Thiele Kaolin Co. v. Envtl. Res. Mgmt.-Se.

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THIELE KAOLIN COMPANY, Plaintiff, v. ENVIRONMENTAL RESOURCES MANAGEMENT-SOUTHEAST, INC. d/b/a ERM SOUTHEAST, INC., Defendant.

Civil Action No. 5:22-cv-232 (MTT)

United States District Court, M.D. Georgia, Macon Division

April 27, 2023

ORDER

MARC T. TREADWELL, CHIEF JUDGE.

This case involves a commercial dispute between Plaintiff Thiele Kaolin Company (“Thiele”) and Defendant Environmental Resources Management -Southeast, Inc. (“ERM”). Doc. 1 ¶ 1. Thiele contends ERM failed to properly perform a site assessment and limited compliance review and thus breached the parties' Master Agreement for Environmental Consulting Services (the “Agreement”). Id. Thiele's complaint alleges ERM is liable under theories of contract and tort, in addition to being liable for attorney's fees under O.C.G.A. § 13-6-11. Id. ¶¶ 30-55. ERM moved to dismiss, and filed an answer in which it asserted a counterclaim against Thiele for breach of contract and attorney's fees. Docs. 13; 14. Thiele, in turn, moved to dismiss ERM's counterclaim. Doc. 23. For the reasons that follow, both ERM's motion to dismiss (Doc. 14) and Thiele's motion to dismiss ERM's counterclaim (Doc 23) are DENIED.

I. BACKGROUND

Thiele is a mining and mineral processing company, and “one of the world's leading sources for processed minerals,” specifically kaolin, which is “an essential ingredient in the making of paper, rubber, paint and many other products.” Doc. 1 ¶¶ 3, 7. To expand its operations, Thiele sought to acquire “43 active and inactive mining sites and other assets” in and around Sandersville, Georgia. Id. ¶¶ 10-11. “As part of its due diligence process and to ensure compliance” with applicable environmental laws, Thiele hired ERM to conduct a “Phase I Environmental Site Assessment” and a “Limited Environmental Compliance Review” of the Sandersville mineral facilities it sought to acquire. Id. ¶ 12. The parties entered into an Agreement on April 6, 2021, under which ERM was required to “(1) identify environmental risks that might materially affect the value of the Mineral Facilities; (2) identify any actual or potential noncompliance issues with state and federal environmental laws; and (3) provide estimates of methods and costs to correct actual or potential non-compliance issues.” Id. ¶¶ 13-14.

ERM conducted the Site Assessment and Limited Environmental Compliance Review from April 2021 to June 2021. Id. ¶ 19. On June 25, 2021, ERM submitted final reports to Thiele pursuant to the Agreement. Id. ¶ 20. Relying on those reports, Thiele purchased the Sandersville mineral facilities in July 2021. Id. ¶¶ 10, 21. However, after ERM's final reports were submitted, and presumably after Thiele closed on the mineral facilities in July 2021, Thiele “discovered several instances of actual or potential noncompliance with federal and state environmental laws and regulations at various mining sites,” which ERM had allegedly given a clean bill of health. Id. ¶ 22. For example, Thiele contends ERM failed to identify “multiple instances of stormwater discharges causing erosion and sediment accumulation beyond certain mine site boundaries ... a pit dewatering hose routed directly off-site into an unpermitted location,” and the fact “that a majority of the outfalls were not recognized by permit-required signage.” Id. ¶¶ 23-25. Consequently, Thiele was forced to incur “significant” remediation costs after it purchased the mineral facilities and was subsequently required to disclose those non-compliant conditions to the Environmental Protection Agency in April 2022. Id. ¶ 26.

In accordance with the terms of the Agreement, Thiele notified ERM on May 25, 2022, of its damages, which Thiele contends were caused by “ERM's breaches, negligent actions, errors, omissions, or willful misconduct.” Id. ¶ 28. After ERM failed to compensate or indemnify Thiele, Thiele filed this action on June 24, 2022. Id. ¶ 29. Specifically, Thiele alleges ERM is liable for (1) breach of contract, (2) professional negligence, (3) negligence, and (4) attorney's fees and litigation expenses. Id. ¶¶ 3055. ERM argues Thiele's claims must be dismissed because the Agreement's limitation of liability clause precludes all claims for damages, and even if Thiele could sue, Thiele's claimed damages do not satisfy the materiality provision of the Agreement. Doc. 20 at 21. ERM's answer, filed concurrently with its motion to dismiss and motion to stay discovery, also asserted a counterclaim for breach of contract, reasoning that because the Agreement's limitation of liability clause precludes suit, then Thiele's initiation of this action breached the Agreement. Docs. 13 at 15-16; 14; 17. Because, in Thiele's view, the Agreement does no such thing, Thiele moved to dismiss ERM's counterclaim. Doc. 23.

II. STANDARD^[1]

The Federal Rules of Civil Procedure require that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief[.]” Fed.R.Civ.P. 8(a)(2). To avoid dismissal pursuant to Rule12(b)(6), a complaint must contain sufficient factual matter 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 is facially plausible when “the court [can] draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “Factual allegations that are merely consistent with a defendant's liability fall short of being facially plausible.” Chaparro v. Carnival Corp., 693 F.3d 1333, 1337 (11th Cir. 2012) (internal quotation marks and citations omitted).

At the motion to dismiss stage, “all well-pleaded facts are accepted as true, and the reasonable inferences therefrom are construed in the light most favorable to the plaintiff.” FindWhat Inv. Grp. v. FindWhat.com., 658 F.3d 1282, 1296 (11th Cir. 2011) (internal quotation marks and citations omitted). But “conclusory allegations, unwarranted deductions of facts or legal conclusions masquerading as facts will not prevent dismissal.” Wiersum v. U.S. Bank, N.A., 785 F.3d 483, 485 (11th Cir. 2015) (cleaned up). The complaint must “give the defendant fair notice of what the ... claim is and the grounds upon which it rests[.]” Twombly, 550 U.S. at 555 (internal quotation marks and citation omitted). Where there are dispositive issues of law, a court may dismiss a claim regardless of the alleged facts. Patel v. Specialized Loan Servicing, LLC, 904 F.3d 1314, 1321 (11th Cir. 2018) (citations omitted).

III. DISCUSSION

Georgia contract law controls the Court's interpretation of the Agreement.^[2]“The cardinal rule of contractual construction is to ascertain the intent of the parties.” Knott v. Knott, 277 Ga. 380, 381, 589 S.E.2d 99, 101 (2003) (citing O.C.G.A. § 13-2-3). Under Georgia law, contract interpretation requires three steps:

First, the trial court must decide whether the language is clear and unambiguous. If it is, the court simply enforces the contract according to its clear terms; the contract alone is looked to for its meaning. Next, if the contract is ambiguous in some respect, the court must apply the rules of contract construction to resolve the ambiguity. Finally, if the ambiguity remains after applying the rules of construction, the issue of what the ambiguous language means and what the parties intended must be resolved by a jury.

City of Baldwin v. Woodard & Curran, Inc., 293 Ga. 19, 30, 743 S.E.2d 381, 389 (2013).

“Ambiguity exists where the words used in the contract leave the intent of the parties in question-i.e., that intent is uncertain, unclear, or is ‘open to various interpretations.'” Capital Color Printing, Inc. v. Ahern, 291 Ga.App. 101, 106, 661 S.E.2d 578, 583 (2008) (quoting Investment Properties Co. v. Watson, 278 Ga.App. 81, 83, 628 S.E.2d 155, 159 (2006)). “Conversely, no ambiguity exists where, examining the contract as a whole and affording the words used therein their plain and ordinary meaning, the contract is ‘capable of only one reasonable interpretation.'” Id. (quoting Quality Foods v. Smithberg, 288 Ga.App. 47, 51, 653 S.E.2d 486, 490 (2007)).

“Extrinsic evidence to explain ambiguity in a contract becomes admissible only when a contract remains ambiguous after the pertinent rules of construction have been applied.” Claussen v. Aetna Cas. & Sur. Co., 259 Ga. 333 334, 380 S.E.2d 686, 687 (1989). Two statutorily mandated rules of contract construction have particular relevance here. First, “[t]he construction which will uphold a contract in whole and in every part is to be preferred, and the whole contract should be looked to in arriving at the construction of any part.” O.C.G.A. § 13-2-2(4); see also Cajun Contractors, Inc. v. Peachtree Prop. Sub, LLC, 360 Ga.App. 390, 415, 861 S.E.2d 222, 245 (2021) (“[I]t is axiomatic that contracts must be construed in their entirety and in a manner that permits all of the terms contained therein to be consistent with one another.”); VATACS Group, Inc. v. HomeSide Lending, Inc., 276 Ga.App. 386, 389, 623 S.E.2d 534, 538 (2005) (“[A] contract must be interpreted to give the greatest effect possible to all provisions rather than to leave any part of the contract unreasonable or having no effect.”). Second, “[i]f the construction is doubtful, that which goes most strongly against the party executing the instrument or undertaking the obligation is generally to be preferred. O.C.G.A. § 13-2-2(5); see also Dep't of Cmty. Health v. Pruitt Corp., 295 Ga.App. 629, 632, 673 S.E.2d 36, 39 (2009) (“Another rule of construction requires us to construe ambiguous contract provisions against the drafter.”). The Court notes, and the parties appear to agree, that the pleadings do not reveal who drafted the relevant provisions of the...