Konover Constr. Corp. v. ATC Assocs. Inc., CIVIL ACTION NO. MJG-10-2801

• Decision Date: 27 April 2012
• Docket Number: CIVIL ACTION NO. MJG-10-2801
• Parties: KONOVER CONSTRUCTION CORP. n/k/a KBE BUILDING CORP. Plaintiff v. ATC ASSOCIATES INC., et al. Defendant
• Court: U.S. District Court — District of Maryland

KONOVER CONSTRUCTION CORP. n/k/a KBE BUILDING CORP. Plaintiff
v.
ATC ASSOCIATES INC., et al. Defendant

CIVIL ACTION NO. MJG-10-2801

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

Dated: April 27, 2012

MEMORANDUM AND ORDER

The Court has before it Defendant Massachusetts Bay Insurance Company's Motion for Summary Judgment and Request for Hearing [Document 77], Defendant ATC Associates Inc.'s Motion to Dismiss Second Amended Complaint [Document 78], and documents related thereto. The Court has held a hearing and had the benefit of the arguments of counsel.

I. BACKGROUND¹

In 2001, Wal-Mart contracted with Plaintiff, Konover Construction Corporation n/k/a KBE Building Corporation ("KBE") to build a Wal-Mart store and a Sam's Club store in Port Covington, Maryland. The contract documents provided extensive project specifications (the "Specifications"). KBE subsequently

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entered into a subcontract with Defendant Superus, Inc., ("Superus") which provided that Superus would construct the concrete masonry walls of the Wal-Mart and Sam's Club stores. As required by its contract with KBE, Superus purchased an insurance policy from Defendant Massachusetts Bay Insurance Company ("Massachusetts Bay"), and named KBE as an "additional insured" on that policy.

In connection with the construction, Wal-Mart contracted with ATC Associates, Inc. ("ATC") to independently test and inspect the concrete, structural steel, and masonry of the buildings' compliance with the Specifications.

Construction on the Wal-Mart and Sam's Club stores took place in late 2001 and early 2002. Superus constructed the masonry walls, and while they did so, ATC's engineers prepared daily reports summarizing their test results and observations, which were transmitted to both Wal-Mart and KBE. ATC's daily reports from November 2001 to January 2002 contain representations that the concrete, masonry, grout, and vertical and horizontal steel reinforcing assemblies were placed in compliance with the projects' Specifications.

Construction on both stores was completed and both buildings were occupied in 2002. By 2007, a large crack appeared in the construction joint on an exterior wall of the Wal-Mart store. Wal-Mart investigated the crack and determined

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that it was caused by "latent and observable construction deficiencies." Second Am. Compl. ¶ 26. Wal-Mart also noted property damage including "step pattern cracks" on an exterior wall, cracks in the building's concrete footings, uneven slabs, and a crack on the interior floor. These construction deficiencies and other related property damage will collectively be referred to as "Problems."

In November 2007, Wal-Mart notified KBE of the Problems. Wal-Mart hired a consulting firm to conduct follow-up thermographic studies to document the Problems. The firm produced a report which concluded that the Problems consisted primarily of (1) voids or foam in the concrete block surrounding the reinforcing steel in areas that should have been filled with grout; and (2) in limited circumstances, reinforcing steel was missing or not installed in accordance with the Specifications; and (3) the spacing of the walls did not conform to the Specifications.

As the investigation into the Wal-Mart store Problems progressed, Wal-Mart and KBE determined that the Sam's Club store also suffered from Problems. According to KBE, the Wal-Mart and Sam's Club Problems "decreased the capacity of the exterior masonry walls to resist out-of-plane wind loads in violation of the Baltimore City Building Code" and "compromised

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the structural integrity of the Wal-Mart and Sam's Club buildings in their entirety." Second Am. Compl. ¶¶ 32-33.

KBE completed and paid for the repair and remediation of the Problems. In 2008, Wal-Mart and KBE entered into a settlement agreement and release (the "2008 Settlement") resolving any and all claims by Wal-Mart against KBE relating to the Wal-Mart store Problems upon KBE's repair thereof. In 2009, Wal-Mart and KBE entered into a similar settlement agreement with respect to the Sam's Club store (the "2009 Settlement"). The 2008 and 2009 Settlements contained assignment clauses whereby Wal-Mart assigned to KBE all of Wal-Mart's rights and interests in claims against ATC.

KBE filed the Complaint in the instant case in October 2010. In December 2010, ATC filed a motion to dismiss the Complaint [Document 11] arguing that KBE's claims against ATC failed as a matter of law because Wal-Mart had no valid claims against ATC to assign because KBE had remediated all of the Problems. While the dismissal motion was pending, in January 2011, KBE and Wal-Mart signed two additional agreements superseding the 2008 Settlement and 2009 Settlement, (the "2011 Novation Agreements"). The purpose of the 2011 Novation Agreements was to provide KBE enforceable rights against ATC and Superus. To achieve this end, the 2011 Novation Agreements eliminated the assignment of rights provided in the 2008 and

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2009 Agreements and was intended to provide KBE with contribution rights against ATC and Superus.

On January 21, 2011, KBE filed the Amended Complaint [Document 21] that was thereafter superseded by the currently pending Second Amended Complaint [Document 73] filed June 24, 2011.

In the Second Amended Complaint, KBE presents claims in fourteen Counts against ATC, Superus and Massachusetts Bay.

Defendant ATC:

I. Negligence
II. Negligent misrepresentation
III. Fraud
IV. Indemnity
V. Contribution

Defendant Superus:

VI. Breach of contract (Construction)
VII. Breach of contract (Insurance related)
VIII. Negligence
IX. Unjust enrichment
X. Indemnity
XI. Contribution
XII. Breach of contract (Indemnification) Defendant Massachusetts Bay:
XIII. Declaratory judgment (Coverage)

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XIV. Breach of Contract (Coverage)

By the instant motions, Massachusetts Bay seeks summary judgment and ATC seeks dismissal of all claims against it.

III. LEGAL STANDARDS

A. Summary Judgment Standard

A motion for summary judgment shall be granted if the pleadings and supporting documents "show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2).

The well-established principles pertinent to summary judgment motions can be distilled to a simple statement: The Court may look at the evidence presented in regard to a motion for summary judgment through the non-movant's rose-colored glasses, but must view it realistically. After so doing, the essential question is whether a reasonable fact finder could return a verdict for the non-movant or whether the movant would, at trial, be entitled to judgment as a matter of law. See, e.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Shealy v. Winston, 929 F.2d 1009, 1012 (4th Cir. 1991). Thus, in order to defeat a motion for summary judgment, "the party opposing the

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motion must present evidence of specific facts from which the finder of fact could reasonably find for him or her." Mackey v. Shalala, 43 F. Supp. 2d 559, 564 (D. Md. 1999) (emphasis added).

When evaluating a motion for summary judgment, the Court must bear in mind that the "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed 'to secure the just, speedy and inexpensive determination of every action.'" Celotex, 477 U.S. at 327 (quoting Rule 1 of the Federal Rules of Civil Procedure).

B. Motion to Dismiss Standard

A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a complaint. A complaint need only contain "a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). When evaluating a 12(b)(6) motion to dismiss, a plaintiff's well-pleaded allegations are accepted as true and the complaint is viewed in the light most favorable to the plaintiff.

However, conclusory statements or a "formulaic recitation of the elements of a cause of action" will not suffice. Id. A

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complaint must allege sufficient facts to "cross 'the line between possibility and plausibility of entitlement to relief.'" Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Twombly, 550 U.S. at 557).

Inquiry into whether a complaint states a plausible claim is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. Thus, if the well-pleaded facts contained within a complaint "do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not shown - that the pleader is entitled to relief." Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1950 (2009)) (internal quotation marks omitted).

IV. DISCUSSION

A. Massachusetts Bay's Motion For Summary Judgment

KBE seeks to recover from Massachusetts Bay, as an additional insured, for the costs it incurred...