Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Custom Mechanical Systems Corp.

United States District Court, S.D. Indiana, Indianapolis Division

May 5, 2017

UNITED STATES OF AMERICA for the use and benefit of SUSTAINABLE MODULAR MANAGEMENT, INC., Plaintiff,
v.
CUSTOM MECHANICAL SYSTEMS, CORP. also known as CMS CORPORATION, LEXON INSURANCE COMPANY, Defendants. CUSTOM MECHANICAL SYSTEMS, CORP., Counter Claimant,
v.
SUSTAINABLE MODULAR MANAGEMENT, INC., Counter Defendants. CUSTOM MECHANICAL SYSTEMS, CORP., Third Party Plaintiff,
v.
GREAT AMERICAN INSURANCE COMPANY, Third Party Defendants.

          ORDER ON DEFENDANTS' MOTION TO DISMISS

          Hon. Jane Magnus-Stinson, Chief Judge

         Defendant Custom Mechanical Systems, Corp., also known as CMS Corporation (“CMS”), entered into a contract with the United States Government in 2014 regarding a construction project at a Marine Corps Base in Hawaii. CMS subsequently entered into two subcontracts with Plaintiff Sustainable Modular Management, Inc. (“SMM”), related to the construction project. SMM has sued CMS and its surety, Defendant Lexon Insurance Company (“Lexon”), alleging breach of contract and quantum meruit claims against CMS and a payment bond claim against Lexon. [Filing No. 14 at 4-5.] CMS and Lexon (collectively, “Defendants”) move to dismiss all of SMM's claims and its request for attorney's fees, [Filing No. 23], and SMM opposes that request, [Filing No. 41]. For the reasons that follow, the Court grants CMS's Motion to Dismiss. [Filing No. 23.]

         I.

         Standard of review

         Federal Rule of Civil Procedure 8(a)(2) “requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief.'” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (quoting Fed. R. Civ. Pro. 8(a)(2)). “Specific facts are not necessary, the statement need only ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Erickson, 551 U.S. at 93 (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007)).

         A motion to dismiss asks whether the complaint “contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). In reviewing the sufficiency of a complaint, the Court must accept all well-pled facts as true and draw all permissible inferences in favor of the plaintiff. See Active Disposal, Inc. v. City of Darien, 635 F.3d 883, 886 (7th Cir. 2011). The Court will not accept legal conclusions or conclusory allegations as sufficient to state a claim for relief. See McCauley v. City of Chicago, 671 F.3d 611, 617 (7th Cir. 2011). Factual allegations must plausibly state an entitlement to relief “to a degree that rises above the speculative level.” Munson v. Gaetz, 673 F.3d 630, 633 (7th Cir. 2012). This plausibility determination is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. When a plaintiff “pleads [itself] out of court by making allegations sufficient to defeat the suit, ” dismissal under Rule 12 is appropriate. Vincent v. City Colleges of Chicago, 485 F.3d 919, 924 (7th Cir. 2007). A copy of any written instrument that is an exhibit to a pleading is considered to be part of the pleading and may be considered in ruling on a motion to dismiss without converting the motion into a motion for summary judgment. Burke v. 401 N. Wabash Venture, LLC, 714 F.3d 501, 505 (7th Cir. 2013) (citing Fed. R. Civ. Pro. 10(c)).

         II.

         Background

         The following allegations are taken from SMM's Amended Complaint and are accepted as true for purposes of deciding the pending motion, consistent with the applicable standard of review. [Filing No. 14.]

         In 2014, CMS contracted with the Government for the construction of a temporary medical facility and preparation site at the Marine Corps Base in Kaneohe Bay, Hawaii (the “Project”). [Filing No. 14 at 2.] Pursuant to the Miller Act, which governs certain federal contracts, CMS obtained a payment bond totaling more than $5, 000, 000 from Lexon. [Filing No. 14 at 2; Filing No. 14-1.] The payment bond guarantees payment to all of CMS's subcontractors in the event that CMS fails to fulfill its obligation to directly pay the subcontractors. [Filing No. 14 at 2.]

         On October 7, 2014, CMS entered into two subcontracts with SMM for work on the Project (the “Subcontracts”). [Filing No. 14; Filing No. 14-2; Filing No. 14-3.] CMS and SMM entered into Subcontract 1576 to provide modular buildings as well as the installation of fire alarms, fire sprinklers, and voice and data systems on the Project. [Filing No. 14 at 3; Filing No. 14-2.] CMS and SMM entered into Subcontract 1577 for, among other things, the installation of water and sewer lines and various electrical systems on the Project. [Filing No. 14 at 3; Filing No. 14-3.] CMS agreed to pay SMM $2, 725, 336.41 for its services under the Subcontracts. [Filing No. 14 at 3.]

         CMS caused numerous delays throughout the course of the Project, which delayed SMM's performance of its obligations under the Subcontracts by at least 259 days. [Filing No. 14 at 3.] These delays increased the cost of SMM's labor, management, and overhead by $268, 065. [Filing No. 14 at 3.]

         CMS requested that SMM complete additional work not specifically included in the Subcontracts and agreed to pay SMM for the value of the additional work performed. [Filing No. 14 at 3.] The value of that additional work is $232, 666.89. [Filing No. 14 at 3.]

         The State of Hawaii imposed a General Use and Excise Tax on SMM in the amount of $151, 947.81. [Filing No. 14 at 4.] SMM paid this tax and CMS refuses to reimburse SMM for that amount. [Filing No. 14 at 4.]

         SMM submitted invoices to CMS for payment totaling $3, 378, 016.11, and CMS subsequently submitted these invoices to the Government for payment. [Filing No. 14 at 4.] SMM believes that the Government paid CMS the amounts requested. [Filing No. 14 at 4.] CMS has only paid SMM $2, 230, 357.75 to date. [Filing No. 14 at 4.]

         On October 26, 2016, SMM filed a Complaint in this District.[1] [Filing No. 1.] SMM filed an Amended Complaint on December 20, 2016, and it remains the operative pleading. [Filing No. 14.] SMM asserts breach of contract and quantum meruit claims against CMS and a breach of payment bond claim against Lexon. [Filing No. 14.] In response, CMS filed a Counterclaim against SMM and a Third-Party Complaint against Great American Insurance Company (“GAIC”).[2] [Filing No. 22.] Defendants also filed a Motion to Dismiss SMM's Claims. [Filing No. 23.] SMM opposes that motion, [Filing No. 41], Defendants filed a reply, [Filing No. 46], and the motion is now ripe for the Court's decision.

         III.

         Discussion

         Defendants move to dismiss all of SMM's claims-the breach of contract and quantum meruit claims against CMS and the breach of payment bond claim against Lexon. [Filing No. 23; Filing No. 24.] They also ask the Court to deny the request for attorneys' fees in SMM's prayer for relief because neither the Miller Act nor the Subcontracts contain fee-shifting provisions. [Filing No. 24 at 21-22.] The terms of the Subcontracts that must be analyzed to decide the pending motion are identical. [Filing No. 14-2; Filing No. 14-3.]

         If no party raises a choice of law issue, “the federal court may simply apply the forum state's substantive law.” McCoy v. Iberdrola Renewables, Inc., 760 F.3d 674, 684 (7th Cir. 2014) (citations omitted). Here, both parties cite Indiana law to support their interpretations of the Subcontracts, [Filing No. 24 at 10-11; Filing No. 41 at 6-9], and the Court will follow suit.

         A. Breach of Contract Claim Against CMS

         SMM alleges that CMS breached the Subcontracts by causing numerous delays throughout the course of the Project, requesting that SMM complete additional work not specifically included in the Subcontracts, and requiring SMM to pay Hawaii taxes in violation of the Subcontracts. [Filing No. 14.] The Court will first set forth the generally applicable standard for contract interpretation and then address the parties' specific arguments regarding CMS's alleged breaches.

         1) Generally Applicable Law

         “Indiana courts zealously defend the freedom to contract, ” Indiana v. Int'l Bus. Machines Corp., 51 N.E.3d 150, 160 (Ind. 2016), and the Indiana Supreme Court has confirmed that courts “must leave to the individual parties the right to make the terms of their agreements as they deem fit and proper, and, as long as those terms are clear and unambiguous and are not unlawful, [courts] can only enforce them as agreed upon[, ]” New Welton Homes v. Eckman, 830 N.E.2d 32, 35 (Ind. 2005). It is well-settled under Indiana law that “[t]o recover for a breach of contract, a plaintiff must prove that: (1) a contract existed, (2) the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.