The Carter-Jones Lumber Co. v. Oro Rb Spe Owner, LLC

• Decision Date: 24 June 2021
• Docket Number: 2:20-cv-04894,2:19-cv-5087
• Parties: THE CARTER-JONES LUMBER CO., D/B/A HOLMES LUMBER CO., Plaintiff, v. ORO RB SPE OWNER, LLC, et al., Defendants. ORO CAPITAL ADVISORS, LLC, et al., Plaintiffs, v. BORROR CONSTRUCTION CO., LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

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

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

Nos. 2:20-cv-04894, 2:19-cv-5087

United States District Court, S.D. Ohio, Eastern Division

June 24, 2021

Elizabeth P. Deavers Magistrate Judge

OPINION & ORDER

ALGENON L. MARBLEY, CHIEF UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

This matter is before the Court on three motions: (1) a Combined Motion to Strike and Motion to Dismiss by Cross Defendant Canal Services Corporation d/b/a Canal Flooring (“Canal Flooring” or “Canal”) (ECF No. 8); a Motion to Dismiss a Counterclaim by Plaintiff The Carter-Jones Lumber Co. d/b/a/ Holmes Lumber Co. (“Holmes Lumber” or “Holmes”) (ECF No. 16); and (3) a Motion to Dismiss and/or Strike by Cross-Claim and Third-Party Defendants BPI Associates, LLC (“BPI”); Borror Construction Co., LLC (“Borror Construction” or “Borror”); and Danielle Borror-Sugarman, Matthew Devereaux, Tom Garske, Jeffrey Rankey, Tina Shivers, and LoriBeth Steiner (the “Individual Defendants”) (together, the “Borror Defendants”) (ECF No. 20). For the reasons set forth below, the Court DENIES Canal Flooring's Motion to Strike but GRANTS its Motion to Dismiss [#8]; GRANTS Holmes Lumber's Motion to Dismiss [#16], and GRANTS IN PART and DENIES IN PART the Borror Defendants' Motion to Dismiss and/or Strike [#20].

II. BACKGROUND

A. Facts

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” or “Oro RB”); and Oro Island Club SPE Owner (together, the “Oro Entities” or “Oro”) own and operate residential properties located in central Ohio. (ECF No. 6 ¶¶ 24-33). 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. ¶ 17-18). 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. 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 on Oro properties. (See Id. ¶¶ 34-36, 87, 134). Specifically, Canal Flooring agreed to remove and install flooring in portions of at least 75 apartment units at Runaway Bay, and Holmes Lumber agreed to provide labor and materials to renovate balconies and to complete other carpentry work at Runaway Bay. BPI prepared and submitted certain permits related to the construction work at Runaway Bay. (See Id. ¶¶ 225-26).

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. (Id. ¶ 36). 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. ¶ 47). Subsequently, on July 23, 2019, Borror's agents told the Oro Entities that Borror would complete the partially-started renovations by August 2, 2019. (Id. ¶ 48). Borror later recanted on this statement and abandoned all unfinished work. (Id. ¶ 50). In addition to the abandoned work, Oro also asserts that it discovered myriad problems relating to work that was finished, including construction defects and defective work on the balconies constructed by Holmes Lumber, flooring installed by Canal Flooring, and the permits secured by BPI. (See Id. ¶¶ 236, 239; Countercl. ¶ 28, ECF No. 5).

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. ¶ 65). Holmes Lumber was among the subcontractors who threatened to file a lien. (Id. ¶ 76). 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 (the “Escrow Agreement”), 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.” (the “Escrowed Funds”) (Id. ¶¶ 77-80, Ex. 10).

B. Procedural History

The Oro Entities filed a Complaint in the Southern District of Ohio on November 20, 2019 (the “Federal Construction Case”), asserting ten contract and tort claims against Borror Construction and some of the Individual Defendants. (2:19-cv-5087, ECF No. 1).^[2] Canal Flooring and Holmes Lumber were not party to the Federal Construction Case at this time, but Oro included John Doe Corporations and John Doe Entities as Defendants.^[3]

One week after the Oro Entities filed the Federal Construction Case, Holmes Lumber filed this case (the “Removed Action”) in the Franklin County Court of Common Pleas, on November 27, 2019. (ECF No. 1). In the state court Complaint, Holmes alleged that it is owed money for balcony work on Project Runaway Bay and asserted three claims: (1) breach of contract against Borror Construction; (2) unjust enrichment against Oro Runaway Bay; and (3) a claim seeking declaratory judgment about Holmes' entitlement to the Escrowed Funds against Oro Runaway Bay. (ECF No. 3).

Holmes' Complaint precipitated a series of additional claims by the other parties to the Federal Construction Case. On February 13, 2020, Borror Construction filed a Third-Party Complaint against Oro Capital for breach of contract. (ECF No. 1, Ex. B-18). Oro Capital moved to dismiss Borror's Third-Party Complaint, but the Court of Common Pleas denied this motion. (ECF No. 1, Ex. B-24). Oro Capital then asserted a Third-Party Counterclaim against Borror on August 3, 2020. (ECF No. 1, Ex. B-26). Oro Capital also asserted its own Third-Party Complaint against the Individual Defendants and against BPI. (Id.).

Also on August 3, 2020, Oro RB filed a Counterclaim against Holmes Lumber and sought a declaratory judgment that Holmes Lumber is not entitled to the Escrowed Funds. (ECF No. 1, Ex. B-27). Oro RB also filed a Counterclaim against Holmes, a Cross-Claim and Third-Party Complaint against Borror Construction, BPI, the Individual Defendants, and Canal Flooring. (Id.). Oro RB voluntarily dismissed its claim against Canal Flooring just ten days later, on August 13, 2020. (Id., Ex. B-28).

Initially, the Removed Action could not be removed to federal court because Holmes Lumber (a citizen of Ohio) sued both Borror Construction (a citizen of Ohio) and Oro RB (not a citizen of Ohio). Complete diversity was lacking until September 11, 2020, when Holmes Lumber voluntarily dismissed its claims against Borror Construction, rendering the case removable. Holmes Lumber then removed the case to the Southern District of Ohio on September 18, 2020. Thus, Borror Construction is no longer a defendant to Removed Action, but it remains in the case as a Third-Party Defendant, Third-Party Plaintiff, and Third-Party Counterclaim Defendant. (ECF No. 1 ¶ 5).

While the Removed Action was still pending in the Franklin County Court of Common Pleas, on September 30, 2020, Oro RB filed a First Amended Cross-Claim and Third-Party Complaint (“Amended Cross-Claim” or “Amended Third-Party Complaint”) along with the rest of the Oro Entities, which were listed as “new party Cross-Claim Plaintiffs.” (ECF No. 1, Ex. B-30; ECF No. 6). These claims also generally arise out of the Borror Construction Agreement and make allegations against Borror Construction, BPI, the Individual Defendants, and Canal Flooring. Many of the counts Oro alleges in the Amended Cross-Claim and Third-Party Complaint are identical to claims it has asserted in the Federal Action.

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.”

Additionally the Court may, upon motion or on its own, strike from a pleading “any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). Motions to strike are entrusted to the “sound discretion of the trial court, but are generally disfavored.” Yates-Mattingly v. University of Cincinnati, No. 1:11-cv-753, 2013 WL 526427, at *1 (S.D. Ohio Feb. 11, 2013). Indeed, “[s]triking pleadings is considered a drastic remedy to be used sparingly and...