Oro Capital Advisors, LLC v. Borror Constr. Co.

• Decision Date: 16 June 2021
• Docket Number: Case No. 2:19-cv-5087,Case No. 2:20-cv-04894
• Parties: ORO CAPITAL ADVISORS, LLC, et al., Plaintiffs, v. BORROR CONSTRUCTION CO., LLC, et al., Defendants. THE CARTER-JONES LUMBER CO., D/B/A HOLMES LUMBER CO., Plaintiff, v. ORO RB SPE OWNER, LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

ORO CAPITAL ADVISORS, LLC, et al., Plaintiffs, v. BORROR CONSTRUCTION CO., LLC, et al., Defendants.

THE CARTER-JONES LUMBER CO., D/B/A HOLMES LUMBER CO., Plaintiff, v. ORO RB SPE OWNER, LLC, et al., Defendants.

Case No. 2:19-cv-5087

Case No. 2:20-cv-04894

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO EASTERN DIVISION

June 16, 2021

CHIEF JUDGE ALGENON L. MARBLEY

Magistrate Judge Elizabeth P. Deavers

OPINION & ORDER

I. INTRODUCTION

This matter is before the Court on three motions: (1) a Motion to Dismiss by Defendant Canal Services Corporation d/b/a Canal Flooring ("Canal Flooring" or "Canal") (ECF No. 53); (2) a Motion to Dismiss by Defendant The Carter-Jones Lumber Co. d/b/a/ Holmes Lumber Co. ("Holmes Lumber" or "Holmes") (ECF No. 69); and (3) a Motion for Judgment on the Pleadings in Part by Defendants Borror Construction Company, LLC ("Borror Construction" or "Borror"); BPI Associates, LLC ("BPI"); and LoriBeth Steiner, Tom Garske, Danielle Borror Sugarman, Matthew Devereaux, Jeffrey Rankey, and Tina Shivers (together, the "Individual Borror Defendants"). For the reasons set forth below, the Court GRANTS Canal Flooring's Motion to Dismiss [#53], GRANTS Holmes Lumber's Motion to Dismiss [#69], and GRANTS the Motion for Judgment on the Pleadings in Part by Borror, BPI, and the Individual Borror Defendants [#84].

II. BACKGROUND

Plaintiffs Oro Capital Advisors, LLC ("Oro Capital"); Oro Karric South, LLC; Oro Karric North, LLC; Oro Silvertree, LLC; Oro Springburne, LLC; Oro RB SPE Owner, LLC ("Oro Runaway Bay"); and Oro Island Club SPE Owner (together, the "Oro Entities" or "Oro") own and operate residential properties located in central Ohio. (Am. Compl. ¶¶ 34-44, ECF No. 50). On June 25, 2018, Oro Capital, acting as an agent for all Oro Entities, entered into a written contract with Borror Construction (the "Borror Construction Agreement" or "Agreement"). (Id. ¶¶ 27-28). Under the contract, Borror agreed to provide construction management services for renovations on certain residential apartment complexes in Columbus. The most substantial of these projects was planned to occur at the Runaway Bay property ("Project Runaway Bay" or the "Project") in Columbus, Ohio. (See id. ¶¶ 24, 26, 88). Borror served as the construction manager for Project Runaway Bay and subcontracted with Canal Flooring, Holmes Lumber, BPI, and at least two other companies to perform work at Runaway Bay. (See id. ¶¶ 88, 98, 134). Specifically, Canal Flooring agreed to remove and install flooring in portions of at least 75 apartment units, and Holmes Lumber agreed to provide labor and materials to renovate balconies and to complete other carpentry work. (ECF No. 76 at 7). BPI prepared and submitted certain permits related to the construction work at Runaway Bay. (Am. Compl. ¶ 232, ECF No. 50).

Taking the facts as stated by Oro, Borror began renovations on the properties between June 25, 2018 and July 19, 2019, but the work was never finished. (Am. Compl. ¶ 47, ECF No. 50). Borror informed the Oro Entities that it would no longer complete the entire project but represented that it would finish the renovations it had already begun. (Id. ¶ 58). Subsequently, on July 23, 2019, Borror's agents told the Oro Entities that Borror would have the partially-started renovations completed by August 2, 2019. (Id. ¶ 59). Borror later recanted on this statement and abandoned all unfinished work. (Id. ¶ 61). In addition to the abandoned work, Oro also asserts that it discovered myriad problems relating to the work on the Project that was finished, including construction defects and defective work on the balconies constructed by Holmes Lumber (which was actually constructed by sub-subcontractors) and flooring installed by Canal Flooring (also performed by sub-subcontractors). (ECF No. 76 at 7-8).

The Oro Entities report that some of the subcontractors Borror hired, both for Project Runaway Bay and for other projects, "filed or have threatened to file mechanics' liens"¹ due to "Borror Construction's failure to pay certain [subcontractors] for the Renovations they claim to have performed[.]" (Id. ¶ 76). Holmes Lumber was among the subcontractors who threatened to file a lien. (Id. ¶ 86). To prevent Holmes Lumber from filing an affidavit for a mechanics' lien at the Runaway Bay Property, Oro Runaway Bay entered into an escrow agreement with Borror and Holmes, whereby Oro agreed to place in escrow "the total sum of $92,099.83—the amount Holmes Lumber claimed it was due for those portions of the Renovations it claims it performed." (Id. ¶¶ 87-90, Ex. 10).

The Oro Entities brought a Complaint in the Southern District of Ohio ("the Federal Construction Case") on November 20, 2019, asserting ten contract and tort claims against Borror Construction and some of the Individual Borror Defendants.² (ECF No. 1). In response, these Defendants filed a Motion to Dismiss. (ECF No. 16). This Court granted this motion, dismissing counts three through eight of the Complaint for failure to state a claim on July 15, 2020.³ (ECF No. 41). Additionally, Borror filed a counterclaim against the Oro Entities. (ECF No. 45).

Plaintiffs amended their Complaint on August 27, 2020, this time including eleven total causes of action and adding as Defendants BPI, Holmes Lumber, Canal Flooring, and Individual Defendants Matthew Devereaux, Jeffrey Rankey, and Tina Shivers. (Pls.' Am. Compl., ECF No. 50). Defendants BPI, Borror, and the Individual Defendants responded by filing a Counterclaim against the Oro Entities. (ECF No. 52). Meanwhile, Defendant Canal Flooring moved to dismiss for failure to state a claim (ECF No. 53), as did Defendant Holmes Lumber (ECF No. 69). Defendants Borror Construction, BPI, and the Individual Borror Defendants also filed a Motion for Judgment on the Pleadings in Part on November 24, 2020. (ECF No. 84).

III. STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint for a failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss, "the plaintiff must allege facts that, if accepted as true, are sufficient to raise a right to relief above the speculative level and to state a claim to relief that is plausible on its face." Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 609 (6th Cir. 2009) (citing Bell Atlantic Corp. v.Twombly, 550 U.S. 544, 555, 570 (2007)) (internal quotations omitted). "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." Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Although the Court "must accept all well-pleaded factual allegations in the complaint as true," the Court "need not accept as true a legal conclusion couched as a factual allegation." Id. (quoting Twombly, 550 U.S. at 555) (internal quotations omitted). In short, the plaintiff's complaint "must be enough to raise a right to relief above the speculative level."

IV. LAW & ANALYSIS

In matters that are brought in federal court due to diversity jurisdiction, the Erie doctrine requires district courts to apply the same substantive law that would have been applied if the action had been brought in a state court within the federal court's jurisdiction. Corrigan v. U.S. Steel Corp., 478 F.3d 718, 723 (6th Cir. 2007). Accordingly, this Court applies Ohio law to interpret the contracts at issue here.

A. Motions to Dismiss

In the Amended Complaint, the Oro Entities added both Holmes Lumber and Canal Flooring as Defendants, bringing one count of unjust enrichment against each. (ECF No. 50 ¶¶ 227-234). The two motions to dismiss by Holmes and Canal are almost identical: Holmes moves this Court to dismiss Oro's unjust enrichment claim against it, which is Count Eight of the Amended Complaint; and Canal makes the same request with respect to Count Nine. Both Holmes and Canal argue that Oro has failed to state viable unjust enrichment claims because Oro did not directly confer a benefit on either Holmes or Canal. Instead, Oro paid Borror pursuant to the Construction Contract, and then Borror paid its subcontractors under separate agreements. (Am. Compl., ECF No. 50 ¶¶ 27-28, 45).

With respect to its unjust enrichment claims against Holmes and Canal, Oro's Amended Complaint also alleges the following:

. . . Defendant[s] Holmes Lumber [and Canal Flooring] have been unjustly enriched, to Plaintiff's detriment, in an amount exceeding $75,000 [each] as a result of Defendant Holmes Lumber [and Canal Flooring] receiving payment for work and/or materials related to the balconies, posts, and/or other carpentry work [or flooring] at the Runaway Bay Project, when such work is incomplete, defective and/or not completed in accordance with the Borror Construction Agreement.

. . . Holmes Lumber [and Canal Flooring] received payment for such work indirectly from the funds that Plaintiffs provided to Borror Construction and which Borror Construction then paid to Holmes Lumber [and Canal Flooring].

. . . It would be unjust, under the circumstances, to allow Holmes Lumber to retain funds that it received indirectly from Plaintiffs for work and/or materials related to the balconies at the Runaway Bay Property when such work and/or materials are defective.

(Id. ¶¶ 228-34). In essence, Oro paid funds to Borror, which were used to compensate both Holmes and Canal. Oro alleges that both Holmes and Canal knew that the payment they received came from Oro. Accordingly, Oro argues that a "direct tie exists between the money paid by Oro" and the allegedly defective work and materials that Holmes and Canal provided to Oro at the Runaway Bay property. (ECF No. 73).

Additionally, the Court takes judicial notice of allegations Holmes asserts in an action related to this case, which Holmes filed in state court and has since been removed to this Court (the "Removed Action").⁴ See Wright,...