Skanska USA Building Inc. v. Regeneron Pharmaceuticals Inc.

Background

Skanska brought a breach-of-contract action against Regeneron under a Master Services Agreement and a separate statement of work for preconstruction services. The agreements concerned construction-management services for new construction at Regeneron’s campus in Tarrytown, New York, and were governed by New York law.

Skanska alleged that Regeneron requested additional preconstruction services, failed to issue change orders or pay for those services, and caused delays and related costs. Skanska also alleged that the parties later failed to reach agreements for the construction phase because Regeneron used bad-faith negotiation tactics and ultimately solicited bids from others.

The complaint asserted two breach-of-contract claims, two claims for breach of the implied covenant of good faith and fair dealing, and one claim seeking a declaratory judgment. Regeneron moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim, as to the third, fourth, and fifth claims.

Court’s Analysis

Third Claim: Declaratory Judgment

Skanska sought a declaration that Regeneron had constructively terminated the preconstruction statement of work. The court held that a declaratory judgment is a remedy rather than a separate cause of action. The court also held that declaratory relief was unnecessary because the allegations supporting that request were the same allegations supporting Skanska’s breach-of-contract claims and would be resolved through those claims. The court declined Skanska’s request to treat the declaratory-judgment claim as equitable relief under the contract claims.

The motion to dismiss was granted as to the third claim.

Fourth Claim: Good Faith and Fair Dealing During Preconstruction

Skanska alleged that Regeneron prevented Skanska from performing and withheld contract benefits by failing to issue authorizations to proceed, revising construction drawings, halting parts of the bidding process, requesting additional services, and failing to respond to change-order requests.

The court held that these allegations were also the basis for Skanska’s breach-of-contract claims. Under New York law, a separate claim for breach of the implied covenant of good faith and fair dealing cannot proceed when it is based on the same facts as a breach-of-contract claim. The court also noted that the damages alleged were duplicative and that the agreement barred consequential damages in the circumstances discussed by the court.

The Fourth Claim for Relief was dismissed as redundant of the breach-of-contract claims.

Fifth Claim: Good Faith and Fair Dealing During Construction-Phase Negotiations

Skanska alleged that Regeneron failed to negotiate the terms of future construction statements of work in good faith. The court found that the Master Services Agreement contemplated that the parties might negotiate and enter into construction-phase statements of work, but none of the provisions cited by Skanska required them to do so.

Because the agreements did not require negotiation of the construction-phase statements of work, the court held that there was no contractual obligation supporting an implied covenant to negotiate those agreements in good faith. The court therefore did not reach Regeneron’s alternative arguments concerning bad faith, duplication, or damages.

The motion was granted as to the fifth claim.

Disposition

Judge Philip M. Halpern granted Regeneron’s motion to dismiss the Third, Fourth, and Fifth Claims for Relief. The opinion addresses the challenged claims under Rule 12(b)(6) and does not decide the underlying merits of Skanska’s remaining breach-of-contract claims.