['CORPORATE SYSTEMS RESOURCES v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY'] , 31 F. Supp. 3d 124 ( 2014 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
CORPORATE SYSTEMS RESOURCES,
Plaintiff,
v. Civil Action No. 13-1258 (BAH)
WASHINGTON METROPOLITAN AREA Judge Beryl A. Howell
TRANSIT AUTHORITY, et al.
Defendants.
MEMORANDUM OPINION
The plaintiff, Corporate Systems Resources, alleges in this breach of contract suit that it
is owed approximately $160,000 under a subcontract with Defendant LTK Consulting Services
Inc. (“Defendant LTK”), which served as the “prime” contractor for Defendant Washington
Metropolitan Area Transit Authority (“Defendant WMATA”). Pending before the Court are
Motions to Dismiss by both defendants under Federal Rule of Civil Procedure 12(b)(6), and by
Defendant WMATA under Rule 12(b)(1). Defs.’ Mots. Dismiss, ECF Nos. 5, 7. For the reasons
set forth below, the defendants’ motions are granted.
I. BACKGROUND
The plaintiff is a “District of Columbia Corporation” and a “Certified Disadvantage [sic]
Business Enterprise.” Compl. ¶ 3, ECF No. 1-3. 1 The claims at issue allegedly arise from work
performed by the plaintiff as a subcontractor to a prime contract awarded to Defendant LTK by
Defendant WMATA “to provide personnel for contract administration for WMATA’s railcar
engineering services project.” Id. ¶ 6. The plaintiff first entered into a “Time and Materials
1
All facts are taken from the complaint and assumed to be true for the purposes of a motion to dismiss. See, e.g.,
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
1
Subcontract” with another subcontractor of Defendant LTK, called Unified Industries
Incorporated (“UII”), on August 27, 2010 to provide contract administration services. See
Compl. Ex. 3 (Subcontract No. 6502-2 between UII and Plaintiff dated August 27, 2010), ECF
No. 1-3. The plaintiff subsequently entered into a subcontract directly with Defendant LTK on
January 5, 2012 to provide the same services. Compl. Ex. 2 (Subcontractor Letter Agreement
between plaintiff and Defendant LTK entered into on January 5, 2012) (the “Subcontract”) at 1,
ECF No. 1-3. 2
The Subcontract incorporated by reference the Prime Contract between Defendants LTK
and WMATA, and stated that the plaintiff “shall be compensated for the services provided” to
Defendant LTK. Id. The Subcontract provided that the plaintiff’s rates were “subject to review
by WMATA’s audit group” and “[s]hould the review result in a change to the rates” charged by
the plaintiff, “the [plaintiff’s] invoices will be adjusted to reflect the change.” Id. Finally, the
Subcontract stated that “[p]ayments due to [the plaintiff] . . . shall be made within ten calendar
days after receipt of payment by LTK from WMATA. Any payments due to [the plaintiff] by
LTK are contingent upon LTK receiving payment from WMATA.” Id. at 2.
The plaintiff alleges that it “performed all the services required under the contracts from
which [Defendant] WMATA greatly benefited” and that the plaintiff “submitted all
documentation required by the contracts and invoiced for payments.” Compl. ¶¶ 10–11.
Nevertheless, the plaintiff alleges that Defendant “LTK and UII informed [the plaintiff] that it
had not received payment from WMATA for the work performed by [the plaintiff] on the
outstanding invoices.” Id. ¶ 12. The plaintiff alleges that “[a]fter all reconciliation of payments,
2
The parties do not explain why the plaintiff’s contract shifted from UII to Defendant LTK in 2012, but this change
is ultimately irrelevant to the instant motion. Although the complaint alleges that the plaintiff has not received full
payment of invoices submitted “since July 30, 2010,” Compl. ¶ 27, which includes the period when UII was the
contracting party with the plaintiff, UII is not named as a defendant in this action.
2
accounts and credits given, the Defendants owe the amount of $158,800.76 not including
interest.” Id. ¶ 13. Despite making a demand for payment, “the Defendants have failed and
refuses [sic] to pay [the plaintiff] for the services rendered for which payment is due and owing
to [the plaintiff].” Id. ¶ 14.
The plaintiff sets forth three causes of action against both defendants, namely, breach of
contract for “failing to pay [the plaintiff] for services rendered,” (Count I), id. ¶ 17; “Quantum
Merit [sic]” because “[t]he Defendants would be unjustly enriched if they were permitted to
retain the benefits of the services rendered by [the plaintiff] without having to pay for those
services,” (Count II), id. ¶ 22; and “Account Stated,” alleging that the plaintiff “sent the
Defendants invoices for services rendered,” id. ¶ 27, and that those invoices have not been paid,
(Count III), id. ¶ 29.
This matter was originally filed in D.C. Superior Court and removed to this Court by
Defendant WMATA pursuant to D.C. Code § 9-1107.10, which grants “United States district
courts . . . original jurisdiction, concurrent with the courts of Maryland and Virginia, of all
actions brought by or against the [Defendant WMATA].” See Not. Removal, ECF No. 1. 3 Upon
removal, both defendants timely moved to dismiss for failure to state a claim upon which relief
can be granted and, as to the quantum meruit claim against Defendant WMATA, for lack of
subject matter jurisdiction. See Defs.’ Mots. Dismiss; FED. R. CIV. P. 12(b)(1), (b)(6). In its
opposition to Defendant WMATA’s motion to dismiss, the plaintiff “concede[d] WMATA’s
motion as to Counts II & III.” Pl.’s Opp’n Def. WMATA’s Mot. Dismiss (“Pl.’s WMATA
Opp’n”) at 3, ECF No. 10. Accordingly, Counts II and III against Defendant WMATA are
3
The complaint also states that the amount in dispute is more than $75,000, see Compl. ¶ 13 (alleging $158,800.76
due to plaintiff), and that the plaintiff is diverse from Defendant LTK, see Compl. 3, 5 (identifying plaintiff as
domiciled in D.C. and Defendant LTK as a “foreign corporation”); see also Compl. Ex. 2 (showing, on face of
Subcontract, that Defendant LTK is located in Pennsylvania). Thus, jurisdiction in the absence of Defendant
WMATA is proper under 28 U.S.C. § 1332(a) for complete diversity.
3
dismissed and the Court need only evaluate the parties’ arguments under Federal Rule of Civil
Procedure 12(b)(6).
II. LEGAL STANDARD
The Federal Rules of Civil Procedure require that a complaint contain “‘a short and plain
statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the
defendant fair notice of what the . . . claim is and the grounds upon which it rests[.]’” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957));
FED. R. CIV. P. 8(a). A motion under Rule 12(b)(6) does not test a plaintiff’s likelihood of
success on the merits; rather, it tests whether a plaintiff properly has stated a claim. See Scheuer
v. Rhodes, 416 U.S. 232, 236 (1974) abrogated on other grounds by Harlow v. Fitzgerald, 457
U.S. 800, 814 (1982). Although “detailed factual allegations” are not required to withstand a
Rule 12(b)(6) motion, a complaint must offer “more than labels and conclusions” to provide
“grounds” of “entitle[ment] to relief.” Twombly, 550 U.S. at 555 (alteration in original). “Nor
does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual
enhancement.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557)
(alteration in original). The Supreme Court stated that “[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.’” Id. (quoting Twombly, 550 U.S. at 570). A claim is facially plausible
“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. (citing Twombly, 550 U.S. at 556).
III. DISCUSSION
Due to the plaintiff’s concession of Counts II and III against Defendant WMATA, the
only live claim against Defendant WMATA is Count I, for breach of contract. All three counts
4
remain contested against Defendant LTK. The remaining count against Defendant WMATA is
examined first before turning to the claims against Defendant LTK.
A. Defendant WMATA
Under District of Columbia law, 4 in order to show a breach of contract, “a party must
establish (1) a valid contract between the parties; (2) an obligation or duty arising out of the
contract; (3) a breach of that duty; and (4) damages caused by breach.” Logan v. LaSalle Bank
Nat’l Ass’n, 80 A.3d 1014, 1023 (D.C. 2013) (quoting Tsintolas Realty Co. v. Mendez, 984 A.2d
181, 187 (D.C. 2009)); Osseiran v. Int’l Fin. Corp., 950 F. Supp. 2d 201, 208 (D.D.C. 2013)
(same). A valid contract “requires both: (1) intention of the parties to be bound; and (2)
agreement as to all material terms.” Steven R. Perles, P.C. v. Kagy, 473 F.3d 1244, 1249 (D.C.
Cir. 2007) (citing Simon v. Circle Assocs., 753 A.2d 1006, 1012 (D.C. 2000)). Defendant
WMATA argues that the plaintiff’s breach of contract claim must be dismissed because the
plaintiff “has not alleged, and cannot allege, that there was a valid contract between WMATA
and [the plaintiff].” Def. WMATA’s Mem. Supp. Mot. Dismiss (“Def. WMATA’s Mem.”) at 4,
ECF No. 5-1. Defendant WMATA is correct.
The complaint makes clear that the plaintiff had no direct contract with Defendant
WMATA, stating that Defendant WMATA awarded the Prime Contract to Defendant LTK and
UII. Compl. ¶ 6. 5 Indeed, Defendant WMATA is named in only three other places in the
Complaint: in the introductory paragraph naming the parties, see Compl. at 1; in a paragraph
identifying Defendant WMATA as a “tri-jurisdictional government agency,” id. ¶ 4; and in
4
Federal courts apply the common law of the jurisdictions in which they sit. See Tidler v. Eli Lilly & Co., 851 F.2d
418, 424 (D.C. Cir. 1988) (citing Erie R.R. v. Tompkins, 304 U.S. 64 (1938)). The parties have not argued that any
other jurisdiction’s law should apply.
5
The complaint alleges that UII was “the prime contractor of the Contract,” Compl. ¶ 7, but this allegation is
inconsistent with Exhibit 3, the subcontract between the plaintiff and UII, which clearly states that the prime
contract is with Defendant LTK.
5
Paragraph 10, where the plaintiff alleges that it “performed all the services required under the
contracts from which [Defendant] WMATA greatly benefited.” The plaintiff attached portions
of the Prime Contract between the two defendants, the Subcontract, and the contract between the
plaintiff and UII, which confirm that the plaintiff and WMATA are not both parties to any of
those contracts. See Compl. Ex. 1 (naming only Defendant LTK and Defendant WMATA as
parties to Prime Contract); id. Ex. 2 (naming only Defendant LTK and plaintiff as parties to
Subcontract); id. Ex. 3 (naming only plaintiff and UII as parties to contract). 6
The Subcontract states that Defendant WMATA “has entered into a Contract with
[Defendant LTK] to provide professional Railcar Engineering Services,” and that Defendant
LTK “is permitted to retain subcontractors to perform a portion of the services” required by the
contract. Compl. Ex. 2 at 1. This reference to Defendant WMATA does not make it a party to
the Subcontract. See id. Rather, the Subcontract makes clear that Defendant LTK was
“retain[ing] [the plaintiff] to provide services,” that the plaintiff’s “services will be provided at
the direction of LTK’s Project Manager . . . or his designated replacement,” and that “[i]nvoices
for such services and supporting documentation should be submitted on a monthly basis and be
received by LTK on or before the first day of the following month.” Id. The contract notes that
“[p]ayments due to [the plaintiff] under this Letter Contract shall be made within ten calendar
days after receipt of payment by LTK from WMATA” and that “[a]ny payments due to [the
plaintiff] by LTK are contingent upon LTK receiving payment from WMATA.” Id. at 2. It was
6
The defendants have attached in their opposition papers other portions of the same contracts referenced in the
complaint. The Court may review those contracts on a motion to dismiss. See Abhe & Svoboda, Inc. v. Chao, 508
F.3d 1052, 1059 (D.C. Cir. 2007) (noting court may consider, on motion to dismiss, “facts alleged in the complaint,
documents attached thereto or incorporated therein, and matters of which it may take judicial notice” (quoting
Stewart v. Nat’l Educ. Ass’n, 471 F.3d 169, 173 (D.C. Cir. 2006))); Vanover v. Hantman, 77 F. Supp. 2d 91, 98
(D.D.C. 1999) aff’d, 38 F. App’x 4 (D.C. Cir. 2002) (concluding court could properly consider, on motion to
dismiss, chapter of Personnel Manual and “various letters and materials produced in the course of plaintiff’s
discharge proceedings” attached to plaintiff’s opposition that were “referred to in the complaint and [were] central to
plaintiff’s claims” without converting motion to summary judgment).
6
signed by Defendant LTK’s Vice President–CFO and the plaintiff’s President. Id. On its face,
the Subcontract does not present any indication that Defendant WMATA intended to be bound
by the Subcontract, nor that there was substantial agreement between Defendant WMATA and
the plaintiff on all material terms. See Steven R. Perles, P.C., 473 F.3d at 1249. Consequently,
the plaintiff has failed to plead the existence of a valid contract between the plaintiff and
Defendant WMATA.
In opposition, the plaintiff makes two arguments in an unsuccessful attempt to avoid this
conclusion. 7 First, the plaintiff contends that it was a third-party beneficiary to the Prime
Contract. Pl.’s Opp’n Def. WMATA’s Mot. Dismiss (“Pl.’s WMATA Opp’n”) at 7–14, ECF
No. 10. Alternatively, the plaintiff asserts that its relationship with Defendant WMATA could
be construed as being in direct privity because Defendant WMATA had the ability to audit the
plaintiff’s invoices under the Subcontract. Pl.’s WMATA Opp’n at 14.
At the outset, Defendant WMATA is correct that the plaintiff “failed to allege that it was
a third-party beneficiary of the WMATA-LTK Contract in its Complaint.” Def. WMATA’s
Reply Pl.’s Opp’n Def. WMATA’s Mot. Dismiss (“Def. WMATA’s Reply”) at 3, ECF No. 11.
Since this third-party beneficiary status argument is not pleaded in the complaint, it is not
properly before the Court on a Rule 12(b)(6) motion. Arbitraje Casa de Cambio, S.A. de C.V. v.
U.S. Postal Serv., 297 F. Supp. 2d. 165, 170 (D.D.C. 2003) (“It is axiomatic that a complaint
7
The plaintiff further argues that motions to dismiss under Federal Rule of Civil Procedure 12(b)(6) are
“disfavored,” citing the more lenient “no set of facts” standard from Conley v. Gibson, 355 U.S. 41, 45–46 (1957).
Pl.’s WMATA Opp’n at 6–7. The Conley “no set of facts” standard was abrogated by Twombly, which established
the current standard for 12(b)(6) motions and made clear that dismissal of cases on such motions is not “disfavored”
when the plaintiff fails to make “[f]actual allegations [specific] enough to raise a right to relief above the speculative
level.” Twombly, 550 U.S. at 555 (citation omitted); see also Jones v. Horne, 634 F.3d 588, 596 n.4 (D.C. Cir.
2011) (noting that the Supreme Court has “abrogated the Conley formulation in [Twombly]”). Consequently, the
plaintiff’s reliance on pre-Twombly case law in support of its arguments against the defendants’ motions to dismiss
is misplaced.
7
may not be amended by the briefs in opposition to a motion to dismiss.” (quoting Coleman v.
Pension Benefit Guar. Corp., 94 F. Supp. 2d 18, 24 n.8 (D.D.C. 2000))).
In support of its position that the plaintiff qualifies as a third-party beneficiary to the
Prime Contract, the plaintiff cites fifteen sections of Defendant WMATA’s procurement
procedures manual (“PPM”) which, according to the plaintiff, were incorporated into the Prime
Contract and indicate that the plaintiff “was at the least a third-party beneficiary.” See Pl.’s
WMATA Opp’n at 11–13. The cited provisions generally set out standards and policies which
are applicable to contracts with WMATA and to which its prime contractors should adhere in
subcontracting work. Several of these provisions refer to the prime contractor’s responsibility to
pay subcontractors on a “timely” basis or “no later than,” or “within,” ten days from the receipt
of each payment from Defendant WMATA, see id. at 12 (citing PPM §§302, 305.1, 307.3),
while also requiring each prime contract to provide for reduction in price due to “submission of .
. . subcontractor defective cost or pricing data,” see id. (citing PPM §1314.3).
Merely mentioning subcontractors in generally applicable polices does not establish those
subcontractors as third-party beneficiaries under any contract to which the policies apply; more
is required to gain the status of a third-party beneficiary to a contract. See Fort Lincoln Civic
Ass’n, Inc. v. Fort Lincoln New Town Corp., 944 A.2d 1055, 1064 (D.C. 2008) (“Third-party
beneficiary status requires that the contracting parties had an express or implied intention to
benefit directly the party claiming such status.” (quoting Alpine Cty., Cal. v. United States, 417
F.3d 1366, 1368 (Fed. Cir. 2005))). Nothing in the generally applicable policies contained in the
PPM indicates that Defendant WMATA had an “express or implied intention to benefit directly”
all subcontractors to its contracts. Moreover, the plaintiff has failed to plead that, in the context
8
of the specific contract at issue, Defendant WMATA had any intention to expressly or impliedly
benefit the plaintiff.
The sections cited by the plaintiff may provide some incidental benefits to
subcontractors, but such a party that incidentally benefits from contractual provisions to which it
is not a party is not a third-party beneficiary. See Fort Lincoln Civic Ass’n, Inc., 944 A.2d at1064–65 (“An incidental beneficiary is a person who will be benefited by performance of a
promise but who is neither a promisee nor an intended beneficiary.” (quoting RESTATEMENT
(SECOND) OF CONTRACTS (1981) § 315)). The language relied upon by the plaintiff merely
indicates that it could incidentally benefit from the Prime Contract, not that it was the intended
beneficiary of that contract. See Sealift Bulkers, Inc. v. Republic of Armenia, No. 95-1293, 1996
WL 901091, at *4 (D.D.C. Nov. 22, 1996) (“Under general contract principles, a third party
beneficiary of a contract may bring an action against the principal parties to that contract only
when the parties to the contract intended to create and did create enforceable contract rights in
the third party.” (citing Beckett v. Air Line Pilots Assoc., 995 F.2d 280, 286 (D.C. Cir. 1993));
see also Flexfab, L.L.C. v. United States, 424 F.3d 1254, 1263 (Fed. Cir. 2005) (holding that
government contract officer must “be put on notice, by either the contract language or the
attendant circumstances, of the relationship between the prime contractor and the third-party
subcontractor so that an intent to benefit the third party is fairly attributable to the contracting
officer” before third-party beneficiary status is conferred). To the contrary, General Provision §
42 of the Prime Contract states, in subpart (e), that “[n]othing in this provision is intended to
create a contractual obligation between the [Defendant WMATA] and any subcontractor or to
alter or affect traditional concepts of privity of contract between all parties.” Pl.’s WMATA
9
Opp’n at 5 n.4. 8 Far from showing an intent to benefit the plaintiff, the language in § 42(e)
makes clear that the parties did not intend to create a contractual relationship between Defendant
WMATA and any subcontractors. The sections quoted by the plaintiff also bolster Defendant
LTK’s argument that a duty to pay the plaintiff was triggered only when Defendant LTK was
paid by Defendant WMATA. See Pl.’s WMATA Opp’n at 12 (“The prime contractor shall
certify . . . that payment has been or will be made to all subcontractors due payment, within ten
days after receipt of payment from [Defendant WMATA] for work by those subcontractors.”)
(quoting procurement policy § 307.3); see also Part III.B.1, infra.
Even assuming, arguendo, that the plaintiff were a third-party beneficiary, the plaintiff
would still fail to state a valid claim for breach of contract against Defendant WMATA. The
plaintiff relies heavily upon Sullivan v. United States, 54 Fed. Cl. 214, 215 (“Sullivan I”) (Fed.
Cl. 2002), to support its contention that, as a third-party beneficiary, it has a claim against
Defendant WMATA, see Pl.’s WMATA Opp’n at 8–11. Such reliance is unfounded, since
8
The plaintiff relies on four cases in an attempt to show that subsection 42(e) “is ineffective regarding the fact that
the subcontractor is at the very least a third party beneficiary of this provision,” namely, Shea-S&M Ball v.
Massman-Kiewit-Early, 606 F.2d 1245, 1248 (D.C. Cir. 1979); Paccon, Inc. v. United States, 399 F.2d 162, 164–66
(Ct. Cl. 1968); L.L. Hall. Const. Co. v. United States, 379 F.2d 559, 560–61 (Ct. Cl. 1966); and Hoffman v. United
States, 340 F.2d 645, 652 (Ct. Cl. 1964). Pl.’s WMATA Opp’n at 5 n.4. All four cases are easily distinguishable,
since the parties in all four cases were prime contractors in direct privity with the government, none of them
involved or even discussed subcontractors, and each case involved specific contractual language absent from the
instant contract. Shea-S&M Ball involved two prime contractors, working on adjoining portions of tunnels for the
construction of the Washington, D.C. subway. 606 F.2d at 1247–48. In that case, the court found that one prime
contractor was a third-party beneficiary of another prime contract, which required all adjoining contractors to take
measures to avoid sewer overflows into adjoining sections of tunnel. Id. at 1247–48 & n.2 (quoting contractual
language stating “[a]ny damage, disruption or interference resulting directly or indirectly from [one contractor’s]
operations shall be repaired or restored by [that] Contractor”). Hoffman involved a similar situation where one
prime contractor’s river dam changed the environment around another prime contractor’s bridge abutments,
resulting in delay to the latter’s project. 340 F.2d at 648. The Hoffman court found that the government agency that
was in privity to both prime contractors could have ordered the two to cooperate, but did not do so, resulting in
damage to the plaintiff. Id. at 650–52. Paccon, Inc. involved a prime contractor and, in that case, the contractor had
specific contractual language requiring it to coordinate its schedule with other contractors so as to avoid delays;
language that is wholly absent here. See Paccon, Inc., 399 F.2d at 164–66. Finally, L.L. Hall Construction Co.
involved a breach of contract suit brought by a contractor in direct privity with the government where the
government, through its own efforts, unreasonably delayed the contractor and then sought to deny liability for
damages caused to the contractor. See L.L. Hall Const. Co., 379 F.2d at 560–61.
10
Sullivan amply illustrates why the plaintiff has failed to state an actionable claim against
Defendant WMATA.
In Sullivan I, two private plaintiffs sued the United States for breach of contract after they
were injured in a motor vehicle accident between one of the plaintiffs and a U.S. Postal Service
contractor. 54 Fed. Cl. at 215. The plaintiffs claimed that the contractor did not adhere to the
terms of its contract with the United States to maintain a certain amount of liability insurance,
thus reducing the amount of money available to compensate them for their injuries. See id. The
Sullivan I court did not, as the plaintiffs contend, find “in favor of the plaintiff under the theory
that the plaintiff was a third party beneficiary.” Pl.’s WMATA Opp’n at 8. On the contrary, the
Sullivan I court declined to make such a finding at the motion to dismiss stage of the
proceedings, but nonetheless permitted the case to go forward because “it is more likely than not
under the facts that the [plaintiffs] would have standing to assert a claim against both [the
contractor] and [the government].” Id. at 217 (applying Federal Circuit standard for motions to
dismiss for lack of subject matter jurisdiction under Rule of the Court of Federal Claims
12(b)(1)).
Following summary judgment briefing, the trial court found in favor of the plaintiffs and
the government appealed. Sullivan v. United States, 625 F.3d 1378, 1379 (“Sullivan II”) (Fed.
Cir. 2010). The Federal Circuit reversed the trial court’s finding of government liability on the
breach of contract claim and entered judgment in favor of the government. Id. at 1381. The
Sullivan II court assumed, without deciding, 9 that the plaintiffs were third party beneficiaries to
9
The Sullivan II court cast significant doubt on the idea that the citizen-plaintiffs were actually third-party
beneficiaries, stating in dicta that “[o]rdinarily, liability insurance is purchased to protect the insured party,”—in
Sullivan II, the contractor—“from paying potential losses from [its] own pocket.” Sullivan II, 625 F.3d at 1380.
The court went on to state that the Postal Service’s procurement manual made clear that “contractors may be
required to carry insurance only when necessary to protect the interest of the Postal Service.” Id. Therefore, the
Sullivan II court opined, the “Government’s intent in requiring the carrier to carry additional liability insurance is to
protect the Postal Service from potential risk to the Postal Service—not to compensate others.” Id.11
the contract between the government and the postal service contractor. See id. at 1380. In
examining the plaintiffs’ breach of contract claim against the government, the court determined
that the government did not breach the contract in question, since the contractor was the one
contractually required to maintain liability insurance. See id. at 1380–81. The Sullivan II court
found that, at most, the Postal Service “failed to enforce a contract provision that it was entitled
to enforce.” Id. at 1381. Since the government did not breach the contract, it could not be held
liable by a third-party beneficiary for any breach. See id.To the extent that Sullivan I and II apply to the instant matter, as the plaintiff contends,
Sullivan II is fatal to the plaintiff’s breach of contract claim against Defendant WMATA.
Similarly to the parties in Sullivan II, the plaintiff alleges that the defendants failed to pay the
plaintiff “for services rendered.” See Compl. ¶ 17. The plaintiff cites a portion of the Prime
Contract, which “required LTK to pay [the plaintiff] within ten (10) days of receipt of payment
from WMATA.” Pl.’s WMATA Opp’n at 10 (citing General Provision § 42 from Prime
Contract). In pleading that the plaintiff had performed under the Subcontract, Defendant LTK
was to pay the plaintiff, and that it did not do so, see Compl. ¶¶ 10–14, the plaintiff has pleaded,
just as in Sullivan II, that Defendant LTK breached its contract with Defendant WMATA. Under
the procurement policies, Defendant LTK was obligated to certify that it was paying its
subcontractors on time to Defendant WMATA. See id. If it failed to do so, Defendant LTK
would be breaching its obligation to Defendant WMATA. Thus, just as in Sullivan II, the most
that could be said here is that Defendant WMATA “failed to enforce a contract provision that it
was entitled to enforce.” Sullivan II, 625 F.3d at 1381. Declining to enforce a contract right
does not constitute a breach by Defendant WMATA of any contract. 10 The plaintiff decidedly
10
Another case relied upon by the plaintiff, First Hartford Corp. Pension Plan & Trust v. United States (“First
Hartford”), 194 F.3d 1279, 1289 (Fed. Cir. 1999) reinforces this conclusion. In First Hartford, the Federal Circuit
12
has not pleaded that Defendant WMATA breached any aspect of the Prime Contract, let alone
the terms of the Subcontract.
The plaintiff’s alternative argument that it was effectively in privity with Defendant
WMATA fares no better. The plaintiff asserts that because Defendant WMATA was able “to
demand [the plaintiff’s] financial information and the authority to issue a price adjustment,” and
the contract allegedly “made [the plaintiff] subject to the [PPM] requirements,” Defendant
WMATA “became a party to the subcontract.” Pl.’s WMATA Opp’n at 14. The only case on
which the plaintiff relies in support of this argument is United States v. Johnson Controls, Inc.,
713 F.2d 1541, 1551 (Fed. Cir. 1983), see Pl.’s WMATA Opp’n at 14, but that case is wholly
inapposite and, to the extent that it has any bearing on this case, it cuts against the plaintiff.
The Johnson Controls, Inc. court found that, in the context of a dispute between a
subcontractor and the federal government, a subcontractor was generally not in privity with the
government and could not bring suit for breach of contract. 713 F.2d at 1550–51. An exception
to this general rule may apply only when the prime contractor acts as a government agent by “(1)
acting as a purchasing agent for the government, (2) the agency relationship between the
government and the prime contractor [is] established by clear contractual consent, and (3) the
contract state[s] that the government [is] directly liable to vendors for the purchase price.” Id. at
1551 (emphasis in original). None of those factors are pleaded in the plaintiff’s complaint, nor
contained in the excerpts from the Subcontract before the Court. See generally Compl. & Ex. 2.
Moreover, in Johnson Controls, Inc., the court held that even when the government agency had
“sole authority to reject work”; was the “required interpreter of . . . drawings and specifications”;
noted that, as a general rule, suits against the government may only be raised by those in privity with the
government. Id. The exceptions to that rule require the non-party to the contract in question to stand in the shoes of
an entity that is in privity with the government. Id. Here, the party into whose shoes the plaintiff must step is
Defendant LTK, because it is the only party to this suit that was in privity with the government. See generally,
Compl. Defendant LTK has no claim for breach of contract against Defendant WMATA. See supra.
13
made decisions, as in the instant matter, “concerning equitable adjustments for changes and
suspensions of work under subcontracts”; and “decide[d] disputes under the terms of both the
prime contract and subcontract,” privity did not exist between the government and the
subcontractor. 713 F.2d at 1548. Substantially more interaction between the agency and the
subcontractor than has been pleaded here was found insufficient to establish privity in Johnson
Controls, Inc. See id. Thus, the mere fact that Defendant WMATA was able to audit the
plaintiff’s rates and make adjustments to the invoices, see Compl. Ex. 2 at 1, does not establish
privity between the plaintiff and Defendant WMATA.
In sum, not only has the plaintiff not pleaded that it was in privity with Defendant
WMATA, but also, even assuming, arguendo, that the plaintiff was a third-party beneficiary to
the Prime Contract, the plaintiff has not pleaded an actionable breach of contract against
Defendant WMATA. Therefore, the plaintiff has failed to state a claim upon which relief can be
granted as to Count I and that count must be dismissed. The nature of the plaintiff’s claim
against Defendant WMATA also makes any amendment of its pleading futile, since the plaintiff
has explicitly alleged and argued that Defendant WMATA’s prime contractor, rather than
Defendant WMATA itself, engaged in a breach of contract by failing to pay the plaintiff. See
Compl. ¶ 8, 12; Pl.’s WMATA Opp’n at 4–5 (noting contract provisions requiring Prime
Contractor, not Defendant WMATA, to pay subcontractors). Since the plaintiff cannot amend its
complaint such that it could survive a motion to dismiss, Count I is dismissed with prejudice.
See Metro. Life Ins. Co. v. Blyther, No. 12-1709, 2013 WL 4579754, at *6 (D.D.C. Aug. 29,
2013) (“An amended complaint would be futile if it . . . could not withstand a motion to
dismiss.” (quoting Robinson v. Detroit News, Inc., 211 F. Supp. 2d 101, 114 (D.D.C. 2002))).
14
B. Defendant LTK
The plaintiff asserts three claims against Defendant LTK: breach of contract (Count I);
quantum meruit (Count II); and Account Stated (Count III). The fatal deficiencies in each claim
are discussed below.
1. Breach of Contract
On its face, the complaint fails to plead a breach of the Subcontract. Although Defendant
LTK does not dispute the first two elements for a breach of contract claim—that there was a
valid contract between the parties and that Defendant LTK was obliged to pay the plaintiff under
that contract, see generally Def. LTK’s Mem. Supp. Mot. Dismiss (“Def. LTK’s Mem.”), ECF
No. 7-1—this defendant instead contests whether any breach of any duty owed to the plaintiff
occurred, see id. at 5; Def. LTK’s Reply Pl.’s Opp’n Def. LTK’s Mot. Dismiss (“Def. LTK’s
Reply”) at 7, ECF No. 13 (stating that Defendant “LTK is not arguing that there was no contract
between LTK and [the plaintiff], simply that it did not breach that contract.”).
The complaint alleges that the plaintiff “submitted all documentation required by the
contracts and invoiced for payments,” thereby asserting a claim that it performed under the
contract. Compl. ¶ 11. The Subcontract states that “[p]ayments due to [the plaintiff] under this
Letter Contract shall be made within ten calendar days after receipt of payment by LTK from
WMATA,” and that “[a]ny payments due to [the plaintiff] by LTK are contingent upon LTK
receiving payment from WMATA.” Compl. Ex. 2 at 2 (emphasis added). Despite this explicit
condition for payment of the plaintiff’s invoices, the plaintiff fails to plead that Defendant LTK
“receiv[ed] payment from WMATA.” See generally Compl.; Compl. Ex. 2 at 2. The plaintiff
instead pleads that Defendant “LTK and UII informed [the plaintiff] that it [sic] had not received
15
payment from WMATA for the work performed by [the plaintiff] on the outstanding invoices.”
Compl. ¶ 12.
Citing this contractual language, Defendant LTK argues that payment from Defendant
WMATA to Defendant LTK was a condition precedent to Defendant LTK’s obligation to pay
the plaintiff. See Def. LTK’s Mem. at 5; Def. LTK’s Reply at 3. Under D.C. law, a “condition
precedent may be defined as ‘an event, not certain to occur, which must occur, unless its non-
occurrence is excused, before performance under a contract becomes due.’” Wash. Props., Inc.
v. Chin, Inc., 760 A.2d 546, 549 (quoting RESTATEMENT (SECOND) OF CONTRACTS § 224). “No
particular form of words is necessary in order to create an express condition; however, words and
phrases such as ‘if’ and ‘provided that,’ qualifying a promise, are commonly used to indicate that
the duty of the promisor has expressly been made conditional.” Id.
The plaintiff acknowledges that the Subcontract makes payment due “ten calendar days
after receipt of payment by LTK from WMATA,” and that “any payments due to [the plaintiff]
by LTK are contingent upon” receipt of such payment. Compl. Ex. 2 at 2; see Pl.’s Opp’n Def.
LTK’s Mot. Dismiss (“Pl.’s LTK Opp’n”) at 9, ECF No. 12. Nevertheless, the plaintiff contends
that this clause is ambiguous because the Subcontract also states that the plaintiff “shall be
compensated for the services provided as detailed on each individual task order,” without further
elaboration as to how the two parts of the subcontract are in conflict. Id. at 5, 10–11. 11
11
The plaintiff argues that the Subcontract does not specify what type of payment Defendant LTK had to receive
from Defendant WMATA in order to trigger the duty to pay the plaintiff. Pl.’s LTK Opp’n at 9. Under the
plaintiff’s logic, if Defendant LTK were paid any money at all by Defendant WMATA, it would have to pay the
plaintiff the full amount invoiced by the plaintiff. See id. This argument is belied by the contract provisions the
plaintiff relies upon in its opposition. Specifically, General Provision § 42 of the Prime Contract states “[t]he
Contractor shall pay each subcontractor for satisfactory performance of its contract, or any billable portion thereof,
no later than ten (10) days from the date of the Contractor’s receipt of payment from the Authority for work by that
subcontractor.” Pl.’s LTK Opp’n at 9 (emphasis added). This provision makes plain that Defendant LTK was
bound to pay the plaintiff, as a subcontractor, when paid by Defendant WMATA “for work by” the plaintiff. See id.
Contrary to the plaintiff’s argument, the contract does state payment is due to the subcontractor “only if payment
was especially earmarked for” that subcontractor.
16
Apparently, the plaintiff believes the use of the word “shall” in directing payment to the plaintiff
carries such force as to overcome any other condition set out for payment under the Subcontract.
The plaintiff is incorrect.
The plaintiff also ignores the next two sentences after the sentence quoted by the
plaintiff. These two sentences state that the plaintiff’s rates “are subject to review by WMATA’s
audit group. Should the review result in a change to the rates, the [plaintiff’s] invoices will be
adjusted to reflect the change.” Compl. Ex. 2 at 2. Contrary to the plaintiff’s assertion, the
language in the Subcontract is entirely consistent and unambiguous. When read together, the
only logical reading is that the plaintiff “shall be compensated,” within ten days of Defendant
LTK receiving payment from Defendant WMATA, in the amount on the plaintiff’s invoices,
unless Defendant WMATA adjusts the plaintiff’s rates with a concomitant adjustment to the
plaintiff’s invoices. See Compl. Ex. 2 at 1–2.
It is axiomatic that “[a] contract is not ambiguous simply because the parties have
disputed interpretations of its terms.” Bagley v. Found. for Preservation of Historic
Georgetown, 647 A.2d 1110, 1113 (D.C. 1994). Such ambiguity is present “when, and only
when . . . the provisions in controversy are[] reasonably or fairly susceptible of different
constructions or interpretations . . . and [a contract] is not ambiguous where the court can
determine its meaning without any other guide than a knowledge of the simple facts on which,
from the nature of the language in general, its meaning depends.” Wash. Props., Inc., 760 A.2d
at 548 (quoting Holland v. Hannan, 456 A.2d 807, 815 (D.C. 1983)). Here, any ambiguity is
relieved by the clear language in the contract: “any payments due to [the plaintiff] by LTK are
contingent upon” receipt of such payment. Compl. Ex. 2 at 2. Although, “[a]s a general rule of
contract interpretation, there is a presumption in favor of construing doubtful language in a
17
contract as language of promise rather than as language of condition,” Wash. Props., Inc., 760
A.2d at 549 (citing N.Y. Bronze Powder Co. v. Benjamin Acquisition Co., 716 A.2d 230, 234
(Md. 1998)), here, there is no such doubtful language. The Subcontract is clear that Defendant
LTK was to receive payment from Defendant WMATA for the plaintiff’s work before Defendant
LTK was obligated to pay the plaintiff.
The plaintiff pleads that it was informed that the condition precedent to Defendant LTK’s
duty to pay the plaintiff—namely, payment from Defendant WMATA to Defendant LTK—did
not occur. Compl. ¶ 12. Thus, taking all of the facts as alleged in the plaintiff’s complaint as
true, the obligation to pay had not yet been triggered and, consequently, the plaintiff has
affirmatively pleaded that there was no breach. In an attempt to rectify this fatal error, the
plaintiff adds facts not in the record to its opposition, stating “[i]t is Plaintiff’s belief that
[Defendant] LTK has been paid.” Pl.’s LTK Opp’n at 8. This assertion, and the factual basis for
it, are not present in the pleading. See generally Compl. Thus, contrary to the plaintiff’s
assertion that “[t]he difference of the parties’ positions is a fact question,” id. at 8, the plaintiff
has not set forth in the pleadings, as it must, its position that Defendant LTK was actually paid
for the plaintiff’s services by Defendant WMATA. On this basis, the complaint is deficient and
the breach of contract claim must be dismissed.
The reason for this pleading failure becomes clearer when the plaintiff’s briefs in
opposition to both defendants’ motions to dismiss are read together. In the plaintiff’s opposition
to Defendant WMATA’s motion to dismiss, the plaintiff states that Defendant “WMATA
performed a review of [the plaintiff’s] pricing, rates and cost. Thereafter, WMATA issued a rate
reduction,” as provided for in the contract between Defendant LTK and the plaintiff, and
Defendant WMATA “reduced its payments to LTK.” Pl.’s WMATA Opp’n at 6. The plaintiff
18
further alleges that Defendant “WMATA improperly adjusted down [the plaintiff’s] rates and
cost, to the detriment of [the plaintiff].” Pl.’s WMATA Opp’n at 13. While this allegation does
not appear in the complaint, if true, this allegation bolsters the statement in the complaint that
Defendant LTK informed the plaintiff “that it had not received payment from WMATA for the
work performed by [the plaintiff] on the outstanding invoices.” Compl. ¶ 12. Indeed, based on
the plaintiff’s briefing, it would appear that Defendant LTK was not paid the full amount the
plaintiff feels it was owed. 12
Based on these allegations, which were raised for the first time in the plaintiff’s
opposition briefing and do not appear in the complaint, it would appear that the plaintiff’s actual
dispute is with the results of Defendant WMATA’s audit. See Pl.’s WMATA Opp’n at 13
(“WMATA improperly adjusted down [the plaintiff’s] rates and cost, to the detriment of [the
plaintiff].”); Pl.’s LTK Opp’n at 13 (“If WMATA paid LTK less than the total amount of the
invoices it submitted, LTK could have challenged the reduced payment under the WMATA
disputes clause.”). Defendant LTK lends credence to this theory in its briefing by alleging that
the plaintiff “disputed the lack of payment with WMATA and ultimately filed an appeal with the
[Armed Services Board of Contract Appeals (“ASBCA”)] on November 23, 2012.” Def. LTK’s
Mem. at 4. Defendant LTK further alleges that it was only after this appeal was denied that the
plaintiff filed the instant suit. Id.The plaintiff, adding still more facts to the record that are not in its pleading, states that it
will “be able to show that LTK failed to get Plaintiff’s rates pre-approved” as required by
12
It appears from the briefing that the plaintiff did receive at least some payments for the work done. SeeCompl. ¶
13 (“After all reconciliation of payments, accounts and credits given, the Defendants owe the amount of
$158,800.76.”); see also Def. LTK’s Mem. at 4 (“LTK made all payments to [the plaintiff] which were received
from WMATA for [the plaintiff’s] services, and [the plaintiff] received approximately $382,000 in payments for its
work . . . . However, as a result of an audit by WMATA of [the plaintiff’s] billing rates, WMATA did not remit to
LTK the full amount [the plaintiff] invoiced, and WMATA informed [the plaintiff] of its decision.”).
19
Defendant LTK’s contract with Defendant WMATA. Pl.’s LTK Opp’n at 13. Even assuming
this to be true, such a claim does not set out a breach of contract claim between the plaintiff and
Defendant LTK—it hints at a breach of the Prime Contract, to which the plaintiff was not a
party. See supra Part III.A. Thus, any additional pleading by the plaintiff would be futile, since
the plaintiff’s opposition makes clear that any additional facts the plaintiff could plead would
merely confirm that the condition precedent to trigger Defendant LTK’s duty to pay the plaintiff
did not occur. 13 Accordingly, the plaintiff’s breach of contract claim against Defendant LTK is
dismissed with prejudice. 14
2. Quantum Meruit
The plaintiff’s second cause of action, quantum meruit or unjust enrichment, fails since
quantum meruit is only available in the absence of an express contract. The plaintiff’s argument
that it should be able to plead quantum meruit in the alternative is incorrect. In Plesha v.
Ferguson, 725 F. Supp. 2d 106, 112 (D.D.C. 2010), this court noted that when applying District
of Columbia law to “causes of action [that] clearly involve promises contained in an express
written contract,” the plaintiff must “recover under a breach of contract theory.” This is because
13
Notably, in its opposition to Defendant LTK’s motion to dismiss, the plaintiff admits that Defendant “LTK was
the only party who had a right to challenge a declaration that rates were to be adjusted,” Pl.’s LTK Opp’n at 13, and
that the plaintiff “provided LTK sufficient information to challenge the reduction and request LTK to help correct
the wrongful reduction,” id. at 13 n.4. If, as the plaintiff argues in its opposition to Defendant WMATA’s motion to
dismiss, the plaintiff was actually in privity with Defendant WMATA, the plaintiff would have had some recourse
since it was a party to the Prime Contract. The plaintiff’s admission that it had no ability to challenge Defendant
WMATA’s rate reduction under the Prime Contract undercuts its assertion of privity with Defendant WMATA.
14
The plaintiff also argues that “pay if paid” clauses are generally disfavored on public policy grounds, relying on
authority from other states and districts. Pl.’s LTK Opp’n at 11–12. This argument is unavailing for at least two
reasons. First, the plaintiff has raised a breach of contract action, not a declaration that the Subcontract is void and
that the defendants owe the plaintiff regardless of the contractual terms. Second, contrary to the law from other
jurisdictions, “pay if paid” contracts are enforced in this District and in Maryland, to which this District looks for
guidance on issues of common law. See Urban Masonry Corp. v. N&N Contractors, Inc., 676 A.2d 26, 36 (D.C.
1996) (enforcing “pay if paid” clause); Gilbane Bldg. Co. v. Brisk Waterproofing Co., Inc., 585 A.2d 248, 252 (Md.
Ct. Spec. App. 1991) (enforcing “pay when paid” clause); see also Napoleon v. Heard, 455 A.2d 901, 903 (D.C.
1983) (noting that Maryland is “the source of the District’s common law and an especially persuasive authority
when the District’s common law is silent”). Thus, even if other jurisdictions disfavor “pay when paid” clauses, such
clauses are not disfavored in this jurisdiction and the plaintiff has offered no case law stating otherwise.
20
District of Columbia law “recognizes unjust enrichment as a species of quasi contract that
imposes ‘in the absence of an actual contract,’ ‘a duty . . . upon one party to requite another in
order to avoid the former’s unjust enrichment[,] . . . to permit recovery by contractual remedy in
cases where, in fact, there is no contract.” Vila v. Inter-Am. Inv. Corp., 570 F.3d 274, 279–80
(D.C. Cir. 2009) (alterations in original and citations omitted). Thus, “[u]nderscoring the nature
of promissory estoppel and unjust enrichment as remedies for failed agreements, courts tend not
to allow either action to proceed in the presence of an actual contract between the parties.” Id. at
280.
Here, this is no dispute that there is a valid contract between Defendant LTK and the
plaintiff. See Compl. ¶ 8 (“[The plaintiff] executed a subcontract under the Contract with
[Defendant] LTK on or about January 5, 2012.”); Def. LTK’s Reply at 7 (“LTK is not arguing
that there was no contract between LTK and [the plaintiff], simply that it did not breach that
contract.”). Since an express contract exists between the parties, that contract provides the only
remedy for breach and quantum meruit is unavailable, even if pleaded in the alternative. See
Plesha, 725 F. Supp. 2d at 112 (dismissing alternatively pleaded quantum meruit claim where
express contract undisputedly existed). Accordingly, Count II against Defendant LTK is
dismissed with prejudice, since it is undisputed that there is an express contract between the
parties, making any amended complaint futile.
3. Account Stated
The plaintiff’s cause of action for account stated also must fail. “An account stated is ‘a
promise by a debtor to pay a stated sum of money which the parties had agreed upon as the
amount due.’” Eagle Maint. Servs., Inc. v. D.C. Contract Appeals Bd., 893 A.2d 569, 582 (D.C.
2006) (quoting Ally & Gargano, Inc. v. Comprehensive Accounting Corp., 615 F. Supp. 426,
21
428–29 (S.D.N.Y. 1985)). Such a claim “presupposes an absolute acknowledgement or
admission of a certain sum due, or an adjustment of accounts between the parties, the striking of
a balance, and an assent, express or implied, to the correctness of the balance.” Id. at 582–83
(quoting Falcone v. Paradiso, 54 F.2d 715, 717 (D.C. Cir. 1931)). The plaintiff has merely
pleaded that it sent Defendant LTK “invoices for services rendered” and made repeated attempts
“to collect the amount past due on the invoices.” Compl. ¶¶ 27–28. Under District of Columbia
law, “the mere sending of the bills . . . imported no promise of payment on the part of” the party
to whom the bills were sent. First Nat’l Realty Corp. v. Impact Advertising, Inc., 206 A.2d 579,
580 (D.C. 1965); see also Chinn v. Lewin, 16 F.2d 512, 514–15 (D.C. Cir. 1926) (finding
“[t]here is no way in which” the mere “submission of a bill for professional services, over which
there had been a sharp controversy as to the proper amount, followed by three written demands
for payment, all within less than three months . . . can be held to constitute acquiescence on the
part of the defendant, or be distorted into an account stated”).
In the instant matter, the plaintiff has failed to plead that Defendant LTK agreed, either
expressly or impliedly, that it owed the plaintiff a sum certain. See Compl. ¶¶ 25–29. On the
contrary, Defendant LTK states that it “is not indebted to [the plaintiff]” under the terms of the
subcontract. Def. LTK’s Mem. at 6. Consequently, the pleading fails on its face since it does
not plead the presence of an express or implied agreement as to the amount due, and amending
the pleading would be futile since Defendant LTK does, in fact, dispute the amount due.
Accordingly, Count III against Defendant LTK is dismissed.
IV. CONCLUSION
For the foregoing reasons, the plaintiff has failed to plead a cause of action against either
Defendant WMATA or LTK, and any amended pleading would be futile since such a pleading
22
would not survive a motion to dismiss. The defendants’ motions to dismiss for failure to state a
claim are granted and this action is dismissed with prejudice.
An appropriate Order accompanies this Memorandum Opinion.
Date: March 25, 2014 Digitally signed by Beryl A. Howell
DN: cn=Beryl A. Howell, o=District Court for the District
of Columbia, ou=District Court Judge,
email=howell_chambers@dcd.uscourts.gov, c=US
Date: 2014.03.25 17:02:39 -04'00'
__________________________
BERYL A. HOWELL
United States District Judge
23