Anchorage, a Municipal Corporation v. Integrated Concepts and Research Corporation et al

Filing 76

ORDER: denying Motion to Dismiss for Failure to State a Claim 12 . Signed by Judge Sharon L. Gleason on 03/04/2014. (AEM, CHAMBERS STAFF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA

ANCHORAGE, A Municipal Corporation,
Plaintiff,
v.
INTEGRATED CONCEPTS AND
RESEARCH CORPORATION; PND
ENGINEERS, INC.; and CH2M HILL
ALASKA, INC.,
Case No. 3:13-cv-00063-SLG
Defendants.
ORDER DENYING MOTION TO DISMISS
Before the Court at Docket 12 is a motion to dismiss filed by Defendant
Integrated Concepts and Research Corporation (“ICRC”) on April 17, 2013. At Docket
14, Defendant PND Engineers, Inc. (“PND”) joined the motion. Plaintiff Municipality of
Anchorage (“MOA”) opposed the motion, and ICRC timely replied. 1 On January 6,
2014, a few days before oral argument was scheduled, at Docket 70, Defendant CH2M
Hill Alaska, Inc. (formerly known as VECO Alaska, Inc., and referred to within this Order
as “VECO”) also joined ICRC’s motion to dismiss. Oral argument was held on January
9, 2014. 2 Shortly after, on January 15, 2014, MOA opposed VECO’s joinder to the
motion to dismiss, and VECO replied. 3 For the following reasons, the Court will deny
the motion to dismiss.

1

Docket 37 (Opp’n); Docket 45 (Reply).

2

Docket 72 (Minute Entry); Docket 75 (Transcript).

3

Docket 73 (Opp’n VECO Joinder); Docket 74 (Reply VECO Joinder).

FACTUAL BACKGROUND
The Complaint makes the following factual allegations:
The Port of Anchorage Intermodal Expansion Project (the “Project”) was
envisioned to be a multi-year infrastructure project that would replace deteriorated and
outdated facilities, expand the Port’s capacity, and increase the Port’s ability to serve
MOA, as well as the State of Alaska and U.S. military. 4 The Project was intended to be
designed to account for the seismic risk posed by the Project’s location in Anchorage,
Alaska. 5
In or about March 2003, MOA signed a Memorandum of Understanding (“MOU”)
with the Maritime Administration, a federal agency within the United States Department
of Transportation (“MarAd”), that delineated MOA and MarAd’s responsibilities with
respect to the Project’s funding and administration. 6 MOA, as the Project owner, was to
focus on programmatic needs. 7 MarAd was to provide specialized technical expertise,
including the Project’s design and construction. 8
In May 2003, MarAd first contracted with Koniag Services Inc., and by novation in
2004 with ICRC (the “2003 Contract”), for ICRC to “among other things, provide
program management, design-build and related procurement services” for the Project’s

4

Docket 2-2 at 9 ¶ 11 (Compl.).

5

Docket 2-2 at 9 ¶¶ 12-13 (Compl.).

6

Docket 2-2 at 9 ¶ 14 (Compl.).

7

Docket 2-2 at 10 ¶ 17 (Compl.); Docket 2-12 at 5 (MOU).

8

Docket 2-2 at 10 ¶ 15 (Compl.).

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administration, design, and construction. 9 The 2003 Contract included a Statement of
Work, which described in broad terms ICRC’s Project responsibilities, which included
design responsibilities, as well as construction, management, and oversight
responsibilities. 10 The Complaint alleges that “MOA relied upon MarAd to contract with,
and oversee, ICRC’s administration of the overall Project.” 11

The Complaint also

alleges that “[t]he 2003 Contract . . . made ICRC liable for all damages to persons or
property occurring as a result of ICRC’s fault or negligence.” 12
ICRC subcontracted with PND to assist in preparing “a bid-ready project design
assembly for the North Waterfront project, preliminary engineering services, and
separate bid-ready project design assemblies for follow-on construction projects.”13 The
subcontract noted that PND’s proprietary Open-Cell-Sheet-Pile Structure (“OCSP”) had
been selected for the Project. 14 PND subcontracted with VECO for technical support
and technical reviews. 15 The Complaint alleges that “MOA relied upon ICRC (and its

9

Docket 2-2 at 10-11 ¶ 19 (Compl.); Docket 2-8 (2003 Contract).

10

Docket 2-2 at 11-12 ¶¶ 20-21 (Compl.).

11

Docket 2-2 at 10 ¶ 15 (Compl.).

12

Docket 2-2 at 12 ¶ 22 (Compl.). The Complaint includes a similar allegation with respect to
the 2008 Contract, discussed infra. See Docket 2-2 at 16 ¶ 39 (“Like its 2003 counterpart, the
2008 MarAd-ICRC Contract made ICRC liable for all damages to persons or property occurring
as a result of ICRC’s fault or negligence.”).
13

Docket 2-2 at 14 ¶¶ 28-29 (Compl.).

14

Docket 2-2 at 14 ¶ 31 (Compl.).

15

Docket 2-2 at 15 ¶¶ 35-37(Compl.).

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consultants and their sub-consultants) for . . . analysis and validation of the OCSP
design recommended by ICRC.” 16
In July 2008, MarAd awarded another contract to ICRC (the “2008 Contract”) to
continue performance of program management and design-build related to the
Project. 17 The 2008 Contract expressly states that MOA and the Port are third-party
beneficiaries to the contract. 18
The Complaint contains detailed assertions that the work performed by ICRC,
PND, and other subcontractors was plagued with a variety of problems. 19 Some of
these problems are summarized in a “Suitability Study,” issued in February 2013 by
CH2M Hill, Alaska, Inc., which had been engaged by the United States Army Corps of
Engineers through agreement with MarAd. 20 The Suitability Study “detail[ed] various
deficiencies in the Project’s administration, design, and construction” that the Complaint
alleges are attributable to the Defendants. 21 MOA alleges that as of the time it filed its
lawsuit, “the Project work [wa]s . . . on hold,” and that “the completion date for the
Project ha[d] been significantly pushed back.” 22

16

Docket 2-2 at 26 ¶ 88 (Compl.).

17

Docket 2-2 at 15-16 ¶ 38 (Compl.).

18

Docket 2-2 at 16-17 ¶ 40 (Compl.); Docket 2-9 at 7 (2008 Contract).

19

Docket 2-2 at 28-44 ¶¶ 98-189 (Compl.).

20

Docket 2-2 at 45-47 ¶¶ 200-204 (Compl.).

21

Docket 2-2 at 47 ¶ 204 (Compl.).

22

Docket 2-2 at 45 ¶¶ 198-99 (Compl.).

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MOA’s Complaint asserts six causes of action: (1) breach of contract by ICRC;
(2) professional negligence by ICRC; (3) negligence by ICRC; (4) professional
negligence by PND; (5) negligence by PND; and (6) professional negligence by
VECO. 23 ICRC moves to dismiss this action on three alternative bases: (1) pursuant to
Federal Rule of Civil Procedure 12(b)(1), asserting that ICRC is protected by derivative
sovereign immunity; (2) with respect to the breach of contract claim, pursuant to Federal
Rule of Civil Procedure 12(b)(6), asserting that MOA has failed to state a claim upon
which relief can be granted because MOA was not an intended third-party beneficiary to
the 2003 and 2008 Contracts between MarAd and ICRC; and (3) pursuant to Federal
Rule of Civil Procedure 12(b)(7), asserting that MOA failed to join the United States,
which ICRC asserts is an indispensible party. 24 As noted above, Defendants PND and
VECO joined ICRC’s motion. 25
DISCUSSION
I. ICRC’s Motion to Dismiss Pursuant to Rule 12(b)(1): Derivative Sovereign
Immunity.
ICRC asserts that the Court should dismiss this action under principles of
derivative sovereign immunity because ICRC did not exceed the scope of authority
validly conferred upon it through the MarAd contracts. 26 MOA disagrees, asserting that

23

Docket 2-2 at 47-53 ¶¶ 205-236 (Compl.).

24

Docket 12 (Mot.).

25

See Docket 14 (PND Joinder); Docket 70 (VECO Joinder). This Order focuses on facts and
legal analysis pertinent to ICRC. To the extent that ICRC’s arguments are applicable to the
other Defendants, the Court’s reasoning would not differ.

26

Docket 12 at 8-9 (Mot.).

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ICRC’s independent, negligent acts caused MOA’s damages—not any directives from
MarAd—and thus derivative sovereign immunity is inapplicable. 27
A. Review of a Rule 12(b)(1) Motion to Dismiss. 28
Federal Rule of Civil Procedure 12(b)(1) allows a party to seek dismissal of a
complaint for lack of subject-matter jurisdiction.

Challenges to subject matter

jurisdiction can take two forms, facial or factual. The parties here agree that ICRC is
making a facial challenge. 29 In a facial challenge to subject matter jurisdiction, “the
challenger asserts that the allegations contained in a complaint are insufficient on their
face to invoke federal jurisdiction.” 30

“Whether subject matter jurisdiction exists

therefore does not depend on resolution of a factual dispute.”31 Rather, the allegations
in the complaint are “assume[d] . . . to be true and [the court] draw[s] all reasonable
inferences in [plaintiff’s] favor.” 32

27

Docket 37 at 13-14 (Opp’n).

28

Although ICRC characterizes the portion of the motion to dismiss on grounds of sovereign
immunity as a Rule 12(b)(1) motion, see Docket 12 at 1, 7-13 (Mot.), and MOA does not dispute
this characterization, see Docket 37 at 4, 15-26 (Opp’n), the motion may be more appropriately
considered under another portion of Rule 12. See infra, notes 52 and 77.

29

Docket 12 at 7-8 and n.2 (Mot.); Docket 37 at 16 (Opp’n).

30

Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir. 2004) (quoting Safe Air for Everyone v.
Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004)).
31

Wolfe, 392 F.3d at 362.

32

Id. at 362 (citing Fed. R. Civ. P. 12(b)(1) and cases); see also Doe v. Schachter, 804 F.Supp.
53, 56-57 (N.D. Cal. 1992) (“Where there is a facial attack on the court’s subject matter
jurisdiction . . . the plaintiff enjoys safeguards akin to those applied when a Rule 12(b)(6) motion
is made.” (internal citation omitted)).
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B. Discussion.
The Complaint makes a number of allegations to support MOA’s assertion that
ICRC breached its 2003 and 2008 Contracts with MarAd, and that ICRC, PND, and
VECO acted negligently:
•

•

The Complaint describes various problems with the Project (e.g., problems
with armor rock, dredging, dike construction, driving the piles, wye piles), and
asserts that “[m]any issues that impacted the Project work are indicative of
the lack of Project oversight, quality control, and quality assurance methods in
place on the Project; issues for which ICRC and PND were responsible.” 34

•

The Complaint alleges that ICRC and PND should have been aware of
certain problems with the Project in 2008, but failed to take investigative
action until 2010. 35

•

33

The Complaint alleges that the 2003 and 2008 Contracts required ICRC “to
provide a constructability review of various design documents,” including
PND’s OCSP design, and asserted that “[u]pon information and belief . . .
neither ICRC nor PND performed a constructability review,” and if it was
performed, “it was clearly performed in a negligent manner.” 33

MOA alleges that ICRC acted negligently in “administering, designing, and
constructing the Project . . . and otherwise failing to perform its duties with the
requisite degree of care that a reasonably prudent, skilled, and qualified
professional would exercise under the circumstances.” 36 The Complaint
provides examples of the alleged negligent conduct. For instance, MOA
asserts that ICRC reviewed PND’s OCSP design and ultimately
recommended the selection of that design for the Project; 37 and that “ICRC
put PND in charge of supervising, directing, and inspecting the OCSP work,”

Docket 2-2 at 17, 32 ¶¶ 42-43, 124 (Compl.).

34

Docket 2-2 at 29-33 ¶¶ 99-104 (armor rock), 105-106 (dredging), 110-118 (dike construction),
118-123 (driving piles), 127-130 (wye piles), 131.
35

Docket 2-2 at 35 ¶ 141 (Compl.).

36

Docket 2-2 at 48, 49 ¶¶ 214, 219 (Compl.).

37

Docket 2-2 at 17-18, 24, 26 ¶¶ 44-45, 77-78, 84 (Compl.).

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but that PND “was unwilling to admit or acknowledge that there were
problems with PND’s [OCSP] design and its prescriptive requirements.” 38
•

MOA alleges that PND acted negligently in “designing and administering the
construction of the Project.” 39 For example, the Complaint alleges that PND
provided a report stating that OCSP was appropriate for the Project. 40 But as
noted above, the Complaint details various problems with OCSP.

•

MOA alleges that VECO acted negligently in “performing its design services
. . . and otherwise failing to perform its duties with the requisite degree of care
that a reasonably prudent, skilled, and qualified professional would exercise
under the circumstances.” 41 For example, the Complaint asserts that VECO
provided a stability analysis report that concluded that the PND OCSP system
was suitable for use at the Project site. 42

ICRC has asserted that irrespective of these allegations, the Complaint does not
specifically allege that ICRC exceeded the authority that had been conferred on it by the
federal government under the 2003 and 2008 Contracts. 43 ICRC further asserts that
derivative sovereign immunity should apply to preclude MOA’s suit against ICRC
because, despite MOA’s listing of various concerns with the Project, “there is no
suggestion in the complaint that MARAD ever rejected ICRC’s contract work or
otherwise asserted that ICRC failed to perform in compliance with its contractual
requirements.” 44 Instead, ICRC notes that the Complaint itself maintains that ICRC was

38

Docket 2-2 at 18 ¶ 47 (Compl.).

39

Docket 2-2 at 50, 51 ¶¶ 224, 229 (Compl.).

40

Docket 2-2 at 26 ¶¶ 85-86 (Compl.).

41

Docket 2-2 at 52 ¶ 234 (Compl.).

42

Docket 2-2 at 25-26 ¶¶ 80-83 (Compl.).

43

See Docket 12 at 8-9 (Mot.); Docket 75 at 5-6, 28, 29-30 (Transcript).

44

Docket 12 at 6-7 (Mot.).

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acting only at the direction of MarAd and cites to portions of the Complaint, including the
following allegations:
•

“MOA relied upon MarAd to contract with, and oversee, ICRC’s administration
of the overall Project.” 45

•

ICRC “sought and received MarAd’s approval to engage PND for the
oversight role.” 46

The parties each cite to numerous cases that discuss derivative sovereign
immunity and its exceptions.

ICRC’s motion cites primarily Yearsley v. W.A. Ross

Construction Co., a 1940 Supreme Court decision; Ackerson v. Bean Dredging LLC, a
2009 Fifth Circuit decision; Gomez v. Campbell-Ewald Company, an unreported 2013
decision from the Central District of California; and Filarsky v. Delia, a recent Supreme
Court decision considering qualified immunity in a 42 U.S.C. § 1983 case. 47 MOA’s
opposition distinguishes the cases relied upon by ICRC, and cites to other cases,
including Cabalce v. VSE Corporation, a 2013 decision from the District Court for the
District of Hawaii and In re Fort Totten Metrorail Cases (“Fort Totten”), a 2012 decision
from the District Court for the District of Columbia. 48 While each of these cases is
instructive, none is directly on point.

45

Docket 2-2 at 10 ¶ 15 (Compl.) (as discussed in Docket 12 at 6 (Mot.)); see also Docket 75 at
9 (Transcript).
46

Docket 2-2 at 17-18 ¶ 45 (Compl.) (as discussed in Docket 12 at 6 (Mot.)).

47

See Docket 12 at 8-12 (Mot.) (discussing Yearsley v. W.A. Ross Constr. Co., 309 U.S. 18
(1940); Ackerson v. Bean Dredging LLC, 589 F.3d 196 (5th Cir. 2009); Gomez v. CampbellEwald Co., No. CV 10-02007, 2013 WL 655237 (C.D. Cal. Feb. 22, 2013); Filarsky v. Delia, 132
S.Ct. 1657 (2012)).

48

See Docket 37 at 18-25 (Opp’n) (discussing Cabalce v. VSE Corp., 922 F.Supp.2d 1113 (D.
Hawaii 2013), appeal docketed, No. 13-15256 (9th Cir. Feb. 11, 2013); Fort Totten, 895
F.Supp.2d 48, 73 (D.D.C. 2012)).
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In Yearsley, the Supreme Court considered whether a private contractor that was
building river dikes at the direction of the United States Army Corps of Engineers could
be held liable for a “taking” of plaintiff landowners’ land when the dikes caused erosion
to the plaintiffs’ property.

After reviewing the evidence in the record, the Court

concluded that it was “undisputed that the work which the contractor had done in the
river bed was all authorized and directed by the Government of the United States.”49 As
such, the Court determined that the private contractor could not be held liable because
“if this authority to carry out the project was validly conferred, that is, if what was done
was within the constitutional power of Congress, there is no liability on the part of the
contractor for executing its will.” 50 And yet the Supreme Court in Yearsley specifically
left open the possibility that the private landowners could obtain compensation from the
government had there been an unconstitutional taking without just compensation. 51
Thus, this Court does not construe Yearsley to involve derivative sovereign immunity. 52
Rather, it is a case that accords protection from suit to a private contractor when it is
acting solely at the government’s authority and direction, while expressly recognizing
the potential liability of the government itself. 53

49

Yearsley, 309 U.S. at 20 (internal quotation omitted).

50

Id. at 20-21.

51

Id. at 21.

52

Cf. Ackerson, 589 F.3d at 207 (in context of determining that a Yearsley defense would not
be jurisdictional in nature, noting that Yearsley “does not discuss sovereign immunity”).
53

Indeed, Yearsley could be read as simply acknowledging a basic rule of agency: “[T]here is
no ground for holding [the government] agent liable who is simply acting under . . . authority . . .
validly conferred. The action of the agent is ‘the act of the government.’” In Yearsley, the
Supreme Court also noted that this principle had been applied in the patent context, explaining
that “the statute providing compensation for the use by the Government of patented inventions
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In Ackerson, the Army Corps of Engineers contracted with defendant contractors
to dredge the Mississippi River. Local residents, whose property was damaged in a
hurricane, later sued the private contractors, alleging that the dredging had caused
damage, which amplified the hurricane’s storm surge. The Fifth Circuit affirmed a Rule
12(b)(1) and 12(c) dismissal with prejudice of claims against the defendant contractors
on the basis of “government-contractor immunity,” concluding the “complaints le[ft] no
doubt that the Contractor Defendants were executing Congress’s will in dredging” the
river. 54

And while the plaintiffs did claim negligence, that claim focused on the

government’s policy to undertake the dredging and “not any separate act of negligence
by the Contractor Defendants.” 55 Here, in contrast, MOA is not asserting that ICRC was
simply executing MarAd’s policy with respect to the OCSP design and other acts.
Instead, MOA asserts that it was the Defendants’ specific acts (or failures to act) that
caused the alleged harms. 56

without license of the owner” would “relieve the contractor from liability of every kind ‘for the
infringement of patents in manufacturing anything for the government,’” while at the same time
insuring “complete compensation by the Government.” Id. at 21-22. But see Ackerson, 589
F.3d at 204 (The Fifth Circuit has “never held that Yearsley requires a common-law agency
relationship between the government and a contractor.”). See also In re Hanford Nuclear
Reserv. Litig., 534 F.3d 986, 1000 (9th Cir. 2007) (The Yearsley “Court limited the applicability
of the defense to principal-agent relationships where the agent had no discretion in the design
process and completely followed government specifications.”).
54

Ackerson, 589 F.3d at 207.

55

Id.; see also id. at 209 (“[T]he factual allegations in the remainder of the original complaint go
to the alleged damage from the existence and state of the [river], not the Contractor Defendants’
activities in maintaining it.”).
56

See, e.g., Docket 2-2 at 12-13, 17-18, 24-26, 29-33, 35, 48-52 ¶¶ 24, 42-45, 47, 77-78, 80,
83-86, 99-106, 110-124, 127-131, 141, 214, 219, 224, 229, 234 (Compl.).
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In Gomez, the District Court for the Central District of California granted a
government contractor’s motion for summary judgment, concluding that the contractor,
an advertising agency, was entitled to derivative sovereign immunity in a lawsuit in
which the plaintiff alleged a violation of the Telephone Consumer Protection Act (TCPA)
in connection with text messages sent as part of military recruitment efforts. 57 The court
first noted that the United States was immune from liability for violations of the TCPA. 58
The court then held that the immunity should extend to the private contractor, as the
plaintiff “point[ed] to no evidence indicating that [the contractor] exceeded the scope of
its authority to send the text message at issue.” 59 Rather, the court noted that the
contractor had presented “uncontroverted evidence” that the government “worked
closely” with the defendant contractor on the text message recruitment campaign. 60 In
contrast to Gomez, here, MOA’s Complaint infers that MarAd played a less active role,
and that it was the Defendants, not the government, that were responsible for the
design and construction problems that arose. 61
ICRC also cites to the Supreme Court decision in Filarsky v. Delia. 62 In that
case, Filarsky, a private lawyer with
57

Gomez, 2013 WL 655237, at *4.

58

Id.

59

Id. at *5.

60

experience conducting internal affairs

Id. at *6.

61

See, e.g., Docket 2-2 at 10 ¶ 17 (Compl.) (MarAd charged with “technical aspects, the
ultimate design and construction of the Project, [and] administration of the design and
construction,” for which it contracted with ICRC); see also Docket 2-2 at 11-12, 33, 46-47 ¶¶ 20,
21, 131, 204 (Comp.).

62

Filarsky v. Delia, 132 S.Ct. 1657 (2012).

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investigations, was temporarily retained by a city government to investigate a city
employee. Filarsky worked “in close coordination with public employees” in conducting
the investigation. 63 The city employee sued Filarsky for civil rights violations under 42
U.S.C. § 1983. Filarsky moved for summary judgment, asserting that he was entitled to
qualified immunity.

The Supreme Court held that Filarsky could invoke qualified

immunity, first explaining there was “no dispute that qualified immunity [wa]s available
for the sort of investigative activity at issue.” 64 The Court then reasoned that there was
no basis not to accord that qualified immunity to a person whom the government
retained to conduct its work on a temporary basis, when that immunity was available to
permanent government employees. 65
ICRC directs the Court to the following statement in Filarsky concerning the
policy underlying immunity:
[I]mmunity protects government’s ability to perform its traditional functions
. . . by helping to avoid unwarranted timidity in performance of public
duties, ensuring that talented candidates are not deterred from public
service, and preventing the harmful distractions from carrying out the work
of government that can often accompany damages suits. 66
But in Filarsky, the Supreme Court was considering the extension of qualified immunity
to a temporary government worker in a section 1983 action, who was working “in close
coordination” with permanent employees. This Court is not persuaded that Filarsky and

63

Id. at 1666.

64

Id. at 1662.

65

Id. at 1667-68.

66

Docket 12 at 11 (Mot.) (quoting Filarsky, 132 S.Ct. at 1665 (internal citations, quotations, and
alterations omitted)).
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the policy it recognizes are helpful in determining the applicability of derivative
sovereign immunity to a government contractor that is alleged to have negligently
performed acts that are separate from the government’s role in a construction project.
In its opposition to the motion to dismiss, MOA cites Cabalce v. VSE
Corporation. 67

In Cabalce, several employees of the defendant government

subcontractor were killed when handling a cache of government-seized fireworks. The
plaintiffs initially sued in state court. The defendant then removed the case to federal
court. The plaintiffs moved to remand, and the defendant asserted federal jurisdiction
under the federal officer removal statute, which requires a defendant to demonstrate a
colorable federal defense.

In that context, the defendant attempted to assert a

colorable defense of derivative sovereign immunity. 68

67

Docket 37 at 19-20, 24-25 (Opp’n) (discussing Cabalce, 922 F.Supp.2d 1113). MOA also
cites Myers v. United States, 323 F.2d 580, 581 (9th Cir. 1963) and Merritt, Chapman & Scott
Corp. v. Guy F. Atkinson Co., 295 F.2d 14 (9th Cir. 1961). See Docket 37 at 19, 21-22, 25
(Opp’n). Myers concluded, after a trial, that a government contractor could not be liable for
“work performed . . . under its contract with the Bureau of Public Lands, and in conformity with
the terms of said contract.” Myers, 323 F.2d at 584 (citing Yearsley, 309 U.S. 18). Myers is not
particularly instructive with respect to the motion to dismiss before this Court because it was
decided on a complete trial record. Merritt similarly evaluated a “government contract defense”
after trial, rather than derivative sovereign immunity on a motion to dismiss. Merritt, 295 F.2d at
16. In Merritt, the court declined to extend a government contract defense to a contractor that
was alleged to have acted negligently. Id. (nothing in the contract nor circumstances
“convince[d the court] that [the contractors] were required by any government directive or
authority to do that which was charged against them as negligent acts”). Merritt’s government
contract defense analysis pre-dates Boyle, the leading case on that defense. Various courts
have recognized the interplay between the two defenses, but many courts find the distinction
imprecise. See, e.g., Cabalce, 922 F.Supp.2d at 1123 (compiling cases and stating
“[s]pecifically, it is unclear whether a ‘derivative sovereign immunity defense’ (or a ‘shared
immunity defense’) derived from Yearsley is truly distinct from a ‘government contractor
defense’ derived from Boyle.”).
68

Cabalce, 922 F.Supp.2d at 1125; see also Docket 67 at 10-11 (Order on Motion to Remand
and Related Motions) (discussing Cabalce).
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The District Court for the District of Hawaii analyzed the claim under Yearsley
and its progeny. 69

The court cited Fort Totten and concluded that government

contractor immunity is subject to two limitations: (1) the Yearsley doctrine may apply
only if “the contractor was following the sovereign’s directives”; and (2) “derivative
sovereign immunity is not available to contractors who act negligently in performing their
obligations under the contract.”70 With those limitations in mind, the court concluded
that the defendant could not demonstrate a colorable defense of derivative sovereign
immunity because the defendant “was not simply ‘following the sovereign’s directives,’”
but was an independent contractor that “developed and implemented the fireworks
destruction plan (albeit with government approval.).” 71

The court further found that

defendant lacked a colorable claim for derivative sovereign immunity because the
defendant “was allowed to exercise discretion in determining how the task should be
accomplished,” and that any harm could be traced to the “contractor’s independent
decision to perform the task in an unsafe manner.” 72
Cabalce provides a well-reasoned, thoughtful analysis of precedent from various
jurisdictions. 73 But this Court is tasked with answering a different question than the one
before the Cabalce court: In Cabalce, the court was asked to determine whether, based
69

Cabalce, 922 F.Supp.2d at 1125.

70

Id. at 1125 (discussing Fort Totten, 895 F.Supp.2d at 73); see also Hanford, 534 F.3d at
1000 (discussing government contractor defense, but noting “Yearsley [did not] extend[]
immunity to military contractors exercising a discretionary governmental function”).

71

Id. at 1126.

72

Id. at 1127 (internal quotations omitted).

73

Cabalce is currently on appeal before the Ninth Circuit. See Cabalce, 922 F.Supp.2d 1113,
appeal docketed, No. 13-15256 (9th Cir. Feb. 11, 2013).
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upon the record, the defendant had asserted a colorable defense of derivative
sovereign immunity for purposes of federal jurisdiction; otherwise, the case would be
remanded to state court. In contrast, here, the Court is asked to determine whether,
drawing all inferences from the Complaint in MOA’s favor, the allegations conclusively
demonstrate that ICRC is entitled to derivative sovereign immunity and dismissal of the
action.
ICRC asserts that dismissal on this basis is warranted, largely because the
Complaint does not specifically allege that ICRC exceeded its authority under its
contracts with MarAd. 74 But to dismiss for failure to allege those precise words would
elevate form over substance. 75

And although several allegations in the Complaint

suggest that MarAd exercised some oversight over ICRC, other allegations assert
ICRC’s independent discretion and negligence. 76 Thus, the Complaint does not, on its
face, demonstrate ICRC’s entitlement to dismissal of this action based on derivative
sovereign immunity. 77
74

See Docket 12 at 8-9 (Mot.); Docket 75 at 5-6, 28, 29-30 (Transcript).

75

Because MOA filed this litigation in state court, it arguably lacked notice that it must plead
these allegations.
76

Compare Docket 2-2 at 10, 17-18 ¶¶ 15, 45 with Docket 2-2 at 12-13, 17-18, 24-26, 29-33,
35, 48-52 ¶¶ 24, 42-45, 47, 77-78, 80, 83-86, 99-106, 110-124, 127-131, 141, 214, 219, 224,
229, 234.

77

Cf. Al Shimari v. CACI Int’l, Inc., 679 F.3d 205, 218 (4th Cir. 2012) (in concluding district
court decisions denying federal contractor defendants’ motions to dismiss on grounds of
derivative sovereign immunity were not reviewable, noting that derivative sovereign immunity is
more a defense to liability than a pure immunity from suit); Contango Operators, Inc. v. United
States, -- F.Supp.2d --, 2013 WL 4459065, at *15 (S.D. Texas Aug. 15, 2013) (denying
government contractor motion for summary judgment where defendant “[wa]s alleged to have
acted negligently in performing the dredging activities, the subject of the government contract”);
Bixby v. KBR, Inc., 748 F.Supp.2d 1224 (D. Oregon 2010) (denying motion to dismiss for lack of
subject matter jurisdiction based on defenses, including government contractor defense).
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II. ICRC’s Motion to Dismiss Pursuant to Rule 12(b)(7): Rule 19.
ICRC alternatively asserts that this case should be dismissed pursuant to
Federal Rule of Civil Procedure 19 because MarAd is a necessary party and cannot be
joined in this forum. 78 ICRC maintains that MarAd is necessary because it was a party
to the contracts between MOA and MarAd; because failure to join MarAd might result in
unnecessary and repetitive litigation; and because the 2003 and 2008 Contracts are
“cost-reimbursement contracts,” which could require that MarAd reimburse ICRC for any
legal costs incurred in defending this litigation. 79 MOA responds that MarAd is not a
necessary party because: “1) ICRC has released any and all claims it has against
MarAd, including claims for attorneys’ fees and costs; 2) the terms of the 2003 Contract
and 2008 Contract make ICRC liable for any damages caused due to ICRC’s fault or
negligence and ICRC cannot recover costs incurred to defend litigation arising from its
breach of the contracts with MarAd; and 3) the negligence and professional negligence
claims asserted against ICRC are unrelated to the 2003 Contract and 2008 Contracts,
and MarAd has no obligation to indemnify ICRC for ICRC’s own negligence.” 80

78

Rule 19 was revised in 2007, and”[t]he Rules Committee advised the changes were stylistic
only . . . . [T]he word ‘required’ replaced the word ‘necessary’ in [Rule 19](a).” Philippines v.
Pimentel, 553 U.S. 851, 855 (2008). The terms “required” and “necessary” are used
interchangeably in this Order.
79

Docket 12 at 13-23 (Mot.).

80

Docket 37 at 31 (Opp’n).

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A. Review of a Rule 12(b)(7) Motion to Dismiss.
Federal Rule of Civil Procedure 19 requires that a court conduct a three-step
analysis to determine whether joinder of an absent person is required. 81 First, a court
evaluates whether the absent person is required or necessary to the action. A person
may be necessary in three different ways: (1) under Rule 19(a)(1)(A), if “in that person’s
absence, the court cannot accord complete relief among [the] existing parties”; or (2)
under Rule 19(a)(1)(B)(i), if that person claims an interest in the action and a decision
issued in its absence may “impair or impede [its] ability to protect the interest”; or (3)
under Rule 19(a)(1)(B)(ii), if that person claims an interest in the action and a decision
issued in its absence may “leave an existing party subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent obligations.” 82 If the party is found
to be necessary, the court next determines whether joinder is feasible. 83 Finally, if
joinder is not feasible, the court evaluates whether “equity and good conscience” require
that the litigation proceed among the existing parties. 84 In determining whether equity
and good conscience require that the litigation proceed, the court considers the four
Rule 19(b) factors. 85 A Rule 19 inquiry is “a practical one and fact specific.”86 On a

81

Salt River Project Agric. Improvement & Power Dist. v. Lee, 672 F.3d 1176, 1179 (9th Cir.
2012); see also Dawavendewa v. Salt River Project Agric. Improvement & Power Dist., 276 F.3d
1150, 1154-55 (9th Cir. 2002).
82

Fed. R. Civ. P. 19; Lee, 672 F.3d at 1179.

83

Lee, 672 F.3d at 1179.

84

Fed. R. Civ. P. 19(b); see also Lee, 672 F.3d at 1179.

85

Fed. R. Civ. P. 19(b). The four factors are: “(1) the extent to which a judgment rendered in
the person’s absence might prejudice that person or the existing parties; (2) the extent to which

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Rule 12(b)(7) motion to dismiss for failure to join an indispensible party, “[t]he moving
party has the burden of persuasion in arguing for dismissal.”87 The court “accept[s] as
true the allegations in [p]laintiff’s complaint and draw[s] all reasonable inferences in
[p]laintiff’s favor. 88
B. Discussion.
The Court turns to the three-part Rule 19 analysis.
1. MarAd is Not Required under Rule 19(a)(1)(A).
Pursuant to Rule 19(a)(1)(A), a party is required if “in that person’s absence, the
court cannot accord complete relief among existing parties.” Relief is “complete” where
it is “meaningful relief as between the parties.” 89 Here, the parties’ arguments focus on
whether MarAd might be required to reimburse ICRC for litigation costs associated with
this action.

ICRC appears to argue that because MarAd might be obligated to

reimburse ICRC for legal costs, the Court cannot accord complete relief with respect to
ICRC without MarAd’s presence. 90 MOA responds that through the September 28,
2012 Negotiated Contract Adjustment Agreement between ICRC and MarAd (the

any prejudice could be lessened or avoided . . . ; (3) whether a judgment rendered in the
person’s absence would be adequate; and (4) whether the plaintiff would have an adequate
remedy if the action were dismissed for nonjoinder.”
86

Makah Indian Tribe v. Verity, 910 F.2d 555, 558 (9th Cir.1990).

87

Id. (citing Sierra Club v. Watt, 608 F. Supp. 305, 312 (E.D. Cal. 1985)).

88

Paiute-Shoshone Indians of the Bishop Cmty. v. Los Angeles, 637 F.3d 993, 996 n.1 (9th Cir.
2011).
89

Alto v. Black, 738 F.3d 1111, 1126 (9th Cir. 2013) (quoting Disabled Rights Action Comm. v.
Las Vegas Events, Inc., 375 F.3d 861, 879 (9th Cir. 2004) (emphasis in original)).
90

Docket 12 at 16-18 (Mot.); Docket 45 at 16 (Reply).

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“Release”), “ICRC has released any and all claims it has against MarAd, including
claims for attorneys’ fees and costs.” 91 MOA further asserts that regardless of how the
Release is interpreted, ICRC could not seek reimbursement for litigation costs to the
extent that those costs arise from ICRC’s alleged negligence, which MOA contends is
“unrelated to the 2003 and 2008 Contracts.” 92 ICRC responds that MOA misinterprets
the Release, and that regardless of the interpretation, ICRC could seek reimbursement
on unrelated claims. 93
The Court concludes that MarAd is not a required party because the Court can
afford “complete relief” to the current parties, as between them, without MarAd’s
presence. 94 The Court recognizes that the parties disagree concerning ICRC’s rights to
pursue reimbursement of litigation costs from MarAd. The Court does not and need not
resolve that dispute, at least at this juncture. 95

Stated differently, ICRC has not

demonstrated that the fact that ICRC asserts a potential right to recover its litigation
costs from the government makes the government’s presence required in this litigation.

91

Docket 37 at 31-32 (Opp’n). ICRC does not dispute that the Court may take judicial notice of
the existence of the Release. Docket 45 at 3, n.1 (Reply).
92

Docket 37 at 31, 33, 35 (Opp’n).

93

Docket 45 at 16-17 (Reply); Docket 37-1 at 3 (9/28/12 Negotiated Contract Adjustment
Agreement between ICRC and MarAd). ICRC asserts the Release reserves the rights and
liabilities of MarAd and ICRC with respect to “the final audit and close out of the Contracts
unrelated in any way to the released claims . . . .”
94

See Alto, 738 F.3d at 1126.

95

In contrast to Boeing N. Am., Inc. v. Roche, discussed by the parties, the question of
allowable legal costs is not before this Court. 298 F.3d 1274 (Fed. Cir. 2002) (discussing
allowability of legal costs in shareholder derivative lawsuit).
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Case law supports the conclusion that MarAd is not a necessary party in these
circumstances. 96 For example, in Hurley v. Horizon Project, Inc., the District Court for
the District of Oregon evaluated whether the State of Oregon, an alleged joint tortfeasor,
was a necessary party to the litigation. In analyzing whether joinder was required under
Rule 19(a)(1)(A), the court concluded that “it is not necessary for all joint tortfeasors to
be named as defendants in a single lawsuit.” 97 Several cases analyzing Rule 19(b)
(i.e., considering the four Rule 19(b) factors) have similarly concluded that contribution
and indemnity are not legitimate reasons so as to require joinder. For instance, in
Gardiner v. Virgin Islands Water & Power Authority (“WAPA”), the Third Circuit
evaluated whether the United States was a necessary party in an action brought by a
securities services provider against WAPA. 98

The Third Circuit did not specifically

evaluate whether the United States was a necessary party under Rule 19(a)(1)(A), but
concluded that the case could proceed without the United States under the Rule 19(b)
equitable factors because “a defendant’s right to contribution or indemnity from an
absent non-diverse party does not render that absentee indispensible pursuant to Rule

96

ICRC also asserts that MarAd is the “real party” because it bore “ultimate responsibility for
making the decisions that form the bases of the Municipality’s complaint.” Docket 12 at 18
(Mot.) (discussing Grasso v. U.S. Postal Service, 438 F.Supp. 1231, 1235 (D. Conn. 1977)).
The Court finds this argument unpersuasive because the Grasso court ultimately found that the
United States was a necessary party because the named defendant had acted “only in the
name of the United States.” Id. In contrast, here, MOA’s Complaint alleges that ICRC acted
with discretion and negligently, i.e., not merely in the name of MarAd. Furthermore, if ICRC
proceeds with this “real party” line of defense, ICRC would likely not be prejudiced by MarAd’s
absence. Cf. Hurley v. Horizon Project Inc., No. 08-cv-1365-ST, 2009 WL 5511205, at *8 (D.
Oregon Dec. 3, 2009) (“Because the State will not be present to defend itself, it is difficult to
understand how its absence will prejudice the county defendants.”).
97

Hurley, 2009 WL 5511205, at *7 (quoting Temple v. Synthes Corp., 498 U.S. 5, 7 (1990)).

98

Gardiner v. Virgin Islands Water & Power Auth., 145 F.3d 635, 640 (3d Cir. 1998).

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19.” 99 The court found relevant that, although “a less convenient . . . remedy,” WAPA
could separately bring an action for indemnity against the United States. 100 Although
Gardiner was decided under Rule 19(b), it supports a conclusion that MarAd’s potential
financial interest does not render it indispensible. 101
2. MarAd is Not Required under Rule 19(a)(1)(B).
Pursuant to Rule 19(a)(1)(B), a person is required if “that person claims an
interest” in the litigation and proceeding without that person might impair the person’s
ability to protect that interest or leave another party subject to risk of substantial or
inconsistent obligations. MarAd is not a required party under Rule 19(a)(1)(B)(i) or (ii)
because MarAd, which is aware of this litigation, 102 has not claimed an interest in the
litigation. 103
99

Id. at 641 (quoting Janney Montgomery Scott, Inc. v. Shepard Niles, Inc., 11F.3d 399, 412
(3d Cir. 1993)).
100

Id. at 642; see also Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 829 (1989)
(because absent party is jointly and severally liable with named parties does not mean absent
party is indispensible); Cachil Dehe Band of Wintun Indians v. California, 547 F.3d 962, 971 (9th
Cir. 2008) (“The mere fact that the outcome of Colusa’s litigation may have some financial
consequences for the non-party tribes is not sufficient to make those tribes required parties.”);
Yates v. Delano Retail Partners, LLC, No. C 10-3073, 2012 WL 1094444 (N.D. Cal. Mar. 29,
2012) (“possible existence of an indemnification agreement does not make [the indemnifying
party] an indispensable party”).
101

Gardiner, 145 F.3d at 641. That MOA also asserts negligence claims against the
Defendants that it maintains are independent of the MarAd contracts also supports a finding that
MarAd is not a necessary party.
102

It appears that a representative from MarAd was present at the January 9, 2013 oral
argument. See Docket 75 at 15-16 (Transcript).
103

Altmann v. Austria, 317 F.3d 954, 971 (9th Cir. 2002) (“Where a party is aware of an action
and chooses not to claim an interest, the district court does not err by holding that joinder was
‘unnecessary.’”); United States. v. Bowen, 172 F.3d 682, 689 (9th Cir. 1999) (“Joinder is
‘contingent . . . upon an initial requirement that the absent party claim a legally protected interest
relating to the subject matter of the action.’” (quoting Northrop Corp. v. McDonnell Douglas
Corp., 705 F.2d 1030 (9th Cir. 1983)) (emphasis in original)).
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3. Rule 19 Analysis—Steps (2) and (3).
Because the Court has concluded that MarAd is not required, the Court does not
consider whether joinder is feasible nor whether equity and good conscience require
permitting the matter to proceed.
4. MarAd’s Joinder is Not Required Simply Because it is a Party to the
Contracts. 104
ICRC quotes Hall v. Club Corporation of America to support its argument that “[i]t
goes without saying that parties to a contract are necessary ones.” 105

But Hall is

unreported, provides limited analysis, and the Court cannot rely upon it for this
proposition. 106 The Court agrees with MOA that the additional cases that ICRC cites do
not mandate the blanket categorization of parties to a contract as necessary parties.
Rather, as discussed above, whether a party to a contract is a necessary party to the
litigation requires “a practical . . . and fact specific” inquiry. 107
For example, ICRC cites American Greyhound Racing, Inc. v. Hull. 108 In that
case, racetrack owners and operators brought an action against the Governor of
Arizona to challenge the legality of the Governor’s actions in negotiating new gaming
104

It appears that ICRC’s argument here would only apply to MOA’s breach of contract claim.

105

Docket 12 at 15 (Mot.) (quoting Hall v. Club Corp. of Am., 33 Fed. App’x 873, 876 (9th Cir.
2002)).

106

See Ninth Cir. Fed. R. App. P. 36-3(c) (unpublished decisions dated prior to January 1, 2007
may not be cited, absent limited exceptions).

107

Makah Indian Tribe, 910 F.2d at 558; see also 4 James Wm. Moore et al., Moore’s Fed.
Practice § 19.06 [4] (3d ed. 2005) (“There is no per se rule that parties to a contract are
indispensible in cases in which the contract is in dispute. The court must apply a flexible
analysis depending on the facts of each case. Generally, however, courts will find parties to a
contract to be necessary in an action to set aside the contract.”).

108

305 F.3d 1015 (9th Cir. 2002).

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compacts with Indian tribes. 109 The Ninth Circuit concluded that the Indian tribes, which
had previously entered into contracts with the Governor, were necessary to the litigation
pursuant to what is now Rule 19(a)(1)(B), because the tribes “claim[ed] an interest and
[we]re so situated that th[e] litigation as a practical matter impair[ed] or impede[d] their
ability to protect [that interest].” 110 Notably, the Ninth Circuit did not conclude the tribes
were necessary parties simply because they were parties to contracts with the
Governor; rather, the Ninth Circuit evaluated how the litigation would affect the tribes’
rights, past and future, under those contracts. Regardless, American Greyhound is
easily distinguishable because, in contrast to MarAd, the tribes there claimed an interest
in the litigation.
ICRC also relies upon McClendon v. United States, which if read broadly, might
support an argument that all parties to a contract are necessary parties. 111 But that
reading of McClendon would disregard the Ninth Circuit’s precise and consistent
holdings, dating back to 1975, that it is a “fundamental principle” that “a party to a
contract is necessary, and if not susceptible to joinder, indispensable to litigation
seeking to decimate that contract.”112

109

Id. at 1018.

110

Here, MOA does not seek to set aside the

Id. at 1023 (emphasis in original).

111

885 F.2d 627, 633 (9th Cir. 1989) (“Because the Tribe is a party to the lease agreement
sought to be enforced, it is an indispensable party under [Rule] 19.”).

112

Dawavendewa, 276 F.3d at 1157 (2002) (emphasis added); Northrop, 705 F.2d at 1044
(1983) (“parties who may be affected by a suit to set aside a contract must be present,” but this
rule was not applicable to case because parties did not seek to set aside contract);
Lomayaktewa v. Hathaway, 520 F.2d 1324, 1325 (9th Cir.1975) (“No procedural principle is
more deeply imbedded in the common law than that, in an action to set aside a lease or a
contract, all parties who may be affected by the determination of the action are indispensable.”).
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contracts between MarAd and ICRC, and ICRC has provided no compelling authority to
support a conclusion that MarAd is a necessary party simply because it was a party to
the contracts with ICRC.
For the foregoing reasons, the Court will deny ICRC’s motion to dismiss pursuant
to Rule 12(b)(7) for failure to name MarAd as a party in this litigation.
III. ICRC’s Motion to Dismiss Pursuant to Rule 12(b)(6): Third-Party Beneficiary.
ICRC asserts that MOA has not and cannot plead sufficient facts to demonstrate
that it is a third-party beneficiary of the 2003 and 2008 Contracts. On this basis, ICRC
asserts the Court must dismiss the breach of contract claim against ICRC (Count I). 113
A. Review of a Rule 12(b)(6) Motion to Dismiss.
Under Rule 12(b)(6), a party may move to dismiss a cause of action for failure to
state a claim upon which relief can be granted.

Pursuant to the Supreme Court’s

decision in Ashcroft v. Iqbal, to survive a Rule 12(b)(6) motion to dismiss, “a complaint
must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is
plausible on its face.’” 114 This requires “more than a sheer possibility” of entitlement to
relief, though it need not rise to the level of probability. 115 “When there are well-pleaded
factual allegations, a court should assume their veracity and then determine whether
they plausibly give rise to an entitlement to relief.”116 Making such a determination is “a

113

Docket 12 at 24 (Mot.).

114

556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556
(2007)).
115

Id.

116

Iqbal, 556 U.S. at 679.

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context-specific task that requires the . . . court to draw on its judicial experience and
common sense.”117
B. Discussion.
In the briefing, ICRC and MOA each evaluate the motion to dismiss for failure to
state a claim under both federal and Alaska law, but neither directly addresses whether
federal or Alaska law should apply. 118 The 2003 Contract incorporates various Federal
Acquisition Regulation (“FAR”) contract clauses, including FAR 52.233-1, which
provides that the 2003 Contract is governed by the Contract Disputes Act (i.e., federal
law). 119
Under federal law, only a party to a contract or an intended third-party beneficiary
may sue to enforce the terms of that contract or to obtain a remedy for its breach. 120
“To prove intended beneficiary status, ‘the third party must show that the contract
reflects the express or implied intention of the parties to the contract to benefit the third

117

Id. at 679 (citation omitted).

118

See Docket 12 at 24-30 (Mot.); Docket 37 at 41-47(Opp’n).

119

See Docket 2-8 at 14 (2003 Contract). The 2008 Contract incorporates numerous FAR
clauses, but does not appear to include FAR 52.233-1. However, the Court need not resolve
whether FAR 52.233-1 applies to the later contract because, even if Alaska law applied, the
result on this motion would be the same. “The Alaska Supreme Court ‘will recognize a thirdparty right to enforce a contract upon a showing that the parties to the contract intended that at
least one purpose of the contract was to benefit the third party.’” Green v. Allstate Ins. Co., 885
F. Supp. 2d 959, 963 (D. Alaska 2012) (quoting Ennen v. Integon Indem. Corp., 268 P.3d 277,
283 (Alaska 2012)).

120

GECCMC 2005-C1 Plummer St. Office Ltd. P’ship. v. JPMorgan Chase Bank, Nat’l Assoc.,
671 F.3d 1027, 1033 (9th Cir. 2012).
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party.’” 121 Contracts with the government are subject to additional restrictions. The
Ninth Circuit recently explained:
Parties that benefit from a government contract are generally assumed to
be incidental beneficiaries, rather than intended beneficiaries, and so may
not enforce the contract absent a clear intent to the contrary. This clear
intent hurdle is a high one. It is not satisfied by a contract’s recitation of
interested constituencies, vague, hortatory pronouncements, statements
of purpose, explicit reference to a third party, or even a showing that the
contract operates to the third parties’ benefit and was entered into with
them in mind. Rather, [a court] examine[s] the precise language of the
contract for a clear intent to rebut the presumption that the third parties are
merely incidental beneficiaries. 122
Thus, for MOA to demonstrate that it is the intended beneficiary of a government
contract, it must show not only that MarAd and ICRC intended the Contracts to benefit
MOA, but also that the language of the Contracts demonstrates a “clear intent to rebut
the presumption” that MOA was a merely incidental beneficiary. Although MOA was not
a signatory to either the 2003 or 2008 Contracts between MarAd and ICRC, MOA has
pled sufficient facts, in conjunction with the language of the Contracts, to survive this
motion to dismiss. 123
The Statement of Work, incorporated into the 2003 Contract, rebuts the
presumption, for purposes of this motion to dismiss, that MOA was merely an incidental

121

GECCMC, 671 F.3d at 1033 (quoting Klamath Water Users Prot. Assoc. v. Patterson, 204
F.3d 1206, 1211 (9th Cir. 1999)).
122

GECCMC, 671 F.3d at 1033-34 (internal citations, quotations, and alterations omitted); see
also Smith v. Central Arizona Water Conservation Dist., 418 F.3d 1028, 1035 (9th Cir. 2005).

123

On this motion to dismiss, the Court may consider the 2003 and 2008 Contracts, which were
incorporated by reference into the Complaint. See Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
551 U.S. 308, 322 (2007).
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beneficiary to the contract. 124

The Statement of Work broadly describes the

“Background” for the Project: “The Port of Anchorage (Port) is planning a variety of
expansion activities to enhance the transportation of goods and people within the State
of Alaska,” and that this expansion will occur “through multiple projects.”125

The

Statement of Work then explains the contract’s “objective”: “To meet this challenge [i.e.,
the Port’s challenge to expand], the Contract [i.e., the 2003 Contract] requires both
program management and technical assistance and support [i.e., which would be
provided by ICRC] for the duration of the expansion process.”126 The Statement of
Work further provides:
[ICRC] will conduct appropriate meetings with the Port staff . . . and
potential future and commercial and military users of the Port . . . to
understand their needs and requirements. Those needs and requirements
will be used to revise the Port’s Master Plan, and to develop Port
operational concepts, intermodal facility concepts, and pier/wharf/terminal
concepts. These concepts will be integrated into overall expansion
program alternatives and carried forward into the environmental
documentation and permitting process. 127
For purposes of the motion to dismiss, the Statement of Work demonstrates that the
2003 Contract was intended to benefit MOA. Whether it demonstrates a “clear intent to
rebut the presumption” that MOA was an incidental beneficiary is a closer question.
124

Several Ninth Circuit cases cite to Smith, 418 F.3d at 1037, for the proposition that a
statement of purpose is insufficient to rebut the presumption that a plaintiff is an incidental
beneficiary. However, in Smith, the district and appellate courts reviewed and evaluated the
statement of purpose in the contract, and found it not compelling because it included only a
“horatory statement of purpose.” That is, the Smith court did not reject the statement of purpose
because it was not an actual term of the contract, but because it was unpersuasive. This is
easily distinguishable from the specific and detailed Statement of Work in the 2003 Contract.

125

Docket 2-8 at 18 (2003 Contract, Statement of Work).

126

Docket 2-8 at 18 (2003 Contract, Statement of Work).

127

Docket 2-8 at 21 ¶ 4.3 (2003 Contract, Statement of Work).

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However, the contract excerpts described above, in conjunction with MOA’s allegations
are sufficient. Most significantly, MOA pled that it is the “Project owner,” 128 thereby
demonstrating a considerable greater interest in the Project than that of a merely
incidental beneficiary. 129 In addition, MOA pled that it was “an intended third party
beneficiary of the ICRC-MarAd Contract, as ICRC clearly intended to give [MOA] the
benefit of ICRC’s promised performance under the ICRC-MarAd Contract.” 130
With respect to the 2008 Contract, the Complaint alleges that it “formalized
MOA’s already recognized third-party beneficiary status under the MarAd-ICRC
agreements. 131 The 2008 Contract unequivocally states:
Upon acceptance by MARAD of work tendered under this Contract, all
right, title and interest to such work shall convey to the Municipality of
Anchorage and its Department Port of Anchorage as a third party
beneficiary, unless otherwise provided. All warranties and guarantees
provided by the Contractor shall benefit both MARAD and the Municipality
of Anchorage and its Department Port of Anchorage. 132
ICRC asserts that the 2008 Contract demonstrates that MarAd and ICRC knew how to
designate a third party beneficiary, which they did not do in the 2003 Contract, and also
that the third party beneficiary clause in the 2008 Contract was limited because MOA
could not independently decline ICRC’s work. 133

But neither of these arguments

demonstrates that MarAd and ICRC did not intend for the 2003 or 2008 Contracts to
128

Docket 2-2 at 10 ¶ 17 (Compl.).

129

Docket 2-2 at 10 ¶ 17 (Compl.)

130

Docket 2-2 at 47 ¶ 208 (Compl.).

131

Docket 2-2 at 16-17 ¶ 40 (Compl.).

132

Docket 2-2 at 16-17 ¶ 40 (Compl.) (quoting Docket 2-9 at 7 (2008 Contract)).

133

Docket 12 at 28 (Mot.); Docket 75 at 13-14 (Transcript).

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benefit MOA.

Nor could these arguments refute the Court’s conclusion that the

allegations of the Complaint and terms of the contract, for purposes of this motion to
dismiss, adequately rebut the presumption that MOA was an incidental beneficiary.
ICRC cites various cases, many involving water rights contracts, to support its
argument that MOA was an incidental, rather than intended, beneficiary to the contracts
between MarAd and ICRC. 134

For example, Klamath Water Users Protective

Association v. Patterson concerned a relief water reclamation project in the Klamath
Basin. 135

Irrigators in the basin challenged modification of a contract between the

United States and a California power company, which had the right to operate a dam in
the basin.

The Ninth Circuit concluded that although the contract operated to the

irrigators’ benefit, there was no language of “clear intent” in the contract to make them
third-party beneficiaries. 136

But Klamath, like the other water rights cases, is

distinguishable from this case because there, the plaintiffs were members of the general
public, while here, MOA is the owner of the Project. 137
On this motion to dismiss, viewing the facts in the light most favorable to MOA,
MOA’s allegations combined with the terms of the Contracts demonstrate a “clear

134

Docket 12 at 26-28 (Mot.).

135

Klamath, 204 F.3d at 1211.

136

Klamath, 204 F.3d at 1211.

137

See also Orff v. United States, 358 F.3d 1137, 1145 (9th Cir. 2004) (contract did not
demonstrate “clear intent” to benefit farmers, who sought to enforce water contract between
United States and company overseeing water management project); Smith, 418 F.3d at 1035
(contract did not demonstrate “clear intent” to benefit landowners who sought declaratory relief
related to water contract between conservation district and United States).
3:13-cv-00063-SLG, MOA v. ICRC et al.
Order Denying Motion to Dismiss
Page 30 of 31

intent” to rebut the presumption that MOA was merely an incidental beneficiary. 138
Accordingly, ICRC’s motion to dismiss on this basis will be denied.
CONCLUSION
For the foregoing reasons, IT IS HEREBY ORDERED that ICRC’s motion to
dismiss at Docket 12 is DENIED.

Defendants PND and VECO have already filed

answers at Dockets 8 and 10. Defendant ICRC’s answer is due within 14 days of this
Order. 139
DATED at Anchorage, Alaska this 4th day of March 2014.
/s/ Sharon L. Gleason
United States District Judge

138

See GECCMC, 671 F.3d at 1033; Smith, 418 F.3d at 1035; Klamath, 204 F.3d at 1211.

139

See Fed. R. Civ. P. 12(a)(4).

3:13-cv-00063-SLG, MOA v. ICRC et al.
Order Denying Motion to Dismiss
Page 31 of 31