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Goudy Construction Inc. v. Raks Fire Sprinkler LLC

United States District Court, N.D. Alabama, Southern Division

December 16, 2019

RAKS FIRE SPRINKLER LLC, et al., Defendants.



         This case is before the court on Defendant Aegis Security Insurance Company's Motion to Strike or in the Alternative, Motion to Dismiss the Bad Faith Claim. (Doc. # 4). The Motion is fully briefed and ripe for review. (Docs. # 4, 11, 15, 16, 17, 18, 19, 22). After careful consideration, the court concludes that Defendant's Motion (Doc. #4) is due to be granted.

         I. Background[1]

         Plaintiff Goudy Construction, Inc., (“Plaintiff” or “Goudy”) is a construction company located in Bessemer, Alabama. (Doc. # 1, Exh. A ¶1). In 2017, Defendant Raks Fire Sprinkler, LLC, (“RAKS”) submitted a bid to install a fire sprinkler system on a project where Goudy was the General Contractor. (Id. at ¶9). Defendant Romero Ali is the managing member and incorporator of RAKS. (Id. at ¶3).

         Goudy accepted RAKS' bid and they entered into a contractual agreement on August 21, 2017. (Id. at ¶9). As part of the agreement RAKS was required to provide commercial liability insurance in the amount of $2, 000, 000 for the duration of the project. (Id.). In addition, RAKS was required to provide a performance bond with Goudy listed as the owner, and a labor and material bond with Goudy listed as the owner. (Id. at ¶10). RAKS complied with Goudy's requirements and purchased both bonds from Defendant Aegis Security Insurance Company (“Aegis). (Id. at ¶11). After receiving approval on the design specifications for the installation of the fire sprinkler system, RAKS began the installation. (Id. at ¶13-14).

         However, after the installation began, RAKS fell significantly behind on the scheduled progress dates. (Id. at ¶15). In addition, RAKS began to experience payroll changes and failed to make timely payments to its employees. (Id. at ¶16). Due to their failure to make payments, RAKS was not in compliance with its union contracts. (Id.). These financial challenges spurred RAKS to request that Goudy make payments due to RAKS under the contract directly into RAKS' payroll account.[2] (Id. at ¶17). Goudy complied with this request and made all remaining payments due to RAKS into their payroll account. (Id.)

         In order to receive their scheduled payroll draws, RAKS employees, at the direction of Romero Ali, represented that the agreed upon design specifications were being followed and installation deadlines were being met. (Id. at ¶18). Meanwhile, RAKS continued to fall behind on the established timeline for the project. (Id. at ¶19). RAKS was given a warning with a final demand for performance on February 13, 2018. On November 6, 2018, RAKS left the job site and did not return. (Id. at ¶20).

         Goudy attempted to communicate with RAKS via e-mail and phone to no avail. (Id. at ¶21). On November 26, 2018, Goudy sent correspondence to RAKS by certified mail, requesting that they return and finish installing the sprinkler system. (Id.). RAKS failed to respond. (Id. at ¶22). After RAKS failed to respond, Goudy informed RAKS' insurer their failure to perform the installation as contracted. (Id.). Goudy subsequently filed a formal claim with the insurance company on November 13, 2019. (Id. at ¶22). Goudy later learned that RAKS lost its liability insurance shortly after beginning the project. (Id. at ¶24). Goudy also filed a formal claim with Aegis. (Id.) Goudy provided Aegis with documentation of RAKS' incomplete installation, as well as other proof and evidence that RAKS' work was performed in direct conflict to the approved design specifications. (Id. at ¶23).

         After more than sixty (60) days elapsed, Aegis began an investigation of RAKS' performance. (Id. at ¶25). On March 8, 2019 Aegis denied Goudy's claim based upon RAKS' execution of a “Final Waiver and Release of Lien.” (Id. at ¶26). According to Aegis, the waiver and release represents Goudy's acceptance of RAKS' performance under the contract. (Id.).

         On July 9, 2019 Goudy commenced the instant case in the Circuit Court of Jefferson County, Bessemer Division, Alabama, alleging negligence, breach of contract, fraud/misrepresentation against RAKS (and presumably Romero Ali), as well as breach of contract and bad faith against Aegis.[3] (Doc. # 1, Exh. A). On August 14, 2019, Aegis timely removed the case to the United States District Court for the Northern District of Alabama, Southern Division. (Doc. # 1 at 2-3). Subsequently, Aegis filed a Motion to Strike, or in the Alternative, Motion to Dismiss the Bad Faith Claim. (Doc. # 4)

         II. Standard of Review[4]

         The Federal Rules of Civil Procedure require only that the complaint provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Having said that, the complaint must include enough facts “to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Pleadings that contain nothing more than “a formulaic recitation of the elements of a cause of action” do not meet Rule 8 standards, nor do pleadings suffice that are based merely upon “labels and conclusions” or “naked assertion[s]” without supporting factual allegations. Twombly, 550 U.S. at 555, 557.

         In deciding a Rule 12(b)(6) motion to dismiss, courts view the allegations in the complaint in the light most favorable to the non-moving party. Watts v. Fla. Int'l Univ., 495 F.3d 1289, 1295 (11th Cir. 2007). To survive a motion to dismiss, a complaint must “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009). Although “[t]he plausibility standard is not akin to a ‘probability requirement, '” the complaint must demonstrate “more than a sheer possibility that a defendant has acted unlawfully.” Id. A plausible claim for relief requires “enough fact[s] to raise a reasonable expectation that discovery will reveal evidence” to support the claim. Twombly, 550 U.S. at 556.

         The Supreme Court has recently identified “two working principles” for a district court to use in applying the facial plausibility standard. First, in evaluating motions to dismiss, the court must assume the veracity of well-pleaded factual allegations; however, the court does not have to accept as true legal conclusions when they are “couched as [] factual allegation[s].” Iqbal, 556 U.S. 679. Second, “only a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. The Court has also instructed that application of the facial plausibility standard involves two steps. Under prong one, the court must determine the scope and nature of the factual allegations that are well-pleaded and assume their veracity; and under prong two, the court must proceed to determine the claim's plausibility given the well-pleaded facts. That task is context specific and, to survive the motion, the allegations must permit the court based on its ...

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