choice of law rules to the state law issues raised by the crossclaim.
Absent a strong public policy dictating otherwise, New Jersey's courts ordinarily will apply the law of another state in deciding a question of construction or validity of a contract made and performed in that state. Congress Factors v. Malden Mills Incorporated, 332 F. Supp. 1384, 1390 (D.N.J. 1971); Jaclyn, Inc. v. Edison Brothers Stores, Inc., 170 N.J. Super 334, 348, 406 A.2d 474 (Law Div. 1979). Universal is a Pennsylvania corporation with its principal place of business in New York. Transmission is a Delaware corporation with its principal place of business in West Virginia. The parties entered into the contracts at issue in New York. Those contracts contained no choice of law provision and concerned gas wells in western New York. New York's relationship to the contract is most significant. Therefore, this court will apply New York law to Universal's state law claims.
2. Count Three: Breach of Contract
Universal contends in Count Three that Transmission's actions, as enumerated in the crossclaim, constitute a breach of its contracts with Universal. Specifically, Universal alleges that Transmission's renegotiation efforts contravened its contractual obligation to pay the maximum lawful price for natural gas under the contracts and to take the volume of gas required by such contracts. Crossclaim, para. 36.
Universal's breach of contract claim is rooted in Transmission's alleged "coercion and duress." Crossclaim, para. 31. According to the crossclaim, Transmission breached its existing contracts by wielding its economic power arbitrarily and unfairly. In addition, Universal claims that the renegotiated contract it eventually signed was obtained by coercion and is therefore voidable and subject to recission.
Since this is a Rule 12(b)(6) motion to dismiss, the court must accept the crossclaim's factual allegations as true and determine whether it states a viable claim of duress. Under New York law, a claim of duress has four elements: (1) a threat; (2) unlawfully made; (3) that caused involuntary acceptance; (4) because the circumstances permitted no alternative. Gulf & Western Corp. v. Craftique Prod., Inc., 523 F. Supp. 603, 610 (S.D.N.Y. 1981); Business Incentives Co. v. Sony Corp. of America, 397 F. Supp. 63, 69-70 (S.D.N.Y. 1975).
To establish that contract acceptance was involuntary because the circumstances permitted no alternative, a party must show that "a breach of contract action would have been impossible when the threat was made." Gulf & Western, supra, 523 F. Supp. at 610; Austin Instrument, Inc. v. Loral Corp., 29 N.Y.2d 124, 272 N.E.2d 533, 535, 324 N.Y.S.2d 22 (1971); see Neuman v. Pike, 591 F.2d 191, 194 (2d Cir. 1979)(threatened breach of contract not duress when adequate legal remedies existed); National Am. Corp. v. Federal Rep. of Nigeria, 448 F. Supp. 622, 644-45 (S.D.N.Y. 1978), aff'd 597 F.2d 314, 323 (2d Cir. 1979)(no duress when plaintiff failed to pursue legal remedies for alleged breach).
Universal nowhere alleges that a breach of contract action would have been impossible or inadequate when Transmission "extorted" price concessions. Crossclaim, para. 26(e). Transmission first approached Universal about renegotiating their contracts in early 1983. Discussions continued until August 1984, when Universal agreed to renegotiate. Because Universal failed to pursue a legal remedy for alleged breach of contract then, its present claim for duress is inadequate as a matter of law. See National Am. Corp., supra, 448 F. Supp. at 644 (rejecting claim of duress because "plaintiff's legal remedy not only was available, but was ultimately pursued").
A "threat" is a necessary element of duress, and an announced intention to exercise a legal right cannot constitute a threat. Printers, II, Inc. v. Professionals Pub., Inc., 615 F. Supp. 767, 772 (S.D.N.Y. 1985); Business Incentives Co., supra, 397 F. Supp. at 69. Transmission contends that by announcing that it would curtail its purchases and take other steps to reduce its "take" from Universal, it was merely exercising its contractual rights.
The original "take or pay" contract contained several provisions limiting Transmission's actual obligation to purchase and take gas during any given year. Section 6.1 provides that although Transmission promises to take all the gas the seller has available "insofar as it can consistently do so having regard for its other related interests . . ."
It is further expressly understood and agreed that Buyer may restrict the flow or discontinue the taking of the gas temporarily, when and for such length of time as in its judgment it is deemed expedient so to do, Buyer's judgment being based upon consideration of market demand, its then existing pipeline facilities, the line pressure it deems necessary to maintain, and the competitive and other conditions in the various fields in which it is purchasing or producing gas.
In addition, Section 6.4 provides that "it is recognized that Buyer may not be able to take and need not take gas from seller hereunder . . . during any definite period," and Section 6.5 provides that so long as the volume of gas specified in the take or pay clause is taken or paid for, "all gas delivered hereunder may be taken in whatever manner and at such times as will best suit the convenience of the Buyer."
The Sixth Circuit Court of Appeals interpreted identical provisions in contracts between Transmission and other producers in American Exploration Company v. Columbia Gas Transmission Corp., 779 F.2d 310, 312 (6th Cir. 1985). The producers sought a preliminary injunction prohibiting Transmission from implementing a plan to purchase only 25 percent of the gas produced by their wells during 1985 under long term "take or pay" contracts identical to those with Universal. The district court denied injunctive relief because it found that the plaintiffs failed to demonstrate a likelihood of success on the merits. The court found that Section 6.1 expressly allowed Transmission to discontinue taking gas for "such length of time as it deemed expedient" because of considerations of market demand. Id., 779 F.2d at 313. The Sixth Circuit affirmed, noting that the contract empowers Transmission to curtail production "temporarily", with the length of any curtailment determined solely by Transmission's judgment. Id.
Even if Transmission did threaten to reduce the amount of gas it took from Universal, Transmission did not exceed its contractual authority. Similarly, even if Transmission increased the pressure in the pipeline to restrict Universal's access, Section 6.1 provides that Transmission shall decide "the line pressure it deems necessary to maintain." The "threats" alleged by Universal do not support a claim of duress as a matter of law.
3. Count Four: Indemnification
In Count Four, Universal seeks indemnification from Transmission for any legal liability to plaintiffs in the main action or other similarly situated claimants. Universal claims that Transmission's actions "were the direct, active and primary cause of damages sustained by the plaintiffs herein." Crossclaim, para. 43. The court will dismiss Universal's indemnity claim because neither plaintiffs nor Universal have stated a viable cause of action against Transmission, for the reasons stated in Garshman I and elsewhere in this opinion.
4. Count Five: Declaratory Judgment
The Fifth Count asserts that because of Transmission's "wrongful actions, including threats, coercion and breach of contract," the minimum termination date of Universal's contract should be extended for a period of time "equal to that period" during which Transmission "engaged in wrongful activities." Crossclaim, para. 51. For the reasons expressed elsewhere in this opinion, Universal has not shown that Transmission has engaged in any "wrongful activities" at all. Therefore, Count Five will be dismissed.
5. Count Six: Tortious Interference and Duress
The Sixth Count alleges that Transmission's actions constitute "duress and coercion" and "tortious interference with prospective economic advantage." Crossclaim, para. 54. For the reasons discussed in connection with the Third Count's breach of contract claim, the "duress and coercion" claim of this count will be dismissed. Universal's allegations of "tortious interference with contract rights" will likewise be dismissed because the only contracts identified in the crossclaim are those between Universal and Transmission, and a party "cannot be guilty of inducing the breach of [its] own contract." Robbins v. Ogden Corp., 490 F. Supp. 801, 810 (S.D.N.Y. 1980).
Universal claims that Transmission interfered with its "prospective economic advantage". The Restatement (Second) of Torts defines the tort of intentional interference with prospective contractual relations:
One who intentionally and improperly interferes with another's prospective contractual relation (except a contract to marry) is subject to liability to the other for the pecuniary harm resulting from loss of the benefits of the relation, whether the interference consists of
(a) inducing or otherwise causing a third person not to enter into or continue the prospective relation or