Centrans Truck Lines LLC v. Orient Express Container Co.

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CENTRANS TRUCK LINES, LLC, an Indiana Limited Liability Company, Plaintiff, v. ORIENT EXPRESS CONTAINER CO LTD, a Foreign Corporation & OEC FREIGHT NY INC., a New York Corporation, Defendants.

No. 1:22-cv-05477 (MKV)

United States District Court, S.D. New York

August 21, 2023

MEMORANDUM OPINION AND ORDER GRANTING PARTIAL MOTION TO DISMISS

MARY KAY VYSKOCIL, UNITED STATES DISTRICT JUDGE

Plaintiff Centrans Truck Lines, LLC (“Centrans”) brings this action against Orient Express Container Co. Ltd. and OEC Freight (NY) Inc. (collectively, “OEC”) asserting five claims: (1) breach of a settlement agreement, (2) promissory estoppel, (3) breach of contract, (4) account stated, and (5) unjust enrichment. OEC moves to dismiss the first, second, fourth, and fifth causes of action under Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the partial motion to dismiss is GRANTED.

BACKGROUND^[1]

Centrans is a motor carrier. Complaint ¶ 1 [ECF No. 1] (“Compl.”). OEC is a non-vessel operating common carrier. Compl. ¶¶ 7, 10.

On November 19, 2020, the parties executed a Transportation Agreement, stating that Centrans would provide transportation services for OEC's customers. Compl. ¶¶ 16, 17. The Transportation Agreement provided that OEC would compensate Centrans within 30 days of receiving any invoice. Compl. ¶ 17. For almost a year, OEC routinely paid Centrans' invoices.

Compl. ¶ 23. However, beginning in August 2021, OEC stopped making payments. Compl. ¶ 25. By January 2022 OEC owed Centrans $861,721.61. Compl. ¶ 26.

Centrans sent OEC a demand letter in February 2022. Compl. ¶ 26; see also Exhibit D [ECF No. 1-4]. OEC did not reply. Compl. ¶ 27. The next month, Centrans' CEO, Mike Cavanaugh, emailed OEC, offering to settle the outstanding balance for $732,463.36. Compl. ¶ 27. Later that day Cavanaugh spoke on the phone with OEC's Regional Vice President of Operations, Steve Myers. Compl. ¶ 28. Myers “accepted Centrans' [settlement] offer” on the call. Compl. ¶ 28.

The next day, Cavanaugh sent Myers a draft settlement agreement memorializing the terms of their agreement. Compl. ¶ 29. Before responding to Cavanaugh's draft settlement agreement, OEC wired Centrans $366,232.52. Compl. ¶ 31. Several days later, Myers sent Cavanaugh a revised settlement agreement, showing his changes in redline. Compl. ¶ 32. Of note, Myers' redlined draft (i) reduced the amount owed to account for the $366,232.52 payment, (ii) made $11,200 of the remaining balance due within three days of locating a particular shipping container and its contents and (iii) made the remaining balance of $355,030.84 due within three days of the execution of the agreement. Compl. ¶ 34. Cavanaugh responded the next day with a clean draft, accepting all of Myers' revisions (the “Settlement Agreement” or the “Agreement”) and asking Myers to “sign return, and process payment.” Compl. ¶ 35; see also Exhibit E [ECF No. 1-5] (“SA”). Myers did not reply. Several days later, Centrans followed up to “inquir[e] about the status of [Myers'] signature.” Compl. ¶ 36. Myers then indicated to Centrans his “intent to renege on the Settlement Agreement.” Compl. ¶ 37.

Centrans filed its Complaint in June 2022, asserting claims for (i) breach of the Settlement Agreement, (ii) promissory estoppel, (iii) breach of the Transportation Agreement, (iv) account stated, and (v) unjust enrichment. See Compl. OEC moves to dismiss all claims except for the breach of contract claim stemming from the Transportation Agreement. See Motion to Dismiss [ECF No. 27]; Defendants' Memorandum of Law in Support [ECF No. 28] (“Def. Mem.”). Centrans opposed, see Memorandum of Law in Opposition [ECF No. 29] (“Opp.”), and OEC replied, see Reply Memorandum of Law [ECF No. 30] (“Reply.”).

LEGAL STANDARD

To survive a Rule 12(b)(6) motion to dismiss, the Complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While the Court “must accept as true all of the allegations contained in a complaint,” this “tenet . . . is inapplicable to legal conclusions” and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. The Court may also consider “documents attached to the complaint as an exhibit.” Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002).

ANALYSIS

I. Centrans Does Not Plausibly State a Claim for Breach of the Settlement Agreement

Centrans first asserts a claim titled “breach of the settlement agreement.” Compl. ¶¶ 4253. Specifically, Centrans contends that the “sending of the redline agreement was an offer to settle OEC's outstanding debt to Centrans” and that “Centrans accepted the offer by incorporating all of the edits proposed in the redline agreement and sending the document . . . to OEC for signature without any reservations.”^[2] Compl. ¶¶ 43, 44. OEC disagrees, arguing that the Settlement Agreement was never executed by the parties and is, therefore, not an enforceable contract. Def. Mem. 6-14.

“New York follows the generally accepted rule that when parties negotiating a proposed contract express an intent not to be bound until their negotiations have culminated in the execution of a formal contract, they cannot be held bound until that event has occurred.” Jim Bouton Corp. v. Wm. Wrigley Jr. Co., 902 F.2d 1074, 1081 (2d Cir. 1990); see also Kowalchuk v. Stroup, 61 A.D.3d 118, 122, 873 N.Y.S.2d 43, 47 (1st Dep't 2009) (“It is well settled that, if the parties to an agreement do not intend it to be binding upon them until it is reduced to writing and signed by both of them, they are not bound and may not be held liable until it has been written out and signed.”). “The point of these rules is to give parties the power to contract as they please, so that they may, if they like, bind themselves orally or by informal letters, or that they may maintain ‘complete immunity from all obligation' until a written agreement is executed.” R.G. Grp. v. Horn & Hardart Co., 751 F.2d 69, 74 (2d Cir. 1984) (quoting Corbin on Contracts § 30 at 98 (1963)).^[3]

In Winston v. Mediafare Entertainment Corporation, the Second Circuit outlined four factors to consider in determining whether parties “intended to be bound in the absence of a document executed by both sides.” 777 F.2d 78, 80 (2d Cir. 1985); see also CAC Grp. v. Maxim Grp. LLC, 523 Fed.Appx. 802, 803-04 (2d Cir. 2013). The factors are: (1) “whether there has been an express reservation of the right not to be bound in the absence of a writing,” (2) “whether there has been partial performance of the contract,” (3) “whether all of the terms of the alleged contract have been agreed upon,” and (4) “whether the agreement at issue is the type of contract that is usually committed to writing.” 777 F.2d at 80. Although no single factor is dispositive, the first is “the most important.” Adjustrite Sys., Inc. v. GAB Bus. Servs. Inc., 145 F.3d 543, 549 (2d Cir. 1998) (citation omitted). Indeed, where “there is a writing between the parties showing that the defendant did not intend to be bound . . . a court need look no further than the first factor.” RKG Holdings, Inc. v. Simon, 182 F.3d 901 (2d Cir. 1999) (quoting Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 72 (2d Cir. 1989)).^[4]

A. Express Reservation

Beginning with the first Winston factor, the Court finds “numerous indications” in the Settlement Agreement “that the parties did not intend to bind themselves until the settlement had been signed.” Ciaramella v. Reader's Dig. Ass'n, 131 F.3d 320, 324 (2d Cir. 1997). Mindful of the obligation to “avoid frustrating the clearly-expressed intentions of the parties,” the Court “give[s] these statements considerable weight.” Id.

To start, the Settlement Agreement repeatedly refers to execution. See SA § 1 (“Upon execution of this Agreement by both Parties, the Parties agree to ....” (emphasis added)); SA § 8 (“This Agreement may be executed in one or more identical counterparts.” (emphasis added)); SA § 11 (“The Parties warrant that they are authorized to execute this Agreement.”) (emphasis added)). Indeed, the Settlement Agreement explicitly ties OEC's payment obligation to the date that the Agreement is executed. See SA § 1.1 (“OEC shall pay Centrans $355,030.84 within three (3) days of the execution of this agreement.” (emphasis added)). These repeated references to execution “evince[] an intent not to create a binding settlement until some formal date of execution.” Kaczmarcysk v. Dutton, 414 Fed.Appx. 354, 355 (2d Cir. 2011) (quoting Ciaramella, 131 F.3d at 324); see also Hernandez v. Fresh Diet Inc., No. 12-CV-4339, 2017 WL 4838328, at *3 (S.D.N.Y. Oct. 25, 2017) (“Such references to execution demonstrate an intent not to be bound until then.”).

But references to execution are not the only textual indicators that the parties believed formal execution was necessary for the Settlement Agreement to become effective. The Agreement contains a merger clause, see SA § 9, which the Second Circuit has explained constitutes “persuasive evidence that the parties did not intend to be bound prior to the execution of a written agreement.” Ciaramella, 131 F.3d at 324; see also CAC 523 Fed.Appx. at 805; Kaczmarcysk, 414 Fed.Appx. at 355. The Settlement Agreement also provides that it may be modified only “by a writing that has been approved by and signed by all the Parties.” SA § 10. This provision, too, indicates that the parties contemplated...