Level Heating & Air Conditioning Co. v. Patriot Constr.
| Decision Date | 07 December 2021 |
| Docket Number | DLB-20-3154 |
| Parties | LEVEL HEATING AND AIR CONDITIONING COMPANY, et al., Plaintiffs, v. PATRIOT CONSTRUCTION, LLC, et al., Defendants. |
| Court | U.S. District Court — District of Maryland |
LEVEL HEATING AND AIR CONDITIONING COMPANY, et al., Plaintiffs,
v.
PATRIOT CONSTRUCTION, LLC, et al., Defendants.
No. DLB-20-3154
United States District Court, D. Maryland
December 7, 2021
MEMORANDUM OPINION AND ORDER
DEBORAH L. BOARDMAN, UNITED STATES DISTRICT JUDGE
In this contractual dispute, plaintiffs Level Heating and Air Conditioning Company (“Level”) and Upper Bay Mechanical, Inc. (“Upper Bay”), both subcontractors, claim that defendant Patriot Construction, LLC (“Patriot”), a primary contractor on a federal construction project, improperly terminated three subcontracts resulting in $666, 000.00 in lost profits. Plaintiffs' complaint includes three breach of contract counts against Patriot, one for each contract, and one count for an alleged violation of the Miller Act, 40 U.S.C. § 3133, against Hartford Casualty Insurance Company (“Hartford”), Patriot's surety on the project. Defendants have moved to dismiss plaintiffs' complaint in its entirety for failure to state a claim and for lack of jurisdiction. ECF 7, 7-1. The motion has been fully briefed. ECF 11 & 12. A hearing is not necessary. See Loc. R. 105.6. The motion to dismiss is granted.
I. Background[1]
Level and Upper Bay are Maryland corporations that provide plumbing and HVAC services. ECF 1, ¶¶ 1-2. The two companies have the same owners. Id. ¶ 2. Patriot is a limited liability company that provides general construction services to the federal government. Id. ¶ 3. Patriot was the primary contractor for all relevant construction work on a federal construction project at Aberdeen Proving Ground (“the Project”). Id. ¶ 56. Hartford was the surety on the Project and posted a payment bond of $1, 000, 000.00 for the Project. Id. ¶ 57.
Between January and July 2019, Patriot executed three subcontracts with Level and Upper Bay for work on various buildings at the Project. Patriot and Level contracted for Level's installation of HVAC, plumbing, and ductwork on Building 310 (the “310 Contract”). Id. ¶ 9. The 310 Contract price, after an immediately executed change order, was set for $840, 000.00, of which “$330, 000.00 was profit to Level.” Id. ¶ 10. Patriot and Upper Bay contracted for Upper Bay's installation of ductwork and exhaust fans on Building 4118 (“the 4118 Contract”). Id. ¶ 12. The 4118 Contract price was set for $52, 355.00, of which “$21, 000.00 was profit to Upper Bay.” Id. ¶ 13. Patriot and Upper Bay entered into a second contract for Upper Bay's installation of HVAC, plumbing, and fire alarm systems on Building 4220 (“the 4220 Contract, ” and collectively with the 310 Contract and the 4118 Contract, “the Contracts”). Id. ¶ 15. The 4220 Contract price was set for $1, 266, 879.00, of which “$315, 000.00 was profit to Upper Bay.” Id. ¶ 16.
The Contracts contain near-identical termination clauses. Id. ¶¶ 11, 14, 17. The 310
Contract termination clause states:
If SUBCONTRACTOR at any time refuses or neglects to supply sufficient, properly skilled workers, or materials or equipment of the proper quality and
quantity, or fails in any respect to prosecute the Work with promptness and diligence or to maintain the schedule of Work or causes by any action or omission the stoppage or interference of Work of PATRIOT or any other subcontractor or fails in the performance of any of the covenants contained in this Agreement, or be unable to meet its debts as they mature, PATRIOT may at its option and at any time after serving three calendar days' notice of such default terminate this Agreement by delivering written notice of termination to SUBCONTRACTOR. Thereafter, PATRIOT may take possession of the plant and Work, materials, tools, appliances, and equipment of SUBCONTRACTOR at the building site, and through itself or others provide labor, equipment and materials to prosecute SUBCONTRACTOR's Work on such terms and conditions as shall be deemed necessary, and shall deduct the cost thereof, including all charges, expenses, losses, costs, damages and attorneys' fees incurred as a result of SUBCONTRACTOR's failure to perform from any money due or thereafter to become due to SUBCONTRACTOR. If PATRIOT so terminates this Agreement, SUBCONTRACTOR shall not be entitled to any further payment under this Agreement until SUBCONTRACTOR's Work has been completed and accepted by OWNER and payment has been received by PATRIOT from OWNER with respect thereto.
In the event that the unpaid balance due exceeds PATRIOT's cost of completion, the difference shall be paid to the SUBCONTRACTOR; but if such expense exceeds the balance due, SUBCONTRACTOR agrees to promptly pay the difference to PATRIOT.
PATRIOT shall have the right to terminate this Agreement, by written notice, without SUBCONTRACTOR being in default for any cause or for its own or OWNER's convenience, and require SUBCONTRACTOR to immediately stop Work. In such event, PATRIOT shall pay SUBCONTRACTOR for that Work actually performed in an amount proportionate to the sum payable under this Agreement after payment is received by PATRIOT from OWNER. PATRIOT shall not be liable to SUBCONTRACTOR for any other costs, speculative damages, or for any prospective profits on Work not performed.
Id. ¶ 11.[2]
Level and Upper Bay “began work on each project shortly after the execution of their respective contracts, ” id. ¶ 18, and “last performed work on the Project[] on or after November 1, 2019.”
Id. ¶ 61. On or around January 23, 2020, “the owner ordered Patriot to halt work, who then ordered that Plaintiffs halt work on the Project[].” Id. ¶ 19.[3]
On or around May 2, 2020, “Patriot emailed Plaintiffs and attempted to terminate the Contracts.” Id. ¶ 24. Level and Upper Bay allege that “[a]t no time prior to Patriot's purported termination of the Contracts had [Patriot] provided notice of default to Plaintiffs and afforded Plaintiffs an opportunity to cure.” Id. ¶ 25.
In June 2020, the owner and Patriot recommenced work on the Project. Id. ¶ 20. Plaintiffs were not asked to recommence their work under the Contracts at any time following the stop work order or the recommencement of work. Id. ¶ 21. Plaintiffs learned that Patriot had hired other subcontractors to complete the work originally specified in the 310 and 4220 Contracts. Id. ¶¶ 22-23.
Plaintiffs allege the “termination of the Contracts for-cause by Patriot was wrongful and in violation of the terms of each of the respective Contracts.” Id. ¶ 26. Plaintiffs claim that Patriot materially breached the Contracts when it “wrongfully purported to terminate” the Contracts by failing to provide “at least three calendar days' notice of any alleged default” and failing to provide an opportunity “to cure any such alleged default.” Id. ¶ 31 (the 310 Contract), ¶ 40 (the 4118 Contract), ¶ 49 (the 4220 Contract). As a result of these alleged breaches, Level and Upper Bay claim entitlement “to the value of the profits lost pursuant to the Contracts.” Id. ¶ 26. They allege the total amount of lost profits for all three contracts is $660, 000.00. Id. ¶ 62.[4]
Level and Upper Bay allege Hartford, as Patriot's surety, is liable under the Miller Act for the lost profits because more than 90 days have passed since plaintiffs sent Patriot an invoice for $666, 000.000 and no payment has been made. Id. ¶¶ 63-65.
On October 29, 2020, plaintiffs filed their complaint against Patriot and Hartford. This motion to dismiss followed.
II. Analysis
A. Jurisdiction
The Court has original jurisdiction over plaintiffs' Miller Act claim under 40 U.S.C. § 3133 and 28 U.S.C. § 1331. The Court has supplemental jurisdiction over plaintiffs' breach of contract claims under 28 U.S.C. § 1367(a). Should the Court dismiss the Miller Act claim, 28 U.S.C. § 1367(c) provides the Court with “wide latitude in determining whether or not to retain jurisdiction over state claims when all federal claims have been extinguished.” Shanaghan v. Cahill, 58 F.3d 106, 110 (4th Cir. 1995) (other citation omitted). Relevant factors include “convenience and fairness to the parties, the existence of any underlying issues of federal policy, comity, and considerations of judicial economy.” Id. (citing Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n.7 (1988)).
Ordinarily, the Court would first decide whether the federal claim survives a motion to dismiss and then decide whether to exercise supplemental jurisdiction over any remaining state claims. Here, however, the Miller Act claim and the contract claims are based on the same set of facts, and the legal viability of the former turns on the legal viability of the latter. In other words, if the contract claims fail, the Miller Act claim fails too. Thus, for the sake of judicial economy, the Court exercises jurisdiction over all claims to decide the motion to dismiss. The Court first determines the legal sufficiency of the contract claims and then addresses the Miller Act claim.
B. Rule 12(b)(6) Motion
Under Rule 8, a complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2)). A Rule 12(b)(6) motion to dismiss for failure to state a claim “tests the legal sufficiency of a complaint.” In re Birmingham, 846 F.3d 88, 92 (4th Cir.), as amended (Jan. 20, 2017) (citing Papasan v. Allain, 478 U.S. 265, 283 (1986)); see Fed. R. Civ. P. 12(b)(6).
To survive a motion to dismiss, a complaint must state “a plausible claim for relief.”
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged . . . [t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.
Id. at 678; see also Veney v. Wyche, 293 F.3d 726, 730 (4th...
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