W&W Steel, LLC v. BSC Steel, Inc.

• Decision Date: 09 May 2013
• Docket Number: Case No. 11–2613–RDR.
• Court: U.S. District Court — District of Kansas
• Parties: W & W STEEL, LLC, Plaintiff/Counterclaim Defendant, v. BSC STEEL, INC., Defendant/Counterclaim Plaintiff/Third–Party Plaintiff, and Jay D. Patel, Defendant, v. Marcus Salazar, d/b/a Materials Management, Inc. d/b/a MMI; Mortgage Management, Inc. d/b/a Martials Management, Inc. a/k/a MMI; and Liberty Mutual Insurance Company, Third–Party Defendants.

944 F.Supp.2d 1066

W & W STEEL, LLC, Plaintiff/Counterclaim Defendant,

v.BSC STEEL, INC., Defendant/Counterclaim Plaintiff/Third–Party Plaintiff,andJay D. Patel, Defendant,

v.Marcus Salazar, d/b/a Materials Management, Inc. d/b/a MMI; Mortgage Management, Inc. d/b/a Martials Management, Inc. a/k/a MMI; and Liberty Mutual Insurance Company, Third–Party Defendants.

Case No. 11–2613–RDR.

United States District Court,

D. Kansas.

May 9, 2013.

Edward T. Oglesby, Timothy A. Steadman, Kutak Rock LLP, Little Rock, AR, Erin R. McClernon, John M. McFarland, Scott E. Harvison, Kutak Rock LLP, Kansas City, MO, for Plaintiff/Counterclaim Defendant/Third–Party Defendants.

Diane Hastings Lewis, Heather F. Shore, G. Steven Ruprecht, Brown & Ruprecht, PC, Kansas City, MO, for Defendants/Counterclaim Plaintiff/Third–Party Plaintiff.

Henry D. Hoss, S. Gregory Frogge, McAfee & Taft, PC, Oklahoma City, OK, Jessica John Bowman, McAfee & Taft, PC, Tulsa, OK, for Third–Party Defendants.

MEMORANDUM AND ORDER

JULIE A. ROBINSON, District Judge.

This action is presently before the court upon the following motions: (1) third-party defendant Materials Management, Inc.'s motion to dismiss BSC Steel, Inc.'s third-party complaint; and (2) plaintiff/counterclaim defendant W & W Steel, LLC and third-party defendant Liberty Mutual Insurance Company's motion to dismiss BSC Steel, LLC's second amended counterclaim Counts I, II, IV, V, VI, VII, VIII, IX, X and XI. Having carefully reviewed the arguments of the parties, the court is now prepared to rule.

I.

This case arises out of the construction of the Irwin Army Community Hospital located on Fort Riley, Kansas. Balfour–Walton Joint Venture (BWJV) served as the general contractor on the project. BWJV subcontracted a portion of the work to W & W Steel, LLC. W & W agreed to perform the steel erection of the general contract work on the project. W & W then subcontracted some of its work to Materials Management, Inc. (MMI). MMI then entered into a contract with BSC Steel, LLC for the steel erection. Liberty Mutual Insurance Company issued a payment bond in connection with the subcontract between Balfour–Walton and W & W. W & W filed its complaint in this case on November 8, 2011 against BSC and Jay Patel. BSC and Patel filed its answer on January 13, 2012. Along with its answer, BSC also filed a counterclaim against W & W and third-party claims against Marcus Salazar, MMI and Liberty Mutual. W & W and Liberty Mutual filed a motion to dismiss on February 24, 2012. Salazar and MMI each filed a motion to dismiss on March 30, 2012. MMI also filed its answer on March 30, 2012. On April 6, 2012, BSC sought to amend its counterclaims and third-party complaint. On May 18, 2012, Magistrate Judge Sebelius granted in part and denied in part BSC's motion to amend. BSC eventually filed an amended answer with amended counterclaims and amended third-party complaint on June 12, 2012. MMI, W & W and Liberty Mutual filed the instant motions to dismiss on June 26, 2012. On December 17, 2012, the court denied the earlier motions to dismiss filed by MMI, W & W and Liberty Mutual. In that order, the court noted that it would consider the arguments raised by MMI in that motion on Counts I, VIII and IX in determining MMI's later filed motion to dismiss.

II.

The amended counterclaims and amended third-party complaint filed by BSC contain eleven counts. The eleven counts are as follows: (I) Alter Ego—counterclaim against W & W and a third-party claim against MMI; (II) Breach of Contract as Third–Party Beneficiary—counterclaim against W & W; (III) Breach of Contract—third-party claim against MMI; (IV) Negligent Misrepresentation—counterclaim against W & W and third-party claim against MMI; (V) Quantum Meruit/Unjust Enrichment—counterclaim against W & W; (VI) Promissory Estoppel—counterclaim against W & W; (VII) Suit on Bond—third-party claim against Liberty Mutual; (VIII) Kansas Fairness in Public Construction Contract Act—counterclaim against W & W and third-party claims against MMI and Liberty Mutual; (IX) Federal Prompt Payment Act—counterclaim against W & W and third-party claims against MMI and Liberty Mutual; (X) Fraudulent Misrepresentation—counterclaim against W & W; and (XI) Kansas Fairness in Private Construction Contract Act—counterclaim against W & W and third-party claims against MMI and Liberty Mutual.

In its motion to dismiss, MMI contends that Counts IV and XI of BSC's amended third-party complaint should be dismissed for failure to state a claim upon which relief can be granted. MMI further argues that Counts I, VIII and IX of BSC's original complaint should also be dismissed for failure to state a claim upon which relief can be granted.

W & W and Liberty Mutual seek to dismiss most of the claims asserted by BSC. They contend that Counts I, II, IV, V, VI, VII, VIII, IX, X and XI fail to state claims upon which relief can be granted. W & W and Liberty Mutual raise essentially the same arguments as those asserted by MMI concerning Counts I, IV, VIII, IX and XI. The court will address those arguments with the contentions asserted by MMI. W & W and Liberty Mutual contend that BSC's claim of quantum meruit and unjust enrichment in Count V must be dismissed because BSC has failed to allege that it expected to get paid by W & W. W & W and Liberty Mutual further contend that BSC's claim of promissory estoppel in Count VI must be dismissed because the oral promises alleged do not constitute a valid and enforceable contract. Liberty Mutual then argues BSC's claim based upon the payment bond in Count VII must be dismissed because BSC has failed to state a claim against W & W. Thus, since none of the claims in the second amended counterclaims state a claim against W & W, then BSC cannot assert a claim of derivative liability against it. Lastly, W & W and Liberty Mutual contend that BSC's claim of fraudulent misrepresentations in Count X must be dismissed because BSC has failed to meet the pleading requirements of Fed.R.Civ.P. 9(b).

III.

The court will dismiss a cause of action for failure to state a claim only when the factual allegations fail to “state a claim to relief that is plausible on its face,” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), or when an issue of law is dispositive. Neitzke v. Williams, 490 U.S. 319, 326, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). The complaint need not contain detailed factual allegations, but a plaintiff's obligation to provide the grounds of entitlement to relief requires more than labels and conclusions; a formulaic recitation of the elements of a cause of action will not do. Bell Atlantic, 550 U.S. at 555, 127 S.Ct. 1955. The court must accept the facts alleged in the complaint as true, even if doubtful in fact, id. at 556, 127 S.Ct. 1955, and view all reasonable inferences from those facts in favor of the plaintiff, Tal v. Hogan, 453 F.3d 1244, 1252 (10th Cir.2006). Viewed as such, the “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atlantic, 550 U.S. at 555, 127 S.Ct. 1955 (citations omitted). The issue in resolving a motion such as this is “not whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).

IV.

A. Count I

In Count I of its second amended counterclaims against W & W, BSC alleges that W & W is the alter ego of MMI with regard to the contract that BSC entered into with MMI. Therefore, BSC asserts that (1) the MMI corporate form should be disregarded; (2) the MMI–BSC subcontract should be disregarded and collapsed into the W & W–MMI contract; and (3) BSC should be deemed the subcontractor of that W & W–MMI contract.

MMI contends that BSC has failed to allege sufficient facts that would support the legal conclusion that MMI is the alter ego of W & W. MMI argues that BSC has failed to allege facts showing that MMI and W & W were functioning as “a single entity.” Specifically, MMI points out that BSC has not alleged that MMI shares officers, office space, or other resources with W & W. They further note that BSC has not alleged any of the traditional indica of alter ego status such as common ownership, common control, financial dependence, undercapitalization, shared payment of losses, salaries and expenses, the absence of an independent business existence, and the absence of independently owned assets.

W & W argues that BSC has failed to allege the necessary factors for the application of the alter ego theory. W & W suggests that close project oversight by W & W of BSC and MMI does not suffice to trigger the alter ego doctrine so that a party's corporate form can be disregarded. W & W also contends that BSC has failed to alleged that it suffered any specific harm or injustice from the alleged domination of MMI by W & W.

BSC contends that facts alleged in the complaint are sufficient for the court to find that it is plausible that MMI is the alter ego of W & W. BSC points to the following alleged facts: (1) MMI is not a corporate entity but rather a trade name under which Marcus Salazar and/or Mortgage Management, Inc. does business; (2) MMI was an undercapitalized entity that W & W used and controlled to enter into a subcontract with BSC; (3) MMI did not have sufficient funds or resources to carry out the terms of the MMI–BSC subcontract; (4) W & W performed all of MMI's responsibilities under the subcontract including negotiating with BSC on the scope or price of the work, scheduling and managing BSC's work, discussing with BSC the design deficiencies or others, receiving and reviewing BSC's daily logs and reports, reviewing and submitting BSC's pay applications to BWJV, paying BSC directly, and communicating with BWJV regarding...