United States, for the use and benefit of Drill Tech Drilling & Shoring, Inc. et al v. Lexon Insurance Company et al

Filing 22

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS PLAINTIFF'S SIXTH CLAIM FOR RELIEF 16 by Judge Dean D. Pregerson. Defendant's Motion to Dismiss isGRANTED. Plaintiff's Sixth Cause of Action against ICS isdismissed. Plaintiff is granted leave to amend non-Prompt PaymentAct, breach of contract claims. Any amended complaint shall befiled within fourteen days of the date of this Order. (jre)

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1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 13 14 UNITED STATES, for the use and benefit of DRILL TECH DRILLING & SHORING, INC., a California corporation; and DRILL TECH DRILLING & SHORING, INC., a California corporation, Plaintiff, 15 v. 16 17 18 19 20 LEXON INSURANCE COMPANY, a Texas corporation; INNOVATIVE CONSTRUCTION SOLUTIONS, a California corporation, Defendants. ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. SACV 14-01573 DDP (ANx) ORDER GRANTING DEFENDANT’S MOTION TO DISMISS PLAINTIFF’S SIXTH CLAIM FOR RELIEF [Dkt. 16] 21 22 Presently before the court is Defendant Innovative 23 Construction Solutions’ Motion to Dismiss Plaintiff’s sixth claim 24 for relief. 25 26 27 Having considered the submissions of the parties, the court grants the motion and adopts the following order. I. Background Plaintiff Drill Tech Drilling & Shoring, Inc. ("Drill Tech") is a construction company that provides services in geotechnical 28 1 construction. Defendant Innovative Construction Solutions ("ICS") 2 is also a construction company that provides general contracting 3 services. As alleged in the complaint, the United States Air Force hired 4 nonparty Toltest, Inc. as the primary contractor for a construction 5 project known as the "Southeast Slope Stabilization" project in San 6 Pedro, California. (Complaint ¶¶ 9, 12). TolTest then 7 subcontracted a portion of the project to Defendant ICS. 8 9). 9 subcontracting agreement with ICS to furnish and install soil 10 (Id. ¶ In February 2013, 2013 Plaintiff Drill Tech entered into a nails, shotcrete, and architectural shotcrete, and perform other work, for $1,940,445.90 plus additional sums for certain overbreak 11 work. (Id. at ¶ 12, Ex. 2 at 12.) 12 Plaintiff alleges the contract was subsequently modified due 13 to multiple change orders, and the price of the work to be 14 performed increased to $2,014,589.56. (Id. at ¶ 12.) 15 alleges that it has fully and completely performed all of its 16 obligations the contract. (Id. at 14.) Plaintiff claims, of the 17 Plaintiff total contract price for the work furnished, ICS only paid $1,538,694.74, leaving a balance due of $475,894.82. (Id. at ¶ 16.) 18 Plaintiff’s Complaint alleges a claim against ICS under the 19 Prompt Payment Act. 20 claim for relief. 21 II. 22 23 ICS now moves to dismiss Plaintiff’s sixth Legal Standard A complaint will survive a motion to dismiss when it contains “sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 24 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 25 570 (2007)). When considering a Rule 12(b)(6) motion, a court must 26 “accept as true all allegations of material fact and must construe 27 those facts in the light most favorable to the plaintiff.” Resnick 28 v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). 2 Although a complaint 1 need not include “detailed factual allegations,” it must offer 2 “more than an unadorned, the-defendant-unlawfully-harmed-me 3 accusation.” Iqbal, 556 U.S. at 678. Conclusory allegations or allegations that are no more than a statement of a legal conclusion 4 “are not entitled to the assumption of truth.” Id. at 679. In 5 other words, a pleading that merely offers “labels and 6 conclusions,” a “formulaic recitation of the elements,” or “naked 7 assertions” will not be sufficient to state a claim upon which 8 relief can be granted. 9 Id. at 678 (citations and internal quotation marks omitted). “When there are well-pleaded factual allegations, a court should 10 assume their veracity and then determine whether they plausibly 11 give rise to an entitlement of relief.” Id. at 679. 12 must allege “plausible grounds to infer” that their claims rise 13 “above the speculative level.” Twombly, 550 U.S. at 555. 14 Plaintiffs “Determining whether a complaint states a plausible claim for relief” is a “context-specific task that requires the reviewing 15 court to draw on its judicial experience and common sense.” 16 17 18 19 20 Iqbal, 556 U.S. at 679. III. Discussion ICS argues that Plaintiff’s sixth claim for relief against ICS fails as a matter of law because no express or implied private right of action exists under the Prompt Payment Act. The court agrees. 21 “The fact that a federal statute has been violated and some 22 person harmed does not automatically give rise to a private cause 23 of action in favor of that person.” 24 441 U.S. 667, 688 (1979). “Instead, the statute must either 25 explicitly create a right of action or implicitly contain one.” 26 28 In re Digimarc Corp. Derivative Litig., 549 F.3d 1223,1230 (9th Cir. 2008). 27 Cannon v. Univ. of Chicago, A statute explicitly creates a private right of action when the statute contains language that defines a cause of action. Id. Where a federal statute does not explicitly create a private right 3 1 of action, a plaintiff can maintain a suit only if Congress 2 intended to provide the Plaintiff with an implied private right of 3 action. Touche Ross & Co. v. Redington, 442 U.S. 560, 568 (1978). In the absence of clear evidence of congressional intent, the Court 4 5 6 may not usurp the legislative power by unilaterally creating a cause of action. Digimarc, 549 F.3d at 1231. In 1982, Congress enacted the Prompt Payment Act “to provide 7 incentives for the Federal Government to pay its bills on time.” 8 Sarang Corp. v. United States, 76 Fed. Cl. 560, 569 (Fed. Cl. 2007) 9 (citation omitted). In furtherance of that goal, the Prompt Payment Act provides that “the head of an agency acquiring property 10 or service from a business concern, who does not pay the concern 11 for each complete delivered item of property or service by the 12 required payment date, shall pay an interest penalty to the concern 13 on the amount of the payment due.” 31 U.S.C. § 3902(a) (emphasis 14 added). Drill Tech does not appear to dispute that this language does not expressly confer a private right of action upon 15 subcontractors. 16 In 1988, the Prompt Payment Act was amended to include 17 provisions applicable to subcontractors. 18 3905(b) states that contracts awarded by a government agency must 19 require prime contractors to include certain payment and penalty 20 For example, 31 U.S.C. § clauses in all subcontracts, while 31 U.S.C. § 3905(c) includes similar language regarding contracts between subcontractors. 21 Plaintiff here relies largely on 31 U.S.C. § 3905(j), which states 22 that the Prompt Payment Act does “not limit or impair any 23 contractual, administrative, or judicial remedies otherwise 24 available to a contractor or a subcontractor in the event of a 25 dispute involving late payment or nonpayment by a prime contractor 26 or deficient subcontract performance or nonperformance by a subcontractor.” 31 U.S.C. § 3905(j). 27 28 The 1988 amendments did not expressly provide a private cause of action to subcontractors or sub-tier subcontractors. 4 1 2 3 Apparently arguing that Section 3905 implicitly creates a private cause of action, Plaintiff contends that the legislative history refers to a subcontrator’s “entitlement” to payments under the terms of a contract and the availability of pre-existing 4 remedies, and that Drill Tech’s right to sue “as part of a breach 5 of contract claim should not be in doubt.” 6 “Congressional intent can be implied by the text or structure of 7 the statute, or by a review of the statute's legislative history.” 8 Rice v. Office of Servicemembers' Group Life Ins., 260 F.3d 1240, 9 1246 (10th Cir.2001). (Opp. at 6.) The thrust of plaintiff’s legislative history argument, which is not supported by specific citations to 10 the legislative record, is unclear. ICS has not disputed that 11 Drill Tech may have some other remedy apart from the Prompt Payment 12 Act. 13 the “bill was specifically designed to encourage federal government 14 Furthermore, review of the legislative history reveals that managers to improve their bill paying procedures by authorizing the charging of a penalty against program operating budges when federal 15 agencies fail to pay their bills on time.” H.R. Rep. 97-461, 1982 16 U.S.C.C.A.N. 111, 112 (emphasis added). When Congress amended the 17 statue, it provided it did so “in an effort to close loopholes that 18 have existed in the law, clarify its language and send a clear 19 message to Federal Government agencies to improve their 20 implementation of the Prompt Payment Act.” H.R. Rep. 100-784, 27, 1988, U.S.C.C.A.N. 3036,3037. (Emphasis added). 21 22 23 The weight of legislative history does not, therefore, support Drill Tech’s position. Drill Tech then argues that the plain meaning of the Prompt 24 Payment Act supports Drill Tech’s “Claim for Relief for Payment of 25 Prompt Payment Penalties.” 26 Drill Tech contends that Section 3905 explicitly creates a private cause of action. 27 28 It is unclear to the court whether Such a position would have no merit. To the extent Plaintiff asserts that a private right of action exists because (1) federal courts have jurisdiction over federal questions 5 1 and (2) Section 3905 does not limit pre-existing rights to collect 2 interest penalties provided for by contracts, the court is not 3 persuaded by Plaintiff’s undeveloped arguments that Section 2905 created a new, Prompt Payment Act cause of action. 4 Finally, every other district court to consider this issue 5 appears to have concluded that the Prompt Payment Act does not 6 confer a private right of action upon subcontractors. 7 & W Steel, LLC v. BSC Steel, Inc., 944 F.Supp.2d 1066, 1081 (D. 8 Kan. 2013). 9 See, e.g. W United States ex rel. IES Commercial, Inc. v. Cont’l Ins. Co., Inc., 814 F.Supp.2d 1, 3 (D. D.C. 2011); United States ex rel. King Mountain Gravel, LLC v. RB Constructors, LLC, 556 10 F.Supp.3d 1250, 1253 (D. Colo. 2008); United States ex rel. 11 Virginia Beach Mech. Servs., Inc. v. SAMCO Constr. Co., 39 F.Supp 12 2d 661, 677 (E.D. Va. 1999); United States ex rel. CKF Excavating, 13 LLC v. ACC Constr., Inc., No. 11-CV-42, 2012 WL 3161294 at *6 (W.D. 14 Ky. Aug. 3, 2012). This court sees no reason to deviate from this weight of authority. 15 IV. Conclusion 16 For the reasons stated above, Defendant’s Motion to Dismiss is 17 GRANTED. 18 dismissed. 19 Act, breach of contract claims. 20 Plaintiff’s Sixth Cause of Action against ICS is Plaintiff is granted leave to amend non-Prompt Payment Any amended complaint shall be filed within fourteen days of the date of this Order. 21 22 23 IT IS SO ORDERED. 24 25 26 Dated: June 3, 2015 DEAN D. PREGERSON United States District Judge 27 28 6

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