Windamir Development, Inc. v. Greenheart Construction, Inc. et al

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM Against Greenheart's Counter-Claim with Brief In Support

N.D. Ga.September 19, 2016

1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION WINDAMIR DEVELOPMENT, INC., ) ) Plaintiff, ) ) v. ) CIVIL ACTION ) FILE NO. 1:16-cv-02665-ELR GREENHEART CONSTRUCTION, INC. ) & NAVAL FACILITIES ENGINEERING ) COMMAND SOUTHEAST ) ) Defendants. ) PLAINTIFF’S MOTION TO DISMISS DEFENDANT GREENHEART’S COUNTER-CLAIM AND INCORPORATED MEMORANDUM OF LAW COMES NOW Windamir Development, Inc. (“Windamir”). Plaintiff in the above-styled action, and hereby sets forth this its Motion, pursuant to Federal Rules of Civil Procedure 12(b)(6), to Dismiss Defendant Greenheart Construction, Inc.’s (“Greenheart”) Counter-Claim for failure to state a claim upon which relief may be granted, as well as Windamir’s incorporated Memorandum of Law supporting such Motion. I. MOTION AND RELIEF Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, Windamir hereby moves this Court for an Order Dismissing with Prejudice Greenheart’s Counter-Claim against Windamir for failure to state a claim upon which relief may Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 1 of 15 2 be granted. Such Motion is supported by the Memorandum of Law incorporated herein, the pleadings filed in this case, as well as the Exhibits incorporated into such pleadings. II. INTRODUCTION AND OVERVIEW Windamir brought its Complaint against Greenheart on July 22, 2016, alleging Greenheart’s failure to pay it for work Windamir performed for Greenheart on both the Subcontract between them and an additional purchase order arising out of work at the King’s Bay Submarine Base. The Subcontract is attached as Exhibit B to such Complaint (Docket Entry 1-2). On Aug 29, Greenheart filed its Answer to the Complaint and its Counter-Claim against Windamir. In the interim, Plaintiff filed motions requesting injunctive relief and both defendants responded thereto. The underlying facts of this matter are set forth in detail in such submissions, and Windamir will not rehash them in their entirety here. However, is important to note the relative positions of the parties on the various monetary claims asserted in the Pleadings. Greenheart has admitted in both its TRO response1 and its Counter- Claim2, that Windamir is due at least $313,948.51 for its work on the Kings’ Bay project.3 Greenheart arrives at this figure by first noting the full amount of the 1 [D.E. 12], p. 2. 2 Counter-Claim, Paragraph 9 [D.E. 11]. 3 As noted in other Pleadings, Windamir asserts it is due much more than $313,948.51. Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 2 of 15 3 Subcontract ($2,577,694) and the amount already paid to Windamir ($2,107,264.85), which results in a difference, or unpaid balance, of $470,429.15. If one subtracts the Counter-Claim amount alleged by Greenheart ($156,480.64) from this balance, the resulting net is the amount Greenheart admits is due Windamir - $313,948.51. Thus, the only way these numbers alleged by Greenheart can be reached is by admitting Windamir is entitled to the full amount of the Subcontract, minus a set-off for the alleged amounts in Greenheart’s Counter-Claim.4 However, as shown below, Greenheart’s Counter-Claim contains only vague and unsupported conclusions and, as such, does not meet the pleading standards imposed by the federal courts. As such, Greenheart’s Counter-Claim must be dismissed pursuant to Rule 12(b)(6). III. STANDARD OF REVIEW ON A MOTION TO DISMISS. Rule 12(b)(6) requires a proper pleading by a party, and mere conclusions will not be sufficient. Under Rule 8, a pleading must include “a short and plain statement showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). However, such a short and plain statement “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. 4 As noted in its Complaint, Windamir also alleges it is entitled to no less than $98,692.20 for additional site safety work billed on top of the Subcontract. This additional claim was not addressed in Greenheart’s Counter-Claim, and is not addressed in the above figures. Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 3 of 15 4 v. Twombly, 550 U.S. 544, 555 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To survive a motion to dismiss under Rule 12(b)(6), a claimant “must plead ‘enough facts to state a claim to relief that is plausible on its face.’” Ray v. Spirit Airlines, Inc., 767 F.3d 1220, 1223 (11th Cir. 2014) (quoting Twombly, 550 U.S. at 570). A claim is plausible on its face if “the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. A claim must demonstrate “more than the ‘mere possibility of misconduct,’”5, and must allege “enough fact[s] to raise a reasonable expectation that discovery will reveal evidence [supporting the claim],” Twombly, 550 U.S. at 556. “[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678 (Rule 8 “does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions”). The Court need not “accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555. As noted below, Greenheart’s claims are mere threadbare recitals and conclusions, and do not meet the standard set forth herein. 5 Williams v. Fed. Nat’l Mortgage Ass’n, No. 1:13-CV-1899-WSD, at *2 (N.D. Ga. Sept. 25, 2013) (quoting Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir. 2010)). Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 4 of 15 5 IV. ARGUMENT AND CITATION OF AUTHORITY In support of Count I of its Counter-Claim, Defendant fails to set forth sufficient allegations of both a breach of the Subcontract and of damages proximately caused by such breaches. If Defendant has failed to set forth sufficient allegations of either one of these underlying elements of its breach of contract claim6, then Defendant has failed to set forth a claim for breach of contract upon which relief may be granted. Further, Defendant’s Count II for attorney’s fees likewise fails to state a claim upon which relief may be granted. As such, this Court should dismiss both counts. A) Insufficient Allegations of Breach Defendants’ allegations of breaches of contract by Windamir do not rise to the level required by federal pleading standards. They are, as shown below, naked assertions which show, at most, the “mere possibility of misconduct.” Iqbal, 556 U.S. at 678. Moreover, as shown below, the terms of the Subcontract, properly before this Court on this Motion to Dismiss as an exhibit to Windamir’s Complaint, make such allegations unlikely. Or, as noted in Iqual, Greenheart’s allegations do not set forth enough evidence to make a claim of breach of the Subcontract ‘plausible 6 Under Georgia law, the elements of a breach of contract claim include both (1) the breach, and (2) damages proximately caused by such breach. See, e.g., Kuritzky v. Emory Univ., 294 Ga.App. 370, 371, 669 S.E.2d 179 (2008); Budget Rent-A-Car & c. v. Webb, 220 Ga.App. 278, 279, 469 S.E.2d 712 (1996). Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 5 of 15 6 on its face,’ nor do they provide sufficient “factual content” to allow this Court “to draw the reasonable inference” that Windamir breached its subcontract with Greenheart. Iqbal at 678. Each individual allegation of breach is set forth in Paragraph 7 of the Counter- Claim, and each is addressed below. Each of those allegations is a bare assertion of a breach, with no additional facts, citations, or allegations supporting the same. None of the alleged “Breaches” in Paragraph 7 show more than a “mere possibility of misconduct.” This is especially true in this case where it is undisputed the Navy has accepted the project and not cited any breach of duties by Greenheart or Windamir.7 Given the Navy’s lack of objection, such bare assertions by Greenheart to do not rise to the required level of plausibility. Further, many of these alleged “breaches” are contradicted by the terms of the Subcontract itself. For instance, Greenheart alleges the failure to provide a turn-key project. However, the Subcontract is clear that Windamir did not have a duty to produce a turn-key project. Instead, while the Subcontract does use the phrase “turn- key” a reading of the Subcontract shows Windamir duties were instead limited and excluded certain subcontract work. Windamir’s scope of work in listed Article 1, and that scope is to complete all work in Article 21 of the Subcontract. However, Article 21 does not require a true turnkey project. Instead, numerous items were 7 See, e.g. Answer, Paragraph 9 [D.E. 11] Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 6 of 15 7 removed from Windamir’s scope and were performed by others, such as Hodges Plumbing.8 Greenheart makes the bare assertion Windamir failed to procure equipment in a timely fashion and/or failed to complete the project on time. However, as noted above, it was not Windamir’s duty to complete the entire project, regardless of time. Moreover, the Navy has made no allegation in any documents, or withheld any credit to Windamir, based on untimely completion of any portion of the work. Greenheart also nakedly asserts the failure to provide various “submittals” as a breach of the Subcontract. However, most of the items alleged are not submittals and not Windamir’s responsibility. Moreover, for those that might be Windamir’s responsibility, these naked assertions do not rise the level of a plausible claim. For instance, nothing in the Subcontract requires Windamir to provide daily reports, NavFac form 7300/30, NavFac form 4300/54A, Safety Reports, Project Schedule, As-Built drawings, QC Certifications, Waste Management Plan, or accident/exposure/incident forms. Instead, these items are Greenheart’s responsibility as the General Contador to provide the Navy. See Subcontract. Further, some of these same items are part of Greenheart’s invoice and billing responsibilities to the Navy, would not in any case fall to Windamir, its 8 See, e.g., Article 21 of the Subcontract [D.E. 1.2] as well as Affidavit of Kenny Hodges [D.E. 10-1]. Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 7 of 15 8 subcontractor. For instance, Form 7300/30 is the actual pay application form. Form 4300/54A (which is not a Warranty form but a schedule of prices), the QC Certifications, the Waste Management Plan, and the accident/exposure/incident forms are all part of the Contractor’s invoice package. Nothing in the Subcontract, industry custom, or the law in general would make such items Windamir’s responsibility. See Subcontract. All of these allegations of “breach” are implausible naked assertions and do not properly allege breach of the Subcontract. As such, this Court should dismiss Count I of Greenheart’s Counter-Claim for failure to state a claim. B) Insufficient Allegations of Proximate Cause Even assuming for the sake of argument Greenheart has set forth a single plausible allegation of breach of the Contract, Greenheart has certainly failed to set forth a proper or sufficient factual allegation of proximately caused damages. The only statement or allegation of any kind in the entire Counter-Claim relating to proximate cause or damages is in Paragraph 8, which states “The Damages associated with the forgoing breaches = $156,480.” Such a statement is the textbook definition of an unsupported legal conclusion. It in no way notes how Greenheart suffered damages, what those damages might actually be, be from, or how they are calculated, and certainly does not provide any information as to how the alleged breaches by Windamir as set out in Paragraph 7 caused Greenheart to suffer (or be Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 8 of 15 9 associated with, in the words of Paragraph 8) such damages. Greenheart has not attempted to show how any of the alleged breaches, even if true, could have caused damages to Greenheart. This shallow allegation is even more problematic when one considers the undisputed facts. The Navy has accepted the project, is prepared to pay full contract balance (subject to 48 C.F.R. 28.106-7(b), as noted in other motions) and is not reducing the contract amount in any manner because of any alleged breach. With this in mind, how could the alleged breaches noted in Paragraph 7 (the vast majority of which merely involve the provision of paper) in any way cause damage to Greenheart, much less damages in excess of $150,000? If any of the allegations in Paragraph 7 were true, the Navy would have back charged or otherwise sought compensation from Greenheart - which it has not done. Here, Greenheart’s mere conclusion Windamir has caused it to incur damages is nothing more than the “mere possibility” precluded as insufficient in Williams9. Such a conclusion is a classic “threadbare recital of the elements of a cause of action, supported by mere conclusory statements” as noted in Iqbal. 556 US. at 678. It is a “formulaic recitation of the elements of a cause of action” as precluded in Twombly. 550 U.S. at 555. As such, the allegation in Paragraph 8 does not suffice to set forth 9 Williams v. Fed. Nat’l Mortgage Ass’n, No. 1:13-CV-1899-WSD, at *2 (N.D. Ga. Sept. 25, 2013) (quoting Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir. 2010)) Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 9 of 15 10 a valid proximate cause claim upon which relief may be granted,10 and this Court should dismiss Count I of Greenheart’s Counter-Claim for this additional and/or alternative reason. C) Insufficient Allegations Supporting Attorney’s Fees Claim As an initial matter, to have a claim for attorney’s fees a party must have a valid underlying claim. As shown above, Greenheart has not brought forth a valid breach of contract claim, and as such has no valid claim for attorney’s fees upon which relief may be granted. Second, the actual allegation in Count II - “Windamir is liable for attorney’s fees under applicable Georgia statutes and/or the Subcontract in an amount to be proven at trial” - is a threadbare assertion which does not provide the sufficiency to meet federal pleadings standards. It is a bare legal conclusion couched as a factual allegation, with no factual support or information of any kind. It must be dismissed for failure to state a claim pursuant to Iqbal, Twombly, Williams, and similar controlling cases. Third, Defendant is not entitled to any fees under either of the Georgia attorney’s fees statutes. O.C.G.A. § 13-6-11 does not authorize the recovery of 10 Moreover, the allegation in Paragraph 8 does not, on its face, actually allege that Windamir caused any damage to Greenheart. Instead, it only claims Greenheart has damages “associated with” such alleged breaches. This is not a sufficient allegation to meet the standard set forth in Iqbal and Twombly. Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 10 of 15 11 attorney’s fees by a defendant; O.C.G.A. § 9-15-14 is not an independent cause of action; and even if O.C.G.A. § 9-15-14 were an independent cause of action, it is unavailable in federal court. 1. O.C.G.A. § 13-6-11. Greenheart cannot claim entitlement to attorney’s fees pursuant to O.C.G.A. § 13-6-11 (for “bad faith” and/or “stubbornly litigious” conduct). O.C.G.A. § 13-6-11 authorizes attorney’s fees only to a plaintiff who brings a lawsuit: The expenses of litigation generally shall not be allowed as a part of the damages; but where the plaintiff has specially pleaded and has made prayer therefor and where the defendant has acted in bad faith, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense, the jury may allow them. O.C.G.A. § 13-6-11. “In general, a defendant’s expenses for defending against a claim are not recoverable under O.C.G.A. § 13-6-11.” Singh v. Sterling United, Inc., 326 Ga. App. 504, 512-13 (2014). While a defendant may recover attorney’s fees pursuant to O.C.G.A. § 13-6- 11 when it successfully prosecutes an independent counterclaim,11 a defendant cannot recover attorney’s fees and expenses on its counterclaims under O.C.G.A. § 13-6-11 where those counterclaims are compulsory pursuant to O.C.G.A. § 9-11- 13(a)-i.e., where those counterclaims “arise out of the transaction or occurrence that is the subject matter of the opposing party’s claim.” In applying Georgia law, 11 See Gardner v. Kinney, 230 Ga. App. 771 (1998). Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 11 of 15 12 the Northern District of Georgia has previously held that “[A] defendant and plaintiff-in-counterclaim cannot recover [under O.C.G.A. § 13-6-11] where there is a compulsory counterclaim.” Tri-State Consumer Ins. Co., Inc. v. LexisNexis Risk Solutions, Inc., 858 F.Supp.2d 1359, 1373 (N.D. Ga. 2012). See also Alcovy Properties v. MTW Investment Co., 212 Ga. App. 102, 104 (1994); White v. Lance H. Herndon, Inc., 2013 Ga. App. 580, 581 (1992); Byers v. McGuire Properties, Inc., 285 Ga. 530, 540 (2009); and Sanders v. Brown, 257 Ga. App. 566, 569 (2002). Windamir brought this action to recover for unpaid contractual obligations owed by Defendant Greenheart under the Subcontract. Defendant brought its counterclaims seeking its own cause of action for breach of the same Subcontract. Defendant’s counterclaims are therefore compulsory counterclaims under O.C.G.A. § 9-11-13(a), as they arise from the same Agreement under which Greenheart now sues. Accordingly, Defendant may not recover any attorney’s fees under O.C.G.A. § 13-6-11 as a matter of Georgia law. 2. O.C.G.A. § 9-15- 14. Defendant also cannot invoke O.C.G.A. § 9-15-14 as a basis for attorney’s fees in Count II of its counterclaims. “Under OCGA § 9-15- 14, a litigant is not authorized to seek an award until after the case is concluded, and such an award may not be sought by counterclaim filed prior to the final disposition of the action.” Swafford v. Bradford, 225 Ga. App. 486, 488 (1997). Accordingly, Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 12 of 15 13 O.C.G.A. § 9-15-14 is not an independent cause of action by which Defendant may maintain a claim for attorney’s fees. Further, the plain language of O.C.G.A. § 9-15-14 forbids any party from recovering fees pursuant to that statute in federal court. Specifically, O.C.G.A. § 9- 15- 14(a) states: In any civil action in any court of record of this state, reasonable and necessary attorney’s fees and expenses of litigation shall be awarded to any party against whom another party has asserted a claim, defense, or other position with respect to which there existed such a complete absence of any justiciable issue of law or fact that it could not be reasonably believed that a court would accept the asserted claims, defense, or other position. O.C.G.A. § 9-15-14(a). This “in any court of record of this state” language “makes it clear that the statute was not intended to provide for claims in federal court.” Edwards v. Associated Bureaus, Inc., 128 F.R.D. 682, 683 (N.D. Ga. 1989) (quoting Thomas v. Brown, 708 F. Supp. 336, 339 (N.D. Ga. 1989). For all these reasons, Defendants’ Count II of its counter-claim fails to set forth a claim upon which relief may be granted and should be dismissed. III. CONCLUSION As shown above, both Counts I and II of Greenheart’s Counter-Claim fail to set forth a sufficient claim upon which Greenheart may recover. As such, Plaintiff Greenheart moves this Court to dismiss such claims with prejudice pursuant to Rule 12(b)(6). In the alternative to a full dismissal, Plaintiff moves this Court to strike Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 13 of 15 14 such portions of Counts I and II which this Court finds fail to state a claim pursuant to federal pleading requirements. Respectfully submitted this 19th day of September, 2016. PATEL BURKHALTER LAW GROUP /s/ David C. King David C. King Georgia Bar Number 422220 4045 Orchard Road Building 400 Atlanta, Georgia 30080 dking@patelburkhalter.com (678) 825-8132 Attorney for Plaintiff LOCAL RULE 7.1(D) CERTIFICATION By signature below, counsel certifies that the foregoing was prepared in Times New Roman, 14-point font in compliance with Local Rule 5.1C. Respectfully submitted this 19th day of September, 2016. /s/ David C. King David C. King Attorney for Plaintiff Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 14 of 15 15 CERTIFICATE OF SERVICE This is to certify that I have this day electronically filed the foregoing PLAINTIFF’S MOTION TO DISMISS DEFENDANT GREENHEART’S COUNTER-CLAIM AND INCORPORATED MEMORANDUM OF LAW with the Clerk of Court using the CM-ECF System which will automatically send e-mail notification of such filing to the following attorney(s) of record: David Powell The United States Attorney's Office Richard B. Russell Federal Building 75 Ted Turner Dr. SW, Suite 600 Atlanta, GA 30303-3309 R.David.Powell@usdoj.gov Counsel for Defendant The Navy John Menechino Wienberg Wheeler, Hudgins, Gunn & Dial 3344 Peachtree Road, NE, Suite 2400 Atlanta, GA 30326 jmenechino@wwhgd.com Counsel for Defendant Greenheart Construction, Inc,. Respectfully submitted this 19th day of September, 2016. PATEL BURKHALTER LAW GROUP /s/ David C. King David C. King Georgia Bar Number 422220 4045 Orchard Road Building 400 Atlanta, Georgia 30080 dking@patelburkhalter.com (678) 825-8132 Attorney for Plaintiff Case 1:16-cv-02665-ELR Document 14 Filed 09/19/16 Page 15 of 15