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The Sanitary Board of City of Charleston, West Virginia v. Colonial Surety Company

United States District Court, S.D. West Virginia, Charleston

May 28, 2019

THE SANITARY BOARD OF THE CITY OF CHARLESTON, WEST VIRGINIA, a municipal utility, Plaintiff,
v.
COLONIAL SURETY COMPANY, a Pennsylvania corporation; and PARTNERRE INSURANCE COMPANY OF NEW YORK, a New York corporation, Defendants. and COLONIAL SURETY COMPANY, a Pennsylvania Corporation, Third-Party Plaintiff,
v.
TRI-STATE PIPELINE, INC., an Ohio corporation; and ERIC D. TAYLOR, Third-Party Defendants and Fourth-Party Plaintiffs,
v.
BURGESS & NIPLE, INC., an Ohio corporation, Fourth-Party Defendant.

          MEMORANDUM OPINION AND ORDER

          John T. Copenhaver, Jr., Senior United States District Judge.

         Pending is a motion to dismiss, filed October 11, 2018 by The Sanitary Board of the City of Charleston, West Virginia (“the Sanitary Board” or “Owner”), seeking to dismiss the crossclaim complaint filed by third-party defendant and fourth-party plaintiff Tri-State Pipeline, Inc. (“Tri-State, ” “Contractor, ” or “Bidder”).[1]

         I. Facts and Procedural Background

         This case arises from a project to improve the sewer systems of Charleston, West Virginia. Specifically, according to the crossclaim complaint, “[o]n or about July 26, 2016, the [Sanitary Board] accepted bids for Contracts 15-1 ‘Porters Branch & Spring Branch Sanitary Sewer Improvement' and 15-2 ‘Callie Road & Anderson Heights Road Sanitary Sewer Improvements'. These contracts involved gravity sewer line replacement, manhole installation, house service connections, restoration of pavement and other related work.” Crossclaim ¶ 2. As part of the bidding process, the Sanitary Board “provided prospective bidders with the project design prepared by [Project Engineer Burgess & Niple, Inc., (“Burgess & Niple” or “Engineer”), ] including plans, specifications, bid documents, and other contract documents, also prepared by [Burgess & Niple] for the [Sanitary Board].” Id. ¶ 4. According to Tri-State, “[t]hese bidding documents were intended to provide a ‘road map' for prospective bidders to allow reasonable anticipation of the conditions in the work area and to allow them to prepare accurate bids for the work.” Id.

         Tri-State submitted a bid, “[i]n specific reliance upon the information provided by [the Sanitary Board.]” Id. ¶ 5. The Sanitary Board accepted Tri-State's bid and on September 22, 2016, the parties entered into an agreement for the completion of both projects for a contract price of $9, 876, 186.44. Id. ¶ 6, see also The Agreement, Motion to Dismiss, ECF # 28 Ex. C. The contract had a start date of on or about October 10, 2016, and provided that substantial completion should be achieved in 330 calendar days, with final completion 30 days thereafter. Id. ¶ 8. Burgess & Niple acted as the project engineer as well as the Sanitary Board's onsite representative during the construction project. Id. ¶ 7.

         Tri-State immediately suffered delays in its performance, allegedly “as a direct result of the [Sanitary Board]'s failure to timely and adequately perform its obligations under its contract, including, but not limited to, a failure to adequately and timely approve submittals, failure to make timely payment for materials and work provided, [and] failure to address and provide compensation for changed work and for extra work resulting from unforeseen or changed site conditions[.]” Id. ¶ 9. Specifically, Tri-State alleges in paragraph 10 that the Sanitary Board breached its obligations under the contract by:

a. failing to provide accurate and adequate plans, specifications and contract documents adequate to perform the contract work;
b. interfering with, altering and controlling Tri-State's planned means, methods, techniques, sequences and procedures of construction;
c. issuing unjustified stop work orders without adequate cause and without compensating Tri-State for resulting delays and costs;
d. requiring Tri-State to comply with the direction of the City Engineer of the City of Charleston in contravention of the specifications included in the contract documents without compensating Tri-State for resulting delays and costs;
e. failing to timely and adequately review and approve Tri-State's requests for additional compensation and time resulting from the [Sanitary Board]'s delays and changes in the work;
f. failing to compensate Tri-State for delays and expenses resulting from the Owner's failure to provide proper easements;
g. failing to compensate Tri-State for extra work resulting from changed site conditions;
h. failing to compensate Tri-State for delays, extra work and added expense resulting from unmarked and mismarked existing underground utilities;
i. failing to compensate Tri-State for delays and extra work resulting from owner caused changes in its manner and method of performance;
j. failing to compensate Tri-State for delays, extra work and added expense resulting from faulty or leaking existing underground utilities; and
k. failing to compensate Tri-State for delays and extra costs associated with interference by other contractors operating in its work area.

Id. ¶ 10. Tri-State alleges that it suffered “at least 57 instances of changed work, delays, unforeseen or changed site conditions[, ]” for each of which it submitted claims to the Sanitary Board that were denied. Id. ¶ 11. For such claims, section 10.05 of the contract's general conditions requires that all claims be referred to the engineer, Burgess & Niple, for decision, and that written notice be delivered “by the claimant to Engineer and the other party to the Contract promptly (but in no event later than 30 days) after the start of the event giving rise thereto.” General Conditions, ECF # 28, Ex. A at 7-8.

         Tri-State alleges that “the [Sanitary Board] had adequate and timely notice [as to each claim Tri-State submitted] as the [Sanitary Board]'s own actions were the direct cause of the delay and/or extra work, the [Sanitary Board] had actual notice of the events giving rise to the claim through its on-site representatives who were on site daily during the course of Tri-State's work and who kept a daily record of events occurring on the Project, and through written and oral communications with Tri-State and the [Sanitary Board]'s project representatives.” Crossclaim ¶ 12. Tri-State further alleges that the Sanitary Board, “[t]hrough its conduct during the course of Tri-State's work, including orally directing work different from that specified in the contract documents without utilizing the formal change order process set forth in the contract documents, . . . waived its right to rely on the formal written notice and claims provisions in the contract[.]” Id. ¶ 13.

         Eventually, according to Tri-State, “[d]espite Tri-State's diligent performance of its obligations under its contract with the [Sanitary Board] in the face of delays, extra work and added costs directly resulting from the acts or inactions of the [Sanitary Board] and unforeseen or changed site conditions, the [Sanitary Board] wrongfully terminated its contract with Tri-State without adequate cause.” Id. ¶ 16.

         Tri-State alleges that “[a]s a direct, proximate and foreseeable result of the [Sanitary Board]'s material breaches of its contract and its wrongful termination, Tri-State has suffered a substantial financial loss, including the cost of performing additional work directed by the [Sanitary Board], extra costs resulting from delays and lost productivity, extended overhead costs and lost profits.” Id. ¶ 17, see also ¶ 14.

         Following these events, the Sanitary Board commenced this action on June 29, 2018 against Colonial Surety Company, the surety on the project, and PartnerRe Insurance Company of New York, the re-insurer surety on the project, invoking the court's diversity jurisdiction. See Original Complaint, ECF # 1. Thereafter, on August 28, 2018, defendants Colonial Surety Company and PartnerRe Insurance Company of New York filed an answer to the complaint, accompanied by a third-party complaint by Colonial Surety Company against third-party defendants Tri-State and Eric D. Taylor, Tri-State's president. See Answer and Third-Party Complaint, ECF # 16. Then, on September 20, 2018, the third-party defendants filed an answer to the third-party complaint, along with the instant crossclaim[2] by Tri-State against the plaintiff and the fourth-party complaint by Tri-State against Burgess & Niple, Inc. See Answer, Crossclaim and Fourth-Party Complaint, ECF # 22.

         Tri-State brings its claim for breach of contract, seeking judgment against the Sanitary Board in the amount of $5, 000, 000.00, “or such other amount as will fully and fairly compensate it for the Cross-Claim Defendant's breach of its contract with Cross-Claimant, together with all other relief as may be necessary to do justice in this matter.” Id., WHEREFORE clause.

         On October 11, 2018, the Sanitary Board filed its motion to dismiss Tri-State's claim against it under Rule 12(b)(6). ECF # 28. Tri-State filed a response on October 25, 2018, ECF # 32, to which the Sanitary Board replied on November 1, 2018, ECF # 36.

         II. Motion to Dismiss Standard

         Federal Rule of Civil Procedure 8(a)(2) requires that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Rule 12(b)(6) correspondingly provides that a pleading may be dismissed when there is a “failure to state a claim upon which relief can be granted.”

         To survive a motion to dismiss, a pleading must recite “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Monroe v. City of Charlottesville, 579 F.3d 380, 386 (4th Cir. 2009) (quoting Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008)). In other words, the “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555 (citation omitted).

         “In resolving a motion pursuant to Rule 12(b)(6)[, ] a district court cannot consider matters outside the pleadings without converting the motion into one for summary judgment.” Occupy Columbia v. Haley, 738 F.3d 107, 116 (4th Cir. 2013) (citing Fed.R.Civ.P. 12(d)). “A court may, however, consider a ‘written instrument' attached as an exhibit to a pleading, ‘as well as [documents] attached to the motion to dismiss, so long as they are integral to the complaint and authentic.'” Id. (alteration in original) (internal citation omitted) (quoting Fed.R.Civ.P. 10(c) and Phillips v. Pitt Cty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009)).

         A district court's evaluation of a motion to dismiss is underlain by two principles. First, the court “must accept as true all of the factual allegations contained in the [pleading].” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citing Twombly, 550 U.S. at 555-56). Such factual allegations should be distinguished from “mere conclusory statements, ” which are not to be regarded as true. Iqbal, 556 U.S. at 678 (“[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.”). Second, the court must “draw[] all reasonable factual inferences . . . in the [nonmovant's] favor.” Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999).

         III. Discussion

         To state a breach of contract claim, a plaintiff must allege: 1) the existence of a valid contract; 2) that plaintiff has performed under that contract; 3) that defendant breached or violated its duties under that contract, and 4) that plaintiff was injured as a result. Executive Risk Indem., Inc. v. Charleston Area Medical Center, Inc., 681 ...


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