Boart Longyear Ltd. v. Alliance Industries, Inc.
Boart Longyear Ltd. v. Alliance Industries, Inc.
Opinion of the Court
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”), 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
Boart Longyear is a leading provider of mineral exploitation services and drilling to the global market.
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
The SPA provides that the agreement is to be construed in accordance with New York law.
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:
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 ....14
The Non-Compete Period expired on December 6, 2011.
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:
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.18
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.
In September 2010, information circulated among Boart Longyear employees that Lehman was building a sonic drill rig.
In August 2011, a Boart Longyear employee observed the completed Lehman rig in the Marietta facility.
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
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.
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”
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.”
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
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.’”
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.”
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.”
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
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.
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
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,
The development and sale of sonic drilling technology is a business that plainly competes with a portion of the sonic drilling services business.
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.”
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.
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.
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
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.
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.
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.’”
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”
In support of her claim, a plaintiff may allege “upon information and belief’ facts
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.”
IY. 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.
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.
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,
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.
. The following facts are drawn from the Complaint and assumed to be true for the purpose of adjudicating this motion to dismiss.
. See Complaint ¶ 17.
. See id. ¶ 18.
. See id. ¶¶ 15-16.
. See id. ¶¶ 18-20.
. See id. ¶ 20.
. See id.
. See id. ¶ 21.
. See 12/06/06 Stock Purchase Agreement ("SPA”), Ex. 2 to 4/02/12 Declaration of Marc E. Bernstein, defendants’ counsel, at 49.
. See id. at 48.
. See id. at 36.
. See Complaint ¶ 46.
. See id. ¶ 45.
. SPA at 29-30 (emphasis in original).
. See Complaint ¶ 23.
. SPA at 2.
. See Complaint ¶ 22.
. SPA at 30.
. See Complaint ¶ 27.
. See id.
. See id. ¶ 28.
. See id. ¶ 30.
. See id. ¶ 31.
. See id.
. See id. ¶ 36.
. See id. ¶ 32.
. See id. ¶ 33.
. See id. ¶ 40.
. See id. ¶ 34.
. See id. ¶ 35.
. See id. ¶ 36.
. See id. ¶ 39.
. See id. ¶ 38.
. See id. ¶ 25.
. See id. ¶ 26
. See id. ¶ 29.
. Id.
. See id. ¶ 30.
. 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)).
. Ofori Tenkorang v. American Int’l Group, Inc., 460 F.3d 296, 298 (2d Cir. 2006).
. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted).
. 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.
. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted).
. Id. (quotation marks omitted).
. Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010).
. 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)).
. Slayton v. American Express Co., 460 F.3d 215, 226 n. 10 (2d Cir. 2006) (citation and quotation marks omitted).
. Fed.R.Civ.P. 15(a)(2).
. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007) (citation omitted)
. 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).
. 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)).
. 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).
. 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).
. See M/A-COM Sec. Corp. v. Galesi, 904 F.2d 134, 136 (2d Cir. 1990).
. 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).
. 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).
. Id. (citations omitted).
. Id. (citing Restatement (Second) of Agency § 147).
. See Plaintiffs' Memorandum of Law in Opposition to Motion to Dismiss ("PI. Mem.'') at 18.
. See Complaint ¶¶ 34-35.
. 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.”).
. See Complaint ¶ 36.
. See id. ¶ 20.
. 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).
. See Complaint ¶¶ 22, 43; SPA at 30.
. See Complaint ¶ 44.
. SPA at 30.
. See Complaint ¶ 29.
. See Defendants' Memorandum of Law in Support of Motion to Dismiss ("Def. Mem.”) at 10.
. 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).
. 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).
. See Complaint ¶ 22; SPA at 29-30.
. See Complaint ¶ 44.
. SPA at 30.
. See Complaint ¶ 36.
. See Def. Mem. at 3.
. SPA at 30.
. See White v. Continental Cas. Co., 9 N.Y.3d 264, 267, 848 N.Y.S.2d 603, 878 N.E.2d 1019 (2007) ("[Ujnambiguous 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
. Def. SPA at 49.
. See Complaint ¶ 49.
. See supra Part IV.A.
. See PL Mem. at 14.
. 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).
. See Def. Mem. at 14.
. See supra Part V.B.2.
. See id.
. See Def. SPA at 36.
. 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).
. See 869 F.Supp.2d at 409-10.
. See Complaint ¶¶ 20-21.
. See id. ¶ 27.
. See id. ¶¶ 39-40.
. See id. ¶ 38.
. Id. ¶ 50.
. 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)).
. 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)).
. Grand Crossing, LIP. 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.”).
. 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”).
. 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)).
. 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.
. 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)).
. Ofori-Tenkorang v. American Int’l Group, Inc., 460 F.3d 296, 298 (2d Cir. 2006).
. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted).
. 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.
. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted).
. Id. (quotation marks omitted).
. Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010).
. 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)).
. 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).
. See M/A-COM Sec. Corp. v. Galesi, 904 F.2d 134, 136 (2d Cir. 1990).
. 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).
. See Plaintiffs’ Memorandum of Law in Support of Motion for Reconsideration ("PI. Mem.”), at 4.
. See 869 F.Supp.2d at 414-16.
. See Complaint ¶¶ 39-40, 50.
. See Defendants’ Opposition to Motion for Reconsideration, at 3.
. 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)
. See Complaint ¶¶ 36-39.
. 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”).
Reference
- Full Case Name
- BOART LONGYEAR LTD., Boart Longyear Global Holdco, Inc., Longyear Holdings, Inc., Resources Services Holdco, Inc., and Prosonic Corporation v. ALLIANCE INDUSTRIES, INC., Terra Sonic International, LLC, HI-VAC Corporation, Promanco, Inc., Mole Master Services Corp., and Rudolph John Lehman
- Cited By
- 21 cases
- Status
- Published