Gore & Assocs. Mgmt. Co. v. SLSCO Ltd.

Decision Date25 September 2020
Docket NumberCIVIL NO. 19-1650 (GAG)
CourtU.S. District Court — District of Puerto Rico

Plaintiff Gore and Associates Management Company, Inc. ("Gore") filed this diversity suit, 28 U.S.C. § 1332(a)(1), against SLSCO Ltd. ("SLSCO") and Hartford Fire and Insurance Company ("Hartford") (collectively, "Defendants") alleging breach of contract, payment bond claim pursuant to third party beneficiary provisions, and payment bond claim under P.R. LAWS ANN. tit. 22, § 51. (Docket No. 31).1

Pending before the Court is Defendants' Motion to Dismiss for Plaintiff's violation of valid forum selection contractual clauses; for failure to state a claim upon which relief may be granted under FED. R. CIV. P. 12(b)(6); or in the alternative, as to any surviving claims, that it be stayed pending contractually mandated mediation proceedings. (Docket No. 36). Gore timely opposed Defendants' motion to dismiss. (Docket No. 37).

After reviewing the parties' submissions and the pertinent law, the Court GRANTS IN PART AND DENIES IN PART Defendant's Motion to Dismiss at Docket No. 36.

I. Relevant Facts and Procedural Background2

In its Amended Complaint, Gore alleges that between January and February of 2018, SLSCO entered into separate contracts with the Puerto Rico Department of Housing ("PR FEMA Contract") and the U.S. Virgin Islands Housing Authority ("USVI FEMA Contract") that relied on Federal Emergency Management Agency ("FEMA") funds for rebuilding the infrastructure lost which had been allocated to each respective authorities. (Docket No. 31 ¶¶ 8-10).

Under both the PR FEMA Contract and the USVI FEMA Contract (collectively, "FEMA Contracts"), SLSCO was required to furnish labor, materials, tools, supplies, equipment, services, temporary facilities, supervision, administration, and other items as necessary to perform the construction repair work for the projects in accordance with the contract. Id. ¶ 11. Pursuant to the FEMA Contracts, SLSCO was also required to post a labor and material payment bond for insuring against claims by subcontractors for labor and materials provided in support of the FEMA disaster recovery programs in Puerto Rico and the U.S. Virgin Islands. SLSCO contracted with Hartford Insurance to act as surety under the required payment bond for the FEMA Contracts. Id. ¶ 12.

On March 21, 2018, SLSCO contracted with Earthwrx, LLC ("Earthwrx") to provide manpower staffing in support of the FEMA Contracts for services in Puerto Rico and the U.S. Virgin Islands ("PR Subcontractor Agreement" and "USVI Subcontractor Agreement", collectively "Subcontractor Agreements"). Id. ¶ 13. To furnish the labor as required under the Subcontractor Agreement, Earthwrx contracted with Uniify of Puerto Rico, LLC, through its parent company, Uniify Strategic Business Solutions, LLC, (collectively "Uniify") to procure staffing to support the FEMA Contracts in Puerto Rico and the U.S. Virgin Islands. Id. ¶ 16.

Uniify and Earthwrx then entered into an agreement with Gore, who would fund the designated payrolls for all employees assigned and invoiced to Earthwrx ("Funding Agreement"). Id. ¶¶ 17, 18. Under the Funding Agreement, Earthwrx would provide weekly time tracking reports for each Uniify worker, Uniify would process payroll for the workers, and Gore would fund the gross payroll. Id. ¶ 19. Uniify would invoice Earthwrx for the total amount of labor services provided. Id. Upon receipt of the Invoices from Uniify, Earthwrx would invoice SLSCO for the direct labor costs, as agreed to in the Subcontractor Agreements. Id. ¶ 20. Once SLSCO paid Earthwrx, Earthwrx would transfer that payment to Gore to be disbursed in part to Uniify for its fees, and in part to Gore for its fees under the Funding Agreement. Id.

Earthwrx invoiced SLSCO for labor furnished between the dates of April 4, 2018 through July 6, 2018. Id. ¶ 21. SLSCO has allegedly not satisfied the outstanding invoices from Earthwrx. Id. ¶ 22. Uniify invoiced Earthwrx for the it labor furnished between the dates of April 4, 2018 through July 6, 2018 in the approximate amount of $1,557,158.05. Id. ¶ 23. According to the allegations, Earthwrx has only paid Uniify $289,500.00, leaving a balance of $1,267,658.05. Id. Pursuant to the formula provided in the Funding Agreement, Gore's portion of the amount due from Earthwrx is $764,260.49. Id. ¶ 24. Gore has received only $250,000. Id. ¶¶ 21-24. Gore claims that Uniify and Earthwrx together owe a total of $514,260.49, plus accrued late fees, as of the date of this filing. Id. ¶ 27.

Gore contends that, with Earthwrx and Uniify, they have each demanded payment from SLSCO, but SLSCO has failed and/or refused to pay the outstanding balances. Id. ¶¶ 30, 34. On May 13, 2019, Earthwrx executed an Assignment of Rights Agreement assigning its rights to collect the monies owed to Earthwrx under the Subcontractor Agreements to Gore. Id. ¶ 31. Similarly, on May 22, 2019, Uniify executed an Assignment of Rights Agreement assigning its rights to collectthe monies owed to Uniify under the Staffing Agreement and the Funding Agreement to Gore. Id. ¶ 32.

Finally, Gore alleges that under these assigned rights and its rights under the Funding Agreement, it has suffered damages in the amount of the unpaid Invoices of $1,402,313.28, including interest through January 23, 2019, in addition to additional accrued interest, consequential damages and reasonable attorney's fees and costs. Id. ¶ 33.

On September 30, 2019, Defendants initially filed a motion to dismiss Gore's Complaint (Docket No. 20) and renewed this motion on February 14, 2020 for violating valid forum selection contractual clauses and under FED. R. CIV. P. Rule 12(b)(6). (Docket No. 36). Defendants pray that in the alternative, as to any surviving claims, that this action be stayed pending contractually mandated mediation proceedings. Id.

Defendants argues that the Complaint should be dismissed for Plaintiff's failure to comply with clear and unambiguous contractual conditions for the commencement of a judicial action to collect, which are stipulated in the two Subcontractor Agreements. (Docket No. 36 at 2). Defendants posit that pursuant to Fed. R. Civ. P. 12(b), their motion is limited to the well-pleaded allegations and contracts that are included and/or are referenced in the Complaint, namely: (1) the PR Contract; (2) the PR Subcontract; (3) the PR Bond; (4) the USVI Prime Contract; (5) the USVI Subcontract; (6) the USVI Sub-subcontract, and (7) the USVI Bond. Furthermore, they allege that a careful and coherent reading of said agreements unequivocally shows that: (1) Plaintiff blatantly disregarded the forum selection clauses in the Earthwrx Subcontracts and the Payment Bonds; (2) Plaintiff failed to engage in mandatory mediation of its alleged claims under the PR Subcontract; and (3) Plaintiff has no direct claim against Defendants under P.R. LAWS ANN. tit. 22 § 51 (Commonwealth statute equivalent to the federal Little Miller Act) because the services it provided do not fall under the statute's purview. Id. at 4.

Plaintiff opposed, (Docket No. 38), and Defendants replied. (Docket No. 45).

II. Standard of Review

A motion to dismiss based on a forum selection clause is treated as a motion alleging the failure to state a claim for which relief can be granted under Rule 12(b)(6). Silva v. Encyclopedia Britannica, Inc., 239 F.3d 385, 387 & n. 3 (1st Cir.2001). When considering a motion to dismiss for failure to state a claim upon which relief can be granted, FED. R. CIV. P. 12(b)(6), the Court analyzes the complaint in a two-step process under the current context-based "plausibility" standard established by the Supreme Court. See Schatz v. Republican State Leadership Comm., 669 F.3d 50, 55 (1st Cir.2012) (citing Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011) which discusses Ashcroft v. Iqbal, 556 U.S. 662 (2009) and Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). First, the Court must "isolate and ignore statements in the complaint that simply offer legal labels and conclusions or merely rehash cause-of-action elements." Schatz, 669 F.3d at 55. A complaint does not need detailed factual allegations, but "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678-79. Second, the court must then "take the complaint's well-pled (i.e., non-conclusory, non-speculative) facts as true, drawing all reasonable inferences in the pleader's favor, and see if they plausibly narrate a claim for relief." Schatz, 669 F.3d at 55. Plausible, means something more than merely possible, and gauging a pleaded situation's plausibility is a context-specific job that compels the court to draw on its judicial experience and common sense. Id. (citing Iqbal, 556 U.S. at 678-79). This "simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element." Twombly, 550 U.S. at 556.

"[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not 'show[n]'-'that the pleader is entitled to relief.'" Iqbal, 556 U.S. at 679 (quoting FED. R. CIV. P. 8(a)(2)). If, however, the "factualcontent, so taken, 'allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,' the claim has facial plausibility." Ocasio-Hernández, 640 F.3d at 12 (quoting Iqbal, 556 U.S. at 678).

III. Discussion and Legal Analysis3
A. Forum Selection Clauses

A forum selection clause is "prima facie valid" and, absent a "strong showing" by the resisting party that the clause is "unreasonable under the circumstances," it should not be set aside. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, (1972) (internal quotation...

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