Arvin Kam Construction Company v. Environmental Chemical Corporation

Filing 33

ORDER RE AMENDED COMPLAINT AND CASE MANAGEMENT. Signed by Judge James Donato on 5/25/2018. (jdlc1S, COURT STAFF) (Filed on 5/25/2018)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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ARVIN KAM CONSTRUCTION
COMPANY,

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United States District Court
Northern District of California

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Plaintiff,
v.

Case No. 16-cv-02643-JD
ORDER RE AMENDED COMPLAINT
AND CASE MANAGEMENT
Re: Dkt. No. 24

ENVIRONMENTAL CHEMICAL
CORPORATION,
Defendant.
In response to the dismissal of the complaint with leave to amend, Dkt. No. 22, plaintiff

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AKCC filed an amended complaint. Dkt. No. 23. The amended complaint provides just enough

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detail for the contract and fraud claims to survive ECCI’s motion to dismiss under Federal Rules

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of Civil Procedure Rule 8(a) and Rule 9(b). Further amendment under those rules is not required.

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The Court is considerably more concerned about the undisputed status of AKCC as an

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active supporter of insurgency in Afghanistan. The factual allegations in the amended complaint

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tell an unusual story on this score. AKCC agrees that the United States Central Command

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classified it as an insurgency supporter in July 2012, and that ECCI followed instructions from the

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Army Corps of Engineers to “terminate” its sub-contract with AKCC for that reason. Dkt. No. 23

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¶¶ 9-11. The insurgency supporter classification appears to trigger a number of potential

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consequences under the National Defense Authorization Act of 2012 and Department of Defense

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regulations, including the voiding of all contracts between AKCC and American entities like

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ECCI and a ban on further business dealings. Nevertheless, the amended complaint alleges that

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ECCI signed several post-termination agreements with AKCC in the form of “settlement

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agreements” that are described as allocating compensation and follow-up duties for the terminated

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sub-contract. Id. ¶¶ 13-15. The parties’ motion papers also indicate that ECCI filed an

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administrative action before the Armed Services Board of Contract Appeals that appears to

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overlap with the factual and legal disputes in this case. See Dkt. No. 31 at 4-5. The Court cannot

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tell from the current state of the record whether the administrative appeal has been completed, and

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if so, the board’s determinations.
Consequently, in light of the atypical circumstances here, the Court finds that the optimal

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case management approach is to proceed to summary judgment on these key issues: (1) the

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factual and statutory or regulatory grounds for the termination of the sub-contract between AKCC

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and ECCI; (2) the legal effect of the termination, with attention to whether the contract was

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deemed void ab initio and whether a ban on further dealings with AKCC was imposed; (3) the
preclusion or estoppel effects, if any, from the administrative proceedings, and any admissions of

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United States District Court
Northern District of California

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fact that might be relevant here; and (4) the law governing the agreements identified in the

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amended complaint, for example California state law or the law of some other jurisdiction. The

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Court would also like the parties’ legal positions on the right of a supporter of insurgency to sue in

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federal court for breach of contract and fraud claims relating to a contract terminated for supporter

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status.

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The parties may jointly propose other issues that they would like the Court to consider

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along with this list. The proposals must be factually or legally related to the Court’s topics, and

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not raise different claims or issues. Additional summary judgment proceedings are possible at a

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future time, depending on developments. Discovery is limited to the summary judgment topics.

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The parties are directed to file a joint proposed summary judgment schedule by June 8, 2018.

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IT IS SO ORDERED.
Dated: May 25, 2018

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JAMES DONATO
United States District Judge

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