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Advancetec, L.L.C. v. Wohlsen Construction Co.

United States District Court, E.D. Virginia, Richmond Division

May 9, 2017

ADVANCETEC, L.L.C., Plaintiff,
v.
WOHLSEN CONSTRUCTION COMPANY, Defendant.

          MEMORANDUM OPINION (GRANTING DEFENDANT'S MOTION TO DISMISS)

          Henry E. Hudson, United States District Judge

         THIS MATTER is before the Court on Defendant Wohlsen Construction Company's Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), filed on March 31, 2017. (ECF No. 18.) Both parties filed memoranda supporting their respective positions. Oral argument followed on May 2, 2017.

         For the reasons announced from the bench during the hearing and further amplified herein, the Court will grant the Motion. This case will be dismissed without prejudice.

         I. BACKGROUND

         As required by Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court assumes Plaintiffs well-pleaded allegations to be true and views all facts in the light most favorable to it. T.G. Slater & Son v. Donald P. & Patricia A. Brennan LLC, 385 F.3d 836, 841 (4th Cir. 2004) (citing Mylan Labs, Inc. v. Matkari, 1 F.3d 1130, 1134 (4th Cir. 1993)). At this stage, the Court's analysis is both informed and constrained by the four corners of Plaintiff s Complaint. Viewed through this lens, the facts are as follows.

         Plaintiff AdvanceTEC, L.L.C. ("Plaintiff or "AdvanceTEC") is a Virginia limited liability company that specializes in cleanroom design and construction as well as process tool installation and integration. (Compl. ¶ 2, ECF No. 1.) This action arises out of a construction bid process for a 220, 000 square foot pharmaceutical processing/manufacturing plant being built by Datwyler Pharma Packaging USA (the "Owner"). (Id. ¶ 9.)[1]

         In or around October 2016, Defendant Wohlsen Construction Company ("Defendant" or "Wohlsen"), a general commercial contractor serving the mid-Atlantic region (id. ¶ 3), invited Plaintiff "to submit a bid that included assisting the designated Engineer of Record with the design of the cleanroom and thereafter constructing the cleanroom." (Id. ¶ 12.) One month later, Defendant approached Plaintiff again to invite it "to participate directly in the final selection interview for award of the Project to Wohlsen, as Wohlsen's design-build specialty subcontractor for the Project." (Id. ¶ 13.)

         On December 14, 2016, representatives from both Plaintiff and Defendant met to discuss the terms of a letter of intent, which would form the basis of their relationship. (Id. ¶ 15.) Throughout their negotiations, Plaintiff "made clear that it intended to reserve for itself all rights in the Instruments of Service [("IOS")[2] provided pursuant to any letter of intent entered into between the parties], including but not limited to any copyrights AdvanceTEC might have, except as specifically provided for in any written agreements." (Id. ¶ 16.)

         On December 20, 2016, Wohlsen provided AdvanceTEC with a "proposed Subcontract for the cleanroom scope of work." (Id. ¶ 17.) Several weeks later, on January 5, 2017, Defendant provided Plaintiff with a proposed Letter of Intent for Subcontract (the "Draft LOI") in which it requested that Plaintiff perform certain design services directed toward reducing the overall cost of the cleanroom in advance of completing the Subcontract. (Id. ¶¶ 18, 19; see also Compl. Ex. A, ECF No. 1-1.) However, Plaintiff found the Draft LOI to be unacceptable. Specifically, AdvanceTEC objected to the fact that it defined the scope of work solely for "design-assist services" and not "design-build services." (Compl. ¶ 20.)

         And so, later that day, representatives from Plaintiff emailed Defendant and provided comments and suggested revisions to the Draft LOI. (Id. ¶ 21; see also Compl. Ex. B, ECF No. 1-2.) In the email, Plaintiff reaffirmed that it had no intention of providing solely "design-assist services" and stated that it could not "accept an LOI that is not tied to constructing our scope of work for the Project." (Compl. Ex. B, at 2.) Plaintiff elaborated that "[t]his context is very important and applicable when we get down to the lower topic of ownership right to work products produced by AdvanceTEC." (Id.) Plaintiff concluded the January 5 email by proposing that the following terms be added so that the parties could clarify ownership rights in the event that their relationship ended prior to entering into a design-build subcontract:

AdvanceTEC is agreeing to participate and perform design-assist, value engineering, and estimating services under this Letter of Intent until such time as a fully executed design-build subcontract is executed between Wohlsen Construction and AdvanceTEC. Until such time that AdvanceTEC is contracted, constructs, and is compensated for the scope of design-assist/build scope of work stated in AdvanceTEC's December 14, 2016 document, all work products shall remain the property of AdvanceTEC, unless such time if AdvanceTEC is found to be in contract breach. Upon completion and compensation of AdvanceTEC's work[, ] a perpetual royalty free license will be granted to the Owner for the Owner's future use pertaining to the Project.

(Id. at 3.)

         The next day, the parties signed an executed Letter of Intent (the "Executed LOI" or "LOI"), which included some, but not all, of Plaintiff s proposed revisions. (See generally Compl. Ex. C, ECF No. 1-3.) At the outset, the LOI affirmed that it was a fully integrated contract by stating that "[t]his Letter is the entire agreement between the parties until the parties execute a subcontract and any changes to the terms of this Letter must be made in writing based on mutual agreement of the parties." (Id. at 3.) The LOI continued by clarifying that Plaintiffs scope of services went beyond mere "design-assist services" by noting that the "scope of ('Service') [to be provided] is based on AdvanceTEC's attached 'Design-Assist / Build Scope of Work, dated December 14, 2016." (Id. at 2.)

         Wohlsen went on to make clear that it "reserve[d] the right to stop the Services at any time." (Id. at 3.) The Executed LOI also stated that "[i]n the event that negotiations between Owner and [Defendant] conclude without an executed Contract, Subcontractor shall be compensated for the costs of the Services performed in accordance with the provisions of this Letter." (Id.) And, if such an event occurred, "all work product produced by [Plaintiff] pursuant to this Letter shall be the property of, and provided to the Owner." (Id.)

         The LOI contained no provision by which Defendant would acquire any rights in Plaintiffs work product created pursuant to the Executed LOI. (See generally id) Significantly, the fully integrated contract also did not include Plaintiffs proposed terms regarding its retention of ownership rights until the completion of the project. (See generally id.) The LOI contained no provision to that effect.

         Subsequent to signing the LOI, Plaintiff "provided the [IOS] described in the LOI and delivered the resulting work product to Wohlsen." (Id. ¶ 31.) At some point over the ensuing months, the parties' relationship soured, and Defendant notified Plaintiff by letter on February 23, 2017, that it was ending subcontract negotiations and terminating the LOI. (Compl. Ex. D, ECF No. 1-4.) Defendant requested that Plaintiff submit "all invoices for the costs of the Services AdvanceTEC performed ... in accordance with the" LOI[3] and also asked Plaintiff to sign an "Acknowledgement of Termination of Letter of Intent and Final Release of Liens and Claims."[4] (Id. at 2.)

         AdvanceTEC objected to the Acknowledgement, contending that Wohlsen was conditioning payment for Plaintiffs services on an extra-contractual requirement that Plaintiff assign all rights to its work product to Defendant.[5] (Compl. ¶ 33.) In a letter dated February 28, 2017, Plaintiff informed Wohlsen it was "not willing to sign the Acknowledgement in its current form, and frankly, [it did] not see any benefit in attempting to negotiate a document that is so unreasonably one-sided." (Compl. Ex. E, at 2, ECF No. 1-5.)

         In the letter, AdvanceTEC told Defendant that it had "no continuing right to use any of the Instruments of Service prepared by AdvanceTEC for or in connection with the Project." (Id.) In support of this assertion, Plaintiff cited Section 201(a) of the Copyright Act and stated that it was "the author and, therefore, the owner of the Instruments of Service." (Id. (citing 17 U.S.C. § 201(a).) Therefore, it demanded that "Wohlsen must immediately discontinue all use of the Instruments of Service, any derivative works prepared from them and any protected information contained in them." (Id.)

         Plaintiff also affirmed that it "ha[d] not granted and does not grant Wohlsen any license to use the Instruments of Service[And], to the extent Wohlsen may claim that it has an implied license to use some or all of the Instruments of Service ... AdvanceTEC hereby terminates any such license effective immediately." (Id.) Plaintiff concluded by noting that "[g]oing forward, any use by the Owner, Wohlsen, or the consultants or subcontractors of either of them, or anyone else acting on behalf of either of them, will constitute ...


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