Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca3-07-01095/USCOURTS-ca3-07-01095-0/pdf.json

Parties Involved:
International Business Machines Corp
Appellee
Trianco LLC
Appellant

Document Text:

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

__________

No. 07-1095

__________

TRIANCO, LLC,

Appellant

v.

INTERNATIONAL BUSINESS MACHINES CORPORATION,

Appellee

__________

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

No. 06-cv-03533

District Judge: Honorable Anita B. Brody

___________

Submitted Under Third Circuit L.A.R. 34.1(a)

March 10, 2008

___________

Before: FUENTES, CHAGARES, and ALDISERT, Circuit Judges

(Opinion Filed: April 2, 2008)

___________

OPINION

___________

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FUENTES, Circuit Judge:

Presently before the Court is Trianco, LLC’s (“Trianco”) appeal of the dismissal

of its complaint against International Business Machine Corporation (“IBM”) under Rule

12(b)(6) of the Federal Rules of Civil Procedure. For the following reasons, we will

affirm in part, vacate in part, and remand with instructions.

I.

In early 2005, the federal Defense Commissary Agency (the “Government”)

issued a “request for proposal” (“RFP”) seeking bids for a prime contract to install

computerized “point-of-sale” checkstand equipment at the approximately 280 military

commissaries located in the United States and abroad. IBM, which possessed no prior

experience in performing point-of-sale work at military commissaries, wished to submit a

bid proposal as a potential prime contractor. IBM sought out Trianco, which possessed

considerable experience in performing point-of-sale work, as a “team member” to

prepare the bid.

In May 2005, IBM and Trianco entered into a “Teaming Agreement.” Under the

Teaming Agreement, IBM was obligated to prepare the bid proposal for the prime

contract. Trianco, in turn, was obligated to submit to IBM, prior to submission of the bid

proposal, its “cost/price” and “technical” proposals for the subcontract work. The

Teaming Agreement further required Trianco to assist in drafting the bid proposal. In

addition, the Teaming Agreement required Trianco to collaborate exclusively with IBM.

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The crux of the present litigation is whether the Teaming Agreement required

IBM to grant Trianco the subcontract, or whether IBM could grant the subcontract to a

more affordable third party. A few provisions of the Teaming Agreement are relevant to

our discussion. Several sections support Trianco’s position, including Section 1.3 of the

Teaming Agreement, which provides that “[u]pon award to IBM of a prime contract for

the [Project], IBM will award a subcontract to [Trianco].” (App. 121.) Next, Section 5.0

of a document entitled “Scope of Work,” which was attached to the Teaming Agreement,

provides that “[s]ubject to successful contract award from [the Government], IBM shall

offer Trianco a Subcontract to support IBM by providing resources to perform under the

contract.” (App. 124.) Section 5.0 of the Scope of Work also states that “[i]f Trianco

offers competitive pricing, availability of competent resources, and an acceptable

plan/strategy to perform the work in these areas, Trianco will have the right of first

refusal to perform the work.” (App. 125.)

However, other sections of the Teaming Agreement support IBM’s position that,

if the Government awarded IBM the prime contract, IBM and Trianco would then

negotiate the terms of a subcontract and, if such negotiations were unfruitful, IBM could

award the subcontract to another party. For instance, Section 1.4 of the Teaming

Agreement provides that “[a]fter the successful award of a contract to IBM, the parties

will in good faith negotiate mutually acceptable terms and conditions of the subcontract.”

(App. 121.) Furthermore, Section 5.1(f) of the Teaming Agreement provides that the

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agreement would terminate if “[t]he parties fail to negotiate and execute a subcontract

agreement containing mutually satisfactory prices and terms within a reasonable period

after the award of the prime contract to IBM.” (App. 122.) Moreover, Section 5.0 of the

Scope of Work states that “Trianco’s support/participation is subject to the ability of the

parties to negotiate mutually acceptable terms and conditions and Trianco offering

competitive pricing.” (App. 125.)

In the spring and summer of 2005, Trianco began preparing the technical plans

and proposals responsive to the RFP. Trianco’s work-product contained proprietary

business information and reflected its years of experience working on similar proposals. 

In July 2005, Trianco submitted the proposal, which IBM used to prepare its bid for the

prime contract. In addition, Trianco submitted a proposal to IBM for the pricing of the

subcontract work. According to Trianco, IBM’s bid proposal, which it submitted to the

Government, confirmed that Trianco’s pricing proposal was “competitive” and

“acceptable.” (App. 102.)

The Government awarded IBM the prime contract on December 30, 2005. On

December 31, 2005, IBM advised Trianco that its pricing proposals for the subcontract

work were unacceptable and not competitive. IBM then asked Trianco to “re-bid” its

initial pricing. (App. 106.) Trianco submitted a new bid “under protest,” which IBM

rejected. (App. 107.) IBM then revealed that it had solicited an alternative bid for the

subcontract work from a third party.

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The Teaming Agreement contained a choice of law provision stating that New 1

York law would govern its terms.

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Trianco then filed suit in the United States District Court for the Eastern District

of Pennsylvania. Trianco alleged that IBM breached its fiduciary duty to Trianco and the

implied covenant of good faith and fair dealing. Trianco also asserted claims of unjust

enrichment, equitable estoppel, and promissory estoppel. IBM then moved to dismiss

Trianco’s complaint under Federal Rule of Civil Procedure 12(b)(6). On December 21,

2006, the District Court granted IBM’s motion and dismissed the complaint in its

entirety. See Trianco LLC v. Int’l Bus. Mach. Corp., 466 F. Supp. 2d 600 (E.D. Pa.

2006). Trianco now appeals. 

II.

We have jurisdiction to review this matter under 12 U.S.C. § 1291. We will

review the District Court’s dismissal of Trianco’s complaint de novo. Edgar v. Avaya,

Inc., 503 F.3d 340, 344 (3d Cir. 2007). When reviewing the grant of a motion to dismiss,

we must accept as true all factual allegations asserted in the complaint and draw all

reasonable inferences in favor of Trianco. Lum v. Bank of Am., 361 F.3d 217, 223 (3d

Cir. 2004). In assessing the sufficiency of Trianco’s allegations, we may consider the

various documents referenced in the complaint, such as the Teaming Agreement and

Scope of Work. See Winer Family Trust v. Queen, 503 F.3d 319, 327 (3d Cir. 2006). 

Furthermore, neither party disputes that this matter is governed by New York law. 

1

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III.

The first issue before us is whether Trianco’s complaint states a claim for breach

of contract. The District Court dismissed Trianco’s breach of contract claim because the

Teaming Agreement, it held, was missing an essential term – namely, Trianco’s price for

performing the subcontract. According to the District Court, the Teaming Agreement

left the award of the subcontract contingent on future negotiations, and thus, the Teaming

Agreement did not require IBM to grant Trianco the subcontract. Trianco, 466 F. Supp.

2d at 606. 

It is well-settled under New York law that a contract provision may be rendered an

unenforceable “agreement to agree” if the parties left a material term for future

negotiations. See Joseph Martin, Jr. Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105,

109 (N.Y. 1981). However, “where it is clear from the language of an agreement that the

parties intended to be bound and there exists an objective method for supplying a missing

term, the court should endeavor to hold the parties to their bargain.” 166 Mamaroneck

Ave. Corp. v. 151 East Post Rd. Corp., 78 N.Y.2d 88, 91 (N.Y. 1991). Martin

Delicatessen sets forth two ways the “objective method” can be identified: (1) where,

within the four corners of the agreement, there exists a methodology for ascertaining the

missing term; or (2) where the agreement “invited recourse to an objective, intrinsic

event, condition or standard on which the amount was made to depend.” Martin

Delicatessen, 52 N.Y.2d at 110. 

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We note that Section 1.2(e) of the Teaming Agreement states that Trianco’s 2

pricing proposal would constitute the maximum it could be paid if a subcontracting

agreement was reached. (App. 121.) This provision falls well short, though, of

constituting an objective pricing mechanism. All this provision created was a price

ceiling which Trianco could charge IBM. It did not provide any range or method for

determining when a price would be considered “competitive” under the Teaming

Agreement.

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We find that IBM’s promise to grant Trianco a subcontract, subject to the parties’

future agreement on its terms, conditions, and pricing, is merely an agreement to agree. 

As such, it is unenforceable under New York law. While the Teaming Agreement

provided that Trianco “will” and “shall” be awarded a subcontract, a material term of that

promise was missing – namely, the price that IBM would pay Trianco for performing the

subcontract. The agreement also contains no method for determining this price. While

the Teaming Agreement states that Trianco will have a right of first refusal to reject the

subcontract if it submitted “competitive pricing,” the Teaming Agreement also does not

define the term “competitive” nor does it refer to any extrinsic method for determining

whether Trianco’s pricing was, in fact, “competitive.”

We are also not persuaded by Trianco’s assertion that IBM accepted its pricing as

competitive when it submitted its bid to the Government. Nothing in the Teaming

Agreement states that Trianco’s proposed pricing, when submitted by IBM to the

Government, would constitute a definitive or even an approximate basis for determining

Trianco’s price. Again, while the doctrine of definiteness is not a rigid concept, there 2

must be some objective method for supplying a missing material term. See, e.g., Clifford

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R. Gray, Inc. v. Le Chase Constr. Servs., LLC, 31 A.D.3d 983 (N.Y. App. Div. 2006)

(holding that a subcontractor’s pricing proposals submitted to the prime contractor to

secure a bid did not, without more, supply the missing term of the subcontractor’s

pricing). No such method existed here. Accordingly, we agree with the District Court

that the Teaming Agreement, as it relates to Trianco’s right to receive the subcontract, is

unenforceable as a matter of law. Thus, because Trianco had no contractual right to

receive the subcontract, the District Court correctly dismissed Trianco’s claim for breach

of contract. 

IV. 

Next, we consider Trianco’s unjust enrichment claim. Unjust enrichment is a

“quasi-contract claim” and “is an obligation the law creates in the absence of any

agreement.” Goldman v. Metro. Life Ins. Co., 5 N.Y.3d 561, 572 (N.Y. 2005). The

elements of an unjust enrichment claim are: (1) the defendant was enriched; (2) at the

expense of the plaintiff; and (3) it would be inequitable to permit the defendant to retain

that which is claimed by the plaintiff. Cruz v. McAneney, 31 A.D.3d 54, 59 (N.Y. App.

Div. 2006) (quotations omitted). The District Court dismissed Trianco’s unjust

enrichment claim on the ground that the Teaming Agreement was enforceable and thus

precluded the unjust enrichment claim. Trianco, 466 F. Supp. 2d at 609. However, the

District Court did not analyze whether the Teaming Agreement was, in fact, enforceable

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The District Court did hold that “[t]he Teaming Agreement was an enforceable 3

contract to the extent that it bound the parties to negotiate for a subcontract price in good

faith after the award of the prime bid.” Trianco, 466 F. Supp. 2d at 609. This holding,

though, appears to contradict the District Court’s earlier comment that “The question of

whether the bid-preparation phase obligations of the Teaming Agreement are all

enforceable – for example, Trianco’s exclusivity agreement – is not reached by this

case.” Trianco, 466 F. Supp. 2d at 607 n.3. Regardless, as discussed below, the District

Court did not discuss whether valid consideration existed for the Teaming Agreement. 

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in its entirety.3

Above we found that the Teaming Agreement did not bind IBM to grant Trianco

the subcontract. However, Section 12.0 of the Teaming Agreement contains a

severability clause providing that the unenforceability of any of its provisions does not

render the remainder of the agreement unenforceable. (App. 123.) Thus, our holding

that IBM’s promise to award Trianco a subcontract is unenforceable does not require us

to find the remainder of the Teaming Agreement to be unenforceable. The promise of

each party to a bilateral agreement, such as the Teaming Agreement, must be supported

by valuable consideration. See, e.g., Curtis Props. Corp. v. Grief Cos., 212 A.D.2d 259,

264 (N.Y. App. Div. 1995) (citing Calamari and Perillo, Contracts § 70, at 134). As

such, a promise obliging only one party to a contract to do something, without receiving

any benefit in return, is illusory and creates no enforceable obligation. Id. 

Here, the Teaming Agreement required Trianco to provide IBM with its

proprietary information and industry expertise to assist in preparing the bid. However,

without receiving a guaranteed subcontract in return, it appears that Trianco may not

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have received consideration. 

Accordingly, we will remand this matter to the District Court for a determination

as to whether the remainder of the Teaming Agreement was valid and, if so, whether

Trianco’s complaint states a cause of action for unjust enrichment.

V.

Next, Trianco challenges the District Court’s dismissal of its breach of fiduciary

duty claim. The District Court rejected this claim because the allegations in Trianco’s

complaint described an “arms-length” transaction between two parties possessing

considerable industry experience. Trianco, 466 F. Supp. 2d at 608. The District Court

also held that IBM did not breach its fiduciary duty by awarding the subcontract to a

third party because it was merely exercising its rights under the Teaming Agreement. See

id. at 608-609.

Trianco argues that the District Court erred because IBM’s “dominant position” in

their relationship, and IBM’s representations and assurances, created a “special

relationship of trust and confidence” that IBM breached by not awarding the subcontract

to Trianco. (App 111.) Trianco also argues that IBM breached its fiduciary duty when it

secretly sought cheaper bids on the subcontract, and by using Trianco’s proprietary

business information and industry credentials contrary to Trianco’s best interests.

To determine whether a fiduciary relationship exists, “New York law inquires

whether one person has reposed trust or confidence in the integrity and fidelity of another

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who thereby gains a resulting superiority or influence over the first.” Teachers Ins. &

Annuity Assoc. of Am. v. Wometco Ent., Inc., 833 F. Supp. 344, 349-50 (S.D.N.Y. 1993). 

Accordingly, a fiduciary duty exists where one assumes control and responsibility over

another, or where one has a duty, created by his undertaking, to act primarily for the

benefit of another in matters connected with his undertaking. See id.; see also

Mandelblatt v. Devon Stores, Inc., 132 A.D.2d 162, 168 (N.Y. App. Div. 1987). 

Fiduciary relationships, though, typically do not arise between parties engaging in arms

length business transactions. See EBC I, Inc. v. Goldman Sachs & Co., 5 N.Y.3d 11, 22

(N.Y. 2005); SNS Bank, N.V. v. Citibank, N.A., 7 A.D.3d 352, 355 (N.Y. App. Div.

2004). Absent an allegation of a special relationship, mere assertions of “trust” in one

party are insufficient to support a claim of fiduciary relationship. See Freedman v.

Pearlman, 271 A.D.2d 301, 305 (N.Y. App. Div. 2000). 

We agree with the District Court that this claim was appropriate for dismissal. As

the District Court correctly ruled, Trianco’s complaint merely reflects an arms length

commercial transaction between two experienced business entities. See Abercrombie v.

Andrews Coll., 438 F. Supp. 2d 243, 274 (S.D.N.Y. 2006) (though claims alleging the

existence of a fiduciary duty are not normally appropriate for dismissal at the 12(b)(6)

stage, “absent an allegation of a special relationship, mere assertions of trust and

confidence are insufficient to support a claim of a fiduciary relationship.”) (quotations

omitted); SNS Bank, N.V., 7 A.D.3d at 355 (affirming dismissal of breach of fiduciary

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duty claims where “the parties merely had an arm’s length business relationship.”). In

fact, Trianco concedes in its complaint that it is an “experienced electrical services

contractor” which has been the “sole [point-of-sale] site survey, site preparation and

checkstand installation contractor (or subcontractor) for all military commissary

installations” for the past 20 years. (App. 92.) While Trianco alleges that IBM held a

“dominant position” in their relationship, Trianco does not allege that IBM possessed

some “superior expertise or knowledge about some subject and misled plaintiff by false

representations concerning that subject,” thereby creating a fiduciary duty. Talansky v.

Schulman, 2 A.D.3d 355, 360 (N.Y. App. Div. 2003) (quotations omitted).

VI.

Next, Trianco challenges the District Court’s dismissal of its claim that IBM

breached the implied covenant of good faith and fair dealing. The District Court

dismissed this claim because it was “based on and incorporates the same allegations that

the breach of contract claim is based on: that IBM stopped Trianco from getting a

subcontract.” Trianco, 466 F. Supp. 2d at 609. We agree. Under New York law, a

claim for breach of the implied covenant of good faith and fair dealing must be separate

from any breach of contract claim. See Cerberus Int’l, Ltd. v. BancTec, Inc., 16 A.D.3d

126, 127 (N.Y. App. Div. 2005) (“The claim for breach of the implied covenant of good

faith and fair dealing was properly dismissed as duplicative of the contract claim.”). 

Here, Trianco’s allegations essentially duplicate the allegations in its breach of contract

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claim. Accordingly, dismissal was appropriate.

VII.

Trianco also challenges the District Court’s dismissal of its equitable estoppel

claim. “Equitable estoppel is defined as ‘[t]he doctrine by which a person may be

precluded by his act or conduct, or silence when it is his duty to speak, from asserting a

right which he otherwise would have had.’” Besicorp Group v. Enowitz, 235 A.D.2d 761,

764 (N.Y. App. Div. 1997) (quoting Black’s Law Dictionary 538 (6th ed. 1990)). To

state a claim for equitable estoppel, a party must plead: (1) lack of knowledge of the true

facts; (2) reasonable reliance on the conduct of the party estopped; and (3) a prejudicial

change in its position. Broadworth Realty Assoc. v. Chock 336 B’Way Operating, Inc.,

168 A.D.2d 299, 301 (N.Y. App. Div. 1990).

Even if IBM concealed its solicitation of a cheaper subcontractor, or failed to

advise Trianco that its pricing was not competitive, the Teaming Agreement nevertheless

clearly stated that Trianco would only be awarded the subcontract if, after future

negotiations, it was the cheapest bidder. As such, Trianco could not have reasonably

relied on any alleged misrepresentation or concealment of fact by IBM that it its pricing

was competitive, or that it was guaranteed the subcontract. Accordingly, we agree with

the District Court that dismissal of this claim was appropriate.

VIII.

Finally, Trianco challenges the District Court’s dismissal of its promissory

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estoppel claim. The District Court dismissed this claim because Trianco did not allege

that IBM made an express promise to award it a subcontract at the prices Trianco

proposed. We agree with this conclusion. To state a claim for promissory estoppel, the

complaint must allege a “clear and unambiguous promise.” Richbell Info. Servs. v.

Jupiter Partners, L.P., 309 A.D.2d 288, 304 (N.Y. App. Div. 2003). Here, Trianco’s

claim that IBM clearly and unambiguously promised Trianco a subcontract at a certain

price is contradicted by the terms of the Teaming Agreement, which states in no

uncertain terms that Trianco’s receipt of a subcontract was subject to future negotiations

on price. Accordingly, the District Court properly dismissed this claim.

IX.

For the foregoing reasons, we will affirm in part and vacate in part.

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