G4S Technology LLC v. WCC Cable, Inc. et al

Filing 36

MEMORANDUM AND ORDER - The Motion to Dismiss Count VI, ECF No. 74 , filed by Defendant Liberty Mutual Insurance Company, is granted. Count VI of the Complaint, ECF No. 1, is dismissed, with prejudice. Member Cases: 8:17-cv-00483-LSC-MDN, 8:17-cv-00182-LSC-MDN Ordered by Chief Judge Laurie Smith Camp. (LKO)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA

WCC CABLE, INC., A Virginia
Corporation;
8:17CV483
Plaintiff,
MEMORANDUM
AND ORDER

vs.
G4S TECHNOLOGY LLC, A Delaware
limited liability company; and LIBERTY
MUTUAL INSURANCE COMPANY,
Defendants.

G4S TECHNOLOGY LLC, A Delaware
limited liability company;
8:17CV182
Plaintiff,
vs.
WCC CABLE, INC., A Virginia
Corporation; and IRONSHORE
INDEMNITY, INC., a Minnesota
corporation,
Defendants.

This matter is before the Court on the Motion to Dismiss Count VI, ECF No. 74,
filed by Defendant Liberty Mutual Insurance Company. For the reasons stated below,
the motion will be granted.
BACKGROUND
The following facts are those alleged in the Complaint, ECF No. 1, and assumed
true for purposes of the pending Motion to Dismiss.

In December of 2013, Defendant1 G4S Technology Inc. entered into a contract
(Prime Contract) with the Virginia Depart of Transportation (VDOT) for the design and
construction of a traffic and safety management system for portions of Interstate 64 in
Virginia (Project).

Complaint ¶ 7, ECF No. 1 in 17cv483, Page ID 3.

The Prime

Contract required G4S to meet certain interim deadlines and a final completion deadline
by July 6, 2015. Id. ¶ 8.
Nine months later, G4S subcontracted (Subcontract) with Plaintiff WCC Cable,
Inc., for a portion of the Project’s construction work, which included installing cable,
conduit, and pullboxes for certain areas of the Project, with all materials to be provided
to WCC by G4S. Id. ¶ 9. In November 2013, G4S, as principal, and Liberty Mutual, as
surety, executed Payment Bond No. 024051952 (Bond) in the amount of $4,599,262.00
for the benefit of VDOT and all parties providing labor and materials to the Project. Id.
¶ 10. The total obligation of the Bond was guaranteed, jointly and severally, by G4S
and Liberty. Id. ¶ 11.
G4S instructed WCC to proceed with the work of the Subcontract beginning on or
about September 15, 2014. Id. ¶ 12. At the time WCC was instructed to proceed, there
were 294 calendar days remaining before G4S’s Prime Contract deadline. Id. ¶ 13,
Page ID 4. WCC alleges this was an insufficient amount of to complete its work., id.
¶ 14, and that adverse weather and G4S’s failure to supply appropriate material and
coordination limited WCC’s ability to work, id. ¶ 15.
Due to these challenges, WCC alleges that all parties agreed and understood
that the completion date under the Subcontract would be waived, and that the initial

1

The parties in this order are labeled according to their posture in the designated lead case, 17-

cv-483.

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completion date came and went without G4S attempting to establish a new completion
date. Id. ¶ 22, Page ID 5. On August 10, 2015, G4S provided WCC with a schedule
showing a revised completion date of September 11, 2015, for the Subcontract. Id. ¶
25, Page ID 6. On August 12, 2015, notwithstanding G4S’s alleged waiver of the initial
completion date, G4S sent WCC a “Notice to Cure.”

Id. ¶ 26. WCC alleges that

following receipt of the letter, G4S specifically directed WCC’s work means and
methods. Id. ¶ 27.
On September 25, 2015, G4S sent WCC a “Notice of Default and Bond Claim”
on the grounds that WCC had not met the initial completion date. Id. ¶ 28. WCC
objected to the Notice of Default, and continued to work at the Project as directed by
G4S. Id. ¶ 29. G4S issued two subsequent notices to cure, the first on January 13,
2016, which listed items it deemed incomplete, id. ¶ 30, Page ID 7, and the second on
January 26, 2016, which claimed that WCC failed to respond to the corrective action
demanded in the prior notice, id. ¶ 33. WCC objected to both notices and continued to
work on the Project under G4S’s direction. Id. ¶ 34.
WCC alleges that at the time of issuing of the notice, G4S was substantially in
breach of the Subcontract. Id. ¶ 35. G4S has withheld amounts owed to WCC since
November 2015. Id. ¶ 36, Page ID 8. G4S has paid WCC only $349,074.31 of the total
$933,734.02 billed and owed, leaving an outstanding balance due to WCC of
$584,659.71. Id. ¶ 38.
In late September of 2016, WCC provided notice to Liberty Mutual of G4S’s lack
of payment and submitted its claim for payment of the Outstanding Balance under the
Bond. Id. ¶ 41. By letter dated September 28, 2016, Liberty Mutual acknowledged

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WCC’s claim and requested additional documentation regarding the claim, id. ¶ 42,
which WCC provided on November 14, 2016, id. ¶ 43, Page ID 9. Liberty Mutual
denied WCC’s claim on April 19, 2017. Id. ¶ 44. WCC alleged that the justifications set
forth in Liberty Mutual’s letter of denial were factually inaccurate, id. ¶ 45, and that
Liberty Mutual “did not and has not adequately and in good faith investigated or
responded to WCC’s notice of claim, id. ¶ 46.
WCC filed this action on May 25, 2017, alleging Breaches of Contract against
G4S (Counts I and II); Breach of Implied Obligations against G4S (Count III); Unjust
Enrichment against G4S and Liberty Mutual (Count IV); Breach of Payment Bond
against G4S and Liberty Mutual (Count V); and “Common Law Bad Faith and Breach of
Duty of Good Faith and Fair Dealing” against Liberty Mutual (Count VI).
Regarding Count V, WCC alleged that Liberty Mutual “engaged in bad faith,
including, but not limited to: (a) requesting information from WCC without the intent to
act on such information; (b) failing to identify a reasonable basis for denial of indemnity
to WCC; and (c) failing to promptly and fairly indemnify WCC for all covered losses
under the Payment Bond.” As to Count VI, WCC alleged that Liberty Mutual:
“engaged in bad faith, including, but not limited to: (a) failing to adopt and
implement reasonable standards for the prompt and thorough investigation
and processing of claims; (b) failing to promptly and fairly indemnify WCC
for all covered losses under the Bond; (c) failing to conduct a reasonable
investigation before denying WCC’s claim; and (d) failing to promptly
identify a reasonable basis for denial of indemnity to WCC.”
Id. ¶ 92, Page ID 15.
STANDARD OF REVIEW
A complaint must contain “a short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To satisfy this requirement, a
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plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.”
Corrado v. Life Inv'rs Ins. Co. of Am., 804 F.3d 915, 917 (8th Cir. 2015) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Barton v. Taber, 820
F.3d 958, 964 (8th Cir. 2016) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
“Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Zink v. Lombardi, 783 F.3d 1089, 1098 (8th Cir. 2015)
(quoting Iqbal, 556 U.S. at 678), cert. denied, 135 S. Ct. 2941 (2015). The complaint’s
factual allegations must be “sufficient to ‘raise a right to relief above the speculative
level.’” McDonough v. Anoka Cty., 799 F.3d 931, 946 (8th Cir. 2015) (quoting Twombly,
550 U.S. at 555).

The Court must accept factual allegations as true, but it is not

required to accept any “legal conclusion couched as a factual allegation.” Brown v.
Green Tree Servicing LLC, 820 F.3d 371, 373 (8th Cir. 2016) (quoting Iqbal, 556 U.S. at
678). Thus, “[a] pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of
the elements of a cause of action will not do.’” Ash v. Anderson Merchandisers, LLC,
799 F.3d 957, 960 (8th Cir. 2015) (quoting Iqbal, 556 U.S. at 678), cert. denied, 136 S.
Ct. 804 (2016).
On a motion to dismiss, courts must rule “on the assumption that all the
allegations in the complaint are true,” and “a well-pleaded complaint may proceed even
if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a
recovery is very remote and unlikely.’”

Twombly, 550 U.S. at 555 & 556 (quoting

Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). “Determining whether a complaint

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states a plausible claim for relief . . . [is] a context-specific task that requires the
reviewing court to draw on its judicial experience and common sense.” Mickelson v.
Cty. of Ramsey, 823 F.3d 918, 923 (8th Cir. 2016) (alternation in original) (quoting Iqbal,
556 U.S. at 679).
DISCUSSION
Liberty Mutual moves for dismissal of Count VI of WCC’s complaint.

Liberty

Mutual primarily argues the claim should be dismissed because Virginia law2 does not
recognize the breach of the duty of good faith and fair dealing as an independent cause
of action.
Virginia law recognizes that “every contract carries an implied covenant of good
faith and fair dealing.” Rogers v. Deane, 992 F. Supp. 2d 621, 633 (E.D. Va. 2014),
(citing Eplus Tech. Inc. v. Nat’l R.R. Passenger Corp., 407 F.Supp.2d 758, 762 (E.D.
Va. 2005)) aff’d, 594 F. App’x 768 (4th Cir. 2014). Because of this, “[a] claim for the
breach of that covenant is a claim for breach of contract,” id. (citing Eplus Tech., 407
F.Supp.2d at 762; Want v. St. Martin's Press LLC, No. 1:12–cv–908, 2012 WL 5398887,
at *4 (E.D. Va. Nov. 1, 2012)), and “[w]here there is a claim for breach of contract, the
inclusion of a claim for breach of the implied covenant of good faith and fair dealing as a
separate claim is duplicative of the breach of contract claim [and] does not provide an
independent cause of action,” id. (citing Joyce v. Lincoln Nat’l Life Ins. Co., 845 F .Supp.
353, 355 (E.D. Va.1993)). See Middle E. Broad. Networks, Inc. v. MBI Glob., LLC, No.
1:14-CV-01207-GBL, 2015 WL 4571178, at *5 (E.D. Va. July 28, 2015) (“Virginia law
does not recognize an independent cause of action for this claim”); Luther v. Wells
Fargo Bank, N.A., No. 4:13-CV-00072, 2014 WL 6451667, at *5 (W.D. Va. Nov. 17,
2

WCC and Liberty Mutual agree that Virginia law governs this issue.

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2014) (citing Rogers, 992 F.Supp.2d at 633) (“[A] claim for breach of [the covenant of
good faith and fair dealing] is not an independent cause of action; it is a claim for breach
of contract.”), aff’d, 623 F. App’x 608 (4th Cir. 2015); Albayero v. Wells Fargo Bank,
N.A., No. 3:11CV201-HEH, 2011 WL 4748341, at *6 (E.D. Va. Oct. 5, 2011) (quoting
Frank Brunckhorst Co., L.L.C. v. Coastal Atl., Inc., 542 F. Supp.2d 452, 462 (E.D. Va.
2008)) (“Under Virginia law, every contract contains an implied covenant of good faith
and fair dealing; however, a breach of those duties only gives rise to a breach of
contract claim, not a separate cause of action.”); Healy v. Chesapeake Appalachia,
LLC, No. 1:10CV00023, 2011 WL 24261, at *14 (W.D. Va. Jan. 5, 2011) (“Virginia law
does not recognize a separate cause of action for breach of implied duties arising out of
a written contract.”).
Despite this weight of authority, WCC argues that “[n]umerous Virginia and
federal courts have recognized a cause of action for breach of the implied duty of good
faith and fair dealing in common law contracts.” ECF No. 77 in 17cv483, Page ID
1039–40 (citing Wolf v. Fannie Mae, 512 F. App’x 336, 345 (4th Cir. 2013) (“In Virginia,
every contract contains an implied covenant of good faith and fair dealing”); Stoney
Glen, LLC v. S. Bank & Tr. Co., 944 F. Supp. 2d 460, 465 (E.D. Va. 2013); Bourdelais v.
JPMorgan Chase Bank, N.A., Civil Action No. 3:10CV670, 2012 U.S. Dist. LEXIS
158508, at *13 (E.D. Va. Nov. 5, 2012)). WCC also states that “Count V seeks redress
for the defendants’ failure to pay amounts due to WCC in accordance with the parties’
contractual relationship per the terms of the bond, whereas Count VI seeks redress for
Liberty Mutual’s exercise of its discretion in bad faith.” ECF No. 77 in 17cv483, Page ID
1041–42.

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WCC primarily relies on Enomoto v. Space Adventures, Ltd., 624 F. Supp. 2d
443 (E.D. Va. 2009). Although the court in Enomoto allowed a stand-alone claim for
breach of the duty of good faith to proceed alongside a breach of contract claim, the
court noted that the good faith claim was “properly pled because Plaintiff [did] not seek
redress through an implied covenant claim merely for Defendant’s unfavorable exercise
of its explicit contractual rights. Plaintiff allege[d] that Defendant’s actions were not
merely unfavorable, but actually dishonest.” Id. at 450.
Even if allegations of dishonesty create an exception to the prohibition of freestanding good faith claims, WCC has not alleged any such conduct. The Court finds
that under Virginia law, Claim VI is duplicative of Claim V and will be dismissed.
Accordingly,
IT IS ORDERD:
1. The Motion to Dismiss Count VI, ECF No. 74, filed by Defendant Liberty
Mutual Insurance Company, is granted;
2. Count VI of the Complaint, ECF No. 1, is dismissed, with prejudice.

Dated this 27th day of April, 2018.

BY THE COURT:
s/Laurie Smith Camp
Chief United States District Judge

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