United States ex rel. Five Star Elec. Corp. v. Liberty Mut. Ins. Co.

UNITED STATES OF AMERICA for the use and benefit of FIVE STAR ELECTRIC CORP., Plaintiff, v. LIBERTY MUTUAL INSURANCE CO. and CAULDWELL-WINGATE CO., LLC, Defendants.

15-CV-4961 (LTS) (JLC)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

May 19, 2020

OPINION AND ORDER

JAMES L. COTT, United States Magistrate Judge.

In this contract dispute involving a federal construction project, Plaintiff Five Star Electric Corporation moves for leave to serve a second amended complaint. Its proposed pleading increases the amount of damages sought for its breach of contract and payment bond claims and asserts additional claims for further unpaid work and for breach of implied covenant of good faith and fair dealing. Defendants Cauldwell-Wingate Company LLC and Liberty Mutual Insurance Company oppose the motion. For the reasons stated below, Five Star's motion is denied.¹

I. BACKGROUND

The factual background and procedural history in this case are set out more fully in the November 1, 2016, August 28, 2017, and April 19, 2018 decisions from Judge Swain and the December 18, 2018 summary order issued by the United States Court of Appeals for the Second Circuit, and familiarity with those decisions is assumed. See United States for Use & Benefit of Five Star Elec. Corp. v. Liberty Mut. Ins. Co., No. 15-CV-4961 (LTS), 2016 WL 6464481 (S.D.N.Y. Nov. 1, 2016); 2017 WL 3724096 (Aug. 28, 2017); and 2018 WL 10456415 (Apr. 19, 2018); United States for Use & Benefit of Five Star Elec. Corp. v. Liberty Mut. Ins. Co., 758 F. App'x 97 (2d Cir. 2018).

In short, Defendant Cauldwell-Wingate Co., LLC ("Cauldwell") as general contractor subcontracted with Plaintiff Five Star Electric Corp. ("Five Star") in 2009 for a construction project at the Thurgood Marshall United States Courthouse in Manhattan. Proposed Second Amended Complaint ("SAC"), Dkt. No. 112-A, ¶¶ 1, 7-8. In connection with this project, Defendant Liberty Mutual Insurance Company ("Liberty") issued a payment bond to the General Services Administration ("GSA") on behalf of Cauldwell. Id. ¶ 81. Five Star alleges that, at Cauldwell's request, it performed work outside of the subcontract for which it has not been compensated by Cauldwell. Id. ¶¶ 9-19. Pursuant to the SAC, Five Star now seeks to include work associated with a change order for which Five Star was unable to bill Cauldwell in the full amount, in addition to work performed outside of that change order. Id. ¶¶ 16-33. Five Star also includes allegations in the SAC that Cauldwell "refused" tonegotiate an agreement in good faith that would have entitled Five Star to recover balances owed to it by GSA. Id. ¶¶ 70-79.

On June 26, 2015, Five Star filed its original complaint alleging claims against Cauldwell and Liberty based on the Miller Act, breach of contract, and quantum meruit. Dkt. No. 8. Defendants originally moved to dismiss on October 23, 2015, Dkt. Nos. 28-30, and renewed their motion on November 30, 2015, Dkt. Nos. 40-42. On November 1, 2016, Judge Swain concluded that Five Star's allegations that Cauldwell owed it an additional $20 million were "premised on no facts whatsoever," and granted the motion, but permitted Five Star to move for leave to amend its complaint. Five Star, 2016 WL 6464481, at *2.

On January 1, 2017, Five Star moved for leave to file an amended complaint, alleging that $677,158.05 remained due from Cauldwell for breach of contract, and further seeking to recover $22,136,009.00 for costs incurred as a result of Cauldwell's alleged delays and inefficiencies. Proposed Amended Complaint dated November 30, 2016, Dkt No. 63-B ¶¶ 35, 42. The court denied Five Star's motion for leave to amend as futile on August 28, 2017. Five Star, 2016 WL 6464481, at *2. In particular, the court concluded that Five Star had failed to plead facts sufficient to raise a plausible inference as to the breach of contract claim. Id. at 5-6. The court also reasoned that Five Star was foreclosed from collecting any monetary damages as a result of delays by the terms and conditions of the subcontract, which excused Cauldwell from financial liability for delays it caused in connection with Five Star's work, with the sole remedy being time extension. Id. at 6. Five Starmoved for reconsideration, but its motion was denied on April 19, 2018. Dkt. Nos. 70-71, 75. Five Star then appealed the August 28, 2017 and April 19, 2018 orders to the Court of Appeals. Dkt. No. 76.

On December 18, 2018, the Second Circuit vacated the district court's holding that Five Star failed to plausibly allege a breach of contract claim for underpayment in the amount of $677,158.05, affirmed the denial of leave to amend as to all other claims, and remanded for further proceedings. Five Star, 758 F. App'x at 100. Notably, the Second Circuit held that Five Star plausibly alleged a claim for $677,158.05 because it submitted change orders "agreed to by [Cauldwell] and performed by Five Star" that had not been paid. Id. at 99. In affirming the dismissal of Five Star's additional work claim, the Second Circuit agreed with Judge Swain's analysis of the no-damages-for-delay clause and further reasoned that Five Star submitted only proposed change orders, but failed to allege "that [Cauldwell] ever approved or accepted these proposed change orders." Id. at 100. Therefore, the Second Circuit concluded that Five Star had "not identified a meeting of the minds on what or how it was to be paid for work beyond that originally contemplated by the subcontract and the change orders," and was deficient in its explanation of the "contractual basis for the alleged shortage . . . ." Id.

In light of the Second Circuit's mandate, Judge Swain granted Five Star leave to file an amended complaint asserting a breach of contract claim for the underpayment of $677,158.05 and referred this case to me for general pre-trialsupervision. Order dated March 15, 2019, Dkt. No. 80. Five Star filed an amended complaint on April 23, 2019 to that end, which Defendants answered on June 3, 2019. Dkt. Nos. 94-98. On September 13, 2019, following an unsuccessful settlement conference, Five Star moved for leave to serve a second amended complaint. Dkt. Nos. 111-13. In addition to increased damages amounts for its claims of breach of contract and payment bond, the SAC includes additional claims for unpaid extra work and for breach of implied covenant of good faith and fair dealing. SAC ¶¶ 20-86. Defendants filed their opposition papers on December 16, 2019. Defendants' Memorandum of Law in Opposition to Plaintiff's Motion for Leave to Serve a "Second Amended Complaint" ("Def. Mem.") dated December 16, 2019, Dkt. No. 117. Five Star filed its reply on January 6, 2020. Plaintiff's Reply Memorandum of Law in Further Support of Motion for Leave to Serve Second Amended Complaint ("Pl. Reply") dated January 1, 2020, Dkt. No, 118.

II. DISCUSSION

A. Legal Standards

Under Rule 15(a)(2) of the Federal Rules of Civil Procedure, the Court should freely grant leave to amend "when justice so requires." Fed. R. Civ. P. 15(a)(2). Notwithstanding this standard, it is within a court's discretion to "deny leave [to amend] for good reason, including futility, bad faith, undue delay, or undue prejudice to the opposing party." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007) (citing Foman v. Davis, 317 U.S. 178, 182 (1962)). An amendment is deemed futile if the allegations in the complaint would not survive amotion to dismiss, Hayes v. L3 Commc'ns Holdings, Inc., No. 07-CV-1853 (PKC), 2007 WL 4103824, at *1 (S.D.N.Y. Nov. 9, 2007) (citing Oneida Indian Nation v. City of Sherrill, 337 F.3d 139, 168 (2d Cir. 2003)), or if the plaintiff "seeks a remedy which [the] Court has no authority to grant," such as a claim that is "barred by either res judicata, judicial immunity, statute of limitations, [or] the law-of-the-case doctrine[.]" Gleis v. Buehler, No. 3:11-CV-663 (VLB), 2012 WL 1194987, at *8 (D. Conn. Apr. 10, 2012). "The party opposing a motion to amend bears the burden of establishing that an amendment would be futile." Ballard v. Parkstone Energy, LLC, No. 06-CV-13099 (RWS), 2008 WL 4298572, at *3 (S.D.N.Y. Sept. 19, 2008).

When considering a motion to dismiss, a court must accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of a plaintiff. Littlejohn v. City of N.Y., 795 F.3d 297, 306 (2d Cir. 2015) (citing Ofori-Tenkorang v. Am. Int'l Grp., Inc., 460 F.3d 296, 300 (2d Cir. 2006)). To survive a Rule 12(b)(6) motion, a plaintiff must plead facts in his complaint that "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 there exists "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). "A complaint need not include 'detailed factual allegations,' but it must contain more than mere 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action.'" JCG v. Ercole, No. 11-CV-6844 (CM) (JLC), 2014 WL 1630815, at *5 (S.D.N.Y. Apr. 24, 2014) (quotingIqbal, 556 U.S. at 678) (internal quotations omitted), adopted by 2014 WL 2769120 (June 18, 2014). A complaint containing only "conclusory allegations or legal conclusions masquerading as factual conclusions" will not survive a motion to dismiss. Womack v. Capital Stack, LLC, No. 18-CV-4192 (ALC), 2019 WL 4142740, at *3 (S.D.N.Y. Aug. 30, 2019) (quoting Faber v. Metro. Life Ins. Co., 648 F.3d 98, 104 (2d Cir. 2011)).

In the context of a Rule 12(b)(6) motion, a court "may permissibly consider documents other than the complaint . . . [including d]ocuments that are attached to the complaint or incorporated in it by reference," or those which are "integral" to the pleadings. Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007); Cortec...