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Sewer v. Travelers Casualty & Surety Co. of America

United States District Court, M.D. Pennsylvania

November 3, 2014

MILTON REGIONAL SEWER, AUTHORITY, Plaintiff,
v.
TRAVELERS CASUALTY & SURETY CO. OF AMERICA, Defendant.

MEMORANDUM OPINION

MATTHEW W. BRANN, District Judge.

I. BACKGROUND:

The question before the Court is whether one party to a contract (in this case the drafter) may ignore the bargained for terms of the contract and terminate the contract without complying with the terms prior to termination? The answer, based on the alleged facts in this case, is no.

On October 17, 2013, Plaintiff, the Milton Regional Sewer Authority (hereinafter "MRSA"), filed a complaint in the Court of Common Pleas of Northumberland County against Travelers Casualty & Surety Co. of America (hereinafter "Travelers"). Travelers promptly removed the complaint to the United States District Court for the Middle District of Pennsylvania, predicated on diversity jurisdiction.

On November 20, 2013 Travelers filed a Motion to Dismiss the Complaint pursuant to Fed.R.Civ.P. 12(b)(6). ECF No. 3. The undersigned granted that motion in part, and denied that motion in part, holding that MRSA did not comply with the conditions precedent set forth in the contract and bond in order to terminate the contractor in compliance with the contract and bond. The Court ordered Plaintiff to file an amended complaint that set forth facts to substantiate its' claim that the contractor was in material breach of the contract with MRSA. Under Pennsylvania law, only a material breach by the contractor is sufficient to excuse MRSA from complying with the conditions precedent in the contract for terminating the contractor. Here, the condition precedent was a standard provision allowing for an opportunity to cure. MRSA's original complaint only vaguely alleged "numerous deficiencies" in the contract as its basis for alleging a material breach.

MRSA filed its amended complaint on July 2, 2014. ECF No. 13. In this new pleading, MRSA enumerated the reasons the contractor was "deficient, " such that MRSA deemed the "multitude of errors" delineated to be a material breach. ECF No. 13 at ¶¶ 12, 14, and 28. On July 16, 2014, Travelers filed a Motion to Dismiss the amended complaint. ECF No. 16.

The matter has been fully briefed by the parties. Additionally, the Court had the benefit of oral argument on the motion heard on October 20, 2014. The matter is now ripe for disposition. The Court will grant the motion and dismiss the action in its entirety.

II. DISCUSSION:

A. MOTION TO DISMISS STANDARD

When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court must view all allegations stated in the complaint as true and construe all inferences in the light most favorable to plaintiff. Hishon v. King & Spaulding , 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Kost v. Kozakiewicz , 1 F.3d 176, 183 (3d Cir. 1993). However, "the tenet that a court must accept as true all of the [factual] allegations contained in the complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal citations omitted). In ruling on such a motion, the court primarily considers the allegations of the pleading, but is not required to consider legal conclusions alleged in the complaint. Kost , 1 F.3d at 183. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal , 556 U.S. at 678. At the motion to dismiss stage, the court considers whether plaintiff is entitled to offer evidence to support the allegations in the complaint. Maio v. Aetna, Inc. , 221 F.3d 472, 482 (3d Cir. 2000).

A complaint should only be dismissed if, accepting as true all of the allegations in the amended complaint, plaintiff has not pled enough facts to state a claim to relief that is plausible on its face. Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "Determining whether a complaint states a plausible claim for relief will... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal , 556 U.S. at 663-664.

"In considering a Rule 12(b)(6) motion, we must be mindful that federal courts require notice pleading, as opposed to the heightened standard of fact pleading." Hellmann v. Kercher , 2008 U.S. Dist. LEXIS 54882, *4, 2008 WL 1969311 (W.D. Pa. May 5, 2008) (Lancaster, J.). Federal Rule of Civil Procedure 8 "requires only a short and plain statement of the claim showing that the pleader is entitled to relief, ' in order to give the defendant fair notice of what the...claim is and the grounds on which it rests, '" Bell Atlantic Corp. v. Twombly , 127 S.Ct. at 1964 (citing Conley v. Gibson , 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). However, even under this lower notice pleading standard, a plaintiff must do more than recite the elements of a cause of action, and then make a blanket assertion of an entitlement to relief under it. Hellmann, supra . Instead, a plaintiff must make a factual showing of his entitlement to relief by alleging sufficient facts that, when taken as true, suggest the required elements of a particular legal theory. Twombly , 127 S.Ct. at 1965. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not "shown" - "that the pleader is entitled to relief." Iqbal , supra , citing Fed.R.Civ.P. 8(a).

The failure-to-state-a-claim standard of Rule 12(b)(6) "streamlines litigation by dispensing with needless discovery and factfinding." Neitzke v. Williams , 490 U.S. 319, 326-27, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). A court may dismiss a claim under Rule 12(b)(6) where there is a "dispositive issue of law." Id . at 326. If it is beyond a doubt that the non-moving party can prove no set of facts in support of its allegations, then a claim must be dismissed "without regard to whether it is based on an outlandish legal theory or on a close but ultimately unavailing one." Id. at 327

B. FACTS ALLEGED IN THE COMPLAINT

The MRSA is a municipal authority situated in Milton, Northumberland County, Pennsylvania. Travelers is, inter alia , a surety company based in Connecticut.

In the complaint, MRSA alleges that pursuant to a performance bond (hereinafter "the bond"), found at ECF No. 13 at Ex. D, Travelers is liable to MRSA for the failure of MRSA's contractor, Ankiewicz Enterprises, Inc., d/b/a/ Grandprix Excavation (hereinafter "Ankiewicz") to perform under a construction contract (hereinafter "the contract") between MRSA and Ankiewicz. ECF No. 13 at Ex. A.

Ankiewicz was the low bidder on a municipal construction project known as the Brown Avenue Pump Station Abandonment Project (hereinafter "the project" or "the construction project") to, inter alia , demolish an existing wastewater treatment pump station, abandon a force main, replace laterals, construct approximately 4, 900 feet of sewer pipe and rehabilitate approximately 820 feet of existing sewer pipe. ECF No. 13 at 4. Accordingly, MRSA and Ankiewicz entered into a construction contract on July 25, 2011. ECF No. 13 at Ex. A. The engineers for MRSA on the construction project were Herbert, Rowland & Grubic, Inc. (hereinafter "HRG").

After becoming increasingly dissatisfied with Ankiewicz's work, MRSA terminated the contract on March 15, 2012. ECF No. 13 at 7. The Court previously held, as a matter of law, that MRSA did not comply with the conditions precedent set forth in the contract to terminate Ankiewicz.[1] ECF Nos. 11 and 12.

According to the amended complaint, MRSA alleges that it was excused from the cure provision because Ankiewicz materially breached the contract in the following ways:

• "the work from one manhole to another, a significant part of the work performed by Ankiewicz, was defective as the piping failed to meet the required slopes and the inverts did not meet the required elevations" ECF No. 13 at ¶ 12.a.

• "failure to supply sufficient skilled workers" ECF No. 13 at ¶ 12.b.

• "failure to adhere to the progress schedule" ECF No. 13 at ¶12.c.

• "failure to comply with laws and regulations pertaining to the work." ...


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