space between workers. (See Compl. ¶ 19(b).) Regardless, MECO has not plausibly pled a contractual basis that would obligate Siemens to compensate MECO for the effects of COVID-19. And to the extent MECO's claim does implicate Article 7.1, it fails due to the absence of plausible allegations that MECO complied with conditions precedent as explained above.
5. MECO Failed To Allege A Claim For Breach Of The Covenant Of Good Faith And Fair Dealing
Article 29.1 of each Subcontract provides that “[e]ach party shall act in good faith at all times in the fulfillment of its contractual obligations.” (Dkt. 28, Exs. A-C.) “Under Illinois law, good faith is good faith, whether analyzed in [the] context of implied or express duty to negotiate in good faith; analysis of what constitutes good faith [does] not change depending on whether it is implied or express duty.” In re Midway Airlines, Inc., 180 B.R. 851, 938 (Bankr. N.D.Ill. 1995). Compliance with an express or implied covenant of good faith requires that where the terms of a contract grants one of the parties with “broad discretion in performing a term of the contract,” the party must exercise that discretion “‘reasonably and with proper motive, not arbitrarily, capriciously, or in a manner inconsistent with the reasonable expectations of the parties.'” Mid-West Energy Consultants, Inc. v. Covenant Home, Inc., 352 Ill.App.3d 160, 165, 287 Ill.Dec. 267, 272 (2004) (citing Resolution Trust Corporation, 248 Ill.App.3d at 112, 187 Ill.Dec. at 833).
In order to plead a breach of the covenant of good faith and fair dealing, a plaintiff must plead the existence of contractual discretion. Northern Trust Co. v. VIII South Michigan Associates, 276 Ill.App.3d 355, 367, 212 Ill.Dec. 750, 759 (1995). The good- faith duty to exercise contractual discretion reasonably does not apply where no contractual discretion exists. Bank One, Springfield v. Roscetti, 309 Ill.App.3d 1048, 1060, 243 Ill.Dec. 452, 461 (1999) (good-faith duty to exercise contractual discretion reasonably was inapplicable because “Roscetti [had] not identified any provisions of the floor plan, note, or guaranty that either vested Bank One with contractual discretion to renew the floor plan or the note or obligated Bank One to renew).
MECO fails to identify what provisions of the Subcontracts, if any, granted Siemens discretion related to MECO's grievances. Instead, MECO limply argues that the “contracts do not state every obligation that Siemens is to perform.” (Pl. Mem. at 7.) This omission is fatal to its claim for breach of the covenant of good faith and fair dealing. See Grabianski v. Bally Total Fitness Holding Corp., 891 F.Supp.2d 1036, 1046 (N.D. Ill. 2012) (dismissing claim alleging violation of covenant of good faith and noting “[w]hile Plaintiffs need not plead the contract terms verbatim, they should make plain what contractual obligations [Defendant] is alleged to have breached”). Without a nexus to an exercise of contractual discretion, any alleged misconduct by Siemens is not actionable as a breach of the covenant of good faith and fair dealing. See Northern Trust Co., 276 Ill.App.3d at 367, 212 Ill.Dec. at 759 (“Although the covenant of good faith and fair dealing is used as an aid in construing a contract, it does not form the basis of an independent tort recognized in Illinois” and, notwithstanding the covenant of good faith, “[p]arties to a contract ... are entitled to enforce the terms of the contract to the letter” and such a covenant “cannot overrule or modify the express terms of a contract”).
Nor does MECO allege how Siemens supposedly exercised its discretion unreasonably beyond claiming in conclusory fashion that Siemens “made MECO's contract performance unreasonably more difficult.” (Compl. ¶ 19.) Rather, MECO once again speculates, alleging that it is unsure if excessive mobilizations and demobilizations were “caused by incompetent Siemens managers, or necessitated by changed site conditions.” (Compl. ¶ 19(a)(i)(1).) And while MECO states in conclusory fashion that “[a] company like MECO does [not] lose the kind of money noted above on three separate and consecutive projects with the same general contractor unless there are forces beyond MECO's control” (Compl. ¶ 22), MECO does not plead any facts that would allow the Court to infer that its losses are the result of an unreasonable exercise of contractual discretion by Siemens rather than, for example, forces beyond both parties' control. See Business Exposure R Eduction Group Associates, LLC v. Pershing Square Capital Management, L.P., 549 F.Supp.3d 318, 332 n. 14 (S.D.N.Y. 2021) (“speculative assumptions” about defendant's motivations “do not support that [defendant] acted unreasonably or arbitrarily” such that it violated the covenant of good faith and fair dealing).
B. MECO Has Abandoned Its Unjust Enrichment Claim
Siemens further contends that MECO's claim for unjust enrichment should be dismissed because it is duplicative of MECO's contract claims. (Def. Mem. at 13-16.) MECO offers no argument in its opposition brief to respond to Siemens's contention. As a result, Plaintiff has waived any opposition to the point and the claim for unjust enrichment should be deemed abandoned. See BYD Company Ltd. v. VICE Media LLC, 531 F.Supp.3d 810, 821 (S.D.N.Y. 2021), aff'd, No. 21-1097, 2022 WL 598973 (2d Cir. March 1, 2022) (“Plaintiffs' failure to oppose Defendants' specific argument in a motion to dismiss is deemed waiver of that issue”) (quoting Kao v. British Airways, PLC, No. 17-CV-0232, 2018 WL 501609, at *5 (S.D.N.Y. Jan. 19, 2018); Arista Records, LLC v. Tkach, 122 F.Supp.3d 32, 38-39 (S.D.N.Y. 2015) (same); Guzman v. Macy's Retail Holdings, Inc., No. 09-CV-4472, 2010 WL 1222044, at *8 (S.D.N.Y. March 29, 2010) (“[F]ailure to adequately brief an argument constitutes waiver of that argument at [the] motion to dismiss stage.”) (internal quotation marks and citation omitted).
Even if MECO had not abandoned its unjust enrichment claim, dismissal would be warranted because the parties' relationship is governed by the Subcontracts, and MECO has not pled any facts to suggest that the Subcontracts were invalid. Under Illinois law, “unjust enrichment [is] unavailable where the parties have entered into an express contract.” City of Rockford v. Mallinckrodt ARD, Inc., 360 F.Supp.3d 730, 770 (N.D. Ill. 2019) (citing Prodromos v. Poulos, 202 Ill.App.3d 1024, 1032, 148 Ill.Dec. 345, 351 (1990)); see also High Concept Holdings, Inc. v. CarMedix, Inc., 2019 IL App (1st) 18-0075-U, ¶ 51, 2019 WL 2256812, at *9 (May 22, 2019) (“[A]lthough a plaintiff may plead claims alternatively based on express contract and an unjust enrichment, the unjust enrichment claim cannot include allegations of an express contract”) (quoting Gagnon v. Schickel, 2012 IL App (1st) 120645, ¶ 25, 368 Ill.Dec. 240, 248 (2012)); Annous v. Blaschek, No. 18-CV-2094, 2019 WL 9667844, at *10 (C.D. Ill. March 26, 2019), aff'd, 799 Fed.Appx. 402 (7th Cir. 2020) (“Illinois law does not allow a claim of unjust enrichment where there is a contract that governs the relationship between the parties” in order to “prevent[ ] a contracting party from making an end run around contract law by pursuing an unjust enrichment theory”) (internal quotation marks and citations omitted).
MECO's unjust enrichment claim does not identify any obligation of Siemens to MECO that is not encompassed expressly by the Subcontracts. To the contrary, MECO pleads facts establishing that it entered into the three contracts with Siemens (Compl. ¶¶ 6, 12(a), 13(a), 14(a), 16) and performed work under those contracts. (Compl. ¶¶ 9, 12(f), 12(h), 12(i), 13(h), 13(i), 14(h), 14(i), 17.) MECO invokes several specific contractual provisions. (See Compl. ¶¶ 15, 16.) And throughout the Complaint, MECO characterizes its damages as money owed to it for work performed under the Subcontracts. (See, e.g., Compl. ¶¶ 7-10, 17-19, 24-30.) MECO's unjust enrichment claim repeats all of those paragraphs as if fully stated therein, only to plead in a conclusory and speculative fashion that “should it be deemed that no express contract exists, or that MECO is entitled to compensation outside the bounds of a formal contract, then Siemens has been unjustly enriched by receiving services from MECO without paying for such services,” and seeks the exact same damages as it asserts under the breach of contract claim. (Compl. ¶¶ 31-33).
Because MECO's claims are grounded in the Subcontracts, and MECO has pled no facts to suggest the contracts are invalid or do not govern the present dispute, its unjust enrichment claim fails.
As Siemens notes, unjust enrichment is an equitable claim, and a Court may therefore apply the law of a state other than that identified by the parties' choice of law. (Def. Mem. at 13 n. 19 (citing FCX Solar, LLC v. FTC Solar, Inc., No. 21-CV-3556, 2022 WL 355606, at *7 (S.D.N.Y. Feb. 7, 2022) (quoting Xiotech Corp. v. Express Data Products Corp., 11 F.Supp.3d 225, 241-42 (N.D.N.Y. 2014)); Gross Foundation, Inc. v. Goldner, No. 12-CV-1496, 2012 WL 6021441, at *11 (S.D.N.Y. Dec. 4, 2012)).) Whether the Court applies Illinois law or New York law, though, the outcome is the same: MECO's unjust enrichment claim is duplicative of its contract claim and precluded by the Subcontracts. See, e.g., Stanley v. Direct Energy Services., LLC, 466 F.Supp.3d 415, 430 (S.D.N.Y. 2020) (“As a general rule, the existence of a valid contract renders unjust enrichment ... unavailable as a remedy”) (collecting cases); see also id., 430-31 (“where the validity of a contract that governs the subject matter at issue is not in dispute, and the claimant alleges breach of the contract, the claimant cannot plead unjust enrichment in the alternative”) (collecting cases); Bourbia v. S.C. Johnson & Son, Inc., 375 F.Supp.3d 454, 466 (S.D.N.Y. 2019) (“In New York, a plaintiff may plead unjust enrichment in the alternative, but where an unjust enrichment claim is duplicative of other causes of action, it should be dismissed”).
C. Dismissal With Or Without Prejudice
When granting a motion to dismiss “leave to amend at least once should normally be granted as a matter of course.” Oliver Schools, Inc. v. Foley, 930 F.2d 248, 253 (2d Cir. 1991). Notwithstanding the general policy favoring leave to amend, “the Court may deny leave to amend if: (1) there has been undue delay; (2) plaintiff has repeatedly failed to provide satisfactory amendments; (3) amendment would prejudice the opposing party; (4) the amendment would be futile.” Sulehria v. New York, No. 12-CV-0021, 2012 WL 1284380, at *3 (N.D.N.Y. Apr. 16, 2012) (citing Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230 (1962)); accord Sprague v. Salisbury Bank & Trust Co., 969 F.3d 95, 101 (2d Cir. 2020); Ruotolo v. City of New York, 514 F.3d 184, 191 (2d Cir. 2008); Ferring B.V. v. Allergan, Inc., 4 F.Supp.3d 612, 618 (S.D.N.Y. 2014).
The subject of the instant motion is MECO's Second Amended Complaint, representing its third try at sufficiently pleading its claims. MECO previously amended its complaint twice in response to arguments raised by Siemens, including once in response to arguments that have been largely repeated in the present motion. MECO's First Amended Complaint was filed in response to Siemens's pre-motion to dismiss letter. (See Dkts. 8, 9, 12.) Then, MECO moved for, and was granted, permission to file its Second Amended Complaint because Siemens raised new arguments for dismissal not raised in its pre-motion letter, including MECO's failure to comply with conditions precedent and the need to plead the existence of contractual discretion to assert breach of the covenant of good faith. (See Dkts. 19, 21, 22.)
Despite having a third opportunity, MECO has again failed to plead its strict compliance with conditions precedent for its “total cost” claims, and in fact concedes that it has not complied with such conditions. (Compl. ¶ 27 (claiming that “MECO complied with the intent and purpose behind any condition precedent to a claim for ... ‘total cost' damages” but also conceding “that it did not give Siemens formal notice of a claim each time Siemens' conduct fell below expected industry standards and fell below MECO's reasonable expectations”); see also Pl. Mem. at 4-5.) Those conditions precedent are time-dependent, having expired ten days after each occurrence giving rise to a claim for additional compensation. (Dkt. 28, Exs. A-C Article 16.1.) No amendment can cure MECO's failure to satisfy that condition precedent, the time for which has long-ago expired.
Further amendment of MECO's complaint as to the total cost claims thus would be futile, and dismissal with prejudice is appropriate. See Onondaga Hilltop Homes, Inc. v. Syracuse Housing Authority, No. 5:12-CV-626, 2016 WL 10000264, at *5 (N.D.N.Y. March 23, 2016) (dismissing complaint with prejudice where plaintiff failed to comply with a condition precedent to defendant's performance); Hanover Insurance Co. v. R.W. Dunteman Co., No. 19-CV-1979, 2020 WL 1042053, at *4, *4 n. 3 (N.D. Ill. March 4, 2020) (dismissing counterclaim with prejudice because defendants failed to comply with condition precedent to coverage in insurance contract); see also TechnoMarine SA v. Giftports, Inc., 758 F.3d 493, 506 (2d Cir. 2014) (affirming dismissal with prejudice where “Plaintiff already amended its complaint once following Defendant's first motion to dismiss for failure to state a claim” and “failed to resolve its pleading deficiencies” in its amended complaint); Business Exposure, 549 F.Supp.3d at 334 (dismissing amended complaint with prejudice where “[Plaintiff] had the benefit of reviewing the motion to dismiss [Defendant] filed in response to [Plaintiff's] initial complaint, which made approximately the same arguments that today have proven fatal to its claim”); Tutor Perini Building Corp. v. New York City Regional Center, LLC, 525 F.Supp.3d 482, 517 (S.D.N.Y. 2021) (dismissing claims with prejudice and without leave to amend when plaintiff had already twice amended its complaint, including once in response to defendants' motion to dismiss, and continued to fail to sufficiently plead its claims); Stanley, 466 F.Supp.3d at 439 (“As Plaintiff has already amended her Complaint once, the dismissal is with prejudice”).
The Court also recommends dismissal with prejudice of MECO's claims related to alleged breaches of the covenant of good faith and fair dealing. MECO, despite being on notice of Siemens's argument prior to filing its Second Amended Complaint, has failed to plead the existence, and unreasonable exercise, of Siemens's contractual discretion. MECO even has conceded that many of its grievances are not based on Siemens's activities under the contract but rather unwritten “obligations” of Siemens based in alleged industry practice and MECO's subjective expectations. (See Pl. Mem. at 7.) MECO already has had an opportunity to amend its pleading to state a plausible claim for breach of the covenant of good faith and fair dealing but once again has failed to do so. Accordingly, MECO's claim for breach of the covenant of good faith and fair dealing should be dismissed with prejudice.
The Court also recommends dismissal with prejudice of MECO's claim for COVID-19-related damages. If viewed as a claim for extra work under Article 7.1 of the Subcontracts, MECO has failed multiple times to plead compliance with the condition precedent to payment; that is, request for and approval from Siemens to perform the work. MECO's pleading suggests that it performed the work and then sought compensation afterwards, contrary to the express requirements of Article 7.1. (Compl. ¶ 19(b) (“MECO submitted requests for extra compensation for this impact, but Siemens never paid MECO any extra money.”) Again, amendment cannot cure that lapse. On the other hand, if MECO's COVID-19 related claim is viewed as among the damages claimed for breach of the covenant of good faith and fair dealing, amendment would be futile for the reasons explained above. Dismissal with prejudice is therefore appropriate.
MECO's claims for contract balance and retainage, however, should not be dismissed with prejudice. MECO's complaint suggests that there may be facts on which relief could be granted once it provides the required documents and/or the warranty period elapses. (See Compl. ¶ 18.) The Court cannot conclude that a claim based on such future events would be futile. The claims therefore should be dismissed without prejudice.
Finally, MECO's unjust enrichment claim should be dismissed with prejudice given MECO's abandonment of the claim, MECO's reliance on the Subcontracts as the basis for its claims, and its lack of any challenge to the Subcontracts' validity.
CONCLUSION
For the reasons discussed above, I recommend that Defendants' motion be GRANTED and the complaint be DISMISSED with prejudice except as to MECO's breach of contract claim for contract balance and retainage damages, which should be dismissed without prejudice.
DEADLINE TO OBJECT AND PRESERVE APPEAL
Pursuant to 28 U.S.C. § 636(b)(1) and Rules 72, 6(a), and 6(d) of the Federal Rules of Civil Procedure, the parties have fourteen (14) days to file written objections to this Report and Recommendation. Such objections shall be filed with the Clerk of Court, with extra copies delivered to the Chambers of the Honorable Gregory H. Woods, United States Courthouse, 500 Pearl Street, New York, New York 10007, and to the Chambers of the undersigned, 500 Pearl Street, New York, New York 1007. Failure to file timely objections will result in waiver of objections and preclude appellate review.