Continental 332 Fund, LLC et al v. Kozlowski

Filing 110

ORDER granting in part and denying in part #80 motion to dismiss; granting in part and denying in part #81 motion to dismiss; granting in part and denying in part #82 motion to dismiss; granting in part and denying in part #83 motion to dismiss; granting in part and denying in part #84 motion to dismiss; granting in part and denying in part #85 motion to dismiss; granting in part and denying in part #86 motion to dismiss; granting in part and denying in part #87 motion to dismiss; granting in part and denying in part #88 motion to dismiss. a.Counts 1-3, 5-7, 12-19, 21, 23, 25-27, 29-31, 33-35, and 37-44 are DISMISSED without prejudice. b. Count 8 is DISMISSED without prejudice as to Defendant David Albertelli. c.Count 22 alleging the implied warranty of workmanlike quality and implied warranty of habitability claims are DISMISSED without prejudice. Plaintiffs may file a Third Amended Complaint on or before February 27, 2018. Signed by Judge Sheri Polster Chappell on 2/13/2018. (LMF)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
CONTINENTAL 332 FUND, LLC,
CONTINENTAL 298 FUND LLC,
CONTINENTAL 306 FUND LLC,
CONTINENTAL 326 FUND LLC,
CONTINENTAL 347 FUND LLC,
CONTINENTAL 355 FUND LLC,
CONTINENTAL 342 FUND LLC, and
CONTINENTAL 245 FUND LLC,
Plaintiffs,
v.

Case No: 2:17-cv-41-FtM-38MRM

DAVID ALBERTELLI, ALBERTELLI
CONSTRUCTION INC., GEORGE
ALBERTELLI, WESTCORE
CONSTRUCTION, LLC, NATIONAL
FRAMING, LLC, MFDC, LLC, TEAM
CCR, LLC, BROOK KOZLOWSKI,
JOHN SALAT, KEVIN BURKE,
ANGELO EQUIZABAL, BRAVO21, LLC,
KERRY HELTZEL, AMY BUTLER, US
CONSTRUCTION TRUST,
FOUNDATION MANAGEMENT, LLC,
KMM CONSTRUCTION, LLC, and
WESTCORE CONSTRUCTION, L.L.C.,
Defendants.
/
OPINION AND ORDER1
This matter comes before the Court on nine motions to dismiss filed by Defendants
David Albertelli (Doc. 80); Albertelli Construction, Inc. (“ACI”) (Doc. 81); George Albertelli

1

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(Doc. 82); Amy Butler (Doc. 83); Brook Kozlowski (Doc. 84); Kevin Burke (Doc. 85); John
Salat (Doc. 86); Kerry Heltzel (Doc. 87); and Foundation Management, LLC, KIMM
Construction, LLC, MFDC, LLC, National Framing, LLC, Team CCR, LLC, US
Construction Trust, Westcore Construction, LLC (Del.) (“Westcore I”) and Westcore
Construction L.L.C. (Nev.) (“Westcore II”)2 (Doc. 88). Plaintiffs’ have filed an Omnibus
Response (Doc. 97). This matter is ripe for review.
BACKGROUND
The 130-page Second Amended Complaint alleges that Defendants, a group of
interrelated individuals and companies, perpetrated a pattern of fraud and other acts on
apartment construction projects around the country. (Docs. 49; 49-1). Plaintiffs are
single-purpose entities that fund apartment complex construction projects. (Doc. 49 at
¶¶ 15-24, 3 n. 1). They allege Defendants George Albertelli and his son David Albertelli
(collectively, the “Albertellis”) provided bribes to an official from Plaintiffs’ parent company
to secure inside information and $202,696,588.38 in construction contracts. (Doc. 49 at
¶¶ 50, 78-79, 86, 116 - 123). Each Plaintiff contracted with either ACI or Westcore to
build eight apartment complexes in five states:


Continental 245 Fund LLC and ACI for a project in Lexington, Kentucky (the
“Lexington Project”);



Continental 298 Fund LLC and ACI for a project in Savage, Minnesota (the
“Savage Project”);



Continental 306 Fund LLC and ACI for a project in New Braunfels, Texas (the “New
Braunfels Project”);



Continental 332 Fund, LLC and ACI for a project in Fort Myers, Florida (the “Fort
Myers Project”);

The Court will utilize the term “Westcore” to refer to Westcore I and Westcore II in the
alternative.
2

2



Continental 326 Fund, LLC and ACI for a project in Rochester, Minnesota (the
“Rochester Project”);



Continental 355 Fund LLC and Westcore I for a project in Bryan, Texas (the “Bryan
Project”);



Continental 347 Fund LLC and Westcore I for a project in Waco, Texas (the “Waco
Project”); and



Continental 342 Fund LLC and Westcore I for a project in Longmont, Colorado (the
“Longmont Project”).

(Doc. 49 at ¶¶ 116 - 123).
After the contracts were executed, Defendants allegedly engaged in coordinated
schemes to enrich the Albertellis. (Doc. 49 at ¶¶ 128-229). On this basis, the Second
Amended Complaint lodges counts ranging from the Racketeer Influenced and Corrupt
Organizations Act (“RICO”) to professional negligence. (Doc. 49). Defendants move to
dismiss arguing the Second Amended Complaint violates Federal Rule of Civil Procedure
8(a) and 9(b). (Docs. 80, 81, 82, 83, 84, 85, 86, 87, 88).
STANDARD
Federal Rule of Civil Procedure 8(a)(2) states that a pleading must contain a short
and plain statement of a claim showing that the pleader may have relief. Rule 8(a)(2)'s
purpose is to “give the defendant fair notice of what the claim is and the grounds upon
which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal punctuation
omitted). “Each allegation must be simple, concise, and direct.” Fed. R. Civ. P. 8(d)(1).
Fraud allegations are subject to heightened pleading standards under Federal
Rule of Civil Procedure 9(b), which requires a party to “state with particularity the
circumstances constituting fraud.” Generally, this occurs where the pleading alleges

3

(1)

precisely what statements were made in what
documents or oral representations or what omissions
were made, and

(2)

the time and place of each such statement and the
person responsible for making (or, in the case of
omissions, not making) same, and

(3)

the content of such statements and the manner in
which they misled the plaintiff, and

(4)

what the defendants obtained as a consequence of the
fraud.

Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1371 (11th Cir. 1997)
(internal quotations omitted). Allegations relating to “[m]alice, intent, knowledge, and
other conditions of a person’s mind may be alleged generally.” Id.
Rule 9(b) “serves an important purpose in fraud actions by alerting defendants to
the precise misconduct with which they are charged and protecting defendants against
spurious charges of immoral and fraudulent behavior.” Id. at 1370-71 (internal quotations
omitted). Although it imposes a heightened pleading standard, the Eleventh Circuit has
cautioned that “Rule 9(b) must not be read to abrogate [R]ule 8 . . . and a court considering
a motion to dismiss for failure to plead fraud with particularity should always be careful to
harmonize the directives of [R]ule 9(b) with the broader policy of notice pleading.”
Friedlander v. Nims, 755 F.2d 810, 813 (11th Cir. 1985). Courts have found requisite
particularity in a pleading that lacked specifics but presented sufficient description to
apprise defendants of the allegations against them. See Seville Indus. Mach. Corp. v.
Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984) (list containing fraud allegations
and nature of statements found to meet the Rule 9(b) threshold, even though precise
words were not alleged); see also Brooks, 116 F.3d at 1371 (“alternative means are also

4

available to satisfy the rule.”). Though “[i]t is certainly true that allegations of date, place
or time [are traditional indicia of particularity] . . . nothing in the rule requires them.” Seville
Indus. Mach. Corp., 742 F.2d at 791.
Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss a pleading for
failure to state a claim upon which relief can be granted. The Twombly–Iqbal plausibility
standard guides such dismissals. This standard requires a plaintiff to allege sufficient
facts “to raise a reasonable expectation that discovery will reveal evidence” to support a
claim. Twombly, 550 U.S. at 556.

The court must accept all factual allegations in a

plaintiff's complaint as true and take them in the light most favorable to the plaintiff.
Pielage v. McConnell, 516 F.3d 1282, 1284 (11th Cir. 2008). This acceptance is limited
to well-pleaded factual allegations. La Grasta v. First Union Sec., Inc., 358 F.3d 840, 845
(11th Cir. 2004). Alleging “the-defendant-unlawfully harmed me” is insufficient. Iqbal,
556 U.S. at 677. “Nor does a complaint suffice if it tenders naked assertions devoid of
further factual enhancement.” Id. (internal modifications omitted).
DISCUSSION
Defendants argue that nearly all the forty-four counts in the Second Amended
Complaint should be dismissed. Some arguments apply to more than one count. The
Court will address each.
A.

RICO - Counts 1-33
Count 1 alleges that Defendants violated the RICO Act by perpetrating several

schemes to defraud Plaintiffs on construction projects across the country. (Doc. 49 at ¶¶
62-236).

Counts 2 and 3 incorporate the entire pleading with Count 1 to allege

3

The Court recognizes that the Second Amended Complaint styled the counts in roman numerals. But for
comprehension, the Court will refer to them as numbers.

5

Defendants conspired to violate Florida’s RICO Act and did so. (Doc. 49 at ¶¶ 237-57).
Defendants argue these counts should be dismissed because they do not satisfy Rules
8(a) or 9(b). The Court agrees.
First, the 76 pages of allegations to support Count 1 do not constitute short or plain
statements under Rule 8(a)(2). Although Count 1’s allegations are complex, Plaintiff must
still satisfy the pleading requirements. “While a complaint containing RICO claims is often
required to be somewhat lengthier than other complaints, the assertion of RICO claims
does not in itself excuse a plaintiff from satisfying the requirements of Rule 8(a)(2) and
Rule 8[(d)(1)].” Thomas v. Am. Tobacco Co., 173 F.R.D. 546, 547 (M.D. Ga. 1997).
Second, Count 1’s allegations are redundant and confusing. In 257 paragraphs,
the allegations to support Count 1 appear twice in the body of the pleading and at least
twice more in Count 1. (Doc. 49 at ¶¶ 1-14, 48-61, 63-67, 68-115, 128-217, 223-229).
Count 1 alleges out of chronological order over ten fraudulent schemes on eight
construction sites across the country.

Complicating matters, Plaintiff pleads different

levels of specificity.
Third, and perhaps most confusing, the RICO allegations switch vantage points
between the actions of select parties and the broadly-described “schemes” perpetrated
by the Defendants. (Doc. 49 at ¶¶ 88-115, 128-217). This structure convolutes Count I
to a point of near unreadability. This unreadability breaks with Rule 8(a)(2)’s command
for a “simple, concise, and direct” pleading. See Kleinschmidt v. Liberty Mut. Ins. Co.,
142 F.R.D. 502, 504 (S.D. Fla. 1992) (affirming report and recommendation for dismissal
of RICO claim for failure to comply with Rule 8(a)(2)).

6

For these reasons, Count 1 must be dismissed. And because Counts 2 and 3
incorporate the allegations of Count 1, the Court dismisses them too.4
B.

Shotgun pleadings – Counts 5-7, 12-19, 40-43
Next, Defendants allege that several counts should be dismissed as improper

shotgun pleadings. They are correct. Generally, shotgun pleadings “are those that
incorporate every antecedent allegation by reference into each subsequent claim for relief
or affirmative defense.” Wagner v. First Horizon Pharm. Corp., 464 F.3d 1273, 1279 (11th
Cir. 2006). The result is that the last count eventually constitutes a combination of the
other counts incorporated in it. See Weiland v. Palm Beach County Sheriff’s Office, 792
F.3d 1313 (11th Cir. 2015).
[I]f tolerated, [shotgun pleadings] harm the court by impeding
its ability to administer justice. The time a court spends
managing litigation framed by shotgun pleadings should be
devoted to other cases waiting to be heard. Wasting scarce
judicial and parajudicial resources impedes the due
administration of justice and, in a very real sense, amounts to
obstruction of justice.
Byrne v Nezhat, 261 F.3d 1075 (11th Cir. 2001) abrogated on other grounds by Bridge v.
Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) (internal punctuation omitted). The
Eleventh Circuit has “roundly, repeatedly, and consistently condemn[ed]” them. Davis v.
Coca-Cola Bottling Co. Consol., 516 F.3d 955, 979 (11th Cir. 2008). When faced with a
shotgun complaint, the Eleventh Circuit encourages courts to “demand repleading,” even
if such a demand comes sua sponte.

Bailey v. Janssen Pharmaceutica, Inc., 288 F.

App'x 597, 603 (11th Cir. 2008) (citations omitted); see also Vibe Micro, Inc. v. Shabanets,
878 F.3d 1291, 1295 (11th Cir. 2018).

Because the Court dismisses Counts 1-3 on Rule 8(a)(2) grounds, it need not reach Defendants’
alternative arguments for dismissal.
4

7

Here Count 5 incorporates every allegation in Count 1; Count 6 incorporates every
allegation in Count 5; Count 7 incorporates every allegation in Count 4; Counts 12 to 19
incorporate the substantive allegations of Count 8; and Counts 40 to 43 incorporate
paragraphs 44 to 417. (Doc. 49 at ¶¶ 266, 269, 301, 306, 310, 314, 319, 324, 328, 332,
428, 433, 437, 441). Because these Counts incorporate the substantive allegations of
other counts, they must be dismissed.5
C.

Theft by Contractor in Minnesota - Count 8
Next, Defendants challenge Count 8, which alleges David Albertelli and ACI

violated Minnesota Statute 514.02 by failing to pay subcontractors on the Savage and
Rochester Projects. (Doc. 49 at ¶¶ 273-280). Defendants argue the claim fails because
the statute pertains only to residential real estate properties, and the Savage and
Rochester Projects do not meet this criteria as they are apartment complex construction
projects.
The Court must first decide whether Minnesota law applies. A federal court sitting
in diversity applies the conflict of law rules of the forum state. Klaxon Co. v. Stentor Elec.
Mfg. Co., 313 U.S. 487, 496 (1941). That analysis need not be undertaken if the laws of
the different states are (1) the same; (2) different but would produce the same outcome
under the facts; or (3) when the policies of one state would be furthered by applying its
laws while the policy of the other state would not be advanced by applying its laws. Hatton
v. Chrysler Canada, Inc., 937 F. Supp. 2d 1356, 1368 (M.D. Fla. 2013); see also Fioretti
v. Massachusetts Gen. Life Ins. Co., 53 F.3d 1228, 1234 (11th Cir. 1995); Tune v. Philip
Morris Inc., 766 So. 2d 350, 352 (Fla. 2d DCA 2000).

5

Because the Court dismisses Counts 5-7, 12-19, and 40-43 as shotgun pleadings, it need not reach
Defendants’ alternative arguments for dismissal.

8

With this in mind, Minnesota law would advance Minnesota’s policy directives by
allowing parties injured in Minnesota to seek redress. By contrast, Florida’s interests
would not be advanced by applying Florida law because the injuries did not occur here
and Florida has no law like Minnesota’s. Because the lack of such a law would preclude
Plaintiffs from bringing Count 8, and because Florida has no cognizable interest in an outof-state injury, the Court will apply Minnesota law here. See Tune, 766 So. 2d at 352.
The next issue concerns the bounds of Minnesota Statute 514.02. Subdivision 1
of the statute prohibits an entity from keeping payments distributed and then held in trust
to pay for “labor, skill, material, or machinery contributing to the improvement.” Minn.
Stat. § 514.02 subd. 1(b). Subdivision 1a then grants a private right of action to those
injured by the acts set out in Subdivision 1, allowing them to sue
1)

against the person who committed the theft under
subdivision 1; and

2)

for an improvement to residential real estate made by
a person licensed, or who should be licensed . . .
against a shareholder, officer, director, or agent of a
corporation who is not responsible for the theft but who
knowingly receives proceeds of the payment as salary,
dividend, loan repayment, capital distribution, or
otherwise.

Id. at subd. 1a (emphasis added). Residential real estate, as mentioned in Subdivision
1a(2), is defined as “a new or existing building constructed for habitation by one to four
families, and includes garages.” Minn. Stat. § 326B.802 subd. 13.
Defendants argue the Minnesota statute does not apply here because this case is
about apartment complex construction projects, and not residential real estate. This
argument asks the Court to conclude the clauses of Subdivision 1a should be construed
conjunctively, allowing a private right of action against only those who committed a theft

9

in improvements to homes for one to four families. But that interpretation goes too far.
The Minnesota Court of Appeals has construed the statute to extend a private right of
action against those that committed theft, against the officers and agents of those who
may have committed theft in relation to residential real estate, or against both. See Amcon
Block & Precast, Inc. v. Suess, 794 N.W.2d 386, 390 (Minn. Ct. App. 2011). However,
civil liability for a theft by a corporate entity does not extend to corporate principles
responsible for carrying out the acts of a corporation. Id. Liability would only attach to a
corporate principle in a theft involving improvements to residential real estate. Id.
Plaintiffs bring Count 8 against ACI and David Albertelli. (Doc. 49 at ¶¶ 273-280).
They allege ACI received payments for work done on the Savage and Rochester Projects,
that David Albertelli and ACI did not use those payments to pay subcontractors, and that
David Albertelli deposited the money into ACI’s bank account. (Doc. 49 at ¶ 202-217;
274-278). It also alleges that both Continental 298 Fund and Continental 326 Fund were
injured. (Doc. 49 at ¶¶ 279-280). Taking the allegations as true, they state a viable claim
against ACI as the entity directly responsible for theft. Although indirect liability for ACI’s
theft may otherwise attach to David Albertelli as the owner and principal of ACI under the
second prong of subdivision 1a, Count 8 falls short because it does not allege that he
“knowingly receive[d] the proceeds of the payment as salary, dividend, loan repayment,
capital distribution, or otherwise.” See Minn. Stat. § 514.02 subd. 1a(2). Count 8 is
dismissed as against David Albertelli but stands as to ACI.6

6

The Court also expresses doubt about whether the Second Amended Complaint has
plausibly alleged that the relevant payments concerned residential real estate Projects as
laid out by the Minnesota Statute.

10

D.

Breach of Contract - Counts 20, 24, 28, 32 and 36
Next, Defendants take aim at Counts 20, 24, 28, 32 and 36, which allege that ACI

or Westcore breached contracts regarding construction projects in Florida (Count 20),
Texas (Counts 24, 28 and 32), and Colorado (Count 36). Defendants argue these counts
contain no particular contract terms, or allege how they were breached.
Breach-of-contract actions are governed by the law of the state where the contract
is made or to be performed. Innovak Int'l, Inc. v. Hanover Ins. Co., No. 8:16-CV-2453MSS-JSS, 2017 WL 5632718, at *4 (M.D. Fla. Nov. 17, 2017). In Florida, “[a]n adequately
pled breach of contract action requires three elements: (1) a valid contract; (2) a material
breach; and (3) damages.” Friedman v. New York Life Ins. Co., 985 So. 2d 56, 58 (Fla.
4th DCA 2008). Texas and Colorado laws have similar elements for breach of contract
claims. See Lesikar v. Moon, No. 14-16-00299-CV, 2017 WL 4930851, at *7 (Tex. App.
Oct. 31, 2017); see also Long v. Cordain, 2014 COA 177, ¶ 19. As a result, the Court will
apply Florida law to Counts 20, 24, 28, 32 and 36. See Tune, 766 So. 2d at 352.
Here, reading the allegations in the light most favorable to Plaintiffs, Counts 20,
24, 28, 32 and 36 state plausible breach of contract claims. Each count alleges that ACI
or Westcore owed contract-based duties to the Plaintiffs with whom they dealt, that ACI
or Westcore breached those duties, and Plaintiffs were damaged. (Doc. 49 at ¶¶ 337342, 356-360, 374-378, 392-396, 410-414). They also allege specific ways that ACI or
Westcore breached the contracts. (Doc. 49 at ¶¶ 337-342, 356-360, 374-378, 392-396,
410-414). The counts sufficiently notify ACI or Westcore of the allegations against them.
Therefore, Counts 20, 24, 28, 32 and 36 stand.

11

E.

Breach of Express Warranty - Counts 21, 25, 29, 33 and 37
Defendants next challenge Counts 21, 25, 29, 33 and 37 of the Second Amended

Complaint, which allege that either ACI or Westcore breached express warranties in
contracts they held with respective Plaintiffs in Florida (Count 21), Texas (Counts 25, 29,
and 33), and Colorado (Count 37). Like their breach of contract arguments, Defendants
assert the claims are defective because they fail to include specific supporting facts.
State law governs express warranty claims. Hinkle v. Cont'l Motors, Inc., No. 8:16CV-2966-T-36MAP, 2017 WL 3131465, at *5 (M.D. Fla. July 24, 2017). To state a claim
for breach of express warranty in Florida, a pleading must allege
1)

facts in respect to sale of the product or other
circumstances giving rise to warranty, express or
implied, identifying the type of warranties accompanying
the pertinent transactions involved.

2)

reliance upon the representations by the seller or skill
and judgment of the seller where the action is based
upon express warranty or warranty of fitness for a
particular purpose.

3)

circumstances of the injury as caused by the breach of
warranty.

4)

notice of breach of warranty.

5)

injuries sustained and damages.

Weimar v. Yacht Club Point Estates, Inc., 223 So. 2d 100, 104 (Fla. 4th DCA 1969). This
substantially matches the laws of Texas and Colorado. See Paragon Gen. Contractors,
Inc. v. Larco Const., Inc., 227 S.W.3d 876, 886 (Tex. App. 2007); Scott v. Honeywell Int'l
Inc., No. 14-CV-00157-PAB-MJW, 2015 WL 1517527, at *3 (D. Colo. Mar. 30, 2015);
Palmer v. A.H. Robins Co., 684 P.2d 187, 205-208 (Colo. 1984). The Court will apply
Florida law to Counts 25, 29, 33 and 37. See Tune, 766 So. 2d at 352.

12

Each breach of express warranty count alleges that ACI or Westcore owed a select
Plaintiff several express warranties, the warranties were breached, and the respective
Plaintiff was damaged. (Doc. 49 at ¶¶ 343-346, 361-364, 379-382, 397-400, 415-418).
They do not allege, however, what warranties were breached. Instead, each count simply
states that ACI or Westcore “breached one or more of those warranties.” (Doc. 49 at ¶¶
308, 326, 345, 363, 381, 399, 417). These allegations contravene Twombly’s directive
that a pleading “give the defendant fair notice of what the claim is and the grounds upon
which it rests.” See Twombly, 550 U.S. at 555 (internal punctuation altered). As a result,
Counts 21, 25, 29, 33 and 37 are legally insufficient and dismissed.
F.

Breach of Implied Warranty - Counts 22, 26, 30, 34 and 38
Defendants move to dismiss Counts 22, 26, 30, 34 and 38, which allege that either

ACI or Westcore breached implied warranties of (1) workmanlike quality; (2) fitness for a
particular purpose; (3) merchantability; and (4) habitability on every relevant project.
(Doc. 49 at ¶¶ 347-350, 365-368, 383-386, 401-404, 419-422). Defendants again argue
that dismissal is warranted because the Second Amended Complaint provides no factual
allegations or explanations how they allegedly breached implied warranties. The counts
concern injuries sustained in Florida (Count 22), Texas (Counts 26, 30, and 34), and
Colorado (Counts 38). The Court will address each implied warranty claim.
1. Implied Warranty of Workmanlike Quality
In Florida, a contractor must “deliver services performed in a good and
workmanlike manner.” Lochrane Eng'g, Inc. v. Willingham Realgrowth Inv. Fund, Ltd.,
552 So. 2d 228, 232 (Fla. 5th DCA 1989). Texas and Colorado laws are substantially
similar. See Barnett v. Coppell N. Texas Court, Ltd., 123 S.W.3d 804, 823 (Tex. App.

13

2003); see also Shiffers v. Cunningham Shepherd Builders Co., 470 P.2d 593, 595 (Colo.
App. 1970); Erickson v. Oberlohr, 749 P.2d 996, 999 (Colo. App. 1987). The Court will
apply Florida law to the breach of implied warranty of workmanlike quality claims in
Counts 26, 30, 34 and 38. See Tune, 766 So. 2d at 352.
Although the Second Amended Complaint alleges either ACI or Westcore
breached the implied warranty of workmanlike quality, it does not detail how ACI or
Westcore failed to provide construction services in a skillful or workmanlike manner. At
best, it alleges ACI and David Albertelli intentionally installed non-conforming materials
into each project “without following the contractual process for having substitutions of
materials approved by the architect.” (Doc. 49 at ¶ 139).

And the allegations do not

explain how the installation of non-conforming materials ultimately damaged the Plaintiffs.
Thus, the implied warranty of workmanlike quality claims are dismissed.
2. Implied Warranties of Fitness for a Particular Purpose and Merchantability
In Florida, whether a contractor has breached implied warranties of fitness and
merchantability in a construction context hinges on “whether the premises meet ordinary,
normal standards reasonably to be expected of living quarters of comparable kind and
quality.” Maronda Homes, Inc. of Fla. v. Lakeview Reserve Homeowners Ass'n, Inc., 127
So. 3d 1258, 1268 (Fla. 2013); Biscayne Roofing Co. v. Palmetto Fairway Condo. Ass'n,
Inc., 418 So. 2d 1109, 1110 (Fla. 3d DCA 1982); see also David v. B & J Holding Corp.,
349 So. 2d 676, 677 (Fla. 3d DCA 1977). This breach includes situations in which
contractors breach the building contract by deviating from pre-drawn specifications.
David, 349 So. 2d at 678.

14

Texas and Colorado have not applied the implied warranties of fitness for a
particular purpose or merchantability to construction projects. G-W-L, Inc. v. Robichaux,
643 S.W.2d 392, 394 (Tex. 1982), overruled on other grounds by Melody Home Mfg. Co.
v. Barnes, 741 S.W.2d 349 (Tex. 1987); Tile Design Studio, Inc. v. Rosendahl, No.
94CA0060, 1995 WL 761995, at *1 (Colo. App. 1995). Rather, implied warranties of
fitness and merchantability only arise in transactions for goods. G-W-L, Inc., 643 S.W.2d
at 394; Texas Dev. Co. v. Exxon Mobil Corp., 119 S.W.3d 875, 881 (Tex. App. 2003);
see also Palmer v. A.H. Robins Co., 684 P.2d 187, 208 (Colo. 1984). Generally, goods
are all things movable at the time of sale. Tex. Bus. & Com. Code Ann. § 2.105(a); see
also Colo. Rev. Stat. § 4-2-105(a). When a contract calls for a mix of goods and services,
the court derives a contract’s overarching purpose by looking to its nature. Texas Dev.
Co., 119 S.W.3d at 881; Colorado Carpet Installation, Inc., 668 P.2d at 1388.
Here, the first issue is whether Count 22’s Florida-based breach of implied
warranty of fitness and merchantability claim is legally sufficient. According to Plaintiffs,
ACI and David Albertelli intentionally installed non-conforming materials in the projects,
and demanded money to fix the error with conforming materials. (Doc. 49 at ¶ 139).
Because Plaintiffs allege that they deviated from their contract with the non-conforming
goods, this is enough to state a plausible breach of implied warranty of fitness and
merchantability claim. David, 349 So. 2d at 678.
Next, the Court addresses Texas and Colorado-based claims in Counts 26, 30, 34,
and 38. A conflict-of-law analysis is necessary because Florida law differs from Texas
and Colorado laws. Florida courts apply the “most significant relationship” test in the
Restatement (Second) of Conflict of Laws. Bishop v. Florida Specialty Paint Co., 389 So.

15

2d 999, 1001 (Fla. 1980). This test weighs “(a) the place where the injury occurred, (b)
the place where the conduct causing the injury occurred, (c) the domicil[e], residence,
nationality, place of incorporation and place of business of the parties, and (d) the place
where the relationship, if any, between the parties is centered.” Restatement (Second)
of Conflict of Laws § 145(2) (1971). Normally, “[t]he state where the injury occurred would
. . . be the decisive consideration in determining the applicable choice of law.” Bishop,
389 So. 2d at 1001. This rule is only limited where the use of foreign law would offend
Florida public policy. See State Farm Mut. Auto. Ins. Co. v. Roach, 945 So. 2d 1160,
1164 (Fla. 2006).
Here, both and the conduct causing the injuries, and the actual injuries themselves
occurred in Texas and Colorado where the projects were performed. (Doc. 49 at ¶¶ 118,
121-123). In Counts 26, 30, 34 and 38 while no party alleges to be domiciled in Texas or
Colorado, all contracts focused on performance there. The application of Texas and
Colorado law would not offend Florida public policy because Florida’s implied warranty of
fitness and merchantability laws exist to protect purchasers of Florida real estate. See
Gable v. Silver, 258 So. 2d 11, 17 (Fla. 4th DCA 1972), opinion adopted, 264 So. 2d 418
(Fla. 1972). Because Plaintiffs in Counts 26, 30, 34 and 38 did not purchase Florida real
estate, the Court will apply Texas and Colorado laws. As stated, under Colorado and
Texas laws, the implied warranties of fitness and merchantability only arise in transactions
for goods. See G-W-L, Inc., 643 S.W.2d at 394; see also Palmer, 684 P.2d 187, 208
(Colo. 1984). Because construction services – and not goods – were the main focus of
the relevant contracts, the implied warranty of fitness and merchantability claims in
Counts 26, 30, 34 and 38 fail.

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3. Implied Warranty of Habitability
Last, Plaintiffs allege ACI or Westcore owed them implied warranties of habitability
for each project, the duties were breached, and Plaintiffs were injured. In Florida, a
contractor breaches the implied warranty of habitability when the dwelling fails to meet
the “ordinary, normal standards reasonably to be expected of living quarters of
comparable kind and quality.” Hesson v. Walmsley Const. Co., 422 So. 2d 943, 945 (Fla.
2d DCA 1982). Because Texas and Colorado laws are substantially the same the Court
will apply Florida law. See Centex Homes v. Buecher, 95 S.W.3d 266, 273 (Tex. 2002);
Beeftu v. Creekside Ventures LLC, 37 P.3d 526, 528 (Colo. App. 2001); see also Tune,
766 So. 2d at 352.
Even with the most favorable reading of the operative pleading, Plaintiffs state no
plausible claim for implied warranty of habitability. There are no allegations the completed
projects did not conform to ordinary or normal standards for “living quarters of comparable
kind and quality.” See Hesson, 422 So. 2d at 945. As a result, the Court dismisses the
implied warranty of habitability claims in Counts 22, 26, 30, 34 and 38.
G.

Professional Negligence - Counts 23, 27, 31, 35, and 39
Defendants challenge Counts 23, 27, 31, 35 and 39 which allege either ACI or

Westcore are liable for professional negligence. They argue the claims allege no facts to
support any breach of care. These Counts regard injuries arising in Florida (Count 23),
Texas (Counts 27, 31, and 35), and Colorado (Count 39).
In Florida, the elements of a negligence claim are “(1) a duty by defendant to
conform to a certain standard of conduct; (2) a breach by defendant of that duty; (3) a
causal connection between the breach and injury to plaintiff; and (4) loss or damage to

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plaintiff.” Bartsch v. Costello, 170 So. 3d 83, 86 (Fla. 4th DCA 2015). The Court will apply
Florida law as the laws of Texas and Colorado are substantially similar. See Kemp v.
Jensen, 329 S.W.3d 866, 869 (Tex. App. 2010); Connes v. Molalla Transp. Sys., Inc.,
831 P.2d 1316, 1320 (Colo. 1992).
Here, the negligence claims specify no particular duties ACI or Westcore owed the
respective Plaintiffs or how either Defendant breached those duties.

Plaintiffs

professional negligence claims are the “defendant-unlawfully harmed me accusation[s]”
that Iqbal prohibits. Iqbal, 556 U.S. at 677. The Court will dismiss Counts 23, 27, 31, 35,
and 39.
H.

Motion to Strike Punitive Damages Claim - Count 44
Finally, Defendants move to strike the request for punitive damages in Count 44.

According to Plaintiffs, ACI is liable for slander of title because it recorded an overstated,
fraudulent, and unenforceable mechanic’s lien on the Fort Myers Project, which damaged
Continental 332 Fund. (Doc. 49 at 447-450). Defendants seek dismissal because Count
44 fails to allege ACI acted with intentional misconduct or gross negligence that would
justify punitive damages.
But the problems in Count 44 are more fundamental than potential insufficiency in
a punitive damages prayer, as the claim itself fails to pass Rule 12(b)(6) muster. In
Florida, the elements of a slander of title action are
(1) [a] falsehood (2) [that] has been published, or
communicated to a third person (3) when the defendantpublisher knows or reasonably should know that it will likely
result in inducing others not to deal with the plaintiff and (4) in
fact, the falsehood does play a material and substantial part
in inducing others not to deal with the plaintiff; and (5) special
damages are proximately caused as a result of the published
falsehood.

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McAllister v. Breakers Seville Ass'n, Inc., 981 So. 2d 566, 573 (Fla. 4th DCA 2008).
Taking the allegations as true, Plaintiffs allege that ACI recorded an unwarranted
mechanics lien against the Fort Myers Project. (Doc. 49 at ¶¶ 447-449). It does not,
however, allege ACI knew its actions would likely cause others to avoid dealing with
Continental 332 Fund, or that ACI’s actions induced others to avoid dealing with
Continental 332 Fund. Without such allegations, the request for punitive damages is not
plausible. The Court strikes the request for punitive damages in Count 44.
Accordingly, it is now
ORDERED:
1. Defendants’ motions to dismiss (Docs. 80, 81, 82, 83, 84, 85, 86, 87, 88) are
GRANTED IN PART and DENIED IN PART.
a. Counts 1-3, 5-7, 12-19, 21, 23, 25-27, 29-31, 33-35, and 37-44 are
DISMISSED without prejudice.
b. Count 8 is DISMISSED without prejudice as to Defendant David
Albertelli.
c. Count 22 alleging the implied warranty of workmanlike quality and
implied warranty of habitability claims are DISMISSED without
prejudice.
2. Plaintiffs may file a Third Amended Complaint on or before February 27, 2018.
DONE and ORDERED in Fort Myers, Florida this 13th day of February, 2018.

Copies: All Parties of Record

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