CHRISTOPHER J. BURKE, Magistrate Judge.
Presently before the Court in this contract dispute is a motion to dismiss the claims in the operative Complaint, filed by Defendants Project 64 LLC, John M. Wiertel and Geoffrey Graham (collectively "Defendants"), pursuant (at least in significant part) to Federal Rule of Civil Procedure 12(b)(6) (the "Motion"). (D.I. 5) For the reasons set forth below, the Court recommends that Defendants' Motion be GRANTED-IN PART and DENIED-IN-PART.
Plaintiff RBAHTDSR, LLC ("Rehoboth Beach Animal Hospital" or "Plaintiff") is a Delaware limited liability company located in Rehoboth Beach, Delaware; it has been in the business of "providing veterinarian care services" since 2009. (D.I. 1, ex. A at ¶ 1) Non-party Dr. Timothy Dabkowski ("Dr. Dabkowski") is the sole member of Plaintiff and is a resident of Delaware. (D.I. 1 at ¶ 4)
Defendant Project 64 LLC ("Project 64") is an Ohio limited liability company located in Cleveland, Ohio. (Id., ex. A at ¶ 2) It is in the business of "providing architectural design and project management services" for veterinary care facilities. (Id.) Defendant John M. Wiertel ("Mr. Wiertel") is a resident of Ohio and is the principal owner, managing member, and registered agent of Project 64. (Id. at ¶ 3) Defendant Geoffrey Graham ("Mr. Graham") is also a resident of Ohio and is a principal owner and managing member of Project 64. (Id. at ¶ 4)
In early 2017, Plaintiff and Defendants entered into a contract (the "Contract") under which Defendants were to provide various services relating to the eventual construction of Plaintiff's new veterinary facility (the "Project"). (Id. at ¶ 6; see also id. at ex. "A" (hereinafter, "Contract"))
In March of 2017, Project 64 presented to Plaintiff "preliminary designs ... which were approved by [Plaintiff] without any substantial modifications[.]" (D.I. 1, ex. A at ¶ 12) On March 6, 2017, "[a]fter the preliminary designs were approved, the Parties formally executed the Contract, reconfirming their agreement to the conceptual design[.]" (D.I. 1, ex. A at ¶ 12; see also D.I. 6, ex. 1 ("Executed Contract"))
By mid-2018, Defendants began to receive bids for the Project. Defendants received three bids in total—for $2,063,467, $1,488,199 and $1,630,600, (id. at ¶¶ 13(a)-(c))—all well above the "approximately $750,000.00" Total Cost Estimate figure referenced in the Contract, (see id. at ¶ 14; see also Contract at 1). Allegedly, Defendants "did not solicit any additional bids ... because [they] knew the designs were defective and that the Project could not be built within a reasonable approximation of the Total Cost Estimate." (D.I. 1, ex. A at ¶ 15) Plaintiff also alleges that "[b]ecause [Project 64] did not obtain a suitable bid within [Plaintiff's] known budgetary constraints, [Plaintiff] was forced to abandon the Project." (Id. at ¶ 16)
Plaintiff alleges that Defendants' conduct caused it to suffer damages. These damages purportedly came in the form of: (1) monies paid to Project 64 under the Contract for the provision of project designs that Plaintiff says were unusable, because they could not be built within Plaintiff's budget constraints; and (2) costs associated with the purchase and development of the property on which the Project was to be built (the "Property"), which Plaintiff is currently marketing for sale. (Id. at ¶¶ 18-22)
Any further relevant facts will be set out as needed in Section III.
On May 16, 2019, Plaintiff filed the Complaint in the Superior Court of the State of Delaware. (D.I. 1, ex. A) On July 9, 2019, Defendants removed the case to this Court on the basis of diversity jurisdiction, pursuant to 28 U.S.C. § 1332. (D.I. 1 at ¶¶ 2, 9) On August 2, 2019, Defendants filed the Motion. (D.I. 5) Briefing was complete on the Motion on September 19, 2019,
With one exception (further explained below), Defendants' Motion is brought pursuant to Rule 12(b)(6). Pursuant to Rule 12(b)(6), a party may move to dismiss a plaintiff's complaint based on the failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). The sufficiency of pleadings for non-fraud cases is governed by Federal Rule of Civil Procedure 8, which requires "a short and plain statement of the claim showing that the pleader is entitled to relief[.]" Fed. R. Civ. P. 8(a)(2).
When presented with a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court conducts a two-part analysis. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the court separates the factual and legal elements of a claim, accepting "all of the complaint's well-pleaded facts as true, but [disregarding] any legal conclusions." Id. at 210-11. Second, the court determines "whether the facts alleged in the complaint are sufficient to show that the plaintiff has a `plausible claim for relief.'" Id. at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). In assessing the plausibility of a claim, the court must "`accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.'" Fowler, 578 F.3d at 210 (quoting Phillips v. Cty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)).
Plaintiff brings two Counts: Count I's claim for "Breach of Contract[,]" (D.I. 1, ex. A at ¶¶ 24-30), and Count II's claim for "Professional Negligence/Malpractice[,]" (id. at ¶¶ 31-37). Defendants move to dismiss both Counts. Below, the Court will separately analyze the Motion as it relates to each Count.
Count I is a claim for breach of contract brought against Project 64 only. Pursuant to Delaware law, which is at issue here, a plaintiff states a breach of contract claim by alleging facts that support the following elements: (1) the existence of a contract; (2) the breach of an obligation imposed by that contract; and (3) resultant damages to the plaintiff. Pharm. Corp. of Am. v. Askari, Civil Action No. 16-1123-RGA-MPT, 2018 WL 2108200, at *5 (D. Del. May 7, 2018); Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 883 (Del. Ch. 2009). Defendants argue for dismissal of this Count on three grounds, which the Court will assess in turn.
First, Defendants argue that Plaintiff does not have standing to sue. A challenge to standing is properly framed as a challenge to the Court's subject matter jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(1).
Defendants argue here that Plaintiff lacks standing because "[Dr.] Dabkowski signed the contract documents" at issue, and further because he did so "in his individual capacity" and "without regard ... to [his] role, title or alleged function with Plaintiff." (D.I. 6 at 6-7; see also Executed Contract at 5) The Court, however, disagrees that Plaintiff's pleading is deficient on this ground.
Instead, for three primary reasons, the Court concludes that, by a preponderance of the evidence, Plaintiff has established that Dr. Dabkowski signed the Contract in his representative (and not individual) capacity—i.e., on behalf of Plaintiff, the entity that brings this suit. First, the first page of the Contract itself lists the "Client" as "RBAHTDSR, LLC" (and only lists Dr. Dabkowski's name underneath that designation). (Executed Contract at 1) Second, in the portion of the Contract where Dr. Dabkowski signed, indicating acceptance, it is stated that once signed, "this proposal will become the basis for all services between PROJECT 64 and the Client." (Id. at 5 (certain emphasis added, certain emphasis omitted)) And third, Plaintiff has pleaded (and Defendants do not here dispute) that Plaintiff has performed its obligations under the Contract, including by making certain payments to Project 64. (See e.g., D.I. 1, ex. A at ¶¶ 6-7 ("[Rehoboth Beach Animal Hospital] made payments to [Project 64] totaling ... $108.682.50[.]")) This all provides sufficient evidence for the Court to conclude that Plaintiff was the party to this Contract, and that Dr. Dabkowski simply signed the Contract as Plaintiff's agent. Cf. REI Holdings, LLC v. LienClear — 0001, LLC, Civil Action No. 18-1401-MN, 2019 WL 3546881, at *8 (D. Del. Aug. 5, 2019) (noting that, pursuant to Delaware agency law, an individual defendant signs a contract in his representative capacity "as long as somewhere in the contract it is made clear that it is between the principal and a third party") (emphasis added); Brandt v. Rokeby Realty Co., No. C.A. 97C-10-132-RFS, 2004 WL 2050519, at *10-11 (Del. Super. Ct. Sept. 8, 2004) (concluding that the defendant, who was the president of the co-defendant realty company, could not be liable under a contract theory, inter alia, because the contract at issue, while signed by the individual defendant, stated that it was between the plaintiff and the defendant realty company). In light of this, Defendants' standing argument cannot support dismissal of Count I.
Second, Defendants assert that Plaintiff has not plausibly alleged the existence of a valid contractual obligation that was breached. Plaintiff's theory of breach, set out in the Complaint, is that Project 64 "had a contractual duty to design the Project so that it could be completed within a reasonable approximation of the Total Cost Estimate, which was not to exceed $800,000." (D.I. 1, ex. A at ¶ 25; see also D.I. 8 at 13 ("[A] reasonable person would conclude, based upon [the] plain language of the Contract, that [Project 64] breached the Contract by ... failing to furnish suitable designs so that a veterinary care facility could be built within a reasonable approximation of $750,000.00.")
Pursuant to Delaware contract law, if a contract is unambiguous, extrinsic evidence may not be used to interpret the intent of the parties, to vary the terms of the contract or to create an ambiguity. Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997). But when there is uncertainty in the meaning and application of contract language, the reviewing court must consider any extrinsic evidence offered in order to arrive at a proper interpretation of contractual terms. Id. A contract is ambiguous when its provisions are fairly susceptible to different interpretations or may have two or more different meanings. Id. And here, contrary to Defendants' argument, (D.I. 6 at 8-9; D.I. 11 at 4-5), the Contract is not unambiguous in Project 64's favor. Instead, its language referenced above could well have amounted to a requirement that the Project would (absent further alteration by Plaintiff) not exceed approximately $750,000 in scope. And thus Project 64's alleged conduct—charging for and receiving payments for services "up [to] and including the Contract Document phase of the Project" (i.e., nearly the entirety of Project 64's to-be-charged fees), at a point when no contractor had been selected, and no proposed contractor had even bid less than $1.48 million for the Project—could well plausibly amount to a breach of that Contract. (D.I. 1, ex. A at ¶¶ 13, 18; see also D.I. 8 at 15)
Third, Defendants assert that Plaintiff has not plausibly alleged that it suffered damages due to breach. To that end, in their briefing, Defendants challenge the validity of some of the categories of damages set out in the Complaint (i.e., damages relating to settlement-related costs associated with the purchase of the Property, or damages relating to certain approvals and to civil engineering costs associated with readying the Property for construction). (D.I. 6 at 10-11; D.I. 11 at 6; see also D.I. 1, ex. A at ¶¶ 28(b), 29) But in the Complaint, Plaintiff also alleges damages resulting from payments made to Project 64 pursuant to the Contract. (D.I. 1, ex. A at ¶¶ 18, 28(a)) Defendants do not appear to dispute that the allegations as to the latter type of damages are plausible. Thus, Count I cannot be dismissed on this ground.
For the above reasons, the Court recommends that Defendants' Motion be denied as to Count I.
In Count II, Plaintiff brought a claim against all Defendants
Restatement (Second) of Torts § 552(1) (Am. Law. Inst. 1977). In Delaware, however, where (as here) a plaintiff seeks solely economic damages regarding a negligent misrepresentation claim, the economic loss doctrine would preclude the plaintiff's ability to recover in tort, unless the plaintiff can demonstrate the following two elements: (1) the defendant supplied the information to plaintiff for use in business transactions with third parties; and (2) the defendant is in the business of supplying information. Kuhn Const. Co. v. Ocean & Coastal Consultants, Inc., 844 F.Supp.2d 519, 527 (D. Del. 2012) (citation omitted); Millsboro Fire Co. v. Const. Mgmt. Servs., Inc., C.A. No. 05C-06-137 MMJ, 2006 WL 1867705, at *2 (Del. Super. Ct. June 7, 2006).
The focus of the parties' dispute here is on the second element of a negligent misrepresentation claim: whether Plaintiff has sufficiently pleaded that Project 64 is "in the business of supplying information." (D.I. 6 at 14; D.I. 11 at 7) In determining whether a defendant is "in the business of supplying information" for purposes of Section 552, Delaware courts have held that when "information is the `end and aim' product of a defendant's work, there is the potential for liability." Delaware Art Museum v. Ann Beha Architects, Inc., Civil Action No. 06-481-GMS, 2007 WL 2601472, at *2 (D. Del. Sept. 11, 2007); see also Guardian Const. Co. v. Tetra Tech Richardson, Inc., 583 A.2d 1378, 1386 (Del. Super. Ct. 1990). Conversely, where the information supplied is "merely ancillary to the sale of a product or service in connection with the sale," then the defendant will not be considered to be an information provider. Delaware Art Museum, 2007 WL 2601472, at *2 (internal quotation and citation omitted); see also Christiana Marine Serv. Corp. v. Texaco Fuel & Marine Mktg., No. Civ. A. 98C-02-217WCC, 2002 WL 1335360, at *7 (Del. Super. Ct. June 13, 2002). Delineating when information is the "end and aim" of defendant's work versus when it is "ancillary to it" is a "`precise, case-specific inquiry[.]'" Christiana Marine, 2002 WL 1335360, at *6-7 (quoting Rankow v. First Chicago Corp., 870 F.2d 356, 360 (7th Cir. 1989)); see also Delaware Art Museum, 2007 WL 2601472, at *2.
The Court has reviewed the case law in this area (both the cases cited by the parties and cases the parties did not cite), including opinions from Delaware state courts and opinions of this Court interpreting the relevant Delaware law. The underlying law as to this issue is sometimes difficult to parse. As a result, the Delaware state and federal precedent is not always uniform in its analysis—particularly as applied to cases (like this one) where the work of the defendant bears at least some relation to a current or future construction project. Thus, in these circumstances, the process of determining whether a business "cross[es] the line into the world of `supplying information'" is "anything but [a] clear" one. Christiana Marine, 2002 WL 1335360, at *7.
In the Court's view, the opinions that best set out how Delaware state courts (and ultimately, were it called to analyze the issue, the Delaware Supreme Court) interpret what the "end and aim" of a defendant's work is in such cases are Christiana Marine Serv. Corp. v. Texaco Fuel & Marine Mktg., No. Civ. A. 98C-02-217WCC, 2002 WL 1335360 (Del. Super. Ct. June 13, 2002) and Danforth v. Acorn Structures, Inc., Civ. A. No. 90C-JN-30, 1991 WL 269956 (Del. Super. Ct. Nov. 22, 1991). Christiana Marine and Danforth are some of the first Delaware state cases to describe in detail how Delaware courts should assess this question; in doing so, they draw heavily on Illinois state case law for guidance. From these opinions, one can discern that "manufacturers and sellers who deal only in tangible products are generally not in the business of supplying information[,]" and that while "businesses that supply tangible goods and/or non-informational good[s] or services may [sometimes also] exchange information, [that] information relates only to the goods or services, and, thus, is supplied incidental to the sale of the product." Christiana Marine, 2002 WL 1335360, at *6-7 (citing Rankow, 870 F.2d at 364; Tolan & Son, Inc. v. KLLM Architects, Inc., 719 N.E.2d 288, 296 (Ill. App. Ct. 1999)) (internal quotation marks, citations and alterations omitted).
Project 64's work for Plaintiff here, at least based on the record the Court can consider, appears to have been varied. On the one hand, Plaintiff alleges that among the other duties it performed, Project 64 "assisted [it] in selecting and evaluating a suitable location for the Project." (D.I. 1, ex. A at ¶ 9) And the Contract's "Project Summary" describes how Project 64 was to provide "design consultation, management and cost budgeting services[.]" (Contract at 1). These allegations make it seem like Project 64 was merely a "design consultant[] that provided advice on how to best allocate $750,000 to build the new veterinary facility[,]" (D.I. 8 at 17), and thus that it was simply a provider of information and advice.
In the end, with the exact nature and extent of Project 64's work unclear, but with at least some facts pleaded to suggest that it is plausible that Project 64 could be considered an information provider under the law, the Court recommends that Defendants' Motion as to Count II be denied with regard to Project 64. Cf. RLI Ins. Co. v. Indian River Sch. Dist., Civil Action No. 05-858-JJF, 2006 WL 1749069, at *3 (D. Del. June 20, 2006) (denying a motion to dismiss a negligent misrepresentation claim, where it was "not clear" that the defendant designers and architects were not in the business of supplying information, and where the complaint alleged that the defendants had "provided information regarding the progress of" a contractor's work in renovating a high school).
For the foregoing reasons, the Court recommends that Defendants' Motion is GRANTED-IN PART and DENIED-IN-PART. More specifically, the Court recommends that Defendants' Motion be DENIED as to Count I. It recommends that the Motion be GRANTED as to Count II as to Mr. Wiertel and Mr. Graham, but DENIED as to Count II with regard to Project 64.
Plaintiff indicated that it would amend its Complaint in response to certain arguments raised by Defendants, (D.I. 8 at 19), and, as noted above, has moved to amend, (D.I. 12). The Court will address the viability of any claims sought to be added via the motion to amend when it resolves that motion.
