Cutler Assocs., Inc. v. Palace Constr., LLC

132 F.Supp.3d 191

Cutler Associates, Inc., Plaintiff

v.Palace Construction, LLC, Colby Palace, LLC, and Optimum Building Systems and Management, Defendants.

CIVIL ACTION NO. 15-40021-TSH

United States District Court, D. Massachusetts.

Signed September 22, 2015

John W. Dinicola, II, Michael E. Brangwynne, Dinicola Seligson & Upton LLP, Boston, MA, for Plaintiff.

Mark A. Darling, Litchfield Cavo LLP, Lynnfield, MA, Daniel R. Sonneborn, Preti Flaherty Beliveau & Pachios LLP, Boston, MA, for Defendants.

MEMORANDUM OF DECISION AND ORDER ON DEFENDANT'S MOTION TO DISMISS (Docket No. 8) AND PLAINTIFFS' MOTION TO STAY AND COMPEL ARBITRATION (Docket No. 12)

Timothy S. Hillman, United States District Judge

Introduction

Plaintiff Cutler Associates, Inc. ("Plaintiff") asserts claims against Defendants Palace Construction, LLC, Colby Palace, LLC, and Optimum Building Systems and Management, Inc. (collectively, "Defendants") for negligence, breach of contract, and indemnification. The claims all arise out of allegedly defective exterior sheeting the Defendants installed during the construction of a building, the New Hall, for Mount Ida College ("Mount Ida"). Plaintiff filed this complaint in Worcester Superior Court July 3, 2014. The Defendants removed to this Court February 11, 2015. The Defendants moved to dismiss the complaint pursuant to Mass. R. Civ. P. 12(b)(5) and Mass. R. Civ. P. 4(j), for insufficient service of process, and Fed. R. Civ. P. 12(b)(6), for failure to state a claim. Plaintiff has moved to stay the case and compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. § 1, et seq.

This Order addresses Defendants' Motion to Dismiss (Docket No. 8) and Plaintiff's Motion to Stay and Compel Arbitration (Docket No. 12). For the reasons set forth below, the Defendant's Motion to Dismiss is denied in part and stayed in part, and the Plaintiff's Motion to Stay and Compel Arbitration is granted .

Standard of Review

A. Mass. R. Civ. P. 12(b)(5) Untimely Service of Process

When faced with a Rule 12(b)(5) challenge, the burden of proof to establish proper service rests on the plaintiff. Rissman Hendricks & Oliverio, LLP v. MIV Therapeutics Inc. , 901 F.Supp.2d 255, 267 (D.Mass.2012) (citing Saez Rivera v. Nissan Mfg. Co. , 788 F.2d 819, 822 n. 2 (1st Cir.1986) ). The federal court has broad discretion to either dismiss a complaint or simply to quash service of process. DiDonato v. Mosher , 1996 Mass.App.Div. 135, 136 (Mass.App.1996). The dismissal of a complaint is an inappropriate exercise of this discretion when there exists a reasonable prospect that service may yet be obtained. Id. When reviewing a Fed. R. Civ. P. 12(b)(5) motion, the Court is permitted to look beyond the pleadings and may consider affidavits and other documents to determine whether process was properly served, however, any factual ambiguities are to be resolved squarely in the plaintiff's favor. Morse v. Commonwealth Exec. Office of Pub. Safety Dep't of State Police , 2013 WL 1397736, *1, 2013 U.S. Dist. LEXIS 48938, *4 (D.Mass.2013) (citing Fisher v. Lynch , 531 F.Supp.2d 1253, 1260 (D.Kan.2008) ).

B. Fed. R. Civ. P. 12(b)(6) Failure to State a Claim Upon Which Relief Can Be Granted

To overcome a Fed. R. Civ. P. 12(b)(6) motion to dismiss for failure to state a claim, a complaint must allege sufficient facts "to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 667, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 546, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The plausibility of a claim is evaluated in a two-step process. Manning v. Boston Med. Ctr. Corp. , 725 F.3d 34, 43 (1st Cir.2013). First, the court must separate the complaint's factual allegations, which must be accepted as true, from its conclusory legal allegations, which are not entitled to the presumption of truth. Id. at 43 ; A.G. ex rel. Maddox v. Elsevier, Inc. , 732 F.3d 77, 80 (1st Cir.2013). Second, the court must accept the remaining factual allegations as true and decide if, drawing all reasonable inferences in the plaintiffs' favor, they are sufficient to show an entitlement to relief. Manning , 725 F.3d at 43 The court draws on judicial experience and common sense in evaluating a complaint, but may not disregard factual allegations even if it seems that actual proof of any particular fact is improbable. Iqbal , 556 U.S. at 667, 129 S.Ct. 1937 ; Twombly , 550 U.S. at 556, 127 S.Ct. 1955. A motion to dismiss must focus not on whether the plaintiff will ultimately prevail, but whether he is entitled to offer evidence to support the claims. Mitchell v. Mass. Dep't of Corr. , 190 F.Supp.2d 204, 208 (D.Mass.2002).

C. Plaintiff's Motion to Stay and Compel Arbitration

The Federal Arbitration Act provides:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

9 U.S.C. § 3. Furthermore,

A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.

9 U.S.C. § 4. When deciding a motion to stay and compel arbitration, a court must determine whether, (i) there exists a written agreement to arbitrate, (ii) the dispute falls within the scope of that arbitration agreement, and (iii) the party seeking an arbitral forum has not waived its right to arbitration. Combined Energies v. CCI, Inc. , 514 F.3d 168, 171 (1st Cir.2008). Whether a claim falls within the reach of a particular arbitration clause is a question for the district court to determine initially as a matter of law. Id. ; seeAcevedo Maldonado v. PPG Indus., Inc. , 514 F.2d 614, 616 (1st Cir.1975). Federal policy favors arbitration. See Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth Inc. , 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) ("The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.").

Facts

Plaintiff is a Massachusetts corporation with a principal place of business in Worcester, Mass. Pl. Compl. ¶ 2. Defendant Optimum Building Systems and Management, Inc. ("Optimum") is a New Hampshire corporation with a principal place of business in New Hampshire. Id. ¶ 6. Optimum's principal office has been listed as 12 Colby Road, Litchfield, New Hampshire since its incorporation (as Optimum Building Systems) in 1990. Pl. Mot. to Stay & Comp. Arb. Ex. G. Defendant Palace Construction, Inc., ("PCI") was a New Hampshire corporation with a principal place of business in New Hampshire. Pl. Mot. to Stay & Comp. Arb. Ex. G. Defendant Colby Palace, LLC ("Palace/Colby") was a limited liability company organized under the laws of New Hampshire, originally named Palace Construction, LLC. See id. Ex. A, C. Three changes in these entities occurred March 31, 2010: Palace Construction, LLC changed its name to Colby Palace, LLC; PCI was incorporated; and the newly-named Colby Palace, LLC merged with PCI, with PCI surviving the merger. See id. Ex. A, C, D, E. On January 1, 2014, PCI merged with Optimum, with Optimum surviving the merger. Pl. Mot. to Stay & Comp. Arb. Ex. G. The principal office address for all three defendant entities has been listed as 12 Colby Road, Litchfield, New Hampshire since their respective formations. Rene Theroux was listed as the registered agent and as a founding member of Palace/Colby, as Secretary of PCI, and as incorporator, director, president, secretary, and treasurer of Optimum. Sylvain Theroux has been listed as a member of Palace/Colby, president and secretary of PCI, and vice president of Optimum.

On May 31, 2007, Cutler as design-builder entered into a contract with Mount Ida as owner for construction of a residential project commonly referred to as the New Hall. Pl. Compl. ¶ 8. On August 13, 2007, Cutler entered into a subcontract, which included indemnification and arbitration provisions, with Palace/Colby as subcontractor, pursuant to which Palace/Colby would perform the exterior sheathing or stucco work required of Cutler under its design-builder contract. Pl. Mot. to Stay & Comp. Arb. Ex. K. On July 10, 2008, following completion of construction, the City of Newton issued a Certificate of Occupancy for the New Hall. Def. Motion to Dismiss Ex. C ¶ 3. On April 24, 2014, Mount Ida notified Cutler of a claim regarding alleged defects in the New Hall's exterior sheathing and subsequent water damage. Id. ¶ 11. Mount Ida's notification also included a line stating that Mount Ida was seeking damages "in an amount not less than $640,000.00." Id. At some point in 2014, Cutler approached Optimum to ask that Cutler and Optimum enter into a tolling agreement to discuss Mount Ida's claims. Id. ¶ 10. Optimum chose not to enter into the agreement following its own investigation and after receiving reports from the manufacturer of the sheathing material used, who had also inspected the New Hall premises involved in the claim. Id. Cutler provided Optimum with a copy of Mount...