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RI KY Roofing & Sheet M LLC v. DTL Builders, Inc.

United States District Court, D. Oregon

February 7, 2018

RI KY ROOFING & SHEET M LLC, an Oregon limited liability company, Plaintiff,
v.
DTL BUILDERS, INC., a Utah corporation, and THE CINCINNATI INSURANCE COMPANY, an Ohio surety, Defendants. DTL BUILDERS, INC., a Utah corporation, Plaintiff,
v.
RI KY ROOFING & SHEET M LLC, an Oregon limited liability company, Defendant.

          FINDINGS AND RECOMMENDATION

          JOLIE A. RUSSO UNITED STATES MAGISTRATE JUDGE

         Ri Ky Roofing & Sheet M LLC (“Ri Ky”) partially moves to dismiss DTL Builders, Inc.'s (“DTL”) complaint pursuant to Fed.R.Civ.P. 12(b)(6). The Court held oral argument on February 1, 2018. For the reasons set forth below, Ri Ky's motion should be granted in part and denied in part.

         BACKGROUND

         On June 13, 2017, Ri Ky commenced a lawsuit in Linn County Circuit Court against DTL, Waverly Land Management, and Winco Foods, asserting claims for breach of contract, quantum meruit, and foreclosure of a construction lien. First Am. Compl. ¶¶ 5-31 (Case No. 6:17-01592-JR, Doc. 1). Ry Ki's claims are premised on allegedly unpaid construction services provided to DTL between January and March 2017 pursuant to a subcontract for improvements to a Winco Foods store located in Albany, Oregon. Id.

         On August 11, 2017, DTL filed a complaint against Ri Ky alleging breach of contract, negligence, and breach of the duty of good faith and fair dealing based on the same construction project and underlying subcontract. Compl. ¶¶ 5-20 (Case No. 6:17-cv-01251-JR, Doc. 1).

         On September 11, 2017, Ri Ky amended its complaint, reasserting the same three claims against DTL and The Cincinnati Insurance Company. Second Am. Compl. ¶¶ 4-29 (Case No. 6:17-01592-JR, Doc. 1). On October 10, 2017, DTL removed Ri Ky's case to this Court.

         On October 18, 2017, the Court granted DTL's and Ri Ky's stipulated motion to consolidate. On December 21, 2017, DTL filed an amended complaint. See generally First Am. Countercl. (Case No. 6:17-cv-01592-JR, Doc. 18). That same day, Ri Ky moved to dismiss DTL's breach of the duty of good faith and fair dealing claim (“good faith claim”).

         STANDARD OF REVIEW

         Where the plaintiff “fails to state a claim upon which relief can be granted, ” the action must be dismissed. Fed.R.Civ.P. 12(b)(6). To survive a motion to dismiss, the complaint must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). For purposes of a motion to dismiss, the complaint is liberally construed in favor of the plaintiff and its allegations are taken as true. Rosen v. Walters, 719 F.2d 1422, 1424 (9th Cir. 1983). Bare assertions that amount to nothing more than a “formulaic recitation of the elements” of a claim “are conclusory and not entitled to be assumed true.” Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009). Rather, to state a plausible claim for relief, the complaint “must contain sufficient allegations of underlying facts” to support its legal conclusions. Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

         DISCUSSION

         Ri Ky contends that DTL's good faith claim should be dismissed with prejudice because DTL “does not allege a single fact regarding any bad faith by Ri Ky.” Ri Ky's Mot. Dismiss 2 (Case No. 6:17-cv-01251, Doc. 12; Case No. 6:17-cv-01592, Doc. 19). According to Ri Ky, DTL's good faith claim asserts nothing “more than a failure to adequately perform a construction contract, ” which is insufficient under Oregon law. Id. at 3-5; see also Ri Ky's Reply to Mot. Dismiss 2-5 (Case No. 6:17-cv-01251, Doc. 18; Case No. 6:17-cv-01592, Doc. 24).

         Conversely, DTL contends its good faith claim, as alleged, both “complies with Rule 8” and “state[s] a plausible claim” because “intentional misconduct - or motive of any kind - is not required.” DTL's Opp'n to Mot. Dismiss 2-4 (Case No. 6:17-cv-01251, Doc. 16; Case No. 6:17-cv-01592, Doc. 23). As such, DTL maintains its allegation that “Ri Ky's poor performance necessitated replacement of the roof system at a significant cost to DTL” establishes a good faith claim at this stage in the proceedings. Id. at 3.

         Ri Ky's motion poses a preliminary legal question concerning the parameters of good faith and fair dealing claims. In Oregon, “[t]he law imposes a duty of good faith and fair dealing in the performance and enforcement of every contract.” Hampton Tree Farms, Inc. v. Jewett, 320 Or. 599, 615, 892 P.2d 683 (1995) (citations omitted). The purpose of this duty “is to prohibit improper behavior [and] ensure that the parties will refrain from any act that would have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.” Klamath Off-Project Water Users, Inc. v. Pacificorp, 237 Or.App. 434, 445, 240 P.3d 94 (2010) (citation and internal quotations omitted). The good faith doctrine is therefore designed to effectuate the objectively reasonable contractual expectations of the parties. Tolbert v. First Nat'l Bank of Or., 312 Or. 485, 494, 823 P.2d 965 (1991); see also Arnett v. Bank of Am., N.A., 874 F.Supp.2d 1021, 1033-35 (D. Or. 2012) (summarizing the “substantial evolution” of Oregon's good faith and fair dealing law) (citations omitted).

         Accordingly, courts generally permit breach of good faith and fair dealing claims to proceed where the plaintiff has alleged facts indicative of conduct that goes beyond that which is reasonably contemplated by the parties' contract - e.g., intentional misconduct, improper behavior, etc. See, e.g., Brown v. Am. Prop. Mgmt. Corp., 167 Or.App. 53, 63, 1 P.3d 1051 (2000); Cantua v. Creager, 169 Or.App. 81, 97, 7 P.3d 693 (2000); Iron Horse Eng'g Co., Inc. v. N.W. Rubber Extruders, Inc., 193 Or.App. 402, 421, 89 P.3d 1249 (2004); see alsoBest v. U.S. Nat'l Bank of Or., 303 Or. 557, 563, 739 P.2d 554 (1987) (listing examples of the “types of bad faith . . . which have been recognized in judicial decisions, ” including “evasion of the spirit of the bargain, lack of diligence and slacking off, willful rendering of imperfect performance, abuse of power to specify terms, and interference with or failure to cooperate in the other party's performance”). Nevertheless, ...


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