United States District Court, D. Oregon
RI KY ROOFING & SHEET M LLC, an Oregon limited liability company, Plaintiff,
DTL BUILDERS, INC., a Utah corporation, and THE CINCINNATI INSURANCE COMPANY, an Ohio surety, Defendants. DTL BUILDERS, INC., a Utah corporation, Plaintiff,
RI KY ROOFING & SHEET M LLC, an Oregon limited liability company, Defendant.
FINDINGS AND RECOMMENDATION
A. RUSSO UNITED STATES MAGISTRATE JUDGE
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.
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.
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).
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.
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
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).
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).
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.
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
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,