United States District Court, S.D. California
ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND
JEFFREY T. MILLER, District Judge.
On June 6, 2014, Defendants filed a motion to dismiss Plaintiff's second amended complaint for failure to state a claim. (Dkt. No. 18.) Plaintiff filed an opposition to Defendants' motion on July 16, 2014, (Dkt. No. 20), and Defendants filed their reply on July 12, 2014, (Dkt. No. 21). Having reviewed the parties' arguments, the court finds this matter suitable for resolution on the papers without oral argument pursuant to Civil Local Rule 7.1.d.1. For the reasons set forth below, Defendants' motion to dismiss is GRANTED with leave to amend.
Plaintiff is a public water district with its principal place of operation in Winterhaven, California. Defendant James Davey and Associates, Inc. is an Arizona corporation with its principal place of business in Yuma, Arizona, and James Davey is an individual and an officer of James Davey and Associates, Inc. residing in Arizona.
In April 2005, Plaintiff alleges Defendants entered into a written contract with Plaintiff to serve as Project Engineer for the Reservation Main Canal Improvement Project (the "Project"), located in Imperial County. Plaintiff alleges Defendants agreed to use, and did use the document entitled "Contract Documents - Reservation Main Canal Improvement Project, Schedule I (2004), Concrete Canal Lining" ("Project Document") to memorialize the terms of their agreement. Defendants prepared the Project Documents and stamped them with James Davey's seal indicating he is a registered civil engineer in California. Plaintiff attached the 150-page Project Documents as Exhibit A to the second amended complaint. (SAC, Dkt. No. 17 at Ex. A ("Project Documents").) Plaintiff contends the Project Documents specifically detail the authority and obligations of Defendants while serving as the Project Engineer, including their duty to supervise and inspect the work of the general contractor and carry out specific testing requirements.
Pursuant to their Project Documents, Plaintiff alleges it relied on Defendants to ensure enforcement and compliance by the general contractor with the terms of the Project Documents. Plaintiff further contends Defendants owed Plaintiff a fiduciary duty as the Project Engineer to ensure that the Project Documents were enforced.
In the complaint, Plaintiff alleges two claims against Defendants: (1) breach of contract, and (2) breach of fiduciary duty while serving as Project Engineer, Plaintiff's agent under the contract. Plaintiff alleges Defendant breached the terms of the Project Documents by unilaterally waiving, in contravention of the contract documents and without Plaintiff's knowledge or consent, the testing and inspection requirements and by failing to ensure the general contractor complied with the contract. Specifically, Defendants allegedly waived the required inspections and tests to ensure that the beds of the irrigation ditches were properly compacted and otherwise prepared to receive the concrete ditch lining. Thereafter, Defendants allegedly failed to disclose and concealed these breaches from Plaintiff until November 15, 2009, at the earliest. Plaintiff alleges Defendants' breaches and failure to comply with their contractual responsibilities resulted in the widespread failure of the ditch lining throughout the Project and damages in excess of $75, 000. Given the amount in controversy and the diversity of citizenship between Plaintiff and Defendants, Plaintiff filed this action in federal court on the basis of diversity jurisdiction.
For a plaintiff to overcome a Rule 12(b)(6) motion to dismiss for failure to state a claim, the complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atl. 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." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009). Factual pleadings merely consistent with a defendant's liability are insufficient to survive a motion to dismiss because they only establish that the allegations are possible rather than plausible. See id. at 678-79. The court should grant 12(b)(6) relief only if the complaint lacks either a "cognizable legal theory" or facts sufficient to support a cognizable legal theory. See Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1990).
In addition, when resolving a motion to dismiss for failure to state a claim, courts may not generally consider materials outside the pleadings. Schneider v. Cal. Dep't of Corrs. , 151 F.3d 1194, 1197 n. 1 (9th Cir. 1998); Jacobellis v. State Farm Fire & Cas. Co. , 120 F.3d 171, 172 (9th Cir. 1997); Allarcom Pay Television Ltd. v. Gen. Instrument Corp. , 69 F.3d 381, 385 (9th Cir. 1995). "The focus of any Rule 12(b)(6) dismissal... is the complaint." Schneider , 151 F.3d at 1197 n. 1. This precludes consideration of "new" allegations that may be raised in a plaintiff's opposition to a motion to dismiss brought pursuant to Rule 12(b)(6). Id . (citing Harrell v. United States , 13 F.3d 232, 236 (7th Cir. 1993); 2 Moore's Fed. Prac. § 12.34 (Matthew Bender 3d ed.)).
However, "[w]hen a plaintiff has attached various exhibits to the complaint, those exhibits may be considered in determining whether dismissal [i]s proper...." Parks Sch. of Bus., Inc. v. Symington , 51 F.3d 1480, 1484 (citing Cooper v. Bell , 628 F.2d 1208, 1210 n. 2 (9th Cir. 1980)). The court may also consider "documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading...." Knievel v. ESPN , 393 F.3d 1068, 1076 (9th Cir. 2005) (citing Branch v. Tunnell , 14 F.3d 449, 454 (9th Cir. 1994) overruled on other grounds by Galbraith v. County of Santa Clara , 307 F.3d 1119 (9th Cir. 2002)).
Plaintiff alleged breach of contract and breach of fiduciary duty claims based upon the Project Document in the first amended complaint. In the court's order granting Defendants' motion to dismiss the first amended complaint, the court dismissed Plaintiffs' claims based on the Project Documents because they were not a contract between the parties. (See Dkt. No. 16 at 6-9). "On its face, " the court found the Project Document was "more akin to a bid package created for the consideration of general contractors than a contract between Plaintiff and the Project Engineer, much less a contract between Plaintiff and Defendants." (Id. at 6-7). After dismissing Plaintiff's breach of contract claim, the court further concluded that Plaintiff could not allege a breach of fiduciary duty claim based upon Defendants' alleged failure to comply with purported contractual obligations within the Project Document. (Id. at 8-9). As a result, the court granted Defendants' motion to dismiss the first amended complaint with leave to amend. In doing so, the court advised Plaintiff that a second amended complaint ("SAC") should "specifically refer to those document provisions which Plaintiff contends (1) resulted in the formation of a contract between these parties; and (2) imposed specific duties upon Defendants." (Id. at 9).
Plaintiff filed a SAC on May 23, 2014. Plaintiff alleges that Defendants "entered into a contract" with Plaintiff to serve as Project Engineer "subject to the terms of the parties' written agreement." (SAC, Dkt. No. 17 at ¶ 9). Plaintiff alleges the Defendants agreed to use, and did use, the Project Documents "to memorialize the terms of their agreement, " consistent with Plaintiff's general policy and practice. (Id.) The SAC then alleges breach of contract and breach of fiduciary duty based upon the contract's terms as "memorialized" in the Project Documents. Plaintiff also alleges Defendants sent billing invoices to Plaintiff in excess of $190, 000 for services rendered under the contract and accepted payment for these services. (SAC, Dkt. No. 17 at ¶ 13). ...