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KBWB Construction Company, LLC v. Allied Environmental Services, Inc.

United States District Court, D. New Jersey

February 13, 2019



          WALTER STEPHEN ZIMOLONG ZIMOLONG LLC On behalf of Defendants


          NOEL L. HILLMAN, U.S.D.J.

         This action concerns alleged problems with a well drilling project in Livingston, New Jersey. Pending before the Court is the motion of Defendants to dismiss Plaintiff's fraud claims. Also pending is Plaintiff's motion for leave to file a Third Amended Complaint. For the reasons expressed below, Plaintiff's motion will be granted, and Defendants' motion will be denied.[1]


          According to Plaintiff KBWB Construction Company, LLC's proposed Third Amended Complaint, [2] on October 12, 2016, Plaintiff entered into two subcontracts with Defendant Allied Environmental Services, Inc. d/b/a Allied Well Drilling (“Allied Well”) to perform specifically described geothermal well drilling and headers work at a site in Livingston, New Jersey. Prior to entering into the subcontracts, Plaintiff met with Allied Well to ensure that Allied Well would comply with New Jersey State law when it performed the drilling work. See N.J.S.A. 58:4A-1 et seq., the Subsurface and Percolating Waters Act, and N.J.A.C. 7:9D-1, et seq., the implementing regulations.

         Plaintiff claims that Allied Well and its two certified well drillers, Defendants John Hess and Ronald Cook, did not use a tremie pipe to completely fill the annular space from the bottom to the top as the subcontracts and the regulations required. Plaintiff claims that Defendants instead grouted the 500-foot wells from the top down (putting grout in at the top of the well), which would not insure that the wells were fully sealed.

         Plaintiff enlisted the services of Sound Geothermal Corporation (“SGC”) to inspect and report on the propriety of Defendants' work. On March 10, 2017, Plaintiff sent SCG's report to Allied Well and demanded corrective action. Plaintiff claims that it did not receive a satisfactory response to its demand. On March 14, 2017, Plaintiff terminated the two subcontracts.

         In response, Plaintiff claims that Allied Well affirmatively represented that it would work with SGC to remediate the work to comply with the contracts and the state regulations. Plaintiff also claims that Allied Well stated that it would obtain a letter of approval from the New Jersey Department of Environmental Protection (“NJDEP”).

         Plaintiff claims that Allied Well precluded Plaintiff and its experts from participating in an investigation conducted once the NJDEP was alerted by Plaintiff of the improper well drilling techniques. Ultimately, Plaintiff claims that Allied Well's efforts to correct the improper grouting techniques were unsuccessful.

         As a result, Plaintiff instituted this action against Defendants, asserting claims for breach of contract against Allied Well, and fraud against Allied Well, Cook and Hess. Defendants moved to dismiss Plaintiff's fraud claim in its amended complaint, arguing that Plaintiff's allegations of fraud did not meet the heightened pleading requirements to assert a viable fraud claim. Defendants also argue that the gist of Plaintiff's case is for breach of contract, and Plaintiff cannot transform Defendants' alleged breach of contract into a fraud case.

         While Defendants' motion was pending, Plaintiff filed a second amended complaint pursuant to the Court's order regarding insufficient pleading as to subject matter jurisdiction. See, supra, note 1. Shortly thereafter, Plaintiff filed its instant motion for leave to file a Third Amended Complaint. Plaintiff's proposed Third Amended Complaint reasserts its claim against Allied Well for breach of contract (Count I), but it has re-cast its original fraud claim against all three Defendants into a fraud in the inducement claim against Allied Well only (Count II). Plaintiff has added a claim against Cook and Hess for negligence (Count III).

         It is well settled that a pleading is sufficient if it contains “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Following the Twombly/Iqbal standard, the Third Circuit has instructed a two-part analysis in reviewing a complaint under Rule 12(b)(6). First, the factual and legal elements of a claim should be separated; a district court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (citing Iqbal, 129 S.Ct. at 1950). Second, a district court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a “‘plausible claim for relief.'” Id. (quoting Iqbal, 129 S.Ct. at 1950). A complaint must do more than allege the plaintiff's entitlement to relief. Id.; see also Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008).

         For claims of fraud, Fed.R.Civ.P. 9(b) provides, “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” This heightened pleading standard applies to fraud in the inducement claims. Cotapaxi Custom Design and Manufacturing, LLC v. Chase Bank USA, N.A., 2017 WL 5598215, at *3 (D.N.J. 2017) (citing Ceruzzi Holdings, LLC v. Inland Real Estate Acquisitions, Inc., 2010 WL 1752184, at *4 (D.N.J. 2010) (applying Rule 9(b) to fraud in the inducement claim)). “To satisfy this standard, the plaintiff must plead or allege the date, time and place of the ...

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