United States District Court, S.D. California
HDR ENVIRONMENTAL, OPERATIONS AND CONSTRUCTION, INC., Plaintiff,
DARWIN DEASON; and DOES 1-100 inclusive Defendant.
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT'S MOTION TO DISMISS [DOC. NO 30]
JOHN A. HOUSTON, UNITED STATES DISTRICT JUDGE.
before the Court is Defendant Darwin Deason's
(“Defendant” or “Deason”) Motion to
Dismiss Plaintiff HDR Environmental Operations and
Contruction, Inc, 's (“HDR” or
“Plaintiff”) Second Amended Complaint
(“SAC”) for failure to state a claim pursuant to
Rule 12(b)(6) of the Federal Rules of Civil Procedure. [Doc.
No. 30]. HDR's SAC alleges four causes of action: (1)
breach of contract, (2) money due and owing on an open book
account, (3) a quantum meruit claim for work, labor and
services provided, and (4) promissory fraud. After a careful
review of the pleadings, relevant law, and reasons set forth
below, Defendant's motion to dismiss is GRANTED
IN PART and DENIED IN PART.
matter arises from a contract dispute. The following facts
are taken from Plaintiff's SAC, the written agreement
between the parties, including amendments and modifications,
as well as documents in the form of written communications
incorporated by reference, integral to, or explicitly relied
upon in the Complaint.
2011, Deason began the demolition and reconstruction of his
residence located at 1900 and 1912 Spindrift Drive
(hereinafter the “Spindrift Sites”) along the La
Jolla coast in the City of San Diego, California. Doc.
No. 29, p2; SAC ¶ 6. HDR and Deason entered into an
agreement for HDR to perform work at both sites, including
the excavation, recovery and monitoring of soils containing
Native American artifacts (including human remains).
Id. To comply with regulations implemented by the
City of San Diego, HDR proposed an Alternative Archaeological
Data Recovery Mitigation Monitoring and Reporting Program
(“Alternative MMRP Program”) for the excavation
and analysis of a Native American habitation and burial site
where the potential to encounter intact human remains was
high. Doc. No.29, p20; SAC Ex 1. The Alternative
MMRP Program included three main components: (1) the
Archeological Data Recovery Program (ADRP), (2) a Cultural
Materials Inventory Program (CMIP) and Mitigation Monitoring.
original proposal, dated November 14, 2011, HDR outlined work
to be done under each component, identifying a project area
of approximately 230 square meters of the Spendthrift Site at
1912 Spindrift Drive. Id. at 20-22. The
Archeological Data Recovery (“ADR”) consisted of
the excavation of 30 square meters of the approximately 206
square meters of deposits to be impacted. Id. at 20.
In addition, for the portions of the site that were disturbed
[by construction] or the portions that were intact and not
subject to the ADRP, HDR recommended a Cultural Material
Inventory Program (CMIP) be implemented. Id. at 21
.Within the project area, HDR “estimated 326m3 of
sediment would be processed, either by hand or mechanically
excavated. Doc. No.30-3, p10; Def's. Ex 1.
Finally, HDR offered monitoring of any remaining ground
disturbing construction and landscaping activities after the
completion of the ADRP and CMIP phases. Doc. No.29,
p22; SAC Ex 1.
a total cost of $451, 864.76, HDR listed thirteen assumptions
in which the estimated cost was based - namely:
8. …[A] total of 206 square meters of Site CA SDI-39
will be impacted by the proposed development… [o]f the
…176 square meters that were subject to CMIP
treatment, half (88 square meters) would require excavation
to a maximum depth of 2 meters and the other half would
require a maximum depth of 1 meter within the project
area. Id. at 24; SACEx1.
proposal also estimated 688 man hours of fieldwork.
parties added the “1900 Spindrift Drive Scope of Work
(“SOW”) Addendum” in which HDR assumed
responsibility for CMIP treatment of 143 square meters (55.8
m3 of sediment), with compensation not-to-exceed $64, 046.20.
Doc. No. 29, p.4-5; SAC ¶19-20; Doc. No
30-3, p.6; Def's. Ex: 1. This resulted in total
compensation for time and materials not-to-exceed $515,
910.96 for both sites. Doc. No. 29, p.4-5; SAC
Short Form Agreement (“Agreement”), attachments
and addendum included, and/or referenced by incorporation,
the following pertinent provisions:
SECTION II: TERMS AND CONDITIONS OF ENGINEERING
Provision 12: Changes
The parties agree that no change or modification to the
Agreement, or any attachments hereto, shall have any force or
affect unless the change is reduced to writing, dated, and
made part of this Agreement. The execution of the change
shall be signed in the same manner as the Agreement.
Adjustments in the period of services and in compensation
shall be in accordance with applicable paragraphs and
sections in this Agreement… In any event, as the
project progresses, the facts developed may dictate a change
in the services to be performed, which may alter the scope.
ENGINEER will inform OWNER of such situations so that changes
in scope and adjustments to the time of performance and
compensation can be made as required. If such change,
additional services, or suspension of services results in an
increase or decrease in the cost of or time required for
performance of the services, an equitable adjustment shall be
made, and the Agreement modified accordingly.
Provision 13: Controlling Agreement
These Terms and Conditions shall take precedence over any
inconsistent or contradictory provisions contained in any
proposal, contract, purchase order, requisition,
notice-to-proceed, or like document.
SECTION IV: COMPENSATION
Compensation for Engineer's services under this Agreement
shall be on the basis of Time and Materials not to
exceed…. $515, 910.96.
… If any specified dates for the completion of
Engineer's services are exceeded through no fault of the
Engineer, the time for performance of those services shall be
automatically extended… and all rates, measures and
amounts of Engineer's compensation shall be equitably
15, 2012, HDR submitted the 1900 and 1912 Spindrift Drive
Modification Request (“Modification Request”) as
a result of “changes in the construction work
plan…the amount of disturbance to culturally-bearing
soils…cultural data uncovered, …[and] changes
in the landscape plans.” Doc 30-3, p.2; Def's.
Ex: 1. HDR discusses the challenging nature of treating
cultural resources and the unknown factors that can be (and
were) exposed during demolition. Id. HDR noted
impacts to cultural resources due to the landscaping
improvements, demolition, and tree stump removal.
Id. at 3-5; Def's. Ex: 1. HDR indicated that
“substantial additional landscaping was
undertaken” impacting and extending beyond the original
expected scope requiring “unanticipated monitoring and
screening… [and] result[ing] in the need for CMIP
excavations, significantly increasing the cost of the overall
project. ” Id. Additionally, it notes that
such “improvements for the 1900 Spindrift Drive
property are ongoing and may continue to change.”
Modification Request states that the original proposal
greatly underestimated the anticipated depth of
intact cultural materials and midden soils on site.
Id. at 7; Def's. Ex: 1. The original
1912 Spindrift Drive SOW stipulated to the excavation of 36
cassions. However, in the Modification Request, HDR placed
the number of proposed caissons at 50, with the CMIP
Treatment Plan resulting in greater levels of examination and
an increase of labor to 835 man hours. Id. In sum,
to meet the conditions of the contracted scope of work and to
recover expenses related to “out-of-scope”
efforts, HDR outlined an additional cost of $66, 191.96 for
treatment of an additional 24m3 at 1912 Spendrift
and $93, 701.12 for examination of an additional
41.7m3 at 1900 Spindrift.. Doc
30-3, p.6, 10; Def's. Ex: 1. The new combined total
compensation was “not to exceed” $675, 804.04 as
confirmed by Jeff Hokanson, Vice President HDR EOC on or
about May 21, 2012. Id. at 14-15; Def's. Ex: 2.
Modification Request concluded with the following:
Assumptions for 1900 and 1912 Construction and
In order for HDR EOC to successfully complete the cultural
resource recovery program for 1900 and 1912 Spindrift, it is
imperative that we are able to effectively communicate
landscape issues and demolition problems that have a
significant impact to the existing cost structure. We believe
that in order to prevent such significant changes in the
future, the following assumptions/ stipulations need to be
understood between both parties. If the modifications listed
above are accepted, no additional changes or modification
requests will be made unless:
a) Intact human remains or intact cultural features are
b) It is determined by the regulators that the landscaping
proposed for 1912 requires CMIP treatment.
[T]o not, under any circumstance, complete
additional out-of-scope work without written
approval from the client or the client's
representative. If additional out-of-scope work is
identified, HDR EOC will wait until a clear
understanding between HDR EOC and the client is reached.
Finally, HDR EOC understands that Bruce Mezan is our
designated point person for vetting and approving any
additional change orders.
Doc 30-3, p.12; Defs. Ex: 2.
2012, Plaintiff alleges Defendant's contractor, Sharratt
Construction, disturbed significantly more soil than that
outlined in the permit application and approved by the
City's Planning Department in the July 2011 Final
Mitigated Negative Declaration. Doc. No. 29, p.3, 4; SAC
¶¶9, 14. The volume of
material to be excavated nearly doubled the amount covered by
the Modification Request due to the disturbance of a much
larger surface area. Id. at 5-6; SAC ¶24. HDR
requested a second contract modification. Although the
parties agreed during negotiation of the first modification
request that HDR would not charge for additional work due to
increase in depth, no agreement was reached for
additional disturbed soil outside of the agreed surface area.
Id. at 5; SAC ¶23. The parties were unable to
reach an agreement as to the terms of the second contract
modification and HDR ceased all work. Id. at 6; SAC
returned to the Project around December 26, 2012, after being
threatened with a lawsuit for delay damages, replacement
costs, and punitive damages. Doc. No. 29, p.6; SAC
¶27. On February 9, 2013, Defendant's son, Doug
Deason (“Doug”), spoke with Brian Hoppy
(“Hoppy”), the director and Senior Vice President
of HDR's Environmental Sciences and planning division.
Id. at 10; SAC ¶53(c). Plaintiff alleges during
the phone conversation, Doug agreed HDR should receive a
second contract modification for material processed over and
beyond the 290m3 identified in the original
contract and stipulated modification. Id. Plaintiff
further alleges that at an in-person meeting on February 19,
2013, Doug agreed to execute a second modification to process
an additional 300m3. Id. at 11; SAC
¶53(b)-(d). On February 27, 2013, HDR sent a
“scope and cost modification proposal” to process
an additional 300m3 of soil at the 1912 Spindrift
property. Doc. 30-3, p.31;Def's Ex: 7. As the
terms were being negotiated, Doug urged HDR to expedite the
completion of project and get them to “the finish