Giannetti Bros. Const. Corp. v. Lee County

• Citation: 585 F. Supp. 1214
• Decision Date: 04 May 1984
• Docket Number: No. 83-68 CIV-FtM-15.,83-68 CIV-FtM-15.
• Parties: GIANNETTI BROTHERS CONSTRUCTION CORPORATION, a Florida corporation, Plaintiff, v. LEE COUNTY, FLORIDA, a political subdivision of the State of Florida, Defendant.
• Court: U.S. District Court — Middle District of Florida

585 F. Supp. 1214

GIANNETTI BROTHERS CONSTRUCTION CORPORATION, a Florida corporation, Plaintiff, v. LEE COUNTY, FLORIDA, a political subdivision of the State of Florida, Defendant.

No. 83-68 CIV-FtM-15.

United States District Court, M.D. Florida, Fort Myers Division.

May 4, 1984.

James B. Tilghman, Jr., Scott D. Sheftall, Floyd, Pearson, Stewart, Richman, Greer, Weil & Zack, P.A., Miami, Fla., for plaintiff.

Thomas F. Icard, Jr., Donald E. Hemke, Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., Tampa, Fla., for defendant.

ORDER

CASTAGNA, District Judge.

This case presents the Court with a novel question of federal jurisdiction that is a matter of first impression. The Defendant has filed a Motion To Dismiss asserting that the Court lacks jurisdiction under 28 U.S.C. § 1331, the general federal question jurisdictional provision. Plaintiff has contested that assertion contending that the Complaint states a claim under numerous regulations promulgated by the Environmental Protection Agency (EPA).

The facts presented in the Plaintiff's Complaint, which must be taken as true for the purposes of a motion to dismiss, see e.g. American Invs-Co Countryside, Inc. v. Riverdale Bank, 596 F.2d 211, 213 (7th Cir.1979), establish that this controversy arises from the construction of the Lee County Fort Myers Central Sewer District project, EPA Project No. C/20392060. Plaintiff Giannetti Brothers Construction Corp. entered into an agreement with Defendant Lee County to act as the contractor of the sewer project. Pursuant to the various contracts comprising the agreement, Plaintiff was to receive fixed prices for completion of each portion of the work according to detailed specifications.

The Complaint alleges that the EPA was to provide 80% of the funding for the project and that EPA regulations mandated the inclusion of various contractual provisions in the agreement. The only "regulation" specifically named in the Complaint— although Part 35 is appended to the Complaint in its entirety—is 40 CFR Part 35, Subpart E, Appendix C-2 (December 29, 1976). Appendix C-2 promulgates EPA Form 5720-10 (4-77), entitled "Required Provisions Construction Contracts."¹ The relevant contract provisions for present purposes primarily deal with "equitable adjustments" to be made in the fixed contract prices when the contractor incurs increased expenses because of changes in work specifications, differences in site conditions or unexpected delays in the work schedule due to no fault of the contractor. The Plaintiff asserts that these regulations directly provide the rights and remedies upon which the suit is based. The Complaint seeks compensation for five specific types of adjustments, such as increased costs stemming from failure to provide proper plans and increased costs caused by resulting design changes. A further claim is included for wrongful withholding of "retainage monies" intended to insure completion of the project.

Based upon this background, the Defendant asserts that this controversy does not engender sufficient federal involvement to satisfy the requirement of federal question jurisdiction under § 1331. The Defendant contends that Plaintiff's Complaint attempts to "bootstrap" a "garden-variety state law breach of contract action" into a federal question by merely citing EPA regulations. The crux of this argument is that although EPA regulations required the "equitable adjustment" provisions to be included in the contract as a prerequisite to EPA funding, see 40 CFR § 35.938-8 (1975),² Plaintiff's remedy is for breach of those contract provisions based upon state contract law. In short, the Defendant acknowledges that a federal question may "lurk in the background" of this case, but argues that the EPA regulations at issue are "incidental" to the main thrust of the action—state law breach of contract.

Plaintiff counters that the contract provisions involved are remedial provisions required by the EPA regulations and that without these provisions, it would have been forced to resort to common law remedies for breach of contract. This argument seems to urge that the Plaintiff is in fact proceeding with a claim under the regulations themselves, rather than under the contract provisions mandated by those regulations. Seminal to this argument is the fact that the EPA regulations require the contract to contain the provisions in question as specified in EPA forms. See 40 CFR Part 35, Subpart E, Appendix C-2 (December 1976) (EPA form 5720-10). To that end, the Plaintiff has attached to the Complaint the mandatory contract forms designated in the EPA regulations, as opposed to the actual contract provisions entered into pursuant to those regulations.

Turning now to the legal authority with which to gauge the jurisdictional issue, the Eleventh Circuit has recently summarized the standards for ascertaining whether federal question jurisdiction attaches within a particular case. In Mobil Oil Corp. v. Coastal Petroleum Co., 671 F.2d 419 (11th Cir.1982), cert. denied, 459 U.S. 970, 103 S.Ct. 300, 74 L.Ed.2d 281, the Court observed:

For a case to arise under federal law, a right or immunity created by that law must be an essential element of the plaintiff's claim; the federal right or immunity that forms the basis of the claim must be such that the claim will be supported if the federal law is given one construction or effect and defeated if it is given another. Maxwell v. First Nat'l Bank of Monroeville, 638 F.2d 32, 35 (5th Cir. 1981); In Re Carter, 618 F.2d 1093, 1100 (5th Cir.1980), citing Gully v. First Nat'l Bank in Meridian, 299 U.S. 109, 112, 57 S.Ct. 96, 97, 81 L.Ed. 70 (1936).... We look to the complaint unaided by anticipated defenses and with due regard to the real nature of the claim. Maxwell, 638 F.2d at 35; Gully, 299 U.S. at 113, 57 S.Ct. at 98. "A suit to enforce a right which takes its origin in the laws of the United States is not necessarily, or for that reason alone, one arising under those laws, for a suit does not so arise unless it really and substantially involves a dispute or controversy respecting the validity, construction or effect of such a law, upon the determination of which the result depends ...." (citing Heirs of Burat v. Bd. of Levee Comm'rs, 496 F.2d 1336, 1342 (5th Cir.), cert. denied, 419 U.S. 1049, 95 S.Ct. 625, 42 L.Ed.2d 644 (1974)).

Id. See also Ray v. Tennessee Valley Authority, 677 F.2d 818, 825 (11th Cir.1982), cert. denied, 459 U.S. 1147, 103 S.Ct. 788, 74 L.Ed.2d 994 (1983). With this general statement of the law in mind, especially the Gully standard, the parties have offered various cases as controlling in the instant case. While none of the cited authorities deal with factually identical situations— remedial contract provisions mandated by federal regulation—the Court finds two lines of cases particularly persuasive.

The first line of cases deals with suits brought by building contractors in relation to disputes over construction projects paid for or in some way regulated by the Department of Housing and Urban Development (HUD) or a subdivision thereof, the Federal Housing Administration (FHA). The first such case is Lindy v. Lynn, 501 F.2d 1367 (3d Cir.1974), where a building contractor received a construction mortgage that was insured by the FHA. Pursuant to FHA regulation, the mortgagee required the plaintiff contractor to place various sums in escrow and on deposit, for which sums the mortgagee issued a Morgagee's Certificate and an Escrow Agreement that were both in a form prescribed by the FHA. When the plaintiff thereafter defaulted on the mortgage, the mortgagee was notified that the sums put on deposit and in escrow would be set off against any insurance claim the mortgagee might have. The plaintiff contractor then brought suit against HUD contending that under the terms of the Mortgagee's Certificate and the Escrow Agreement, the FHA did not have the right to set off the sums involved against the mortgagee's insurance claim. Id. at 1368.

The Lindy Court found no federal jurisdiction noting that the fact that a contract is "subject" to federal regulation does not necessarily confer federal jurisdiction. The Court characterized the dispute as merely relating to the construction and interpretation of contractual documents. As a concluding remark, this Third Circuit panel noted: "The fact that these documents were subject to the regulations of the FHA is not significant, since we know of no federal statutory policy which would require federal law to determine their operation and effect." Id. at 1369.

It is apparent to the Court, however, that the HUD cases lie along a continuum with Lindy at one end finding no federal question and Trans-Bay Engineers and Builders, Inc. v. Hills, 551 F.2d 370 (D.C.Cir. 1976), lying at the other finding a federal question. While the factual details need not be recounted in depth, Trans-Bay dealt with a minority contractor who sought the return of "hold-back" sums retained by HUD during the construction of a housing project financed through the National Housing Act, 12 U.S.C. § 1715Z-1. The plaintiff directly sued HUD, inter alia, on a theory of equitable lien/unjust enrichment. The Trans-Bay Court found a federal question and distinguished Lindy by noting: "Here we are asked to determine whether the Secretary of HUD has an obligation to plaintiff Trans-Bay that is not rooted in a contract between them, but rather on equitable rights generated by HUD's course of activities pursuant to federal statutes, including the contracts it has sponsored, and prescribed for others, as a condition of federal aid. The claim of federal right is dependent on federal common law." Id. at 377 (citations omitted). It is significant to note that HUD was directly a party to that suit.

Trans-Bay and Lindy demonstrate that a determination of federal jurisdiction must be made upon the circumstances of each case. To the extent that the cases can be read...