Nat'l Gear & Piston, Inc. v. Cummins Power Sys., LLC

975 F.Supp.2d 392

NATIONAL GEAR & PISTON, INC., Plaintiff,

v.CUMMINS POWER SYSTEMS, LLC and Cummins Inc., Defendants.

Case No. 10–CV–4145 (KMK).

United States District Court, S.D. New York.

Sept. 27, 2013.

Nancy A. Luongo, Esq., Harrison, NY, for Plaintiff.

Samuel Goldblatt, Esq., Kathleen C. Burns, Esq., Nixon Peabody LLP, New York, NY, for Defendant Cummins Inc.

OPINION AND ORDER

KENNETH M. KARAS, District Judge:

National Gear & Piston, Inc. (“Plaintiff”) originally filed this suit against Cummins Power Systems, LLC (“CPS”) and Cummins Inc. (“Cummins”) (collectively “Defendants”) in state court in 2010, and Defendants removed it to this Court shortly thereafter. By an Opinion and Order entered on May 16, 2012, the Court dismissed all of the claims in Plaintiff's Amended Complaint without prejudice, but granted Plaintiff leave to file a Second Amended Complaint. Plaintiff filed the Second Amended Complaint on June 29, 2012, asserting claims for breach of the duty of good faith and fair dealing, tortious interference with prospective business opportunities, breach of contract, and violations of federal and state antitrust laws—i.e., 15 U.S.C. § 1 (“the Sherman Act”), and New York General Business Law § 340(1) ( “the Donnelly Act”)—against both Defendants. Now before the Court is Cummins's Motion To Dismiss all of Plaintiff's claims. For the reasons explained below, Cummins's Motion is granted.

I. Background

The Court set forth the history of this dispute in a prior Opinion and Order, National Gear & Piston, Inc. v. Cummins Power Systems, LLC, 861 F.Supp.2d 344 (S.D.N.Y.2012). The Court assumes the Parties' familiarity with the underlying factual background, and will describe the history, as well as the new allegations in the Second Amended Complaint, only as relevant to the resolution of the instant Motion.

A. History

Plaintiff is a New York-based corporation in the business of providing infrastructure support as a supplier and servicing agent for essential automotive components for its customers, including public agencies such as the New York Metropolitan Transit Authority (“MTA”) and the New York City Transit Authority (“NYCTA”). (2d Am. Compl. (“SAC”) ¶¶ 1, 8.) Defendant CPS is a Delaware-based limited liability company, formed as a joint venture between Defendant Cummins, an Indiana-based corporation, and R. Scott Patrohay (“Patrohay”), the current president of CPS. ( Id. ¶¶ 2–4; see also id. ¶ 23.) Cummins still retains an equity membership interest in CPS; indeed, according to the allegations in the Second Amended Complaint, Cummins is the beneficial owner of eighty-two percent of the membership interest of CPS. ( Id. ¶¶ 5–6.)

Plaintiff is an authorized dealer of engine parts and maintenance items manufactured by Cummins. ( Id. ¶ 9.) Cummins does not deal directly with end users; instead, it appoints authorized distributors on a territorial basis, and the distributors appoint authorized dealers, which interact directly with end users. ( Id. ¶ 10.) Plaintiff became an authorized dealer for Cummins Metropower, Inc. (“CMP”) in the late 1990s. CMP was ultimately acquired by CPS. ( Id. ¶¶ 11, 25.) The relationship between CMP and Plaintiff was set forth in an agreement in 2007—which agreement, although never signed, was adhered to by both Plaintiff and CMP during the course of their relationship. Plaintiff alleges that the agreement was a form agreement prepared by Cummins. ( Id. ¶¶ 13–14; see also id. ¶¶ 15–18.)

Both CMP and CPS acted as upstream distributors to Plaintiff. Each entity maintained a first-level business-to-business relationship with Cummins on behalf of Plaintiff. ( Id. ¶ 20.) But both CMP and CPS were also functionally Plaintiff's competitors, because each also distributed Cummins products to authorized dealers and to end users, and each bid on the same contracts that Plaintiff did. ( Id. ¶ 21.) CPS never offered Plaintiff a written agreement as to the terms of their relationship; for at least some time after CPS's formation, however, Plaintiff and CPS “continued to function under the contractual relationship as existing between CMP and [Plaintiff],” ( id. ¶ 24), and CPS has acknowledged that after it acquired CMP, it “continued the relationship with Plaintiff pursuant to the terms of [the] unsigned ... [a]greement.” ( Id. ¶ 25 (internal quotation marks omitted).)

According to Plaintiff, at some point in or about fall 2009, CPS “began instituting increasingly onerous, unnecessary and unlawful business practices affecting its contractual relationship with [Plaintiff], all of which actions were intended to deprive [Plaintiff] of its effective operation as an authorized dealer [and to] destroy [Plaintiff's] business model ....” ( Id. ¶ 29.) Plaintiff tried to comply with CPS's new policies and requirements, and it alleges that CPS took retaliatory and unlawful steps when Plaintiff failed to comply—including, eventually, attempting to terminate its agreement with Plaintiff. ( See id. ¶¶ 41, 59–64.) Plaintiff's claims against CPS, as set forth in both the Amended Complaint and the Second Amended Complaint, arise from CPS's conduct and allegedly unlawful actions against Plaintiff. Plaintiff asserts claims for breach of the duty of good faith and fair dealing, tortious interference with prospective business opportunities, breach of contract, Sherman Act violations, and Donnelly Act violations.

Plaintiff asserts the same claims against Cummins. The Court previously held that Plaintiff, in its Amended Complaint, had failed adequately to plead a basis for finding that Cummins was either directly or indirectly liable on an alter-ego/veil-piercing theory for CPS's allegedly unlawful actions against Plaintiff. See Nat'l Gear, 861 F.Supp.2d at 375–77. In its Second Amended Complaint, Plaintiff attempted to cure the pleading deficiencies by alleging new facts regarding the relationship between CPS and Cummins.

B. The Newly Alleged Facts

In the previously dismissed Amended Complaint, Plaintiff alleged, in support of Cummins' liability, that Cummins was aware of the allegedly unlawful actions taken by CPS, and that Cummins failed to respond in writing to a letter sent by Plaintiff regarding CPS's conduct or otherwise to direct CPS to alter its conduct. (Am. Compl. ¶¶ 61–63.) In its Second Amended Complaint, Plaintiff sets forth a number of additional facts to support its claims against Cummins. For the purposes of deciding the instant motion, the Court assumes these allegations to be true.

Plaintiff alleges that CPS was established in 2007 as a joint venture between Cummins and CPS's current president, Patrohay. (SAC ¶ 91.) Prior to the formation of CPS, Cummins had employed Patrohay in “a series of executive positions” from 1988; after the formation, he was appointed president of CPS in January 2008. ( Id. ¶¶ 96–97.) Moreover, according to Plaintiff, Cummins “follows a pattern and practice of appointing [its] executive staff to positions in its wholly owned and partially owned distributor subsidiaries.” ( Id. ¶ 98.) Additionally, the CPS website “prominently” features the “Service Years with Cummins” of its executives, including both Patrohay and CPS Vice President Karl Gontkof, who have served with Cummins for twenty-three years and thirty-five years, respectively. ( Id. ¶¶ 99–101.) The website also indicates Gontkof's status as an active member of the “Cummins Truck Engine Council,” although Plaintiff does not explain what this council is, or how it functions. ( See id. ¶ 101.) According to Plaintiff, this alleged pattern of executive overlap “indicates a continuous period of professional engagement by a unitary, integrated corporate structure.” ( Id. ¶¶ 99–101.)

Plaintiff further alleges that in addition to sharing overlapping management, CPS and Cummins are “inextricably interconnected” based on Cummins's overall corporate structure. ( Id. ¶ 90.) Indeed, Cummins has described itself in a press release as “a corporation of complementary business units that design, manufacture, distribute, and service engines and related technologies.” ( Id. ¶ 91 (emphasis and internal quotation marks omitted).) Plaintiff relatedly asserts, upon information and belief, that the “near entirety” of the original CPS capital contribution was provided by Cummins, and that Cummins currently holds eighty-two percent of the equity membership in CPS. ( Id. ¶¶ 92–93.) As a Cummins subsidiary, CPS's financial information is incorporated into Cummins' quarterly and annual financial reports, and informational meetings between Cummins and CPS are conducted on an annual basis. ( Id. ¶¶ 94–95.) Plaintiff also states that by including CPS's financial information in its disclosures, Cummins reaps a financial benefit—although Plaintiff does not specify the nature or extent of that benefit. ( Id. ¶ 107.) As further support of the interconnectedness of the two corporations, Plaintiff alleges that in its most recent 10–K filing, Cummins stated that its Distribution Segment manages the performance and capabilities of its network of subsidiary distributors and that two of its three principal distribution facilities are operated by CPS. ( Id. ¶¶ 108–09.) Cummins also indicatedin that filing that its products are supplied to its customers through its wholly and partially owned subsidiaries. Plaintiff notes that Cummins employs words such as “we” and “our” throughout its literature, seemingly in reference to its subsidiaries. ( Id. ¶ 110.)

Finally, Plaintiff states that Cummins was free to terminate its relationship with CPS at any time for CPS's violations of the Cummins Business Code of Conduct, as further evidence of Cummins' control over CPS. ( Id. ¶¶ 111–12.) As in the Amended Complaint, Plaintiff asserts that despite having knowledge of CPS's conduct in its dealings with Plaintiff, Cummins took no action to correct CPS's alleged misconduct. ( Id. ¶¶ 115–17.)

II. Discussion

A. Standard of Review

Rule 12(b)(6) Motion To Dismiss

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