United States of America et al v. Perry Bartsch, Jr. Construction Company et al

Filing 34

MEMORANDUM OPINION AND ORDER by Senior Judge Thomas B. Russell on 10/11/2012 re 26 Motion to Dismiss. For the foregoing reasons, IT IS HEREBY ORDERED that Plaintiff's Motion to Dismiss Defendant Bartsch Construction's counterclaims is DENIED. cc: Counsel, Blaine Adams, AIC Roofing & Construction (CDF) Modified distribution on 10/12/2012 (CDF).

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
BOWLING GREEN DIVISION
CASE NO. 1:12-CV-23
UNITED STATES OF AMERICA FOR THE
USE AND BENEFIT OF ROOFING SUPPLY
GROUP-KENTUCKY, LLC and
ROOFING SUPPLY GROUPKENTUCKY, LLC

PLAINTIFF

v.
PERRY BARTSCH, JR. CONSTRUCTION
COMPANY, et al.

DEFENDANTS

MEMORANDUM OPINION AND ORDER
This matter is before the Court upon Plaintiff’s Motion to Dismiss Defendant Perry
Bartsch, Jr. Construction Company’s (“Bartsch Construction”) Counterclaims (DN 26). Bartsch
Construction has filed its response (DN 31), to which Plaintiff has filed its reply (DN 33). These
matters are now ripe for adjudication. For the following reasons, Plaintiff’s Motion to Dismiss
(DN 26) is DENIED.
BACKGROUND
In late January 2010, Bartsch Construction entered into a general contractor agreement
with the National Park Service, a department of the United States of America (“NPS”), to
perform construction work on the NPS’s renovation project in Mammoth Cave, Kentucky
(“Project”). Bartsch Construction thereafter entered into a subcontract agreement with AIC
Roofing and Construction, Inc. (“AIC”) to perform some of the Project’s roofing work. To
perform its work under the subcontract, AIC in turn entered into a sales agreement with Plaintiff,
Roofing Supply Group-Kentucky, LLC (“Roofing Supply”), in which Roofing Supply agreed to

supply certain materials and supplies for the Project to AIC. AIC President Blaine Adams served
as a guarantor on that contract. In early February 2011, Roofing Supply and AIC entered into an
assignment of proceeds under which AIC assigned its right to receive sums due to it on the
Project from Bartsch Construction. Bartsch Construction signed acknowledgement of the
Assignment.
On February 7, 2012, Roofing Supply filed this action against Defendants Bartsch
Construction, AIC, Blaine Adams, and Great American Insurance Company (“Great American”).
In its complaint, Roofing Supply alleges claims of breach of contract against Bartsch and AIC
and a breach of guaranty against Blaine Adams. Roofing Supply also seeks payment from Great
American under a payment bond on which Great American signed as a surety. In its answer,
Bartsch Construction asserts counterclaims of negligent inducement/misrepresentation and
breach of contract. It is these counterclaims Roofing Supply seeks to dismiss.
STANDARD
The Federal Rules of Civil Procedure require that pleadings contain a “short plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A
defendant may move to dismiss a claim or case because the complaint fails to “state a claim upon
which relief can be granted.” Fed. R. Civ. P. 12(b). When considering a Rule 12(b)(6) motion to
dismiss, the court must presume all of the factual allegations in the complaint are true and draw
all reasonable inferences in favor of the non-moving party. Total Benefits Planning Agency, Inc.
v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir. 2008) (citing Great Lakes Steel
v. Deggendorf, 716 F.2d 1101, 1105 (6th Cir. 1983)). “The court need not, however, accept
unwarranted factual inferences.” Id. (citing Morgan v. Church’s Fried Chicken, 829 F.2d 10, 12
(6th Cir. 1987)).
2

Even though a “complaint attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, a plaintiff’s obligation to provide the grounds of his entitlement to
relief requires more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations
omitted). Instead, the plaintiff’s “[f]actual allegations must be enough to raise a right to relief
above the speculative level on the assumption that all the allegations in the complaint are true
(even if doubtful in fact).” Id. (citations omitted). A complaint should contain enough facts “to
state a claim to relief that is plausible on its face.” Id. at 570. A claim becomes plausible “when
the plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)
(citing Twombly, 550 U.S. at 556).
DISCUSSION
Under Kentucky law, a person is liable for negligent misrepresentation when “he fails to
exercise reasonable care or competence in obtaining or communicating ... false information for
the guidance of others in their business transactions” upon which another party relies to his
detriment. Presnell Constr. Managers, Inc. v. EH Construction, LLC, 134 S.W.3d 575, 580 (Ky.
2004) (quoting Restatement (Second) of Torts § 552). “To set forth a claim for negligent
misrepresentation, it is imperative to allege, in some form, that false information was supplied or
relied upon by a party.” H & R Mech. Contractors, Inc. v. Codell Const. Co., Civ. Act. No. 02–
CI–24, 2005 WL 3487870, at *3 (Ky. Ct. App. Dec. 22, 2005). A plaintiff may maintain a
negligent misrepresentation action against a party with whom the plaintiff has no privity of
contract, as “the tort of negligent representation defines an independent duty.” Presnell, 134
S.W.3d at 582.
3

Roofing Supply argues that Bartsch Construction’s negligent misrepresentation claim
must be dismissed because the Assignment at issue does not contain any misrepresentations. This
is not fatal to Bartsch Construction’s counterclaims. As the court in Presnell has pointed out,
privity is not required to assert a claim of negligent misrepresentation. Id. Because alleging the
existence of a contract is not required to maintain a negligent misrepresentation claim, alleging a
misrepresentation in the terms of a contract is similarly not required.
In its counterclaim, Bartsch Construction alleges that Roofing Supply represented that it
would apply payments received from Bartsch Construction on amounts due from AIC, make sure
AIC performed its work in a proper and timely manner, and would supply to the Project all
materials for which AIC was responsible. Bartsch Construction further alleges the
representations were false and negligent, and that but for those representations Bartsch
Construction would not have signed the Assignment under which Roofing Supply now seeks to
hold Bartsch Construction liable. Construing these allegations in a light most favorable to the
Bartsch Construction, the Court finds that it has stated a claim for negligent misrepresentation
under Kentucky law. Whether or not Bartsch Construction can ultimately support its negligent
misrepresentation claim, as Roofing Supply suggests it cannot, is a question to be determined at
a later date. At this early stage in the litigation, the Court finds that Bartsch Construction has
alleged sufficient facts to state a claim for negligent misrepresentation.
Bartsch Construction has similarly alleged sufficient facts to state a breach of contract
claim at this stage of the proceedings. In order to establish a claim for breach of contract, the
plaintiff must demonstrate by clear and convincing evidence the existence and breach of an
actual agreement, or “‘contractually imposed duty.’” Abney v. Amgen, Inc., 443 F.3d 540, 547
(6th Cir. 2006) (quoting Lenning v. Comm. Union Ins. Co., 260 F.3d 574, 581 (6th Cir.2001)).

4

Here, Bartsch Construction alleges that it reached an agreement with Roofing Supply, wherein
Roofing Supply promised to apply payments received from Bartsch Construction on amounts
due from AIC, ensure that AIC performed its work in a proper and timely manner, and supply to
the Project all materials for which AIC was responsible in consideration for Bartsch
Construction’s signature on the Assignment. Bartsch Construction further alleges that Roofing
Supply breached its duty under that agreement by failing to perform those promises. Whether it
can ultimately prove the existence of such an agreement, at this stage of the proceedings, Bartsch
Construction has done enough.
CONCLUSION
For the foregoing reasons, IT IS HEREBY ORDERED that Plaintiff’s Motion to Dismiss
Defendant Bartsch Construction’s counterclaims is DENIED.

CC: counsel

October 11, 2012

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