SG Blocks, Inc. v. Hola Cmty. Partners
| Citation | 521 F.Supp.3d 881 |
| Decision Date | 25 February 2021 |
| Docket Number | Lead Case No.: 2:20-cv-03432-ODW (RAOx),Consolidated Case No.: 2:20-cv-04386-ODW (RAOx) |
| Court | United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California |
| Parties | SG BLOCKS, INC., Plaintiff, v. HOLA COMMUNITY PARTNERS; Heart of Los Angeles Youth, Inc. ; and City of Los Angeles, Defendants. Hola Community Partners, Consolidated Plaintiff, v. SG Blocks, Inc.; Teton Buildings, LLC; Avesi Construction, LLC; American Home Building and Masonry Corp dba American Home Building; and Does 1-1000, inclusive, Consolidated Defendants. And Related Third-party Claims |
Jessica C. Foster, Lee Jackson, Milstein Jackson Fairchild and Wade LLP, Mark Robert Hartney, Allen Matkins Leck Gamble Mallory and Natsis LLP, Los Angeles, CA, for Plaintiff.
Sean P. O'Connor, Zachary James Golda, Sheppard Mullin Richter and Hampton LLP, Costa Mesa, CA, Tyler J. Cesar, Construction Counsel of California, PC, Newport Beach, CA, Patrick Kevin O'Brien, O'Brien and Associates, Petaluma, CA, for Defendants.
(1) HOLA'S MOTION TO DISMISS COMPLAINT [27];
On April 13, 2020, Plaintiff SG Blocks, Inc. ("SG Blocks") filed a Complaint against Defendants HOLA Community Partners ("HCP"), Heart of Los Angeles Youth, Inc. ("HY"), and the City of Los Angeles ("City") in SG Blocks, Inc. v. HOLA Community Partners, et al. , case no. 2:20-cv-03432-ODW (RAOx) (the "Lead Case"). (See Compl., ECF No. 1.)1 On April 20, 2020, HCP filed its own action against SG Blocks in the Los Angeles Superior Court, which SG Blocks removed to this Court on the basis of diversity jurisdiction on May 14, 2020. HOLA Community Partners v. SG Blocks, Inc., et al. , case no. 2:20-cv-04386-ODW (RAOx) (the "Consolidated Case"). On July 24, 2020, the Court consolidated the two actions. (Order Consolidating Cases, ECF No. 26.) On August 19, 2020, Consolidated Plaintiff HCP filed a First Amended Consolidated Complaint against Consolidated Defendant SG Blocks. (First Am. Consol. Compl. ("FACC"), ECF No. 31.) And on January 22, 2021, SG Blocks filed a Third-Party Complaint against Third-Party Defendants Teton Buildings, LLC, Avesi Construction, LLC, and American Home Building and Masonry Corp ("AHB"). (Third Party Compl., ECF No. 49.)2
Now, three motions are pending before the Court. First, Defendants HCP and HY (collectively referred to in the singular as "HOLA") move to dismiss the claims against them in the Lead Case. (HOLA Mot. Dismiss ("HOLA Mot."), ECF No. 27.) HOLA's Motion is fully briefed. (See id. ; Opp'n HOLA Mot., ECF No. 34; Reply HOLA Mot., ECF No. 38.) Second, Defendant City moves for judgment on the pleadings with respect to SG Blocks's seventh cause of action, which is the only claim asserted against the City in the Lead Case.3 (City Mot. J. Pleadings ("City Mot."), ECF No. 32.) The City's Motion is also fully briefed. (See id. ; Opp'n City Mot., ECF No. 33; Reply City Mot., ECF No. 37.) Third, Consolidated Defendant SG Blocks moves to dismiss the First Amended Consolidated Complaint. (SGB Mot. Dismiss FACC ("SGB Mot."), ECF No. 35.) SG Blocks's Motion is fully briefed as well. (See id. ; Opp'n SGB Mot., ECF No. 40; Reply SGB Mot., ECF No. 41.)
For the following reasons, (1) HOLA's Motion (ECF No. 27) is GRANTED in part and DENIED in part ; (2) the City's Motion (ECF No. 32) is GRANTED ; and (3) SG Blocks's Motion (ECF No. 35) is DENIED .4
The HOLA entities (HCP and HY) are non-profit organizations that work together to provide at-risk youth with free academic, art, and athletic programs. (HOLA Mot. 7; see also Compl. ¶ 6 ().) In pursuit of their mission, they operate the HOLA Performing Arts and Enrichment Center (the "Center"), located at Lafayette Park in Los Angeles, California (the "Premises"). (HOLA Mot. 8.) The present dispute concerns the construction of the Center.
In September 2017, HOLA entered into a ground lease agreement with the City to lease the Premises from the City for fifty years. 5 In the Ground Lease, the parties recited, "HOLA has special abilities in the areas of fundraising, enrichment, recreation programs, and community outreach for at-risk youth, and [HOLA] desires to construct, operate, and maintain an arts and recreation center that emphasizes community enrichment, recreation programs and activities for the inner-city youth of Los Angeles (the ‘Center’)." (Ground Lease ¶ 1.2.3.) The Ground Lease also "set[s] forth the duties, obligations, responsibilities, aims, and goals of the parties, for the specific purpose of constructing, operating, and maintaining the Center." (Id. ¶ 1.2.4.)
Relevantly, the Ground Lease states, "HOLA shall be required to fund the development, construction, financing, maintenance, and operation of the Center," and "no [City] monies shall be required to fund the development, construction, financing, maintenance, and/or operation of the Center." (Id. ¶ 3.2.) In consideration for leasing the Premises, HOLA agreed to operate the Center for the community's benefit and to pay the City a nominal rent of one dollar per year. (Id. ¶ 3.1.) If HOLA stops using the Premises to operate the Center as intended, the Ground Lease may be terminated with the Premises reverting to the City. (Id. ¶ 2.3.) And, as is typical of such agreements, the Ground Lease states, "Any improvements which have been constructed or erected on the Premises shall, upon termination of [the Ground Lease], become the property of [the City]." (Id. ¶ 16.1.)
In June 2017, while the Ground Lease was being finalized, HOLA contracted SG Blocks to design, fabricate, and construct the Center.6 (Compl. ¶ 16, Ex. C ("Construction and Delivery Agreement" or "Agreement").) The Agreement acknowledges that HOLA had also hired non-party Balfour Beatty Construction, Inc. as a "site contractor who w[ould] be performing site-related work ... concurrently with [SG Blocks]," and that SG Blocks would need to "fully cooperate with the site contractor while working on the project site." (Agreement 3; see Compl. ¶ 19.) SG Blocks, in turn, subcontracted work to non-party EDI International, PC ("EDI"), as well as to several other subcontractors. (Compl. ¶¶ 75–76; FACC ¶¶ 4–6.)
Critically, HOLA alleges—and SG Blocks does not contest—that SG Blocks did not hold a valid contractor's license as required under California law. (See FACC ¶ 46.) Nonetheless, SG Blocks maintains the Agreement is severable, so its lack of a license does not preclude recovery of payment for "fabrication and delivery work, which has no such license requirement." (Compl. ¶¶ 17, 38.) SG Blocks also emphasizes that HOLA did not hold a contractor's license, either. (Compl. ¶ 15; SGB Mot. 8, 19–20.)
In any event, HOLA hired SG Blocks as a "Design-Builder" to design, fabricate, and install the structure of the Center. (See HOLA Mot. 9 (citing Agreement 3).) According to HOLA, "SG Blocks failed in all aspects." (HOLA Mot. 7.) HOLA alleges that SG Blocks provided incomplete design plans, delivered dangerously defective building materials, failed to meet deadlines, and performed defective construction work. (See FACC ¶ 9.) SG Blocks alleges a slightly different story, that its delays were somehow caused by HOLA and HOLA's subcontractors’ failure to complete the foundation for the Center as scheduled. (Compl. ¶¶ 18–22.) In any event, the parties seem to agree that HOLA eventually terminated the Agreement with SG Blocks and hired Balfour Beatty to complete construction of the Center. (Compl. ¶ 33; see FACC ¶¶ 10(D), 38(B).) SG Blocks also alleges that HOLA refuses to pay for goods and services rendered in performance of the Agreement. (Compl. ¶ 34.)
Now, everyone is upset. SG Blocks filed the Lead Case against HOLA and the City. (See Compl.) HCP then filed the Consolidated Case against SG Blocks. (See FACC.) HOLA moves to dismiss SG Blocks's Complaint under Federal Rule of Civil Procedure ("Rule") 12(b)(6). (HOLA Mot.) Having already filed an Answer to SG Blocks's seventh claim, the City moves for judgment on the pleadings as to that claim, pursuant to Rule 12(c). (City Mot.) And SG Blocks moves to dismiss HCP's First Amended Consolidated Complaint under Rule 12(b)(6). (SGB Mot.)
A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable legal theory or insufficient facts pleaded to support an otherwise cognizable legal theory. Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1988). To survive a dismissal motion, a complaint need only satisfy the minimal notice pleading requirements of Rule 8(a)(2)—a short and plain statement of the claim. Porter v. Jones , 319 F.3d 483, 494 (9th Cir. 2003). The factual "allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). That is, the complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted).
Additionally, any party may move for judgment on the pleadings after pleadings are closed, so long as the motion is brought within such time as to not delay the trial. Fed. R. Civ. P. 12(c). Because Rule 12(c) motions and Rule 12(b)(6) motions are "functionally identical," the same standard of review applies to both. Dworkin v. Hustler Mag. Inc. , 867 F.2d 1188, 1192 (9th Cir. 1989) ; accord Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc. , 637 F.3d 1047, 1055 n.4 (9th Cir. 2011). When ruling on a motion for judgment on the pleadings, "[a]ll allegations of fact by the party opposing the motion are accepted as true" and are construed in the light...
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