H.S. Martin Construction, Corp. v. Lee County School Board et al

Filing 55

OPINION AND ORDER granting 18 Motion to Dismiss for Failure to State a Claim; denying 37 Motion to Amend/Correct; granting 40 Motion to Dismiss Amended Complaint; directing defendant Robinson & Associates, Inc. to file a response to the Amended Complaint within 14 days. Signed by Judge James P. Jones on 12/21/2016. (lml)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
BIG STONE GAP DIVISION
H.S. MARTIN CONSTRUCTION
CORP., DBA INSURANCE CLAIMS
CONSTRUCTION SERVICES,
Plaintiff,
v.
LEE COUNTY SCHOOL BOARD,
ET AL.,
Defendants.

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Case No. 2:16CV00010
OPINION AND ORDER
By: James P. Jones
United States District Judge

Ilya I. Berenshteyn and K. Justin Hutton, The Senter Law Firm, Bristol,
Tennessee, and Russell L. Egli, Egli Law and Loss Claim Specialist, Knoxville,
Tennessee, for Plaintiff; Melissa W. Robinson and Johneal M. White, Glenn
Robinson & Cathey, PLC, Roanoke, Virginia, for Defendant Risk Management
Programs Inc.; and Jennifer D. Royer, Guynn & Waddell, P.C., Salem, Virginia,
for Defendant Lee County School Board.
In this case invoking the court’s diversity jurisdiction, the plaintiff, H.S.
Martin Construction Corp., doing business as Insurance Claims Construction
Services (“H.S. Martin”), has asserted two breach-of-contract claims against
defendant Lee County School Board (“School Board”), as well as a claim of bad
faith breach of contract against defendant Risk Management Programs, Inc. (“Risk
Management”), and a claim of intentional interference with prospective economic
advantage against defendants Robinson & Associates, Inc. (“Robinson”),
Highlands Claims Services, LLC (“HCS”), and William Curtis Prater. The School

Board and Risk Management have moved to dismiss the Amended Complaint for
failure to state any viable claims against them. In response, H.S. Martin has
moved for leave to amend its Amended Complaint. For the reasons that follow, I
will grant the motions to dismiss and deny the Motion for Leave to Amend
Complaint.
I.
The plaintiff alleges the following facts, which I must accept as true for the
purpose of deciding the pending motions.
H.S. Martin is a Tennessee corporation with its principal place of business in
Tennessee. The School Board, a public entity located in Lee County, Virginia,
owns and operates Pennington Gap Middle School (“Middle School”) and Lee
County High School (“High School”). Risk Management is a group self-insurance
risk pool based in Richmond, Virginia. Robinson is a Virginia corporation with a
principal place of business in Lynchburg, Virginia. HCS is a Virginia corporation
with a principal place of business in Abingdon, Virginia. 1 Prater, a citizen of
Virginia, was a senior claims specialist working for Robinson and HCS. He was
hired by Risk Management to work as the claims adjuster for the School Board for
claims related to damages sustained during two separate weather incidents that
occurred in 2014 and 2015. Prater was named as a defendant in this lawsuit, but he
1

HCS has not yet entered an appearance or otherwise participated in this

litigation.
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died several months before the plaintiff filed its original complaint in this case, and
Prater’s estate has not been served with process.
A. The Middle School.
On July 27, 2014, the Middle School suffered damage due to a weather
incident. The same day, the School Board contacted H.S. Martin and requested
estimates for emergency mitigation and reconstruction. A representative of the
School Board signed an Authorization to Pay form that stated:
I am authorizing the third party named below to be added as a
“named party” on the initial and all future “approved” payments from
the claim payable proceeds as a result of my insurance claim arising
out of Hail damage. Claim number: 052B2014107694
I understand that I will be named and listed on the initial and
subsequent checks, due to me being the named insured on the policy
in force and binding contract I have with you, as being my insurance
carrier.
I am invoking my right as a policy holder through the “Terms
and Conditions” portion of my policy, for cause that if a situation
arises out of the handling of my claim, that the third party named
below will be able to discuss, negotiate, and assist in concluding my
insurance claim on my behalf.
I am giving my allocation to them as the named insured on the
policy, or appointed representative of the named insured.
This joint agreement allows third party to protect and preserve
their security interest through and by, being a named party on the
insurance proceeds, payable through endorsed check from you as my
insurance carrier and or Mortgage Company.
I also understand that my signing of this agreement does not
waive any of my rights as the named insured or policy holder.
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(Compl. Ex. 6, ECF No. 1-6.) The “Third Party Information” portion of the form
was filled in with the name, address, phone number, and tax identification number
of H.S. Martin.
H.S. Martin’s work at the Middle School was directed by representatives of
the School Board, Prater, and Risk Management. On August 13, 2014, H.S.
Martin contacted Prater to request partial payment for work completed up to that
time. When it did not receive payment, H.S. Martin asked representatives of the
School Board for instruction on how to bill for the emergency mitigation work that
had been completed.
On September 10, 2014, a representative of Risk Management informed
H.S. Martin and the School Board that it would release $250,000 as advance
payment for work completed and would not issue any further payments until all
work was completed. On September 24, 2014, representatives of the School Board
authorized payment of $250,000 to H.S. Martin.

On September 26, 2014,

representatives of the School Board and Risk Management discussed meeting with
H.S. Martin to reach an agreed price for the emergency mitigation work that had
been completed and the remaining repairs to be completed.

Sometime after

September 27, 2014, H.S. Martin received check number 147010 in the amount of
$250,000.

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On October 1, 2014, H.S. Martin contacted representatives of the School
Board and Risk Management to discuss issues of water leaks through the
temporary repairs and the use of additional personnel to monitor barriers and keep
students out of work areas.

H.S. Martin suggested spraying for airborne

contaminates, and representatives of the School Board directed H.S. Martin to
spray.

On October 2, 2014, Prater represented that Risk Management had

authorized thermal fogging and additional workers to provide on-site supervision,
and he directed H.S. Martin to complete work on the Middle School roof as
quickly as possible while also taking every measure to avoid further leaks.
On October 17, 2014, Alan Ingles, Maintenance Superintendant for the
School Board, sent an email to representatives of Risk Management asserting that
he had not received requested paperwork from Risk Management and that he
needed the paperwork to show to the School Board. Prater was responsible for
providing the paperwork to Risk Management, the School Board, and H.S. Martin.
Prater responded, asserting that the agreed price estimate would require one large
appraisal of the loss because Risk Management preferred to issue one payment per
claim, and that he had not been able to complete the appraisal.
On October 28, 2014, H.S. Martin contacted representatives of the School
Board and Risk Management to request payment of additional funds for the Middle

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School project. The following day, Ingles requested that Risk Management pay
H.S. Martin for the work completed to date.
On November 13, 2014, Prater represented to the School Board and H.S.
Martin that the agreed price appraisal had been completed and forwarded to Risk
Management. Risk Management inspected the property on November 18, 2014,
with Garry Smith, Vice President of H.S. Martin. On December 23, 2014, Risk
Management issued a check to H.S. Martin in the amount of $692,608.05,
indicating that the money was payment for “Roof Repair, First Dry Out, Second
Dry Out, Third Dry Out, Fourth Dry Out, Agg Shop building, Football Field
Lights, Alternative Ed Building, Janitorial Equipment Building, Greenhouse
Building, and Structural Repairs.”

(Am. Compl. ¶ 50, ECF No. 32.)

Risk

Management indicated that an additional $88,435.68 was owed for the work listed,
but that money was being withheld pending receipt of further information from
H.S. Martin. The total price for all work completed was $1,491,614.00, and the
School Board and Risk Management paid a total of $942,608.05.
H.S. Martin provided the further information requested. On May 22, 2015,
H.S. Martin completed all work and requested payment in full for its services.
Representatives of the School Board forwarded the request for final payment to
Risk Management. School Board representatives were sent copies of
correspondence throughout the mitigation and construction process and did not
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direct H.S. Martin to discontinue its work at the Middle School. H.S. Martin has
not received payment of the outstanding balance of $549,005.95 for work
performed at the Middle School.
B. The High School.
On January 6, 2015, the High School suffered damage from a weather
incident. The following day, Ingles contacted Smith and informed him that an
insurance claim had been submitted to Risk Management for the weather damage.
That day, at the request of Ingles and the School Board, H.S. Martin began making
emergency repairs to the High School. On January 12, 2015, the Director of
Maintenance, as a representative of the School Board, signed an Authorization to
Pay form for claim number 052B2015118636, arising out of water damage at the
High School, that named H.S. Martin as the third party. The text of the form was
the same as the one that had been executed about six months earlier in relation to
the hail damage at the Middle School.
Prater, the claims adjuster, requested that Smith submit estimates directly to
him for the High School. Prater also asked Smith to assist him in preparing
estimates for other schools damaged by the same weather incident. On January 14,
2015, Smith sent an email to Prater requesting estimates for three other schools and
asked Prater to let him know when he was starting the estimate for the High School

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so that Smith could tell him the number of labor hours that would be required to
perform certain work on the bleachers.
On January 20, 2015, Smith sent Prater estimates for remediation and repair
of damages at the High School. Three days later, Ingles informed Smith in an
email that Mr. Carter, the superintendent of schools, had the paperwork for Smith
to sign. The email also discussed a meeting of Carter, Smith, and Prater to discuss
the estimates, checks, and other paperwork for the High School.
On January 29, 2015, Smith, Carter, Ingles, and Prater met at the High
School and agreed that H.S. Martin would be the contractor for the mitigation and
reconstruction of multiple buildings owned by the School Board. On February 4,
2015, Prater contacted Smith to request an email about the moisture readings from
the High School gym floor.
H.S. Martin performed temporary repairs to the roof and windows of the
High School and dried out the gym, which had sustained rain damage. On April
14, 2015, H.S. Martin submitted an invoice for this mitigation work to the School
Board requesting payment in the amount of $123,569.51. Reconstruction work on
the High School was scheduled to begin on May 16, 2015, and Smith sent an email
to Prater stating that H.S. Martin would start performing reconstruction work on
the gym on that date. By April 2, 2015, the School Board, Risk Management, and
Prater had received estimates for all of the work to be performed at the High
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School.

The estimates referred to H.S. Martin as the general contractor and

referred to the estimates as contracts.
Before H.S. Martin could begin reconstruction work on the High School,
Prater contacted Scott Flooring and began to negotiate for reconstruction of the
High School gym floor. On May 8, 2015, Prater told H.S. Martin that H.S. Martin
was not to perform the reconstruction work, in breach of the alleged contract
between H.S. Martin and the School Board. H.S. Martin asserts that it suffered
damages in the amount of $24,842.85, representing supplies purchased for the
reconstruction work and lost profits. H.S. Martin also alleges that it has not
received payment for the mitigation work it performed at the High School.
Count I of the Amended Complaint asserts a breach of contract claim against
the School Board based on failure to make payments arising out of the High
School project. Count II asserts a breach of contract claim against the School
Board based on failure to make payments due for the work performed at the
Middle School.
Count III asserts a claim of bad faith breach of contract against Risk
Management for failure to make payments to H.S. Martin as directed by the School
Board for work performed at the Middle School and the High School. H.S. Martin
asserts that it is a third-party beneficiary of the contract between the School Board
and Risk Management and relied on the promises and covenants in the insurance
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policy to its detriment. Count IV asserts a claim against Prater, Robinson, and
HCS for intentional interference with prospective economic advantage.
II.
The procedural history of this case is unduly complex.

The original

Complaint by H.S. Martin named as a defendant Virginia Association of Counties
(“VACO”) instead of Risk Management. On June 16, 2016, the School Board
moved to dismiss that Complaint pursuant to Federal Rule of Civil Procedure
12(b)(6), arguing that (1) any alleged contract between the School Board and H.S.
Martin was void for failure to comply with the Virginia Public Procurement Act;
(2) the allegations failed to establish a breach of contract under Virginia law; (3) to
the extent that the plaintiff invoked the Uniform Computer Information
Transactions Act (“UCITA”) to support its breach of contract claims, the UCITA is
inapplicable to the facts presented; (4) H.S. Martin did not properly appeal the
School Board’s disallowance of his claim; and (5) the School Board cannot be
liable to H.S. Martin for bad faith denial of an insurance claim or tortious
interference with prospective economic advantage.
On the same day that the School Board moved to dismiss the original
Complaint, “Risk Management Programs Inc. f.k.a. VACO Risk Management
Programs, Inc.” filed with H.S. Martin a Joint Motion to Amend Complaint and for
Extension of Time to Respond. (ECF No. 28.) The motion sought leave for the
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plaintiff to amend the Complaint “to reflect the proper name of the entity described
in Plaintiff’s Complaint which should be Risk Management Programs Inc.,
formerly known as VACO Risk Management Programs Inc., a separate and distinct
legal entity from Virginia Association of Counties.” (Id. at 1.) The magistrate
judge granted this motion, and on July 11, 2016, the plaintiff filed an Amended
Complaint that named as a defendant “Risk Management Programs, Inc.” rather
than VACO. (Amended Compl. 1, ECF No. 32.) The Amended Complaint is
substantially identical to the original Complaint in all other respects.
On July 29, 2016, H.S. Martin moved for leave to amend the Amended
Complaint again, and without waiting for leave of court simultaneously filed a
“First Amended and Restated Complaint” (hereafter “FARC”). (ECF No. 38.)
H.S. Martin asserts that the FARC
more precisely sets forth the facts giving rise to the causes of actions
[sic] against the named Defendants, removes certain causes of actions
[sic] and adds new causes of action, more clearly sets forth the
applicable state laws that impact the lawsuit against the Defendants, is
not futile, does not prejudice any of the Defendants as no answers
have been filed to the original complaint and no discovery has taken
place in this lawsuit.
(Mot. for Leave to Amend Compl. 1, ECF No. 37.)
A little more than two hours later on July 29, 2016, Risk Management
moved to dismiss the Amended Complaint for failure to state a claim, contending
that (1) Risk Management is not a party to the School Board’s insurance policy,
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(2) H.S. Martin is not a third party beneficiary of the insurance policy, and
(3) under Virginia law, there is no independent cause of action for bad faith breach
of contract. In its response to Risk Management’s motion to dismiss, filed about
two hours later on July 29, 2016, H.S. Martin relies on allegations from both the
Amended Complaint and the FARC. H.S. Martin also filed that day a response to
the School Board’s Motion to Dismiss, which likewise relied on allegations from
the FARC as well as the Amended Complaint.
On August 5, 2016, the School Board filed a Reply Memorandum in support
of its Motion to Dismiss. In addition to responding to the plaintiff’s arguments
regarding the Amended Complaint, the School Board also requests the court to
deny the Motion for Leave to Amend Complaint, arguing that amendment would
be futile and the FARC does not resolve the problems present in the Amended
Complaint.
On August 15, 2016, Risk Management filed a Brief in Opposition to
Plaintiff’s Motion for Leave to Amend Complaint. In its brief, Risk Management
argued that (1) Virginia law does not recognize a cause of action for bad faith
breach of insurance contract; (2) H.S. Martin is neither a party to the insurance
coverage contract nor a third-party beneficiary; (3) H.S. Martin has failed to state a
claim of unjust enrichment against Risk Management, referring to a new claim
asserted in the FARC, and (4) the FARC failed to set forth a viable claim of
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tortious interference with contract against Risk Management. On the same day, the
School Board followed suit and filed a Response in Opposition to Plaintiff’s
Motion for Leave to Amend Its Complaint, which simply incorporated by
reference Risk Management’s brief and its own reply brief to its Motion to
Dismiss. On August 18, 2016, H.S. Martin filed a response to Risk Management’s
Motion to Dismiss. On August 23, 2016, Risk Management filed a reply brief in
support of its motion to dismiss.
The pending motions have been fully briefed and orally argued and are ripe
for decision. I will first consider the motions to dismiss as they relate to the
Amended Complaint. I will then address the plaintiff’s motion for leave to amend.
III.
“The purpose of a Rule 12(b)(6) motion is to test the sufficiency of a
complaint.” Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999).
Rule 12(b)(6) does “not require heightened fact pleading of specifics, but only
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). “[I]t does not resolve contests surrounding
the facts, the merits of a claim, or the applicability of defenses.” Republican Party
of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992).
In deciding whether a complaint will survive a Rule 12(b)(6) motion to
dismiss, the court evaluates it and any documents attached or incorporated by
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reference. Sec’y of State for Defence v. Trimble Navigation Ltd., 484 F.3d 700,
705 (4th Cir. 2007). In ruling, the court must regard as true all of the factual
allegations contained in the complaint, Erickson v. Pardus, 551 U.S. 89, 94 (2007),
and must view those facts in the light most favorable to the plaintiff. Christopher
v. Harbury, 536 U.S. 403, 406 (2002).
A.

Claims Against the School Board.

The School Board argues that any purported contract between H.S. Martin
and the School Board is ultra vires and void ab initio for failure to comply with the
competitive bidding requirements and other strictures of the Virginia Public
Procurement Act, Va. Code Ann. §§ 2.2-4300 – 4377 (“VPPA”). The School
Board further contends that the Amended Complaint fails to aver that the
representatives who allegedly contracted on behalf of the School Board were
authorized to do so.
In response, H.S. Martin argues that the VPPA does not apply to the
contracts at issue here. H.S. Martin asserts that the crucial contracts for purposes
of this lawsuit are the Authorization to Pay forms, not construction contracts. H.S.
Martin further argues that it is exempt from complying with the VPPA because the
School Board adopted a different standard operating procedure for addressing
mitigation and restoration projects. H.S. Martin contends it has adequately pleaded
that the representatives of the School Board were authorized to contract on the
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School Board’s behalf and did so, and that the School Board breached its contracts
with H.S. Martin.
The VPPA was enacted to ensure that
public bodies in the Commonwealth obtain high quality goods and
services at reasonable cost, that all procurement procedures be
conducted in a fair and impartial manner with avoidance of any
impropriety or appearance of impropriety, that all qualified vendors
have access to public business and that no offeror be arbitrarily or
capriciously excluded.
Va. Code Ann. § 2.2-4300(C). The VPPA states that “[a]ll public contracts with
nongovernmental contractors for . . . the purchase of services, insurance, or
construction, shall be awarded after competitive sealed bidding, or competitive
negotiation as provided in this section, unless otherwise authorized by law.” Va.
Code Ann. § 2.2-4303(A). More specifically, the VPPA states:
Construction may be procured only by competitive sealed
bidding, except that competitive negotiation may be used in [certain
specified] instances upon a determination made in advance by the
public body and set forth in writing that competitive sealed bidding is
either not practicable or not fiscally advantageous to the public, which
writing shall document the basis for this determination[.]
Va. Code Ann. § 2.2-4303(D). “‘Construction’ means building, altering, repairing,
improving or demolishing any structure, building or highway, and any draining,
dredging, excavation, grading or similar work upon real property.” Va. Code Ann.
§ 2.2-4301.
Regarding emergencies, the VPPA states:

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In case of emergency, a contract may be awarded without
competitive sealed bidding or competitive negotiation; however, such
procurement shall be made with such competition as is practicable
under the circumstances. A written determination of the basis for the
emergency and for the selection of the particular contractor shall be
included in the contract file. The public body shall issue a written
notice stating that the contract is being awarded on an emergency
basis, and identifying that which is being procured, the contractor
selected, and the date on which the contract was or will be awarded.
This notice shall be posted on the Department of General Services’
central electronic procurement website or other appropriate websites,
and in addition, public bodies may publish in a newspaper of general
circulation on the day the public body awards or announces its
decision to award the contract, whichever occurs first, or as soon
thereafter as is practicable. Posting on the Department of General
Services’ central electronic procurement website shall be required of
any state public body. Local public bodies are encouraged to utilize
the Department of General Services’ central electronic procurement
website to provide the public with centralized visibility and access to
the Commonwealth’s procurement opportunities.
Va. Code Ann. § 2.2-4303(F).
H.S. Martin has not alleged compliance with these competitive bidding and
negotiation requirements. Instead, H.S. Martin argues that the VPPA does not
apply because it was hired to perform mitigation and restoration rather than new
construction.

That argument is unavailing, as the statute’s definition of

“construction” expressly includes “repairing” a structure. Va. Code Ann. § 2.24301. H.S. Martin also contends that its breach of contract claim against the
School Board is based on the Authorization to Pay forms rather than a construction
contract, but I find this to be a distinction without a difference. The Authorization
to Pay forms address payment for construction services performed for the School
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Board. H.S. Martin cannot rely on these forms to get around the VPPA and its
requirements.
The VPPA provides an exemption for:
Any county, city or town whose governing body has adopted,
by ordinance or resolution, alternative policies and procedures which
are (i) based on competitive principles and (ii) generally applicable to
procurement of goods and services by such governing body and its
agencies, except as stipulated in subdivision 12.
Va. Code § 2.2-4343(A)(10) (emphasis added). H.S. Martin does not allege that
that School Board had passed any resolution adopting alternative procurement
policies and procedures. It is clear from counsel’s representations at oral argument
that H.S. Martin has no reason to believe that any such resolution exists. H.S.
Martin is not relieved of the VPPA requirements based solely on an alleged prior
course of conduct that is inconsistent with the VPPA.
A school board in Virginia can only exercise “those powers expressly
granted by the General Assembly, those necessarily or fairly implied therefrom,
and those that are essential and indispensable.” W.M. Schlosser Co. v. Sch. Bd. of
Fairfax Cty., 980 F.2d 253, 255 (4th Cir. 1992) (internal quotation marks and
citation omitted).

“Significantly, ‘[i]f there is any reasonable doubt whether

legislative power exists, that doubt must be resolved against the local governing
body.’”

Id. (quoting City of Richmond v. Confrere Club of Richmond, Va.,

Inc., 239 Va. 77, 387 S.E.2d 471, 473 (1990)). Through the VPPA, the General
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Assembly has limited a school board’s power to enter into certain kinds of
contracts.
When a school board attempts to enter into a contract without complying
with the VPPA, the school board seeks to exercise powers beyond those granted to
it by the General Assembly, and the resulting contract is therefore ultra vires. A
contract that is ultra vires is void ab initio and has no legal effect. Richard L. Deal
& Assocs., Inc. v. Commonwealth, 299 S.E.2d 346, 348 (Va. 1983).

“[N]o

performance by either party thereto can give the unlawful contract validity or serve
as the basis of any right of action upon it and the doctrine of estoppel has no
application.” Cty. of York v. King’s Villa, Inc., 309 S.E.2d 332, 335 (Va. 1983).
To allow a party to enforce a contract that was executed without complying with
the VPPA would undermine the strength of the VPPA and thwart its purposes.
H.S. Martin’s claims against the School Board fail as a matter of law, and Counts I
and II of the Amended Complaint must be dismissed for failure to state claims
upon which relief can be granted.
B. Claim Against Risk Management.
Risk Management contends that H.S. Martin’s claim against it is not viable
because (1) Risk Management is not an insurer and is not the entity that issued the
School Board’s insurance policy; (2) H.S. Martin is not a third party beneficiary to
the insurance policy; (3) Virginia does not recognize an independent cause of
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action for bad faith breach of contract; and (4) the absence of an enforceable
contract between the School Board and H.S. Martin is fatal to H.S. Martin’s claim
against Risk Management.
The final issue is dispositive. A contract that is void and unenforceable
against the School Board is equally unenforceable against Risk Management, the
School Board’s insurance administrator. H.S. Martin cannot recover funds under
the insurance policy that it claims are due to it based on its invalid contract with
the School Board.
Moreover, the Authorization to Pay forms did not make H.S. Martin an
intended third-party beneficiary of the School Board’s insurance policy, nor do the
forms constitute contracts in their own right.

First and foremost, Risk

Management did not sign the Authorization to Pay forms. See Copenhaver v.
Rogers, 384 S.E.2d 593, 596 (Va. 1989) (“The essence of a third-party
beneficiary’s claim is that others have agreed between themselves to bestow a
benefit upon the third party but one of the parties to the agreement fails to uphold
his portion of the bargain” (emphasis added).) Second, the Authorization to Pay
forms do not purport to require Risk Management to do anything; they merely
authorize Risk Management to list H.S. Martin as a payee on future checks.
For these reasons, Count III of the Amended Complaint fails to state a
cognizable claim against Risk Management, and it will be dismissed.
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IV.
Under the rules, a complaint may be amended once without leave within 21
days of service of a motion under Rule 12(b). Fed. R. Civ. P. 15(a)(1)(B). H.S.
Martin could not avail itself of this rule, however, because it had already amended
its complaint once, to substitute Risk Management for VACO, before seeking
leave to file the FARC.
Rule 15(a)(2) of the Federal Rules of Civil Procedure provides that courts
should freely give leave to amend pleadings when justice so requires. Fed. R. Civ.
P. 15(a)(2).

I may only deny a motion to amend a pleading where there is

prejudice to the opposing party or bad faith on the part of the moving party, or
where the proposed amendment would be futile. Laber v. Harvey, 438 F.3d 404,
426–27 (4th Cir. 2006).
In the FARC, H.S. Martin alleges the following additional facts.

The

Authorization to Pay forms are essentially assignments and gave H.S. Martin a
security interest in any payments made by Risk Management to the School Board
relating to the mitigation work at the Middle School and High School. Risk
Management approved certain work and authorized H.S. Martin to perform that
work. Risk Management and the School Board both assured H.S. Martin that
additional payments would be made. The School Board received a new roof as a
result of H.S. Martin’s work and did not fully pay the new roof. The School Board
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received a significant amount of other restoration work for which it did not fully
pay H.S. Martin. The School Board received some of the insurance proceeds and
did not remit them to H.S. Martin. Prater, Robinson, and HCS acted negligently in
processing the claims.
Based on these and the original allegations, the FARC asserts new claims of
unjust enrichment and conversion against the School Board. The FARC also
asserts claims of unjust enrichment and interference with contract against Risk
Management. Finally, the FARC asserts a new claim of negligence against Prater,
HCS, and Robinson.
The School Board and Risk Management ask the court to deny leave to
amend because the proposed amendments would be futile. I agree. The proposed
new claims against the School Board and Risk Management are merely additional
attempts to recover under the alleged contracts despite failure to comply with the
requirements of the VPPA. To permit these claims to proceed would undermine
the purposes of the VPPA.
Regarding the new claim against Prater, HCS, and Robinson, only Robinson
is properly before the court at this time, and it mistakenly filed an answer — which
which is called a “Response” (ECF No. 51) — to the FARC, apparently unaware
that the court had not granted H.S. Martin leave to amend. Robinson has not
argued that the FARC fails to state a claim against it. Nevertheless, I find that the
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FARC fails to set forth a viable claim of negligence in light of the invalidity of the
alleged underlying contract, Robinson’s alleged status as an agent of Risk
Management, and Virginia’s economic loss doctrine. See Gerald M. Moore &
Son, Inc. v. Drewry, 467 S.E.2d 811, 813 (Va. 1996) (explaining that where a
plaintiff sues an agent for negligently performing a contract to which his principal
is a party, “even if the agent’s negligence is established, absent privity of contract,
Virginia’s economic loss doctrine precludes the recovery of damages based on
economic loss alone”). Therefore, I will deny the Motion for Leave to Amend
Complaint as to the negligence claim as well.
V.
For the foregoing reasons, it is ORDERED as follows:
1. The Motion to Dismiss filed by Lee County School Board (ECF No. 18)
is GRANTED;
2. The Motion for Leave to Amend Complaint (ECF No. 37) is DENIED;
3. Defendant Risk Management Programs, Inc.’s Motion to Dismiss
Amended Complaint (ECF No. 40) is GRANTED; and
4. Robinson must respond to the Amended Complaint (ECF No. 32) within
14 days of the date of this Opinion and Order.
ENTER: December 21, 2016
/s/ James P. Jones
United States District Judge
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