United States District Court, D. Vermont
ELHANNON LLC, ELHANNON WHOLESALE NURSERIES, LLC, and ELHANNON WHOLESALE NURSERIES, INC., Plaintiffs,
THE F.A. BARTLETT TREE EXPERT COMPANY, Defendant.
OPINION AND ORDER
WILLIAM K. SESSIONS III, District Court Judge
Plaintiff Elhannon Wholesale Nurseries, Inc. as successor to Plaintiff Elhannon Wholesale Nurseries LLC, as successor, in turn, to Plaintiff Elhannon LLC (collectively “Elhannon”) brought this suit against Defendant F.A. Bartlett Tree Expert Company (“Bartlett”). Elhannon’s Complaint, ECF No. 1, contains eight claims: (I) Breach of Contract, (II) Breach of Implied Covenant of Good Faith and Fair Dealing, (III) Negligence, (IV) Negligent Misrepresentation, (V) Intentional Misrepresentation/Fraud, (VI) Fraud in the Performance, (VII) Violation of New York’s General Business Law, and (VIII) Punitive/Exemplary/Multiple Damages. Pursuant to Federal Rule of Civil Procedure 12(b)(6), Bartlett moves to dismiss all but the breach of contract claim contained in Count I. ECF No. 10. For the reasons set forth below, Bartlett’s motion is granted in part and denied in part. Counts II, VI, and VIII are dismissed without prejudice. The Court grants Elhannon leave to amend its Complaint within 30 days of this Order.
I. Standard of Review
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) a complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A court evaluating a motion to dismiss must accept the facts alleged in the complaint as true and draw all reasonable inferences from those facts in favor of the non-moving party. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). This assumption of truth does not apply to legal conclusions. Davis v. Vermont Dep’t of Corrections, 868 F.Supp.2d 313, 321 (D. Vt. 2012). A plaintiff’s factual allegations “must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555 (internal citation omitted).
II. Factual Background
The Court’s description of the factual background accepts all facts alleged by Elhannon’s Complaint as true, as it must at this stage of the proceedings. According to the Complaint, Elhannon is a wholesale tree-growing and selling operation with several locations and offices in the state of New York. ECF No. 1 ¶ 1. It sells trees across the United States to private homeowners, developers, commercial entities, governmental entities, architects, landscapers, and others. Id. ¶ 2. Bartlett is a Connecticut corporation with offices in Manchester Center, Vermont. According to Elhannon, Bartlett holds itself out as the world’s leading tree care company for both residential and commercial clients. Id. ¶ 3.
The parties first entered into a contractual relationship in 2007 when Bartlett agreed to provide an “Integrated Pest Management” (“IPM”) program for Elhannon at each of Elhannon’s six nursery locations. Id. ¶ 10. That contract and subsequent contracts committed Bartlett to inspect and treat all of Elhannon’s trees as part of a thorough plant healthcare program that Bartlett calls its “MoniTor” program. Id. ¶ 12. Elhannon selected Bartlett to provide its tree care service because of Bartlett’s national reputation and the protection and assurance that Bartlett’s name and reputation provided. Id. ¶ 17.
At a meeting at Elhannon’s offices in Petersburg, New York in November of 2007, Jeromy Gardner of Bartlett’s Manchester, Vermont office made a presentation to Elhannon designed to convince Elhannon to engage Bartlett to provide an IPM program.
Id. ¶ 18. Mr. Gardner outlined a program that would take care of all disease and pests at all six Elhannon locations, encompassing approximately eight hundred and fifty acres. Bartlett would inspect the nursery, analyze the results, and develop and implement an integrated, comprehensive pesticide, disease, and fertilizer program. Id. ¶ 19. Elhannon agreed that Bartlett was to have complete control and was to be paid per treatment, or “mobilization.” Id. The mobilization timeframe was under Bartlett’s complete discretion and any work needed per mobilization was to be performed by Bartlett without limitation. Id. The proposal Mr. Gardner sent to Elhannon stated that Bartlett would collect soil samples from all of Elhannon’s nursery locations, implement an IPM program, and inspect and treat all trees. Id. ¶ 25. Elhannon relied on Bartlett’s experience and expertise in tree care and did not attempt to direct, guide, or limit the proposal or Bartlett’s activities in any way. Id. ¶ 27. Elhannon assumed and expected that the contract encompassed whatever needed to be done and that Bartlett would in fact do whatever needed to be done. Id. ¶ 29.
Elhannon subsequently entered into a series of contracts identical or similar to the first contract through 2013, all of which were drafted by Bartlett. Id. ¶ 34. Elhannon paid the fees demanded with each contract except for the July 2013 contract because it was an “exercise in complete futility” and “Mr. Gardner knew that it was an exercise in futility and was performed for ‘show’ only.” Id. ¶ 35. Elhannon contends that over the years Bartlett not only consistently failed to perform but it failed in almost every respect to meet the commitments made in its “Mission Statement, ” including failing to care for Elhannon’s trees, to act with “full honesty, integrity, and fairness, ” to be “dependable, ” and to “communicate openly” with Elhannon. Id. ¶ 36. Elhannon also contends that Bartlett never had any intention to provide a quality IPM program and took deliberate steps over a period of years to conceal its true intentions, for example by promising when issues arose that it had everything under control and would take care of the problems reported. Id. ¶ 37.
Elhannon claims that despite their seven-year relationship and the terms of all of the parties’ contracts, Bartlett never performed a comprehensive inspection of all Elhannon locations, never treated all trees or anything beyond a small fraction, and never instituted an IPM program. Id. ¶ 38. Bartlett relied on a spraying technician, Jason Graham, rather than an arborist to inspect the trees on the same days he was scheduled to do his limited sprayings. Id. ¶ 39. Elhannon claims that this was not the bona fide inspection program called for in the contracts. Id.
From 2008 to 2010 Elhannon did not attempt to verify that Bartlett was fulfilling its duties under the contracts and assumed that Bartlett was indeed performing its inspections and executing a spraying program as needed. Id. ¶ 40. In 2010, Elhannon representatives noticed scale and larvae on its trees. Id. ¶ 41. Mr. Gardner said he would take care of the problem himself but he did not show up and Mr. Graham was left on his own. Id. ¶¶ 42-43. Mr. Gardner claimed he was ill at the time and when the parties met in 2011 to discuss the 2012 contract, Mr. Gardner promised to revise the program and do anything necessary to correct deficiencies caused by his absence during the 2011 season. Id. ¶¶ 44-46. Mr. Gardner continued to fail to correct the problems and they simply became worse over time as insect and disease issues had become visible and widespread throughout the entire nursery, costing Elhannon sales and damaging its reputation. Id. ¶¶ 48-50.
Mr. Gardner continued to promise to address the problems in various ways and consistently failed to do so. Id. ¶¶ 51-59. For example, Bartlett promised that it would spray the entire nursery but Mr. Graham covered only a small portion of two of the six nurseries. Id. ¶¶ 54-55. Mr. Graham allegedly falsely stated that he was spraying only one side of the trees because the chemicals would “walk.” Id. ¶ 57. Mr. Graham also stated that Mr. Gardner had limited him to only two days of spraying and that he was unable therefore to come back again to complete the job. Id. ¶ 58.
Elhannon claims that Mr. Gardner used a chemical in September of 2013 that is banned in New York “in a desperate effort to address the exploding pest problem.” Id. ¶ 60. The specific chemical is not identified in the Complaint. Moreover, Elhannon alleges that Mr. Gardner was not licensed to spray in New York and there was no paperwork to document the New York sprayings he performed. Id. According to Elhannon, Bartlett then allegedly falsified records in order to hide the illegal spraying. Id. ¶ 68.
Elhannon also claims that Bartlett falsified spraying records to indicate that Elhannon’s entire nursery was sprayed on given dates even though it was not and that Bartlett’s employees falsely reported the application of pesticides. Id. ¶¶ 65-66. Moreover, Bartlett improperly billed Elhannon for work done for other Bartlett clients. Id. ¶ 67. That Bartlett never intended to perform the contract as promised, according to Elhannon, is further demonstrated by Bartlett’s failure to bring equipment necessary to use horticultural oil as a means of pest control as called for in the contracts between the parties. Id. ¶ 69. Mr. Graham, who is no longer employed at Bartlett, told Elhannon’s owner, Jim Sutton that the program for Elhannon was never an IPM program.
The contracts between the parties contained an arbitration clause. Elhannon claims that Bartlett refused to negotiate, arbitrate, or mediate when counsel for Elhannon contacted Bartlett.
Finally, Elhannon claims that it had to destroy trees as a result of Bartlett’s failures and its net loss from pest infestations alone exceeds $8 million. Id. ¶ 75. However, the full extent of Elhannon damages is still unknown and could be several million dollars more.
In its motion Bartlett acknowledges a “bona fide contractual dispute with the Plaintiffs” and argues that the parties’ disagreement arises solely out of their contractual relationship. ECF No. 10-1 at 8. Bartlett also alleges that its performance under the contracts was more than satisfactory.
A. Choice of Law