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)

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