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Anthony Allega Cement Contractor, Inc. v. Johnson Controls Federal Systems/Versar, LLC

United States District Court, D. Delaware

April 24, 2019

ANTHONY ALLEGA CEMENT CONTRACTOR, INC. and UNITED STATES OF AMERICA, by and for the Benefit of Anthony Allega Cement Contractor, Inc., Plaintiffs,
v.
JOHNSON CONTROLS FEDERAL SYSTEMS/VERSAR, LLC, and VERSAR, INC., and WESTCHESTER FIRE INSURANCE COMPANY, Defendants.

          MEMORANDUM OPINION

          SHERRY R. FALLON UNITED STATES MAGISTRATE JUDGE.

         I.INTRODUCTION [1]

         Presently before the court in this breach of contract action is a motion filed by defendants Johnson Controls Federal Systems/Versar, LLC (the "Joint Venture"), Versar, Inc. ("Versar"), and Westchester Fire Insurance Company ("Westchester") (collectively, "defendants") to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) and failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6), or alternatively to stay or transfer venue.[2] (D.I. 10) The court has jurisdiction pursuant to 28 U.S.C. §§ 1331, 1332(a), and 1367(a). For the following reasons, defendants' 12(b)(1) motion is denied, defendants' 12(b)(6) motion is granted-in-part and denied-in-part, defendants' motion to transfer venue is denied, and defendants' motion to stay is granted for a limited period.

         II. BACKGROUND

         A. Procedural History

         On June 13, 2018, plaintiffs Anthony Allega Cement Contractor, Inc. ("Allega") and the United States of America (collectively, "plaintiffs") originally filed this action against multiple defendants for money damages and a declaratory judgment. (D.I. 1) On July 18, 2018, defendants filed their pending motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6), or, in the alternative, to stay or transfer venue. (D.I. 10)

         B. Factual Background

         The Joint Venture was the prime contractor to the Department of Air Force Installation Contracting Agency ("the Government") on a public improvement project in Delaware at Dover Air Force Base, Project FJXT031005 (the "Project"). (D.I. 1 at ¶ 2) Versar was the Joint Venture's subcontractor on the Project. (Id.) Allega was a second-tier subcontractor and cement supplier to Versar. (D.I. 11 at 2) Westchester provided the required Miller Act surety bond with a penal sum of $98, 299, 269.39 that the Joint Venture furnished to the Government. (D.I. 1 at ¶ 24)

         On November 14, 2014, Versar and Allega executed Subcontract Agreement No. 009300 (the "Subcontract"). (D.I. 1 at ¶ 1) Pursuant to the Subcontract, Allega was to demolish and replace a 9, 600 foot long, 150 foot wide runway, "adjoining taxiways, airfield lighting, NAVAIDs, [3] incidental related work, and repair instrumental landing system (ILS) and runway approach lighting" at the Dover Air Force Base. (D.I. 11, Ex. A at 9; D.I. 1 at ¶ 20) Following the award of the Subcontract to Allega, the Project experienced repeated significant delays and Allega incurred costs as it attempted to get the Project back on schedule. (D.I. 1 at ¶¶ 28-29, 37, 39-41) Allega notified Versar of the problems with delays and expenses. (Id. at¶43) Allega avers in the complaint that the Joint Venture and Versar have not paid Allega additional unit costs for labor, equipment, and services. (Id. at ¶¶ 46, 54)

         C. The Subcontract

         Article 29(a) of the Subcontract includes a provision regarding disputes that mandates alternative dispute resolution ("ADR") in accordance with the prime contract's provisions, [4] as the plaintiffs' sole remedy "[t]o the extent a claim, dispute or controversy arises out of, or relates to, problems caused by Client[5] or for which Client is responsible." (D.I. 11, Ex. A at 29)[6] For disputes or controversies "not arising out of, or relating to, problems caused by Client or for which Client is responsible," Article 29(b) of the Subcontract states that:

Seller [Allega] and Buyer [Versar] will first attempt to resolve such claim, dispute or controversy at the field level through discussions between Buyer's Representative and Seller's Representative. If a claim, dispute or controversy cannot be resolved through Buyer's Representative and Seller's Representative, Buyer's Senior Representative and Seller's Senior Representative, upon the request of either party, shall meet as soon as conveniently possible, but in no case later than thirty (30) days after such a request is made, to attempt to resolve such claim dispute or controversy. Prior to any meetings between the Senior Representatives, the parties will exchange relevant information that will assist the parties in resolving the claim, dispute or controversy.[7]

(Id. at 29-30)

The Subcontract includes a forum selection clause that provides that any disputes arising from or regarding the Subcontract "will be litigated in a court of jurisdiction in the Commonwealth of Virginia." (Id. at 7, 28, 30)
Finally, the Subcontract includes a "pay-if-paid" provision, which provides that:
[i]f Client shall order any changes, including additions, reductions or deletions, in the work to be performed, [Allega] shall only be entitled to adjustments in its Subcontract Sum and the times for completion of the Work attributable to such Client directed changes and then only to the extent [Versar] actually receives such adjustments from Client.

(Id. at 18)

         D. Related Litigation

         On May 22, 2017, the Joint Venture filed suit against the Government in the United States Court of Federal Claims (the "Government Action"), seeking delay costs in connection with a six month delay in the Project "[d]ue to the contract changes directed by the Air Force."[8](D.I. 11, Ex. B at ¶¶ 14, 34-37) On June 6, 2016, the Joint Venture submitted a request for equitable adjustment to recover its delay costs from the Government, which the Government rejected. (Id. at ¶ 16) On October 5, 2016, the Government issued a final offer of $7, 549, 967, which the Joint Venture rejected. (Id. at ¶¶ 17-18) On November 18, 2016, after negotiations, the Government issued a unilateral modification, Modification 7 ("Mod 7"), in the same amount as its final offer and extended the period of performance by six months. (Id. at ¶¶ 19-20) According to the complaint in the Government Action, the Government has not explained how it calculated the amount paid under Mod 7. (Id. at ¶ 21)

         The Joint Venture alleges, "[u]pon completion of the Phase 1 and Phase 2, total Delay Costs incurred by [the Joint Venture] and its subcontractors totaled $13, 119, 015.40. Since [Mod 7] paid out $7, 549, 967.00, [the Joint Venture's] unpaid Delay Costs total $5, 569, 048.40." (Id. at ¶ 23) Thus, the Joint Venture seeks to recover the difference between the actual delay costs incurred and the adjustment received under Mod 7. (Id. at ¶¶ 35-37) The Government Action remains pending and whether the Joint Venture may recover additional delay costs has not yet been determined. (Id.)

         E. Subcontract Forum Selection

         The Subcontract mandates that "all disputes arising out of or related to [the Subcontract] shall be governed by the laws of the Commonwealth of Virginia without regard to its conflict of law principles that would apply the law of another jurisdiction . . . ." (D.I. 11, Ex. A at 28) Therefore, Virginia law is applicable to the resolution of contractual disputes in the instant case. See Pyott-Boone Elecs. Inc. v. IRR Trust for Donald L. Fetterolf Dated Dec. 9, 1997, 918 F.Supp.2d 532, 537 (W.D. Va. 2013).

         III. LEGAL STANDARD

         A. Federal Rule of Civil Procedure 12(b)(1)

         Federal Rule of Civil Procedure 12(b)(1) authorizes dismissal of a complaint for lack of jurisdiction over the subject matter, or if the plaintiff lacks standing to bring its claim. Motions brought under Rule 12(b)(1) may present either a facial or factual challenge to the court's subject matter jurisdiction. See Lincoln Ben. Life Co. v. AEI Life, LLC, 800 F.3d 99, 105 (3d Cir. 2015) (quoting Common Cause of Pa. v. Pennsylvania, 558 F.3d 249, 257 (3d Cir. 2009)). In reviewing a facial challenge under Rule 12(b)(1), the standards relevant to Rule 12(b)(6) apply. In this regard, the court must accept all factual allegations in the complaint as true, and the court may only consider the complaint and documents referenced in or attached to the complaint. See Church of Universal Bhd. v. Farmington Twp. Supervisors, 296 Fed.Appx. 285, 288 (3d Cir. 2008); Gould Elec, Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000). In reviewing a factual challenge to the court's subject matter jurisdiction, the court is not confined to the allegations in the complaint. See Mortensen v. First Fed. Sav. & Loan Ass 'n, 549 F.2d 884, 891 (3d Cir. 1977). Instead, the court may consider evidence outside the pleadings, including affidavits, depositions and testimony, to resolve any factual issues bearing on jurisdiction. See Gotha v. United States, 115 F.3d 176, 179 (3d Cir. 1997). Once the court's subject matter jurisdiction over a complaint is challenged, the plaintiff bears the burden of proving that jurisdiction exists. See Lincoln, 800 F.3d at 105; Mortensen, 549 F.2d at 891.

         B. Federal Rule of Civil Procedure 12(b)(6)

         Rule 12(b)(6) permits a party to move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering a Rule 12(b)(6) motion to dismiss, the court must accept as true all factual allegations in the complaint and view them in the light most favorable to the plaintiff. Umlandv. Planco Fin. Servs., 542 F.3d 59, 64 (3d Cir. 2008).

         To state a claim upon which relief can be granted pursuant to Rule 12(b)(6), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Although detailed factual allegations are not required, the complaint must set forth sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." BellAtl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). A claim is facially plausible when the factual allegations allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Iqbal, 556 U.S. at 663; Twombly, 550 U.S. at 555-56.

         When determining whether dismissal is appropriate, the court must take three steps.[9] See Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010). First, the court must identify the elements of the claim. Iqbal, 556 U.S. at 675. Second, the court must identify and reject conclusory allegations. Id. at 678. Third, the court should assume the veracity of the well-pleaded factual allegations identified under the first prong of the analysis, and determine whether they are sufficiently alleged to state a claim for relief. Id.; see also Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). The third prong presents a context-specific inquiry that "draw[s] on [the court's] experience and common sense." Iqbal, 556 U.S. at 663-64; see also Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). As the Supreme Court instructed in Iqbal, "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not 'show[nj' - 'that the pleader is entitled to relief" Iqbal, 556 U.S. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         C. Transfer Venue

         Section 1404(a) of Title 28 of the United States Code grants district courts the authority to transfer venue "[f]or the convenience of parties and witnesses, in the interests of justice ... to any other district or division where it might have been brought." 28 U.S.C. § 1404(a).

         "[F]orum selection clauses are presumptively valid and enforceable absent a showing by the resisting party that enforcement of the clause would be unreasonable under the circumstances." Asphalt Paving Sys., Inc. v. Gannon, 2015 WL 3648739, at *3 (D.N.J. June 11, 2015) (citing MS Bremen v. Zapata Offshore Co., 407 U.S. 1, 10 (1972)). In the Third Circuit, when facing a valid forum selection clause, a district court modifies its analysis three ways:

First, no weight is given to the plaintiffs choice of forum. Second, the court does not consider arguments about the parties' private interests. Instead, 'a district court may consider arguments about public-interest factors only.' Third, 'when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a ยง 1404(a) transfer of venue will not carry with it the original ...

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