Case Information
USDC SDNY DOCUMENT ELECTRONICALLY FILED UNITED STATES DISTRICT COURT DOC #: _________________ SOUTHERN DISTRICT OF NEW YORK DATE FILED: 12/5/2023 ---------------------------------------------------------------------- X :
WCA HOLDINGS III, LLC, :
: Plaintiff, : 1:20-cv-07472-GHW : -against- : : MEMORANDUM OPINION
PANASONIC AVIONICS CORPORATION, : AND ORDER : Defendant. :
:
---------------------------------------------------------------------- X
GREGORY H. WOODS, United States District Judge:
Plaintiff WCA Holdings III, LLC (“WCA”) is the owner of a private aircraft that Defendant Panasonic Avionics Corporation (“Panasonic”) agreed to outfit with the latest and greatest in-flight internet, cabin management, and entertainment systems. After entering into the original agreement in 2010, Panasonic struggled to deliver on its promises. Yet the parties maintained their optimism, slogging through the next 10 years with four additional agreements, extending the promised completion date and adding promises of yet more updates to the aircraft. It was only in 2020 that the parties accepted that their deal had imploded, and the aircraft was left with an obsolete, poorly functioning in-flight system. In a cautionary tale of over-optimism, many of WCA’s claims must now be dismissed as too little, too late. For the reasons set forth below, Panasonic’s motion to dismiss is GRANTED IN PART AND DENIED IN PART.
BACKGROUND
A. The Original Agreement
WCA owns a Boeing 737-700 BBJ aircraft (the “Aircraft”) and operates it as a private business aircraft. Dkt. No. 27 (“Am. Compl.”) ¶¶ 1, 12. Panasonic is engaged in the business of engineering and designing in-flight telecommunications and entertainment systems for private aircraft. Id. ¶ 13. In June 2010, WCA and Panasonic negotiated and entered into the General Terms Agreement Between Panasonic Avionics Corporation and WCA Holdings III, LLC (the “GTA”). Id. ¶ 14; Dkt. No. 35-2 (GTA).
Under the GTA, Panasonic agreed to equip the Aircraft with a new in-flight internet, cabin management, and entertainment system, in exchange for cash or in-kind payment by WCA. Am. Compl. ¶¶ 1, 14–15. Specifically, Panasonic agreed to provide a “Shipset eXConnect System” (alternatively, the “eXConnect System”), an antenna system that connected to a satellite in order to provide in-flight broadband internet service to the Aircraft Id. ¶¶ 15. In exchange, WCA agreed to pay $324,500 for the eXConnect system and various other prices for specific spare parts and monthly broadband service. Am. Compl. ¶ 16; GTA Exh. A.
While the GTA is largely focused on the eXConnect System, the last exhibit to the GTA, titled “Additional Incentives,” introduces the “eX1 System,” a new cabin management and in-flight entertainment system. Am. Compl. ¶ 19; GTA Exh. F (“In addition to the eXConnect shipset parts list . . . , Panasonic is pleased to offer a new cabin management/in-flight entertainment system . . . .”). The eX1 System promises a host of features, such as “[c]abin lighting, flight attendant call, and temperature control” and “[a]udio-video on demand (AVOD), streamed independently to each cabin zone, with high definition video available from a media file server.” GTA Exh. F. The exhibit lists the “retail price” of the eX1 System as $1.2 million, with an additional $560,000 in additional costs for engineering, certification, and labor, but offers the eX1 System for a total discounted price of $500,000. Id.
that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.”
Ashcroft v. Iqbal
,
The GTA also includes provisions for Panasonic to obtain the necessary testing and certifications for the eXConnect and eX1 Systems, and permits Panasonic to use the Aircraft periodically for demonstration flights to show off Panasonic’s new products. See Am. Compl. ¶¶ 18, 20; GTA Exh. D; id. Exh. F.
The GTA contains various warranty provisions, including the following express warranties: Panasonic represents and warrants to [WCA] that:
6.1.1 The Products shall be free from defects in material and workmanship for a period of thirty-six (36) months from the date of shipment of the Products. 6.1.2 For a period of one hundred eighty (180) days from the date of installation, the Software shall substantially operate in accordance with the applicable specification. 6.1.3 At the time of delivery to [WCA], the Products shall conform to Panasonic’s applicable specifications and the applicable airworthiness authority rules, regulations and specifications which are in effect at such time.
. . .
6.1.5 The Services shall be performed in a good and workmanlike manner. Id. § 6.1. Section 7 of the GTA provides for several warranty exclusions, which include:
7.2 Software. Panasonic does not warrant that the functions contained in the Software will meet [WCA’s] requirements or that the operation of the Software will be uninterrupted or error free.
7.3 Disclaimer of Warranties. THE WARRANTIES SET FORTH IN THIS AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER ARISING FROM A COURSE OF DEALING, COURSE OF PERFORMANCE OR TRADE USAGE, OR WHETHER ORAL, WRITTEN, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, THE WARRANTIES OF NON- INFRINGEMENT, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY WAIVED BY BUYER. . . .
Id. § 7.
The terms “Products,” “Software,” and “Services” are separately defined in the GTA as follows:
1.3 “ Products ” shall mean the items set forth in Exhibit A . Products are not delivered with downloadable Software or Interactive Application Software. 1.4 “Services” shall mean certain installation, integration, testing, certification, non- recurring engineering (NRE) and out-of-warranty repair services that Panasonic may perform for Buyer from time to time pursuant to this Agreement.
. . .
1.6 “Software” shall mean Panasonic’s proprietary operating software in object code format, which is embedded in or downloadable to the Products. Software shall not include any Interactive Application Software.
. . .
1.8 “Workmanlike” shall mean worthy of a good workman; “a competent job” and work will be done in accordance with accepted aviation industry standards.
Id. §§ 1.3–1.8.
B. Delayed Installation of the eX1 System On or about May 25, 2012, Panasonic provided WCA with a completion schedule that represented that the installation of the eX1 System would be completed by September 20, 2012, provided that WCA delivered the Aircraft by July 16, 2012. Am. Compl. ¶ 23. WCA timely delivered the Aircraft, but the installation of the eX1 System was not completed on time. Id.
In fact, the installation of the eX1 System suffered a number of delays, engendering multiple extensions over the course of multiple amendments to the GTA (the “Amendments”). First, WCA and Panasonic entered into Amendment No. 1 to the GTA on October 19, 2012, under which Panasonic agreed to complete the installation of the eX1 System by December 20, 2012. Id. ¶ 24; see Dkt. No. 35-3 (“Amendment 1”) § 3. As part of the consideration for extending the deadline by which Panasonic agreed to complete the installation, Amendment 1 extended the warranty periods for the “Products” and “Software” warranties, under Sections 6.1.1 and 6.1.2 of the GTA. See Amendment 1 § 4.2 (“[The WCA] is hereby amended to delete Sections 6.1.1. and 6.1.2 thereof and to substitute the following in their stead[.]”).
Amendment 1 also provides for “Equipment Upgrades” for the eX1 System, in further consideration of the extension:
4.3 Equipment Upgrade. Panasonic shall install in the Aircraft in September 2017 (or such other month as the parties may agree) any and all upgrades to the eX1 System then available, including touch screens, Blu-ray players, audio speakers, LCD cabin monitors, cabin handsets, system remote controls and related software. All such upgrades to the eX1 System shall be covered by the warranty provided in Section 6 of the [GTA], as amended by this Agreement. It is the intention of [WCA] and Panasonic that the costs of all such upgrades shall be exchanged for Demonstration Flights as described below.
4.4 Demonstration Flights. In the event that [WCA] agrees to provide Aircraft demonstration flights for Panasonic or its prospective customers, Panasonic shall pay to [WCA] an amount equal to . . . .
. . .
Panasonic acknowledges and agrees that nothing in this Amendment obligates [WCA] to provide Aircraft demonstration flights for Panasonic or its prospective customers and that the provision of such flights shall be solely at [WCA’s] discretion . . . .
. . .
It is the intention of the parties that the Demonstration Flights will occur at an annual hour usage of approximately sixty (60) hours per year for a period of five years commencing on the Extended Completion Date. Panasonic is not obligated to use the quantity of hours stated above.
Id. § 4.3–4.4; see Am. Compl. ¶ 26.
On November 16, 2012, WCA and Panasonic entered into Amendment No. 2 to the GTA, pursuant to which the installation date of the eX1 System was extended to February 15, 2013. Am. Compl. ¶ 27; see Dkt. No. 35-4 (“Amendment 2”) § 4. In March 2013, the parties entered into Amendment No. 3 to the GTA, which further extended the installation date to May 19, 2013. Am. Compl. ¶ 28; see Dkt. No. 35-5 (“Amendment 3”) § 4. Amendments 2 and 3 also extended the “Products” and “Software” warranties. See Amendment 2 §§ 5.2.1, 5.2.2; Amendment 3 §§ 5.2.1, 5.2.2. Amendments 2 and 3 also contain an identical “Equipment Upgrade” section and the same terms for “Demonstration Flights” as Sections 4.3 and 4.4 of Amendment 1. Amendment 2 § 5.3; Amendment 3 § 5.4.
C. Problems with the eXConnect and eX1 Systems Panasonic finally completed the installation of the eX1 System in the Aircraft by May 19, 2013, the extended installation date provided for in Amendment 3. Am Compl. ¶ 29; see also Dkt. No. 35-6 (“Amendment 4”) at 1. WCA paid for the eX1 System through in-kind demonstration flights and flight testing in the Aircraft pursuant to the GTA and its amendments. Am Compl. ¶ 30.
However, the “combined eX1 and eXConnect system” did not “perform according to its specifications or Panasonic’s representation.” Id. ¶ 31. Among other failures, the combined system was unable to consistently provide streaming videos or television to the Aircraft or provide high- definition video and other cabin-management system requirements, as was promised. Id. WCA alleges that, “[o]n information and belief, theses failures occurred in part because Panasonic failed to install the eX1 and eXConnect systems pursuant to Panasonic’s own specifications, as indicated by the failure of the systems to work as Panasonic itself expected and represented.” Id. These failures were numerous and continued over many years, dating from early installation through the present. Id. ¶ 33.
WCA and Panasonic sought to resolve the issues and engaged in various communications about the eXConnect and eX1 System failures. Id. ¶ 32. Panasonic engaged in warranty repairs on the eXConnect and eX1 Systems, with mixed results. Id. ¶ 33. WCA alleges that, “[d]espite the numerous efforts to resolve the failures in the combined eX1 and eXConnect system, Panasonic has been unable or unwilling to put the eX1 and eXConnect systems in working condition it represented and warranted.” Id. ¶ 35.
D. Failure to Provide the Equipment Upgrades While the eX1 System was installed in May 2013, there still remained Panasonic’s promise to install the Equipment Upgrades to the eX1 System. Accordingly, on April 10, 2017, the parties entered into Amendment No. 4 to the GTA. Id. ¶ 37; see Amendment 4. In relevant part, Amendment 4 required that Panasonic provide a new, updated broadband controller (the “New Broadband Controller”) on the Aircraft as well as the Equipment Upgrades, as follows:
3. BROADBAND EQUIPMENT. Panasonic shall install the New Broadband Controller in the Aircraft at no cost to [WCA] on or prior to Flight Test No.5 set forth on Schedule B hereto. The New Broadband Controller shall be covered by the warranty provided in Section 6 of [the GTA]. It is the intention of [WCA] and Panasonic that the costs of the New Broadband Controller shall be exchanged for the Flight Tests as described in Section 4 and the Compensation as described in Section 4.4.
3.1. Equipment Upgrades. Panasonic shall also install in the Aircraft in September 2017 (or such other month as the parties may agree) any and all upgrades to the eX1 System then available, including . . . . All such upgrades to the eX1 System shall be covered by the warranty provided in Section 6 of [the GTA]. It is the intention of [WCA] and Panasonic that the costs of all such upgrades shall be exchanged for Demonstration Flights as described in Amendment 3, Section 5.4.
. . .
6. WARRANTY. Panasonic and [WCA] each agree that the term “Products” shall include the New Broadband Controller and any Equipment Upgrades referenced in Section 3.1. Without limiting Section 6 of [the GTA] and notwithstanding the expiration, termination or cancellation of the [GTA], Panasonic represents to [WCA] that the New Broadband Controller and any Equipment Upgrades shall be free from defects in material and workmanship for a period commencing on the date of installation (the “Installation Date”) ending on the later to occur of (a) the date that is sixty (60) months after the Installation Date or (b) the date that ownership of the Aircraft is transferred to an entity that is not controlled by or is under common control with [WCA].
Amendment 4 §§ 3, 6. WCA asserts that “the New Broadband Controller and Equipment Upgrades were intended by the parties to be paid for via in-kind test flights to obtain [Federal Aviation Administration] certification and demonstration flights for potential Panasonic customers, or alternatively, for cash payment by WCA pursuant to the terms of Exhibit F to the 2010 GTA.” Am. Compl. ¶¶ 38–39. In other words, WCA believed that it “agreed to and was obligated to pay for New Broadband Controller and Equipment Upgrades through such test flights, demonstration flights and/or cash payments.” Id. ¶ 39.
Panasonic did not complete the installation of the Equipment Upgrades by the end of September 2017, as promised—nor did the parties agree on a new installation date. Id. ¶ 41–42. Instead, Panasonic implicitly acknowledged that it does not have the ability or willingness to provide the Equipment Upgrades to WCA. Id. ¶ 43.
E. Procedural History
WCA commenced suit against Panasonic on September 11, 2020. Dkt. No. 1. WCA then amended its complaint, which is now the operative complaint in this matter. Dkt. No. 27. WCA asserts the following causes of action: (1) breach of contract for (a) failure to install the eXConnect and eX1 Systems “in a fully working condition and in the manner described in the GTA and related specifications for the eX1 system,” (b) breach of the warranty provisions of the GTA “by failing and refusing to repair or replace” the eXConnect and eX1 Systems, and (c) breach of its obligation to “provide Equipment Upgrades to the Aircraft no later than September 2017”; (2) breach of the implied covenant of good faith and fair dealing, including by failing to install the Equipment Upgrades in September 2017; and (3) to the extent that any of the Amendments are not valid contracts, promissory estoppel for Panasonic’s alleged failure to provide the Equipment Upgrades. Id. ¶¶ 44–60.
Panasonic moves to dismiss the complaint. Dkt. No. 34 (Notice of Motion); Dkt. No. 36 (“Motion”). WCA opposes. Dkt. No. 39 (“Opp.”). Panasonic has filed a reply. Dkt. No. 40 (“Reply”).
LEGAL STANDARD
A. Motion to Dismiss Under Rule 12(b)(6)
A complaint must contain “a short and plain statement of the claim showing that the pleader
is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A defendant may move to dismiss a plaintiff’s claim for
“failure to state a claim upon which relief can be granted.”
Id.
12(b)(6). In a motion to dismiss
under Rule 12(b)(6), the court accepts as true the facts alleged in the complaint and draws all
reasonable inferences in the plaintiff’s favor.
DiFolco v. MSNBC Cable L.L.C.
,
To survive dismissal under Rule 12(b)(6), a complaint must allege sufficient facts to state a
plausible claim.
Lynch v. City of New York
,
and common sense.” Id. at 679.
“In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a
district court may consider the facts alleged in the complaint, documents attached to the complaint
as exhibits, and documents incorporated by reference in the complaint.”
DiFolco
,
A court can also consider documents that are “integral to” the complaint.
Id.
For a
document to meet this exception to the general principle that a court may not consider documents
outside of the pleadings without converting the motion to one for summary judgment, the
complaint must rely heavily upon its terms and effects.
See DiFolco
,
B. Contract Interpretation
When interpreting a contract, the court’s “primary objective . . . is to give effect to the intent
of the parties as revealed by the language of their agreement.”
Chesapeake Energy Corp. v. Bank of N.Y.
Mellon Tr. Co.
,
“[W]hen the terms of a written contract are clear and unambiguous, the intent of the parties
must be found within the four corners of the contract . . . .”
Id.
(alterations in original) (quoting
Howard v. Howard
,
Conversely, a contract is ambiguous “if its terms could suggest more than one meaning
when viewed objectively by a reasonably intelligent person who has examined the context of the
entire integrated agreement and who is cognizant of the customs, practices, usages and terminology
as generally understood in the particular trade or business.”
Orchard Hill Master Fund Ltd. v. SBA
Commc’ns Corp.
,
DISCUSSION
Panasonic moves to dismiss portions of the Amended Complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Specifically, Panasonic argues that WCA has failed to allege a breach of contract claim as to the eX1 System, that the breach of warranty claim as to the eX1 System fails because no warranty covers the eX1 System, that WCA’s breach of contract claim as to the Equipment Upgrades is unenforceable, that WCA’s implied covenant of good faith and fair dealing claim should be dismissed as duplicative, and that WCA’s promissory estoppel claim is also duplicative and fails on the merits. Motion at 7–9. Panasonic does not contest the breach of contract claim or breach of warranty claim as to the eXConnect system.
Because this case arises under diversity jurisdiction, the Court applies the substantive law of
the forum state, New York, to its analysis.
Omega Eng’g, Inc. v. Omega, S.A.
,
In evaluating Panasonic’s motion to dismiss, the Court has considered the GTA and the Amendments (together, the “Agreement”), in addition to the factual allegations in the Amended Complaint. Dkt. Nos. 35-2 to -6. While the Agreement was not attached to the Amended Complaint, it is clearly integral to WCA’s claims, which center around the Agreement and the interpretation and enforcement of its terms. The parties also rely heavily on the language of the Agreement and do not appear to dispute the authenticity or accuracy of the Agreement.
The Court also adopts, for the purposes of framing the discussion, the parties’ division of the Agreement into three substantive portions: (1) the eXConnect System; (2) the eX1 System; and (3) the Equipment Upgrades. The parties do not discuss, and the Court does not need to decide today, whether the breach or unenforceability of one portion of the GTA or the Amendments affects the remainder of the Agreement between the parties.
A. Breach of Contract Claim as to the eX1 System WCA asserts a breach of contract claim for Panasonic’s alleged “fail[ure] to install the eX1 . . . system[] in a fully working condition and in the manner described in the GTA and related specifications for the eX1 system.” Am. Compl. ¶ 47(a). Panasonic argues that WCA’s breach of contract claim as to the installation of a functional eX1 System is barred by the statute of limitations.
Dismissal of a claim under Rule 12(b)(6) based on an affirmative defense is “warranted only
if the [defense]’s applicability [is] shown on the face of the complaint.”
Petersen Energía Inversora
S.A.U. v. Argentine Republic & YPF S.A.
,
The parties dispute which statute of limitations governs WCA’s breach of contract claim as
to the eX1 System. Under New York law, the statute of limitations for a breach of contract claim is
six years. N.Y. C.P.L.R. § 213(2). A breach of contract claim accrues—and the statute of limitations
begins to run—at the time of the breach, regardless of when the injured party discovered or should
have discovered the breach, and even if the resulting damage occurs later.
See, e.g.
,
V.E.C. Corp. of
Del. v. Hilliard
,
The Court does not need to determine which statute of limitations governs here because WCA’s breach of contract claim as to the eX1 System is time barred regardless of whether the six- year or four-year statute of limitations applies. WCA alleges that the failures of the eX1 System “dat[ed] from early installation . . . .” Am. Compl. ¶ 33. WCA alleges, “[o]n information and belief, these failures occurred in part because Panasonic failed to install the eX1 and eX[C]onnect systems pursuant to Panasonic’s own specifications . . . .” Id. ¶ 31 (emphasis added); see also id. ¶ 47(a) (cause of action asserting breach for “failing to install the eX1 and eXConnect systems in a fully working condition and in the manner described in the GTA and related specifications for the eX1 system”). In short, the alleged breach as to the eX1 System occurred at the time of installation. Amendment 4 recites, and the parties do not dispute, that the eX1 System was installed on the Aircraft on or about May 19, 2013. Amendment 4 at 1. This is also the date by which WCA alleges Panasonic was obligated to install a functioning eX1 System. Amendment 3 § 4. Panasonic’s alleged failure to do so constituted a breach, which started the clock on Panasonic’s time to bring a claim based on that breach. The breach occurred over seven years prior to the filing of this action on September 11, 2020. See Dkt. No. 1. The time to bring the breach of contract claim based on Panasonic’s alleged failure to provide and install a (functional) eX1 System therefore expired under either the four- or six-year statute of limitations.
WCA appears to acknowledge that it cannot recover for any breach of contract claim related to the eX1 System that accrued before September 11, 2014. Opp. at 6 (“[T]he statute of limitations arguably limits damages for breaches first occurring prior to six years before the filing of this action . . . .”). Instead, WCA argues that the failure to provide a fully working eX1 System was a continuous breach extending beyond the installation date. Id. (“[The statute of limitations] does not bar the claim for failure to provide a fully-working eX1 system because the breaches occurred over the course of years after the system was initially installed.”). WCA does not provide any authority for this assertion.
To the extent WCA bases its argument on the “continuing violation doctrine” under New
York law, this argument fails. This doctrine provides that, where “a contract requires continuing
performance over a period of time, each successive breach may begin the statute of limitations
running anew.”
Guilbert
,
Panasonic’s alleged obligation at issue was not a continuing obligation. WCA essentially
asserts that Panasonic’s single breach, at the time of installing the eX1 System, resulted in continued
damages that never abated, not a continuing violation.
Maloul v. New Colombia Res., Inc.
, No.
15-cv-8710-KPF,
Finally, WCA argues that its claim is timely because the GTA and its Amendments comprise
one comprehensive contract whose term expired on December 31, 2017, less than three years before
the commencement of this action. Amendment 4 § 5 (“Panasonic and [WCA] each agree that the
term of the [GTA] shall be extended through December 31, 2017.”). In short, WCA argues that the
breach did not occur until the written contractual term for the combined Agreement expired. The
only authority WCA cites in support of this proposition is
Haber v. Gutmann
, in which the purported
breach occurred when the defendant, who contracted to renovate the plaintiff’s house, abandoned
the renovations.
Accordingly, WCA’s breach of contract claim as to the alleged installation of the eX1 System is barred by the statute of limitations and is dismissed as untimely.
B. Breach of Warranty Claim as to the eX1 System WCA asserts a breach of warranty claim for the alleged breach of “the warranty provisions of the GTA relating to the Products, Software and Services by failing and refusing to repair or replace the combined eX1 and eXConnect system to put it in good working condition and to render the eX1 System free from defects in material and workmanship.” Am. Compl. ¶ 47(b). Panasonic argues that the eX1 System is not covered by any warranty under the Agreement, express or limited. Motion at 12–15. Panasonic is correct, except as to the Services warranty under the Agreement. Any such claim under the Services warranty, however, is time-barred.
As an initial matter, WCA does not dispute that it waived any and all implied warranties that
might otherwise apply to the eX1 System.
See
GTA § 7.3 (warranty disclaimer);
see also Roberts v.
Weight Watchers Int’l, Inc.
,
Panasonic represents and warrants to [WCA] that:
6.1.1 The Products shall be free from defects in material and workmanship for a period of thirty-six (36) months from the date of shipment of the Products. 6.1.2 For a period of one hundred eighty (180) days from the date of installation, the Software shall substantially operate in accordance with the applicable specification. 6.1.3 At the time of delivery to [WCA], the Products shall conform to Panasonic’s applicable specifications and the applicable airworthiness authority rules, regulations and specifications which are in effect at such time.
. . .
6.1.5 The Services shall be performed in a good and workmanlike manner. GTA § 6.1. Amendments 1 to 3 contain identical provisions that replace and extend the warranty periods in Sections 6.1.1 and 6.1.2 of the GTA, which only apply to the Products and Software warranties. See Amendment 1 § 4.2; Amendment 2 § 5.2; Amendment 3 § 5.2. Amendment 4 expands the definition of “Products” to include the New Broadband Controller and the Equipment Upgrades. Amendment 4 § 6.
The Court addresses each of these warranties below.
1. The eX1 System Is Not Covered by the “Products” Warranty The eX1 System is not covered by the “Products” warranty under the Agreement. Under the GTA, “Products” is defined as “the items set forth in Exhibit A,” which in turn lists a single product: “One (1) Shipset eXConnect.” GTA § 1.3 (“Products” definition); id. exh. A. The eX1 System is separately defined in Exhibit F of the GTA, which provides: “ In addition to the eXConnect shipset parts . . . , Panasonic is pleased to offer a new cabin management system / in- flight entertainment system . . . .” Id. Exh. F (emphasis added). In short, “Products” only encompasses the eXConnect System and excludes the eX1 System. This is supported by the inclusion of the phrase “in addition” in Exhibit F, which indicates that the eX1 System is distinct and separate from the eXConnect System. The parties was able to, but did not, change the definition of “Products” until Amendment 4, which expands the definition to include “the New Broadband Controller and any Equipment Upgrades . . . .” Amendment § 6. The parties therefore included specific upgrades to the eX1 System but chose to not fold in the eX1 System itself into the definition of “Products,” over the course of five written agreements. By the plain and clear terms of the Agreement, therefore, the eX1 System is not covered by any “Products” warranty under the Agreement.
WCA argues that the inclusion of the Equipment Upgrades—that is, upgrades to the eX1 System—in the warranty provisions folded in the underlying eX1 System into the warranty provisions as well. Opp. at 15. But the text of the Agreement belies WCA’s argument: “ All such upgrades to the eX1 System shall be covered by the warranty provided in Section 6 of the Agreement . . . .” Amendment 1 § 4.3 (emphasis added); see also Amendment 2 § 5.3; Amendment 3 § 5.3; Amendment 4 § 3.1. The text is clear on its face that it is the upgrades themselves, not the underlying eX1 System, that are added to the warranty provisions. [9]
2. The eX1 System Is Not Covered by the “Software” Warranty The eX1 System is also not covered by the “Software” warranty under the Agreement. WCA does not argue that the eX1 System was covered by a “Software” warranty. In any case, the GTA defines “Software” as “Panasonic’s proprietary operating software in object code format, which is embedded in or downloadable to the Products.” GTA § 1.6. The Amendments did not modify this definition. “Software” is plainly and exclusively defined as the software in the “Products”—which, as already discussed, excludes the eX1 System. Therefore, to the extent that the eX1 System’s flaws arise out of its software, it is not covered by any “Software” warranty under the Agreement. [10]
3. The eX1 System May Be Covered by the “Services” Warranty, But Any Such Claim is Time-Barred
The “Services” warranty of the Agreement arguably encompasses some of the work Panasonic performed to install the eX1 System. [11] The GTA defines “Services” as “certain installation, integration, testing, certification, non-recurring engineering (NRE) and out-of-warranty repair services that Panasonic may perform for [WCA] from time to time pursuant to this Agreement.” GTA § 1.4. The GTA then warrants that, “[t]he Services shall be performed in a good and workmanlike manner.” Id. § 6.1.5. “Workmanlike” is defined as “worthy of a good workman; ‘a competent job’ and work will be done in accordance with accepted aviation industry standards.” Id. § 1.8. The ensuing Amendments did not substitute or amend these provisions. , Amendment 1 § 4.2 (amending Sections 6.1.1 and 6.1.2 of the GTA, which only cover the Products and Software warranties). Therefore, the GTA’s terms constitute the governing Services warranty for the entirety of the Agreement.
Drawing all relevant inferences in WCA’s favor, the installation, integration, testing, and other services for the eX1 System fall under the definition of “Services” under the GTA. The Agreement’s provisions regarding the eX1 System focus on its installation, for example. Exhibit F to the GTA contemplates the “installation” of the eX1 System. GTA Exh. F. Amendments 1 to 3 also repeatedly provide for the “installation” of the eX1 System, such as:
WHEREAS, on or about May 25, 2012 Panasonic provided to Buyer a completion schedule (the “Completion Schedule”) showing that . . . Panasonic would complete the installation of the eX1 System in the Aircraft on or before September 20, 2012. . . .
3. EXTENSION OF COMPLETION DATE. Panasonic agrees to complete the installation of the eX1 System in the Aircraft by December 20, 2012 (the “Extended Completion Date”), and, subject to the terms of this Amendment, [WCA] agrees to extend the date by which Panasonic is required to complete the installation of the eX1 System in the Aircraft to the Extended Completion Date.
Amendment 1 at 1; see Amendment 2 at 1–2 (noting further delay and extension of the completion date for the eX1 System installation); Amendment 3 at 1–2 (same). In addition, the eX1 System is tied to “flight and demonstration testing” requirements and “[a]dditional integration engineering and certification” expectations in the GTA, with “eX1 Installation Engineering,” “eX1 Certification,” and “eX1 Installation Labor” listed as specific items on the pricing chart provided for the eX1 System. See GTA Exh. F. These details indicate that the parties intended for these services related to the eX1 System to be those that Panasonic “may perform for [WCA] from time to time pursuant to this Agreement,” as defined in the Services warranty. GTA § 1.4.
For WCA’s claim to survive, however, it is not enough that Panasonic was obligated to provide services in connection with the eX1 System that were within the scope of the Services warranty under the GTA; WCA must also have adequately pleaded that the warranty was breached—that is, that Panasonic failed to perform a relevant service “in a good and workmanlike manner.” GTA § 6.15. WCA’s breach of warranty claim under the Services warranty is pleaded with little to no detail. Specifically, WCA alleges in relevant part:
The . . . eX1 and eXConnect system did not . . . perform according to its specifications or Panasonic’s representations. . . . On information and belief, these failures occurred in part because Panasonic failed to install the eX1 and eX[C]onnect systems pursuant to Panasonic’s own specifications, as indicated by the failure of the systems to work as Panasonic itself expected and represented.
Am. Compl. ¶ 31. [12]
The Court need not resolve whether this barebones pleading is sufficient to plead a breach
of the Services warranty claim, however, because any such claim is barred by the statute of
limitations.
[13]
A breach of warranty claim accrues at the date of delivery of the underlying product
or
at the time of breach.
Ito v. Marvin Lumber & Cedar Co.
,
WCA appears to argue that a breach of warranty claim accrues upon the expiration of a warranty period. See Opp. at 7. WCA cites no support for this argument, and the Court is not aware of any. Importantly, the only warranty at issue is that certain services, at the time that they are performed, will be performed in a specified manner—there is no “expiration” period to consider, as one might with a warranty to keep a certain product free from defects for a specified period of time.
Accordingly, WCA’s breach of warranty claim as to the eX1 System is dismissed. C. Breach of Contract: The Equipment Upgrades Panasonic seeks to dismiss WCA’s breach of contract claim as to the alleged failure to provide the Equipment Upgrades by arguing that, due to a lack of mutuality of obligation or definiteness in the Agreement, the parties’ bargain as to the Equipment Upgrades is an unenforceable agreement. Motion at 15–20. Because the Equipment Upgrades are supported by consideration and are not too ambiguous to be unenforceable, Panasonic’s arguments fail.
Over the course of four Amendments, the Agreement defines the Equipment Upgrades as follows:
Panasonic shall install in the Aircraft in September 2017 (or such other month as the parties may agree) any and all upgrades to the eX1 System then available, including touch screens, Blu-ray players, audio speakers, LCD cabin monitors, cabin handsets, system remote controls and related software.
Amendment 1 § 4.3; Amendment 2 § 5.3; Amendment 3 § 5.3; Amendment 4 § 3.1. In relevant part, Amendments 1 to 3 then provide as follows:
It is the intention of [WCA] and Panasonic that the costs of all such upgrades shall be exchanged for Demonstration Flights as described below.
. . .
In the event that [WCA] agrees to provide Aircraft demonstration flights . . . . . . .
Panasonic acknowledges and agrees that nothing in this Amendment obligates [WCA] to provide Aircraft demonstration flights for Panasonic or its prospective customers and that the provision of such flights shall be solely at [WCA’s] discretion.
Amendment 1 §§ 4.3, 4.4; Amendment 2 §§ 5.3, 5.4; Amendment 3 §§ 5.3, 5.4. Amendment 4 provides: “It is the intention of [WCA] and Panasonic that the costs of all such upgrades shall be exchanged for Demonstration Flights as described in Amendment 3, Section 5.4.” Amendment 4 § 3.2.
1. Mutuality of Obligation
“To form a valid contract under New York law, there must be an offer, acceptance,
consideration, mutual assent, and intent to be bound.”
Register.com, Inc. v. Verio, Inc.
,
Panasonic argues that the only consideration that WCA offered in exchange for Equipment
Upgrades were certain demonstration flights, which WCA was free to provide or not provide at its
discretion. Motion at 16. But the words that Panasonic points to in support of this argument do
not operate in a vacuum. Panasonic does not deny that the parties have “expressed their intent to
be contractually bound in a writing,” as is evident from the five separate, written agreements
between the parties.
See Credit Suisse First Boston
,
There are numerous other indications that the Equipment Upgrades was not an illusory
promise. For example, the very fact that the parties entered into a final written contract following
the installation of the eX1 System—Amendment 4—that specifically in part focuses on the
Equipment Upgrades indicates that the parties intended to be bound in good faith in contract to the
provision of the Equipment Upgrades.
See, e.g.
,
Fishoff v. Coty Inc.
,
2. Indefiniteness
“Few principles are better settled in the law of contracts than the requirement of
definiteness[:] If an agreement is not reasonably certain in its material terms, there can be no legally
enforceable contract.”
Cobble Hill Nursing Home, Inc. v. Henry & Warren Corp.
,
Precatory language, such as language that purports to name the “intention of the parties” or
“the goal” of a contract, is not generally enforceable.
Adv. Water Techs., Inc. v. Amiad U.S.A.,
Inc.
,
Panasonic argues that the Equipment Upgrades bargain is too indefinite to be enforced
because the Agreement does not (1) precisely define the Equipment Upgrades or (2) provide for a
specific quantity of the demonstration flights or other price in exchange for the Equipment
Upgrades. Motion at 17–20. “Contracting parties are often imprecise in their use of language,” and
imprecision alone is not reason to find an agreement unenforceable.
In re 166 Mamaroneck Ave. Corp.
,
First, Panasonic asks the Court to conclude that, because the parties were not able to predict the precise nature of the upgrades to the eX1 System that would be available in the future, as of September 2017, the entire Equipment Upgrades bargain is unenforceable. This is illogical. While the Agreement does not specify each detail of the Equipment Upgrades to be provided in September 2017, it does provide—over the course of five separate, written agreements that Panasonic agreed to—a temporal limit (upgrades “then available” in September 2017, unless otherwise agreed upon by the parties) and a non-exhaustive but exemplary list of aspects of the eX1 System that the upgrades might affect (“touch screens, Blu-ray players, audio speakers, LCD cabin monitors, cabin handsets, system remote controls and related software”). , Amendment 1 § 4.3; Amendment 4 § 3.1. As added context, the Equipment Upgrades bargain entered the parties’ Agreement as the date of installation for the eX1 System was continually extended, with the eX1 System finally being installed on or about May 19, 2013. See Amendment 4 at 1; Am. Compl. ¶¶ 26– 28. These details provide sufficient parameters to show that Panasonic contracted to provide WCA with whatever model or version of the eX1 System was available as of September 2017, to the extent that Panasonic continued to develop and improve upon its eX1 System product and software after the parties first entered into a contract in 2010. See GTA at 15 (dates of contract). What that specific model or version constitutes is a question of fact to be resolved later; at this stage, it is enough that Panasonic was bound by an enforceable obligation.
Second, as already discussed, WCA was obligated to provide some demonstration flights, and it is immaterial that no defined number of such flights was provided; and even if the Agreement imposes no such duty on WCA, Panasonic’s promise to provide the Equipment Upgrades is nonetheless enforceable, given that there was other consideration—such as the extension of the completion date for the eX1 System installation—for such promise.
Accordingly, Panasonic has failed to show that the Equipment Upgrades bargain is unenforceable.
D. Breach of the Implied Covenant of Good Faith and Fair Dealing WCA asserts a breach of the implied covenant of good faith and fair dealing arising out of the parties’ Agreement. Am. Compl. ¶¶ 49–55. WCA’s claim fails because WCA fails to plead an implied covenant claim separate and distinct from its breach of contract claim.
“Under New York law, parties to an express contract are bound by an implied duty of good
faith, but breach of that duty is merely a breach of the underlying contract.”
Harris v. Provident Life
& Accident Ins. Co.
,
The implied covenant of good faith and fair dealing is “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.”
Fishoff v. Coty Inc.
,
Therefore, to plead both a breach of contract claim and an implied covenant claim, a
plaintiff must thread the needle of “alleg[ing] an implied duty that is consistent with the express
contractual terms, but base[d] . . . on allegations that are distinct from the factual predicate for its
contract claims.”
JPMorgan Chase Bank, N.A. v. IDW Grp., LLC
, No. 08-cv-9116,
At most, WCA arguably asserts that Panasonic had an implied duty to make good faith
efforts to identify and install the Equipment Upgrades, as available, in September 2017, and that
Panasonic breached that duty by “assert[ing] that the [Equipment Upgrades] were too uncertain to
allow it to perform and . . . not making an effort to install then-available upgrades in 2017.”
Id.
¶ 54.
This nonetheless amounts to a claim that Panasonic was obligated, but failed, “to provide the
Equipment Upgrades to the Aircraft no later than September 2017.”
Id.
¶ 47(c) (breach of contract
claim as to the Equipment Upgrades). There is no separate and distinct claim for breach or damages
other than from Panasonic’s alleged failure to provide the Equipment Upgrades on a timely basis.
Rojas v. Don King Prods., Inc.
, No. 11-cv-8468,
Accordingly, WCA’s implied covenant of good faith and fair dealing claim is dismissed. E. Promissory Estoppel
WCA brings a claim of promissory estoppel as to Panasonic’s alleged failure to provide the Equipment Upgrades. Am. Compl. ¶ 58. WCA concedes that this claim is asserted in the alternative, to the extent that the Court finds that there was no valid and enforceable contract between the parties. Opp. at 18. Panasonic has failed to show that the Agreement is unenforceable—but, in any case, WCA has failed to allege a promissory estoppel claim even in the alternative. Therefore, WCA’s promissory estoppel claim is dismissed.
Promissory estoppel requires: “(1) a promise that is sufficiently clear and unambiguous;
(2) reasonable reliance on the promise by a party; and (3) injury caused by the reliance.”
MatlinPatterson ATA Holdings LLC v. Fed. Express Corp.
,
“Courts dismiss promissory estoppel claims as duplicative ‘unless the plaintiff alleges that the
defendant had a duty independent from any arising out of the contract.’”
Hallet v. Stuart Dean Co.
,
WCA’s promissory estoppel claim only focuses on the Equipment Upgrades bargain.
See
Am. Compl. ¶ 58 (“Panasonic’s promises . . . constitute clear and unambiguous promises to WCA to
provide upgrades to the eX1 system in the form of upgrades that were available from Panasonic in
the year 2017.”). The Court has rejected Panasonic’s argument that the Equipment Upgrades
bargain is enforceable; therefore, WCA’s promissory estoppel claim is precluded because there is no
bona fide
dispute as to the existence of an enforceable written contract that covers the dispute at
issue.
See Dart Brokerage Corp.
,
In any case, although the Court has rejected Panasonic’s argument that its obligation to
provide the Equipment Upgrades is not
so
indefinite to render it unenforceable, the Equipment
Upgrades bargain also cannot be said to be defined in such a “sufficiently clear and unambiguous”
manner that WCA was entitled to “reasonably rely” upon them.
Ashland Inc. v. Morgan
Stanley & Co.
,
Accordingly, WCA’s claim for promissory estoppel is dismissed. LEAVE TO AMEND
“It is the usual practice upon granting a motion to dismiss to allow leave to replead.”
Cortec
Indus., Inc. v. Sum Holding L.P.
,
WCA’s breach of contract claim as to the eX1 System and promissory estoppel claim are dismissed with prejudice and without leave to amend. The Court’s dismissal as to these claims is based on the text of the Agreement between the parties and facts, such as the date of the installation of the eX1 System, that are undisputed and fixed. Re-pleading these claims would be futile. Given the liberal standards of Federal Rule of Civil Procedure 15(a)(2), the Court will grant WCA leave to amend its breach of warranty claim as to the eX1 System and its breach of the implied covenant of good faith and fair dealing claim, but only to cure the deficiencies identified in this opinion. CONCLUSION
For the reasons stated above, Panasonic’s Motion to Dismiss is GRANTED IN PART AND DENIED IN PART. Dkt. No. 34. The following claims are dismissed:
(1) breach of contract as to the eX1 System, with prejudice; (2) breach of warranty as to the eX1 System, without prejudice; (3) breach of the implied covenant of good faith and fair dealing, without prejudice; and (4) promissory estoppel, with prejudice.
For the avoidance of doubt, WCA’s breach of contract claim as to the Equipment Upgrades survives Rule 12(b)(6) dismissal. The Motion also does not address, and therefore leaves intact, WCA’s breach of contract and breach of warranty claims as to the eXConnect system.
The Clerk of Court is directed to terminate the motion pending at Dkt. No. 34. SO ORDERED.
Dated: December 5, 2023 _____________________________________ New York, New York GREGORY H. WOODS
United States District Judge
Notes
[1] Unless otherwise noted, the facts are drawn from the amended complaint, and are accepted as true for the purposes of
this motion to dismiss.
Chambers v. Time Warner, Inc.
,
[2] It is not clear if and when the delivery and installation of the eXConnect System was completed.
[3] “[W]hether a contract is divisible is a question of intent, determined from the language of the contract and the
circumstances under which the contract was made.”
Lazard Freres & Co. v. Crown Sterling Mgmt., Inc.
,
[4] WCA’s argument that there is a factual question of how much “reasonable time” Panasonic had to perform its eX1
system obligations, based on this Court’s opinion in
Gillespie v. St. Regis Residence Club
, misses the point. 343 F. Supp. 3d
332 (S.D.N.Y. 2018). The Court in
Gillespie
held that a party was entitled to a “reasonable time” to perform its
contractual obligations
absent a specified time for performance
.
Id.
at 348. There is no need to determine a “reasonable time”
for Panasonic’s time to perform here, where the date of performance (installation of the eX1 system) is both specified in
the contract and the parties do not dispute that the installation of the eX1 system occurred on or around that date.
Because the specific date on which WCA’s claim accrued is clearly on the face of the Agreement, the Court may resolve
this issue on a pre-answer motion to dismiss.
LiveIntent, Inc. v. Naples
,
[5] The claim would accrue on the same day if the Agreement were a sale of goods under the U.C.C.
Rouse v. Elliot
Stevens, Ltd.
, No. 13-cv-01443-SN,
[6] WCA’s breach of warranty claim is addressed separately later in this opinion.
[7] Because this claim is dismissed as untimely, the Court need not address the parties’ arguments as to whether the claim is adequately pleaded.
[8] The warranty extension provision in Amendment 1 is different than those in Amendments 2 and 3. Section 4.2 of Amendment 1 states: 4.2.1 The Products shall be free from defects in material and workmanship for a period commencing on the date of shipment of the Products (the “Shipment Date”) and ending on the earlier to occur of (a) the date that is sixty (60) months after the Extended Competition Date or (b) the date that ownership of the Aircraft is transferred to an entity that is not controlled by or is under common control with [WCA]. 4.2.2 The Software shall substantially operate in accordance with the applicable specification for a period commencing on the date of installation (the “Installation Date”) and ending on the earlier to occur of (a) the date that is one hundred eighty (180) days after the Installation Date or (b) the date that ownership of the Aircraft is transferred to an entity that is not controlled by or is under common control with [WCA]. Amend. No. 1 § 4.2 (emphases added). Notably, Amendments 2 and 3 further extend the warranties by substituting “later to occur” for the italicized “earlier to occur” in the above-quoted provision in Amendment 2. See Amendment 2 § 5.2; Amendment 3 § 5.2.
[9] WCA’s final argument is essentially that Panasonic should be barred from making a breach of warranty claim because
Panasonic acted in a way consistent with understanding that the warranty provisions of the Agreement “applied to the
eX1 system.” Opp. at 16. WCA again cites no authority for this proposition. In any case, this is an argument that turns
to extrinsic evidence, which is unnecessary where, as here, the text of the contract is clear.
Brad H. v. City of New
York
,
[10] The Agreement also provides the following disclaimer: “Panasonic does not warrant that the functions contained in the Software will meet [WCA’s] requirements or that the operation of the Software will be uninterrupted or error free.” GTA § 7.2.
[11] Contrary to Panasonic’s assertion that WCA’s allegation that Panasonic’s alleged failures fell under the Services warranty is newly alleged in its opposition brief, WCA does allege a breach of the Services warranty in its Amended Complaint. Compare Reply at 2 & n.2, with Am. Compl. ¶ 47(b) (“Panasonic has breached the warranty provisions of the GTA relating to the Products, Software and Services . . . .”).
[12] The subsequent warranty repairs that Panasonic performed are outside the scope of the Services warranty, which specifies that “out-of-warranty repairs” are covered, indicating that warranty repairs are excluded. See Am. Compl. ¶ 33 (“Panasonic engaged in warranty repairs . . . on the eXConnect and eX1 systems.”); GTA § 1.4 (defining “Services”).
[13] WCA argues that Panasonic did not assert a statute of limitations defense on this claim in its Motion. Opp. at 5 n.2. While Panasonic appears to have blended the breach of contract claims with the breach of warranty claims in discussing the statute of limitations (as does WCA in its opposition), the Court concludes that Panasonic did assert a statute of limitations defense as to WCA’s breach of warranty claim specifically. See Motion at 11, 15.
[14] WCA argues that its breach of warranty claim is not time-barred because the U.C.C. provides that the claim accrues
“when the breach is or should have been discovered”
if
“a warranty explicitly extends to future performance of the
goods and discovery of the breach must await the time of such performance.” N.Y. U.C.C. § 2-725(2). This fails for
numerous reasons, including that WCA does not point to any
explicit
extension of the Services warranty to a future
performance. Nor could any such warranty of future performance be shown for the Services warranty, which promises
that a service, at the time that it is performed, will be done in a specific manner.
Cf. Coakley v. Regal Cinemas, Inc.
, 134
N.Y.S.3d 74, 79 (2d Dep’t 2020) (“A warranty of future performance is one that guarantees that the product will work
for a specified period of time.”);
Woods v. Maytag Co.
, No. 10-cv-0559 (ADS) (WDW),
[15]
Compare Unitron Graphics, Inc. v. Mergenthaler Linotype Co.
,
[16] The Amended Complaint does not allege a breach of warranty claim as to the Equipment Upgrades. See Am. Compl. ¶ 47.
[17] Panasonic’s cited cases are not to the contrary. For example,
CARI, LLC v. 415 Greenwich Fee Owner, LLC
, dealt with a
party’s unliteral right to terminate the contract in question entirely, which is not at issue here.
[18] Specifically, to the “touch screens, Blu-ray players, audio speakers, LCD cabin monitors, cabin handsets, system remote controls and related software” of the eX1 System. See Amendment 4 § 3.1.
[19] A dismissal of the implied covenant claim as duplicative is appropriate regardless of whether the breach of contract
claim survives.
Gray v. Toyota Motor Sales, U.S.A., Inc.
,