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Mobilization Funding, LLC v. W.M. Jordan Company, Inc.

United States District Court, E.D. Virginia, Newport News Division

November 28, 2018

MOBILIZATION FUNDING, L.L.C., Plaintiff,
v.
W.M. JORDAN COMPANY, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          RAYMOND A. JACKSON UNITED STATES DISTRICT JUDGE

         Before the Court is W.M. Jordan's ("Jordan") Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(1), (6), and (7). ECF Nos. 22-23. For the reasons set forth below, Jordan's Motion to Dismiss is GRANTED IN PART AND DENIED IN PART.

         I. FACTUAL AND PROCEDURAL HISTORY

         The following facts are taken from Mobilization's Complaint and are taken to be true and cast in the light most favorable to Mobilization. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982).

         Jordan entered into a General Contract with Riverside Retirement Services ("Riverside") to build the Apartments at Patriots Colony in Williamsburg, Virginia. ECF No. 1 at ¶ 5; see ECF No. 1-1. On December 12, 2016, Jordan entered into a Subcontract Agreement with Mexarg Contractors, LLC ("Mexarg"). ECF No. 1 at ¶¶ 11-12; see ECF No. 1-2. Jordan had a project manager, Jerry Barthelemy ("Barthelemy") who approved payments to its subcontractors. ECF No. 1 at ¶¶ 9-10. On January 10, 2018, Mexarg's own subcontractor complained that Mexarg had not paid them. Id. at ¶ 14. On January 20, 2018, Mexarg submitted a payment application (Payment Application No. 6) to Jordan, which Barthelemy did not notify Mexarg that he had approved it. Id. at¶¶ 17-18.

         On January 30, 2018, Mexarg entered into a loan agreement with Mobilization for up to $361, 155; the loan was secured by contract assignments, among other collateral. Id. at ¶¶ 19, 21; see ECF No. 1-5 at 3. On January 31, 2018, Jordan entered into a Joint Check Agreement ("JCA") with Mexarg and Mobilization, which allows Jordan to write checks jointly to both Mexarg and Mobilization. ECF No. 1 at ¶ 21; see ECF No. 1-7. JCAs are commonly used in the construction industry. ECF No. 1 at ¶ 20. Essentially, instead of Jordan writing a check to Mexarg who would then write a separate check to Mobilization to repay the loan, the JCA allows Jordan to write checks to both companies for Mexarg's subcontract work that Mobilization would be able to cash directly. See Id. at ¶¶ 46-48. During the time that Mobilization entered the Loan Agreement with Mexarg and the JCA with Mexarg and Jordan, it did not know and was never informed of the issues Mexarg had with its nonpayment of its subcontractors. Id. at ¶ 22.

         On February 1, 2018, Jordan told Mexarg and Mobilization that it had approved Payment Application No. 6 and that it would issue a joint check pursuant to the JCA. See Id. at ¶ 25. On February 2, 2018, Mobilization released $140, 000 of the loan to Mexarg, which Mexarg used to pay its subcontractors. Id. at ¶¶ 30-31. On February 8, 2018, Jordan discovered that Mexarg had sent bounced checks to its subcontractors and did not inform Mobilization. Id. at ¶ 32. As such, Jordan refused to issue a joint check despite approved Payment Application No. 6. Id. at ¶ 33. That same day, Barthelemy approved a payment plan to satisfy the bounced checks to Mexarg's subcontractors, for which Mobilization provided an additional $46, 000 to Mexarg in exchange for an assignment of Mexarg's Payment Application No. 7. Id. at ¶¶ 34-37.

         On February 23, 2018, Jordan terminated the Subcontract Agreement with Mexarg, arguing that Mexarg had breached the contract. Id. at ¶ 38. Mexarg argues that its inability to complete the work was due to Jordan's mismanagement. Id. Jordan has not written any joint checks to Mobilization or Mexarg. Id. at ¶ 39.

         On June 11, 2018, Mobilization sued Jordan for what it claims are outstanding payments under various legal theories, including conversion (Count I), unjust enrichment (Count II), equitable estoppel (Count III), and actual and constructive fraud (Count IV and Count V, respectively). Id. at ¶¶ 58-106. Mobilization seeks to recover the $186, 000 it loaned to Mexarg, punitive damages, attorneys' fees, and prejudgment and post-judgment interest. Id. at 16-17.

         Jordan filed three motions to dismiss on June 27, 2018. See ECF Nos. 6-11. Mobilization filed three responses on July 11, 2018. See ECF Nos. 14-16. Jordan replied on July 17, 2018. See ECF Nos. 18-20. On September 10, 2018, the Court ordered Jordan to refile a single motion because the multiple motions violated the Local Rules. ECF No. 21. On September 12, 2018, Jordan filed its single Motion to Dismiss at issue here. See ECF Nos. 22-23. Jordan seeks to dismiss the action under Federal Rule of Civil Procedure 12(b)(1), 12(b)(6), and 12(b)(7). Id. Mobilization opposed the motion on September 26, 2018. ECF No. 25. Jordan replied on October 1, 2018. ECF No. 26.

         II. LEGAL STANDARD

         A. Lack of Subject Matter Jurisdiction under Rule 12(b)(1)

         1. Generally

         Federal Rule of Civil Procedure 12(b)(1) provides for the dismissal of an action if the Court lacks subject matter jurisdiction. Unless a matter involves an area over which federal courts have exclusive jurisdiction, see 28 U.S.C. §§ 1333-34, a plaintiff may bring suit in federal court only if the matter involves a federal question arising "under the Constitution, laws or treaties of the United States," § 1331, or if "the matter in controversy exceeds the sum or value of $75, 000, exclusive of interests and costs, and is between citizens of different States." § 1332(a)(1).

         The court assumes that all factual allegations in the complaint are true if it is contended that a complaint simply fails to allege facts upon which subject matter jurisdiction can be based. Adams, 697 F.2d at 1219. However, if the factual basis for jurisdiction is challenged, the plaintiff has the burden of proving subject matter jurisdiction. Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991). The plaintiff bears the burden of proving that subject matter jurisdiction exists by a preponderance of the evidence. United States ex rel Vuyyuru v. Jadhav, 555 F.3d 337, 347-48 (4th Cir. 2009). To determine whether subject matter jurisdiction exists, the reviewing court "may consider evidence outside the pleadings without converting the proceeding to one for summary judgment." Velasco v. Gov't of Indonesia, 370 F.3d 392, 398 (4th Cir. 2004) (citing Adams, 697 F.2d at 1219). A party moving for dismissal for lack of subject matter jurisdiction should prevail only if material jurisdictional facts are not in dispute and the moving party is entitled to prevail as matter of law. Richmond, Fredericksburg & Potomac R.R. Co., 945 F.2d at 768. If a court lacks subject matter jurisdiction, it must dismiss the action. Fed.R.Civ.P. 12(h)(3).

         2. Ripeness

         Ripeness is a justiciability doctrine that requires federal courts to withhold considering any actions that are based "upon 'contingent future events that may not occur as anticipated, or indeed may not occur at all.'" Texas v. United States, 523 U.S. 296, 300 (1998) (quoting Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 580-81 (1985)). In determining whether a case is ripe or not, the Court must "'balance the fitness of the issues for judicial decision with the hardship to the parties of withholding court consideration.'" Miller v. Brown, 462 F.3d 312, 319 (4th Cir. 2006) (quoting Franks v. Ross, 313 F.3d 184, 194 (4th Cir. 2002)). An action is deemed fit "when the issues are purely legal and when the action in controversy is final and not dependent on future uncertainties." Id. (citing Charter Fed. Sav. Bank v. Office of Thrift Supervision, 976 F.2d 203, 208 (4th Cir. 1992)). Hardship is determined by comparing "'the immediacy of the threat and the burden'" on the party bringing suit. Id. (quoting Charter Fed. Sav. Bank v. Office of Thrift Supervision, 976 F.2d 203, 208-09 (4th Cir. 1992)).

         B. Failure to State a Claim under Rule 12(b)(6)

         Federal Rule of Civil Procedure 12(b)(6) provides for dismissal of actions that fail to state a claim upon which relief can be granted. The United States Supreme Court has stated that in order "[t]o survive a motion to dismiss, a complaint must contain 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 BellAtl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Specifically, "[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678. Moreover, at the motion to dismiss stage, the court is bound to accept all of the factual allegations in the complaint as true. Id. However, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. Assessing the claim is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679.

         In considering a Rule 12(b)(6) motion to dismiss, the Court cannot consider "matters outside the pleadings" without converting the motion to a summary judgment. Fed.R.Civ.P. 12(d). Nonetheless, the Court may still "consider documents attached to the complaint, ... as well as those attached to the motion to dismiss, so long as they are integral to the complaint and authentic." Sec'y of State for Defence v. Trimble Navigation Ltd, 484 F.3d 700, 705 (4th Cir. 2007); see also Fed. R. Civ. P. 10(c); Bassett v. NCAA, 528 F.3d 426, 430 (6th Cir. 2008) ("When a court is presented with a Rule 12(b)(6) motion, it may consider the Complaint and any exhibits attached thereto, public records, items appearing in the record of the case and exhibits attached to defendant's motion to dismiss so long as they are referred to in the Complaint and are central to the claims contained therein.").

         C. Failure to Join an Indispensable Party under Rule 12(b)(7)

         Federal Rule of Civil Procedure 12(b)(7) states that an action should be dismissed if a necessary party cannot be joined under Rule 19. In considering a Rule 12(b)(7) motion to dismiss for failure to join a party pursuant to Rule 19, courts are required to make a two-part inquiry. First, courts must determine whether the party is necessary to the proceeding because of its relationship to the matter under consideration within the meaning of Rule 19. Teamsters Local Union No. 171 v. Keal Driveway Co., 173 F.3d 915, 917 (4th Cir. 1999). Rule 19(a) states that someone is a required party if "the court cannot accord complete relief among existing parties" without that person or if that person "claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may" hurt their "ability to protect their interest" or "leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest."

         Second, if the party would destroy jurisdiction, a court must determine if the action can continue in that party's absence. Teamsters Local Union No. Ill. 173 F.3d at 917-18. "If it cannot, the party is indispensable and the action should be dispensed." Id. at 918. Under Rule 19(b), if the necessary party cannot be joined to the suit, then "the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed." Generally, "[c]ourts are loath to dismiss cases based on nonjoinder of a party, so dismissal will be ordered only when the resulting defect cannot be remedied and prejudice or inefficiency will certainly result." Owens-Ill, Inc. v. Meade, 186 F.3d 435, 441 (4th Cir. 1999).

         A court considers various factors in making this determination, including (1) whether a judgment without the necessary party "would prejudice that person or the existing parties"; (2) if any such prejudice could be lessened based on how the judgment was rendered; (3) whether a judgment without the necessary party would be adequate; and (4) whether the plaintiff "would have an adequate remedy if the action were dismissed." Fed.R.Civ.P. 19(b). This analysis under Rule 19 at both steps is not a "procedural formula," but rather a decision that '"must be made pragmatically, in the context of the substance of each case."' Home Buyers Warranty ...


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