Util Auditors, LLC v. Honeywell International Inc.
1:17-cv-04673
S.D.N.Y.Nov 7, 2018Background
- Util Auditors, LLC (Florida LLC) and Honeywell International, Inc. (Delaware corp.) entered a Master Services Agreement on March 17, 2016 for Util to identify utility-cost savings and assist with implementation in exchange for a contingent percentage of recovered savings.
- Util began work May 24, 2016 and identified opportunities in Arizona, Kansas, Louisiana, New Mexico, and elsewhere; Honeywell approved pursuit in some states but purportedly withheld invoices and limited scope at Honeywell’s request.
- Util alleges Honeywell told it Honeywell could handle the work internally but later asked Util to help compile documentation; Honeywell then terminated the Agreement on March 9, 2017 and allegedly received refunds/exemptions based on Util’s work without paying Util.
- The Agreement required Util to validate implemented cost reductions and provided that, upon termination, Honeywell’s sole liability was payment for Services fully performed; otherwise contingent fees were owed only after validation and billing-cycle proof.
- Util sued in Southern District of New York alleging breach of contract and breach of the implied covenant of good faith and fair dealing under New York law; Honeywell moved to dismiss for failure to state a claim.
- The court granted Honeywell’s Rule 12(b)(6) motion, finding Util failed to plausibly allege the essential element of damages because the complaint lacked allegations that Util fully performed, validated savings, or otherwise met the Agreement’s prerequisites for contingent fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract — entitlement to contingent fees | Util: Honeywell obtained savings from Util’s work and refused to pay the agreed percentage | Honeywell: Agreement conditions payment on Honeywell approval, Util’s implementation/validation, and Agreement limits liability on termination to services fully performed | Court: Dismissed — complaint fails to allege Util fully performed or validated savings, so no plausible damages alleged |
| Breach of contract — Honeywell’s withholding of data | Util: Honeywell’s failure to provide invoices reduced Util’s fee and prevented identification of additional recoveries | Honeywell: No liability because contingent fee prerequisites still unmet and complaint lacks facts showing damages from withheld data | Court: Dismissed — theory depends on contingent payments that were not plausibly alleged |
| Breach of implied covenant — failure to apply for refunds | Util: Honeywell deliberately avoided applying for refunds, harming Util’s right to contingent payments | Honeywell: Even if refunds were sought, Util must have fully performed and validated to be owed contingent payments | Court: Dismissed — no plausible damages alleged because Agreement preconditions were not met |
| Breach of implied covenant — use of Util’s work after termination | Util: Honeywell used Util’s work post-termination to obtain savings without paying | Honeywell: Same contract defenses; no alleged completed performance to trigger payment | Court: Dismissed — complaint lacks allegations of damages from post-termination use |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard: must plead sufficient factual matter to state a plausible claim)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
- Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168 (court’s role on motion to dismiss is to assess legal feasibility, not weigh evidence)
- Harris v. Mills, 572 F.3d 66 (construing complaint and drawing inferences for plaintiff)
- Fischer & Mandell, LLP v. Citibank, N.A., 632 F.3d 793 (elements of breach of contract under New York law)
- Dalton v. Educ. Testing Serv., 87 N.Y.2d 384 (implied covenant of good faith and fair dealing exists in every contract)
- Shemian v. Research In Motion Ltd., [citation="570 F. App'x 32"] (leave to amend requires indication of what plaintiff would add)
- Horoshko v. Citibank, N.A., 373 F.3d 248 (district court amendment guidance precedent)
- Roth v. Jennings, 489 F.3d 499 (court need not credit factual assertions not in complaint)
- Kramer v. Time Warner, 937 F.2d 767 (same)