Smithfield Bus. Park, LLC v. SLR Int'l Corp.
| Decision Date | 29 July 2014 |
| Docket Number | No. 5:12-CV-282-F,5:12-CV-282-F |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | SMITHFIELD BUSINESS PARK, LLC, Plaintiff, v. SLR INTERNATIONAL CORP., Defendant. SLR INTERNATIONAL CORP., Third-Party Plaintiff, v. MASSOUD TABRIZI, INDUSTRIAL REALTY GROUP, LLC, AND SESTECH ENVIRONMENTAL, LP, Third-Party Defendants. |
This matter is before the court on the following motions: third-party Defendant Massoud Tabrizi's motion to dismiss [DE-70]; third-party Defendant Industrial Reality Group's motion to dismiss [DE-105]; SLR's motion for leave to file second amended third-party complaint [DE-122]; SLR's motion to strike Smithfield's summary judgment evidence [DE-99]; and Smithfield's motion for leave to supplement its response in opposition to SLR's motion for summary judgment [DE-121]. For the following reasons, Tabrizi's motion to dismiss [DE-70] is ALLOWED in part and DENIED in part and IRG's motion to dismiss [DE-105] is ALLOWED in its entirety. All the third-party claims in this case are DISMISSED except the contribution claim against Tabrizi. All the counterclaims against Smithfield are also DISMISSED except theunjust enrichment and breach of contract claims against Smithfield. The motion for leave to file second amended third-party complaint [DE-122] is DENIED. SLR's motion to strike Smithfield's summary judgment evidence [DE-99] is DENIED. Smithfield's motion for leave to supplement its response to SLR's motion for summary judgment [DE-121] is DENIED. The motion for summary judgment and the motion to strike expert testimony [DE-74, -75] are HELD IN ABEYANCE pending counsel's response as described below.
Smithfield Business Park ("Smithfield") initiated this breach of contract suit against SLR in May, 2012. After approximately a year of discovery and multiple extensions of discovery deadlines, SLR filed a motion for leave to file a third-party complaint, which the court allowed. The third-party complaint asserts a variety of fraud and indemnification claims against Massoud Tabrizi ("Tabrizi"), Sestech Environmental ("Sestech"), and Industrial Realty Group ("IRG").
All of these claims relate to an environmental remediation project at a commercial real estate development owned and operated by Smithfield. The development is located, unsurprisingly, in Smithfield, N.C. In the course of various industrial operations at the site, the groundwater became contaminated. Smithfield originally contracted with Sestech, an environmental remediation company, to complete the remediation for an agreed-upon price of $950,000. The parties expressly agreed that the $950,000 price was "fixed" and Sestech would be responsible for any additional costs associated with the project. See Addendum to Sestech Contract [DE-88-3] at 66.
The Sestech contract also included a provision in which Sestech agreed to obtain a "No Further Action Letter" from the North Carolina Department of Environment and NaturalResources (NCDENR). The NCDENR issues a No Further Action Letter when a party successfully completes a voluntary environmental remediation project. Receipt of the letter indicates that the property owner may resume unrestricted use of the property. The site is also placed in "no further action" status in the state's hazardous sites inventory. See No Further Action, NCDENR, http://portal.ncdenr.org/web/wm/sf/ihs/ra/nfa (last visited July 26, 2014).
Third-party Defendant Massoud Tabrizi ("Tabrizi") was employed at Sestech at the time it negotiated the contract with Smithfield. Tabrizi served as the "Registered Site Manager" (a position required by NCDENR) on the Smithfield project. With Tabrizi as manager, Sestech worked on the Smithfield project for more than two years and Smithfield paid Sestech approximately $665,000 out of the total $950,000 contract price. However, prior to completion of the project, TABRIZI left Sestech and joined Defendant SLR in a management capacity.
When Tabrizi left Sestech for SLR, Sestech stopped the remediation work on the property. Smithfield contacted Tabrizi about the project, and Tabrizi suggested that SLR could complete the project for the remainder of the contract price. Smithfield agreed and entered into an "Assumpsit Agreement" [DE-74-1] with SLR. Although the precise scope of the assumpsit agreement appears to be in dispute, the basic agreement was that SLR would complete the remediation project for the remainder of the contract price, approximately $285,000.
After a variety of delays, it appears Tabrizi and SLR resumed work on the Smithfield project in June, 2009. While the remediation work was ongoing at the site in the Spring of 2010, Tabrizi left SLR and joined third-party Defendant Industrial Realty Group. However, Tabrizi continued to serve as the registered site manager on the Smithfield project throughout 2010 and the remediation work continued.
At some point in 2011, SLR and Tabrizi discontinued the remediation work at the Smithfield property and a dispute arose between SLR and Smithfield regarding additional payment beyond the remaining $285,000 contract price. According to SLR, Smithfield owes it approximately $337,000 above the $285,000 contract price because SLR has completed remediation work on the property that extends beyond the scope of the assumpsit agreement. Smithfield, for its part, alleges SLR breached the contract by abandoning the project without obtaining the No Further Action letter and it brings claims for breach of contract, negligent misrepresentation, and professional negligence/malpractice against SLR. Smithfield estimates the cost of obtaining the No Further Action letter at this stage will be between $400,000 and $750,000.
With respect to the third-party claims, SLR alleges the third-party Defendants engaged in a broad civil conspiracy to defraud it into entering the assumpsit agreement with Smithfield. According to SLR, when Tabrizi discussed assuming the Sestech contract with SLR, he misrepresented the scope of the remediation work required to complete the Smithfield project. Tabrizi allegedly informed Smithfield that the work was limited to remediation services related to shallow water wells only, and that the project would take approximately six months. In fact, the project has taken approximately four years and has involved extensive deep water well remediation.
SLR also alleges that when Tabrizi joined SLR he immediately began communicating with third-parties about the prospect of starting or joining another environmental consulting venture. After working at SLR less than a year, Tabrizi joined IRG, leaving SLR without a registered site manager for the Smithfield property and thereby making it impossible for SLR tocomplete the project.1 SLR further alleges that Smithfield is a shell corporation controlled by IRG and that when Tabrizi joined IRG, he suggested to IRG that it refuse to pay SLR for work on the Smithfield project as well as other environmental projects.
Based on the foregoing, SLR alleges the following claims against Smithfield and all the third-party Defendants: fraud, constructive fraud, fraudulent inducement, civil conspiracy, and contribution. In addition, SLR brings contractual indemnity and breach of fiduciary duty claims against TABRIZI, a piercing the corporate veil claim against Smithfield/IRG, and quantum meruit/unjust enrichment and breach of contract counterclaims against Smithfield.2
The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint, not to resolve conflicts of fact or to decide the merits of the action. Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999). While the court accepts the well-pleaded factual allegations as true, the '"[f]actual allegations must be enough to raise a right to relief above the speculative level' and the plaintiff must allege 'enough facts to state a claim to relief that is plausible on its face.'" Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 615 n.26 (4th Cir. 2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw thereasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The complaint must therefore contain factual allegations supporting each element of each claim alleged. Chao v. Rivendell Woods, Inc., 415 F.3d 342, 348 (4th Cir. 2005). Furthermore, well-pleaded factual allegations do not include vague or conclusory allegations that the defendant acted with illegality. Ashcroft, 556 U.S. at 680; Twombly, 550 U.S. at 556-57. The court may consider "documents incorporated into the complaint by reference, and matters of which a court may take judicial notice" when deciding a Rule 12(b)(6) motion. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).
Rule 9(b) of the Federal Rules of Civil Procedure requires even greater specificity when a plaintiff asserts fraud claims. The Rule states, "in alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). The party "must, at a minimum, describe the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby." U.S. ex rel. Wilson v. Kellog Brown & Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008) (citation omitted); Majeed v. North Carolina, 520 F. Supp. 2d 720, 724 (E.D.N.C. 2007). Thus, the plaintiff must plead the "who, what, when, where, and how of the alleged fraud" under Rule 9(b). Wilson, 525 F.3d at 379 (citation omitted). The policy reason for the heightened pleading requirement is four-fold: (1) to put a defendant on sufficient notice of the conduct complained of so that the defendant can properly formulate a defense; (2) to protect defendant...
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