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Construction Management, Inc. v. Expo Hospitality, LLC

United States District Court, M.D. Tennessee, Nashville Division

July 8, 2019

CONSTRUCTION MANAGEMENT, INC., Plaintiff,
v.
EXPO HOSPITALITY, LLC, Defendant. EXPO HOSPITALITY, LLC, Counter-/Third Party Plaintiff,
v.
CONSTRUCTION MANAGEMENT, INC., DUSTIN GEDITZ, and WILLIAM COULSON, Counter-/Third Party Defendants.

          MEMORANDUM

          ALETA A. TRAUGER, JUDGE

         Construction Management, Inc. (“CMI”), Dustin Geditz, and William Coulson have filed a Motion to Dismiss Defendant's Counterclaims (Docket No. 12), to which Expo Hospitality, LLC (“Expo”) has filed a Response (Docket No. 17), and CMI, Geditz, and Coulson have filed a Reply (Docket No. 18). For the reasons set out herein, that motion will be granted in part and denied in part.

         I. BACKGROUND[1]

         Expo, a Tennessee company, owns land in Rutherford County, Tennessee, that it wished to develop into a hotel. (Docket No. 9 ¶ 74.) CMI is a South Dakota-based construction contractor. (Id. ¶ 75.) Expo identifies third-party defendants Dustin Geditz and William Coulson as South Dakota residents who incorporated CMI, with Coulson continuing to serve as its president. (Id. ¶ 76-77, 82-84.) CMI claims that, on July 12, 2017, Expo and CMI entered into an agreement for CMI to build an 81-unit hotel on Expo's land, to be operated under the Best Western Glo Hotel brand. (Docket No. 1 ¶¶ 6-7.) The putative agreement called for CMI to be paid on a “cost-plus” basis, meaning that its payment was not fixed, but rather would be determined based on the costs of the project plus a fee. Accordingly, CMI was to submit an “Application for Payment” on or after the 20th of each month, and, by the 10th of the next month, Expo would pay CMI what it was owed, based on the costs and fees set out in the Application. (Id. ¶ 10-11.)

         CMI performed some early work on the project, including performing grading and erosion control, installing utilities, pouring footings, and completing preliminary drawings for the development. (Id. ¶ 16-18.) Expo, however, stopped providing payment in response to CMI's Applications, beginning in July 2018. (Id. ¶ 23.) CMI suggests that Expo's decision may have been related to the fact that Expo had changed its mind about the nature of the development and now wished to build a hotel to operate under the Avid IHG brand, not the Best Western Glo brand. (Id. ¶¶ 19-21.)

         Expo, however, points to a different problem, having to do with CMI's licensure as a general contractor. Under Tennessee law, “[a]ny person, firm or corporation engaged in contracting in th[e] state shall be required to submit evidence of qualification to engage in contracting, and shall be licensed” under the state's system. Tenn. Code Ann. § 62-6-103(a)(1). A general contractor's license in Tennessee, however, is not an all-or-nothing proposition. Rather, the state's scheme calls for a graduated system of licenses pursuant to which a licensee is permitted to work on projects below a certain value. “It is unlawful for any person, firm, or corporation to engage in or offer to engage in contracting for any project in [Tennessee], unless, at the time of such engagement or offer to engage, the person, firm, or corporation has been duly licensed with a monetary limitation sufficient to allow the person, firm, or corporation to engage in or offer to engage in such contracting project . . . .” Id.

         Coulson formed CMI as a South Dakota corporation on March 9, 2015, and he submitted an application for a Tennessee contractor's license on its behalf on April 21, 2015. (Docket No. 9 ¶¶ 85-88, 95; Docket No. 9-5.) Included with that application was an affidavit in which Coulson and Geditz claimed that CMI had not “bid, offered to engage[, ] or performed” any construction in the state worth over $25, 000 before applying for the license. (Docket No. 9-5 at 6.) Expo contends that that affidavit was false, because Coulson and CMI had already contracted on an earlier hotel project in Nashville's Metro Center area. (Docket No. 9 ¶ 92.)

         On or around May 20, 2015, CMI filed a “Hardship License Request” with the Tennessee Board of Licensing and Contractors. (Id. ¶ 97; Docket No. 9-7.) The initial purpose of the request was to obtain a license with no monetary limit. (Docket No. 9 ¶ 97.) On June 29, 2015, however, CMI revised its request to seek a license with a monetary limit of $284, 000. (Id. ¶ 98; Docket No. 9-8.) On July 31, 2015, CMI was issued a license with a monetary limit of $284, 200. (Docket No. 9-10.) When the license was issued, the Board for Licensing Contractors sent CMI a letter, dated June 30, 2015, confirming that the company had been granted a license and listing the details of the license, including the monetary limit (“Confirmation Letter”). (Docket No. 9-9.)

         At some point-Expo suggests it was shortly after the Confirmation Letter was received- someone altered the Confirmation Letter to appear, falsely, to confirm that CMI had received a license with no monetary limitation. (Docket No. 9 ¶ 104.) CMI then, in Expo's words, “represented to the public that CMI was a board qualified contractor licensed to build hotels in the State of Tennessee with an unlimited budget.” (Id. ¶ 105.) As an example, Expo points to CMI's website, in which the company claims, “We are either licensed or capable of licensing in all lower 48 states.” (Id. ¶ 108.) The website also boasts of two prior Tennessee hotels that CMI allegedly built-which, Expo suggests, implies to the public that CMI has the licensure necessary to complete such projects. Expo also claims that “Coulson fraudulently represented to the [sic] Expo Hospitality that CMI was a board qualified contractor in the State of Tennessee to build hotels with an unlimited budget, ” although Expo does not explain when or how such representations were made. (Id. ¶ 106.)

         Expo alleges that it was in the context of this ongoing misrepresentation that CMI, in 2017, bid on the contract to build the Rutherford county hotel, despite the project's having an estimated cost of over six million dollars, well beyond CMI's actual licensure. (Id. ¶¶ 115, 122.) Although the parties initially proceeded as if CMI had won the bid, Expo maintains that it never signed a written contract, meaning that the work performed was governed by the oral agreement between the parties involving preliminary work. (Id. ¶¶ 126-27.) Expo states that CMI, Coulson, and Geditz “were responsible for [obtaining] the required permits and documents for the construction of the project.” (Id. ¶ 125.) When Expo was unable to obtain the required building permit, the company and, according to Expo, Coulson and Geditz “continued to represent that the reason they could not get a building permit was an issue with the paperwork and affirmatively denied that there was an issue with the license.” (Id. ¶ 128.) Although CMI performed some site preparation work, such as the aforementioned grading, actual construction was delayed due to the lack of a permit. (Id. ¶¶ 132-33.)

         On October 6, 2018-a few months after Expo had stopped paying CMI-a Clarksville man named Mike Hudson filed a complaint with the Board of Licensing that “CMI is building hotels across the state by using a falsified document, ” which he described as the modified Confirmation Latter. (Id. ¶ 138; Docket No. 9-15 at 2.) The Board investigated the matter and concluded that the allegation was supported and that CMI had been using the altered Confirmation Letter to obtain permits to which it was not entitled. As a result, it suspended CMI's license. (Docket No. 9 ¶¶ 139-43.)

         On March 22, 2019, CMI filed a Demand for Arbitration against Expo. (Docket No. 9-19.) Expo contested the arbitrability of the dispute, and CMI elected to waive any right to arbitration “[i]n the interests of avoiding a protracted dispute” over arbitrability. (Docket No. 1 ¶¶ 48-49.) On April 9, 2019, CMI filed its Complaint in this court, pleading claims for breach of contract, quantum meruit, and unjust enrichment. (Docket No. 1 ¶¶ 50-58.) Expo filed an Answer and Counter-Complaint (Docket No. 8), which it shortly thereafter superseded with its Answer and Corrected Counter-Complaint (Docket No. 9). Expo states causes of action against CMI, Coulson, and Geditz, whom the Counter-Complaint largely discusses collectively. It pleads what it characterizes as eight claims[2]: declaratory relief (Count I); intentional misrepresentation/conspiracy (Count II); rescission (Count III); violation of Tenn. Code Ann. § 62-6-103 (Count IV); violation of Tenn. Code Ann. § 62-6-136 (Count V); punitive, treble, and/or consequential damages (Count VI); unjust enrichment (Count VII); and attorney's fees (Count VIII). (Docket No. 9 ¶¶ 150-219.)

         II. LEGAL STANDARD

         In deciding a motion to dismiss for failure to state a claim under Rule 12(b)(6), the court will “construe the complaint in the light most favorable to the plaintiff” and “accept its allegations as true.” Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007); Inge v. Rock Fin. Corp., 281 F.3d 613, 619 (6th Cir. 2002). Unless additional pleading requirements specific to the plaintiff's claims say otherwise, the Federal Rules of Civil Procedure require only that a plaintiff provide “a short and plain statement of the claim that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957). The court must determine only whether “the claimant is entitled to offer evidence to support the claims, ” not whether the plaintiff can ultimately prove the facts alleged. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

         The complaint's allegations, however, “must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). To establish the “facial plausibility” required to “unlock the doors of discovery, ” the plaintiff cannot rely on “legal conclusions” or “[t]hreadbare recitals of the elements of a cause of action, ” but, instead, the plaintiff must plead “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, 678-79 (2009). “[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. at 679; Twombly, 550 U.S. at 556.

         Rule 9(b) of the Federal Rules of Civil Procedure states that, when pleading fraud, “a party must state with particularity the circumstances constituting fraud.” The Sixth Circuit has explained that, while Rule 9(b) imposes a heightened standard, the underlying purpose of the ...


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