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Yor-Wic Construction Co., Inc. v. Engineering Design Technologies, Inc.

United States District Court, W.D. Louisiana, Shreveport Division

July 11, 2018

YOR-WIC CONSTRUCTION CO., INC.
v.
ENGINEERING DESIGN TECHNOLOGIES, INC.

          HORNSBY MAGISTRATE JUDGE.

          MEMORANDUM RULING

          S. MAURICE HICKS, JR., CHIEF JUDGE.

         Before the Court is Plaintiff, Yor-Wic Construction Company, Inc., (“Yor-Wic”) seeking a declaration of rights pursuant to La. Code Civ. Proc. art. 1871 with regard to its subcontract with Defendant, Engineering Design Technologies, Inc. (“EDT”). More specifically, Yor-Wic is requesting this Court find the subcontract invalid, null, unenforceable, extinguished and/or without cause or consent. See Record Document 1-1 at p. 3, ¶¶ 14-17, State Court Petition. EDT filed a Partial Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). See Record Document 30. However, the present Motion is more appropriately classified as a Partial Motion for Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure 12(c), which will be discussed further infra. The Court having considered EDT's Partial Motion for Judgment on the Pleadings (Record Document 30), the Motion is GRANTED IN PART AND DENIED IN PART.

         I. BACKGROUND

         On January 3, 2017, Yor-Wic filed the present lawsuit, styled as a “Petition for Declaratory Judgment with Reservation of other Actions and Defenses, ” against EDT in the 26th Judicial District Court for the Parish of Bossier, State of Louisiana. See Record Document 1-1, Original Petition. This suit was initiated by Yor-Wic because EDT defaulted Yor-Wic for non-performance. According to the original Petition, EDT entered into a contract (the “prime contract”) with the Naval Facilities Engineering Command, Southeast (“NAVFAC”) for construction of drainage improvements at Barksdale Air Force Base. See id. at p.1, ¶ 3. EDT, in turn, entered into a March 30, 2016, agreement (the “subcontract”) with Yor-Wic to perform work under the prime contract. See id. at p. 2, ¶ 5.

         The prime contract specified that EDT should not enter into any contract with a subcontractor who did not comply with the requisite Experience Modification Rate (“EMR”). See id. at ¶ 8. Prior to the execution of the subcontract, Yor-Wic alleges that it advised EDT that its EMR exceeded the maximum permitted by the prime contract. See id. at p. 3, ¶ 9. Thereafter, EDT submitted Yor-Wic's EMR to NAVFAC, but NAVFAC rejected Yor-Wic as a subcontractor. See id. at ¶ 10. Following the initial rejection, “EDT submitted a written request for additional consideration to the [c]ontracting [o]fficer due to Yor-Wic's failure to meet the specified acceptable EMR range, but NAVFAC refused to approve Yor-Wic as a subcontractor to EDT for the [p]roject.” Id. at ¶ 11.

         In its original Petition, Yor-Wic contends that the subcontract, by incorporating the EMR, included a suspensive condition that NAVFAC must approve Yor-Wic as a subcontractor for the project.[1] See id. at ¶ 12. Because of the failure of the suspensive condition, Yor-Wic seeks a judgment declaring the subcontract invalid, void, null, unenforceable, extinguished, and/or without cause or consent. See id. at p. 4, ¶ 15. In addition, Yor-Wic seeks the same declaration as to the payment and performance bonds that secured performance of the subcontract. See id. at ¶¶ 16-17.

         On February 1, 2017, EDT removed the case to federal court on the basis of diversity jurisdiction, 28 U.S.C. § 1332. Also on February 1, Yor-Wic filed a Motion for Leave to File First Amending and Supplemental Petition and Incorporated Memorandum, and this Court administratively entered Yor-Wic's First Amending, Supplemental and Restated Petition on February 19, 2017. See Record Document 9-1 at p. 26. In Yor-Wic's amended Petition, it added several more claims including equitable estoppel, impossibility of performance based on a fortuitous event, subjective novation, nullity based on an alleged False Claims Act violation and lack of consent due to error as to person. See Record Document 9-1 at p. 34, ¶¶ 20-25, Amended Petition. EDT filed an original and amended Answer with affirmative defenses and counterclaims against Yor-Wic based on Yor-Wic's alleged termination for default due to Yor-Wic's unilateral abandonment of the work, not due to any EMR rating non-compliance. See Record Document 13; Record Document 30-1 at p. 7; Record Document 32.

         II. LAW AND ANALYSIS

         As noted supra, this Court's subject matter jurisdiction rests on diversity, and the parties do not appear to dispute that Louisiana substantive law governs the issues at bar. Foradori v. Harris, 523 F.3d 477, 486 (5th Cir.2008) (“Under the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law”) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-79, 58 S.Ct. 817, 822 (1938)).

         A. Pleading Standards and the Federal Rule of Civil Procedure 12(c) Standard.

         Rule 8(a)(2) of the Federal Rules of Civil Procedure governs the requirements for pleadings that state a claim for relief, requiring that a pleading contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The standard for the adequacy of complaints under Rule 8(a)(2) is now a "plausibility" standard found in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007), and its progeny. Under this standard, "factual allegations must be enough to raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555-56, 127 S.Ct. at 1965. If a pleading only contains "labels and conclusions" and "a formulaic recitation of the elements of a cause of action," the pleading does not meet the standards of Rule 8(a)(2). Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949 (2009) (citation omitted).

         While EDT's Motion to Dismiss is couched as a Federal Rule of Civil Procedure 12 (b)(6) Motion to Dismiss for Failure to State a Claim, it should more properly be construed as a Partial Motion for Judgment on the Pleadings pursuant to Rule 12(c). Under Rule 12(c) “[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). After the close of pleadings and prior to the start of trial, EDT filed its Motion to Dismiss, which due to the timing of filing, is construed as a Rule 12(c) judgment on the pleadings. However, this distinction does not affect the Court's legal analysis because the standards for motions under Rule 12(b)(6) and Rule 12(c) are identical. See In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (“The standard for deciding such a motion is the same as that for a Rule 12(b)(6) motion to dismiss for failure to state a claim.”).

         Accordingly, under Rule 12(c), courts must accept all allegations in a complaint as true. See Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949. However, “the complaint must contain either direct allegations on every material point necessary to sustain a recovery . . . or contain allegations from which an inference may be fairly drawn that evidence on these material points will be introduced at trial.” Campbell v. City of San Antonio, 43 F.3d 973, 975 (5th Cir. 1995) (citation omitted). Moreover, “conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.” Id. at 975 (quoting Fernandez-Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir.1993)). Courts considering a motion to dismiss under Rule 12(c) are only obligated to allow those complaints that are facially plausible under the Iqbal and Twombly standard to survive such a motion. See Iqbal, 556 U.S. at 678-79, 129 S.Ct. at 1949, see also Twombly, 550 U.S. at 555, 127 S.Ct. at 1965.

         Rule 12(c) is “designed to dispose of cases where material facts are not in dispute and judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noticed facts.” Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th Cir. 2002) (quoting Hebert Abstract Co., Inc. v. Touchstone Properties, Ltd., 914 F.2d 74, 76 (5th Cir.1990)). In other words, judgment on the pleadings pursuant to Rule 12(c) is appropriate only if “material facts are not in dispute and questions of law are all that remain.” Voest-Alpine Trading USA Corp. v. Bank of China, 142 F.3d 887, 891 (5th Cir.1998); see also Brittan Communications Int'l Corp. v. Southwestern Bell Tel. Co., 313 F.3d 899, 904 (5th Cir.2002). Like Rule 12(b)(6) motions to dismiss for failure to state a claim, a motion to dismiss under Rule 12(c) is disfavored and rarely granted. See, e.g., Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009) (Rule 12(b)(6)); Boyd v. Dallas Indep. Sch. Dist., Civil Action No. 3:08-0426, 2009 WL 159243, at *1 (N.D. Tex. Jan.21, 2009) (Rule 12(c)). However, if the complaint does not meet this standard, it can be dismissed "at the point of minimum expenditure of time and money by the parties and the court." Twombly, 550 U.S. at 558, 127 S.Ct. at 1966.

         Typically at the Rule 12(c) stage, courts may not go outside the pleadings. However, in the present action, the Court may consider the subcontract in assessing the Rule 12(c) Partial Motion for Judgment on the Pleadings because it was referred to in Yor-Wic's original and amended Petition, and it is central to Yor-Wic's claims. See New Orleans City v. Ambac Assur. Corp., 815 F.3d 196, 200 (5th Cir. 2016)

         B. Federal Declaratory ...


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