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Quality Builders Warranty Corporation v. Eastwood Construction Co.

December 28, 2011

QUALITY BUILDERS WARRANTY CORPORATION, PLAINTIFF
v.
EASTWOOD CONSTRUCTION CO., INC. AND EASTWOOD HOMES, INC., DEFENDANTS



The opinion of the court was delivered by: William W. Caldwell United States District Judge

MEMORANDUM

I. Introduction

This is a breach-of-contract action brought by plaintiff, Quality Builders Warranty Corporation (QBW), against defendants, Eastwood Construction Co., Inc., and Eastwood Homes, Inc. Plaintiff filed it in state court, and it was removed here on the basis of our diversity jurisdiction.

Defendants are in the business of building new homes. Plaintiff provides warranty service for new-home builders, and it made separate agreements with each defendant to provide warranty service on their new homes. QBW alleges that Defendants breached the agreements by attempting to terminate them.

We are considering Defendants' motion for judgment on the pleadings, which argues that they terminated the agreements in accordance with their terms and hence Plaintiff has no claim for breach of contract. Under Fed. R. Civ. P. 12(c), "[a]fter the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings." To be successful on a Rule 12(c) motion, the moving party must establish that "'no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law.'" Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008)(quoted case omitted). "'[W]e must view the facts presented in the pleadings and the inferences to be drawn therefrom in the light most favorable to the nonmoving party.'" Id. (quoted case omitted)(brackets added). In deciding the motion, we may also consider documents attached to the complaint. See Huertas v. Galaxy Asset Mgmt., 641 F.3d 28, 32-33 (3d Cir. 2011).

With this standard in mind, we set forth the allegations in the pleadings in the light most favorable to Plaintiff.

II. Background

A. Count I: Breach-of-Contract Claim Against Eastwood Construction Plaintiff QBW is a "Pennsylvania corporation engaged in the Ten-Year New Home Warranty business." (Doc. 1, Compl. ¶ 1). Defendant Eastwood Construction is North Carolina corporation engaged in the construction of new homes. (Id. ¶ 3).

Effective July 1, 1997, Plaintiff and Eastwood Construction entered into a Builder Agreement pursuant to which Eastwood Construction became a member of Plaintiff's new-home warranty program. (Id. ¶¶ 5-6 and Ex. 1, the Agreement). Under the Agreement, Eastwood Construction had to enroll in the warranty program all of the new homes that it built while the agreement was in effect. (Compl., Ex. 1, the Agreement, § B, ¶ 1, CM/ECF p. 14). The Agreement had no fixed term. It "continue[d] until terminated by either party in accordance with the terms of this agreement." (Doc. 1, Compl., § A, ¶ 6, CM/ECF p. 14). Eastwood Construction could terminate the Agreement "upon 30 days advance written notice to QBW." (Id., § B, ¶ 6, last unmarked paragraph, CM/ECF p. 15).

Eastwood Construction paid a warranty rate of $1.65 per $1,000 of the sale price of each new home. (Doc. 1, Compl. ¶ 8). In May 2003, Defendant contacted QBW in an attempt to reduce the rate. The parties agreed that the rate would be reduced to $1.15 in return for Defendant's "commitment to maintain its membership in the QBW program." (Id.). Accordingly, on May 15, 2003, the parties executed an Amendment to the Agreement. In pertinent part, the Amendment modified the Agreement as follows:

1. Builder [Eastwood Construction] shall maintain its membership in QBW's Limited Warranty Program for an additional period of three (3) years to commence upon the below date [May 15, 2003] and submit for enrollment homes which Builder or any affiliate constructs during that time. Builder may not terminate his participation in the QBW Program within that period unless consented to by QBW in writing.

2. Builder's rate will be lowered to $1.15 per thousand. The rate will remain in effect for the period of this Amendment. The Amendment will renew for a like term, unless thirty (30) days prior to the expiration of this term or any extensions either party provides the other thirty (30) days advance written notice that they intend not to extend the period entitling the Builder to a lower rate. If Builder provides notice, QBW will adjust the Builder's rate upward effective at the end of the then current term. . . . .

4. If the terms contained in this Amendment are inconsistent with the Builder Agreement, the terms of this Amendment shall govern. (Doc. 1, Compl., Ex. 2, "Amendment to Builder Agreement," CM/ECF p. 18).

On or about November 1, 2010, Eastwood Construction sent QBW a letter, stating that Eastwood Construction was terminating the Agreement as of December 31, 2010. (Id., Ex. 3, CM/ECF p. 19). Plaintiff alleges the termination violated the Agreement because under the Amendment the Agreement renews for three-year periods unless ...


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