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Costello Constr. Co. of Md. v. City of Charlottesville

United States District Court, W.D. Virginia, Charlottesville Division

March 19, 2015

COSTELLO CONSTRUCTION CO. OF MARYLAND, INC., Plaintiff,
v.
CITY OF CHARLOTTESVILLE, Defendant

For Costello Construction Company of Maryland, Inc., Plaintiff: Jessica Vasconcellos Perro, LEAD ATTORNEY, Fox Rothschild LLP, Washington, DC; Sonia Nassehzadeh Tabriz, Fox Rothschild LLP, Washington, DC.

For City of Charlottesville, Virginia, Defendant: Lisa Ann Robertson, LEAD ATTORNEY, Charlottesville City Attorney's Office, Charlottesville, VA.

Page 820

MEMORANDUM OPINION

Hon. Glen E. Conrad, Chief United States District Judge.

This diversity action arises from a contract entered into by Plaintiff Costello Construction Company of Maryland, Inc. (" Costello" ) and Defendant City of Charlottesville (the " City" ), which provided for the construction of the Fontaine Fire Station in Charlottesville, Virginia (the " Project" ). The case is presently before the court on the City's motion to dismiss. For the following reasons, that motion will be denied.

Factual and Procedural Background

The court accepts the following facts, taken from Costello's complaint, as true for purposes of considering the City's motion to dismiss. See Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007); Katyle v. Penn Nat'l Gaming, Inc., 637 F.3d 462, 466 (4th Cir. 2011).

Costello and the City entered into a contract, effective October 17, 2011, in which Costello agreed to build the Project according to construction documents, including design specifications and drawings, provided by the City. Compl. at ¶ ¶ 28, 38, Docket No. 1. Costello relied on these documents to compile a bid for the Project, in which it " reasonably anticipated" expending 800 hours of project management time and $1,362,600.00 for concrete work and site work. Id. at ¶ ¶ 39-41. As the Project progressed, however, Costello encountered numerous problems with the contract documents and the City, which significantly increased the duration of the

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Project and the costs associated with its completion. Id, at ¶ ¶ 44, 49.

As provided by the contract, Costello notified the City via a Request for Information (" RFI" ) whenever it discovered a " defect, conflict, inconsistency, or omission" in the contract documents. Id. at ¶ 45. In total, Costello submitted 387 RFIs to the City. Id. at ¶ 46. The Project's Architect and the City itself also issued numerous orders clarifying, changing, or otherwise altering the contract documents and Costello's performance under the contract. Id. at ¶ ¶ 47-48. Furthermore, the City failed to respond in a timely and complete manner to many of Costello's RFIs, sometimes resulting in significant construction delays. See id. at ¶ 49-72 (providing examples). Costello has submitted 191 proposed change orders and claims to the City for the direct damages caused by " individual latent defects, conflicts, inconsistencies, and omissions" discovered in the contract documents. Id. at ¶ ¶ 73-74. To date, the City has issued eleven change orders providing Costello with " direct damages associated with numerous latent defects." Id. at ¶ 76. Costello alleges that, in each proposed change order, it expressly reserved the right to claim additional damages " once the cumulative impact of the defects and resulting change directives could be ascertained." Id. at ¶ 75.

On November 12, 2013, Costello filed two claims with the City to recover damages for the cumulative impact of the defects and delays allegedly attributable to the City. Claim #188 seeks $1,052,970.81 for the " additional costs of the unchanged work on the Project resulting from the cumulative impacts of the defective specifications, changes to the work, and the City's failure to provide timely direction." Id. at ¶ 78, 82; Ex. 3. Claim #189 seeks $585,254.47 for project management work on the Project, which included 3000 hours more than Costello anticipated in its bid. Id, at ¶ ¶ 80, 83; Ex. 4. The City has not responded to either claim, which Costello alleges amounts to a denial of those claims. Id. at ¶ 84.

Costello and the City also appeared before the City's Vendor Appeals Board (" VAB" ) on May 6, 2013 to resolve disputes arising from eleven proposed change orders that Costello submitted to the City. Id. at ¶ ¶ 85-86. On June 3, 2013, the VAB issued a decision on nine of those orders, which awarded Costello direct damages on six claims. Id. at ¶ 87; Ex. 5. The VAB declined to award Costello delay damages, however. Id. It therefore directed the City to " recalculate the damages" owed to Costello and remit payment accordingly. Id. Costello alleges it is owed $55,787.65 under the VAB's decision, but that the City has paid only $5,218.98 to date. Id. at ¶ 90.

Costello filed this complaint on August 8, 2014, asserting four claims under the parties' contract. Id, at ¶ 3. First, Costello alleges that the City breached the implied warranty of design adequacy by providing faulty plans and specifications (Count I). Second, Costello asserts a breach of contract claim based on the City's alleged failure to compensate Costello for numerous directed changes under the contract (Count II). Third, Costello contends that the City breached the implied warranty of cooperation when it failed to timely and completely respond to Costello's RFIs (Count III). Costello seeks $1,638,225.28 in cumulative impact damages for these three claims, as initially outlined in Claim #188 and Claim #189. Costello also asserts a breach of contract claim based on the City's alleged failure to comply with the VAB's June 2013 decision awarding Costello direct damages on six claims under the parties' contract (Count IV). Costello

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seeks $50,568.67 in damages on this fourth claim.

The City moved to dismiss Costello's complaint on September 26, 2014. The court held a hearing on the motion on December 18, 2014. It has been briefed and is ripe for review.

Standard of Review

A Rule 12(b)(6) motion to dismiss tests the sufficiency of the plaintiffs complaint, which must contain " a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a); SeePresley v. City of Charlottesville.464 F.3d 480, 483 (4th Cir. 2006). When considering a motion to dismiss, the court must accept the well-pled facts in the complaint as true and make all reasonable inferences in the plaintiffs favor. Bell Atlantic Corp. v. Twombly,550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The court, however, is " not so bound by the plaintiffs legal conclusions." Randall v. United States,30 F.3d 518, 522 (4th Cir. 1994). To survive a motion to dismiss, the complaint must contain " sufficient factual matter...to state a claim...that is plausible on its face." Ashcroft v. Iqbal,556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal citation omitted). " ...


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