MARK A. GOLDSMITH, District Judge.
Before the Court is Defendants' motion to dismiss. For the reasons explained below, the motion will be granted in part and denied in part.
Plaintiff Berger Enterprises (Berger) is a North Dakota contractor in the business of commercial and industrial demolition, excavation, and site work. Second Am. Compl. ¶¶ 1, 6 (Dkt. 22). Defendants are TolTest, Inc. (TolTest), an Ohio corporation doing environmental remediation, design, management, and engineering, and Zurich American Insurance Company (Zurich). Id. ¶¶ 2, 3, 7. The events of this case relate to a contract between TolTest and Berger concerning a project at the Grand Forks Air Force Base in North Dakota.
In August 2008, TolTest contracted with the United States Government to serve as the general contractor for the demolition and restoration of housing and roads on a United States Air Force (USAF) base. As required by statute, TolTest (as principal) and Zurich (as surety) furnished a payment bond to the Air Force for the project. Id. ¶ 8. TolTest then contracted with Berger to do certain demolition and site work.
According to the second amended complaint, Berger "experienced delays, interferences and disruption in the prosecution of the [w]ork" as a "direct result of TolTest failing to timely follow the original contract construction schedule, failing to properly represent the conditions that would be encountered at the Project, failing to represent to Berger that additional equipment would assist in the timely completion of the Project, failing to timely coordinate the activities of the subcontractors working in advance of Berger, and failing to manage and sequence the efficient and timely demolition of the structures at issue." Id. ¶ 12. Berger alleges that, despite the fact that it completed the work in a responsible and professional manner, TolTest failed to fully pay Berger. According to the second amended complaint, there is "a balance due Berger under the Agreement in excess of $3,000,000 for additional labor cost overruns, additional equipment rental costs, extended overhead and retention." Id. at 79.
In October 2010, Berger filed suit in federal court; it amended its complaint in December 2010. In January 2011, Defendants filed a motion to dismiss. In its response, Berger noted its desire to amend the complaint to clarify the basis for its claims. Pursuant to this Court's order, Berger filed a second amended complaint on April 15, 2011, and the Court denied Defendants' motion to dismiss as moot. The second amended complaint alleges seven counts: violation of the Miller Act
Defendants contend that Berger has failed to state a claim on which relief may be granted with regard to all seven counts. Before turning to each argument Defendants make with regard to each claim, the Court notes the governing standard and applicable law.
In evaluating a motion to dismiss pursuant to Rule 12(b)(6),
Albrecht v. Treon, 617 F.3d 890, 893 (6th Cir.2010) (first bracket added, all others in original).
The Court agrees with Defendants that federal law applies to Count 1 (Miller Act), Ohio law applies to Counts 2, 3, 4, 5, and 7 (breach of contract, quantum meruit, account stated, promissory estoppel and Ohio Prompt Pay Act), and that Michigan law applies to Count 6 (innocent misrepresentation). Although Berger argues that North Dakota law applies to Counts 3, 4, and 5 of the complaint (quantum meruit, account stated, promissory estoppel), the argument is not well taken.
As the parties agree, the relevant provision is Article 16.1 of the Terms and Conditions.
Terms and Conditions (Dkt. 15-3 ¶ 16.1). Despite the broad language of the choice-of-law provision, Berger contends that its quasi-contract claims fall outside of its purview. Berger argues that its quasi-contract claims are based, in part, on additional work that was outside the scope of the original Agreement between the parties. Berger contends that the Court should instead apply a balancing test and conclude that North Dakota law is applicable. See Resp. at 5-6 (Dkt. 26).
The Court rejects this argument. Berger does not effectively argue why its quantum meruit, account stated, and promissory estoppel claims are not covered by the provision above. Berger's own example — having to do the additional work of unforeseen asbestos removal — cuts against it. Berger obtained a "change order" so that it could receive compensation for the additional cost of removing the asbestos material. Compl. ¶ 39. However, the very process of obtaining a "change order" is set out in the terms of the Purchase Order. See Purchase Order at 2.
Although Berger's claims for quantum meruit, account stated, and promissory estoppel may not put the validity of the contract in issue in the same sense as the fraud claim in the Moses case did, as alleged, these claims do concern "the validity, interpretation, and performance of this Agreement and the Purchase Order and all other contract documents," the verbatim description of matters that fall under Ohio law. As noted above, Berger engaged in procedures set out in the Agreement regarding the unforeseen asbestos removal on which the quasi-contract claims are at least partially based. Further, the alleged basis for Berger's account-stated claim is TolTest's response to a "formal claim" that Berger made to TolTest in accordance with the Terms and Conditions of the Agreement. See Compl. ¶ 103 (describing basis for account stated claim); TolTest response to Berger's "formal claim" (Dkt. 22-18). Although the Court can envision a case where a party's quantum meruit, account stated, and promissory estoppel claims would not depend upon the interpretation and performance of the contract, under the present allegations, these claims fall within the language of the choice-of-law provision. Accordingly, Ohio law applies to these claims.
The Miller Act requires all federal contractors to obtain a payment bond "for the protection of all persons supplying labor and material in carrying out the work provided for in a contract." 40 U.S.C. § 3131(b)(2). The Act also governs any action by those supplying labor and material to bring a civil action to recover on the payment bond. 40 U.S.C. § 3133(b). Defendants argue that Berger failed to state a claim because it does not allege that it met certain time deadlines set out in the contract. The pertinent part of the Act is as follows:
40 U.S.C. § 3133(b)(1)-(2) & (4).
Defendants argue that the complaint does not provide any dates for the last labor or delivery of supplies, much less provide dates for the completion date of the work on each of its multiple claims under the Miller Act. Defendants also argue that "Berger's failure to plead the date that its work was completed also calls into question the Miller Act's one-year statute of limitations." Motion at 6.
Berger responds that it has sufficiently pled a Miller Act claim. It argues that, contrary to Defendants' assertion, it performed a single project, not several individual work projects requiring multiple claims under the Miller Act. Response at 7. Berger argues that its allegations in the complaint that it (i) furnished labor and materials from September 29, 2008 to May 26, 2010 and (ii) gave "timely, proper, and ongoing notice to TolTest" of its expenses, including its May 26, 2010 "formal claim," are sufficient. Compl. ¶¶ 78-79.
The Court concludes that Berger has pled a Miller Act claim. While Defendants are correct that Berger only has a right to payment under the bond if the dates of the completion of its work and the commencement of the suit comport with the statute, Berger has sufficiently pled with regard to these elements. The complaint, which this Court must accept as true, alleges an end date for furnishing labor and materials of May 26, 2010, well within a year of the filing of the instant suit. Compl. ¶ 78. Further, the suit was not filed until over 90 days after that date, meeting the requirement of 40 U.S.C. § 3133(b)(1). Although the complaint is not detailed about the nature of the notice it gave TolTest, Defendants do not challenge the sufficiency of Berger's notice.
With regard to Defendants' argument that Berger is obligated to break the project up into smaller separate claims and plead the date with regard to each one, the Court cannot credit such an argument at the motion-to-dismiss stage. As a preliminary matter, the Court notes that Defendants cite no authority (nor has the Court found any) requiring that the specific dates of completion of work be affirmatively set out in the complaint in order to state a Miller Act claim. Even if such information were required to eventually prove a successful claim for relief, it is a different matter to conclude that the information is required to be included in the complaint (i.e., that it is essentially an element of the claim), and that a defendant is entitled to dismissal without such affirmative pleading. Although Defendants asserts as much in their brief, Motion at 6, they cite no authority for the proposition.
There are numerous claims underlying Berger's breach-of-contract count. They include that (i) TolTest induced Berger to purchase nearly $1.5 million in equipment by suggesting that it was necessary to complete the work within the project schedule, but then caused delay of the schedule, (ii) TolTest failed to follow the proper procedures that would allow Berger to use a substitute material for backfilling, causing a delay in Berger's work, (iii) TolTest refused to request a time extension from the USAF, despite Berger notifying TolTest of its discovery of "asbestos containing material" above and beyond what was identified in the environmental survey contemplated in the Agreement, resulting in "delay, shut-down, and disruption" for Berger, (iv) TolTest failed to properly coordinate and manage the site, resulting in occupants remaining in homes to be demolished, and causing delay and additional costs for which TolTest refused to compensate Berger, (v) TolTest did not timely obtain a necessary dig permit, which delayed Berger's work, and then did not request a time extension or additional compensation for Berger from the USAF, (vi) TolTest prevented Berger from demolishing certain structures for several months because it delayed in disconnecting telephone lines, but TolTest did not request a time extension or additional compensation for Berger, and (vii) TolTest failed to seek an extension of time or additional compensation for Berger when the delay of a third-party group that relocated several residences caused a multiple-month delay for Berger, about which Berger had promptly notified TolTest. Compl. ¶¶ 16-68. On May 26, 2010, Berger submitted to TolTest a formal claim for the additional costs it incurred due to TolTest's "delays, interferences, and disruptions," but TolTest refused to compensate Berger, "in violation of the agreement." Id. at ¶¶ 62, 69-70.
TolTest raises several arguments in response, two of which merit close examination here.
TolTest repeatedly argues that in order for Berger to be entitled to additional compensation for any reason, as required by the Agreement, Berger "must go through the change order process." Motion at 13. Relatedly, TolTest contends that, under the Agreement, Berger, not TolTest, is the one who must seek any time extensions on the project. Motion at 9. The issue of which party has the responsibility to obtain an extension of time, additional payment, or a modification of work is of central importance — many, if not all, of Berger's allegations of the instances of breach involve TolTest's failure to request a time extension or additional compensation. TolTest cites several sections of Article 6 of the Terms and Conditions as setting out Berger's (and not TolTest's) obligation to take these steps. The Terms and Conditions state in pertinent part:
Terms and Conditions, Article 6 (Dkt. 15-3 at 7-9). Berger argues that "the Agreement makes clear for there to be a modification and an increase in compensation for any [of Berger's] claims, Berger must go through the change order process." Motion at 13.
After having reviewed the relevant provisions of the Terms and Conditions, the Court concludes that, at this stage, TolTest's argument does not warrant dismissal of the breach-of-contract claims. As a preliminary matter, the Agreement itself does not provide that obtaining a change order is the only way to communicate, or receive relief for, any delay or increased cost. It simply states that "Changes in the work may be accomplished ... by Change Order." See id. ¶ 6.1.
Further, Article 6 does not appear to describe a single, unified process; rather,
In addition, TolTest appears to contend that Berger was required to submit to it a "lump sum or guaranteed maximum price proposal" and a "detailed cost breakdown" for the change or delay as set out in ¶ 6.2. Motion at 13. However, these requirements do not appear to apply here. Paragraph 6.2 (where these requirements are located) only applies "[i]n the event that TolTest directs Subcontractor to perform extra work, additional work or changed work." As TolTest did not direct Berger to perform additional or changed work, ¶ 6.2's requirements do not apply to Berger.
For these reasons, the Court rejects Defendants' argument that the complaint should be dismissed because Berger was required to go through the change-order process and the complaint fails to demonstrate that it did. At this early stage, the Court cannot conclude that Berger did not engage in the Agreement-described procedures that were applicable to its claims.
The second argument that warrants analysis here is TolTest's contention that the Agreement prevents Berger from maintaining a claim for monetary compensation for delay or suspension of work. The relevant provisions are as follows:
Terms and Conditions ¶¶ 5.2, 5.3.
Berger responds that these "no damage for delay" provisions are unenforceable under section 4113.62 of Ohio Revised Code, which provides in pertinent part:
Ohio Rev.Code § 4113.62(C)(2). Berger notes that the Sixth Circuit, in an unpublished opinion, found exactly the same language as is in ¶ 5.2 and ¶ 5.3 to be void and unenforceable under the statute. See Acme Contracting, Ltd. v. TolTest, Inc., 370 Fed.Appx. 647, 654-56 (6th Cir.2010). TolTest does not contest that Acme reached that result. However, it argues that the Acme court was not presented with, and did not consider, a key point: the Ohio provision by its terms necessarily only applies to "construction contract[s]," and the statute defines a "construction contract" as being limited to "a contract or agreement for the design, planning, construction, alteration, repair, maintenance, moving, demolition, or excavation of a building, structure, highway, road, appurtenance, or appliance situated on real estate located in this state." Ohio Rev.Code § 4113.62(G)(5) (emphasis added). TolTest contends that, because the Agreement pertains to a demolition of structures situated on real estate in North Dakota, the Ohio statute does not apply.
The Court agrees with TolTest. Although the Court has not found any authority specifically applying the "in this state" provision to limit the reach of the statute, the plain language of the statute makes this understanding clear. Berger argues otherwise, noting that the Acme case employed the Ohio statute provision to make void TolTest's "no damage for delay" language governing work in Georgia. Response at 13. This is true. However, there is no evidence that either the Sixth Circuit, or the district court, was presented with the argument that the statute limits its own application to in-state projects. Even setting aside the fact that Acme is an unpublished case, a case cannot be authoritative on a point that was not considered. Rinard v. Luoma, 440 F.3d 361 (6th Cir.2006) ("[W]e continue to subscribe to the long-held standard that `[q]uestions which merely lurk in the record, neither brought to the attention of the court nor ruled upon, are not to be considered as having been so decided as to constitute precedents.'").
Accordingly, the Court concludes that section 4113.62 of the Ohio Revised Code does not prevent enforcement of the "no damage for delay" language in ¶ 5.2 and ¶ 5.3 of the Terms and Conditions.
However, Berger argues that other authority does prevent enforcement of the "no damage for delay" language, namely, case law concluding that such provisions are unenforceable where the delays were caused by "the active interference of the other contracting party, or if the delay was of a kind not contemplated by the parties." Response at 14. In response, TolTest maintains that this argument does not help
The Court agrees with Berger that case law does prevent enforcement of the "no damage for delay" language under the circumstances currently pled. Ohio law does recognize "several ... exceptions to the enforceability of a no-damage-for-delay clause," including "delay that ... was not intended or contemplated by the parties to be within the purview of the provision." Digioia Bros. Excavating, Inc. v. Cleveland Dep't of Pub. Util., 135 Ohio App.3d 436, 734 N.E.2d 438, 450-451 (Ohio Ct. App.1999). Berger's complaint includes allegations that the delay was not contemplated at all by the parties. For example, the complaint describes the negative impact on Berger of the third-party entity not completing its removal of certain residences until some seven months after the date set by TolTest's and Berger's project schedule. Compl. ¶¶ 63-65. The clear implication is that neither Berger nor TolTest contemplated this delay. The complaint also describes Berger's discovery of "[asbestos-containing material] above and beyond what was identified in the environmental survey provided for in the Agreement." Id. ¶ 36. This allegedly resulted in delay while TolTest made a determination on how to handle the situation, resulting in a negative impact on Berger's anticipated work plan and "significant financial overruns to Berger." Id. ¶¶ 36-38. Again, as the complaint specifically alleges that the conditions were different than what was contemplated by the parties in the Agreement, the clear implication is that the parties did not contemplate this delay. The complaint also describes TolTest's failure to disconnect certain telephone lines on the allegedly mistaken understanding that the telecommunications company, and not TolTest, was to disconnect the lines. Id. ¶¶ 54-61. Berger, at least, did not contemplate such a delay.
Accordingly, the Court concludes that the complaint sufficiently alleges exceptions to the enforceability of "no damage for delay" clauses that have been recognized by Ohio courts. Thus, Berger's claims for monetary compensation for delay or suspension of work will not be dismissed.
TolTest argues that because it and Berger have an express contract, Berger may not sue for equitable relief, and thus, Berger's quantum meruit and promissory estoppel claims must be dismissed. Berger's response does not address this argument. The Court notes, however, that Berger's complaint could be understood to concede the argument to a degree with regard to quantum meruit: the complaint states that the quantum meruit argument is "pled in the alternative if it is determined that there is no contract for the amounts claimed in this Second Amended Complaint." Compl. ¶ 92.
In any case, TolTest is correct that, under Ohio law a party may not generally
Comtide Holdings, LLC v. Booth Creek Mgmt. Corp., 554 F.Supp.2d 821, 827 (S.D.Ohio 2008), rev'd on other grounds, 335 Fed.Appx. 587 (6th Cir.2009). Accordingly, the Comtide court granted a motion to dismiss the plaintiff's claims for, inter alia, quantum meruit and promissory estoppel. Id.
The same result applies here. It is undisputed that the parties have an integrated agreement. Further, the complaint's quantum meruit and promissory estoppel arguments concern the project that the Agreement governs. See Compl. ¶¶ 93, 108-109. Accordingly, Berger improperly seeks both equitable relief and relief under the contract; Berger's quantum meruit and promissory estoppel claims will be dismissed.
The Court agrees with TolTest that Berger's complaint fails to state an "account stated" claim. "An `account stated' exists where the account has been examined and the balance admitted as the true balance between the parties. It is based upon an assent to its correctness and can be implied when an account is rendered by the creditor to the debtor and the debtor fails to object within a reasonable amount of time." Chase Bank, USA v. Curren, 191 Ohio App.3d 507, 946 N.E.2d 810, 816 n. 2 (Ohio Ct.App.2010). "If, however, `the acknowledgment or admission is qualified, and not absolute, or if there is but an admission that something is due, without specifying how much ... there is no account stated.'" HHL Group, Inc. v. Ken's Auto Serv. Ctr., Inc., No. 10CA0021-M, 2011 WL 860427 at *4 (Ohio Ct.App.2011) (quoting Lichter v. S.T. Kenyon & Co., 101 Ohio App. 76, 137 N.E.2d 782, 786 (1956)).
The complaint does not meet the requirements. It does not allege that TolTest agreed to any particular sum. Further, its allegation — that TolTest agreed to an account stated when it stated in its written response to Berger's formal claim that it was willing to assist Berger "to develop an appropriate delay claim," to be submitted to the USAF — is nonsensical. Compl. ¶ 103. Again, the "agreement" cited is not for a particular sum or amount owed. See TolTest response to Berger's formal claim (Dkt. 22-18 at 29). More significantly, the very document that the complaint cites to support the assertion (TolTest's written response to Berger's formal claim) itself contradicts Berger's allegation. TolTest only volunteered to help to develop Berger's potential delay claim as an alternative. Its primary response to Berger's request was that "the
TolTest argues that Berger's claim for innocent misrepresentation — based on alleged oral agreements between the parties — fails to state a claim.
Motion at 19-20. The Court agrees with TolTest's merger clause argument and notes that Berger offers no response to it.
Under the Ohio Prompt Pay Act,
Ohio Rev.Code § 4113.61(A)(1).
The complaint's allegations related to the Act are quite bare-bones: Berger simply alleges that under the Act, "it is presumed that after subcontractors have submitted their invoices for payment to a general contractor that the general contractor will then timely submit its own
TolTest raises a single challenge to Berger's claim — that because the statute defines "owner"
The Court rejects TolTest's argument. The parties do not cite and the Court has not independently found any case law addressing TolTest's argument. However, it appears to the Court that the statute gives a less-than-comprehensive description of an "owner." The statute states: "`Owner' includes the state, and a county, township, municipal corporation, school district, or other political subdivision of the state...." § 4113.61(F)(6) (emphasis added). Notably, the statute does not state "owner is defined as ..." or "owner only includes...". Accordingly, the statute leaves open the interpretation that "owner" could mean private owners, along with entities of the state. This understanding — that an "owner" need not be a state entity — is buoyed by the fact that at least some Ohio cases enforce the Act where all of the parties involved are private actors. See, e.g., Creative Concrete v. D & G Pools, No. 07 MA 163, 2008 WL 2609504, at **1, 6-7 (Ohio Ct.App.2008).
Accordingly, Berger's Ohio Prompt Pay claim is not dismissed on this ground.
For the foregoing reasons, the motion to dismiss (Dkt. 24) is granted in part and denied in part. Specifically, the motion is granted as to Count 3, (quantum meruit), Count 4 (account stated), Count 5 (promissory estoppel) and Count 6 (innocent misrepresentation); and denied as to Count 1 (Miller Act/claim on the payment bond), Count 2 (breach of contract), and Count 7 (violation of the Ohio Prompt Pay Act).
SO ORDERED.
Second, TolTest makes factual arguments not suited to a motion-to-dismiss analysis. For example, regarding the substitute material for backfill, TolTest's motion brief argues, "Berger alleges that TolTest was `responsible for handling all submittals from Berger to the USAF in a timely and professional manner' but there is no assertion that TolTest failed to do so. Rather, Berger acknowledges in Complaint Ex 11, p. 13-14 that TolTest timely made the request ..." This type of argument simply does not acknowledge that in the current procedural posture of the case, the Court is not evaluating two competing interpretations of the complaint's allegations. Rather, the Court must accept complaint allegations as true. And Berger's allegations provide a very different account of this claim. The complaint explicitly argues that TolTest failed "to promptly and efficiently coordinate with the USAF Berger's desire to use recycled concrete as backfill" and failed to "properly administer the submittal process." Compl. ¶¶ 31-32. Further, in the cited exhibit to the complaint, Berger never, as TolTest spins it, "acknowledges ... that TolTest timely made the request." Rather, Berger clearly contends that TolTest delayed in not submitting the crushed concrete samples to the USAF in a prompt fashion. See Dkt. 22-11 at 14: Berger's May 2010 "Formal Claim" to TolTest (noting that Berger had given TolTest the samples by January 6, yet at a January 14 meeting TolTest indicated that it had not yet received them).
Further, to the extent Berger makes allegations that TolTest's error was failing to request time extensions or additional compensation from the USAF, ¶ 6.6 may apply to those claims. As with Berger's ¶ 6.5 claims, the complaint could be understood to allege that Berger met the requirements of ¶ 6.6. Paragraph 6.6 requires that a subcontractor give TolTest notice "as set forth above." Although it is not clear exactly what "above" content to which this phrase refers, it is certainly plausible that it refers to the preceding paragraph, ¶ 6.5, the requirements of which Berger allegedly meets.
