Kostmayer Construction, LLC et al v. California First National Bank

Filing 29

ORDER granting 9 Motion to Dismiss for Failure to State a Claim. Plaintiffs' claims against California First National Bank are hereby dismissed with prejudice. Signed by Judge Martin L.C. Feldman on 10/5/16. (clc)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
KOSTMAYER CONSTRUCTION, LLC AND
ELECTRICAL AND INSTRUMENTATION
UNLIMITED, INC.

CIVIL ACTION

V.

NO. 16-2549

CALIFORNIA FIRST NATIONAL BANK

SECTION "F"

ORDER AND REASONS
Before the Court is a motion to dismiss pursuant to Federal
Rule of Civil Procedure 12(b)(6) filed by the defendant California
First National Bank (CalFirst), or, in the alternative, a motion
to dismiss for forum non conveniens. For the reasons that follow,
defendant’s motion to dismiss is GRANTED. 1
Background
This is a breach of contract case arising out of a contract
to which defendant was a party, and plaintiffs allege they were
the

third-party

beneficiaries

to

the

agreement.

Plaintiff

Kostmayer Construction, LLC is a marine contractor and plaintiff
Electrical & Instrumentation Unlimited, Inc. (EIU) is a provider
of technical and contracting services.
On or about July 7, 2014 defendant CalFirst entered into a
contract with Noranda Alumina, LLC for funding of Noranda’s capital
improvement project at its facility in Gramercy, Louisiana. 2 Under

1
2

The Court need not reach the forum non conveniens issue.
The factual summary is taken from the complaint.
1

the

agreement,

CalFirst

was

to

advance

Noranda

funding

for

construction costs and equipment acquisitions for the project, and
in turn would acquire a capital lease at the scheduled conclusion
of the project on September 30, 2015.
Some time thereafter, Noranda also entered into separate
written contracts with each plaintiff to provide work relating to
the project. In addition to performing work on the project on a
time and materials basis, Kostmayer received a Purchase Order
signed by Noranda’s purchasing agent for $1,667,000, on or about
April 14, 2015. On June 23, 2015, Kostmayer and Noranda reached an
agreement

for

additional

work/change

order

for

Kostmayer

to

provide labor, supervision, equipment, materials and necessary
supplies for part of the capital improvement project, totaling
$717,000.

A

third

agreement

was

reached

between

Noranda

and

Kostmayer on August 11, 2015 for additional labor, equipment and
materials for the project from Kostmayer in exchange for $10,000.
Kostmayer alleges that it was informed that payment of its
invoices would come from CalFirst, since CalFirst was funding the
project.

Allegedly,

the

August

11,

2015

agreement

stated

Kostmayer’s invoices were sold to CalFirst. Email communications
between Noranda’s purchasing agent and Kostmayer on August 4, 2015
and September 10, 2015 reaffirmed that all invoices for the capital
improvement project had been “sold to” CalFirst.

2

Noranda and plaintiff EIU contracted for EIU to provide labor,
supervision,

equipment,

materials

and

necessary

supplies

for

electrical and instrumentation work associated with the project on
September 29, 2015 in exchange for $550,680. The agreement also
stated that EIU’s invoices were “sold to” CalFirst. Additionally,
EIU performed other work on the project on a time and materials
basis.
On September 29, 2015 Kostmayer received its first payment of
$333,400 from CalFirst for the work on the project. This check was
referenced as an “expense check.” On November 12, 2015, Kostmayer
received

two

wire

transfers

from

CalFirst

in

the

amounts

of

$666,800 and $805,559.68 as payment for invoices for furnished
supplies and work performed on the project. EIU submitted pay
applications to CalFirst as instructed but has not received payment
on any of its invoices at this time.
Kostmayer received an email from Noranda’s purchasing agent
on or about December 3, 2015 requesting a copy of all outstanding
invoices that had been submitted to CalFirst. The email also
instructed Kostmayer to send all future invoices directly to
Noranda and not CalFirst.
In February, 2016 Noranda filed for bankruptcy. According to
plaintiffs, pleadings in Noranda’s bankruptcy proceeding indicate
the contract between Noranda and CalFirst had been amended, on or
about September 30, 2015, to substantially reduce the amount of
3

funding CalFirst was to provide for the project. Additionally,
defendant asks the Court take judicial notice that plaintiffs have
filed claims in Noranda’s bankruptcy proceeding for the amounts
claimed in this case.
Plaintiffs filed this lawsuit on March 29, 2016, alleging
that defendant is liable to them for breach of the contract between
defendant and Noranda. As allegedly third-party beneficiaries to
the contract, plaintiffs contend CalFirst is liable to them since
neither plaintiff consented to an amendment or dissolution of the
contract.

Kostmayer

claims

it

is

owed

$1,225,575.29

for

its

outstanding invoices plus judicial interest and costs. EIU claims
it is owed $701,851.10 for its outstanding invoices plus judicial
interest and costs.
Defendant seeks dismissal pursuant to FED.R.CIV.P. 12(b)(6)
for failure to state a claim, or, alternatively, dismissed for
forum non conveniens

based on a forum selection clause in the

alleged third-party beneficiary contract.
I.
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a party to move for dismissal of a complaint for failure to state
a claim upon which relief can be granted.

Such a motion is rarely

granted because it is viewed with disfavor.

See Lowrey v. Tex. A

& M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997) (quoting Kaiser

4

Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d
1045, 1050 (5th Cir. 1982)).
Under Rule 8(a)(2) of the Federal Rules of Civil Procedure,
a pleading must contain a "short and plain statement of the claim
showing that the pleader is entitled to relief."

Ashcroft v.

Iqbal, 556 U.S. 662, 678-79 (2009) (citing Fed. R. Civ. P. 8).
"[T]he

pleading

'detailed

factual

standard

Rule

8

allegations,'

announces

but

it

does

demands

not
more

require
than

an

unadorned, the-defendant-unlawfully-harmed-me accusation." Id. at
678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
Thus,

in

considering

a

Rule

12(b)(6)

motion,

the

Court

"accepts 'all well-pleaded facts as true, viewing them in the light
most favorable to the plaintiff.'"

See Martin K. Eby Constr. Co.

v. Dall. Area Rapid Transit, 369 F.3d 464 (5th Cir. 2004) (quoting
Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999)).

But, in

deciding whether dismissal is warranted, the Court will not accept
conclusory allegations in the complaint as true.
at 1050.

Kaiser, 677 F.2d

Indeed, the Court must first identify allegations that

are conclusory and thus not entitled to the assumption of truth.
Iqbal, 556 U.S. at 678-79.

A corollary: legal conclusions "must

be supported by factual allegations." Id. at 678.

Assuming the

veracity of the well-pleaded factual allegations, the Court must
then determine "whether they plausibly give rise to an entitlement
to relief." Id. at 679. Plaintiffs face a heavy burden.
5

“ . . .

[C]onclusory
factual

allegations

conclusions

dismiss."

or

will

legal

not

conclusions

suffice

to

masquerading

prevent

a

motion

as
to

Taylor v. Books A Million, Inc., 296 F.3d 376, 378 (5th

Cir. 2002).
"'To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.'"

Gonzalez v. Kay, 577 F.3d

600, 603 (5th Cir. 2009) (quoting Iqbal, 556 U.S. at 678) (internal
quotation marks omitted).

"Factual 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)."
footnote omitted).

Twombly, 550 U.S. at 555 (citations and

"A claim has facial plausibility when the

plaintiff pleads factual content that allows the court to draw the
reasonable

inference

misconduct alleged."

that

the

defendant

is

liable

for

the

Iqbal, 556 U.S. at 678 ("The plausibility

standard is not akin to a 'probability requirement,' but it asks
for more than a sheer possibility that a defendant has acted
unlawfully.").

This is a "context-specific task that requires the

reviewing court to draw on its judicial experience and common
sense."

Id. at 679.

"Where a complaint pleads facts that are

merely consistent with a defendant's liability, it stops short of
the line between possibility and plausibility of entitlement to
relief." Id. at 678 (internal quotations omitted) (citing Twombly,
6

550 U.S. at 557).

"[A] plaintiff's obligation to provide the

'grounds' of his 'entitle[ment] to relief'" thus "requires more
than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do."

Twombly, 550 U.S. at

555 (alteration in original) (citation omitted).
In deciding a motion to dismiss, the Court may consider
documents that are essentially "part of the pleadings."

That is,

any documents attached to or incorporated in the plaintiff's
complaint that are central to the plaintiff's claim for relief.
Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th
Cir. 2004) (citing Collins v. Morgan Stanley Dean Witter, 224 F.3d
496, 498-99 (5th Cir. 2000)).

Also, the Court is permitted to

consider matters of public record and other matters subject to
judicial notice without converting a motion to dismiss into one
for summary judgment.

See United States ex rel. Willard v. Humana

Health Plan of Tex. Inc.,

336 F.3d 375, 379 (5th Cir. 2003).
II.

Defendant CalFirst
defendant
allegedly

and

Noranda,

been

has submitted a 2014 agreement between
including

incorporated

several

into

the

addendums
agreement.

which

had

Although

plaintiffs argue that they do not have enough information to
confirm that the agreement relied on by defendant is in fact the
same agreement that they have based their claims on, the agreement
is clearly between defendant and Noranda and contemplates funding
7

of the new ship unloading system project at Noranda’s facility.
Thus,

the

pleadings,

Court

will

without

consider

converting

this
the

document

motion

to

as

part

one

for

of

the

summary

judgment; plaintiffs refer to the agreement in their complaint and
the

agreement

is

central

to

their

claim,

as

third-party

beneficiaries, for breach of contract. Plaintiffs are not helped
by Louisiana law or by California law.
A.
Louisiana

Civil

Code

article

1978

provides

that

“a

contracting party may stipulate a benefit for a third person called
a third-party beneficiary.” Often referred to as a stipulation
pour autrui, this contractual stipulation creates a third-party
beneficiary’s cause of action against the promisor for specific
performance. See Stall v. State Farm Fire and Cas. Co., 995 So.2d
670 (La.App. 4 Cir. 2008). However, there is no codal instruction
on determining whether such a stipulation was intended. Rather,
the courts must analyze each contract “on its own terms and
conditions in order to determine if the contract stipulated a
benefit for a third person.” Joseph v. Hosp. Serv. Dist. No. 2,
939 So. 2d 1206, 1212 (La. 2006).

Third-party beneficiaries are

“never presumed, but rather, the intent of contracting parties to
stipulate a benefit in favor of a third-party must be manifestly
clear.” Paul v. Louisiana State Employees’ Group Ben. Program, 762
So. 2d 136, 140 (La.App. 1 Cir. 2000) (citing Homer Nat’l Bank v.
8

Tri-District Dev. Corp., 534 So. 2d 154, 156 (La.App. 3 Cir.
1988)).
The Louisiana Supreme Court has announced three criteria for
determining whether contracting parties have provided a benefit
for a third party:
(1) The stipulation for a third party is manifestly
clear;
(2) There is certainty as to the benefit provided the
third party; and
(3) The benefit is not a mere incident of the contract
between the promisor and the promise.”
Joseph, 939 So. 2d at 1212.
The

Louisiana

relationships

Supreme

between

Court

property

has
owner

used

the

contractual

and

contractor,

and

contractor and sub-contractors to illustrate that even though the
property owner might have an interest in the contract between
contractor and sub-contractor, the property owner does not have a
right of action arising from the sub-contract agreement. Allen &
Currey Mfg. Co. v. Shreveport Waterworks Co., 37 So. 980, 983 (La.
1905).
Under California law, which the contract between Noranda and
defendant

stipulates

controls

the

agreement,

a

contract

may

stipulate a benefit for a third party as well. “The test for
determining whether a contract was made for the benefit of a third
person is whether an intent to benefit a third person appears from
the terms of the contract.” Prouty v. Gores Tech. Group, 18 Cal.

9

Rptr. 3d 178, 184 (Cal. Ct. App. 3 Dist. 2004). “The party claiming
to be a third-party beneficiary must show the contract was made
expressly for his or her benefit.” Sofias v. Bank of Am., 218 Cal.
Rptr. 388, 390 (Cal. Ct. App. 4 Dist. 1985). “Expressly means in
an express manner; in direct or unmistakable terms; explicitly;
definitely;

directly.”

Id.

Additionally,

“a

third-party

beneficiary of an agreement is bound by the terms of the agreement,
including a valid forum selection clause.” TAAG Linhas Aereas de
Angola v. Transamerica Airlines, Inc., 915 F.2d 1351, 1354 (9th
Cir. 1990).
III.
CalFirst seeks to have plaintiffs’ claims dismissed pursuant
to FED.R.CIV.P. 12(b)(6) for failure to state a claim for which
relief can be granted. (Only in the alternative, does defendant
seek dismissal on the grounds of forum non conveniens based on a
forum selection clause in the contract at issue). Plaintiffs argue
that it is premature to dismiss their complaint because they are
unsure if the document submitted with defendant’s motion is the
same contract they claim gives rise to their cause of action.
Plaintiffs seek time to complete discovery regarding this contract
and time to amend their complaint with additional claims.
Plaintiffs’ complaint states a single breach of contract
claim for each plaintiff against defendant, each of which is
premised on plaintiffs’ allegations that they are third-party
10

beneficiaries to a contract between Noranda and defendant. While
plaintiffs had directly contracted with Noranda for a construction
project, there is no contractual relationship between plaintiffs
and defendant. Instead, according to the contract, defendant and
Noranda

simply

had

entered

into

a

lease

agreement

whereby

defendant:
agrees to lease to [Noranda] the hardware, software,
equipment and all related capitalized costs (capitalized
costs are those cost necessary to put the hardware,
software and equipment into full productive use by
[Noranda]), or other costs or expenditures made by
[defendant](collectively, the “Property”).
The leased property narrowly consisted of “a new ship unloading
system with total installation and indirect costs not to exceed
50% of the total property costs.” Defendant remained the owner of
the property until all rental payments, interest, taxes and other
charges were paid by Noranda along with a final payment of one
dollar, at which point title would transfer to Noranda. Nowhere in
the document does it stipulate that the agreement was intended to
benefit

a

third

party.

However,

plaintiffs

claim

that

this

agreement was entered into to provide Noranda with the funding
needed to pay contractors who supplied materials and labor for the
construction project, including the plaintiffs and therefore, they
are third-party beneficiaries of it.
Whether

the

agreement

between

Noranda

and

CalFirst

is

examined under Louisiana law or California law, there is no express

11

stipulation that there was an intended benefit for any third
parties, particularly plaintiffs. The lease agreement provided
Noranda the advantage of financing for an improvement project for
its facility, while defendant received the advantage of ownership
over the improvements in order to secure repayment from Noranda.
Any advantage plaintiffs derived from the lease agreement between
defendant and Noranda was at best, if at all, incidental to the
agreement, and not the consideration for the contract. The factual
allegations in plaintiffs’ complaint are conclusory and fall short
of demonstrating facial plausibility. Plaintiffs have not pleaded
factual content that would allow the Court to draw the inference
that

defendant

is

liable

to

plaintiffs

under

a

third-party

beneficiary theory.
Accordingly, IT IS ORDERED that the defendant’s motion to
dismiss is GRANTED. The plaintiffs’ claims against CalFirst are
hereby dismissed with prejudice.

New Orleans, Louisiana, October 5, 2016

______________________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE

12