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ABB DAIMLER-BENZ TRANSP., INC. v. AMTRAK

June 8, 1998

ABB DAIMLER-BENZ TRANSPORTATION (NORTH AMERICA), INC., Plaintiff
v.
NATIONAL RAILROAD PASSENGER CORPORATION and NEW JERSEY TRANSIT CORPORATION, Defendants. L.K. COMSTOCK & COMPANY, INC., Plaintiff-Intervenor v. NATIONAL RAILROAD PASSENGER CORPORATION, Defendant.



The opinion of the court was delivered by: KESSLER

MEMORANDUM OPINION

 This matter is before the Court on Defendant New Jersey Transit Corporation's Motion for Summary Judgment And Partial Summary Judgment On All Claims of Adtranz and Comstock pursuant to Fed. R. Civ. P. 56(b) [ # 219], Defendant Amtrak's Motion for Summary Judgment Against Adtranz pursuant to Fed. R. Civ. P. 56(b) [ # 217], and Defendant Amtrak's Motion for Summary Judgment Against L.K. Comstock & Co. pursuant to Fed. R. Civ. P. 56(b) [ # 218].

 Having considered the Motions, Oppositions, Replies, the four and a half hour oral argument, voluminous pleadings, and the entire record, the Court concludes that:

 (1) New Jersey Transit's Motion for Summary Judgment is denied in part and granted in part as follows: (a) denied with respect to the fraud claims; (b) granted with respect to the application of New Jersey law to all claims against New Jersey Transit; (c) granted. with respect to tort claims and punitive damages claims under the New Jersey Tort Claims Act; (d) granted with respect to unjust enrichment and quantum meruit claims under the New Jersey Contractual Liabilities Act; (e) granted with respect to unjust enrichment and quantum meruit claims under New Jersey common law; and (f) denied with respect to tort claims under New Jersey common law;

 (2) Amtrak's Motion for Summary Judgment Against Adtranz is denied in part and granted in part as follows: (a) denied with respect to Rule 17(a); (b) denied with respect to the fraud claims *fn1" ; (c) denied with respect to accord and satisfaction; (d) denied with respect to promissory estoppel; (e) granted with respect to damages on high speed train project; and (f) denied with respect to all damages and costs regarding the Sunnyside Project; and

 (3) Amtrak's Motion for Summary Judgment Against Comstock is granted.

 I. Factual Background2

 ABB Daimler-Benz ("Adtranz") is a Delaware corporation with its principal place of business in Pittsburgh, Pennsylvania. Adtranz designs, manufactures, and sells electrical equipment for rail transportation systems. For the purposes relevant to this case, Adtranz is the successor in interest to ABB Traction, Inc. ("ABB"), which signed the original contract with Amtrak. On January 1, 1996, ABB was merged into AEG Transportation Systems, Inc., and the name of the new entity was changed to Adtranz. For ease of reference, ABB will be referred to as Adtranz.

 Defendant National Railroad Passenger Corporation ("Amtrak") is a private corporation organized and existing under the laws of the United States, with its principal place of business in Washington, D.C. Defendant New Jersey Transit ("NJT") is a State of New Jersey corporation, organized under New Jersey law, with its principal place of business in Newark, New Jersey. NJT was established by the New Jersey Public Transportation Act of 1979 which created NJT as an instrumentality of the state of New Jersey exercising public and essential governmental functions. N.J. Stat. Ann. § 27:54-4 (West 1994). NJT provides commuter passenger rail service through a subsidiary, New Jersey Transit Rail Operations, Inc., within New Jersey and between New Jersey and New York City. Portions of NJT's rail operations in New Jersey and New York City run over the Northeast Corridor (the "NEC") controlled by defendant Amtrak.

 This case arises out of a November 1993 contract (the "Contract") between Adtranz and Amtrak, under which Adtranz was to supply equipment and related services for the Static Frequency Converter Station (the "SFCS"), located on Amtrak's property at the Sunnyside Yard in Long Island City, New York ("the Project"). The purpose of the Project is to increase the available power on Amtrak's traction power system along Amtrak's NEC by converting energy from power lines owned and operated by Consolidated Edison Company of New York, Inc. ("Con Edison") into a form suitable for use by railway traction equipment. The SFCS would convert the 60 Hz electric power being supplied by Con Edison to 25 Hz power which would be usable by both NJT and Amtrak.

 Although not a signatory to the Contract, NJT, like Amtrak, stands to benefit from the increased power to be generated by the Project. Under an earlier agreement with Amtrak executed in February 1993, called the New Initiatives Agreement (the "NIA"), NJT agreed to seek federal grant funds and, once obtained, to pass them through to Amtrak, along with New Jersey tax revenues, for the design and construction of the SFCS. In return, NJT was granted substantial oversight responsibilities with respect to use of those funds. The NIA provided that the up-grading work to be performed at the Project would be "treated as a joint benefit and joint liability project" by Amtrak and NJT. (NIA, Adtranz' Opp'n to NJT's Mot. to Dismiss, Ex. E, p. 10; NIA, Ex. 3.)

 This project would permit NJT to increase its rail service into New York's Pennsylvania Station. Both Amtrak and NJT agreed in the NIA that the SFCS Project would enable them to operate trains more reliably and to provide increased levels of rail service both along Amtrak's NEC in New Jersey and from New Jersey into New York City.

 NJT and its technical consultant L.S. Transit Systems Inc. ("LSTS"), headquartered in New Jersey, have been actively involved in all aspects of the Project. For example, NJT and LSTS worked on preparation of the Performance Specifications, the procurement process, contract negotiations and the award of the November 2, 1993 Design/Build Contact between Amtrak and Adtranz. The Project was set up with a joint management structure between Amtrak and NJT. (NIA, p. 24.)

 In January 1993, Amtrak issued a Request for Proposals ("RFP") for the Project. In connection with the Project, on April 2, 1993, Adtranz entered into a Consortium Agreement with L.K. Comstock & Co., Inc. ("Comstock") for the purpose of: (1) preparing and submitting a proposal to Amtrak for the project; (2) jointly negotiating and signing in the name of Adtranz a contract with Amtrak based upon the proposal; and (3) jointly performing any contract they were awarded. Pursuant to the Consortium Agreement, Adtranz took responsibility for the design and procurement of equipment and Comstock took responsibility for all construction. *fn3"

 Adtranz submitted its proposal, and on November 2, 1993, was awarded the Contract to supply equipment and related services. In March 1994, Adtranz submitted to Amtrak, as required by the Contract, its design drawings and specifications at the 60% completion stage ("60% Design Submittal"). Amtrak rejected the 60% Design Submittal, which was based on the provision of cycloconverter equipment by Adtranz. After rejection of the 60% Design Submittal, Amtrak agreed to allow Adtranz to continue the Contract, but required Adtranz to change its cycloconverter technology to dc-link technology at no additional cost to Amtrak. This change in technology significantly increased costs for both Adtranz and Comstock by approximately $ 10 million.

 Adtranz alleges that rejection of the 60% Design Submittal was based on the setting of new and undisclosed performance requirements for the SFCS by Amtrak and NJT, which were inconsistent with those set out in the original RFP and Contract. Adtranz further alleges that the change in performance requirements was part of a conspiracy by NJT and Amtrak to force Adtranz to upgrade the original Project requirements to the more expensive dc-link technology, at no additional cost to Amtrak. Adtranz further claims that the changed design specifications caused Adtranz to incur significant cost increases and other losses as a result of being forced to redesign the project. Adtranz is suing Amtrak for breach of contract, fraud, quantum meruit and unjust enrichment, and seeks both compensatory and declaratory relief. It also brings claims for fraud, quantum meruit and unjust enrichment against NJT, as well as an additional claim for tortious interference with the Contract.

 Plaintiff-Intervenor Comstock seeks a declaratory judgment as to liability, and damages for increased construction costs incurred by Comstock in connection with the Project. Comstock alleges that Amtrak's wrongfully imposed change in technology to dc-link, increased Comstock's construction costs. Comstock has not been paid for its increased costs and alleges that it will not be paid by Adtranz until Amtrak pays Adtranz. Comstock also asserts a fraud claim against both NJT and Amtrak.

 II. Standard for Summary Judgment

 
A party against whom a claim . . . is asserted . . . may, at any time, move with or without supporting affidavits for a summary judgment in the party's favor as to all or any part thereof. . . . The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

 Fed. R. Civ. P. 56(b)-(c). The party seeking summary judgment bears the initial burden of demonstrating an absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). In determining whether the movant has met this burden, a court must consider all factual inferences in the light most favorable to the non-moving party. McKinney v. Dole, 246 U.S. App. D.C. 376, 765 F.2d 1129, 1135 (D.C. Cir. 1985). Once the moving party makes its initial showing, however, the nonmoving party must demonstrate "specific facts showing that there is a genuine issue for trial." Celotex, 477 U.S. at 324; McKinney, 765 F.2d at 1135. Moreover, "in determining a motion for summary judgment, the court may assume that facts identified by the moving party in its statement of material facts are admitted, unless such a fact is controverted in the statement of genuine issues filed in opposition to the motion." Local Rule 108(h).

 III. Analysis

 Defendant NJT seeks summary judgment against Plaintiffs Adtranz and Comstock pursuant to the New Jersey Tort Claims Act, the New Jersey Contractual Liabilities Act, and New Jersey common law. NJT argues that New Jersey law applies to all the claims against NJT because it is an instrumentality of the state of New Jersey. As such, NJT is immune from Adtranz' lawsuit. NJT also seeks partial summary judgment against Plaintiffs' fraud claims arguing that Adtranz has not met the standard of clear and convincing evidence necessary to show that fraud has been committed by NJT and Amtrak. Further, NJT seeks summary judgment on all claims arguing that since the fraud claims must be dismissed, this Court lacks personal jurisdiction over NJT and venue and service of process are improper.

 As to Defendant Amtrak, it first seeks summary judgment against Adtranz arguing that fraud was not committed by Amtrak and NJT, and therefore the claim must be dismissed. Second, Amtrak argues that the doctrines of accord and satisfaction and/or promissory estoppel bar Adtranz from claiming any and all costs and losses related to the change in technology. Third, Amtrak filed a separate motion for summary judgment against Comstock arguing that Comstock's derivative fraud claims should be dismissed because Adtranz was not defrauded, and even if it was Amtrak could not reasonably anticipate Comstock's reliance on any representations allegedly made by Amtrak. Fourth, Amtrak argues that both Adtranz and Comstock failed to justify the use of a "total cost method" of damage calculations, and, therefore, those damage calculations should be stricken. Fifth, Amtrak argues that Adtranz' and Comstock's punitive damages claims should be stricken as a matter of law and fact.

 Finally, Amtrak argues that summary judgment should be granted against all claims raised against Amtrak because both Adtranz and Comstock are not the real parties in interest in this law suit. Amtrak argues that Comstock cannot sue for breach of contract because there was no contract between Amtrak and Comstock; therefore, Comstock has no privity of contract with Amtrak.

 The Court will address the arguments raised by the Defendants in the following order: (1) whether Adtranz is a real party in interest under Fed. R. Civ. P. 17(a); (2) whether Comstock has authority to sue; (3) Adtranz' fraud claims; (4) NJT's choice of law arguments; (5) Amtrak's affirmative defenses of accord and satisfaction and promissory estoppel; and (6) damages claims.

 A. Rule 17(a) *fn4"

 On April 2, 1993, some seven months prior to being awarded the Contract, Adtranz entered into an Internal Cooperation Agreement ("Cooperation Agreement") with ABB Traction AB ("Adtranz (Sweden)"), a corporation organized under the laws of Sweden that is a separate and distinct entity from Plaintiff Adtranz. (Amtrak's Mot. Summ. J. Against Adtranz, Ex. E.) This Cooperation Agreement was entered into without the knowledge, consent or approval of Amtrak. Amtrak argues that under the Cooperation Agreement, Adtranz assigned to Adtranz (Sweden) all risks and responsibilities for the Project in the event the contract was awarded to Adtranz. The Cooperation Agreement also included an indemnification of Adtranz by Adtranz (Sweden) for any liability that might arise out of the project.

 The Cooperation Agreement states in relevant part, that:

 
In consideration of the Parties [Adtranz (Sweden) and Adtranz] having reached a mutual understanding about the respective actual scope and consequent liability in the Project by accepting that all Project responsibility and liability remains with [Adtranz (Sweden)], which therefore internally assumes the actual role of Contractor, although [Adtranz] will externally bid, and if awarded the Project, sign as the prime contractors [sic];
 
the parties have agreed on the following:
 
1. Since the two main parties involved in the Project - L.K. Comstock and [Adtranz (Sweden)] - cannot bid as consortium, as this set up was rejected by Amtrak, the bid will be submitted in the name of [Adtranz]. [Adtranz] will also sign the internal Consortium Agreement with L.K. Comstock, with a back-to-back agreement with [Adtranz (Sweden)] by which [Adtranz (Sweden)] assumes all responsibility and liability thereto.
 
2. [Adtranz (Sweden)] internally relieves [Adtranz] of all responsibility and liability related to the performance of the Project and [Adtranz (Sweden)] agrees to defend and imdemnify [sic] [Adtranz] against any claims, losses or damages arising therefrom, except as agreed upon separately in a joint signed agreement (if any).
 
3. Internally between [Adtranz (Sweden)] and [Adtranz], [Adtranz (Sweden)] will have the role of leader in the Project and [Adtranz] will make no decisions on behalf of [Adtranz (Sweden)] or the Project without prior consultation and approval. . . . .
 
7. If the proposal effort successfully turns into an order for the Project, [Adtranz (Sweden)] is responsible for all contract requirements, [Adtranz (Sweden)] will reimburse [Adtranz] for actual work done and approved expenses. [Adtranz] agrees to provide office facilities.
 
8. Unless terminated earlier if the proposal is unsuccessful, this Agreement will continue until the Final Acceptance of the works [sic] by Amtrak and until all liabilities of this Agreement have been settled and paid.

 (Amtrak's Mot. for Summ. J. Against Adtranz, Ex. E.) In light of the Cooperation Agreement, Amtrak argues that Adtranz is not the proper party to this lawsuit. Adtranz fails to answer the argument that its responsibilities and performance obligations were assigned to Adtranz (Sweden), and simply states that the Cooperation Agreement was entered into because Adtranz (Sweden) possessed the technical expertise needed for the Project.

 "It is an elementary principle of contract interpretation that the plain and unambiguous meaning of a written agreement is controlling, in the absence of some clear evidence indicating a contrary intention." Pennsylvania Ave. Dev. Corp. v. One Parcel of Land in the District of Columbia, 216 U.S. App. D.C. 131, 670 F.2d 289, 292 (D.C. Cir. 1981) (quoting Vogel v. Tenneco Oil Co., 150 U.S. App. D.C. 383, 465 F.2d 563, 565 (D.C. Cir. 1972)). It is clear from the language of the Cooperation Agreement between Adtranz and Adtranz (Sweden) that Adtranz does not have an enforceable interest in the litigation because Adtranz assigned its rights to Adtranz (Sweden). See York Blouse Corp. v. Kaplowitz Bros., Inc., 97 A.2d 465 (D.C. 1953). The assignment gives the assignee "the present right to pursue this litigation." Macondo's Profit Corp. v. Motorola Communications & Elec., Inc., 863 F. Supp. 148, 150 (S.D.N.Y. 1994). Therefore, Adtranz (Sweden) is the only party who could suffer damages, and thus, the only party who can seek recovery.

 Fed. R. Civ. P. 17(a) provides that

 
every action shall be prosecuted in the name of the real party in interest. . . . [A] party with whom or in whose name a contract has been made for the benefit of another . . . may sue in that person's own name without joining the party for whose benefit the action is brought.

 However, the Rule also provides that "no action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for the ratification". Id. Such ratification "shall have the same effect as if the action had been commenced in the name of the real party in interest." Id.

 Since Amtrak filed its motion for summary judgment on March 12, 1998, arguing that Adtranz is not the real party in interest, Adtranz filed on March 25, 1998, the declaration of Johan Lagercrantz the General Counsel of Adtranz (Sweden). That declaration states that Adtranz (Sweden) ratifies the present lawsuit, authorizes the continuation of this action, and agrees to be bound by the result of such action. (Lagercrantz Decl. PP 9-10.) Consequently, Adtranz does meet all the requirements of Rule 17(a) to bring the present lawsuit, and as such Amtrak's motion for summary judgment against Adtranz for not being the real party in interest must be denied.

 B. Authority to Sue

 Amtrak argues that since Comstock is not a party to the Contract between Amtrak and Adtranz, it should be dismissed from the case. Comstock counters that it is not suing for breach of contract in its own name, but rather, it is suing in the name of Adtranz, which is in privity of contract with Amtrak. Comstock argues that it has the right to sue Amtrak pursuant to the Consortium Agreement entered into by Adtranz and Comstock which divided responsibility for performance of the Contract between the two companies. Comstock claims that the Consortium Agreement gave it the right to sue Amtrak in the name ...


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