Kane Enterprises
v.
MacGregor (Usa), Inc.

United States District Court, E.D. LouisianaApr 3, 2002
CIVIL ACTION VERSUS 01-2935. (E.D. La. Apr. 3, 2002)

CIVIL ACTION VERSUS 01-2935.

April 3, 2002


Before the Court is a Motion to Dismiss, or in the alternative, Motion for Summary Judgment (Document No. 3), filed on behalf of the defendant, MacGREGOR (USA) Inc. ("MacGREGOR"). The Court took this matter under submission on a previous date. The Court, having considered the arguments of counsel, the evidence submitted, the record, the law, applicable jurisprudence, and noting that no opposition has been filed, is fully advised in the premises and ready to rule.

ORDER AND REASONS

I. BACKGROUND

In 1993, the United States Naval Sea System Command entered into a contract with MacGREGOR (the "Prime Contract"). Pursuant to the contract, MacGREGOR assembled certain parts of U.S. Navyships, and is currently assembling parts of U.S. Navy ships which are being built at Avondale Shipyard. These certain pails include Roll-On Roll-Off Ramps ("Ro-Ro Ramps"). The Government did not require MacGREGOR to obtain a performance or payment bond under the Prime Contract.

If a payment or performance bond is required in a construction contract, the contracting officer must "insert a clause substantially the same as the clause at 52.228-15, Performance and Payment Bonds-Construction, in [the] Contracts . . ." See Federal Acquisition Regulation ("FAR") 28.102-3(a) Contract Clauses (1996) ( 48 C.F.R. § 28.102-3). FAR 52.228-15 is not included in the section of the Prime Contract which incorporates the FAR's. See Prime Contract pp. 55-60.

Included in the Prime Contract is Federal Acquisition Regulation ("FAR") 52.232-16 Progress Payments (1991). That section provides:

"Title to the property . . . shall vest in the Government. Vestiture shall be immediately upon the date of this contract, for property acquired or produced before that date. Otherwise, vestiture shall occur when the property is or should have been allocable or properly chargeable to this contract.

FAR 52.232-16.

Due to MacGREGOR being ahead of the shipyard building schedule, and due to the fact that the Ro-Ro-Ramps were too large to be stored at Avondale Shipyard. the Navy and MacGREGOR modified the Prime Contract to include a storage provision. The storage provision states that the "contractor shall provide . . . storage of ramps . . . in accordance with the Contractor's storage proposal dated 5 February 1996." Prime Contract Modification p. 27a. Under the storage plan proposal of February 5, 1996. "The Government, U.S. Navy, takes preliminary acceptance of the Class Standard Equipment at commencement of storage period." Storage Plan Proposal at § II.

MacGREGOR subcontracted with Halter Marine, Inc. ("Halter") to store the Ro-Ro Ramps prior to the installation of the Ro-Ro Ramps. The Ro-Ro Ramps were stored with Halter in May 1999. The subcontract between MacGREGOR and Halter states:

"[Halter] hereby assumes the entire responsibility and liability of the Subcontract Work or any other activities undertaken in connection with this Subcontract, whether performed by Subcontractor, its subcontractors, suppliers, employees, agents or other representatives.

Subcontract ¶ 7(a).

The subcontract also states that the "Subcontractor's liability shall include . . . liability to third parties . . ." Subcontract ¶ 7(b).

The United States Navy formally accepted and paid for the Ro-Ro Ramps on May 26, 1999. See Affidavit of Thomas Boyce, Program manager for the Class Standard Equipment for MacGREGOR's Contract with the United States Naval Sea Systems Command. From May 1999 until February 2001, the Ro-Ro Ramps remained in storage with Halter. In February 2001, pursuant to a contract between Halter and Kane Enterprises ("Kane"), the Ro-Ro Ramps were transported to Avondale Shipyard. In August 2001, the Ro-Ro Ramps were installed on the U.S. Navy vessels.

Kane never received the $85,775.00 it is allegedly due for the transportation of the Ro-Ro Ramps. On August 27, 2001. Kane filed a petition in the 24th Judicial District of the State of Louisiana. The petition alleges that Kane is entitled to sequester property it transported to Avondale Shipyard in February 2001. In addition, Kane alleges that it is entitled to damages from MacGREGOR for transporting this property. The petition acknowledges that the Ro-Ro Ramps are the property of the United States, and the petition acknowledges that the contract to transport the Ro-Ro ramps was between Kane and Halter. However, Halter is currently in Chapter 11 bankruptcy, and it has not been named as a party to this lawsuit. On September 25, 2001, MacGREGOR timely Filed a Notice of Removal to this Court.

II. LAW AND ANALYSIS

A. The Law on Motions to Dismiss.

A motion to dismiss for failure to state a claim upon which relief can be granted under FRCP 12(b)(6) "is viewed with disfavor and is rarely granted." Lowery v. Texas AM University System, 117 F.3d 242, 247 (5th Cir. 1997); Kaiser Aluminum Chem. Sales v. Avondale Shipyards, 677 F.2d 1045, 1050 (5th Cir. 1982) The complaint must be liberally construed in favor of the plaintiff. and all facts pleaded in the original complaint must be taken as true. Campbell v. Wells Fargo Bank, 781 F.2d 440, 442 (5th Cir. 1980). A district court may not dismiss a complaint under FRCP 12(b)(6) "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 (1957);Blackburn v. Marshall, 42 F.3d 925, 931 (5th Cir. 1995). The Fifth Circuit defines this strict standard as "whether in the light most favorable to the plaintiff and with every doubt resolved in his behalf, the complaint states any valid claim for relief" Lowrey, 117 F.3d at 247 (citing 5 Charles A. Wright Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE § 1357, at 601 (1969)).

B. Kane's Remedy is in the Southern District of Mississippi.

In the Supplemental memorandum in Opposition to MacGREGOR's Motion to Dismiss, Kane states:

Here, Kane is pursuing an equitable lien claim against MacGregor such that MacGregor will be ordered to pay Kane from the $150,000.00 owed by MacGregor under the contract [with Halter].
See Kane Exhibits "A", p. 25. lines 11-14 and "B", and p. 5 of Document No. 22.

By Kane's own admission, it is seeking funds that are owed by MacGREGOR to Halter. However, MacGREGOR may not pay Kane directly out of progress payment retainage owed to Halter because the retainage is the property of Halter's Chapter 11 bankruptcy estate. Unpaid progress payments and retainage funds owed to a debtor at the time of its Chapter 11 filing are part of the debtor's Chapter 11 estate. 11 U.S.C. § 541; Matter of Hughes-Bechtol, Inc., Bkrtcy. S.D. Ohio 1990, 117 B.R. 890; In re Universal Builders, Inc., Bkrtcy. M.D. Tenn. 1985, 53 B.R. 183; In re Glover Constr. Co. Inc., Bkrtcy. W.D. Ky. 1983, 30 B.R. 873. MacGREGOR cannot bypass the bankruptcy court and deliver those funds to Kane. The payment of monies owed to Halter from MacGREGOR to Kane would violate 11 U.S.C. § 362 which prohibits parties from taking any actions adverse to debtors with respect to property of a Chapter 11 estate. Pursuant to 28 U.S.C. § 1334 (e), the United States District Court for the Southern District of Mississippi has exclusive jurisdiction over the property of Halter's estate, of which the $150,000 owed by MacGREGOR to Halter is a part.

28 U.S.C. § 1334 (e) states:

The district court in which a case under Title 11 is commenced or is pending shall have exclusive jurisdiction of all the property, wherever located, of the debtor as of the commencement of such case and of property of the estate.

This court is not the proper Court to decide issues concerning property belonging to Halter's Chapter 11 estate. The United States District Court for the Southern District of Mississippi has exclusive jurisdiction over the property, and therefore this matter is not properly before this Court.

III. CONCLUSION

For the foregoing reasons, the Motion to Dismiss filed on behalf of the defendant is granted. Accordingly.

IT IS ORDERED that the Motion to Dismiss filed on behalf of the Defendant, MacGREGOR (USA) Inc. (Document No. 3), be and the same is hereby GRANTED.