## Facts

- Otis Elevator Company operated a major manufacturing plant in Yonkers for decades but faced space constraints and a need for modernization by the late 1960s.
- Otis and Yonkers officials discussed using urban-renewal tools to obtain adjacent land so the plant could expand.
- On June 5, 1972, Otis, the City of Yonkers, and the Yonkers Urban Renewal Agency executed a letter of intent describing goals related to land acquisition and plant modernization.
- The letter of intent did not state that Otis would remain in Yonkers for a fixed term or otherwise guarantee continued operations for any stated duration.
- Yonkers and its development agency acquired adjacent land (including through condemnation) and provided benefits facilitating Otis’s modernization and expansion plans.
- Later technological and market changes made the Yonkers facility economically impractical for Otis’s manufacturing operations.
- Otis ceased operations at the Yonkers plant and ultimately sold the facility to a public entity.
- Yonkers and its agency sued Otis and its parent company, asserting (1) breach of an express or implied obligation to remain for a “reasonable time,” and alternatively (2) quasi-contract, equitable estoppel, and fraud-based theories.
- After discovery, the district court entered summary judgment for defendants on all claims and imposed a $5,000 sanction under Federal Rule of Civil Procedure 11 on the plaintiffs and their counsel for pursuing an unsupported fraud claim.

## Issues

1. Whether the parties formed an express or implied contract obligating Otis to continue operations in Yonkers for a “reasonable time.”
2. Whether the New York statute of frauds barred enforcement of the asserted long-term operating obligation.
3. Whether restitutionary recovery (unjust enrichment/quasi-contract) was available for municipal benefits conferred on Otis despite the parties’ written arrangements.
4. Whether equitable estoppel could prevent Otis from closing the plant based on alleged representations and municipal reliance.
5. Whether Rule 11 sanctions were proper for maintaining a fraud claim lacking factual and legal support after discovery.

## Decision

- The Second Circuit affirmed summary judgment for Otis and its parent company on all claims.
- The court held there was no triable basis to find an express or implied promise by Otis to remain in Yonkers for any definite or “reasonable” period.
- The court did not rest the affirmance on the statute of frauds; even assuming the statute did not apply, the absence of any enforceable commitment independently defeated the contract claim.
- The court affirmed dismissal of the quasi-contract and equitable estoppel claims because the parties’ written arrangements governed the transaction and no clear promise or misrepresentation supported estoppel.
- The court affirmed the $5,000 Rule 11 sanction against the plaintiffs and their counsel for persisting in a groundless fraud claim despite discovery and an opportunity to withdraw it.

## Legal Principles

- A letter of intent and related project documents do not create a binding long-term operational obligation absent a clear contractual commitment to remain for a stated or otherwise enforceable duration.
- An implied promise to continue operations will not be inferred where the record shows the parties understood continued operation depended on economic feasibility.
- Restitution (quasi-contract/unjust enrichment) is generally unavailable when an express agreement covers the subject matter and allocates the parties’ risks and benefits.
- Equitable estoppel requires a clear promise or misrepresentation and reasonable reliance; it cannot be used to impose an obligation the parties did not negotiate into their written arrangements.
- Rule 11 permits monetary sanctions when a party and counsel maintain claims—particularly fraud claims—without evidentiary support and continue pressing them after discovery reveals the lack of factual basis.

## Conclusion

The Second Circuit held that municipal assistance and planning documents aimed at retaining an employer did not, without a clear commitment, bind the employer to keep operating for a “reasonable time,” and it upheld both summary judgment rejecting contract and equitable theories and Rule 11 sanctions for maintaining an unsupported fraud claim.


City of Yonkers v. Otis Elevator Co., 844 F.2d 42 (2d Cir. 1988)