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Werner Deconstruction, LLC v. Siteworks Services NY, Inc.

United States District Court, D. New Jersey

April 27, 2017

WERNER DECONSTRUCTION, LLC, Plaintiff,
v.
SITEWORKS SERVICES NY, INC., et al., Defendants.

          MEMORANDUM OPINION

          HONORABLE TONIANNE J. BONGIOVANNI UNITED STATES MAGISTRATE JUDGE

         Currently pending before the Court is Plaintiff Werner Deconstruction, LLC's (“Werner Deconstruction”) motion to amend its Complaint in order to (1) add a veil piercing claim against Defendant Thomas Garbett (“T. Garbett”) to hold him personally liable for Defendant Siteworks Services NY, Inc.'s (“Siteworks”) obligations; (2) add Yvonne Garbett (“Y. Garbett”) and Richard Harle (“Harle”) as defendants and assert claims for conversion and unjust enrichment against them; and (3) add a claim for an accounting and the turnover of escrow funds against Y. Garbett. [Docket Entry No. 25]. Siteworks and T. Garbett have opposed Werner Deconstruction's motion to amend on futility grounds. The Court has fully reviewed the arguments made in support of and in opposition to Werner Deconstruction's motion. The Court considers Werner Deconstruction's motion to amend without oral argument pursuant to L.Civ.R. 78.1(b). For the reasons set forth more fully below, Werner Deconstruction's motion to amend is GRANTED in part and DENIED in part.

         I. Background and Procedural History

         This matter involves Werner Deconstruction's claims against Siteworks and T. Garbett, as well as certain unnamed John Doe Defendants, for (1) breach of contract based on Siteworks' failure to (a) complete its work under the Debris Removal Services Agreement, (b) pay subcontractors, (c) indemnify Werner Deconstruction for construction lien claims filed by Siteworks' subcontractors, (d) refund pre-payments made by Werner Deconstruction and (e) remove a contaminated tracking pad from the Project; (2) specific performance of contract; (3) quantum meruit; (4) negligence; (5) accounting; (6) fraud; (7) negligent misrepresentation; (8) conversion; and (9) New Jersey Consumer Fraud Act.[1] The Court assumes the parties are familiar with the nature and history of this litigation and will not recite all those details here. Instead, the Court shall focus on the facts most relevant to this motion.

         Broadly, this case arises out of the demolition of the Werner Generating Station in South Amboy, New Jersey (the “Project”). Werner Deconstruction began entering into contracts regarding same as early as April 5, 2012 when it entered into an agreement with GenOn REMA LLC (“GenOn”) (the “Prime Contract”) to demolish Units 1, 2 and 3 at the Werner Generating Station. (Proposed Am. Compl. ¶9; Ex. B to Cert. of Lauren F. Iannaccone; Docket Entry No. 25-2). Anticipating being able to salvage a substantial amount of copper, ferrous and non-ferrous metal under the terms of the Prime Contract, Werner Deconstruction agreed to demolish the three units at its own cost. (Id. ¶11). After entering into the Prime Contract with GenOn, in April 2012, Werner Deconstruction entered into a subcontract with BTU Solutions DE, LLC (“BTU DE”) (the “Subcontract”). (Id. ¶ 12). According to the Subcontract, BTU DE agreed to perform the acts that Werner Deconstruction was responsible to GenOn for under the Prime Contract. (Id.)

         Pursuant to the terms of the Subcontract, Werner Deconstruction and BTU DE agreed that revenue from the demolition of Units 1, 2 and 3 would be deposited into a Project Account administered by Werner Deconstruction and that all expenses for the Project would be paid from said account. (Id. ¶13). They further agreed that after the demolition work was complete, Werner Deconstruction would receive 48% of any money remaining in the Project Account as a net profit distribution. (Id. ¶14).

         On January 21, 2014, BTU Solutions, LLC (“BTU Solutions”), an entity believed to be a subsidiary of BTU DE, entered into a General Services Agreement (the “General Services Agreement”) with Siteworks. (Id. ¶15). The General Services Agreement incorporated a Statement of Work (“Statement of Work #01”) that called for Siteworks to demolish the building containing Unites 1, 2 and 3 at the Werner Generating Station. (Id. ¶16). Pursuant to the General Services Agreement, Siteworks would be compensated with the revenue from the sale of the first $3.5 million worth of scrap material removed from the Project. (Id. ¶ 17). However, Statement of Work #01 incorporated into the General Services Agreement included a provision requiring “‘a $525, 000 hold back of revenues from the sale of scrap to be billed at the completion and acceptance of the work.'” (Id. ¶19). According to Statement of Work #01, said revenues were to be held in escrow. (Id.) The Statement of Work designated Y. Garbett as the escrow agent for the hold-back funds. (Id. ¶20). It also specified the conditions under which the escrow funds could be released to Siteworks. (Id. ¶¶ 21-22).

         In early 2015, it became apparent to Werner Deconstruction that BTU DE lacked the financial capacity to continue working on the Project. Based on the terms of the Prime Contract with GenOn, Werner Deconstruction was still responsible for completing the remaining demolition work, which included the removal of a large demolition debris pile contaminated with asbestos (the “Demolition Debris Pile”). (Id. ¶26).

         On February 6, 2015, Werner Deconstruction entered into a Debris Removal Services Agreement, (the “Debris Removal Contract”) with Siteworks, according to which Siteworks would use its “‘best efforts'” to remove the Demolition Debris Pile within 10 weeks of the effective date of the Debris Removal Contract, i.e. February 6, 2015, and would perform the work outlined in the Debris Removal Project “‘to completion.'” (Id. ¶¶27-28, 32). According to the Debris Removal Contract, Werner Deconstruction would pay Siteworks by wiring payments into a specific account that Siteworks had opened (the “Pre-Payment Account'). (Id. ¶33). Based on Article 6 of the Debris Removal Contract, Werner Deconstruction wired an initial $100, 000.00 payment to the Pre-Payment Account on February 6, 2015. (Id. ¶34). Article 6 of the Debris Removal Contract required Siteworks to use the $100, 000.00 payment “'exclusively for prepayment by Contractor to the Landfill, Contractor for loads, and for services as outlined in Exhibit ‘A''” to the Debris Removal Contract. (Id. ¶35).

         According to the terms of the Debris Removal Contract, between February 13, 2015 and May 26, 2015, Werner Deconstruction wired an additional $2, 314, 904.96 into the Pre-Payment Account. (Id. ¶40). These payments were made based on weekly invoices submitted by Siteworks, which estimated, among other things, the amount of debris to be loaded and transported, and Siteworks' anticipated costs to remove and transport the debris. (Id. ¶ 37). As with the initial 100, 000.00 payment, the Debris Removal Contract required that these additional payments “‘be used by Contractor solely and specifically for Contractor's performance of the Work as set forth in Exhibit ‘A' [to the Debris Removal Contract], and for no other purpose.'” (Id. ¶36). Werner Deconstruction alleges that Siteworks breached the terms of the Debris Removal Contract by failing to remove the entirety of the Demolition Debris Pile and by abandoning the Project on or about June 29, 2015.

         Based on Siteworks alleged breach of the Debris Removal Contract, Werner Deconstruction initiated this litigation, asserting claims against Siteworks, T. Garbett and certain unnamed John Doe Defendants. Werner Deconstruction now seeks to amend its Complaint to (1) add a veil piercing claim against T. Garbett to hold him personally liable for Siteworks obligations; (2) add Y. Garbett and Harle as defendants and assert claims for conversion and unjust enrichment against them; and (3) add a claim for an accounting and the turnover of escrow funds against Y. Garbett.[2]

         As noted above, Siteworks and T. Garbett oppose Werner Deconstruction's motion to amend on futility grounds. With respect to the veil piercing claim, they argue that Werner Deconstruction has not plead facts establishing that Siteworks is a sham entity or that it was used to work a fraud or other injustice. Instead, Siteworks and T. Garbett maintain that the facts alleged by Werner Deconstruction, if taken as true, at best, only establish a breach of contract, which is insufficient to hold T. Garbett personally liable. Turning to Werner Deconstruction's proposed accounting, conversion and unjust enrichment claims against Y. Garbett and/or Harle, Siteworks and T. Garbett contend that they are futile because they are improperly based on Siteworks' contract with non-party BTU Solution, a contract to which Werner Deconstruction was not a party. They also argue that the proposed claims are futile because Werner Deconstruction failed to plead jurisdiction over Y. Garbett or Harle.

         As to the proposed accounting claim against Y. Garbett, Siteworks and T. Garbett also argue that this claim is futile because Werner Deconstruction failed to allege that Y. Garbett agreed to be the escrow agent or even received any escrow funds. Similarly, they allege that the proposed conversion and unjust enrichment claims against Y. Garbett and Harle fail for another reason: namely Siteowkrs and T. Garbett argue that these claims are barred by the economic loss doctrine. As a result, Siteworks and T. Garbett contend that Werner Deconstruction's motion must be denied in total because all of the proposed amendments are futile.

         II. Analysis

         A. Standard of Review

         Pursuant to Rule 15(a)(2), leave to amend the pleadings is generally granted freely. See Foman v. Davis, 371 U.S. 178, 182 (1962); Alvin v. Suzuki, 227 F.3d 107, 121 (3d Cir. 2000). Nevertheless, the Court may deny a motion to amend where there is “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment.” Id. However, where there is an absence of undue delay, bad faith, prejudice or futility, a motion for leave to amend a pleading should be liberally granted. Long v. Wilson, 393 F.3d 390, 400 (3d Cir. 2004). Here, the Court focuses on futility as that is the basis for Siteworks and T. Garbett's objections.

         An amendment is futile if it “is frivolous or advances a claim or defense that is legally insufficient on its face.” Harrison Beverage Co. v. Dribeck Imp., Inc., 133 F.R.D. 463, 468 (D.N.J. 1990) (internal quotation marks and citations omitted). To determine if an amendment is “insufficient on its face, ” the Court utilizes the motion to dismiss standard under Rule 12(b)(6) (see Alvin, 227 F.3d at 121) and considers only the pleading, exhibits attached to the pleading, matters of public record, and undisputedly authentic documents if the party's claims are based upon same. See Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993).

         To determine if a complaint would survive a motion to dismiss under Rule 12(b)(6), the Court must accept as true all the facts alleged in the pleading, draw all reasonable inferences in favor of the plaintiff, and determine if “under any reasonable reading of the complaint, the plaintiff may be entitled to relief[.]” Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008). “[D]ismissal is appropriate only if, accepting all of the facts alleged in the [pleading] as true, the p[arty] has failed to plead ‘enough facts to state a claim to relief that is plausible on its face[.]'” Duran v. Equifirst Corp., Civil Action No. 2:09-cv-03856, 2010 WL 918444, *2 (D.N.J. March 12, 2010) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Put simply, the alleged facts must be sufficient to “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). Additionally, in assessing a motion to dismiss, while the Court must view the factual allegations contained in the pleading at issue as true, the Court is “not compelled to accept unwarranted inferences, unsupported conclusions or legal conclusions disguised as factual allegations.” Baraka, 481 F.3d at 211.

         B. Discussion

         The Court first examines Werner Deconstruction's proposed veil piercing ...


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