Texas Drain Technologies, Inc. v. Centennial Contractors Enterprises, Inc. et al
Filing
17
MEMORANDUM AND ORDER GRANTING IN PART 11 MOTION to Dismiss 8 Amended Complaint/Counterclaim/Crossclaim etc. Texas Drain Technologies, Inc.'s negligence claim against Centennial is DISMISSED. Centennial's Motion for Partial Dismissal is otherwise DENIED. (Signed by Judge Ewing Werlein, Jr) Parties notified. (marflores, 4)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
TEXAS DRAIN TECHNOLOGIES, INC., §
§
Plaintiff,
§
§
v.
§
§
CENTENNIAL CONTRACTORS
§
ENTERPRISES, INC., and
§
TRAVELERS CASUALTY AND
§
SURETY COMPANY,
§
§
Defendants.
§
CIVIL ACTION NO. H-14-3298
MEMORANDUM AND ORDER
Pending
Inc.’s
is
Partial
Defendant
Motion
Centennial
to
Dismiss
Contractors
Plaintiff
Enterprises,
Texas
Drain
Technologies, Inc.’s First Amended Complaint (Document No. 11).
After
carefully
considering
the
motion,
response,
and
the
applicable law, the Court concludes as follows.
I. Background
Plaintiff Texas Drain Technologies, Inc. (“Texas Drain”)
entered into a subcontract with Defendant Centennial Contractors
Enterprises, Inc. (“Centennial”), the general contractor on a
project
for
Harris
County
Hospital
District
(the
“Hospital
District”), to remove and install piping in and around a grease
trap inceptor at Ben Taub Hospital.1
During the course of Texas
Drain’s work on the project, it encountered “undisclosed and/or
unknown conditions on the site,” which had not been disclosed in
the Contract Documents, and which required changes and additional
costs in the scope of the work.
These included: (1) a sewer pipe
in a different location causing the excavation to be much larger in
scope and requiring alternative excavation and shoring methods; (2)
an unknown drainage/waterproofing system which consisted of a
granular
column
required
more
unsuitable
shoring,
for
more
the
planned
containment,
excavation,
more
labor,
which
and
an
engineered-designed backfill procedure outside of the scope of the
project described in the Contract Documents; (3) waterproofing that
was originally excluded from the scope of work; (4) dewatering
services that were originally excluded from the project; and
(5) delays resulting from “acts/inactions and lack of coordination/
planning [that] caused [Texas Drain] great costs .
Drain
alleges
that
it
promptly
informed
. . .”2
Centennial
of
Texas
these
discoveries and of the new estimated costs, and Centennial ordered
Texas Drain to complete the work.
Centennial, however, did not
promptly inform the Hospital District, whose authorization for
changes was required.3
For a number of months after the project
1
Document No. 8 (Pl’s Am. Cmpl.) ¶ 5.
2
Id. ¶¶ 6, 6a-6e.
3
Id. ¶¶ 7-8.
2
was completed, Centennial allegedly falsely represented to Texas
Drain that the Hospital District would accept change orders after
the work was completed and, in reliance on such misrepresentations,
Texas Drain continued to compile, select, rearrange, and calculate
its
costs
“to
appease
Centennial’s
shifting
demands
for
the
presentation of information regarding Change Order requests.”4
Ultimately, the Hospital District denied all of Texas Drain’s
invoices because Centennial had failed promptly and timely to give
the Hospital District notice of the requested change orders and
additional costs.5
In denying the invoices, the Hospital District
“specified that Centennial knew the correct contractual procedure
to follow. . . .” but “wholly failed to follow such procedure.”6
Texas Drain alleges that it has never been paid in full either for
the original contract amount or for the additional work it was
required to perform.7
Texas Drain brought this action against Centennial and its
surety, Travelers Casualty and Surety Company (“Travelers”), in
state court and, after the case was removed based on diversity of
citizenship, Texas Drain amended its complaint to allege the
following causes of action: (1) breach of contract, (2) suit on
4
Id. ¶ 9.
5
Id. ¶ 10.
6
Id.
7
Id.
3
sworn account, (3) an alternative quantum meruit claim, (4) an
alternative
promissory
estoppel/unjust
enrichment
claim,
(5) negligent misrepresentations, (6) fraud, and (7) negligence.8
Texas Drain seeks damages for non-payment of the contract amount,
including the change order request invoices, and actual damages
incurred as a result of Centennial’s negligent misrepresentations
and fraudulent misrepresentations, including its costs for time,
costs, and expenses associated with more than six months of
responding to Centennial’s changing requirements for presentation
of change order requests.9
for
quantum
meruit,
Centennial moves to dismiss the claims
negligent
misrepresentation,
fraud,
and
negligence, arguing that the subcontract governs the issues, and
thus, these claims are precluded by Texas Drain’s action in
contract.10
II. Legal Standard
Rule 12(b)(6) provides for dismissal of an action for “failure
to state a claim upon which relief can be granted.”
P. 12(b)(6).
FED. R. CIV.
When a district court reviews the sufficiency of a
complaint before it receives any evidence either by affidavit or
admission, its task is inevitably a limited one.
See Scheuer v.
8
Document No. 8 ¶¶ 11, 15, 20, 22, 24, 28, 30.
9
Document No. 8 ¶ 35.
10
Document No. 11 at 2.
4
Rhodes, 94 S. Ct. 1683, 1686 (1974), abrogated on other grounds by
Harlow v. Fitzgerald, 102 S. Ct. 2727 (1982).
The issue is not
whether the plaintiff ultimately will prevail, but whether the
plaintiff is entitled to offer evidence to support the claims. Id.
In considering a motion to dismiss under Rule 12(b)(6), the
district court must construe the allegations in the complaint
favorably to the pleader and must accept as true all well-pleaded
facts in the complaint.
See Lowrey v. Tex. A&M Univ. Sys.,
117 F.3d 242, 247 (5th Cir. 1997).
To survive dismissal, a
complaint must plead “enough facts to state a claim to relief that
is plausible on its face.”
1955, 1974 (2007).
Bell Atl. Corp. v. Twombly, 127 S. Ct.
“A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the
reasonable
inference
misconduct alleged.”
(2009).
While
a
that
the
defendant
is
liable
for
the
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949
complaint
“does
not
need
detailed
factual
allegations . . . [the] 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).”
Twombly, 127 S. Ct. at 1964-65 (citations and internal
footnote omitted).
5
III. Discussion
A.
Quantum Meruit
Centennial argues that the quantum meruit claim “clearly fits
within the subject matter of the Subcontract.”11
“Although a party
‘generally cannot recover under quantum meruit when there is a
valid contract covering the services or materials furnished,’ the
party ‘may, however, seek alternative relief under both contract
and quasi-contract theories.’”
Sw. Bell Tel. Co. v. Fitch, 643 F.
Supp. 2d 902, 911 (S.D. Tex. 2009) (Atlas, J.); see also FED. R.
CIV.
P.
8(d)(2)
alternative).
(expressly
allowing
for
pleading
in
the
Texas Drain’s quantum meruit claim is pled in the
alternative, and at present the issue is whether Plaintiff “is
entitled to offer evidence to support the claims,” see Scheuer, 94
S. Ct. at 1686, not whether Plaintiff may recover under both
theories.
Accordingly,
Centennial’s
motion
to
dismiss
Texas
Drain’s alternative claim for quantum meruit is denied.
B.
Tort Claims
Texas Drain also alleges claims of negligent misrepresenta-
tion, fraud, and negligence against Centennial.12
Generally, to
state a tort claim, the duty alleged cannot be derived solely from
11
Document No. 11 at 9.
12
Document No. 8 ¶¶ 24, 28, 30.
6
contract terms, and the damages must go beyond the expected benefit
of the bargain.
Chapman Custom Homes, Inc. v. Dall. Plumbing Co.,
445 S.W.3d 716, 718 (Tex. 2014).
This two-part inquiry is used to
help determine if a claim sounds in tort or contract.
Plastics Corp. USA
Formosa
v. Presidio Eng’rs & Contractors, Inc., 960
S.W.2d 41, 45 (Tex. 1998).
Texas Drain alleges that Centennial--motivated by its desire
to preserve its ongoing business relationship with the Hospital
District--for a period of months after completion of the project
falsely represented and/or negligently misrepresented its ability
to process Texas Drain’s change orders with the Hospital District.13
Centennial moves to dismiss this claim, arguing that its liability
can
only
stem
from
the
subcontract
and
not
negligent
misrepresentation.14
While claims for negligent misrepresentation usually are not
available when a contract exists between the parties, this is not
always the case. Texas has adopted section 552B of the Restatement
(Second) of Torts which requires an independent injury for claims
of negligent misrepresentation.15
D.S.A., Inc. v. Hillsboro Indep.
13
Id. at 12.
14
Document No. 11 at 11-12.
15
According to §552B:
(1)
The
damages
recoverable
for
a
negligent
misrepresentation are those necessary to compensate the
7
Sch. Dist., 973 S.W.2d 662, 663-64 (Tex. 1998).
Texas Drain
alleges that an injury--separate from its contract--arose after
completion of the work when it relied upon Centennial’s intentional
or negligent misrepresentations and demands needlessly to prepare
multiple re-submissions of change order requests that the Hospital
District would not consider.16
submissions
incurred
Texas Drain in preparing such re-
additional
Centennial’s misrepresentations.
costs
and
losses
caused
by
At the pleading stage, the need
for a separate injury is satisfied by plausibly alleging reliance
damages or damages stemming from out-of-pocket expenses.
See,
e.g., TIB--The Indep. BankersBank v. Canyon Cmty. Bank, 13 F. Supp.
3d 661, 671 (N.D. Tex. 2014) (Fitzwater, C.J.) (court denied motion
to dismiss negligent misrepresentation claim when out-of-pocket
expenses, not benefit of the bargain damages, were alleged). Texas
plaintiff for the pecuniary loss to him of which the
misrepresentation is a legal cause, including
(a) the difference between the value of what he has
received in the transaction and its purchase price
or other value given for it; and
(b) pecuniary loss suffered otherwise as a
consequence of the plaintiff's reliance upon the
misrepresentation.
(2)
the
damages
misrepresentation do
plaintiff's contract
(SECOND) OF TORTS § 552B
16
recoverable
for
a
negligent
not include the benefit of the
with the defendant.
RESTATEMENT
(1977).
Document No. 8 ¶¶ 27, 28.4-28.5.
8
Drain’s allegations are sufficient to state a plausible claim for
damages caused by an injury separate from its contract damages.
In addition to a separate injury, negligent misrepresentation
requires a duty independent of any contractual duty. D.S.A., Inc.,
973 S.W.2d at 663.
While a duty of care when supplying commercial
information is normally limited to those in positions of trust, a
duty always exists to correct false representations. Jetpay Merch.
Servs., LLC v. Miller, No. CIV.A. 3:07CV0950-G, 2007 WL 2701636, at
*5 (N.D. Tex. Sept. 17, 2007); see also Shell Oil Prods. Co. v.
Main St. Ventures, L.L.C., 90 S.W.3d 375, 381 (Tex. App.—Dallas
2002
pet.
dism’d
by
agr.)
(claims
for
fraud
and
negligent
misrepresentation were found independent of a contract when the
statements concerned the level of commitment and ability to move
forward with a project).
While Texas Drain does not allege that
Centennial held a position of trust, Texas Drain does allege that
Centennial made statements to Texas Drain about the Hospital
District’s change order procedures that it knew were false, were
not corrected, and were made repeatedly to the detriment of Texas
Drain.17
These allegations are sufficient to state a breach of a
duty independent of the contract, and a plausible claim for
negligent misrepresentation.
Centennial also argues that Texas Drain’s fraud claim is
“duplicative” of the contract claim, and thus, its liability can
17
Id. ¶ 27.
9
only stem from the subcontract.18 Unlike other tort claims, a fraud
claim can survive a motion to dismiss by showing a duty independent
of the contract and without necessarily showing an independent
injury.
See
Mandala
v.
Wells
Fargo
Bank,
N.A.,
No.
CIV.A.
4:12-2335, 2013 WL 1828022, at *3 (S.D. Tex. Apr. 30, 2013) (fraud
claims may have losses that pertain to subject matter of contract).
“The
economic
inducement
loss
claims
rule
because
does
the
not
bar
parties
fraud
to
a
and
fraudulent
contract
had
an
independent duty not to commit the intentional tort of fraud.”
Barcenas v. Fed. Home Loan Mortgage Corp., No. CIV.A. H-12-2466,
2013 WL 286250, at *4 (S.D. Tex. Jan. 24, 2013) (Harmon, J.).
Texas Drain alleges that Centennial’s Walter Won’s material
knowingly false statements and misrepresentations, upon which Texas
Drain justifiably relied to its injury, are not covered by the
subcontract.
Texas Drain’s allegations state a plausible claim of
fraud regarding matters not covered by the contract, and the motion
to dismiss the fraud claim is denied.
The negligence claim, however, is different.
Texas Drain
pleads Centennial “was negligent with regard to handling and/or
mishandling [Texas Drain’s] outstanding invoice amounts.”19
Texas
Drain alleges that Centennial failed “to act within the standard of
care owed by a general contractor to subcontractor,” resulting in
18
Document No. 11 at 12-13.
19
Id. ¶ 31.
10
Texas Drain’s damages.
those
damages
caused
No damages are claimed here other than
by
the
alleged
breach
of
contract.20
Centennial correctly argues that when a defendant’s negligent
conduct, “would give rise to liability only because it breaches the
parties’ agreement, the plaintiff’s claim ordinarily sounds only in
contract.”
(Tex. 1991).
Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494
Accordingly, Centennial’s motion to dismiss Texas
Drain’s negligence claim is granted.
IV. Order
For the foregoing reasons, it is
ORDERED that Centennial Contractors Enterprises, Inc.’s Motion
for Partial Dismissal (Document No. 11), is GRANTED IN PART, and
Texas
Drain
Technologies,
Inc.’s
20
negligence
claim
against
“[Centennial] failed to provide [the Hospital District] with
the newly discovered conditions found within the Project at issue,
and further failed to inform [Hospital District] of the estimated
costs associated with the same, thereby extinguishing any
possibility that [Texas Drain] would be compensated for its work.
This failure and/or breach by Centennial caused [Texas Drain’s]
damages.” Id.
11
Centennial is DISMISSED. Centennial’s Motion for Partial Dismissal
is otherwise DENIED.
The Clerk will enter this Order, providing a correct copy to
all counsel of record.
SIGNED in Houston, Texas, on this 7th day of July, 2015.
____________________________________
EWING WERLEIN, JR.
UNITED STATES DISTRICT JUDGE
12
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