U.S. v. Rcs Corp.

• Decision Date: 11 February 2005
• Docket Number: C.A. No. 2:04-22911-23.
• Citation: 366 F.Supp.2d 332
• Parties: UNITED STATES of America, for and on behalf of CBC of Charleston, Inc., Plaintiff, v. RCS CORPORATION, Carlos F. Garcia, Individually, and Western Surety Co., Defendants.
• Court: U.S. District Court — District of South Carolina

Page 332

366 F.Supp.2d 332

UNITED STATES of America, for and on behalf of CBC of Charleston, Inc., Plaintiff, v. RCS CORPORATION, Carlos F. Garcia, Individually, and Western Surety Co., Defendants.

C.A. No. 2:04-22911-23.

United States District Court, D. South Carolina, Charleston Division.

February 11, 2005.

William A. Scott, Pedersen & Scott, P.C., Charleston, SC, for Plaintiff.

ORDER

DUFFY, District Judge.

This matter is before the court upon Defendants' Motion to Dismiss pursuant to Fed.R.Civ.P. 12(b)(6) and 12(b)(7). For the reasons set forth herein, Defendants' motion is denied.

BACKGROUND

This action involves the construction of the Medical Training Facility in Charleston, South Carolina pursuant to a contract between the United States Government, Department of the Navy, and RCS Corporation ("RCS"). Around December 10, 2003, RCS, the prime contractor, subcontracted certain portions of the work to Plaintiff CBC of Charleston, Inc. ("CBC") (hereinafter "the RCS-CBC subcontract") and to a non-party to this litigation, Howell & Howell Contractors ("Howell"). Howell then subcontracted some of its work to Plaintiff CBC (hereinafter "the Howell-CBC subcontract"). Pursuant to the Miller Act, 40 U.S.C.A. §§ 3131-3133, Defendant Western Surety Co. ("Western") issued a payment bond to RCS to insure payment for services, labor, and material performed by the subcontractors.

Plaintiff CBC contends that during the performance of the prime contract, the Government and/or RCS allegedly made changes in design and in the construction schedule, failed to provide adequate supervision or information necessary for construction, and generally mismanaged the project delaying and disrupting the work required of CBC. CBC maintains that it performed the work required by the RCS-CBC subcontract despite these difficulties. On August 25, 2004, RCS terminated CBC under this subcontract. RCS directed CBC to continue performing work under the Howell-CBC subcontract. In this lawsuit, CBC claims that it has not received payment for its labor, materials, and services in connection with the Medical Training Facility contract. CBC asserts the following claims: (1) a Miller Act bond claim against Western Surety; (2) breach of the RCS-CBC subcontract; (3) a demand for payment under S.C.Code Ann. § 27-1-15; and (4) a violation of the South Carolina Unfair Trade Practices Act against Defendants RCS and Garcia.

STANDARD OF REVIEW

A. Fed.R.Civ.P. 12(b)(6)

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a motion to dismiss for failure to state a claim should not be granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In considering a motion to dismiss, the court accepts as true all well-pleaded allegations and views the complaint in the light most favorable to the plaintiff. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993). As a general rule, the court considers only the facts alleged on the face of the complaint. See Fed.R.Civ.P. 12(b)(6) (when "matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56").

B. Fed.R.Civ.P. 12(b)(7)

Under Fed.R.Civ.P. 12(b)(7), an action may be dismissed for failure to join an indispensable party under Fed.R.Civ.P. 19. Federal Rule of Civil Procedure 19(a) sets forth those parties that should be joined in an action, if feasible. Under this rule, a party is "necessary" if

(1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest.

Fed. R. Civ. Pro. 19(a).

If a necessary party cannot be joined, the court must then decide whether that party is "indispensable" under Fed.R.Civ.P. 19(b). If the party is indispensable, the court must dismiss the action. In determining whether a party is indispensable, the court weighs the following factors:

first, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.

Fed.R.Civ.P. 19(b). The Fourth Circuit Court of Appeals has held that "[c]ourts are loath to dismiss cases based on nonjoinder of a party, so dismissal will be ordered only when the resulting defect cannot be remedied and prejudice or inefficiency will certainly result." Owens-Illinois, Inc. v. Meade, 186 F.3d 435, 441 (4th Cir.1999). Moreover, "[t]he inquiry contemplated by Rule 19 ... is addressed to the sound discretion of the trial court." See Coastal Modular Corp. v. Laminators, Inc., 635 F.2d 1102, 1108 (4th Cir.1980).

ANALYSIS

Defendants raise three arguments in support of dismissal of CBC's' complaint. First, Defendants contend that the entire action should be dismissed pursuant to Fed.R.Civ.P. 12(b)(7) because CBC has failed to name Howell as a party to this action. Defendants contend that Howell "is a necessary and indispensable party to this lawsuit where its subcontractor is seeking payment directly from the Prime Contractor with which Howell & Howell has the direct contractual relationship." (Def. Mem. at 1-2). Second, Defendants argue that, in any event, CBC's Unfair Trade Practices Act claim should be dismissed because the Act does not apply to a breach of the commercial contract as alleged by CBC. Finally, Defendants argue that all claims against Defendant Carlos Garcia should be dismissed as there is no basis for finding him personally liable for the acts alleged by CBC. The court addresses each of Defendants' argument in turn.

A. Howell as a Necessary and Indispensable Party under Rule 19

As discussed above, Rule 12(b)(7) requires the court to conduct a two-part analysis: first, the court must determine whether Howell is a necessary party to this action pursuant to Rule 19(a), and second, the court must conclude whether, if Howell cannot be joined, Howell constitutes an indispensable party under Rule 19(b).

1. Whether Howell is a Necessary Party

Defendants first argue that Howell is a necessary party under Rule 19(a) because it has a substantial interest in the outcome of this litigation that is not adequately represented by the current parties. As Defendants point out, it appears that CBC is attempting to recover monies owed to it both from its work under the RCS-CBC subcontract, and the Howell-CBC subcontract. For example, CBC's third cause of action makes a demand for payment "for unpaid monies owed for [CBC's] work at the Medical Training Facility." (Compl.¶ 29, 31). Similarly, CBC's fourth cause of action complains of unfair trade practices in RCS's failure to pay CBC for work performed, but does not stipulate that CBC is only seeking recovery under the RCS-CBC subcontract.¹

Given CBC's failure to explicitly limit the relief it seeks to that owed under the RCS-CBC subcontract, it is reasonable to infer that CBC attempts to recover all monies owed in connection with the Medical Training Facility construction, including monies owed under the Howell-CBC subcontract.² Because CBC contracted directly with Howell, and would have been paid by Howell for its work performed in connection with the Howell-CBC subcontract, the court concludes that Howell is a necessary party. Thus, any determination of contractual obligations, compliance, or failure to pay necessarily involves Howell, as a party who contracted both with RCS and CBC. See, e.g., Cloverleaf Standardbred Owners Ass'n, Inc. v. National Bank of Washington, 699 F.2d 1274, 1279-80 (D.C.Cir.1983) (district court did not abuse its discretion in dismissing breach of contract action brought against bank in which third party with whom the contract was made had deposited funds, as the obligation of the third party was centrally at issue in the action and the third party was indispensable but joinder would destroy diversity jurisdiction); Japan Petroleum Co. (Nigeria) Ltd. v. Ashland Oil Inc., 456 F.Supp. 831, 836 n. 7 (D.Del.1978) (holding that if the "rights sued upon arise from a contract, all parties to the contract must be joined"); Jacobsen v. Luckenbach Steamship Co., 201 F.Supp. 883, 889 (D.Or.1961) ("[A]ll parties [to a contract] are deemed indispensable and should be joined").

Moreover, no party here can be said to adequately represent Howell,³ and litigation without Howell would clearly impede Howell's interest in resolving all liabilities surrounding the construction of the Medical Training Facility. Finally, allowing this action to go forward without Howell could ultimately result inconsistent obligations for Defendants if, for example, this court were to determine that Defendants wrongfully terminated CBC, and a later court were to conclude that CBC breached the terms of the Howell-CBC subcontract. Accordingly, the court concludes that Howell is a necessary party. See, e.g., Teamsters Local Union No. 171 v. Keal Driveaway Co., 173 F.3d 915, 918-19 (4th Cir.1999) (continuing without the necessary party is impermissible because permitting the suit to proceed without unjoined parties could subject a joined party to conflicting legal obligations); Schlumberger Indus., Inc. v. National...