PECK ORMSBY CONSTRUCTION COMPANY v. City of Rigby et al

Filing 84

MEMORANDUM AND ORDER re: Motions to Dismiss and to Compel Arbitration- Westerns motion to dismiss Peck Ormsby's bond claim is GRANTED; Western's motion to dismiss Rigbys maintenance bond claim is GRANTED; Parkson's motion to dismiss Ri gby's indemnification claim is GRANTED; Parkson's motion to compel arbitration of Rigbys breach of contract claim is DENIED; and the stay of discovery entered by the court on 8/2/11 is LIFTED. Signed by Judge William B. Shubb. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by jm)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE DISTRICT OF IDAHO 10 ----oo0oo---- 11 12 NO. CIV. 1:10-545 WBS PECK ORMSBY CONSTRUCTION COMPANY, a Utah corporation, 13 MEMORANDUM AND ORDER RE: MOTIONS TO DISMISS AND TO COMPEL ARBITRATION Plaintiff, 14 v. 15 18 CITY OF RIGBY, an Idaho municipal corporation; PARKSON CORPORATION, a Delaware corporation; and WESTERN SURETY COMPANY, a South Dakota corporation, 19 Defendants. 16 17 / 20 21 AND RELATED COUNTERCLAIMS AND CROSS-CLAIMS. / 22 23 24 ----oo0oo---Plaintiff Peck Ormsby Construction Company (“Peck 25 Ormsby”) brought this action against defendants City of Rigby 26 (“Rigby”), Parkson Corporation (“Parkson”), and Western Surety 27 Company (“Western”) arising from a construction project in Rigby 28 for which Peck Ormsby is the general contractor and Parkson is a 1 1 subcontractor. After the court granted Parkson’s and Western’s 2 motions to dismiss with leave to amend, Peck Ormsby filed an 3 amended complaint and then a Second Amended Complaint (“SAC”), 4 alleging a claim for breach of contract against Rigby and a bond 5 claim against Western. 6 a counterclaim for breach of contract against Peck Ormsby and 7 cross-claims against Parkson for breach of contract and 8 indemnification and a bond claim against Western. 9 55.) (Docket Nos. 44, 54, 64.) Rigby brought (Docket No. Currently before the court are Parkson’s and Western’s 10 motions to dismiss the claims against them and Parkson’s motion 11 to compel arbitration of Rigby’s breach of contract claim. 12 I. Factual and Procedural Background 13 In January of 2008, Rigby and Peck Ormsby entered into 14 an agreement (“Prime Contract”) whereby Peck Ormsby agreed to 15 construct a wastewater treatment plant in Rigby. 16 One of the components of the plant, a cloth filtration system, 17 would be made by a subcontractor, who was required under the 18 Prime Contract to provide a written guarantee to Rigby that the 19 filtration system would meet particular specifications. 20 Am. Answer, Crosscl. & Countercl. ¶ 15 (Docket No. 55).) 21 April 29, 2008, Peck Ormsby and Parkson entered into an agreement 22 (“Purchase Order”) whereby Parkson would supply the filtration 23 system. 24 Contract, Parkson provided Rigby a “Performance Guarantee” for 25 its equipment in July of 2008. 26 Countercl. ¶ 19.) 27 28 (SAC ¶ 9, 13.) (SAC ¶¶ 7, 11.) (Rigby’s On Pursuant to the requirement in the Prime (Rigby’s Am. Answer, Crosscl. & On August 15, 2008, Keller Associates (“Keller”), the engineer for the project, reviewed and approved Parkson’s 2 1 submittals for the filtration system. (SAC ¶ 14.) The 2 filtration system was installed and operational by August 18, 3 2009. (Id. ¶ 15.) 4 On September 9, 2009, Peck Ormsby received a letter 5 from Keller stating that the filtration system did not meet the 6 specified performance criteria. 7 the letter to Parkson. (Id. ¶ 16.) Peck Ormsby sent (Id. ¶ 17.) On April 16, 2010, pursuant to a Change Order to the 8 9 Prime Contract extending the time of final completion for the 10 project, Parkson as principal and Western as surety executed a 11 Maintenance Bond to guarantee the filtration system against 12 defects in material or workmanship, naming Peck Ormsby and Rigby 13 as dual obligees. 14 (Id. ¶¶ 19-20.) On July 20, 2010, Peck Ormsby received a “rejection 15 letter” from Rigby and Keller formally rejecting the filtration 16 system “based on five (5) reasons indicating that the Equipment 17 is defective.” 18 letter, but has not repaired the alleged defects. 19 23.)1 (Id. ¶ 21.) Parkson acknowledged receipt of the (Id. ¶¶ 22- 20 21 22 23 24 25 26 27 28 1 The parties have requested that the court consider certain documents in deciding the motions to dismiss. As a general rule, “a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989). However, the court may consider documents on which the complaint necessarily relies if their authenticity is not disputed. See Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). On that ground and because the parties have so agreed, the court will consider documents related to the Peck Ormsby-Parkson agreement (Purchase Order Acknowledgment; Parkson’s Quotation, including Standard Conditions of Sale, Quotation Addendum, and General Arrangement Drawing; and Addenda to Purchase Order cover letter and Supplier Purchase Order), and Western’s Maintenance Bond. (Rothenberg Decl. Exs. A-C (Docket 3 1 2 II. Discussion A. 3 Motions to Dismiss On a motion to dismiss, the court must accept the 4 allegations in the complaint as true and draw all reasonable 5 inferences in favor of the plaintiff. 6 U.S. 232, 236 (1974), overruled on other grounds by Davis v. 7 Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 8 (1972). 9 contain sufficient factual matter, accepted as true, to ‘state a Scheuer v. Rhodes, 416 “To survive a motion to dismiss, a complaint must 10 claim to relief that is plausible on its face.’” 11 Iqbal, --- U.S. ----, ----, 129 S. Ct. 1937, 1949 (2009) (quoting 12 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 13 “plausibility standard,” however, “asks for more than a sheer 14 possibility that a defendant has acted unlawfully,” and “[w]here 15 a complaint pleads facts that are ‘merely consistent with’ a 16 defendant’s liability, it ‘stops short of the line between 17 possibility and plausibility of entitlement to relief.’” 18 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 556-57). 19 20 1. Ashcroft v. This Iqbal, Western’s Motions to Dismiss Rigby’s Maintenance Bond Cross-Claim and Peck Ormsby’s Bond Claim 21 22 23 24 25 26 27 28 No. 13); Micheli Decl. Ex. A (Docket No. 16).) In deciding the motion to compel arbitration, the court “may consider the pleadings, documents of uncontested validity, and affidavits submitted by either party.” Macias v. Excel Bldg. Servs. LLC, 767 F. Supp. 2d 1002, 1007 (N.D. Cal. 2011) (quoting Ostroff v. Alterra Healthcare Corp., 433 F. Supp. 2d 538, 540 (E.D. Pa. 2006)). The parties request that the court consider the documents comprising the Prime Contract between Rigby and Peck Ormsby, the Purchase Order between Peck Ormsby and Parkson, and the Performance Guarantee. (Mastin Decl. Ex. A (Docket No. 60); Ritchie Aff. Exs. A-F (Docket No. 72).) Accordingly, the court will consider these documents in deciding the motion to compel arbitration. 4 1 The bond pursuant to which Peck Ormsby and Rigby bring 2 their claims against Western states that Parkson “is required to 3 guarantee the work installed under [the Purchase Order] against 4 defects in materials or workmanship, which may develop during the 5 period of one year ending April 20, 2010.” 6 (Docket No. 16-3).) 7 recovery pursuant to the bond on the ground that Parkson failed 8 to repair the filtration system after being informed in the 9 September 9, 2009, letter and the July 20, 2010, rejection letter (Mitcheli Decl. Ex. A Peck Ormsby and Rigby sue Western for 10 that the filtration system did not meet the performance 11 standards. Both Peck Ormsby and Rigby fail to plead liability with 12 13 the requisite specificity. 14 the letters sent to Parkson informed it of “defects in materials 15 or workmanship”; indeed, it appears from the allegations that the 16 filtration system had no actual defects but simply failed to meet 17 the performance standards set out in the Purchase Order and Prime 18 Contract.2 19 performance standards. 20 construed to apply to performance issues, the parties have not 21 provided any allegations regarding the type of defect that 22 occurred. 23 possibility to plausibility of entitlement to relief. Western’s maintenance bond does not incorporate those Even if the term “defect” could be The bond claims simply do not cross the line from Because Western cannot be held liable unless Parkson 24 25 There is no indication that either of failed to meet its obligations under the bond, see Asociacion de 26 27 28 2 The court notes that it is unlikely Western would have acted as surety to a bond in April of 2010 if Parkson had already been informed of a defect in September of 2009. 5 1 Azucareros de Guatemala v. U.S. Nat’l Bank of Or., 423 F.2d 638, 2 641 (9th Cir. 1970), the court will dismiss Peck Ormsby’s and 3 Rigby’s bond claims against Western. 4 previously been given leave to amend in order to plead these 5 claims with the requisite specificity, but have failed to do so; 6 accordingly, the court will not give leave to amend a second 7 time. 8 2. Peck Ormsby and Rigby have Parkson’s Motion to Dismiss Rigby’s Indemnification Claim 9 Rigby seeks indemnification from Parkson for any 10 11 damages Peck Orsmby recovers on its breach of contract claim 12 against Rigby. 13 must allege (1) an indemnity relationship, (2) actual liability 14 of the indemnitee to a third party, and (3) a reasonable 15 settlement amount. 16 284 (1988). 17 relationship, it has not alleged that it has been found liable to 18 Peck Ormsby or that a settlement has been reached. 19 time, Rigby cannot bring a claim for indemnification against 20 Parkson. 21 To state a claim for indemnification, a plaintiff Chenery v. Agri-Lines Corp., 115 Idaho 281, Even if Rigby has properly alleged an indemnity Until that Rigby argues that it is required to assert the claim 22 now, even though it admits no settlement has taken place. 23 However, Rigby’s claim against Parkson is permissive, not 24 compulsory. 25 666 F.2d 361, 363 (9th Cir. 1982). 26 claim for indemnity against Parkson if and when judgment is 27 entered against Rigby, the court will dismiss this claim. 28 B. See Fed. R. Civ. P. 13(a), (g); Peterson v. Watt, Because Rigby may bring a Parkson’s Motion to Compel Arbitration of Rigby’s 6 1 Breach of Contract Claim 2 The Prime Contract between Rigby and Peck Ormsby 3 provides that the subcontractor installing the filtration system 4 would be required to “provide a written guarantee that the 5 installed filter system will produce an effluent that meets the 6 suspended solids requirements of this specification, based on the 7 specified wastewater quality entering the filtration process.” 8 (Ritchie Aff. ¶ 5, Ex. D (Docket No. 70-5).) 9 between Peck Ormsby and Parkson states that Parkson “does hereby 10 agree to be bound by the terms of the prime contract agreement, 11 construction regulations, general conditions, plans and 12 specifications, and any and all other contract documents in so 13 far as they are applicable to this purchase order.” 14 Ex. E.) 15 [Rigby], a guarantee in writing for [Parkson’s] work.” The Purchase Order (Id. ¶ 6, Parkson also agreed “to execute to [Peck Ormsby] and/or 16 (Id.) Pursuant to these obligations, Parkson provided the 17 Performance Guarantee to Rigby in July of 2008, stating that 18 Parkson would provide a filtration system that would meet 19 specific performance and design specification standards for 20 effluent. 21 contains an arbitration clause and Florida choice of law 22 provision. 23 Guarantee for breach of contract, and Parkson moves to compel 24 arbitration of the claim. (Id. ¶ 7, Ex. F.) (Id.) The Performance Guarantee also Rigby now sues Parkson under the Performance 25 The Federal Arbitration Act (“FAA”) provides that a 26 party may seek an order to compel arbitration from a district 27 court where another party fails, neglects, or refuses to 28 arbitrate. 9 U.S.C. § 4. The Act “leaves no place for the 7 1 exercise of discretion by a district court, but instead mandates 2 that district courts shall direct the parties to proceed to 3 arbitration on issues as to which an arbitration agreement has 4 been signed.” 5 218 (1985). 6 to determining (1) whether a valid agreement to arbitrate exists 7 and, if it does, (2) whether the agreement encompasses the 8 dispute at issue.” 9 207 F.3d 1126, 1130 (9th Cir. 2000). Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, “The court’s role under the Act is therefore limited Chiron Corp. v. Ortho Diagnostic Sys., Inc., Upon a showing that a party 10 has failed to comply with a valid arbitration agreement, the 11 district court must issue an order compelling arbitration. 12 v. Wedbush, Noble, Cooke, Inc., 841 F.2d 282, 285 (9th Cir. 13 1988), overruled on other grounds by Ticknor v. Choice Hotels 14 Int’l, Inc., 265 F.3d 931 (9th Cir. 2001). Cohen 15 Although the FAA sets forth a policy favoring 16 arbitration, “a party cannot be required to submit to arbitration 17 in any dispute which he has not agreed so to submit.” 18 Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 19 574, 582 (1960); see also Three Valleys Mun. Water Dist. v. E.F. 20 Hutton & Co., 925 F.2d 1136, 1139 (9th Cir. 1991). 21 a party has submitted to arbitration is first and foremost a 22 matter of contractual interpretation that must hinge on the 23 intent of the parties. 24 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 25 U.S. 614, 626 (1985). 26 United Thus, whether United Steelworkers, 363 U.S. at 582; Rigby does not dispute Peck Ormsby’s contention that 27 the arbitration clause, if valid, encompasses the breach of 28 contract claim; Rigby only argues that the arbitration clause in 8 1 the Performance Guarantee did not constitute a valid agreement. The commonly accepted meaning of “guarantee” is “[t]he 2 3 assurance that a contract or legal act will be duly carried out.” 4 Black’s Law Dictionary 772 (9th ed. 2009). 5 “performance” is defined to mean “[t]he successful completion of 6 a contractual duty.” 7 the term ‘performance guarantee’ is an assurance or promise that 8 a contractual obligation will be fulfilled.” 9 Props, LLC, Civil Nos. 1:10cv98, 1:10cv198, 2011 WL 1131057, at Id. at 1252. The term Thus, “the plain meaning of In re Versant 10 *7 (W.D.N.C. Mar. 25, 2011). 11 the Purchase Order, which incorporated portions of the Prime 12 Contract, to give Rigby a Performance Guarantee. 13 the Performance Guarantee, Parkson was promising to fulfill a 14 preexisting obligation.3 15 Parkson was allegedly required by By giving Rigby Under Idaho contract law, a party cannot unilaterally 16 amend an agreement to add an arbitration clause unless the 17 original contract expressly provided that party with the right to 18 make such a modification. 19 Idaho 1, 3 (2008). 20 clause in the Performance Guarantee it was contractually 21 obligated to give Rigby without the right to do so. 22 Rigby never agreed to arbitrate disputes with Parkson, the court 23 will deny Parkson’s motion to compel arbitration. 24 IT IS THEREFORE ORDERED that: 25 (1) Western’s motion to dismiss Peck Ormsby’s bond MBNA Am. Bank, N.A. v. Fouche, 146 Parkson unilaterally placed an arbitration Because 26 3 27 28 In deciding this motion, the court makes no judgment regarding the merits of the underlying breach of contract claim. See United Computer Sys., Inc. v. AT & T Corp., 298 F.3d 756, 766 (9th Cir. 2002). 9 1 claim be, and the same hereby is, GRANTED; 2 3 (2) Western’s motion to dismiss Rigby’s maintenance bond claim be, and the same hereby is, GRANTED; 4 5 (3) Parkson’s motion to dismiss Rigby’s indemnification claim be, and the same hereby is, GRANTED; 6 7 (4) Parkson’s motion to compel arbitration of Rigby’s breach of contract claim be, and the same hereby is, DENIED; and (5) The stay of discovery entered by the court on 8 9 10 August 22, 2011, is hereby LIFTED. DATED: August 31, 2011 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10

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