Dominion Transmission, Inc. v. Precision Pipeline, Inc.
| Decision Date | 05 November 2013 |
| Docket Number | Civil Action No. 3:13cv442-JAG |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | DOMINION TRANSMISSION, INC., Plaintiff, v. PRECISION PIPELINE, INC., Defendant. |
This matter comes before the court on the defendant's motion to dismiss for lack of subject matter jurisdiction, pursuant to Fed. R. Civ. P. 12(b)(1). (Dk. No. 7).
The case concerns a contractual dispute over change orders in a construction contract. The defendant's motion to dismiss alleges that this Court lacks subject matter jurisdiction because the plaintiff has failed to submit the instant dispute to formal mediation, a contractually mandated prerequisite to filing litigation. While this Court does possess subject matter jurisdiction over the action, the Court finds that the plaintiff did not abide by its contractual obligation to submit the dispute to formal mediation, and that accordingly, this matter should not yet be before this Court. The Court therefore GRANTS the defendant's Motion to Dismiss, and DISMISSES the plaintiff's complaint WITHOUT PREJUDICE.
The plaintiff (Dominion Transmission, hereinafter "Dominion") is a utility company. Dominion contracted with the defendant (Precision Pipeline, hereinafter "Precision") to construct a portion of the "Appalachian Gateway" pipelines. The parties entered into two different contracts (hereinafter "the contract"), which for the purpose of this motion to dismiss areindistinguishable, to construct sections of pipeline in Pennsylvania and West Virginia. The contract contains a forum selection clause (which also operates as a choice of law clause) designating Virginia as the exclusive forum. Article 23 of the contract provides that the parties will abide by a multi-tiered, progressive alternative dispute resolution ("ADR") process before commencing litigation. Article 23 requires that in the event of a dispute, the aggrieved party must (1) notify the other party of the dispute, then, barring immediate resolution, (2) meet and discuss the issue among the project managers for both parties. If that meeting does not resolve the dispute, the parties must then (3) proceed to a meeting of senior officers. Should that meeting, in turn, fail to produce an accord, the parties must (4) proceed to mediation governed by American Arbitration Association (AAA) standards. The parties agree that they must complete the first three steps of the ADR process before commencing litigation; Dominion, however, disputes the necessity of the fourth and final step (mediation) before any party may file suit.
Despite construction complications and increases in cost, Precision timely completed the pipelines, which went into service in September, 2012.
The parties met in October 2012 to attempt to "close-out" the contract, but did not reach an agreement. On February 1, 2013, Precision presented to Dominion an additional $56 million in change order requests, and shortly thereafter, filed three separate mechanic's liens, amounting to $52 million, on Dominion's pipelines in Pennsylvania and West Virginia, asserting that any delay in filing would have resulted in a waiver of its ability to file such mechanic's lien actions under state law. To preserve their right to pursue those actions, Precision also filed foreclosure actions in West Virginia in August 2013, but at present has effectively stayed those proceedings.1
The parties engaged in contentious communications from February to July 2013, during which time Dominion invoked its contractual audit rights and the parties sparred over the amount, format, and content of Precision's required production of information. While both parties referred to Article 23's ADR provision in their communications, and counsel for the parties met on at least one occasion, neither Dominion nor Precision initiated either a meeting of senior executives (step 3) or submission of the dispute to formal, AAA-brokered mediation (step 4). In sum, the parties did not complete the final two steps of the contractually mandated ADR prior to Dominion's filing of the instant litigation in this Court on July 11, 2013.
A motion to dismiss under Fed. R. Civ. P. 12(b)(1) places the burden on the plaintiff, as the party asserting jurisdiction, to prove that federal jurisdiction is proper. White v. CMA Const. Co., Inc., 947 F. Supp. 231, 233 (E.D. Va. 1996) (citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936); Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982). A Rule 12(b)(1) motion may challenge subject matter jurisdiction in two different ways. First, a Rule 12(b)(1) motion may attack the complaint on its face, asserting simply that the complaint "fails to allege facts upon which subject matter jurisdiction can be based." Id. (quoting Adams, 697 F.2d at 1219). If such is the case, "the facts alleged in the complaint are assumed to be true and the plaintiff, in effect, is afforded the same procedural protection as he would receive under a Rule 12(b)(6) consideration." Id.
A defendant's Rule 12(b)(1) motion may, alternatively, challenge "the existence of subject matter jurisdiction in fact, quite apart from any pleadings." Mortensen v. First Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). In this instance, the district court's "very power to hear the case" is at issue. Walker v. U.S. Dep't of the Army, 60 F. Supp. 2d 553, 555 (E.D. Va. 1999) (quoting Mortensen, 549 F.2d at 891). The district court is then free to weighthe evidence to determine the existence of jurisdiction. Id. (citing Adams, 697 F.2d at 1219). "[N]o presumptive truthfulness attaches to the plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Id. (quoting Mortensen, 549 F.2d at 891).
Precision's motion falls into the second category. Precision asserts that this court lacks subject matter jurisdiction over the dispute because the parties' contract mandates adherence to an ADR process before either may commence litigation - in short, that the court lacks power to hear the case as long as a contractual condition precedent remains unfulfilled.
Precision's motion to dismiss for lack of subject matter jurisdiction relies primarily on its assertion that Article 23's contractual requirement that the parties submit disputes to formal mediation prior to commencing litigation constitutes a condition precedent to such litigation. Review of the parties' contract indicates that Precision's interpretation of formal mediation as a mandatory prerequisite to litigation is correct; to file the instant litigation, Dominion must have first complied with the procedures outlined in Article 23. Precision's motion, however, incorrectly conflates the question of subject matter jurisdiction with that of Dominion's failure to complete a condition precedent. Subject-matter jurisdiction concerns the court's power to hear a case. See United States v. Cotton, 535 U.S. 625, 630 (2002). The Court's power to hear a contractual dispute is unaffected by whether the parties have complied with that contract. Dominion's non-compliance with that condition precedent, then, does not deprive this Court of subject matter jurisdiction over the parties' dispute. While the Court may not dismiss the complaint under Rule 12(b)(1) grounds, it is vested with the discretion to determine anappropriate judicial remedy for Dominion's failure to comply with a condition precedent, to include staying the case2 or dismissing the complaint.3
Dominion asserts that Precision waived its right to insist upon Dominion's compliance with the condition precedent, a legal argument which if correct would forestall any right Precision might have to judicial intervention in its favor. Precision's words and actions (Dominion relies on Precision's decision to file mechanics' liens), however, do not demonstrate a knowing and intentional relinquishment of its contractual right. This Court will not consider Dominion's proffered "first-to-breach" theory; applying that reasoning in the context of an ADR provision would be impractical and inappropriate. Article 23's formal mediation provision required Dominion to submit its dispute to mediation prior to filing litigation, and Precision did not waive its right to insist on adherence to the parties' contract. In light of Dominion's failure to comply with the parties' contractual ADR provision, the Court finds that this matter should not yet be before the Court, and accordingly, dismisses the complaint.
Precision's motion to dismiss asserts that Dominion's failure to abide by a contractual condition precedent necessarily deprives this court of subject matter jurisdiction. This is incorrect. "[F]ederal courts have held in a variety of contexts that the question of subject matter jurisdiction is analytically distinct from that of failure to satisfy conditions precedent to suit."N-Tron Corp. v. Rockwell Automation, Inc., No. 09-0733-WS-C, 2010 WL 653760, at *4 (S.D. Ala. Feb. 18, 2010). A plaintiff's failure to comply with the terms of a contract prior to bringing suit may affect the plaintiff's ability to bring the suit, but it does not affect whether the district court possesses the power to hear the case. See Harris v. Amoco Production Co., 768 F.2d 669, 680 (5th Cir. 1985) (); Griffin v. Dugger, 823 F.2d 1476, 1482 n. 12 (11th Cir. 1987) ().
In this...
To continue reading
Request your trial