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United States v. Agbayani Construction Corporation

United States District Court, N.D. California

October 6, 2014

UNITED STATES OF AMERICA, FOR THE USE AND BENEFIT OF HCI SYSTEMS, INC., Plaintiff,
v.
AGBAYANI CONSTRUCTION CORPORATION, A CALIFORNIA CORPORATION, et al., Defendants.

ORDER RE: MOTION TO DISMISS Re: Dkt. No. 34

MARIA-ELENA JAMES, Magistrate Judge.

INTRODUCTION

This is an interference with contractual relations and breach of contract case related to the construction of a fire alarm system upgrade at the Ronald Dellums Federal Building in Oakland, California. Pending before the Court is Defendant Sabah International, Inc.'s Motion to Dismiss Plaintiff HCI Systems, Inc.'s First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Dkt. No. 34. Sabah seeks to dismiss the third cause of action for Intentional Interference with Contractual Relations ("IICR"), which is the only cause of action plead against Sabah. HCI has filed an Opposition (Dkt. No. 37) and Sabah filed a Reply (Dkt. No. 40). The Court finds this motion suitable for disposition without oral argument and VACATES the October 9, 2014 hearing. Civ. L.R. 7-1(b). Having considered the parties' papers, relevant legal authority, and the record in this case, the Court DENIES Sabah's Motion for the reasons set forth below.

BACKGROUND

Defendant Agbayani Construction Corporation, as a general contractor, entered into a written contract with the General Services Administration, under which Agbayani agreed to construct and complete a fire alarm system upgrade at the Ronald Dellums Federal Building in Oakland, California (the "Project").[1] First Am. Compl. ("FAC") ¶ 7. Agbayani executed a bond with Defendant First National Insurance Company of America, as surety, "for the benefit of all persons who should perform labor upon or furnish materials to be used on the Project, " in accordance with the Miller Act, 40 U.S.C. § 3131-34. Id. ¶ 21.

Agbayani subsequently entered into a written "time and material" subcontract with Plaintiff HCI Systems, Inc., in October 2012, under which HCI was to provide various materials, installation, programming, testing, inspections, and project management to complete the Project, in exchange for which Agbayani agreed to pay HCI up to $1, 216, 325.00. Id. ¶¶ 8, 12. Between October 2012 and September 2013, HCI completed its work under the Project and submitted invoices in the total amount of $436, 243.24. Id. ¶¶ 13, 23. HCI alleges that it fully performed all of its obligations, but Agbayani has paid HCI only $286, 055.47, leaving a balance of $150, 187.77 plus interest owed to HCI. Id. ¶¶ 14, 16.

HCI alleges that Sabah knew of the subcontract between HCI and Agbayani. Id. ¶ 30. Specifically, HCI alleges that "Sabah met with Agbayani Construction and made false representations regarding HCI and its work at the project, and advised, counseled and/or persuaded Agbayani Construction that HCI's work was defective." Id. In a letter dated November 18, 2013, Pamela Scholefield, counsel for Agbayani, informed HCI that Agbayani met with an "Authorized Contractor" on site. Id. ¶ 31. HCI later learned that this "Authorized Contractor" was Sabah. Id. HCI further alleges that at that meeting, Sabah's false representations included: "that HCI's work was defective, that HCI's work was not as far along as HCI had represented in its payment applications, and the work provided by HCI does not conform to the plans and specifications nor the Fire Code." Id. ¶ 32. HCI provides two examples given by Sabah of alleged non-conforming work: "(1) The wire connections are made with wire nut connectors instead of being crimped as is required by Code; and, (2) The relays are not installed correctly in the boxes." Id. HCI contends that these statements and others were made with the intention to interfere with HCI's contractual relation with Agbayani. Id.

After this meeting, Agbayani refused to pay the balance due, and this refusal is the result of Sabah's wrongful conduct. Id. ¶ 33. Agbayani then contracted with Sabah for the work set forth in the subcontract between Agbayani and HCI. Id.

On May 30, 2014, HCI filed its initial Complaint. Dkt. No. 1. Relevant to the present Motion, HCI's third cause of action was for IICR against Sabah. Id. ¶¶ 28-33. HCI alleged that Sabah knew of the subcontract between HCI and Agbayani, Sabah met with Agbayani and made false representations regarding HCI's work, and on that basis Agbayani refused to make payments to HCI and contracted with Sabah for the work set forth in the subcontract. Id. ¶¶ 29-31. Sabah filed a Motion to Dismiss on July 21, 2014, seeking dismissal of the third cause of action for HCI's failure to plead its allegations of intentional interference with contractual relations with particularity as required under Rule 9. Dkt. No. 19.

On August 5, 2014, the Court granted Sabah's motion with leave to amend. Order Re: Motion to Dismiss, Dkt. No. 29. While HCI did not bring a separate claim for fraud, the Court held that its allegations of fraudulent conduct in connection with its interference claim must still satisfy federal pleading standards under Federal Rule of Civil Procedure ("Rule") 9(b), which requires that a plaintiff alleging fraud "must state with particularity the circumstances constituting fraud." Id. at 5 (citing Fed.R.Civ.P. 9(b); Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009). Although HCI alleged generally that Sabah met with Agbayani and made false representations regarding HCI's work, the Court found that it did not identify the specific false allegations, who made them, when and where they were made, or how they were made. Id. As it could cure these deficiencies, the Court ordered HCI to file an amended complaint by August 26, 2014, but warned that it "should be mindful that any allegations of fraud must meet the heightened pleading requirements of Rule 9(b)." Id. at 8.

HCI filed its FAC on August 22, 2014, adding additional allegations as set forth above. HCI also alleges that "the acts of Sabah were willful, oppressive and fraudulent, " and "HCI is therefore entitled to punitive damages." FAC ¶ 35. Sabah responded by filing the present Motion to Dismiss on September 4, 2014, arguing that HCI's additional allegations still do not meet the particularity requirements of Rule 9(b).

LEGAL STANDARD

Under Federal Rule of Civil Procedure ("Rule") 12(b)(6), a party may file a motion to dismiss based on the failure to state a claim upon which relief may be granted. A Rule 12(b)(6) motion challenges the sufficiency of a complaint as failing to 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). A facial plausibility standard is not a "probability requirement" but mandates "more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations and citations omitted). For purposes of ruling on a Rule 12(b)(6) motion, the court "accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the non-moving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). "[D]ismissal may be based on either a lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008) (internal quotations and citations omitted); see also Neitzke v. Williams, 490 U.S. 319, 326 (1989) ("Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law.").

Even under the liberal pleading standard of Rule 8(a)(2), under which a party is only required to make "a short and plain statement of the claim showing that the pleader is entitled to relief, " a "pleading that offers labels and conclusions' or a formulaic recitation of the elements of a cause of action will not do.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). "[C]onclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss." Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004); see also Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) ("[A]llegations in a complaint or counterclaim may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively"). The court must be able to "draw the reasonable inference that the defendant is liable for the ...


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