Motion Sequence Nos. 002 and 003 are consolidated for disposition and are disposed of in accordance with the following decision and order.

Defendants move to dismiss the complaint, pursuant to CPLR 3211 (a)(1), (7), and (8). Plaintiffs Centennial Energy Holdings, Inc. (CEHI) and Centennial Energy Resources, LLC (CER) (collectively, Centennial) move by order to show cause for a preliminary injunction, enjoining defendant Colorado Energy Management, LLC (CEM) from proceeding with the arbitration captioned Lea Power Partners, LLC v Colorado Energy Management, LLC, American Arbitration Association Case No. 51 421 Y 01579 09 CC (the LPP/CEM Arbitration).

In this breach of contract action, plaintiffs claim that defendants have breached provisions of a purchase and sale agreement between plaintiffs and defendant Bicent Power LLC (Bicent), [*2]regarding plaintiffs' sale of defendant CEM to Bicent. CEM, a subsidiary of plaintiffs, had previously entered into an agreement with Lea Power Partners (LPP) to construct a power plant, and plaintiff CEHI guaranteed CEM's performance on that construction contract. LPP later commenced an arbitration proceeding against CEM regarding the project, claiming damages in excess of $145 million. Plaintiffs claim that defendants breached their obligations under the purchase and sale agreement to maintain a letter of credit in plaintiffs' favor to protect plaintiffs under the guaranty, should LPP seek indemnification thereunder, and to allow plaintiffs to participate in the LPP/CEM Arbitration. They seek to enjoin CEM from proceeding with the LPP/CEM Arbitration, so that they can participate in the defense of that arbitration.

Defendants oppose, arguing that this is plaintiffs' third attempt to interfere with the arbitration, and that there is no likelihood of success on plaintiffs' claims, which should be dismissed. They contend that, under the agreement, plaintiffs have no right to a current letter of credit, and that plaintiffs elected not to assume the defense of the arbitration, and cannot now seek to assume the defense of only part of the LPP claim. They argue that plaintiffs fail to properly allege any actual injury caused by the breach, or any injury that specific performance could remedy. They assert that this court lacks jurisdiction over CEM, and that CEM is not a party to the agreement, and therefore, cannot be subject to a claim for breach. Defendants further claim that the claim for breach of the covenant of good faith duplicates the breach of contract claims, and that the indemnification claim is premature.

In November 2006, CEM and LPP entered into a construction agreement, concerning CEM's construction of a power plant for LPP in Hobbs, New Mexico (Complaint, ¶ 1). At that time, CEM was a subsidiary of plaintiff CER, which was a subsidiary of plaintiff CEHI (id., ¶ 2). In February 2007, plaintiff CEHI guaranteed CEM's performance with respect to the construction agreement (the Guaranty) (id., ¶ 3).

On April 25, 2007, plaintiff CER and defendant Bicent (then known as Montana Acquisition Company LLC) entered into a Purchase and Sale Agreement (PSA), pursuant to which CER sold its interest in CEM to Bicent (Exhibit 2 to Complaint). Under the PSA, Bicent was to use commercially reasonable efforts to obtain from LPP a discharge of plaintiff CEHI's obligation under the Guaranty, or failing that, to indemnify plaintiffs against any claims by LPP under the Guaranty (Complaint, ¶5). The PSA contained cross-indemnification provisions. CER agreed to indemnify "Buyer [Bicent], its officers, directors, employees, shareholders, Affiliates . . . (each, a "Buyer Indemnitee") from and against any and all Indemnifiable Losses asserted against or suffered by any Buyer Indemnitee relating to, resulting from or arising out of . . . any Third Party Claims against a Buyer Indemnitee . . . arising out of or in connection with . . . [CER's] ownership or operation of CEM . . . prior to the Closing Date" (Exhibit 2 to Complaint, PSA § 8.1[b], at 51). Bicent agreed to indemnify CER against Third Party Claims arising out of its ownership or operation of CEM "on or after the Closing Date" (id., PSA § 8.1[a], at 50-51). The PSA also contained a provision regarding responsibilities for defending third party claims. Specifically, section 8.2 provided that, if any Indemnitee received notice of the assertion of any claim or the commencement of any claim or proceeding brought by a Third Party with respect to which indemnification is to be sought from an indemnifying party, "the Indemnitee shall give such Indemnifying Party reasonably prompt written notice thereof . . . . The Indemnifying Party will have the right to participate in or, by giving written notice to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's expense" (id., [*3]at 54). It further provided that if "an Indemnifying Party elects not to assume the defense of any Third Party Claim, the Indemnitee may compromise or settle such Third Party Claim over the objection of the Indemnifying Party, which settlement or compromise shall conclusively establish the Indemnifying Party's liability pursuant to this Agreement" (id.).

Prior to the closing date of the PSA on July 10, 2007, Bicent was unable to obtain a discharge of CER's obligation under the Guaranty. Therefore, CER and Bicent entered into "Amendment No. 1 to Purchase and Sale Agreement," dated July 10, 2007 (Amendment No. 1), adding section 2.5 to the PSA, which addressed the issue as to the Guaranty:

Without limiting the provisions of Section 2.4 above, not later than five (5) Business Days following the closing, [Bicent] shall provide or cause CEM to provide an irrevocable standby letter of credit issued to [CEHI] in the principal amount of $10,000,000 in form and substance satisfactory to [CER] which CEHI may draw upon in the event that CEHI is required to make any payment under [the Guaranty] . . . . The CEM [letter of credit] shall be in lieu of and in full satisfaction of [Bicent's] obligations to CER under Section 2.4 of the [PSA]

(Exhibit 3 to Complaint, Amendment No. 1 to PSA § 2.5, at 4). Bicent provided CEHI with a letter of credit dated September 26, 2007 in accordance with section 2.5 (Exhibit C to Affirmation of Arastu K. Chaudhury In Support of Defendants' Motion to Dismiss). This letter of credit was automatically renewed every year, but no automatic extension could extend the letter of credit past the earlier of June 10, 2012, or the later of, final completion under the construction agreement, or the expiration of the warranty period, which was February 16, 2010 (id., at 2; see also Exhibit D to Chaudhury Affirm., Centennial's August 12, 2009 letter).

After completion of the construction project, LPP contested the adequacy of CEM's performance (Complaint, ¶ 9). On February 25, 2009, LPP sent CEHI notice of the dispute, and demanded that CEHI indemnify LPP under the Guaranty for any losses and damages arising from CEM's alleged failures (Complaint, ¶ 38).

On November 1, 2009, the parties agreed to an amended letter of credit, also for $10,000,000, which reflected a termination date of November 1, 2010 (Exhibit G to Chaudhury Affirm. at 2).

On December 4, 2009, LPP filed a demand for arbitration against CEM (the Claim), alleging that LPP incurred over $145 million in damages and costs in excess of the target price for the work in the construction agreement caused by CEM (the LPP/CEM Arbitration). CEM filed counterclaims seeking $13 million in additional fees and compensation earned on the project (Complaint, ¶ 42).

By letter dated December 11, 2009, Bicent informed Centennial of the Claim, indicated that it constituted a Third Party Claim under section 8.2 of the PSA, and stated that because the allegations in the Claim related to matters arising in part out of or in connection with Centennial's operation of CEM prior to the closing date of the PSA, Bicent and CEM are entitled to indemnification from plaintiffs under the PSA section 8.1(c) (which reflects the renumbering of section 8.1 [b] as provided in Amendment No. 1 to PSA, dated July 10, 2007) (Exhibit H to Chaudhury Aff.; Complaint, ¶ 49). By letter dated December 18, 2009, Centennial informed defendants that it had determined not to elect to assume the defense of the Claim, but that it was exercising its right, pursuant to section 8.2 of the PSA, to participate in the defense of the Claim (Exhibit I to Chaudhury Affirm.). [*4]

The LPP/CEM Arbitration proceeded with document discovery, and fact depositions have been conducted from December 2009 through to the present. In August 2010, CER provided a new written notice to defendants that it was electing to assume the defense of pre-closing claims (Complaint, ¶ 73).

CEHI pursued a Complaint for Declaratory Judgment in the Court of Chancery in Delaware. That court ruled that CEHI's claims, defenses, and any potential liability under the Guaranty were not ripe for adjudication, and dismissed the complaint without prejudice (see Plaintiffs' Memorandum of Law In Support of Order to Show Cause, at 10). In addition, Centennial filed a Motion to Intervene in the LPP/CEM Arbitration with the AAA. On September 27, 2010, Centennial's counsel received an email from the AAA, stating that because Centennial was not a party to the arbitration, and because the parties to the arbitration had not requested that the arbitrator rule upon the Motion to Intervene, the arbitrator concluded that he did not have jurisdiction to consider the motion (id. at 11; Affidavit of Daniel S. Kuntz, dated March 28, 2011, ¶ 27).

On November 4, 2010, plaintiffs commenced this action asserting four causes of action. The first claim is for breach of section 2.5 of the PSA, based on defendants' failure to have a letter of credit in place while the LPP/CEM Arbitration is pending, and while CEHI may have liability to LPP under the Guaranty. Plaintiffs seek damages and specific performance of the obligation. In the second claim, plaintiffs assert that defendants breached section 8.2 of the PSA by refusing to permit plaintiffs to participate in the arbitration in defense of the pre-closing claims. This claim only seeks specific performance in the form of an order allowing plaintiffs to participate in the arbitration, or to assume the defense, of the pre-closing claims. The third claim is for breach of the covenant of good faith implied in the PSA, based on defendants' failure to have a letter of credit in place consistent with section 2.5 of the PSA, and to allow plaintiffs to participate in, or assume the defense of, the pre-closing claims as required by the PSA. The fourth claim, asserted only against CEM, alleges a claim for common-law indemnification.

Defendants now move to dismiss plaintiffs' complaint. They contend that the first claim should be dismissed because plaintiffs cannot point to any language in the PSA obligating defendants to provide a letter of credit so long as CEHI may be required to make payment to LPP under the Guaranty. They assert that they satisfied any obligation they had by providing Centennial with the initial letter of credit, and that there was no requirement for a perpetual letter of credit as Centennial claims. They maintain that Centennial expressly accepted the terms of the amended letter of credit, including its limited duration. Defendants contend that the second claim must be dismissed because Centennial fails to allege a breach of the PSA, and injury or damages which are not speculative. They maintain that the PSA does not confer upon Centennial the right to selectively assume the defense of carved out portions of LPP's claim, that is, to assume the defense of only the pre-closing claims, and Centennial waived any right to assume the defense, when it notified defendants that it was electing not to assume it. Defendants also argue that the PSA does not give Centennial the right to participate in the manner in which it seeks. The right to "participate," which is not defined in the PSA, is too vague and indefinite to be capable of specific performance. They also assert that Centennial's claims of risk of harm and risk of liability if they are not permitted to participate in the arbitration are speculative, which is insufficient particularly when seeking specific performance. Defendants further urge that the third claim should be dismissed as it duplicates the claims for breach of contract. The fourth claim for indemnification, defendants contend, should be dismissed as [*5]premature. Finally, they urge that the court lacks jurisdiction over CEM because it is a foreign corporation, without property in the state, in an action that does not involve a tort claim, and there is no basis for claiming that CEM transacted business in this state, or that the claim arose from such transaction. The forum selection clause in the PSA which includes a consent to jurisdiction in New York does not bind CEM because it was not a party to the contract. In addition, because it was not a party to the PSA, the first three claims for breach of that contract should be dismissed against CEM.

Centennial opposes dismissal, and seeks a preliminary injunction enjoining CEM from proceeding with the LPP/CEM Arbitration based on defendants' refusal to allow Centennial to participate or assume the defense of the pre-closing claims. Plaintiffs assert that Bicent and CEM will seek to shift liability to the pre-closing time period, shifting liability from Bicent to plaintiffs. Plaintiffs claim that they are likely to succeed on the merits because the PSA plainly gives CER the right to participate in the defense of LPP's claims. They assert that they have repeatedly requested access to relevant project records in Bicent's and CEM's possession in order to participate in the defense, and that defendants have denied those requests and refused to allow them to participate (Complaint, ¶ 52). Plaintiffs assert that they will suffer irreparable harm, because the right to participate has intrinsic value, which cannot easily be quantified. They claim that their right to participate will be rendered meaningless if the arbitration is not stayed. They claim the equities balance in their favor because they are merely trying to preserve the status quo. Therefore, they are seeking injunctive relief so that they may participate in the defense before the arbitration goes any further and the arbitration hearings are held, which are scheduled for the fall (see Second Revised Scheduling and Procedure Order in the LPP/CEM Arbitration, annexed to Affirmation of Jonathan W. Light). They contend that this court has jurisdiction over CEM, because while it was not a party to the PSA, it intended to be bound by it.

The motion for a preliminary injunction is denied, and the motion to dismiss is granted to the extent that all claims against defendant CEM are dismissed on the ground of lack of jurisdiction, and the third claim also is dismissed as against defendant Bicent for failure to state a claim. First, I will address jurisdiction as to CEM.

CEM is a foreign limited liability corporation, with its principal place of business in Colorado, and with no alleged real property in New York (Complaint, ¶ 22). This action does not involve a tort claim, and plaintiffs fail to allege that CEM is doing business in New York, or that it transacted any business within this state, and that the claims here arose from that transaction of business (see CPLR 302 [a]). The only basis alleged by plaintiffs for jurisdiction over CEM is Section 10.5 of the PSA, which states that New York state and federal courts shall have exclusive jurisdiction over any and all actions and proceedings relating to the subject matter of the PSA. This forum selection clause, however, cannot provide a basis for jurisdiction over CEM, because it was not a party to the PSA.

Plaintiffs argue that CEM has acted as a party to the PSA, and, therefore, is bound by the forum selection clause, and by the obligations in that agreement, which are the subject of the first and second causes of action. They contend that CEM is owned and controlled by Bicent, a signatory to the PSA, it has shown an "intent to be bound" by the PSA, and it has asserted its rights to indemnification under the PSA. Thus, plaintiffs' contend that CEM is "closely related to the disputes arising out of the PSA" and the forum selection clause should be enforced against it (Plaintiffs' [*6]Memorandum in Opposition at 20, 25).

Plaintiffs have failed to sufficiently allege facts that would justify transforming CEM, which was the object for sale in the PSA, into a party to that agreement. In general, a party that is not a signatory to an executed contract is not bound by that agreement (see Kopelowitz & Co. v Mann, 83 AD3d 793, 797 [2d Dept 2011]; Pacific Carleton Dev. Corp. v 752 Pacific, LLC, 62 AD3d 677, 678 [2d Dept 2009]; Black Car and Livery Ins., Inc. v H & W Brokerage, Inc., 28 AD3d 595, 595-596 [2d Dept 2006]). Therefore, it cannot be sued for its breach unless there is a separate basis for the nonsignatory's liability, such as piercing the corporate veil or, under some circumstances, where the nonsignatory manifests an intent to be bound by the contract (see Horsehead Indus. v Metallgesellschaft AG, 239 AD2d 171, 172 [1st Dept 1997]; MBIA Ins. Corp. v Royal Bank of Canada, 28 Misc 3d 1225 [A], 2010 NY Slip Op 51490 [U], at *25, 2010 WL 3294302, at *25 [Sup Ct, Westchester County 2010]). In Horsehead Indus. (239 AD2d at 171), relied upon by plaintiffs here, the Appellate Division determined that a parent company can be held liable as a party to its subsidiary's contract "if the parent's conduct manifests an intent to be bound by the contract, which intent is inferable from the parent's participation in the negotiation of the contract, or if the subsidiary is a dummy for the parent, or if the subsidiary is controlled by the parent for the parent's own purposes" (id. at 172, citing Warnaco Inc. v VF Corp., 844 F Supp 940, 946 [SD NY 1994]). The Court found that the breach of contract claim was properly sustained against the parent because the parent manifested an intent to be bound through its extensive participation in the negotiations on behalf of its then wholly-owned subsidiary, and its later performance of the act that allegedly breached the involved agreement, and its day-to-day domination of the subsidiary (id. at 172).

Here, plaintiffs fail to allege sufficient facts to bind CEM as a party to the PSA. There is no showing or even an allegation that CEM was an alter ego of Bicent, or a sham entity whose independent corporate existence must be disregarded. In addition, there is no basis to infer that CEM intended to be bound. Plaintiffs fail to show that CEM was extensively involved in the negotiation of the PSA, that Bicent was a dummy corporation for CEM, or that CEM controlled Bicent for its own purposes (cf. Horsehead Indus. v Metallgesellschaft AG, 239 AD2d at 172). Moreover, plaintiffs appear to be trying to use cases in which courts have looked through subsidiaries to get to the parent corporation as a way to do the reverse, that is, to look through the parent, Bicent, who is the signatory to the contract, to get to affiliates, like CEM, who are not (see MBIA Ins. Corp. v Royal Bank of Canada, 28 Misc 3d 1225 [A], supra). They do not allege that CEM was directly negotiating the PSA, micro-managing it, or representing that it was the actual party thereto (see e.g. Impulse Mktg. Group, Inc. v National Small Bus. Alliance, Inc., 2007 WL 1701813, at *6 [SD NY 2007] [micro-managed contract, acknowledged that it had assumed obligations thereunder, was actual party in interest, and paid for plaintiff's services]; RUS, Inc. v Bay Indus., Inc., 2004 WL 1240578, at *21 [SD NY 2004], affd by Recticel Foam Corp. v Bay Indus., 128 F Appx 798 [2d Cir 2005] [piercing corporate veil to hold parent liable]). Plaintiffs' opposition alludes to the idea that CEM may also be liable because it assumed the obligations under the PSA. The Complaint and documentary evidence, however, are devoid of any allegations supporting such an assumption. The assertion of the right to indemnification under section 8.1 of the PSA was made in a letter from Bicent to plaintiffs (see Exhibit H to Chaudhury Aff.). The fact that CEM is an "Affiliate" and potential "Indemnitee" under the PSA is a result of that agreement being the instrument by which ownership of CEM was transferred by plaintiffs to Bicent. None of the facts that plaintiffs assert [*7]demonstrate the requisite type of control to make CEM a party to, and not simply the subject of, the PSA. Further, plaintiffs are sophisticated entities, and do not allege any confusion about who was the party to the PSA (see Capricorn Invs. III, L.P. v Coolbrands Intl., Inc., 24 Misc 3d 1224 [A], 2009 NY Slip Op 51608 [U], 2009 WL 2208339, at * 8 [Sup Ct, NY County], affd 66 AD3d 409 [1st Dept 2009]). Therefore, there is no basis to find that CEM as a nonsignatory to the PSA is bound by the forum selection clause in that agreement. Without any other basis for exercising jurisdiction over defendant CEM, all claims (the first through fourth causes of action) against it are dismissed.

Further, without any jurisdiction over CEM, the plaintiffs' application for a preliminary injunction, enjoining CEM from proceeding with the arbitration, is denied.

The third cause of action for breach of the duty of good faith is dismissed as against Bicent as well. A breach of the covenant of good faith claim cannot be maintained where, as here, it is premised on the identical conduct that underlies the breach of contract claim, and it is " intrinsically tied to the damages allegedly resulting from a breach of the contract'" (MBIA Ins. Corp. v Merrill Lynch, 81 AD3d 419, 419-420 [1st Dept 2011], quoting The Hawthorne Group v RRE Ventures, 7 AD3d 320, 323 [1st Dept 2004]). The third claim alleges that defendants breached the duty of good faith by not providing the letter of credit and by taking actions to contravene plaintiffs' rights under section 8.2 of the PSA (Complaint, ¶¶ 80-90). This is the same conduct at issue in the first and second claims for breach of contract. Accordingly, it is dismissed.

Both of plaintiffs' breach of contract claims as against Bicent, however, withstand dismissal at this stage. In the first claim, plaintiffs have sufficiently alleged that Bicent breached section 2.5 of the PSA, which required Bicent to maintain, or cause CEM to maintain, an irrevocable standby letter of credit issued to CEHI "which CEHI may draw upon in the event that CEHI is required to make any payment under its guaranty in favor of [LPP]" (Exhibit 3 to Complaint, at 4). While Bicent had a letter of credit issued in 2007, and a replacement letter of credit issued in 2009, the replacement letter of credit expired on November 1, 2010 (Complaint, ¶ 45; Exhibits C and G to Chaudhury Aff.). Plaintiffs allege that Bicent did not secure a further letter of credit, and LPP has asserted claims against CEM, that are pending in arbitration and for which plaintiffs may incur liability under its Guaranty with LPP (Complaint, ¶ 46). Thus, plaintiffs have sufficiently alleged a contract, plaintiffs' performance thereunder, and defendant Bicent's breach, resulting in damages (Harris v Seward Park Housing Corp., 79 AD3d 425, 426 [1st Dept 2010]). Contrary to Bicent's contention, the language in section 2.5 quoted above provides a sufficient basis for plaintiffs to allege that Bicent was obligated to provide the letter of credit so long as CEHI may be required to make a payment to LPP under the Guaranty.

In the second claim, plaintiffs allege that, under section 8.2 (a) of the PSA, they had "the right to participate in or, by giving written notice to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's expense," and that they gave notice of such election to exercise their right to participate in the LPP/CEM Arbitration, but that defendants have denied such right by refusing to give plaintiffs documents in defendants' possession regarding the power plant project (Complaint, ¶¶ 52, 70-71). Again, this is sufficient at this early stage in the litigation to withstand dismissal. Whether plaintiffs can demonstrate that this "right to participate," which is not defined in the PSA, includes the right to discovery materials or other types of participation in the arbitration, or whether plaintiffs can participate in only the pre-closing claims, cannot be determined on this motion. Further, whether plaintiffs can give sufficient meaning to this contract provision, [*8]through proof of the parties' intent with respect thereto, to entitle them to specific performance is not yet clear. The case upon which defendants rely in arguing that the right to participate is too vague to enforce, Netherby Ltd. v Jones Apparel Group, Inc. (2007 WL 1041648 [SD NY 2007]), fails to provide a basis to dismiss this pre-answer motion to dismiss. The decision in Netherby Ltd. followed over a year of discovery, and a several day bench trial, in which the parties disputed the interpretation of a specific contract term that was the subject of the request for specific performance. Accordingly, it is

ORDERED that the motion for a preliminary injunction is denied; and it is further

ORDERED that the motion of defendant Colorado Energy Management, LLC to dismiss the complaint against it is herein granted and the complaint is dismissed in its entirety against said defendant, with costs and disbursements to said defendant as taxed by the Clerk of the Court, and the Clerk is directed to enter judgment accordingly in favor of said defendant; and it is further

ORDERED that the action is severed and continued against the remaining defendant Bicent Power LLC; and it is further

ORDERED that the motion to dismiss of defendant Bicent Power LLC is granted only to the extent that the third claim of the complaint is dismissed; and it is further

ORDERED that defendant is directed to serve an answer to the complaint within 20 days after service of a copy of this order with notice of entry; and it is further

ORDERED that counsel are directed to appear for a Conference in Room 248, 60 Centre Street, on September 8, 2011, at 9:30 a.m.

Dated: July 6, 2011

ENTER:

________________________

J.S.C.