Collective Shared Servs., LLC v. CPDA Canvass Network, LLC

COLLECTIVE SHARED SERVICES, LLC, Plaintiff, v. CPDA CANVASS NETWORK, LLC, Defendant.

COLLECTIVE SHARED SERVICES, LLC, Plaintiff, v. CPDA CANVASS NETWORK, LLC, et al., Defendants.

Case No.: GJH-19-1208

Case No.: GJH-20-1804

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND Southern Division

July 7, 2021

MEMORANDUM OPINION

This consolidated action involves claims and counterclaims by and between Plaintiff Collective Shared Services, LLC ("CSS"), and CPD Action Canvass Network, LLC ("CPDA Canvass") and Center for Popular Democracy Action Fund, Inc. ("CPDA") (collectively, "Defendants") stemming from a contract between the parties in which CSS agreed to provide payroll and human resources services to CPDA Canvass. ECF No. 1-2; Case No. GJH-20-1804, ECF No. 10.¹ Now pending before the Court is Defendants' Motion to Dismiss. ECF No. 26;Case No. GJH-20-1804, ECF No. 11.² No hearing is necessary. See Loc. R. 105.6 (D. Md. 2018). For the following reasons, Defendants' Motion to Dismiss is granted, in part, and denied, in part.

I. BACKGROUND

A. Factual Background³

CPDA Canvass is a limited liability company whose parent company, CPDA, is a nonprofit corporation. Case No. GJH-20-1804, ECF No. 10 ¶¶ 2-5. Both CPDA Canvass and CPDA "purport[] to carry out door-to-door canvasses to organize citizen support for progressive causes and organizations, including other[] nonprofit organizations based throughout the country[.]" Id. ¶¶ 2, 6. On March 5, 2018, CPDA Canvass entered into a contract (the "Contract") retaining CSS to "assume responsibility as administrative employer of certain individuals working as canvassers for CPDA-sponsored projects[.]" Id. ¶ 11. CSS's duties under the Contract included making wage and salary payments in amounts reported by CPDA Canvass, determining and remitting taxes under applicable law, providing and administering health and welfare benefits, providing workers' compensation coverage, and paying unemployment insurance premiums. Id. ¶¶ 12, 13; see also Case No. GJH-20-1804, ECF No. 8-1 at 2-3.⁴ CPDA Canvass's duties under the contract included: (1) providing timely and accurate information to CSS about CPDA Canvass's workers, which, according to CSS, included documents required toonboard employees, such as the IRS Form W-4 and the USCIS Form I-9; (2) reporting the number of hours worked by each employee during each pay period as well as any changes, bonuses, or expenses; (3) paying advance retainers for the amount of payroll and associated payroll burden costs; and (4) paying all invoices in a timely manner. Case No. GJH-20-1804, ECF No. 10 ¶ 13; Case No. GJH-20-1804, ECF No. 8-1 at 3-4; ECF No. 26-1 at 18.

CSS alleges that CPDA represented to CSS, prior to entering the Contract, that CPDA Canvass would be able to provide the necessary information and funds in a timely manner so that CSS could in return timely perform its obligations under the Contract. Case No. GJH-20-1804, ECF No. 10 ¶¶ 14, 15. CSS also alleges that it relied on CPDA's representations and that CSS's ability to perform its obligations under the contract, as well as the welfare of CPDA Canvass' employees, depended on performance by CPDA Canvass and CPDA of the Contract obligations.⁵ Id. ¶ 15. CSS asserts CPDA's representations were false, and Defendants knew or should have known that CPDA Canvass would be unable to provide the necessary information and funds, as required by the Contract, in a timely manner. Id. ¶¶ 41-43.

According to CSS, CPDA Canvass and CPDA failed to perform their obligations under the Contract. Specifically, Defendants, and various of their field managers, repeatedly failed or refused to provide, confirm, and/or approve the required Form W-4, Form I-9, and direct deposit authorizations when employees were hired as required under the Contract. Id. ¶ 18. Additionally, while CSS paid canvassers each Friday, never missing a payday, CPDA and CPDA Canvass's field managers and affiliates failed to report to CSS the hours worked by each canvasser in a timely manner as required by the Contract. Id. ¶¶ 19, 20. Finally, CPDA Canvass failed to timelysubmit to CSS the first payment due under the Contract and then continually failed to make these payments in advance or to timely pay invoices as required under the Contract. Id. According to CSS, CSS was never repaid for approximately $300,000 of its own funds that it paid canvassers working on CPDA projects. Id. ¶ 21.

"Ultimately CPDA Canvass' breaches of the Contract created impossible operational and financial burdens for CSS and greatly burdened CSS's ability to service other clients." Id. ¶ 24. Accordingly, in October 2018, CSS terminated the Contract. Id. Nevertheless, even after the termination of the Contract, "CSS made every effort to see that no staffer was adversely affected or unpaid." Id. ¶ 25.⁶ In fact, CSS offered to reinstate the Contract after its termination so that a worker seriously injured in Michigan could receive worker's compensation benefits, but CPDA refused to make the payments due so that reinstatement could be achieved. Id. ¶ 29.

B. Procedural Background

CSS brought the original action, consolidated here, in Maryland state court against CPDA Canvass on March 11, 2019, seeking rescission of the Contract. ECF No. 1-2. CPDA Canvass removed the action to this Court on April 24, 2019, ECF No. 1, initiating Case No. GJH-19-1208, and then filed an answer with four counterclaims—breach of contract, unjust enrichment, defamation, and tortious interference—on May 1, 2019, ECF No. 5. CSS filed a Motion to Dismiss CPDA Canvass's counterclaims on May 22, 2019, ECF No. 8, and a Motion for Voluntary Dismissal of its rescission claim on November 1, 2019, ECF No. 14. On March 20, 2020, the Court granted CSS's request for voluntary dismissal of its rescission claim and granted, in part, and denied, in part, CSS's Motion to Dismiss CPDA Canvass's counterclaims,dismissing CPDA Canvass's unjust enrichment and tortious interference claims. ECF No. 18, 19. CSS filed an answer to the remaining counterclaims on April 27, 2020. ECF No. 22.

On June 12, 2020, CSS filed a new Complaint in this Court, alleging breach of contract and constructive fraud against Defendants, initiating Case No. GJH-20-1804. Case No. GJH-20-1804, ECF No. 1. The parties filed a Joint Motion to Consolidate Cases on July 27, 2020. ECF No. 25; Case No. GJH-20-1804, ECF No. 7. While the Motion to Consolidate was pending, CSS filed an Amended Complaint in Case No. GJH-20-1804, adding an unjust enrichment claim. Case No. GJH-20-1804, ECF Nos. 8, 10. CPDA Canvass and CPDA then, on September 1, 2020, filed the same Motion to Dismiss CSS's Amended Complaint in both cases, anticipating that the cases would be consolidated. ECF No. 26; Case No. GJH-20-1804, ECF No. 11. CSS responded in opposition on September 22, 2020, ECF No. 29; Case No. GJH-20-1804, ECF No. 13, and CPDA Canvass and CPDA replied on October 12, 2020, ECF No. 32; Case No. GJH-20-1804, ECF No. 15. The Court granted the parties' Joint Motion to Consolidate on March 23, 2021, consolidating Case No. GJH-19-1208 and Case No. GJH-20-1804. ECF No. 33; Case No. GJH-20-1804, ECF No. 16.

II. STANDARD OF REVIEW

To survive a Rule 12(b)(6) motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting 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." Id. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555 ("[A] plaintiff's obligation toprovide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.")).

The purpose of Rule 12(b)(6) "is to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006) (citation and internal quotation marks omitted). When deciding a motion to dismiss under Rule 12(b)(6), a court "must accept as true all of the factual allegations contained in the complaint[,]" and must "draw all reasonable inferences [from those facts] in favor of the plaintiff." E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011) (citations and internal quotation marks omitted). The Court need not, however, accept unsupported legal allegations, see Revene v. Charles Cnty. Comm'rs, 882 F.2d 870, 873 (4th Cir. 1989), legal conclusions couched as factual allegations, see Papasan v. Allain, 478 U.S. 265, 286 (1986), or conclusory factual allegations devoid of any reference to actual events, see United Black Firefighters of Norfolk v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979).

III. DISCUSSION

A. Breach of Contract (Count I)

To survive a motion to dismiss a breach of contract claim under Maryland law, a plaintiff must allege facts showing that (1) the defendant owed plaintiff a contractual obligation and (2) the defendant breached that obligation. See Taylor v. NationsBank, N.A., 776 A.2d 645, 651 (Md. 2001). Here, CSS attaches the original version of the Contract it signed with CPDA Canvass,⁷effective March 2018, to the Amended Complaint, Case No. GJH-20-1804, ECF No. 8-1, and Defendants attach to their Motion to Dismiss a rider the parties added to the Contract in August 2018, ECF No. 26-1 at 18.⁸

CSS alleges two ways in which Defendants, materially breached obligations owed to CSS under the Contract: (1) "failing to provide necessary information when needed" and (2) "failing to make payments to CSS when due under the Contract." Case...