United States ex rel. Mgmt. & Constr. Servs., LLC v. Sayers Constr., LLC

UNITED STATES OF AMERICA,for the use of MANAGEMENT AND CONSTRUCTION SERVICES, LLC, et al., Plaintiffs, v. SAYERS CONSTRUCTION, LLC, et al., Defendants.

Civil Action No. ELH-20-1232

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

April 15, 2021

MEMORANDUM OPINION

This Memorandum Opinion resolves a motion to dismiss one of sixteen claims in a dispute between a contractor and a subcontractor. Plaintiff, the United States of America, for the use of Management and Construction Services, LLC ("MCS"), has filed suit alleging that MCS, the subcontractor, performed work for Sayers Construction, LLC ("Sayers Construction," "Sayers," or "SC"), a contractor, for which MCS was not paid in full.¹ The work was performed across seven projects, pursuant to a contract with the United States Navy.

The Second Amended Complaint (ECF 57) is the operative complaint. It is supported by several exhibits. As discussed, infra, the Second Amended Complaint names multiple defendants.

The case arises, in part, under the Miller Act, 40 U.S.C. § 3131, et seq., which concerns federal contractors. The Miller Act creates a cause of action to recover on a payment bond issued pursuant to a qualifying contract. Id. § 3133(b). Such an action must be filed "in the name of theUnited States for the use of the person bringing the action." Id. § 3133(b)(3)(A). MCS seeks to recover on the payment bonds issued by the sureties of Sayers Construction, pursuant to the Miller Act. Plaintiff also asserts various claims founded on Maryland law.

This Memorandum Opinion does not address the claims asserted under the Miller Act. Nor does it address most of the State law claims. Rather, only Count XIII is in issue. In that Count, plaintiff lodges a claim for breach of fiduciary duty against Mark Sayers ("Mr. Sayers"), the "officer, director, or agent in control of Sayers Construction." ECF 57 at 2.

Mr. Sayers has moved to dismiss Count XIII, pursuant to Fed. R. Civ. P. 12(b)(6). ECF 58 (the "Motion"). MCS filed an opposition (ECF 64), supported by exhibits. Mr. Sayers replied. ECF 69. Where appropriate, I shall refer to Sayers Construction and Mr. Sayers collectively as the "Sayers Defendants."

No hearing is necessary to resolve the Motion. See Local Rule 105(6). For the reasons that follow, I shall grant the Motion.

I. Background²

A.

MCS is a Maryland limited liability company ("LLC") and contractor for construction services. ECF 57, ¶¶ 1, 10. It primarily serves governmental entities in Maryland and Washington, D.C. Id. ¶ 10. Sayers is a Texas LLC that "holds itself out as an electrical construction and engineering company." Id. ¶ 11; see id. ¶ 2.

MCS filed suit against the Sayers Defendants in the Circuit Court for Anne Arundel County. ECF 2. The suit asserted various claims founded on Maryland law. See id. Two claims were lodged against Mr. Sayers individually: Count IV, which alleged a violation of the Maryland Construction Trust Fund Statute, Md. Code. (2015 Repl. Vol., 2020 Supp.), §§ 9-201, et seq., of the Real Property Article ("R.P."); and Count VI, which alleged a breach of fiduciary duty. ECF 2 at 6-7, 9-10.

The Sayers Defendants timely removed the suit to this Court, pursuant to 28 U.S.C. §§ 1332, 1441, 1446. ECF 1. Shortly thereafter, MCS filed a one-sentence submission, voluntarily dismissing the claim brought under the Maryland Construction Trust Fund Statute. ECF 12.

MCS subsequently obtained leave to amend the suit (ECF 21) and filed a First Amended Complaint. ECF 22. The First Amended Complaint added two defendants to the case: Nationwide Mutual Insurance Company ("Nationwide") and Philadelphia Indemnity Insurance Company ("Philadelphia Indemnity") (collectively, the "Surety Defendants"). Id. Plaintiff alleged that the Surety Defendants issued payment bonds as to certain projects, and it asserted claims against the Surety Defendants under the Miller Act, 40 U.S.C. § 3131, et seq. Id. at 5, 7-9, 15-19.

The First Amended Complaint also included a claim against Mr. Sayers for breach of fiduciary duty. See ECF 22 at 21 (Count XI). Mr. Sayers moved to dismiss that claim. ECF 33. MCS then sought leave to amend, with defendants' consent. ECF 55 at 5. By Order of October 16, 2020 (ECF 56), I granted leave to amend and denied ECF 33 as moot, because it was directed to the First Amended Complaint, which was superseded. The denial as to ECF 33 was without prejudice to the right of Mr. Sayers to seek dismissal of the Second Amended Complaint. Id.

The Second Amended Complaint contains sixteen counts and is supported by nine exhibits, discussed, infra. Counts I through VII, as well as Count XVI, assert breach of contract againstSayers Construction. ECF 57 at 15-25, 38. Counts XII, XIV, and XV lodge other claims arising under State law against Sayers. Id. at 33, 36-37. Counts VIII through XI are directed to the Surety Defendants, and lodge claims under the Miller Act, 40 U.S.C. § 3131. Id. at 27-32. And, in Count XIII plaintiff asserts a claim against Mr. Sayers for breach of fiduciary duty. Id. at 34.

The Motion followed. The facts recounted below are those generally pertinent to the Motion.³

On January 31, 2018, MCS and Sayers Construction "entered into a general teaming agreement for the purpose of performing construction projects." Id. ¶ 12; see ECF 57-1 ("Teaming Agreement" or "Agreement"). Mr. Sayers, the President of Sayers Construction, signed the Agreement on the behalf of Sayers. ECF 57-1 at 2, 9.

According to the Teaming Agreement, "SC is an SBA Section 8(a)certified [sic] company, eligible for set-aside contracts in those categories, and MCS is a consultant business, each of whose performance capabilities render each Party a valuable resource to each other." Id. at 2.⁴ Inaddition, the Teaming Agreement provides: "(a) SC will act as the prime contractor and MCS will act as a consultant and/or prime subcontractor with respect to set-aside contracts for which SC is eligible ("Set-Aside Contracts"), and (b) MCS will act as the prime contractor and SC will act as a subcontractor with respect to other business opportunities as deemed fit for both parties." Id.

Paragraph 8 of the Agreement is titled "Payments/Compensation/Fee Reimbursement." It states, in relevant part: "SC will be entitled to 50% of the G&A and Profit and MCS will be entitled to 50% of the G&A and Profit. Unless stated differently in each proposal submission and agreed upon." Id. at 5, ¶ 8.⁵ "Exhibit A" to the Teaming Agreement, which is titled "Statement of Work," similarly states that for "Procurements resulting in Set-Aside Contracts," Sayers Construction and MCS would each receive fifty percent "of the G&A and Profit." ECF 57-1 at 12.

MCS and Sayers Construction "operated under the Teaming Agreement with little to no issues" for more than a year. ECF 57, ¶ 16. "MCS would perform its scope of work, and Sayers Construction would pay MCS as agreed." Id.

Thereafter, the two companies entered into seven additional agreements ("Subject Agreements") pertaining to construction projects for the Navy ("Subject Projects"). Id. ¶¶ 17, 18.⁶ Detailed allegations are included in the suit as to the Subject Projects, but not all of the allegations are relevant to the Motion. See ECF 57 at 5-14. Although the Second Amended Complaint does not explicitly specify that MCS was to act as the subcontractor for the Subject Projects, that fact is reasonably inferable from the pleading as a whole. See, e.g., id. ¶¶ 13, 16, 55, 68, 71, 82.

According to MCS, it performed work for all of the Subject Projects. Id. ¶ 19; see also, e.g., id. ¶¶ 22, 31, 52, 66, 76, 83. Sayers Construction received payment for all of the Subject Projects; the payment represented, in part, the value of the work performed by MCS. Id. ¶¶ 23, 33, 39, 48, 62, 75, 86; see also id. ¶ 205. Plaintiff asserts that Sayers Construction "had a duty to remit payment to MCS for payments received by Sayers Construction for MCS's work." Id. ¶ 204. But, according to MCS, Sayers Construction has, in bad faith, withheld payment owed to MCS for the Subject Projects. Id. ¶¶ 24, 34, 40, 49, 63, 77, 88.

In Count XIII, MCS asserts that Mr. Sayers knowingly attempted to retain for himself the funds owed to MCS. See id. ¶¶ 211-12. The suit alleges, id. ¶¶ 206-09:

206. Pursuant to the Subject Agreements . . . the funds received by Sayers Construction for MCS's work were to be held by Mark Sayers, in trust for the benefit of MCS.

207. Amounts owed to MCS for MCS's work on the Subject Projects were in fact received and held by Mark Sayers personally, and in his individual capacity.

208. Mark Sayers, as the director, manager, or officer of Sayers Construction was the sole person who directed what happened to the funds owed to MCS.

209. Mark Sayers at all times relevant, acted as the managing agent of the amounts owed to MCS for MCS's work on the Subject Projects and was in direct control of the funds received by Sayers Construction for MCS's work on the Subject Projects, and he was and is trustee of those funds.

II. Rule 12(b)(6)

A defendant may test the legal sufficiency of a complaint by way of a motion to dismiss under Rule 12(b)(6). Paradise Wire & Cable Defined Benefit Pension Plan v. Weil, 918 F.3d 312, 317 (4th Cir. 2019); In re Birmingham, 846 F.3d 88, 92 (4th Cir. 2017); Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 165-66 (4th Cir. 2016); McBurney v. Cuccinelli, 616 F.3d 393, 408 (4th Cir. 2010), aff'd sub nom., McBurney v. Young, 569 U.S. 221 (2013). A Rule 12(b)(6) motionconstitutes an assertion by a defendant that, even if the facts alleged by a plaintiff are true, the complaint fails as a matter of law "to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6).

Whether a complaint states a claim for relief is assessed by reference to the pleading requirements of Fed. R. Civ. P. 8(a)(2). That rule provides that a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to...