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Robinson Mechanical Contractors Inc. v. PTC Group Holdings Corp.

United States District Court, E.D. Missouri, Southeastern Division

June 1, 2017




         This case comes before the Court on defendant PTC Group Holdings Corp.'s (“PTC”) motion to dismiss counts I, II, VI, and VII of plaintiff's second amended complaint (#81). Plaintiff Robinson Mechanical Contractors Inc. d/b/a Robinson Construction Company (“plaintiff”) opposes the motion. Defendant PTC Seamless Tube Corp. (“Seamless”), a dissolved and defunct corporation able to sue and be sued under Delaware law, is not represented in this action and is currently in default. The issues are briefed and ripe for disposition.

         I. Background

         Plaintiff filed this lawsuit against defendant PTC on May 5, 2015. Plaintiff performed extensive construction work at a PTC's subsidiary's steel tubing manufacturing plant in Hopkinsville, Kentucky, pursuant to a contract between plaintiff and a PTC subsidiary, Seamless. When the PTC subsidiary - Seamless - fell behind on paying its invoices from plaintiff, PTC stepped in and made some payments pursuant to a new letter agreement between PTC and plaintiff dated December 16, 2014, for invoices due by the end of December 2014. PTC made the payments discussed in the letter agreement but made no payments for future work done by plaintiff for Seamless. In fact, after the payments made by PTC in accordance with the letter agreement, neither Seamless nor PTC made any payments to plaintiff for plaintiff's work after November 23, 2014.

         Due to the claims presented and complexity of the matter, the Court will expand on the details of plaintiff's allegations. Plaintiff alleges that PTC created Seamless to make and sell seamless piping to complement PTC's existing business. PTC purchased pipe manufacturing equipment and decided to transform an existing facility owned within PTC's corporate family, located in Hopkinsville, into a seamless pipe business. PTC Alliance Acquisitions (“PTC Alliance”), another corporation within PTC's corporate family, entered into a Professional Services Agreement (“PSA”) with plaintiff to remove the equipment currently at the facility.[1] Seamless was incorporated on June 24, 2013, approximately a month and a half after plaintiff entered into the contract with PTC Alliance. After incorporation, PTC purchased all of Seamless' shares of stock for $10. PTC's CFO was the sole initial director for Seamless and eventually was named the CFO and vice president of Seamless. The CFO then nominated the CEO and president of PTC to become the second director of Seamless, in addition to being named the CEO and president of Seamless. Plaintiff alleges that these two were Seamless' only directors and officers from Seamless' incorporation until its bankruptcy. Additionally, Seamless and PTC shared the same physical address and offices.

         Seamless, plaintiff claims, was created by PTC to be the contracting party with contractors and suppliers for construction and renovation of the Hopkinsville facility as a means to shield PTC from liability for the project. In late November or early December 2013, PTC representatives met with plaintiff and asked plaintiff to perform the overall work on the renovation of the Hopkinsville plant, including the installation of the equipment on a time and material basis.[2] As stated above, plaintiff entered into the PSA with Seamless, not PTC. However, PTC representatives were frequently on-site controlling and directing the construction and renovation work. Plaintiff invoiced Seamless every two weeks for its work with payment due 30 days following invoice. By the end of November 2014, Seamless owed plaintiff more than $7 million for plaintiff's work at the Hopkinsville plant.

         Due to financial issues, PTC, on behalf of Seamless, sought to alter the payment terms of the PSA, including extending the due date for invoices from 30 days to 90 days. At the same time, PTC representatives indicated that they were happy with plaintiff's work and wished plaintiff to work on “Phase II” of the project. Plaintiff, owed over $7 million by Seamless under the current PSA, was hesitant about extending the invoice due date. PTC, in an effort to ease plaintiff's concerns, submitted a copy of its financial statement from September 2014 and a document entitled “Summary Borrowing Base Certificate” which indicated an amount of approximately $23.5 million available under PTC's credit facilities with that amount represented to plaintiff as available to pay plaintiff for its continuing work on the Hopkinsville plant. After receiving this information, on December 16, 2014, plaintiff entered into a letter agreement with PTC which stated, inter alia, that (1) PTC would pay plaintiff for invoices through PTC's central cash management system, (2) plaintiff would extend the invoice due date from 30 to 90 days, (3) and plaintiff would complete Phase II of the project.

         PTC made the payments for past-due invoices according to the terms of the letter agreement. Following PTC's payment, plaintiff continued to work on the project with project activities and staffing levels directed by on-site PTC representatives. Plaintiff's first invoice after the letter agreement covered work between November 23, 2014 and December 6, 2014, with the invoice given to PTC and Seamless on December 12, 2014. Because of the 90 day due date, payment for this invoice was not due until March 12, 2015.

         On March 11, one day before Seamless' payment was due pursuant to the letter agreement, nearly three months after the defendants were given plaintiff's invoice, Seamless sent a letter to plaintiff advising plaintiff that Seamless had a dispute regarding plaintiff's invoice and that it would not make the payment. The letter did not refer to any particular invoice and did not explain what Seamless disputed within the invoice. Further, this was the first time that defendants advised plaintiff that defendants disputed plaintiff's invoices or would not pay plaintiff's invoices. Plaintiff ceased work on March 12. Plaintiff alleges that the parties met in-person several weeks after the payment dispute and defendants again declined to identify any particular invoices or items within invoices that defendants disputed.

         Since then, neither Seamless nor PTC has paid plaintiff for its work done after November 23, 2014. Insolvent or approaching insolvency, Seamless applied for bankruptcy on April 26, 2015 and was dissolved, pursuant to Delaware law, on January 29, 2016 (#68-3).[3] Ultimately, plaintiff claims that it is owed $14.8 million for labor and materials that it and its subcontractors furnished for the construction project. Despite the fact that plaintiff had a contract with the PTC subsidiary - Seamless - plaintiff filed its first amended complaint solely against PTC on the basis of the 2014 letter agreement between PTC and plaintiff. Plaintiff brought six claims against PTC - (1) breach of contract, (2) breach of duty of good faith and fair dealing, (3) fraudulent misrepresentation, (4) negligent misrepresentation, (5) promissory estoppel, and (6) quantum meruit.

         PTC moved to dismiss plaintiff's first amended complaint for failure to state a claim. The Court partially granted PTC's motion on March 31, 2016 - dismissing three of plaintiff's claims including breach of contract, breach of duty of good faith and fair dealing, and quantum meruit (#27). The parties then engaged in discovery. The case management order set a deadline for amendment of pleadings and joinder of additional parties of September 30, 2016 (#33). Due to ongoing depositions, plaintiff requested and received an extension of time for that deadline to October 31, 2016 (#38). Plaintiff filed a motion to file a second amended complaint on October 31, seeking to add Seamless as a defendant, to add a new count to pierce the corporate veil between Seamless and PTC, and to reassert counts previously dismissed based upon new allegations in light of facts discovered since the filing of the first amended complaint (#40). The Court granted the plaintiff's motion on January 27, 2017 (#65).

         Now, plaintiff seeks to pierce Seamless' corporate veil because plaintiff alleges that PTC and its wholly-owned subsidiary, Seamless, acted as a single economic entity and are alter egos - subject to liability for plaintiff's claims. Seamless failed to answer plaintiff's second amended complaint and is currently in default in this action (#97). In the instant motion, PTC again seeks to dismiss plaintiff's breach of contract, breach of duty of good faith and fair dealing, and quantum meruit claims, in addition to plaintiff's new claim to pierce the corporate veil between Seamless and PTC (#81).

         II. Legal Standard

         The purpose of a Rule 12(b)(6) motion to dismiss for failure to state a claim is to test the sufficiency of a complaint so as to eliminate those actions “which are fatally flawed in their legal premises and deigned to fail, thereby sparing litigants the burden of unnecessary pretrial and trial activity.” Young v. City of St. Charles, 244 F.3d 623, 627 (8th Cir. 2001) (citing Neitzke v. Williams, 490 U.S. 319, 326-27 (1989)). “To survive a motion to dismiss, a claim must be facially plausible, meaning that the ‘factual content. . . allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Cole v. Homier Dist. Co., Inc., 599 F.3d 856, 861 (8th Cir. 2010) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The Court must “accept the allegations contained in the complaint as true and draw all reasonable inferences in favor of the nonmoving party.” Id. (quoting Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir. 2005)).

         III. Analysis

         A. Breach of Contract

         The breach of contract count is based on the letter agreement dated December 16, 2014 between plaintiff Robinson Construction and defendant PTC.[4] This Court, by order of March 31, 2016, dismissed that count for failure to state a cause of action. Now, with leave of Court, plaintiff has refiled the count, which is essentially the same as the original, but with the addition of allegations pertaining to the oral negotiations between the parties that led to the agreement. These new allegations, of course, are parol evidence, which is disallowed unless the Court determines that the contract is ambiguous. In that event, parol evidence is permitted to determine the intent of the parties. Dunn Indus. Grp. V. City of Sugar Creek, 112 S.W.3d 421, 428-29 (Mo. banc 2003); Royal Banks of Missouri v. Fridkin, 819 S.W.2d 359, 361-62 (Mo. banc 1991).[5]

         Whether the contract is ambiguous so as to permit parol evidence was not an issue addressed by the parties in the briefing on the first motion to dismiss, and for that reason, this Court is compelled to revisit the dismissal. For context, this Court's reasons for the dismissal in the March 31, 2016 memorandum and order are restated as follows:

Plaintiff is clear, in its complaint and in its response to defendant's motion, that its claims against defendant arise from the letter agreement that is independent of and “does not incorporate the terms . . . of the [PSA] with Seamless.” Plaintiff argues that defendant agreed to pay for the future debts of Seamless, its wholly owned and controlled subsidiary, to Robinson through its own cash management system. Plaintiff relies primarily on the following statements in the letter agreement:
As we agreed, you released payment of $1, 749, 974.00 on Friday 12-12-14, receipt of which is hereby acknowledged and we will accept payment of the balance of $6, 190, 472.42 on January 2, 2015 by wire transfer in return for the concessions below. As a part of this agreement we would also be willing to extend ...

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