Intelect Corp. v. Cellco P'ship GP

• Decision Date: 05 February 2016
• Docket Number: Civil Action No.: 15-0902 (RC)
• Citation: 160 F.Supp.3d 157
• Parties: Intelect Corporation, Plaintiff, v. Cellco Partnership GP, et al., Defendants.
• Court: U.S. District Court — District of Columbia

160 F.Supp.3d 157

Intelect Corporation, Plaintiff,

v.Cellco Partnership GP, et al., Defendants.

Civil Action No.: 15-0902 (RC)

United States District Court, District of Columbia.

Signed February 5, 2016

Philip C. Jones, Jones & Cohen, LLC, Annapolis, MD, for Plaintiff.

Scott M. Jarvis, Suzanne N. Boyd, William S. Sugden, Alston & Bird LLP, Atlanta, GA, Marianne R. Casserly, Alston & Bird, LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

Denying Defendants' Motion to Transfer Venue and Granting in Part and Denying in Part Defendants' Motion to Dismiss

RUDOLPH CONTRERAS

, United States District Judge

I. INTRODUCTION

In 2009, a consortium of four cellular telephone carriers (collectively “Defendants” or the “Carrier Consortium”),¹ entered into a Master License Agreement with the Washington Metropolitan Area Transit Authority (“WMATA”) for the design and construction of a wireless communications infrastructure that would allow WMATA riders to use their cellular phones in Metrorail tunnels and stations. In this action, Plaintiff Intelect Corporation (“Intelect”) claims that the Carrier Consortium failed to ensure that the general contractor they hired to undertake the WMATA project, Powerwave Technologies, Inc. (“Powerwave”), obtained the required surety payment bond covering the entire contract price—upwards of $65 million—in order to assure payment to all of Powerwave's subcontractors. Powerwave ultimately suffered financial difficulties and has since defaulted on its construction contract with the Carrier Consortium and filed for bankruptcy in the District of Delaware. Because of Powerwave's default and bankruptcy, Intelect claims that Powerwave failed to make payments on several invoices, and that a total of $1,013,016.83 remains due to Intelect. Intelect initiated this lawsuit not against Powerwave, but directly against the Carrier Consortium, contending that the Carrier Consortium knew that the project was not fully bonded, failed to inform Intelect and other subcontractors about that alleged problem, and, after Powerwave filed for bankruptcy, nevertheless induced Intelect to retain its employees by representing that the project would commence again in Spring 2013.

Now before the Court is Defendants' motion to transfer venue to the United States District Court for the District of Delaware (ECF No. 5) and Defendants' motion to dismiss this action for failure to state a claim (ECF No. 11). For the foregoing reasons, the Court will deny Defendants' motion to transfer venue and will grant in part and deny in part Defendants' motion to dismiss.

II. FACTUAL BACKGROUND²

In 2008, as a condition of receiving $1.5 billion in federal funding, Congress required WMATA to ensure “that customers of [WMATA's] rail service ... have access within the rail system to services provided by any licensed wireless provider ....” Passenger Rail Investment and Improvement Act of 2008, Pub. L. No. 110-432

, Div. B, § 601(e)(1), 122 Stat. 4907, 4969; see also Am. Compl. ¶ 10, ECF No. 8. On February 26, 2009, WMATA's governing board granted approval for WMATA “to enter into a Master License Agreement with the Carrier Consortium to design, build, operate, and maintain seamless wireless communications coverage for 47 underground stations and 50.5 miles of tunnels” for the Carrier Consortium's own use and for the use of WMATA and its customers. Am. Compl. ¶ 11. The contract required the Carrier Consortium to fund the Project at its own expense, and Intelect alleges that the Defendants essentially “assumed the role of Project Owner.” Id. ¶ 12. On June 18, 2009, Defendants hired Powerwave as the project's general contractor. Id. ¶ 14. Powerwave, in turn, hired Intelect as a subcontractor on June 16, 2010, entering into a $5,629,122.26 subcontract under which Intelect was to complete a portion of the project. Id. ¶ 17. The specific contours of Intelect's portion of the project are not described in the complaint.

Intelect alleges that WMATA's “internal policies and standard contract forms” typically require its contractors to supply a payment bond “in the amount of ... 100% of the contract” to ensure that all persons who supply labor and materials to the project are paid. Id. ¶ 13. Because the project was a “public-private partnership,” however, WMATA only required the Carrier Consortium to obtain a nominal bond, in lieu of a surety payment bond for the full contract price. Id. Intelect alleges that WMATA “rel[ied] on the Carrier Consortium to require its contractor to bond the Project in the full amount of the contract.” Id. The full amount of the project, according to the Carrier Consortium's contract with Powerwave, was $65,671,000. Id. ¶ 14. And Intelect claims that, although the contract between the Carrier Consortium and Powerwave divided the project into four milestones, or “phases,” the Carrier Consortium's contract with Powerwave nevertheless “required Powerwave to provide for bonding in the amount of 100% of the full contract price.” Id. ¶¶ 15–16.

Intelect alleges that Powerwave did obtain a bond, naming Defendants as joint obligees, but that the bond was only valued at $5,000,000—a small fraction of the contract price. Id. ¶¶ 18–20 & Ex. A (providing a copy of the payment bond documents). Intelect thus contends that it was apparent to Defendants on the face of the bond that Powerwave had failed to comply with the terms of the Powerwave-Carrier Consortium contract and had failed to secure the required bond. Id. ¶¶ 20–22.

Powerwave began to suffer financial difficulties in late 2012. As a consequence, Powerwave failed to make several payments to Intelect. In total, Intelect contends that invoices totaling $1,013,016.83 remain unpaid. Id. ¶¶ 23–24. Once Powerwave defaulted on its payment obligations, Intelect claims that one of its officers and its counsel both “requested a copy of the Powerwave Payment Bond” from the Carrier Consortium, which they “refused to provide.” Id. ¶ 30. Intelect states that it was only after it “was able to obtain a copy of the bond, indirectly, through its insurance agent, that Intelect discovered, in January 2013, that the bond was limited in amount and restricted to Phase I, and that the monies then due from Powerwave to Intelect were primarily for work performed in Phases II and III.” Id. ¶ 31.

Notwithstanding Powerwave's failure to pay Intelect, Intelect “continued to supply labor and materials to the Project for the benefit [of] and use by the Carrier Consortium.” Id. ¶ 26. Intelect further claims that although Defendants “had actual knowledge that Powerwave was financially unstable” as of the fall of 2012, “and that the work being performed by Powerwave's subcontractors and suppliers were not covered by the Payment Bond ... the Carrier Consortium continued to accept the benefits of Intelect's performance.” Id. ¶ 28. Moreover, as relevant to its promissory estoppel claim, Intelect alleges that “the Carrier Consortium represented to Intelect that work on the Project would resume in early Spring 2013, and requested that Intelect leave its equipment and materials on site, and to continue to maintain its labor force in place.” Id. ¶ 80.

On January 28, 2013, Powerwave filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware. See Chapter 11 Voluntary Petition, In re Powerwave Techs., Inc. , . 0 (Bankr. D. Del. Jan. 28, 2013), ECF No. 1. Intelect filed a proof of claim in those bankruptcy proceedings seeking $1,013,017.00. See Defs.' Mot. to Dismiss Ex. A, ECF No. 11 (attaching proof of claim). Separately, Intelect commenced this action in District of Columbia Superior Court against the Carrier Consortium. Intelect's complaint seeks judgment in the amount of $1,013,016.83 on alternative theories of negligence, negligent misrepresentation, implied contract, unjust enrichment, constructive fraud, and as a third-party beneficiary to the various agreements between WMATA, Defendants, and Powerwave. See Am. Compl. at 15. Each of these counts are based on the Carrier Consortium's alleged failure to ensure that the project was fully bonded or to advise Powerwave's subcontractors that they might not be paid by the payment bond should Powerwave default on its obligations.³ See id. ¶¶ 29–77. Intelect also brings a separate claim of promissory estoppel seeking $400,000 it allegedly incurred in continuing to employ its employees when the Carrier Consortium represented that the project would resume in spring 2013 and asked that Intelect maintain its labor force in place. Id. ¶¶ 80–81.

Defendants removed the action to this Court on June 11, 2015, invoking diversity jurisdiction under 28 U.S.C. § 1332

, and bankruptcy jurisdiction under 28 U.S.C. § 1334. See Notice of Removal at 6, ECF No. 1. Defendants have since filed a motion to transfer venue to the United States District Court for the District of Delaware, where Powerwave's bankruptcy proceedings are ongoing, see Defs.' Mot. to Transfer Venue, ECF No. 5, and a motion to dismiss Intelect's Amended Complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, see Defs.' Mot. to Dismiss, ECF No. 11.

III. ANALYSIS

The Court will first consider Defendants' motion to transfer venue. Finding that the convenience of the parties and witnesses and the interest of justice weigh against transferring this case, the Court will deny that motion. As a result, the Court proceeds to consider Defendants' motion to dismiss and, as explained below, will grant the motion in part and dismiss Counts II and V of the Amended Complaint, but will otherwise deny the motion.

A. Motion to Transfer Venue

Defendants seek to transfer this case to the United States District Court for the District of Delaware. Changes of venue in civil actions are generally governed by 28 U.S.C. § 1404(a)

, which states that: “For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division...