Eagle Rock Contracting LLC et al v. National Security Technologies, LLC

Filing 108

ORDER. IT IS HEREBY ORDERED that 101 Defendant's Motion for Summary Judgment, is GRANTED in part and DENIED in part. Specifically, the Court grants summary judgment for Defendant on Plaintiff's claims for breach of contract and bre ach of the implied covenant of good faith and fair dealing. However, the Court denies summary judgment for Defendant's remaining equitable indemnity counterclaim. Signed by Chief Judge Gloria M. Navarro on 1/25/17. (Copies have been distributed pursuant to the NEF - MR)

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1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 EAGLE ROCK CONTRACTING, LLC, 4 5 6 7 8 9 ) ) Plaintiff, ) vs. ) ) NATIONAL SECURITY TECHNOLOGIES, ) LLC, ) ) Defendant. ) ) Case No.: 2:14-cv-01278-GMN-NJK ORDER Pending before the Court is the Motion for Summary Judgment, (ECF No. 101), filed by 10 11 Defendant National Security Technologies, LLC (“Defendant”). Plaintiff Eagle Rock 12 Contracting, LLC (“Plaintiff”) filed a Response, (ECF No. 102), and Defendant filed a Reply, 13 (ECF No. 103). For the reasons discussed below, Defendant’s Motion is GRANTED in part 14 and DENIED in part. 15 I. BACKGROUND 16 This case arises from a subcontract between Plaintiff and Defendant for construction 17 services in Nevada (the “Subcontract”). (See Mot. for Summ. J. (“MSJ”) 1:24–25, ECF No. 18 101); (see also Exs. 11, 12 (the “Subcontract”) to MSJ, ECF Nos. 101-11, 101-12). 19 Defendant is the prime contractor for the Department of Energy, National Nuclear Security 20 Administration Nevada Field Office, and Plaintiff is a construction contractor. (MSJ ¶ 1). The 21 Subcontract agreed that Plaintiff would “provide architectural-engineering design and 22 construction services, including installation of fiber optic cable by plowing for 18 miles along 23 U.S. Highway 95 to Creech Air Force Base.” (Resp. ¶ 4, ECF No. 102). Plaintiff began 24 performing under the Subcontract on April 11, 2011, (id. ¶ 7), and completed work for the 25 project on July 20, 2011, (id. ¶ 18). Page 1 of 8 1 During the project, Plaintiff subcontracted with at least four subcontractors, including ID 2 Consulting Solutions, LLC; Hofsommer Excavating, Inc.; Trenching Services, Inc.; and 3 Cannon Services Group (collectively “Plaintiff’s Subcontractors”). (Ex. 1 ¶ 13 to MSJ, ECF 4 No. 101-2). Plaintiff’s Subcontractors later filed suit against Plaintiff and Defendant to recover 5 amounts Plaintiff owed for work performed pursuant to their individual subcontracts. (See Ex. 6 18 to MSJ, ECF No. 101-28). Defendant entered into settlement agreements with Plaintiff’s 7 Subcontractors, and the lawsuits were eventually dismissed. (Ex. 22 to MSJ, ECF No. 101-33). 8 Plaintiff did not participate in the lawsuits. (MSJ ¶ 39). Plaintiff brought suit against Defendant on July 25, 2014, claiming that it “performed 9 10 additional work and incurred additional expenses . . . at [Defendant’s] express direction” and 11 that Defendant “refuses to pay” Plaintiff. (Sec. Am. Compl. (“SAC”) ¶¶ 20–22, ECF No. 40). 12 Based on these allegations, Plaintiff asserts causes of action under breach of contract and 13 breach of the covenant of good faith and fair dealing. (SAC ¶¶ 18-31). 14 II. 15 LEGAL STANDARD The Federal Rules of Civil Procedure provide for summary adjudication when the 16 pleadings, depositions, answers to interrogatories, and admissions on file, together with the 17 affidavits, if any, show that “there is no genuine dispute as to any material fact and the movant 18 is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Material facts are those that 19 may affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 20 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable 21 jury to return a verdict for the nonmoving party. See id. “Summary judgment is inappropriate if 22 reasonable jurors, drawing all inferences in favor of the nonmoving party, could return a verdict 23 in the nonmoving party’s favor.” Diaz v. Eagle Produce Ltd. P’ship, 521 F.3d 1201, 1207 (9th 24 Cir. 2008) (citing United States v. Shumway, 199 F.3d 1093, 1103–04 (9th Cir. 1999)). A 25 Page 2 of 8 1 principal purpose of summary judgment is “to isolate and dispose of factually unsupported 2 claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986). 3 In determining summary judgment, a court applies a burden-shifting analysis. “When 4 the party moving for summary judgment would bear the burden of proof at trial, it must come 5 forward with evidence which would entitle it to a directed verdict if the evidence went 6 uncontroverted at trial. In such a case, the moving party has the initial burden of establishing 7 the absence of a genuine issue of fact on each issue material to its case.” C.A.R. Transp. 8 Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citations omitted). In 9 contrast, when the nonmoving party bears the burden of proving the claim or defense, the 10 moving party can meet its burden in two ways: (1) by presenting evidence to negate an 11 essential element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving 12 party failed to make a showing sufficient to establish an element essential to that party’s case 13 on which that party will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 323– 14 24. If the moving party fails to meet its initial burden, summary judgment must be denied and 15 the court need not consider the nonmoving party’s evidence. See Adickes v. S.H. Kress & Co., 16 398 U.S. 144, 159–60 (1970). 17 If the moving party satisfies its initial burden, the burden then shifts to the opposing 18 party to establish that a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. 19 Zenith Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, 20 the opposing party need not establish a material issue of fact conclusively in its favor. It is 21 sufficient that “the claimed factual dispute be shown to require a jury or judge to resolve the 22 parties’ differing versions of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors 23 Ass’n, 809 F.2d 626, 631 (9th Cir. 1987). In other words, the nonmoving party cannot avoid 24 summary judgment by relying solely on conclusory allegations that are unsupported by factual 25 data. See Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposition must go Page 3 of 8 1 beyond the assertions and allegations of the pleadings and set forth specific facts by producing 2 competent evidence that shows a genuine issue for trial. See Celotex Corp., 477 U.S. at 324. 3 At summary judgment, a court’s function is not to weigh the evidence and determine the 4 truth but to determine whether there is a genuine issue for trial. See Anderson, 477 U.S. at 249. 5 The evidence of the nonmovant is “to be believed, and all justifiable inferences are to be drawn 6 in his favor.” Id. at 255. But if the evidence of the nonmoving party is merely colorable or is 7 not significantly probative, summary judgment may be granted. See id. at 249–50. 8 III. 9 DISCUSSION Defendant seeks summary judgment on Plaintiff’s claims of (1) breach of contract and 10 (2) breach of the implied covenant of good faith and fair dealing. (MSJ 1:27–2:1, ECF No. 11 101). Additionally, Defendant seeks summary judgment for its indemnity counterclaims that 12 would render Plaintiff liable to Defendant for Plaintiff’s Subcontractors’ previous lawsuits. (Id. 13 2:8–11). The Court first addresses summary judgment on Plaintiff’s claims and then considers 14 summary judgment on Defendant’s counterclaims. 15 A. 16 Defendant seeks summary judgment on Plaintiff’s claims, citing Plaintiff’s failure to Plaintiff’s Claims 17 secure an active contractor’s license for the duration of the Subcontract. (See MSJ 11:4– 18 15:11). On October 22, 2010, the Nevada State Contractors Board (“NCSB”) placed Plaintiff’s 19 contractor’s license on inactive status. (Ex. 6 at 4, ECF No. 101-16). In November 2010, 20 Plaintiff applied to re-activate its license, which the NCSB denied in March 2011 citing 21 Plaintiff’s failure to show financial responsibility. (Id. at 7). 22 In light of this deficiency, the NCSB pursued disciplinary action against Plaintiff. (Id. at 23 18–20). On June 14, 2011, the NCSB held that Plaintiff’s continued failure to demonstrate 24 financial responsibility required Plaintiff’s license to remain on inactive status. (Id.). Plaintiff 25 did not successfully re-activate its license until July 25, 2012, more than a year after Plaintiff Page 4 of 8 1 fully performed under the Subcontract. (Id. at 31). Indeed, Plaintiff admits that during the 2 performance of the Subcontract “from December 2010 to June 2011, [Plaintiff] did attempt to 3 reactivate the license during the performance of the Subcontract but the request was denied in 4 March 2011 for failure to place an increased bond amount under Nevada law.” (Resp. 10:11– 5 14). 6 Nevada follows the basic doctrine that “contracts made in contravention of the law do 7 not create a right of action.” Vincent v. Santa Cruz, 647 P.2d 379, 381 (1982); see also Al– 8 Ibrahim v. Edde, 897 F. Supp. 620, 623 (D.D.C. 1995) (interpreting Nevada law). In the 9 absence of a duly-issued contractor’s license from the state, a person or business entity is 10 generally barred from bringing an action on the contract or for compensation for performance 11 thereof. Nev. Rev. Stat. § 624.320 (2015). First, the Court must confirm that Plaintiff is a 12 contractor pursuant to the relevant statute, and then the Court determines whether Plaintiff 13 qualifies for one of the case law exceptions to § 624.320 to render its claim still valid. See 14 Interstate Commercial Bldg. Servs., Inc. v. Bank of Am. Nat. Trust & Sav. Ass’n, 23 F. Supp. 2d 15 1166, 1172 (D. Nev. 1998). Here, Plaintiff does not dispute that it is a contractor. (Resp. 16 10:20–22, ECF No. 102) (stating that Plaintiff “has been a practicing contractor in multiple 17 states and held licenses in New Mexico and Virginia as well as working as a contractor in 18 Wyoming and Texas, which don’t have a separate licensing requirement.”). 19 Nevertheless, Plaintiff’s claims may survive summary judgment if Plaintiff has 20 “substantially complied” with Chapter 624. See Interstate Commercial Bldg. Servs., 23 F. 21 Supp. 2d at 1173. Pursuant to § 624.700(4), if an entity does not comply with the licensing 22 scheme and submits a bid or enters into a contract, “the bid or contract shall be deemed void ab 23 initio.” Nev. Rev. Stat. § 624.700(4) (2015). “The primary purpose of Nevada’s licensing 24 statutes is to protect the public against both faulty construction and financial 25 irresponsibility.” MGM Grand Hotel v. Imperial Glass Co., 533 F.2d 486, 489 (9th Cir. 1976). Page 5 of 8 1 Though Chapter 624 initially served as an absolute bar to contract claims brought 2 by unlicensed contractors, Magill v. Lewis, 333 P.2d 717 (Nev. 1958), subsequent cases carved 3 a narrow exception for those who substantially complied with the licensing scheme. In Nevada 4 Equities v. Willard Pease Drilling Co., 440 P.2d 122 (1968), a drilling company that held two 5 contractor’s licenses, one for oil and gas well drilling and a second for water well drilling, 6 maintained a suit for the balance owed on a contract to drill for mineral water even though it 7 did not hold a specialty license from the NCSB. Nevada Equities, 440 P.2d at 122. The Nevada 8 Equities court held that the drilling contractor had “substantially complied” with the Nevada 9 licensing scheme because it possessed the general licenses and evinced no signs of financial or 10 11 technical inadequacy. Id. at 123. Similarly, in Day v. West Coast Holdings, Inc., 699 P.2d 1067 (1985), the Supreme 12 Court of Nevada held that a landscaper subcontractor could enforce a contract with a general 13 contractor given that the landscaper held a general contractor’s license and had informed the 14 general contractor that its application for a specialty license was pending. Day, 699 P.2d at 15 1071. However, the “mere use of licensed subcontractors or another licensed general 16 contractor does not constitute substantial compliance with the licensing scheme.” Interstate 17 Commercial Bldg. Servs., 23 F. Supp. 2d at 1174. 18 Here, Plaintiff did not comply with the Nevada licensing scheme and is therefore 19 precluded from bringing suit. Unlike Nevada Equities and Day, where the contractors only 20 lacked additional specialty licenses, Plaintiff failed to acquire even an active general license to 21 conduct business as a contractor in Nevada. Plaintiff’s contracts with additional subcontractors 22 does not constitute substantial compliance with the licensing scheme. See Interstate 23 Commercial Bldg. Servs., 23 F. Supp. 2d at 1174. As a result, the Court finds that pursuant to 24 § 624.320, Plaintiff is a contractor requiring an active license and, in the absence of such a 25 license, Plaintiff is precluded from bringing an action on a construction contract or for Page 6 of 8 1 compensation for performance thereof. See Nev. Rev. Stat. § 624.700(4) (2015). Accordingly, 2 the Court holds that the Subcontract is void ab initio and therefore grants summary judgment 3 for Defendant on all of Plaintiff’s claims. 4 B. 5 In its Answer to the SAC, Defendant asserts four counterclaims, (ECF No. 41). Because Defendant’s Counterclaims 6 some of the counterclaims relate to the terms of the Subcontract, those claims are rendered 7 moot.1 In its Motion for Summary Judgment, Defendant requests that the Court nevertheless 8 consider its third counterclaim for equitable indemnity against Plaintiff even if the Subcontract 9 is void. (MSJ 26 n.50). Indemnity “allows a complete shifting of responsibility to an ‘indemnity obligor’ when 10 11 the party seeking indemnity has extinguished its liabilities incurred as a result of the indemnity 12 obligor’s ‘active’ fault.” Doctors Co. v. Vincent, 98 P.3d 681, 686 (2004). Moreover, “[a]t the 13 heart of the doctrine is the premise that the person seeking to assert implied indemnity—the 14 indemnitee—has been required to pay damages caused by a third party—the 15 indemnitor.” Harvest Capital v. WV Dept. of Energy, 560 S.E. 2d 509, 513 (2002). Implied 16 indemnification has been developed by the courts to address the unfairness which results when 17 one party, who has committed no independent wrong, is held liable for the loss of a plaintiff 18 caused by another party. Id. at 512. 19 Generally, the remedy is available after the defendant has extinguished its own liability 20 through settlement or by paying a judgment. Doctors Co., 98 P.3d at 686. The Supreme Court 21 of Nevada has stated that “a cause of action for indemnity . . . accrues when payment has been 22 made.” Aetna Casualty & Surety v. Aztec Plumbing, 796 P.2d 227, 229 (1990). As such, a 23 claimant seeking equitable indemnity must plead and prove that: (1) it has discharged a legal 24 25 1 The moot counterclaims are breach of contract, express indemnity, and breach of the covenant of good faith and fair dealing. (Resp. to SAC ¶¶ 83–114, ECF No. 41). Page 7 of 8 1 obligation owed to a third party; (2) the party from whom it seeks liability also was liable to the 2 third party; and (3) as between the claimant and the party from whom it seeks indemnity, the 3 obligation ought to be discharged by the latter. Rodriguez v. Primadonna Co., LLC, 216 P.3d 4 793, 801 (2009). 5 Here, Defendant fails to meet its initial burden to provide evidence demonstrating that it 6 owed a legal obligation to Plaintiff’s Subcontractors. See id. Specifically, because the 7 Subcontract is void ab initio, Defendant did not owe Plaintiff’s Subcontractors a legal 8 obligation as any legal obligation owed was voided with the Subcontract. Although Defendant 9 settled with Plaintiff’s Subcontractors, Defendant does not explain how the settlements created 10 a legal obligation to indemnify Plaintiff. Indeed, settlement alone does not create a legal 11 obligation. See Charlie Brown Const., Inc. v. Hanson Aggregates Las Vegas, Inc., 2013 WL 12 3272508, at *3 (Nev. May 31, 2013) (“To establish a right to indemnification where a case is 13 resolved by settlement, the party must establish that the settlement was reasonable[ ][and] that 14 the underlying claim was valid against it.”). Accordingly, the Court denies summary judgment 15 for Defendant’s remaining equitable indemnity counterclaim. 16 IV. 17 CONCLUSION IT IS HEREBY ORDERED that Defendant’s Motion for Summary Judgment, (ECF 18 No. 101), is GRANTED in part and DENIED in part. Specifically, the Court grants 19 summary judgment for Defendant on Plaintiff’s claims for breach of contract and breach of the 20 implied covenant of good faith and fair dealing. However, the Court denies summary judgment 21 for Defendant’s remaining equitable indemnity counterclaim. 22 25 DATED this _____ day of January, 2017. 23 24 25 ___________________________________ Gloria M. Navarro, Chief Judge United States District Judge Page 8 of 8

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