Opinion
NO. 4:20-CV-5095-TOR
10-27-2020
WYCKOFF FARMS, INCORPORATED, a Washington corporation, Plaintiff, v. INDUSTRIAL CONTROL CONCEPTS, INC., d/b/a ICC, INC., a Missouri corporation, ICC NORTHWEST, INC., an Oregon corporation, and ICC TURNKEY, INC., a Missouri corporation, Defendants.
ORDER DENYING DEFENDANTS' MOTION TO DISMISS AND ALTERNATIVE MOTION FOR A MORE DEFINITE STATEMENT
BEFORE THE COURT is Defendants' Motion to Dismiss for Failure to State a Claim and Alternative Motion for a More Definite Statement (ECF No. 11). These matters were submitted for consideration without oral argument. The Court has reviewed the record and files herein, the completed briefing, and is fully informed. For the reasons discussed below, Defendants' Motion to Dismiss for Failure to State a Claim and Alternative Motion for a More Definite Statement (ECF No. 11) is DENIED.
BACKGROUND
This case generally concerns construction contracts related to an extraction facility. ECF No. 1. On June 12, 2020, Plaintiff filed a Complaint against Defendants Industrial Control Concepts Inc. ("ICC"), ICC Northwest, Inc. ("ICC NW"), and ICC Turnkey, Inc. ("ICC Turnkey"). ECF No. 1. On September 10, 2020, Defendants filed the instant Motion to Dismiss for Failure to State a Claim and Alternative Motion for a More Definite Statement. ECF No. 11. Plaintiff and Defendants timely filed their respective response and reply. ECF Nos. 12-13. The following facts are drawn from Plaintiff's Complaint and construed in the light most favorable to Plaintiff. Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000).
In May 2019, Plaintiff Wyckoff Farms solicited quotes from Defendants for stainless steel tanks for use in an extraction plant Plaintiff intended to build in Prosser, Washington. ECF No. 1 at 2, ¶ 8. On May 17, 2019, the parties executed an agreement (the "Tank Contract") for the purchase of 30 stainless steel tanks for $876,000. ECF No. 1 at 3, ¶ 9.
On or about June 14, 2019, the parties executed a second agreement (the "Engineering Contract") pertaining to the engineering of the extraction plant. ECF No. 1 at 3, ¶ 11. The Engineering Contract required Defendants "to deliver 'an engineering report, documents, diagrams, and models that integrate and close the gaps between the various components of the Wyckoff Extraction facility...' and prepare proposals for the piping system, multi zone CIP system, and integrated control and data collection system." ECF No. 1 at 3, ¶ 12. Defendants represented that the Engineering Contract would "identify the full scope of work and materials required to integrate the various components" needed for the extraction facility. ECF No. 1 at 3, ¶ 13.
On or about August 9, 2019, the parties executed a third agreement (the "Piping Contract") regarding the interconnective piping needed at the extraction facility. ECF No. 1 at 3, ¶ 14. The Piping Contract "required [Defendants] to design, fabricate, and deliver piping needed to connect the various Extraction Project components for a fixed price of $368,000." ECF No. 1 at 4, ¶ 15. Defendants also "agreed to install and build the Piping Contract system on a time and material basis plus travel expenses, not to exceed $135,000. ECF No. 1 at 4, ¶ 16.
On or about August 19, 2019, the parties executed a fourth agreement (the "Control System Contract") regarding the electronic control system needed at the extraction facility. ECF No. 1 at 4, ¶ 17. The Control System Contract "required [Defendants] to design, fabricate, and deliver the electronic system needed to operate the various Extraction Project components at a fixed price of $801,000." ECF No. 1 at 4, ¶ 18. Defendants "agreed to install and build the Control System Contract components on a time and materials basis plus travel expenses, not to exceed $140,000." ECF No. 1 at 4, ¶ 19. Additionally, under the Control System Contract, commissioning and start up was provided for at an hourly rate for the commissioning and start-up engineer, not to exceed $54,000. ECF No. 1 at 4, ¶ 20. Finally, "out-of-scope materials necessary to carry the Piping Contract and Control System Contract were to be provided on a cost plus 10% basis." ECF No. 1 at 4, ¶ 21.
Each contract incorporates the same appendix, requiring Defendants to "defend, indemnify, and hold harmless [Plaintiff] from and against all claims, actions, proceedings, liabilities, losses, damages, costs and expenses, arising out of third party actions, including reasonable attorney's fees and defense costs, which [Plaintiff] may sustain resulting from the acts or omissions of [Defendants]." ECF No. 1 at 7, ¶¶ 39-40.
Once the parties executed the four contracts, Defendants notified Plaintiff that it "identified 686 missing pieces of equipment, valves, instruments, and specialty items that [were] currently not supplied by any other vendor under contract. In addition ... substantial amounts of installation, including piping, insulation, structures, and electrical work, is uncovered." ECF No. 1 at 5, ¶ 22. Defendants informed Plaintiff that an additional agreement (the "Gap Contract") was needed to address the missing equipment and uncovered work. ECF No. 1 at 5, ¶ 24. Plaintiff relied on Defendants' expertise and representations and executed the Gap Contract, requiring Defendants "to procure and deliver all remaining materials needed to operate the various Extraction Project components at a fixed price of $1,638,195." ECF No. 1 at 5, ¶ 25. Defendants "agreed to install the Gap Contract components on a time and materials basis, estimated at $922,572, plus travel expenses." ECF No. 1 at 5, ¶ 26. Additional out-of-scope materials necessary for this contact were to be provided on a cost plus 15% basis. ECF No. 1 at 6, ¶ 27.
In April 2020, Plaintiff discovered Defendants had significantly overbilled on the extraction facility projects by double-billing certain equipment and materials, charging for work not actually performed, and charging for travel expenses not related to the contracts or pre-approved by Plaintiff. ECF No. 1 at 6, ¶¶ 29-31, 33. Plaintiff requested documentation to substantiate the bills, and Defendants submitted falsified time card records. ECF No. 1 at 6, ¶ 32.
That same month, Plaintiff discovered that Defendants were not paying their subcontractors. ECF No. 1 at 7, ¶ 35. As a result, Plaintiff sought assurances that Defendants could complete the contract work, which Defendants failed to provide. ECF No. 1 at 7, ¶¶ 36-37. Plaintiff notified Defendants that it believed they anticipatorily repudiated their contracts, and Defendants subsequently discontinued all work on the extraction facility. ECF No. 1 at 7, ¶ 38.
On May 27, 2020 one of Defendants' subcontractors, NIPR, LLP, recorded a Notice of Claim of Lien against Plaintiff's property. ECF No. 1 at 7-8, ¶¶ 41-42. The lien claims that Defendant "ICC NW owes NIPR the principal amount of $314,792.15 plus interest at a rate of 12% for work performed on the Extraction Project for which NIPR has not been paid." ECF No. 1 at 8, ¶ 42.
Defendants have refused to defend, indemnify, or hold harmless Plaintiff from the subcontractor's lien as required under the appendix attached to each contract. ECF No. 1 at 8, ¶ 43. Plaintiff has also overpaid Defendants no less than $1.3 million. ECF No. 1 at 6, ¶ 34.
DISCUSSION
A. Motion to Dismiss Standard
Federal Rule of Civil Procedure 12(b)(6) provides that a defendant may move to dismiss the complaint for "failure to state a claim upon which relief can be granted." "The burden of demonstrating that no claim has been stated is upon the movant." Glanville v. McDonnell Douglas Corp., 845 F.2d 1029 (9th Cir. 1988). A motion to dismiss for failure to state a claim will be denied if the plaintiff alleges "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
While the plaintiff's "allegations of material fact are taken as true and construed in the light most favorable to the plaintiff[,]" the plaintiff cannot rely on "conclusory allegations of law and unwarranted inferences [] to defeat a motion to dismiss for failure to state a claim." In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1403 (9th Cir. 1996) (citation and brackets omitted). That is, the plaintiff must provide "more than labels and conclusions, and a formulaic recitation of the elements." Twombly, 550 U.S. at 555. When deciding, the Court's review is limited to the complaint, documents incorporated into the complaint by reference, and judicial notice. Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1061 (9th Cir. 2008) (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).
B. Breach of Contract
Defendants argue Plaintiff has failed to state a claim for breach of contract "[b]ecause Plaintiff fails to allege facts that show how each Defendant was a party to each contract, and that each Defendant breached a precise duty under specific contract provision." ECF No. 11 at 4. Plaintiff argues that the factual representations apply to each Defendant, and Defendants will have to engage in discovery for more specific details. ECF No. 12 at 6.
Under Washington law, a plaintiff "must prove a valid contract between the parties, breach, and resulting damage." Lehrer v. State, Dep't of Soc. & Health Servs., 101 Wash. App. 509, 516 (2000) (internal citation omitted).
Here, the essence of Defendants' argument is that Plaintiff must be more specific by delineating duties as to each separate Defendant. Plaintiff has identified the existence of five contracts. See ECF No 1. at 3-6, ¶¶ 9-27. Plaintiff alleges that each Defendant had obligations under these contracts, materially breached these contracts, and Plaintiff suffered harm as a result. ECF No. 1 at 8, ¶¶ 44-48. At this stage, Plaintiff has plausibly alleged a breach of contract claim as to each Defendant.
C. Anticipatory Repudiation
Defendants argue Plaintiff has failed to state a claim for anticipatory repudiation where Plaintiff "fails to plead 1) the contracts and provisions which required Defendants to provide 'adequate assurances' to Plaintiff, and 2) what clear and positive statements were made by Defendants which express their intent to repudiate the contracts." ECF No. 11 at 5-6. Plaintiff argues that Defendants anticipatorily breached the contracts where Defendants failed "to pay subcontractors" ... "coupled with their act of walking off the job once financial assurances were requested." ECF No. 12 at 8.
Under Washington law, an anticipatory breach occurs when a party to a bilateral contract either expressly or impliedly repudiates the contract prior to performance. Wallace Real Estate Inv., Inc. v. Groves, 124 Wash. 2d 881, 898 (1994). Repudiation occurs by a "positive statement or action by the promisor indicating distinctly and unequivocally that he either will not or cannot substantially perform any of his contractual obligations." Id. (internal quotation omitted).
Defendants focus on the lack of "clear and positive statements." ECF No. 11 at 6. However, statements are not the only way to anticipatorily breach a contract. Plaintiff's allegations in the Complaint - that Defendants failed "to pay subcontractors" and walked "off the job once financial assurances were requested" - plausibly states actions by Defendants that indicate Defendants would not substantially perform on the remaining contractual obligations. ECF No. 12 at 8. Therefore, Plaintiff has plausibly alleged a claim for anticipatory repudiation as to each Defendant.
D. Unjust Enrichment
Defendants argue Plaintiff has failed to state a claim for unjust enrichment because "Plaintiff already alleged the 'overcharging' was a material breach of an express contract." ECF No. 11 at 7. Plaintiff argues that it may plead theories in the alternative. ECF No. 12 at 9.
Under Rule 8(d)(2), a plaintiff "may set out 2 or more statements of a claim or defense alternatively or hypothetically, either in a single count or defense or in separate ones." Additionally, a plaintiff "may state as many separate claims or defenses as it has, regardless of consistency." Fed. R. Civ. P. 8(d)(3).
Under Washington law, an unjust enrichment claim requires the plaintiff to show "(1) the defendant receives a benefit, (2) the received benefit is at the plaintiff's expense, and (3) the circumstances make it unjust for the defendant to retain the benefit without payment." Young v. Young, 164 Wash. 2d 477, 484-85 (2008). As such, "[u]njust enrichment is the method of recovery for the value of the benefit retained absent any contractual relationship because notions of fairness and justice require it." Id. at 484 (internal citation omitted).
Here, Plaintiff alleges Defendants "overcharged and double-charged [Plaintiff] for work that was never performed, materials that were never delivered, and costs that were not incurred on the Wyckoff Extraction Project," "[Defendants] received in excess of $1.3 million in unearned funds from [Plaintiff]," and "it is unjust for Defendants to retain the benefit of the funds it received in excess of what it was entitled to for the work actually performed and materials actually supplied." ECF No. 1 at 9-10, ¶¶ 55-57. As the existence and validity of Plaintiff's earlier referenced contracts have not been determined as a matter of law, Plaintiff's alternative theory is plausible. If this Court determines in subsequent proceedings that an enforceable contract exists between the parties, Plaintiff's unjust enrichment claim cannot stand. However, at this stage, Plaintiff has properly alleged an alternative claim for unjust enrichment as to each Defendant.
E. Failure to Defend and Indemnify
Defendants argue Plaintiff has failed to state a claim for failure to defend and indemnify because Plaintiff failed to provide "Defendants with any notice of what contract and term Plaintiff is claiming imposes the duty to defend and indemnify Plaintiff" and Plaintiff "fails to adequately identify the third-party claims which Plaintiff is purportedly alleging that each Defendant has a duty to indemnify and defend Plaintiff against." ECF No. 11 at 8. Plaintiff argues that it adequately pleads the claim by pointing to provisions in the Complaint that identify the contracts, contract term requiring Defendants to defend indemnify, and third-party claims triggering the contract term. ECF No. 12 at 11-12.
Under Washington law, the duty to defend "arises when a complaint against the insured, construed liberally, alleges facts which could, if proven, impose liability upon the insured within the policy's coverage." Mut. of Enumclaw Ins. Co. v. USF Ins. Co., 164 Wash. 2d 411, 420-421 (2008) (internal citation omitted). However, the duty to defend "is separate from, and broader than, the duty to indemnify." Hayden v. Mut. of Enumclaw Ins. Co., 141 Wash. 2d 55, 64 (2000). While the duty to defend exists "merely if the complaint contains any factual allegations which could render the insurer liable to the insured under the policy," the "duty to indemnify hinges on the insured's actual liability to the claimant and actual coverage under the policy." Id. The "duties to defend and indemnify do not become legal obligations until a claim for defense or indemnity is tendered." Mut of Enumclaw Ins. Co., 164 Wash. 2d at 421.
Contrary to Defendants' contentions, Plaintiff identified an indemnity clause that was incorporated by reference into each contract with an appendix, which requires Defendants to "defend, indemnify, and hold harmless [Plaintiff] from and against all claims, actions, proceedings, liabilities, losses, damages, costs and expenses, arising out of third party actions, including reasonable attorney's fees and defense costs, which [Plaintiff] may sustain resulting from the acts or omissions of [Defendants]." ECF No. 1 at 7, ¶¶ 39-40. Plaintiff also identified the third-party claim triggering the indemnity clause, and Defendants' refusal to defend and indemnify on the same. ECF No. 1 at 7-8, ¶¶ 41-43. Thus, Plaintiff adequately pleads a claim for failure to defend and indemnify.
F. Unfair and Deceptive Business Practices
Defendants argue Plaintiff has failed to state a claim for unfair and deceptive business practices by failing to plead facts "to indicate: (a) the nature of the unfair or deceptive act or practice; (b) the public interest impact; or (c) the causal link between the alleged deceptive act and each particular Defendant." ECF No. 11 at 9. Defendants requests this claim be dismissed or amended to plead specific facts. Id. Plaintiff argues it identified the deceptive acts by alleging Defendants submitted fraudulent records for payment, it shows the public interest impact on "a clear pattern of deceptive billing practices," and it demonstrates the causation alleged as to each individual Defendant. ECF No. 12 at 13-14.
The Washington Consumer Protection Act ("CPA") prohibits "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." RCW 19.86.020. Under RCW 19.86.090, "[a]ny person who is injured in his or her business or property by a violation of RCW 19.86.020 ... may bring a civil action" to recover actual damages. To prevail on a CPA claim, "the plaintiff must prove an (1) unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact; (4) injury to plaintiff in his or her business or property; [and] (5) causation." Klem v Washington Mut. Bank, 176 Wash. 2d 771, 782 (2013) (quoting Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash. 2d 778, 780 (1986)).
The Court finds that Plaintiff has sufficiently alleged facts to the first, second, fourth, and fifth elements. Under the first element, Plaintiff's allegations that Defendants' overcharged, double billed, and falsified records constitute an unfair or deceptive act or practice. ECF No. 1 at 6-7, ¶¶ 29-33; see State Farm Fire & Cas. Co. v. Huynh, 92 Wash. App. 454, 459 (1998) (Defendant's false billings and reports made for the purpose to increase profits subject to the CPA). Under the second element, Plaintiff sufficiently alleges that these contracts were based on the sale of services for the construction of the extraction facility, meeting the definition of "trade and commerce." See RCW 19.86.010(2). Under the fourth and fifth elements, Plaintiff has adequately alleged that Defendant's overcharging and double billing caused it economic injury in the overpayment of $1.3 million to Defendants. ECF No. 1 at 6, ¶ 34.
Under the third element, "[o]rdinarily, a breach of a private contract affecting no one but the parties to the contract is not an act or practice affecting the public interest." Hangman Ridge, 105 Wash. 2d at 790. However, a plaintiff can establish that the private "lawsuit would serve the public interest by showing a likelihood that other plaintiffs have been or will be injured in the same fashion." Trujillo v. Nw. Tr. Servs., 183 Wash. 2d 820, 835 (2015) (internal citations omitted). To assess the public interest in a private dispute, courts are guided by "(1) whether the defendant committed the alleged acts in the course of his/her business, (2) whether the defendant advertised to the public in general, (3) whether the defendant actively solicited this particular plaintiff, and (4) whether the plaintiff and defendant have unequal bargaining positions." Id. at 836. No one factor is dispositive. Id.
Here, even viewed in light most favorable to Plaintiff, Plaintiff has failed to allege the public's interest. Plaintiff summarily alleges that Defendants' conduct affects the public interest. ECF No. 1 at 10, ¶ 63. This conclusory legal assertion is insufficient to plausibly state a claim. See In re Stac Elecs. Sec. Litig., 89 F.3d at 1403. Without alleging more facts indicative of public interest, Plaintiff's unfair and deceptive business practices claim cannot survive a motion to dismiss.
G. Leave to Amend Complaint
Defendants argue that the claims against Defendants ICC NW, Inc. and ICC Turnkey, Inc. should be dismissed without leave to amend because "Plaintiff conveniently clusters Defendants together, improperly refers to them collectively, and then fails to identify claims against each individual Defendant as it is legally required to do at this stage." ECF No. 11 at 9. Defendants further argue that "ICC Inc. is the only party named in all of the contracts." ECF No. at 9-10.
Rule 15(a)(2) instructs courts to "feely give leave [to amend] when justice so requires." "This policy is to be applied with extreme liberality." Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (quotation and citation omitted). However, a court may deny leave to amend "due to undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party ..., and futility of amendment." Zucco Partners, LLC v. Digimarc Ltd., 552 F.3d 981, 1007 (9th Cir. 2009) (quotations and citation omitted).
Finding no basis for the contrary, the Court grants Plaintiff leave to amend its complaint to supplement the public interest element, if any, to the unfair and deceptive debt practices claim. However, finding that Plaintiff has properly made allegations against each Defendant, Plaintiff need not amend to distinguish further among the Defendants. Defendants can individually answer as to each allegation.
H. Motion for a More Definite Statement
In the alternative, much like the argument for denying leave to amend, Defendants move this Court to order Plaintiff to provide a more definite statement, so that specifically "Plaintiff must identify facts and circumstances in its pleading to support each claim against each identified Defendant such that each ICC, ICC NW, and ICC Turnkey are each able to adequately respond and defend." ECF No. 11 at 10. Plaintiff argues that Defendants "sloppy business practices" are to blame where Defendants were "treating each of these entities interchangeably in the contracting process." ECF No.12 at 15.
Accepting Plaintiff's allegations as true, the Court has found Plaintiff alleges sufficient factual matter to state claims for relief, with the exception for the unfair and deceptive business practices claim, against each Defendant. Therefore, the Court denies Defendants' alternative motion for a definite statement. As previously stated, Defendants may individually answer the allegations and engage in discovery to further defend against the claims. ACCORDINGLY, IT IS HEREBY ORDERED:
1. Defendants' Motion to Dismiss for Failure to State a Claim and Alternative Motion for a More Definite Statement (ECF No. 11) is DENIED.
2. Plaintiff is granted leave to AMEND its complaint within 21 days of this Order.
The District Court Executive is directed to enter this Order and furnish copies to counsel.
DATED October 27, 2020.
/s/
THOMAS O. RICE
United States District Judge