United States District Court, N.D. California
LARRY D. KUDSK, Plaintiff,
BARA INFOWARE, INC., et al., Defendants.
ORDER GRANTING MOTION TO TRANSFER VENUE AND DENYING
AS MOOT MOTION TO DISMISS OR FOR JUDGMENT ON THE PLEADINGS
RE: DKT. NOS. 52, 53
ILLSTON UNITED STATES DISTRICT JUDGE.
case is before the Court on two motions filed by
use-plaintiff and counter-defendant Larry D. Kudsk, doing
business as Kudsk Construction Services
(“Kudsk”). The first is a motion for dismissal of
counterclaims and/or for judgment on the pleadings. Dkt. No.
52. The second is a motion to dismiss counterclaims or
transfer for improper venue or, in the alternative, to
transfer for convenience. Dkt. No. 53. These motions came on
for hearing on June 28, 2019.
September 15, 2017, Kudsk filed suit in this district against
defendants Bara Infoware, Inc.
(“Bara”) and Fidelity and Deposit Company of
Maryland (“F&D”). Dkt. No. 1. Kudsk amended
the complaint the following day, bringing two claims for
relief: (1) breach of written contract against Bara, and (2)
action upon Miller Act payment bond against Bara and F&D.
Dkt. No. 5. Kudsk alleged that on October 13, 2015, the Air
Force National Guard awarded Bara a prime contract to replace
the roof at Building 681 at Moffett Field in Santa Clara
County, California. Id.
7. F&D acted as surety under the Miller Act, 40 U.S.C.
§ 3133, “whereby F&D guaranteed the payment to
all entities supplying the labor, services and material in
the prosecution of the work provided for in the Contract for
the Project and all duly requested and/or authorized
modifications thereto.” Id. ¶ 8. On March
27, 2016, Bara and Kudsk entered into a written subcontract
agreement in which Kudsk agreed to perform the roofing work
for $375, 000.00. Id. ¶ 9. Kudsk alleges
“that during construction of the Project, BARA directed
KUDSK to perform additional roofing work . . . and issued
Change Orders to the Subcontract Agreement increasing the
final amount to the sum of $443, 000.00.” Id.
¶ 10. Kudsk further alleges that Bara has since paid a
portion of the total sum to Kudsk and a portion to his
suppliers, but “that an unpaid subcontract balance of
$93, 190.50 remains unpaid.” Id. This is the
amount over which Kudsk is suing Bara and F&D.
answered the amended complaint on November 10, 2017. Dkt. No.
11. On November 29, 2017, the Court Clerk entered default
against Bara. Dkt. No. 23. At the initial case management
conference before this Court in January 2018, the parties
indicated that the case may settle prior to trial. Dkt. No.
30. The Court then approved several requests to extend the
deadline to conduct early neutral evaluation, as the parties
indicated they were waiting on documents from the United
States Department of Labor (“DOL”) that were not
yet available and that were material to the case. Dkt. Nos.
34, 39. On June 4, 2018, upon notification that the parties
had settled, the Court entered an order conditionally
dismissing the case and giving the parties ninety days to
inform the Court if settlement had not in fact occurred. Dkt.
Nos. 41, 42. On August 30, 2018, counsel for Kudsk filed a
certification that settlement had not occurred because,
according to Kudsk, “Use-Plaintiff has been unable to
resolve the unrelated United States Department of Labor
claim, and therefore the condition precedent upon which the
settled [sic] was based has not occurred, ” and asked
the Court to restore this matter to its docket. Dkt. No. 43
Court set a case management conference for September 28,
2018. In the joint case management statement, F&D
indicated that it intended to seek the Court's leave
“to file a Counter-Claim against KUDSK based upon the
DOL claim against KUDSK . . . . Use-Plaintiff KUDSK does not
oppose this request.” Dkt. No. 45 at 2. The parties
further stated, “While counsel has not yet been
provided a draft copy of the proposed Counter-Claim,
Use-Plaintiff KUDSK will not oppose a Motion for Leave to
file a Counter-Claim based upon the DOL's wage claim
against KUDSK.” Id. At the case management
conference, the Court granted F&D leave to file its
counterclaim, ordered that the parties complete early neutral
evaluation in February 2019, and set dates for the
dispositive motion hearing (June 28, 2019) and for the bench
trial (August 19, 2019). Dkt. No. 46.
October 9, 2018, F&D filed an answer to the amended
complaint and filed its counterclaim. Dkt. No. 48. That
counterclaim is now the subject of the present motions to
dismiss. In the counterclaim, F&D alleges the following.
“Third-party Federal Solutions Group, Inc.
(‘FSG') was awarded . . . six federal construction
projects by the United States Air Force to be performed at
Vandenberg Air Force Base” located in Santa Barbara
County, California. Counterclaim ¶ 5. These included
contracts to repair the entire HVAC system in Building 91-90
and to repair the fire detection system at the Temporary
Living Facility (“TLF”). Id. “FSG
as principal and F&D as surety executed and delivered to
the United States Air Force separate Performance and Payment
Bonds for each of the Vandenberg Projects, in accordance with
the requirements of the Miller Act (40 U.S.C.
§3131-3134).” Id. ¶ 6. In November
2017, FSG issued Letters of Voluntary Default notifying the
United States that it was unable to perform or complete its
work on the projects, and the United States thereafter made
demand upon F&D to perform and complete performance of
the construction work on the projects. Id.
¶¶ 7-8. F&D states that “[a]s completing
surety, F&D will be entitled to the contract funds
earmarked for the Vandenberg Projects . . . .”
Id. ¶ 10. “F&D has arranged for the
completion or performance of the bonded work on the
Vandenberg projects through The Vertex Companies, Inc.
(‘Vertex')” and Vertex “retained Kudsk
to complete the work on all of the Vandenberg Projects. The
HVAC Project must be completed by November 5, 2018[, ]”
or in slightly less than one month from the filing of
F&D's counterclaim. See Id. ¶¶ 9,
alleges that Kudsk began work on the HVAC Project in May 2018
and that the agreement between Vertex and Kudsk required
Kudsk to complete work on the HVAC Project by August 16,
2018. Id. ¶ 12. F&D alleges that
“[b]eginning in or about July 2018, Kudsk failed to
supply sufficient manpower to meet project milestones causing
the project to fall behind schedule and Kudsk failed to meet
the August 16, 2018 completion date on the HVAC
Project.” Id. ¶ 13.
is informed and believes that it may incur damages to the
extent the HVAC Project is not delivered to the United States
Air Force by November 5, 2018.” Id. ¶ 14.
counterclaim also raises allegations related to a contract
awarded to FSG by the Federal Bureau of Prisons to re-roof
buildings at the Federal Correctional Institute in Dublin,
California. See Id. ¶ 15. “FSG entered
into a subcontract with Kudsk, or a company controlled by
Kudsk, . . . to perform work on the BOP Project[, ]”
and the counterclaim alleges that Kudsk did perform such
work. Id. ¶ 16. Following this work, the DOL
conducted an investigation into Kudsk's compliance with
prevailing wage and fringe benefit obligations related to the
BOP Project and determined that Kudsk failed to pay the
required prevailing wages, resulting in approximately $111,
000 in back wages owed. Id. ¶¶ 18-19.
“F&D is informed and believes that Kudsk has not
agreed to pay the back wages and, as a result, the DOL has
issued a Withhold Request Letter requested [sic] the
Contracting Officer for the United States Air Force to
withhold approximately $111, 000 from payments due on
the” contract for repair of the fire detection system
at TLF that is part of the Vandenberg Projects. See
Id. ¶ 22. As a result, the counterclaim alleges,
“money that would otherwise be paid to F&D will not
be available to offset the costs of completing” the
contract for repair of the fire detection system at TLF.
Id. ¶ 23. Moreover, “F&D is informed
and believes that with the exception of the HVAC Project,
Kudsk's problems with the DOL have delayed the
commencement of the remaining work on the Vandenberg Projects
potentially increasing F&D's completion costs to
complete these projects.” Id. ¶ 24.
brings two claims for relief: (1) declaratory relief, seeking
a declaration that “F&D is entitled to an offset
from any amounts Kudsk proves he is owed on the Amended
Complaint [in] an amount equivalent to the monies deducted
from the contract funds earmarked for the Vandenberg Projects
as a result of . . . the DOL withhold request” and an
offset in “an amount equivalent to any damages
[F&D] sustains in completing the Vandenberg Projects . .
. as a result of Kudsk's failure to fulfill its
obligations in completing the work on the HVAC
Project;” and (2) equitable indemnity “[f]or an
amount equal to any monies deducted from F&D out of the
contract funds earmarked for the Vandenberg Projects as a
resulting [sic] of Kudsk's labor issues and the DOL
withhold request” and “[f]or any damages incurred
by F&D in completing the Vandenberg Project as a
resulting [sic] of Kudsk's labor issues and the DOL
withhold request and its failure to fulfill its obligations
in completing the work on the HVAC Project[.]”
Id. at 14-15.
October 30, 2018, Kudsk answered the counter-complaint,
alleging, among other things, that because the counterclaim
contains allegations regarding the HVAC Project based in
Santa Barbara County, “venue for KUDSK's
Counter-Claim against Counter-Claimant FIDELITY AND DEPOSIT
COMPANY OF MARYLAND . . . upon the Miller Act bond issued for
the HVAC Project would be vested in the United States
District Court, Southern District of California pursuant to
Title 40, U.S.C. §3133(b)(3), not within the Northern
District of California. To the extent F&D intends to
withhold funds from KUDSK based upon these allegations, it is
KUDSK's intention to file suit on the Miller Act bond in
the United States District Court, Southern District of
California.” Dkt. No. 50 ¶ 2.
meantime, on January 17, 2019, Kudsk filed a separate action
in the Central District of California, alleging breach of
written subcontract against FSG, breach of the ratification
agreement and action upon Miller Act payment bond against
F&D, and breach of written subcontract against Vertex,
all related to the Vandenberg HVAC Project. Kudsk v. Fed.
Sols. Grp., No. 19-cv-00389-SVW-RAO (C.D. Cal. Jan. 17,
2019). On March 13, 2019, F&D filed a counterclaim for
equitable indemnity and declaratory relief also related to
construction projects at Vandenberg. According to Kudsk, the
parties met and conferred regarding Kudsk's intent to
file a Rule 12(b)(6) motion to dismiss, and on April 30,
2019, F&D filed an amended counterclaim. See
Dkt. No. 53 at 7. In the amended counterclaim in that case,