DTL Builders, Inc. v. RI KY Roofing & Sheet Metal, LLC
Filing
31
OPINION AND ORDER: DTLs motion for leave to file its second amended counterclaim (28 in 6:17-cv-01592-JR, 23 in 6:17-cv-01251-JR) is GRANTED. Any such counterclaim should be filed within ten days of the date of this Order. Signed on 5/23/2018 by Magistrate Judge Jolie A. Russo. Associated Cases: 6:17-cv-01592-JR, 6:17-cv-01251-JR (jk)
UNITED STATES DISTRICT COURT
DISTRICT OF OREGON
RI KY ROOFING & SHEET METAL, LLC,
an Oregon limited liability company,
Plaintiff,
v.
Case Nos. 6:17-cv-01592-JR
6:17-cv-01251-JR
DTL BUILDERS, INC., a Utah corporation,
and THE CINCINATTI INSURANCE
COMPANY, an Ohio surety,
OPINION AND ORDER
Defendants.
____________________________________
DTL BUILDERS, INC., a Utah corporation,
Plaintiff,
v.
RI KY ROOFING & SHEET METAL, LLC,
an Oregon limited liability company,
Defendant.
___________________________________
RUSSO, Magistrate Judge:
DTL Builders, Inc. (“DTL”) moves for leave to file a second amended counterclaim
pursuant to Fed. R. Civ. P. 15(a). For the reasons set forth below, DTL’s motion is granted.
Page 1 – OPINION AND ORDER
BACKGROUND
On June 13, 2017, Ri Ky Roofing & Sheet Metal, LLC (“Ri Ky”) commenced a lawsuit
in Linn County Circuit Court against DTL, Waverly Land Management, and Winco Foods,
asserting claims for breach of contract, quantum meruit, and foreclosure of a construction lien.
First Am. Compl. Ex. A, at ¶¶ 3-31 (Case No. 6:17-01592-JR, Doc. 1). Ri Ky’s claims are
premised on allegedly unpaid construction services provided to DTL between January and March
2017, pursuant to a subcontract for improvements to a Winco Foods store located in Albany,
Oregon. Id.
On August 11, 2017, DTL filed a complaint against Ri Ky alleging breach of contract,
negligence, and breach of the duty of good faith and fair dealing based on the same construction
project and underlying subcontract. Compl. ¶¶ 5-20 (Case No. 6:17-cv-01251-JR, Doc. 1).
On September 11, 2017, Ri Ky amended its complaint, reasserting the same three claims
against DTL and The Cincinnati Insurance Company. Second Am. Compl. Ex. C, at ¶¶ 4-29
(Case No. 6:17-01592-JR, Doc. 1). On October 10, 2017, DTL removed Ri Ky’s case to this
Court.
On October 18, 2017, the Court granted DTL’s and Ri Ky’s stipulated motion to
consolidate. On December 21, 2017, DTL filed an amended complaint. See generally First Am.
Countercl. (Case No. 6:17-cv-01592-JR, Doc. 18). That same day, Ri Ky moved to dismiss
DTL’s breach of the duty of good faith and fair dealing claim (“good faith claim”). Mot. to
Dismiss (Case No. 6:17-cv-01592-JR, Doc. 19).
On February 7, 2018, the Court issued a Findings and Recommendation (“F&R”)
recommending that DTL’s good faith claim be dismissed without prejudice. F&R (Case No.
6:17-cv-01592-JR, Doc. 26). On March 28, 2018, Judge Aiken adopted the F&R. Order (Case
Page 2 – OPINION AND ORDER
No. 6:17-cv-01592-JR, Doc. 31). DTL moved for leave to file a second amended counterclaim
and Ri Ky objected. Mot. for Leave to File Second Am. Countercl. (Case No. 6:17-cv-01251-JR,
Doc. 23); Response Objections to Motion for Leave to File Second Am. Countercl. (No. 6:17-cv01251-JR, Doc. 28).
STANDARD OF REVIEW
Leave to amend pleadings shall be “freely give[n] when justice so requires.” Fed. R. Civ.
P. 15(a). Courts apply Rule 15 with “extreme liberality.” Eminence Capital, LLC v. Aspeon,
Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (citations omitted). In determining whether a motion to
amend should be granted, the court generally considers five factors: (1) bad faith; (2) undue
delay; (3) prejudice to the opposing party; (4) futility; and (5) whether the plaintiff has
previously amended the complaint. Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004).
These factors are not weighted equally: “futility of amendment alone can justify the
denial of a motion [to amend].” Ahlmeyer v. Nev. Sys. of Higher Educ., 555 F.3d 1051, 1055
(9th Cir. 2009). A proposed amendment is futile if it would be immediately “subject to
dismissal.” Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1298 (9th Cir. 1998). In making this
determination, the complaint is liberally construed in favor of the plaintiff and its allegations are
taken as true. Rosen v. Walters, 719 F.2d 1422, 1424 (9th Cir. 1983). The proposed complaint
must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). That is, a plaintiff must present allegations that are
“enough to raise a right to relief above the speculative level.” Id. at 555 (citation omitted).
Page 3 – OPINION AND ORDER
DISCUSSION
DTL argues that leave to amend its counterclaim should be granted pursuant to Rule
15(a). Ri Ky asserts that the second amended counterclaim should not be allowed because it fails
to state a claim for breach of the duty of good faith and fair dealing upon which relief can be
granted.
In Oregon, “[t]he law imposes a duty of good faith and fair dealing in the performance
and enforcement of every contract.” Hampton Tree Farms, Inc. v. Jewett, 320 Or. 599, 615, 892
P.2d 683 (1995) (citations omitted). The purpose of this duty “is to prohibit improper behavior
[and] ensure that the parties will refrain from any act that would have the effect of destroying or
injuring the right of the other party to receive the fruits of the contract.” Klamath Off-Project
Water Users, Inc. v. Pacificorp, 237 Or.App. 434, 445, 240 P.3d 94 (2010) (citation and internal
quotations omitted). The good faith doctrine is therefore designed to effectuate the objectively
reasonable contractual expectations of the parties. Tolbert v. First Nat’l Bank of Or., 312 Or.
485, 494, 823 P.2d 965 (1991).
In Best, the Oregon Supreme Court cited examples of the “types of bad faith . . . which
have been recognized in judicial decisions,” including “evasion of the spirit of the bargain, lack
of diligence and slacking off, willful rendering of imperfect performance, abuse of power to
specify terms, and interference with or failure to cooperate in the other party’s performance.”
Best v. U.S. Nat’l Bank of Or., 303 Or. 557, 563, 739 P.2d 554 (1987) (internal citation omitted).
In the F&R, this Court noted that because DTL did not “identify any facts evincing the
breach of any objectively reasonable contractual expectation outside the express terms of the
contract, the complaint [did] not currently state a plausible good faith claim.” F&R 5-6 (Case No.
6:17-cv-01592-JR, Doc. 26 (citing Glob. Exec. Mgmt. Solutions, Inc. v. Int’l Bus. Machs. Corp.,
Page 4 – OPINION AND ORDER
260 F.Supp.3d 1345, 1377 (D. Or. 2017))). In its second amended counterclaim, DTL alleged
that Ri Ky breached its duty of good faith and fair dealing by using the wrong insulation boards
which were not approved by the manufacturer, failing to install the requisite number of fasteners
to hold the boards in place, and installing the boards upside down despite express instructions on
the boards indicating which side should be facing down. Mot. for Leave to File Second Am.
Countercl. Ex. 2, at ¶ 14 (Case No. 6:17-cv-01592-JR, Doc. 28). An expectation that Ri Ky use
proper construction materials and follow proper installation methods qualifies as an objectively
reasonable contractual expectation.
Ri Ky argues that there is no allegation that such acts were intentional; however, even if
inadvertent, the use of improper materials and improper installation methods would constitute a
“lack of diligence and slacking off.” Best, 303 Or. at 563. Alternatively, if Ri Ky acted
intentionally, such conduct would constitute a “willful rendering of imperfect performance.” Id.
Thus, taken as true, such acts would establish a breach of good faith and fair dealing under
Oregon law. Id. Therefore, DTL has alleged “enough facts to state a claim to relief that is
plausible on its face.” Twombly, 550 U.S. at 570.
Ri Ky also argues that DTL failed to state a claim for breach of good faith because the
use of improper materials and the improper installation did not cause any damage. DTL,
however, alleged that it had to replace or redo the entire roof system. Mot. for Leave to File
Second Am. Countercl. Ex. 2, at ¶ 14 (Case No. 6:17-cv-01592-JR, Doc. 28).1
1
Ri Ky also asserts that there is no allegation that the manufacturer’s warranty was invalidated.
Although DTL does not expressly make such an allegation, DTL did note that the use of
improper materials could have resulted in an invalidation of the manufacturer’s warranty, but the
warranty became a moot point when the entire roof system had to be replaced.
Page 5 – OPINION AND ORDER
CONCLUSION
For the reasons set forth above, DTL’s motion for leave to file its second amended
counterclaim is GRANTED. Any such counterclaim should be filed within ten days of the date
of this Order.
DATED this 23rd day of May 2018.
s/ Jolie A. Russo
JOLIE A. RUSSO
United States Magistrate Judge
Page 6 – OPINION AND ORDER
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