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Gradillas Court Reporters, Inc. v. Cherry Bekaert, LLP

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

March 2, 2018

CHERRY BEKAERT, LLP, et al., Defendants.



         In this action alleging breach of contract and professional malpractice, Plaintiff Gradillas Court Reporters, Inc., seeks partial judgment on the pleadings as to its breach of contract claim against Defendants Cherry Bekaert, LLP, and Sara Crabtree. Mot. (ECF No. 37). Plaintiff has alleged Defendants breached a contract and committed malpractice by failing to timely submit Gradillas' bid to perform court reporting services to a potential government client.

         After reviewing the pleadings and exhibits submitted in support of the parties' respective positions on the Motion, this Report concludes that Defendants' Answer contests both the existence of the specific duty alleged and the asserted breach of that duty. Accordingly, as explained in greater detail below, the court should DENY the Motion, except it should STRIKE Defendants' affirmative defense that Plaintiff failed to mitigate its damages.[1]

         I. BACKGROUND

         The court recites the facts of the case as alleged or as contested by Cherry Bekaert, LLP, and Sara Crabtree (collectively, "Cherry Bekaert") as the non-moving party[2] in the Motion, and draws all reasonable inferences from those facts in their favor. See Massey v. Ojaniit, 759 F.3d 343, 347 (4th Cir. 2014) .

         Gradillas Court Reporters, Inc. ("Gradillas"), offers court reporting services and is owned by Josephine Gradillas. Answer at ¶¶ 1, 13.[3] Gradillas has performed court reporting services for government agencies for many years. Id. ¶ 40. Since the execution of a 2 012 letter outlining the contract between them, Gradillas has engaged the services of Cherry Bekaert, LLP, an accounting and consulting firm. See 2012 Contract (ECF No. 39-1). The contract described the general privileges and obligations of the parties under the agreement, including subjects like hourly service rates and limitations on the nature of their engagement, but did not assign specific tasks. As a result, the written contract did not address the specific bid underlying this action, nor did it assign responsibility for the timely submission of any bid. See id. Since entering its agreement with Gradillas in 2012, Cherry Bekaert has performed both general accounting services and services rendered specifically in support of Gradillas' pursuit of various government contracts for court reporter services. Answer at ¶¶ 2, 57, 18.

         In the spring of 2017, Cherry Bekaert accepted a task under the agreement to assist Gradillas in the preparation and submission of a bid for court reporting services with the U.S. Securities and Exchange Commission ("SEC"). Answer at ¶¶ 26-27. The deadline for the bid was noon, Eastern Daylight Time, on March 17, 2017, and this was known to Cherry Bekaert. Answer at ¶ 25.

         The lead employee from Cherry Bekaert assigned to the contract with Gradillas was Susan Crabtree. Answer at ¶ 26. Through Crabtree, Cherry Bekaert agreed to to provide services in preparing the bid." Answer at ¶ 27. Neither the 2012 contract nor the emails discussing the SEC bid assigned responsibility for submitting the bid before the noon deadline on March 17, 2017. (ECF No. 39-1, 39-2, 39-3). In fact, Cherry Bekaert asserts that it was to provide a draft to Gradillas and that Gradillas would submit the bid. Later, delays by both parties caused Gradillas to change this plan at the last minute, resulting in the bid being late. Def.'s Br. at 8 (ECF No. 41) (citing Emails between Sara Crabtree and Josephine Gradillas (Mar. 17, 2017) (ECF No. 41-2, 41-3)).

         There is no dispute that the bid was submitted to the SEC contracting officer three minutes after the deadline. Answer at ¶ 29. Although Gradillas alleges Crabtree submitted the bid, Cherry Bekaert has not admitted this fact. Answer at ¶ 29. Cherry Bekaert has also not admitted that the bid was rejected for having been submitted after the deadline. See Answer at ¶30. After the bid was submitted late, Crabtree did contact the SEC contracting officer to tell the contracting officer it was her, Crabtree's, "fault" that Gradillas "lost the chance to be considered for [the bid] ." Answer at ¶ 33; see also Answer at 34.

         Gradillas filed the instant action alleging professional negligence and breach of contract against Cherry Bekaert in the Superior Court of the District of Columbia. Compl. (ECF 1-2). Cherry Bekaert removed the case to the U.S. District Court for the District of Columbia. Removal Notice (ECF No. 1) . That court subsequently transferred the case to this court to establish proper venue. See Hrn'g Tr. at 20-24 (Oct. 6, 2017) (ECF No. 18).

         Gradillas' pending motion seeks "partial judgment on the pleadings, " asserting that Cherry Bekaert has admitted facts sufficient to establish a breach of duty and some damage from the company's lost opportunity. The company also claims several of Cherry Bekaert's affirmative defenses are defectively pled and seeks to preclude further argument on them at trial. Cherry Bekaert denies that its pleadings permit entry of judgment on any part of the claim, and with one exception defends each affirmative defense as correctly asserted. Counsel have fully briefed the Motion, making it ripe for the court's review.

         II. ANALYSIS

         a. Standard of Review.

         Rule 12(c) motions are governed by the same standard as motions brought under Rule 12(b)(6). Massey, 759 F.3d at 347 (citing Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999)). In order to survive a Rule 12(c) motion, a pleading must assert facts or issue denials that are "plausible on [their] face." C.f. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) . A denial or assertion is plausible on its face when it permits the reasonable inference that it is true. Id. The court considers the complaint in the light most favorable to the plaintiff, reads the complaint as a whole, and takes the facts asserted therein as true. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993); Massey, 759 F.3d at 347. However, the court may also refuse to accept allegations that contradict matters properly subject to judicial notice or exhibits which are referenced in the pleadings. Blankenship v. Manchin, 471 F.3d 523, 529 (4th Cir. 2006).

         The court has considered Cherry Bekaert's Answer; Gradillas' Complaint; and exhibits to the Rule 12(c) motion that were integral to the complaint and authentic. Massey, 759 F.3d at 347 (citing Fed.R.Civ.P. 10(c)); Philips v. Pitt Cnty. Mem'1 Hosp., 572 F.3d 176, 180 (4th Cir. 2009). Specifically, The court considered the text of the 2012 Summary of Services letter and the correspondence between Gradillas and Crabtree, all of which Gradillas submitted as exhibits in support of its Motion. (ECF Nos. 39-1, 39-2, 39-3).

         b. Choice of Law.

         This case was transferred to cure improper venue. See Hrn'g Tr. at 20-24 (Oct. 6, 2017) (ECF No. 18). After a transfer under 28 U.S.C. § 1406, the choice of law rules of the state in which the transferee court sits govern the case. See, e.g., Gerena v. Korb, 617 F.3d 197, 204 (2d Cir. 2010) ("If a district court receives a case pursuant to a transfer under 28 U.S.C. § 1406(a) ... it logically applies the law of the state in which it sits, since the original venue, with its governing laws, was never a proper option.")/ Lafferty v. St. Riel, 495 F.3d 72, 77 (3d Cir. 2007) ("When cases have been transferred for improper venue, transferee courts generally apply the substantive law they would have applied had the action been brought there initially."); Ellis v. Great Sw. Corp., 646 F.2d 1099, 1110 (5th Cir. 1981) (“[F]ollowing a section 1406(a) transfer, regardless of which party requested the transfer or the purpose behind the transfer, the transferee court must apply the choice of law rules of the state in which it sits."). As the transferee in this case, this court will apply the choice of law rules of the Commonwealth of Virginia to determine the law applicable to the case.

         In Virginia, questions related to the sufficiency of contract performance are governed by the law of the jurisdiction in which the contract was to be performed. Equitable Tr. Co. v. Bratwursthaus Mgmt. Corp., 514 F.2d 565, 567 (4th Cir. 1975) (citing Arkla Lumber & Mfg. Co. v. W.Va. Timber Co., 146 Va. 641, 648 (1926)). Gradillas' breach of contract claim revolves around the adequacy of Cherry Bekaert's performance of a contractual duty it is alleged to have owed Gradillas, and performance of that duty was to have taken place in Virginia. See Mem. and Order at 2 (ECF No. 21) . Accordingly, Virginia law governs Gradillas' claims in the case.

         c. Breach ...

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