Opinion
Civil Action No. 1:05-cv-1714-GET.
December 14, 2005
ORDER
The above-styled matter is presently before the court on:
(1) RLI Insurance Corporation's motion for summary judgment [docket no. 5];
(2) Cayenta Canada Corporation's motion to dismiss [docket no. 15];
(3) plaintiff's motion to remand [docket no. 18];
(4) L-3 Communications Titan Corporation's motion to intervene [docket no. 27].
Plaintiff filed the instant action in the Superior Court of Newton County on February 1, 2005, asserting a breach of contract claim against defendant RLI Insurance Corporation ("RLI"), claiming that RLI failed to satisfy its obligation to pay plaintiff under a performance bond, due when Cayenta Canada Corporation ("Cayenta") failed to perform under a separate contract. RLI filed a third party complaint against Cayenta, which was served on March 11, 2005. Plaintiff amended its complaint on June 6, 2005, to raise claims of breach of contract against Cayenta and claims of fraud, negligent misrepresentation, and conspiracy to defraud against Cayenta and individuals employed by Cayenta, ("individual defendants") alleging that Cayenta failed to provide it with a contracted-for software program despite assurances from the individual defendants that the program would be ready.
RLI filed a motion for summary judgment on May 10, 2005, while the action remained in the state court. On June 29, 2005, Cayenta removed the action to federal court pursuant to 28 U.S.C. § 1441, alleging diversity jurisdiction under 28 U.S.C. § 1332. On July 7, 2005, Cayenta filed a motion to dismiss three counts of plaintiff's complaint. On July 22, 2005, plaintiff filed a motion to remand the action to state court. On September 2, 2005, L-3 Communications Titan Corporation ("L-3 Titan") filed a motion to intervene.
Motion to Remand
The court will initially discuss plaintiff's motion to remand because it deals with the court's subject matter jurisdiction, without which the court cannot hear the case. Plaintiff concedes that diversity jurisdiction is present, but argues that the removal petition was untimely filed. Specifically, plaintiff argues that the removal petition was not filed within thirty days of service on the first defendant, RLI, or within thirty days of service of the third-party complaint on Cayenta.
Pursuant to 28 U.S.C. § 1446(b), "[t]he notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading." RLI was served on February 3, 2005, and made no attempt to remove the case. It filed an answer, third party complaint, and motion for summary judgment in the state court proceedings. Cayenta was served on March 11, 2005, with a copy of RLI's third party complaint, and on June 6, 2005 with a copy of plaintiff's amended complaint. The individual defendants were served on June 6, 2005 as well. Cayenta and the individual defendants filed a notice of removal on June 27, 2005. RLI consented to the removal.
"Whether the thirty-day time period on removal begins to run with the first service or with the service of the removing. defendant has not been addressed by the Eleventh Circuit."Bussey v. Modern Welding Co., 245 F. Supp. 2d 1259, 1273 (S.D. Ga. 2003). There is a split among the circuits and the district courts within this circuit concerning which rule is correct. The Sixth and Eighth Circuits permit "later-served defendants thirty days from their date of service to file a notice of removal with unanimous consent of the other defendants, even if the first-served defendant did not file a notice of removal within thirty days of its service." Id. Recent district court cases within this circuit have reasoned that when an amended complaint names additional defendants, the court should follow the later-served defendant rule to avoid foreclosing that defendant's right to remove. Id., Collings v. E-Z Serve Convenience Stores, Inc., 936 F. Supp. 892, 895 (N.D. Fla. 1996). The court finds persuasive the reasoning behind the later-served defendant rule, when additional defendants are named over thirty days after service of the first defendant.
In the instant matter, the individual defendants were served more than thirty days after the first-served defendant, RLI. Consequently, they had thirty days from the date they were served in which to file a notice of removal with consent of the other parties. The individual defendants filed within thirty days of service. Accordingly, the notice of removal was filed timely.
The court must then determine whether RLI and Cayenta waived their right to consent when they failed to file a notice of removal within thirty days of their service, or whether the timely filing by the individual defendants was sufficient to remove the act i on. "[I]n cases involving multiple defendants, all defendants must consent to removal." Russell Corp. V. Am. Home Assur. Co., 264. F.3d 1040, 1044 (11th Cir. 2001). The courts are again split as to whether RLI and Cayenta may consent, or whether they have waived the right and the action must remain in state court. In a case where defendants were added after the thirty days expired for the first-served defendant, holding that the first-served defendants waived their right to consent would have the same effect as adopting a first-served defendant rule: it would bar later-served defendants, who timely remove, from proceeding in federal court. Therefore, this court joins the other district courts who found that the timely filing by defendants who were named and served more than thirty days after the initial complaint was filed, along with the consent of the earlier-served defendants, removes the action. See Collings, 936 F. Supp. 892, Fitzgerald v. Bestway Servs., Inc., 284 F. Supp. 2d 1311 (N.D. Ala. 2003). Accordingly, plaintiff's motion to remand [docket no. 18] is hereby DENIED. Motion for Summary Judgment
Plaintiff sued RLI because it claims to be owed money under a performance bond issued by RLI. Cayenta obtained the bond from RLI, and listed plaintiff as beneficiary. The bond obligated RLI to pay plaintiff if Cayenta failed to produce a software program for plaintiff by April 17, 2003. RLI argues that the performance bond expired before plaintiff declared default and made demand on it.
Standard
Courts should grant summary judgment when "there is no genuine Tissue as to any material fact and the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party must "always bear the initial responsibility of informing the district court of the basis of its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548 (1986). That burden is "discharged by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Id. at 325; see also U.S. v. Four Parcels of Real Prop., 941 F.2d 1428, 1437 (11th Cir. 1991).
Once the movant has met this burden, the opposing party must then present evidence establishing that there is a genuine issue of material fact. Celotex, 477 U.S, at 325. The nonmoving party must go beyond the pleadings and submit evidence such as affidavits, depositions and admissions that are sufficient to demonstrate that if allowed to proceed to trial, a jury might return a verdict in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257, 106 S. Ct. 2505 (1986). If he does so, there is a genuine issue of fact that requires a trial. In making a determination of whether there is a material issue of fact, the evidence of the non-movant is to be believed and all justifiable inferences are to be drawn in his favor. Id. at 255; Rollins v. TechSouth, Inc., 833 F.2d 1525, 1529 (11th Cir. 1987). However, an issue is not genuine if it is unsupported by evidence or if it is created by evidence that is "merely colorable" or is "not significantly probative." Anderson, 477 U.S. at 249-50. Similarly, a fact is not material unless it is identified by the controlling substantive law as an essential element of the nonmoving party's case. Id. at 248. Thus, to create a genuine issue of material fact for trial, the party opposing the summary judgment must come forward with specific evidence of every element essential to his case with respect to which (1) he has the burden of proof, and (2) the summary judgment movant has made a plausible showing of the absence of evidence of the necessary element. Celotex, 477 U.S. at 323.
Facts
In light of the foregoing standard, the court finds the following facts for the purpose of this motion for summary judgment only. On or about December 26, 2001, plaintiff entered into three agreements with Cayenta for the installation and implementation of Cayenta's utility management software: a License Agreement, a Services Agreement, and a License Supplement (collectively, "the software contracts").On or about February 11, 2002, Addendum No. 1 to the License Agreement was executed. Addendum No. 1 provides that "the Bond shall remain in force until the following events have occurred . . .However, under no circumstances shall the Bond remain in force (later than May 30, 2003." On or about February 21, 2002, RLI as surety and Cayenta as principal executed a performance bond naming plaintiff as obligee. Pursuant to the specific terms of the Performance Bond, the software contracts were incorporated by reference into the bond.
In a letter dated June 15, 2004, plaintiff notified Cayenta and RLI that it contended that Cayenta was in default of its obligations under the software contracts. The letter noted that although all work by Cayenta was supposed to have been completed by April 17, 2003, plaintiff had permitted Cayenta more than twelve additional months to comply. This letter was the first notice of any alleged default of Cayenta under software contracts. It was written fourteen months after the contract date by which Cayenta was to have performed, and thirteen months beyond the date upon which RLI's performance bond was no longer "in force."
The June 15, 2004 notification triggered a sixty day cure period. After the sixty days expired, plaintiff notified Cayenta and RLI of a default and termination of the software contracts in a letter dated September 27, 2004. The September 27 letter stated that plaintiff had been entitled to the delivery of a working and functional program by April 2003, and that eighteen months after that date, Cayenta still had not produced it.
By letter dated November 19, 2004, RLI notified plaintiff that RLI had no obligation to plaintiff after May 30, 2003, pursuant to the language of Addendum No. 1. The letter further noted that the previous correspondence from plaintiff made it clear that plaintiff was aware that Cayenta was in default in April 2003, yet made no demand upon RLI's performance bond prior to May 30, 2003.
Discussion
RLI contends that the performance bond expired pursuant to Addendum No. 1, freeing RLI of any obligation under the bond as of May 30, 2003, several months before plaintiff declared default and made demand on the bond. Addendum No. 1 to the Licensing Agreement provides that "under no circumstances shall the Bond remain in force later than May 30, 2003." Plaintiff first made demand on the bond on June 15, 2004.
Plaintiff contends that the time limitation in Addendum No. 1 I established the time period in which default had to occur, not the time period in which plaintiff had to file a claim for losses. However, the case cited by plaintiff to support its position involved a beneficiary who did not know whether the guaranty was needed before the guaranty would have expired, whereas here plaintiff knew before May 30, 2003 that Cayenta had not performed. Enter. Fin. Corp. v. Ross Wise Enter., Inc., 212 Ga. App. 318 (1994). Further, plaintiff un i laterally decided to grant extensions in Cayenta's performance deadline past April 17, 2003, the date in the original contracts. Plaintiff may not interpret the bond so that it could indefinitely extend the length of time RLI was liable for payment, by extending the time Cayenta's performance was due, because a "surety's liability will not be extended by implication or interpretation." O.C.G.A. § 10-7-3. Accordingly, the court finds that the bond expired before plaintiff made its demand.
Plaintiff alternatively argues that RLI may not enforce Addendum No. 1 because it is part of the Licensing Agreement, to which RLI was not a party. Plaintiff contends that Addendum No. 1 permitted Cayenta to obtain a bond that expired on May 30, 2003, but that Cayenta did not exercise that option because the performance bond itself had no expiration date on it. In response to RLI's argument that Addendum No. I was incorporated into the performance bond, plaintiff argues that it was incorporated only for the limited purpose of defining "performance" of the contract.
"[I]ncorporation by reference is generally effective to accomplish its intended purpose where the provision to which reference is made has a reasonably clear and ascertainable meaning." Dan J. Sheehan Co. V. Ceramic Technics, Ltd., 269 Ga. App. 773, 778 (2004). Paragraph 1.1 of the performance bond provides: "the contractor and the surety bind themselves. to the owner for the performance of the Construction Contract, which is incorporated herein." The Construction Contract includes the Licensing Agreement. Nothing in the incorporation provision limits the incorporation to measuring "performance." Accordingly, the Licensing Agreement and Addendum No. 1 were incorporated into the bond to which RLI was party. Therefore, RLI may raise a defensee under the language in Addendum No. 1.
Accordingly, and for all the aforementioned reasons, the court finds that the performance bond, on which plaintiff's sole claim against RLI is based, expired before plaintiff asserted its claims. RLI's motion for summary judgment [docket no. 5] is hereby GRANTED. Motion to Dismiss
Cayenta seeks dismissal of plaintiff's claims for fraud, negligent misrepresentation, and conspiracy to defraud, on behalf of itself and the individual defendants.
Standard
A motion to dismiss under Rule 12(b)(6). attacks the legal sufficiency of the complaint. It is viewed with disfavor and rarely granted. See e.g., Int'l Erectors, Inc. v. Wilho it Steel, Erectors Rental Serv., 400 F.2d 465, 471 (5th Cir. 1968). A complaint should not be dismissed for failure to state a claim unless the plaintiff can prove no set of facts entitling him to relief. Hishon v. King Spalding, 467 U.S. 69, 73, 104 S. Ct. 2229 (1984); Pataula Elec. Membership Corp. v. Whitworth, 951 F.2d 1238, 1240 (11th Cir. 1992). The court is to presume true all of the complaint's allegations and make all reasonable inferences in favor of the plaintiff. Duke v. Cleland, 5 F.3d 1399, 1402 (11th Cir. 1993). The rules require nothing more than "a short and plain statement" that will give the defendant fair notice of the claims and the grounds upon which they are based. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99 (1957).
Discussion
Cayenta seeks dismissal of plaintiff's claims for fraud, negligent misrepresentation, and conspiracy to defraud. Cayenta argues that plaintiff fails to plead sufficient facts to satisfy the pleading requirements and, alternatively, cannot establish the elements, of each of these claims.
First, Cayenta argues that the fraud count in the amended complaint fails to satisfy the strict pleading requirements of Rule 9 (b) Fed.R.Civ.P. 9 (b). Rule 9(b) provides that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake must be plead with particularity." In order to allege fraud with particularity, the claimant must identify the person who made the representation, and the time, place and content of the misrepresentation. Cooper v. Blue Cross and Blue. Shield of Florida, 19 F.3d 562, 568 (11th Cir. 1994). The court finds that plaintiff has alleged sufficient facts to support its fraud claim: defendant Sims repeatedly assured plaintiff that the software system was ready to "go live" prior to April 17, 2003; on December 11, 2003, Cayenta representatives committed to finishing the project by May 1, 2004; on May 27, 2004 at plaintiff's headquarters defendants Gardner and Asbury assured plaintiff that the project would be completed on May 1, 2004; and on June 9, 2004 defendants Ross and Featherling presented a cure plan to plaintiff and promised the project would be completed within the cure period. The complaint further alleged that Cayenta representatives knew or should have known at the time the promises were made that they would be unable to complete the software.
Cayenta argues that insufficient facts were alleged to support the conspiracy to defraud and negligent misrepresentations claims as well. Though Cayenta cites caselaw to support its contention that these claims must also be plead with some particularity, the Supreme Court has held that particularity beyond basic notice pleading is not necessary for claims other than those covered by Rule 9(b). Swierkiewicz v. Sorema N.A., 534 U.S. 506, 513, 122 S. Ct. 992 (2002). Accordingly, the complaint sufficiently states claims for fraud, conspiracy and negligent misrepresentation.
Secondly, Cayenta argues that the fraud and negligent misrepresentation claims should be dismissed because misrepresentations must relate to a pre-existing or present fact and not future conduct, and plaintiff's claim is based on promises to complete the project in the future. The complaint includes allegations of fraud and negligent misrepresentation regarding Cayenta's current capability to complete the project. Further, the general rule cited by Cayenta provides for an exception: "a promise may be considered fraudulent if, at the time it was made, the promisor had no intention of following through with the promise. Wilson v. S L Acquisition Co., LP, 940 F. 2d 1429, 1439 (11th Cir. 1991). Plaintiff alleges that at the time Cayenta representatives were making statements that they would complete the software project, they knew that they could not. Accordingly, plaintiff's claims for fraud and negligent misrepresentation fit within the exception and may be maintained.
Cayenta argues that the court should deem plaintiff's fraud claim abandoned because plaintiff argues that the exception applied to its negligent misrepresentation claim without specifying that it also applied to plaintiff's fraud claim. However, plaintiff clearly has not abandoned its fraud claim since it argues earlier in the motion that the fraud claim should not be dismissed for failure to plead with specificity. Accordingly, the court does not find that plaintiff abandoned its fraud claim.
Finally, Cayenta argues that the court should dismiss plaintiff's conspiracy claim because plaintiff cannot show that two or more persons conspired, which is a required element of the claim. See Ass'n. Serv., Inc. v. Smith, 249 Ga. App. 629, 634-635 (2001). Cayenta asserts that the intracorporate conspiracy doctrine bars a finding of conspiracy when the alleged conspirators are employees, acting as agents of a corporation, and the corporation. Kirwin v. Price Commc'n Corp., 391 F.3d 1323, 1326 (11th Cir. 2004). Plaintiff argues that the individual defendants were not necessarily employees acting as agents, but could have been independent contractors, and that employment status will be determined during discovery. Cayenta responds that the court should not consider plaintiff's argument because a motion to dismiss must be based on the face of the complaint alone. A review of the face of the complaint shows that plaintiff did not specify the employment status of each defendant. Consequently, as the face of the complaint does not state that the defendants were employees acting as agents at the time of the alleged conspiracy, the claim cannot yet be dismissed under the intracorporate conspiracy doctrine.
Accordingly, and for all the aforementioned reasons, Cayenta's motion to dismiss [docket no. 15] is hereby DENIED.
Motion to Intervene
Third party L3-Titan seeks to intervene in the action as a matter of right, or alternatively with the court's permission. L3-Titan may be responsible for any recovery against Cayenta because it promised to indemnify the purchaser of Cayenta, which was wholly owned by L3-Titan when the software contracts were signed, for any claims by plaintiff concerning the software contracts. Further, L3-Titan seeks to have plaintiff's counsel disqualified due to its prior and continuing representation of L3-Titan in other matters.
"Upon timely application anyone shall be permitted to intervene in an action when the application claims an interest relating to the property or transaction which is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest," unless the interest is adequately represented by other parties. Fed.R.Civ.P. 24(a). Plaintiff does not argue that L3-Titan did not timely file its application. Accordingly, the court must evaluate whither: (1) L3-Titan has an interest relating to the subject matter of the complaint; (2) disposition of the action may impede or impair L3-Titan's ability to protect that interest; and (3) L3-Titan's interest is not protected adequately by the other parties to the suit. Purcell v. BankAtlantic Fin. Corp., 85 F.3d 1508, 1512 (11th Cir. 1996). RLI filed a response indicating that it does not object to L3-Titan's intervention. Plaintiff, however, opposes L3-Titan's motion to intervene on the grounds that L3-Titan does not have an interest in the action, L3-Titan's interests are adequately represented by Cayenta, and L3-Titan's interests will not be impeded by allowing the suit to go forward without its presence.
Having read and considered L3-Titan's motion and plaintiff's objections, the court finds that L3-Titan has satisfied the Rule 124(a) factors for intervention. L3-Titan has an interest in preventing a judgment it must pay should the court find in plaintiff's favor, obtained through efforts of L3-Titan's own counsel. Cayenta could arguably raise the conflict of interest issue against plaintiff's counsel for prior representation, from representation when Cayenta was wholly owned by L3-Titan, but cannot raise the issue of simultaneous representation of parties with conflicting interests. Therefore, the court cannot find that Cayenta will adequately represent L3-Titan's interests. Finally, because plaintiff's counsel could continue the representation under a direct conflict if L3-Titan does not bring the conflict issue to the court's attention, L3-Titan's interests could be impeded if this lawsuit is allowed to proceed without its participation.
Even if L3-Titan could not intervene as a matter of right, the court would exercise its discretion and permit intervention. Rule 24 (b) provides that the court may permit anyone who timely applies to intervene "when an applicant's claim or defense and the main action have a question of law or fact in common" and intervention will not "unduly delay or prejudice the adjudication of the rights of the individual parties." Fed.R.Civ.P. 24(b) L3-Titan's claim that there is a conflict of interest is shared with Cayenta. Further, L3-Titan's requirement to indemnify depends upon a finding that Cayenta is liable, so the two share any defense to liability. The adjudication of the action will not be unduly delayed, because all pretrial obligations and discovery were stayed pending decision of these motions in this court's order of July 27, 2045."
For all the foregoing reasons, therefore, L3-Titan's motion to intervene [docket no. 27] is hereby G RANTED.
Summary
(1) RLI Insurance Corporation's motion for summary judgment [docket no. 5] is GRANTED;(2) Cayenta Canada Corporation's motion to dismiss [docket no. 15] is DENIED;
(3) plaintiff's motion to remand [docket no. 18] is DENIED;
(4) L-3 Communications Titan Corporation's motion to intervene [docket no. 27] is GRANTED.
SO ORDERED.