ERIC F. MELGREN, District Judge.
Plaintiff Madison, Inc., ("Madison") filed an action for enforcement and foreclosure of Madison's mechanic's lien against Defendant Western Plains Regional Hospital, LLC, ("Western Plains"), and filed a claim against Defendant Sanderling Healthcare, LLC, ("Sanderling") for breach of contract, quantum meruit, and statutory interest and attorneys' fees based on a dispute stemming from a construction project. Madison alleges that Western Plains owes $278,212.28 plus interest pursuant to a mechanic's lien valid under K.S.A. § 60-1102. Western Plains moved to dismiss Madison's claim for enforcement and foreclosure of the mechanic's lien, and Sanderling filed counterclaims of breach of contract, breach of implied warranty, breach of express warranty, negligence, fraudulent or negligent misrepresentation, an action to adjudicate the mechanic's lien as void, and an action for attorneys' fees pursuant to K.S.A. § 16-1806. Madison then moved to dismiss those claims.
For reasons explained below, the Court grants Western Plains's Motion to Dismiss (Doc. 5) and dismisses Madison's claim for enforcement and foreclosure of the mechanic's lien against Western Plains. Sanderling did not challenge Madison's claims for breach of contract, quantum meruit, or statutory interest and attorneys' fees against Sanderling, so these claims remain. The Court grants Madison's Motion to Dismiss (Doc. 11) Sanderling's claims of breach of express warranty and fraudulent misrepresentation, but denies Madison's Motion to Dismiss Sanderling's claims for breach of contract, breach of implied warranty, negligence, negligent misrepresentation, and attorneys' fees.
Western Plains owns a medical complex in Dodge City, Kansas. Western Plains and Sanderling entered into a contract in which Sanderling (as general contractor) would make improvements on the medical complex. Sanderling entered into a subcontract agreement with Madison whereby Madison would provide improvements to the medical complex in the form of labor, materials, equipment, etc. Madison alleges that the last of its services to Sanderling was completed on August 3, 2016, and that Sanderling has an unpaid balance to Madison of $278,212.28. On October 18, 2016, Madison filed a Contractor's Lien on the medical complex in Ford County District Court pursuant to K.S.A. § 60-1103. On May 1, 2017, Madison filed suit in Ford County District Court for enforcement and foreclosure of its lien against Western Plains and against Sanderling for breach of contract, quantum meruit, and statutory interest and attorneys' fees.
Madison alleges that despite having satisfactorily performed all services required by the contract, Sanderling has failed to pay the amount required by the contract, and that Sanderling has been unjustly enriched by accepting Madison's services without paying the fair price for those services. On May 18, 2017, Madison filed a motion to amend its mechanic's lien to add additional itemization left out of the initial lien and on May 30, 2017, Sanderling removed the case to the U.S. District Court for the District of Kansas.
On June 2, 2017, Western Plains moved to dismiss Madison's claim for enforcement of the mechanic's lien and on June 8, 2017, Sanderling filed counterclaims against Madison for breach of contract, breach of implied warranty, breach of express warranty, negligence, fraudulent or negligent misrepresentation, an action to adjudicate the mechanic's lien as invalid, unsubstantiated, and void, and an action for attorneys' fees pursuant to K.S.A. § 16-1806. Sanderling alleges that Madison breached its contract with Sanderling because Madison failed to complete its scope of work, failed to perform a "significant portion of that work in a good and workmanlike manner," breached its duty of good faith and fair dealing, breached its express warranty as to parts and labor, and was negligent in its failure to perform, failure to correct defects, and failure to use ordinary care. On July 13, 2017, Madison moved to dismiss Sanderling's counterclaims.
Under Rule 12(b)(6), a defendant may move to dismiss a claim for which a plaintiff "fails to state a claim upon which relief can be granted."
On October 18, 2016, Madison filed a contractor's lien in Ford County District Court alleging that it was owed $278,212.28 for labor and materials provided to Sanderling in connection with real property owned by Western Plains. The attachment to the lien itemized only $6,574.69 in labor and materials of the total amount due. On May 1, 2017, Madison moved for enforcement and foreclosure of its lien against Western Plains. Western Plains moves to dismiss Madison's claim for enforcement and foreclosure of its mechanic's lien arguing that the lien is vitally defective and that the time to amend the defective lien has passed.
To establish a valid lien under K.S.A. § 60-1102, a person must file:
K.S.A. § 60-1103 provides that subcontractors may file a lien statement in the same manner as the original contractor except that "the lien statement must state the name of the contractor and be filed within three months after the date supplies, material or equipment was last furnished or labor performed by the claimant."
Western Plains argues that Madison's lien was defective because it did not provide a "reasonably itemized statement" in itemizing only $6,574.69 of the $278,212.28 claimed. The Kansas Court of Appeals has held that:
Additionally, the Kansas Supreme Court has held that a "lien statement's validity must be ascertained from its four corners."
Although the lien was not reasonably itemized, K.S.A. § 60-1105 allows amendments of mechanic's liens "in furtherance of justice, except to increase the amount claimed."
Madison argues that the failure to itemize reasonably did not make the lien vitally defective and that it may amend the lien to correct the deficiency. However, "[s]ince the mechanic's lien is purely a statutory creation, only strict compliance with the provisions in the statute will give rise to an enforceable lien."
Although Madison draws to the Court's attention a Kansas Supreme Court decision that permitted amendment of a mechanic's lien and cited eight cases allowing liens to be amended, those cases and are distinguishable from the case at hand.
Next, Madison argues that even if the entire $287,212.28 lien cannot remain, the $6,574.69 was reasonably itemized in the original filing of the lien and therefore should be enforceable. Neither party cited, nor was this Court able to find Kansas case law addressing whether an invalid lien may be saved in part by severing the invalid portion of the lien and allowing the otherwise valid portion of the lien to remain.
Because Madison's lien was vitally defective as filed, it cannot be found to be partially valid. Severing defective portions of liens would not give defendants proper notice of the claim against them and would circumvent the strict requirements of the statute by creating liens without statutory compliance. For these reasons, Western Plains's Motion to Dismiss the claim for enforcement and foreclosure of the lien is granted.
Madison first moves to dismiss Sanderling's claim for breach of contract. In Kansas, the elements of a breach of contract claim are: "(1) the existence of a contract between the parties; (2) sufficient consideration to support the contract; (3) the plaintiff's performance or willingness to perform in compliance with the contract; (4) the defendant's breach of the contract; and (5) damages to the plaintiff caused by the breach."
In its Answer, Sanderling alleges that Madison "failed to perform a significant portion of [its] work in a good and workmanlike manner," including:
Sanderling also alleges that Madison failed to complete the work in accordance with the subcontract and failed to perform warranty work required by the subcontract. Sanderling further alleges that these failures caused Sanderling damages, including costs to complete and repair the defective and incomplete work, lost profits, and lost business income. Accepting these allegations as true, the Court finds that Sanderling stated a claim for relief that is plausible on its face and that adequately gives Madison notice of its claims. For these reasons, Madison's Motion to Dismiss Sanderling's breach of contract claim is denied.
Madison next moves to dismiss Sanderling's breach of implied warranty claim for failure to provide specific factual allegations. Kansas courts have routinely held that "a contract to do work or perform a service includes an implied warranty that the work will be done in a workmanlike manner, using appropriate care and skill, unless there is an express agreement that no such warranty may be implied."
Next, Madison moves to dismiss Sanderling's claim for breach of express warranty. K.S.A. § 84-2-313 states:
(1) Express warranties by the seller are created as follows:
The Kansas Supreme Court has held that in breach of express warranty claims, "the burden of proof resting upon the plaintiff entails merely demonstration that the goods did not have the properties warranted."
Madison next argues that Sanderling's negligence claim should be dismissed because it is barred by the economic loss doctrine. The economic loss doctrine is a creation of modern product liability law "under which a tort action is prohibited if the only damages suffered are economic losses."
In arguing that the economic loss doctrine should apply here, Madison first cites a product liability case.
Madison also cites a recent District of Kansas case, Dearborn, in stating that the economic loss doctrine bars claims of negligence arising out of disputes over a commercial construction project, but Dearborn's holding was not so broad.
Additionally, Kansas courts have routinely held that "where a person contracts to perform work or to render a service, without express warranty, the law will imply an undertaking or contract on his part to do the job in a workmanlike manner and to exercise reasonable care in doing the work."
Finally, Madison argues that Sanderling failed to sufficiently plead its negligence claims. Under Iqbal and Twombly, a claim is facially plausible if the court can reasonably infer the defendant is liable from the facts pleaded.
Sanderling alleges that Madison entered into a contract with Sanderling to perform various construction services, that Madison had a duty to exercise ordinary care and to complete the project as reasonable and prudent contractor would have, and that Madison "failed to perform a significant portion of [its] work in a good and workmanlike manner," including failing to follow various structural and architectural plans. Sanderling alleges that Madison's failure to complete its work in a good and workmanlike manner has caused Sanderling damages in costs to repair the work. Accepting all of Sanderling's allegations as true, Sanderling has sufficiently alleged that Madison had a duty to Sanderling, failed to perform that duty, and thereby caused damages to Sanderling. Sanderling has therefore stated a claim that is plausible on its face and gives Madison fair notice of its claims. For this reason, Madison's Motion to Dismiss Sanderling's negligence claim is denied.
Madison next moves to dismiss Sanderling's fraudulent misrepresentation and negligent misrepresentation claims. Although Sanderling grouped these claims, this Court will address them separately. First, Madison argues that Sanderling's fraudulent misrepresentation claim failed to meet the specificity requirements of Rule 9. Rule 9 states, "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally."
Sanderling's counterclaim for fraud fails this test. Although Sanderling alleged that Madison made "representations that it was qualified, and had the experience necessary, to perform the referenced scope of work," Sanderling failed to identify who made the statement, when or where the statement was made, or provide more specific information about the content of the alleged misrepresentation. Sanderling argues that the standard under Rule 9 is "not quite as demanding as Madison implies," and that Deere & Co. v. Zahm
In Sanderling's Response in Opposition to Madison's Motion to Dismiss (Doc. 15), Sanderling requests leave to amend its counterclaim if the Court finds that it did not plead fraudulent misrepresentation with specificity. Because Sanderling did not separately file a motion to amend with the Court, Sanderling has not complied with D. Kan. Rule 15.1(a), which requires that a copy of the proposed amended pleading be filed with a motion to amend. Instead, Sanderling suggested what its proposed amendment would address in its response brief. Based on this briefing, even if Sanderling had complied with local rules, this Court would deny leave to amend the counterclaim because the proposed amendment is futile.
Although courts must "freely give leave when justice so requires,"
In Kansas, fraudulent misrepresentation requires "an untrue statement of fact, known to be untrue by the party making it, made with the intent to deceive or with reckless disregard for the truth, upon which another party justifiably relies and acts to his or her detriment."
Finally, Sanderling mentions in passing that Madison committed fraud by silence by intentionally failing to disclose that it had "purposely failed to perform substantial work required by the structural and architectural plans, thereby causing significant injury to Sanderling in the form of lost profits." Because Sanderling has not properly requested leave to add this counterclaim, the Court will not address it. For these reasons, Sanderling's claim of fraudulent misrepresentation is dismissed.
Madison next argues that Sanderling's claim for negligent misrepresentation should be dismissed because Sanderling failed to identify any additional damages as a result of the alleged negligent misrepresentation, and that Sanderling's allegations under the negligent misrepresentation claim are "indistinguishable from Sanderling's claim for breach of contract." Kansas defines negligent misrepresentation as:
Sanderling alleges that Madison, who had a pecuniary interest in the contractual agreement, provided false information regarding its qualifications and experience, and either did so recklessly or "without reasonable care in determining the truthfulness of its representations." Sanderling alleges that these misrepresentations caused harm to Sanderling through costs to complete and repair defective and incomplete work, making a plausible claim for negligent misrepresentation.
Although Madison argues that Kansas law requires that Sanderling allege additional injuries arising from the negligent misrepresentation beyond those caused by the breach of contract, it appears that this requirement only applies to claims of fraudulent misrepresentation.
Finally, Madison argues that Sanderling's claim for negligent misrepresentation is barred by the economic loss doctrine. Sanderling responded stating that Madison waived its economic loss doctrine argument by raising it in a footnote. Subsequently, Madison conceded that the Kansas Court of Appeals has rejected the argument that claims of negligent misrepresentation are barred by the economic loss doctrine. Because the Tenth Circuit has repeatedly held that arguments "raised in a perfunctory manner, such as in a footnote, are waived,"
Finally, Madison moves to dismiss Sanderling's claim for attorneys' fees pursuant to K.S.A. § 16-1806, arguing that because Sandlering's other claims fail to meet the standards of 12(b)(6), the attorneys' fees claim cannot survive. K.S.A. § 16-1806 provides, however, that "[i]n any action to enforce KSA 16-1803, 16-1804 or 16-1805 . . . the court . . . shall award costs and reasonable attorney fees to the prevailing party."
Because Madison's lien was vitally defective and therefore never created, Madison's claim for enforcement of its mechanic's lien is hereby dismissed.
Because Sanderling did not challenge Madison's claim for breach of contract, quantum meruit, or attorneys' fees, these claims remain.
Because Sanderling's breach of express warranty claim stated only threadbare recitals of the cause of action, and because Sanderling's claim for fraudulent misrepresentation did not meet the heightened Rule 9 pleading standards, those counterclaims are hereby dismissed.
Because Sanderling's breach of contract, breach of implied warranty, negligence, and negligent misrepresentation counterclaims were plausible and gave Madison fair notice of the claims, these counterclaims remain. Further, because Sanderling's claim for attorneys' fees was valid under K.S.A. § 16-1806, this counterclaim also remains.
