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Parkcrest Builders, LLC v. The Housing Authority of New Orleans

United States District Court, E.D. Louisiana

June 5, 2017

PARKCREST BUILDERS, LLC
v.
THE HOUSING AUTHORITY OF NEW ORLEANS

         SECTION: "J"(4)

          ORDER AND REASONS

         Before the Court is a Motion for Judgment on the Pleadings (Rec. Doc. 67) filed by Intervenor Liberty Mutual Insurance Company (“Liberty”), an opposition thereto (Rec. Doc. 70) filed by the Housing Authority of New Orleans (“HANO”), and a reply (Rec. Doc. 75) filed by Liberty. Also before the Court is a Motion for Judgment on the Pleadings and Motion to Dismiss (Rec. Doc. 170) filed by Liberty, an opposition thereto (Rec. Doc. 189) filed by HANO, and a reply (Rec. Doc. 194) filed by Liberty. Having considered the motion and legal memoranda, the record, and the applicable law, the Court finds that the motion should be GRANTED in part and DENIED in part.

         FACTS AND PROCEDURAL BACKGROUND

         This case arises out of disputes that occurred during the construction of affordable housing units in New Orleans. Liberty alleges that on March 4, 2013, HANO entered into a contract with Parkcrest Builders, LLC (“Parkcrest”) whereby Parkcrest would serve as the contractor for the construction of the Florida Avenue: New Affordable Housing Units (the “Project”). (Rec. Doc. 32 at 3.) Liberty alleges that because the project fell within the ambit of the Louisiana Public Works Act, Parkcrest was obligated to obtain a statutory performance and payment bond, and that it sought the bond from Liberty. Id. Liberty avers that it issued a payment and performance bond naming Parkcrest as principal and HANO as obligee in connection with the project and that the bond's penal sum was $11, 288, 000.00. (Rec. Doc. 67-1 at 4.)

         Liberty alleges that the relationship between HANO and Parkcrest deteriorated during the course of the project, and on April 10, 2015, HANO terminated Parkcrest. On May 8, 2015, Parkcrest brought this suit against HANO, alleging that the delays in the project were caused by HANO and that HANO breached the contract by terminating Parkcrest “for convenience.” (Rec. Doc. 1.) HANO filed a counterclaim against Parkcrest, alleging that delays in the project were attributable solely to Parkcrest. (Rec. Doc. 22) In its counterclaim, HANO seeks damages for the delays and also asserts claims that allegedly arose after Parkcrest was terminated from the project. Id. at 15.

         After terminating Parkcrest, HANO called upon Liberty to perform its obligations as surety for Parkcrest. On or about June 9, 2015, HANO and Liberty entered into a Takeover Agreement to complete the project. Liberty and HANO dispute the factual details leading up to the Takeover Agreement, the interpretation of the Takeover Agreement, and the details surrounding implementation of the Takeover Agreement. These disagreements create the basis for the instant motion.

         Once the Takeover Agreement was executed, Liberty retained Parkcrest as its completion contractor. (See Rec. Doc. 32 at 6.) Liberty alleges that HANO began violating the Takeover Agreement's terms shortly thereafter by failing to make required payments, reducing the amounts approved for payment, failing to timely respond to change order proposals submitted by Parkcrest, and failing to timely issue punch lists and grant substantial performance of the project. Id. at 6-8. Liberty alleges that it was working to complete items on a punch list that HANO had purposefully withheld when HANO terminated it from the project on June 29, 2016. Id. at 8-9.

         Liberty then intervened in this lawsuit to allege breach of the Takeover Agreement, bad faith breach of contract, and wrongful termination claims. (Rec. Doc. 32.) In response, HANO filed a counterclaim against Liberty. (Rec. Doc. 37 at 17.) HANO alleges that Liberty acted as a de-facto contractor and is therefore liable in amounts in excess of the penal sum of the bond. Id. HANO further alleges that Liberty breached the terms of the Takeover Agreement in bad faith and that it induced HANO to sign the Takeover Agreement through fraudulent misrepresentation. Id. HANO alleges that it is due stipulated damages and general damages arising out of Liberty's failure to perform. Id.

         On December 19, 2016, Liberty filed an initial motion for judgment on the pleadings (Rec. Doc. 67) on HANO's counterclaim. Thereafter, HANO moved to file a first supplemental and amended counterclaim (“first amended counterclaim”) which the Magistrate Judge granted. (See Rec. Doc. 79.) HANO then moved to file a second supplemental and amended counterclaim (“second amended counterclaim”), which the Magistrate Judge also granted. (See Rec. Doc. 124.) Liberty responded by filing a second motion for judgment on the pleadings, this time also requesting dismissal of HANO's fraud claim for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (Rec. Doc. 170). HANO's second amended counterclaim incorporates the original and the first amended counterclaims. Accordingly, the Court will analyze the instant motion for judgment on the pleadings and motion to dismiss by referring to the briefing for both motions filed by Liberty and the original, first amended, and second amended counterclaim. See Johnson v. Moog, Inc., No. 10-67, 2011 WL 719600, at *1 n.1 (E.D. Tex. Feb. 22, 2011).

         PARTIES' ARGUMENTS

         Liberty argues that HANO's fraud claim should be dismissed because Liberty was under no obligation to disclose that its representative for completing the construction was also providing Liberty with litigation services. Liberty also argues that HANO's breach of contract claim should be dismissed to the extent that HANO alleges that Liberty breached the contract by using Parkcrest as the completion contractor. More specifically, Liberty argues that the terms of the Takeover Agreement explicitly permitted Liberty to use Parkcrest as the completion contractor. Finally, Liberty argues that its liability is capped at the penal sum of its bond because the Takeover Agreement specifically states that Liberty would not be liable in excess of that amount.

         In opposition, HANO argues that its fraud claim should not be dismissed because Liberty withheld the true nature of the construction representative's and Parkcrest's role in the project, and that HANO would not have entered into the Takeover Agreement had it known the entire truth. HANO also argues that its breach of contract claim states a clear cause of action. HANO further contends that Liberty is liable in excess of the penal sum of the bond because it acted as a de-facto contractor on the project and therefore lost the benefit of its liability cap.

         LEGAL STANDARD

         Rule 12(c) provides that “[a]fter the pleadings are closed- but early enough not to delay trial-a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). A motion brought pursuant to Rule 12(c) “is designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any ...


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