United States District Court, D. New Jersey
HONORABLE TONIANNE J. BONGIOVANNI UNITED STATES MAGISTRATE
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.
Background and Procedural History
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
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.
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.)
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).
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).
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”).
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).
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.
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.
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.
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.
Standard of Review
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.
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).
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.
Court first examines Werner Deconstruction's proposed
veil piercing ...