Warnock Eng'g, LLC v. Utilities

WARNOCK ENGINEERING, LLC,and RUDOLPH M. WARNOCK, JR. PLAINTIFFS v. CANTON MUNICIPAL UTILITIES DEFENDANT

Civil No. 3:17cv160-HSO-JCG

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI NORTHERN DIVISION

December 21, 2018

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT CANTON MUNICIPAL UTILITIES' [206] MOTION FOR SUMMARY JUDGMENT, AND DENYING AS MOOT DEFENDANT CANTON MUNICIPAL UTILITIES' [126] MOTION TO DISMISS

BEFORE THE COURT are Defendant Canton Municipal Utilities' Motion [126] to Dismiss and its Motion [206] for Summary Judgment, which both seek dismissal of all claims advanced against it by Plaintiffs Warnock Engineering, LLC, and Rudolph M. Warnock, Jr. After due consideration of the Motions [126], [206], related pleadings, the record, and relevant legal authority, the Court finds that Defendant's Motion [206] for Summary Judgment should be granted in part and denied in part, and that Defendant's Motion [126] to Dismiss should be denied as moot. Plaintiffs' claims for copyright infringement, RICO violations, injunctive relief, negligence, open account, misappropriation, and breach of contract should be dismissed. Plaintiffs' claims for wrongful discharge and for retaliation in violation of the First Amendment under 42 U.S.C. § 1983 will proceed.¹

I. BACKGROUND

A. Factual background

According to the Third Amended Complaint [118], which is the operative pleading in this case, Plaintiff Warnock Engineering, LLC ("Warnock Engineering"), is an engineering firm owned by Plaintiff Rudolph M. Warnock, Jr. ("Mr. Warnock").² 3d Am. Compl. [118] at 4. Warnock Engineering and Mr. Warnock (collectively, "Plaintiffs" or "Warnock") began providing engineering services to Defendant Canton Municipal Utilities ("CMU") in January 2016 and worked on a number of projects for CMU. Id. CMU is a public utility commission within the City of Canton, Mississippi, and is managed by a five-member Board of Commissioners. See Pls.' Mem. [212] at 1.

Plaintiffs allege that Warnock Engineering entered into three written contracts with CMU: (1) an agreement for "General Engineering Services," effective January 4, 2016 (the "General Engineering Services Agreement"); (2) an agreement for "Sewer and Water System Improvements" entered into on November 8, 2016 (the "Sewer/Water Agreement"); and (3) an agreement for "Water & SewerSystem Facility Improvements" that was part of a "Five Point Plan" submitted by Warnock Engineering, and which became effective October 7, 2016 (the "Five Point Plan Agreement"). 3d Am. Compl. [118] at 4. Plaintiffs assert that the Board of Commissioners of CMU (the "CMU Board") terminated CMU's arrangements with all engineers other than Plaintiffs in August 2016, making Mr. Warnock the exclusive engineer for CMU. Id. at 5. The Third Amended Complaint claims that Cleveland Anderson ("Mr. Anderson") was appointed to the CMU Board on June 7, 2016, and was later removed in June 2017. Id. at 4-5. At some point before he was removed, Mr. Anderson became Chairman. Id. at 10.

Plaintiffs maintain that during a meeting with Mr. Warnock on September 18, 2016, Mr. Anderson offered to arrange the murder of a journalist in exchange for $10,000.00. Later, on September 25, 2016, Mr. Anderson allegedly offered to arrange the murder of the mayor of Madison, Mississippi, also for $10,000.00. Id. at 4-5. Plaintiffs allege that prior to Mr. Warnock proposing the Five Point Plan Agreement to the CMU Board, Mr. Anderson asked Mr. Warnock "if Anderson could get paid for his vote to approve the agreement," a request which Mr. Warnock refused. Mr. Anderson allegedly subsequently requested a $200,000.00 kickback for supporting the Five Point Plan Agreement in a meeting held on October 6, 2016. Id. at 6. Mr. Warnock again refused. Id. Plaintiffs assert that they did not adjust the price of the proposed $1,474,000.00 Five Point Plan Agreement, and that it was approved by unanimous vote of the CMU Board at its meeting held on October 7, 2016. Id. at 7.

In September 2016, the CMU Board unanimously voted to place Mr. Warnock on the CMU Personnel Committee. Id. Mr. Anderson also served on this committee. Id. According to Plaintiffs, Mr. Anderson was heavily involved in restructuring the CMU, including adding new departments and new positions, and "insisted that CMU hire his wife in a newly created General Counsel Department." Id. When outside counsel advised Mr. Anderson that hiring his wife at CMU would be illegal, he withdrew her name from consideration for possible employment. Id.

Mr. Warnock asserts that he expressed frustration to City of Canton officials over Mr. Anderson's attempts to solicit kickbacks and other improper benefits. Id. at 8. Mr. Anderson allegedly retaliated by influencing other CMU Commissioners and making motions to fire outside counsel and terminate Plaintiffs from all CMU engineering and personnel work. Id. at 9. As a result, Mr. Warnock was informed by letters dated December 29, 2016, and January 17, 2017, that the CMU Board had voted to terminate its contracts with Warnock Engineering. Id. at 10. Plaintiffs accuse Mr. Anderson, as Chairman of the CMU Board, of orchestrating the termination, id. at 10, because Mr. Warnock had "refused to provide bribes and kickbacks, and consent to the illegal and improper hiring of relatives and friends, demanded by [Mr.] Anderson," id. at 11.

According to the Third Amended Complaint, after terminating its contracts with Plaintiffs, Mr. Anderson and CMU continued to use and distribute Plaintiffs' work product, even though CMU had not paid invoices for work performed prior to,and contract fees resulting from, the termination. Id. Plaintiffs allege that CMU has no license or other right to use Warnock Engineering's copyrights, work product, or other intellectual property, unless and until all outstanding amounts are paid by CMU. Id. At the time CMU terminated the contracts, it purportedly owed Warnock Engineering $2,369,477.28 for services performed prior to the termination, exclusive of interest, costs, and attorneys' fees, and also owed Warnock Engineering fees in accordance with the termination provisions contained in the Agreements. Id. at 11.

B. Procedural history

Plaintiffs filed the original Complaint [1] in this case on March 9, 2017, and have amended their Complaint three times. The Third Amended Complaint [118] asserts claims against CMU for copyright infringement, vicarious and contributory infringement, wrongful discharge, breach of contract, open account, negligence, defamation, misappropriation of advertising/commercial materials, and violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(b), and the First Amendment under 42 U.S.C. § 1983. See 3d Am. Compl. [118] at 19-23, 24-26.³ The Third Amended Complaint [118] seeks a declaratory judgment that

(i) until full and final payment is made, Warnock and Warnock Engineering are entitled to the full protection and ownership of its workproduct under United States copyright law, 17 U.S.C. § 101 et seq., and (ii) to the extent Warnock and/or Warnock Engineering have licensed any such work product to CMU, such licenses have terminated and expired because of CMU's failure to comply with their payment terms.

Id. at 23.

CMU has filed a Motion [126] to Dismiss, asking the Court to dismiss all of Plaintiffs' claims pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). CMU's Mot. [126] at 1.⁴ Although Plaintiffs have opposed this Motion, see Pls.' Resp. [150] & Mem. [151], they have dismissed their defamation claim, see Notice [134] at 1.

CMU subsequently filed a Motion [206] for Summary Judgment pursuant to Federal Rule of Civil Procedure 56, again seeking dismissal of Plaintiffs' claims. CMU's Mot. [206] at 1-2. CMU states that it filed this Motion "with the understanding that the relief sought in its Motion to Dismiss the Third Amended Complaint is not waived," and it reserves the right to answer the Third Amended Complaint and raise any affirmative or other defenses once the Motion to Dismiss is resolved. Id. at 2.

Plaintiffs have filed a Response [211] and Memorandum [212] in opposition to the Motion [206] for Summary Judgment conceding some, but not all, claims. Plaintiffs maintain that the Motion [126] to Dismiss "is essentially mooted and superseded by CMU's Motion for Summary Judgment in that the parties have nowpresented materials outside of the pleadings for consideration." Pls.' Mem. [212] at 4 n.2.

II. DISCUSSION

A. CMU's request for hearing

CMU has requested that the Court conduct a hearing on its Motion [206] for Summary Judgment. See CMU's Mot. [206] at 1. The Court finds that a hearing would not be helpful in resolving CMU's Motion [206] and is not necessary. Pursuant to Local Uniform Civil Rule 7(b)(3), the Court will deny CMU's request for a hearing on its Motion [206] for Summary Judgment.

B. CMU's Motion [126] to Dismiss

CMU's Motion to Dismiss, filed pursuant to Federal Rule of Civil Procedure 12(b)(1), was premised upon Plaintiffs' purported lack of standing as to the copyright claims and was otherwise based upon Rule 12(b)(6) for failure to state a claim. Plaintiffs have since conceded the copyright and several other claims. As for the remaining claims, the Motions to Dismiss and for Summary Judgment argue substantially the same bases for dismissal. For this reason, CMU's Motion to Dismiss is moot in light of the Court's resolution of the Motion for Summary Judgment.

C. CMU's Motion [206] for Summary Judgment

1. Relevant legal standard

Under Federal Rule of Civil Procedure 56(a), a "court shall grant summary judgment if the movant shows that there is no genuine dispute as to any materialfact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is "material" if it is one that might affect the outcome of the suit under governing law, and a dispute is "genuine" if a jury could return a...