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District v. James Davey and Associates, Inc.

United States District Court, S.D. California

November 14, 2014

BARD WATER DISTRICT, Plaintiff,
v.
JAMES DAVEY AND ASSOCIATES, INC., an Arizona corporation, and JAMES DAVEY, Defendants.

ORDER GRANTING MOTION TO DISMISS WITH PREJUDICE

JEFFREY T. MILLER, District Judge.

On September 12, 2014, Defendants filed a motion to dismiss Plaintiff's third amended complaint for failure to state a claim. (Doc. No. 27.) Plaintiff filed an opposition to the motion on October 14, 2014, (Doc. No. 30), and Defendants filed a reply on October 21, 2014, (Doc. No. 33). 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 is granted and Plaintiff's third amended complaint is dismissed with prejudice.

BACKGROUND

According to the third amended complaint ("TAC"), Plaintiff is a public water district with its principal place of operation in Winterhaven, California. (Doc. No. 26 ¶ 1). 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. (Id. ¶¶ 2-3.)

Plaintiff alleges that beginning in late 2002 Defendants acted as engineers for Plaintiffs on a canal-improvement construction project in Imperial County ("canal project" or "project"), and were responsible for the planning, engineering, design, preparation of bid documents, and preparation of the contracts for the project. (Id. ¶¶ 8-9.) In April 2005 Defendants prepared documents, entitled "Contract Documents-Reservation Main Canal Improvement Project, Schedule I (2004), Concrete Canal Lining" ("project document"), and stamped them with James Davey's seal, which indicates that he is a registered civil engineer in California. (Id. ¶ 11 & Exh. A.) Plaintiff alleges that Volume II of the project document "was, and is, the contract under which the Canal Project was constructed" and sets forth Defendants' authority and obligations while serving as project engineer on the canal project, including the duty to supervise and inspect the work of the general contractor and carry out specific testing requirements. (Id. ¶¶ 12, 21).

Plaintiff asserts two claims against Defendants: (1) breach of contract, and (2) breach of fiduciary duty. On the first claim Plaintiff alleges that Defendants "breached the agreement and their contractual duties, responsibilities, and obligations of Project Engineer for the Canal Project under and pursuant to the Contract by unilaterally waiving, without plaintiff's knowledge or consent" the specific testing and inspection requirements set forth in the project document, and by failing to ensure that the general contractor complied with the written specifications for proper preparation of the ditch lining. (Id. ¶ 23.) On the second claim Plaintiff alleges that Defendants, by acting as project engineer for the canal project, owed a fiduciary duty "to Plaintiff to act with utmost good faith and in the best interests of Plaintiff, " separate and distinct from any contractual obligations, which Defendants breached by "failing to perform the duties, responsibilities, and obligations of Project Engineer memorialized in the Contract." (Id. ¶¶ 27-31.) Plaintiff asserts that Defendants failed to disclose and concealed the breaches until November 15, 2009, (id. ¶¶ 24, 30), and that the breaches resulted in widespread failure of the ditch lining throughout the project and damages in excess of $75, 000, (id. ¶¶ 25, 31). 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.

LEGAL STANDARD

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. Corp. 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). The court must "take all of the factual allegations in the complaint as true, " but is "not bound to accept as true a legal conclusion couched as a factual allegation." Id . (internal quotation marks omitted). Factual pleadings merely consistent with a defendant's liability are insufficient to survive a motion to dismiss because they establish only that the allegations are possible rather than plausible. See id. at 678-79. The court should grant 12(b)(6) relief 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).

When resolving a motion to dismiss for failure to state a claim, courts may not generally consider materials outside the pleadings. See 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. "A court may, however, consider certain materials-documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice-without converting the motion to dismiss into a motion for summary judgment." United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).

DISCUSSION

Plaintiff's first amended complaint ("FAC"), like the third amended complaint at issue here, alleged claims for breach of contract and breach of fiduciary duty based on the duties purportedly set forth in the project document. (Doc. No. 9.) The FAC had one attached exhibit, a copy of the approximately 150-page project document. ( Id., Exh. A.) Defendants moved to dismiss the claims in the FAC for failure to state a claim, and the court granted the motion. (Doc. No. 16.) On the first claim, Plaintiff had not specifically identified which provisions in the project document supported its allegations that a contract existed between the parties and that Defendants had an obligation to supervise and inspect. (Id. at 5.) Based on the court's own review, the project document was not, on its face, a contract between the parties. (Id. at 6-9.) It 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.) Although the document contained numerous references to the "Engineer, " it did not identify Defendants as the Engineer or the project engineer, and there was no language in the document suggesting a contractual relationship between Plaintiff and Defendants or what specific duties and obligations they may have agreed to. (Id.) On the second claim, for breach of fiduciary duty, the court found that Plaintiff had adequately alleged the existence of a fiduciary relationship, but the basis of Plaintiff's claim was that Defendants had failed to comply with their obligations as "Engineer" under the project document, and there was nothing to suggest that Defendants owed Plaintiffs any obligations pursuant to the project document. (Id. at 8-9.) Accordingly, the court granted Defendants' motion to dismiss the first amended complaint with leave to amend. (Id. at 9.) In doing so, the court advised Plaintiff that a second amended complaint 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.)

Plaintiff filed a second amended complaint ("SAC") on May 23, 2014, again asserting claims for breach of contract and breach of fiduciary duty. (Doc. No. 17). In the SAC Plaintiff alleged that Defendants had "entered into a contract" with Plaintiff to serve as project engineer "subject to the terms of the parties' written agreement, " and "agreed to use, and did use" the project document "to memorialize the terms of their agreement." (Id. ¶ 9). This time Plaintiff identified the provisions in the project document that it asserted gave Defendants, as project engineer, "the exclusive responsibility to ensure compliance by the general contractor with the specifications of said contract through continuing supervision and inspection of the construction of the Project in accordance with the agreement's specifications." (Id. ¶ 11.) Plaintiff alleged that Defendants manifested their assent to these terms "by stamping defendant James Davey's seal of approval on the contract documents, by undertaking the duties articulated in the parties' contract, by billing for services rendered under the contract, and by accepting payment from plaintiff for services rendered pursuant to the contract." (Id. ¶ 10.) The SAC had two attached exhibits: (1) the project document, and (2) copies of invoices and a check, offered to show Defendants' billing and acceptance of payment for services rendered. ( Id., Exhs. A & B.).

Defendants moved to dismiss the SAC for failure to state a claim, and the court granted the motion because Plaintiff had not remedied the deficiencies the court had identified in its order dismissing the FAC. (Doc. No. 23.) Although Plaintiff relied heavily on the language in the project document to allege breach, the project document did not contain any specifics regarding the duties and obligations agreed to by Plaintiff and Defendants, the allegations in the SAC did not clarify that aspect of their relationship, and the invoices and proof of payment did not provide the missing information. (Id. at 5-6.) In dismissing the SAC with leave to amend, the court advised Plaintiff that a third amended complaint should "specifically reference document provisions which Plaintiff contends (1) resulted in the formation of a contract between these parties, including the parties' mutual assent to the contract and the material terms of the contract; and (2) imposed specific duties upon Defendants." (Id. at 6-7.) The court advised Plaintiff that "[f]ailure to do so will result in the dismissal of Plaintiff's claims with prejudice." (Id. at 7.)

Plaintiff filed the instant third amended complaint ("TAC") on August 29, 2014, again asserting claims for breach of contract and breach of fiduciary duty. (Doc. No. 26.) In the TAC Plaintiffs allege that Defendants manifested their intent to perform the obligations of project engineer "memorialized, defined, and described, in writing" in the project document by stamping James Davey's seal on the document, performing the duties of project engineer outlined in the document, issuing and executing change orders as project engineer, providing written invoices to Plaintiff for services performed as project engineer, and accepting more than $190, 000 in payment. (Id. ¶ 20.) The TAC has four attachments: (1) the project document, (Exh. A); (2) change orders to the general contractor signed by Defendant, the contractor, and Plaintiff, offered to show that Defendant was acting as project engineer, (Exh. B); (3) invoices and a copy of a check, offered to show that Defendant billed Plaintiff and accepted payment for its services as project engineer, (Exh. C); and (4) a summary of engineering costs allegedly prepared by Defendants, offered to show that Plaintiff ...


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