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Arbon Valley Solar, LLC v. Thomas & Betts Corp.

United States District Court, D. Idaho

January 19, 2017

ARBON VALLEY SOLAR, LLC., INTERCONNECT SOLAR DEVELOPMENT, LLC., and JOHN HESS CONSTRUCTIONS, INC., Plaintiffs,
v.
THOMAS & BETTS CORPORATION, a Tennessee Corporation, and John and Jane Does I through, whose true identities are unknown, Defendants.

          MEMORANDUM DECISION AND ORDER

          Edward J. Lodge United States District Judge

         This matter is before the Court on a Motion to Dismiss (Dkt. 11) filed by Defendant Thomas & Betts Corporation. Having fully reviewed the record, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds the decisional process would not be significantly aided by oral argument, this matter shall be decided on the record before this Court without oral argument.

         I. BACKGROUND[1]

         Plaintiffs Arbon Valley Solar, LLC (“Arbon Valley Solar”) and Interconnect Solar Development LLC (“Interconnect Solar”) (referred to collectively hereinafter as “Plaintiffs”) bring claims for breach of contract and breach of the implied covenant of good faith and fair dealing, negligence, breach of assumed duty, and negligent hiring, supervision and training, against Defendant Thomas & Betts Corporation (“Thomas & Betts” or “Defendant”). Plaintiffs' claims arise out of the construction of a solar power facility in Idaho (“Solar Project”). Arbon Valley Solar is an affiliate of Cranney Farms, a business enterprise engaged in agricultural operations carried out in the Arbon Valley, Idaho.

         On or about December 3, 2012, Arbon Valley Solar entered into an agreement (“Construction Agreement”) with Interconnect Solar, under which Interconnect Solar agreed to provide all labor, materials, equipment and services necessary to complete the Solar Project on behalf of Arbon Valley Solar. The Solar Project was designed to charge five irrigation pivots and two irrigation wells, which would then serve the agricultural operations of Cranney Farms by way of a lease agreement between it and Arbon Valley Solar. Before entering into the Construction Agreement, Interconnect Solar contacted Thomas & Betts to seek comment and feedback on the viability of the Construction Agreement, as well as general contract oversight and project management with respect to the Solar Project.

         In contacting Thomas & Betts, Interconnect Solar primarily communicated and dealt with Sammy Germany, Thomas &Betts', “Market Development Manager of Renewable Energy and Power Generation for the United States and Latin America.” Mr. Germany's business card identified him with the aforementioned title, and also stated Mr. Germany held a PhD/MBA. Mr. Germany reviewed the Construction Agreement between Arbon Valley Solar and Interconnect Solar. After reviewing and confirming the viability of the Construction Agreement, Mr. Germany agreed to provide contractual oversight, project management, and engineer procurement for the Solar Project.

         In consideration of such services, Plaintiffs tendered $50, 000.00 in care of Mr. Germany, who represented the sum would be deposited into an escrow account maintained by Sunjoy Power, LLC (“Sunjoy Power”), a subsidiary of Thomas & Betts. Thereafter, Mr. Germany began providing contractual oversight and project management for the Solar Project. Mr. Germany procured engineering services by retaining Eric R. Hepburn, a professional engineer with Hepburn and Sons, LLC (“Hepburn and Sons”), for the purpose of completing the necessary engineering plans and drawings for the Solar Project. Mr. Germany paid an invoice amount of $7, 500.00 to Hepburn and Sons from the $50, 000.00 tendered by Plaintiffs to Sunjoy Power in care of Mr. Germany.

         On March 5, 2013, while conducting contractual oversight, project management, and other duties, Mr. Germany executed an agreement (“Confidentiality Agreement”) with Dynapower Company LLC (“Dynapower”) on behalf of Sunjoy Power. Plaintiffs suggest the Confidentiality Agreement was entered into for the purpose of facilitating the completion of the Solar Project.[2] On March 21, 2013, based upon Mr. Germany's review and recommendation, Interconnect Solar purchased four 100 kilowatt Micro Power System Inverters, for a total purchase price of $240, 000.00, from Dynapower. The products were delivered in July or August of 2013. Interconnect Solar also purchased $100, 000.00 of equipment and other products for the Solar Project from another company, Wesco, based on the recommendation of Mr. Germany.

         In April 2013, Randy Vigos, another employee of Thomas & Betts, traveled to Boise, Idaho, to meet with Interconnect Solar, Mr. Germany, and others. Plaintiffs suggest the meeting with Mr. Vigos concerned Defendant's project management, contractual oversight and engineer procurement duties in relation to the Solar Project which were being performed by Mr. Germany. During the aforementioned meeting, Mr. Vigos introduced himself as a manager for Thomas & Betts and presented a business card to Interconnect Solar which identified him as “Product Specification Specialist Pacific N.W. Region Electrical Division Masters Award.” Both Mr. Vigos and Mr. Germany stated Mr. Vigos was the representative of Thomas & Betts who would be able to assist with the Solar Project in the event Mr. Germany was not available.

         Following the meeting in Boise, Mr. Vigos transmitted an e-mail through his account with Thomas & Betts to thank Bill Piske of Interconnect Solar for the meeting and opportunity. Plaintiffs note the e-mail was also sent to Thomas & Betts' top level executives, and contend the e-mail thus ratified the authority Thomas & Betts delegated to Mr. Germany to provide project management, construction oversight, and engineer procurement in relation to the Solar Project.

         In or about July 2013, Interconnect Solar suspected that Mr. Germany had improperly used the professional engineer stamp of Richard D. Hepburn with respect to the Solar Project. Interconnect Solar confronted Mr. Germany about the authenticity of the engineering drawings and was assured by Mr. Germany that all matters were “above board.” (Dkt. 10, ¶ 39.) However, on or about December 11, 2013, an engineer with Dynapower performed an initial assessment of the Solar Project on behalf of Plaintiffs and concluded many deficiencies existed which rendered the Solar Project incompatible with the operations of Arbon Valley Solar and Cranney Farms. Moreover, on January 13, 2014, an attorney for Hepburn and Sons sent a demand letter to Mr. Germany stating: “Our investigation demonstrates that you and [SunJoy Power] have purposefully and with intent to deceive affixed Mr. Hepburn's professional engineer stamp issued by the Commonwealth of Massachusetts to multiple drawings which you submitted to [Interconnect Solar] for use on the [Solar Project].” (Dkt. 10, Ex. C.)

         Plaintiffs thereafter learned that assembling, building and fabricating the Solar Project in reliance upon the faulty engineering plans procured by Mr. Germany rendered all of the labor, material, equipment and services involved in the Solar Project incompatible and obsolete. Plaintiffs maintain they have suffered in excess of $5, 000, 000.00 in losses as a direct and proximate cause of Defendant's actions.

         Plaintiffs filed their Complaint and Demand for Jury Trial in Oneida County, Idaho, district court on January 13, 2016. (Dkt. 1-3.) On February 12, 2016, Thomas & Betts removed the matter to this Court on the basis of diversity jurisdiction. (Dkt. 1.) On March 16, 2016, Thomas & Betts moved to dismiss Plaintiffs' Complaint and Demand for Jury Trial pursuant to Federal Rule of Civil Procedure 12(b)(6). (Dkt. 5.) Plaintiffs responded by filing an Amended Complaint on April 6, 2016.[3] (Dkt. 10.) Thomas & Betts then filed the instant Motion to Dismiss the Amended Complaint (Dkt. 11.) Although both the initial and Amended Complaint included John Hess Construction, Inc. as a plaintiff, the parties have since stipulated to, and the Court has approved, dismissal of the claims of John Hess Construction, Inc. (Dkt. 16; Dkt. 17.)

         II. STANDARD OF REVIEW

         A motion to dismiss for failure to state a claim challenges the legal sufficiency of the claims stated in the complaint. Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011). To sufficiently state a claim to relief and survive a 12(b)(6) motion, the pleading “does not need detailed factual allegations, ” however, the “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Mere “labels and conclusions” or a “formulaic recitation of the elements of a cause of action will not do.” Id. Rather, there must be “enough facts to state a claim to relief that is plausible on its face.” Id. 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. Id. at 556. The plausibility standard is not akin to a “probability requirement, ” but does require more than a sheer possibility that a defendant acted unlawfully. Id.

         In Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), the Supreme Court identified two “working principles” that underlie Twombly. First, although a court must accept as true all factual allegations in a complaint when ruling on a motion to dismiss, the court need not accept legal conclusions as true. Id. “Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Id. at 678-79. Second, only a complaint that states a plausible claim for relief will survive a motion to dismiss. Id. at 679. “Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id.

         In light of Twombly and Iqbal, the Ninth Circuit has summarized the governing standard as follows: “In sum, for a complaint to survive a motion to dismiss, the nonconclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009). Apart from factual insufficiency, a complaint is also subject to dismissal under Rule 12(b)(6) where it lacks a cognizable legal theory, Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990), or where the allegations on their face show that relief is barred for a legal reason. Jones v. Bock, 549 U.S. 199, 215 (2007).

         III. ANALYSIS

         Thomas & Betts argues the claims asserted in Plaintiffs' Amended Complaint should be dismissed because Plaintiffs fail to allege any relationship between the parties that would give rise to any contractual obligation or other duties that would support Plaintiffs' claims. Thomas & Betts argues Plaintiffs fail to allege any facts that indicate Mr. Germany had express, implied or apparent authority that would allow him to provide construction oversight services on its behalf. In the absence of any allegations of an agency relationship between Mr. Germany and Thomas & Betts, Thomas & Betts suggests Plaintiffs' negligence claims must also be dismissed. Thomas & Betts maintains Plaintiffs have not alleged it had any duty to Plaintiffs, and have not alleged any facts to show Mr. Germany's actions were reasonably foreseeable to Thomas & Betts. Thomas & Betts also seeks dismissal of Plaintiffs' negligence claims on the basis of the economic loss rule.

         A. Contract Claims

         Plaintiffs' first claim is for breach of contract and breach of the implied covenant of good faith and fair dealing. The elements of a claim for breach of contract are: (1) the existence of a contract; (2) breach; (3) causation; and (4) damages. Mosell Equities, LLC v. Berryhill & Co., 297 P.3d 232, 241 (Idaho 2013). The implied covenant of good faith and fair dealing “is a covenant implied by law in the parties' contract. No covenant will be implied which is contrary to the terms of the contract negotiated and executed by the parties.” Idaho First Nat. Bank v. Bliss Valley Foods, Inc., 824 P.2d 841, 863 (Idaho 1991) (citations omitted). A violation of the covenant occurs only when either party violates, nullifies or significantly impairs any benefit of the contract. Sorensen v. Comm Tek, Inc., 799 P.2d 70, 75 (Idaho 1990). Plaintiffs allege a valid and binding contract was entered into by and between Plaintiffs and Thomas & Betts, that “Defendant materially breached the contract in several respects, ” and that “Defendant… likewise breached the covenant of good faith and fair dealing implied in the valid contract entered into by and between the parties.” (Dkt. 10, ¶ 49.) Plaintiffs do not specify whether the agreement Defendant allegedly entered into (through Mr. Germany) was written or oral.

         In its Motion to Dismiss, Thomas & Betts argues Plaintiffs' Amended Complaint fails to allege either the existence of a contract between Plaintiffs and Defendant or entry of a contract between Plaintiffs and Defendant's authorized agent. Thomas & Betts claims the Amended Complaint is focused entirely on the actions of a non-party, Mr. Germany. Thomas & Betts suggests Mr. Germany acted “largely unilaterally and in an area in which [Defendant] does not do business, ” and that Plaintiffs have not alleged facts to establish Mr. Germany had the authority of Thomas & Betts when he agreed to provide construction management services for Plaintiffs. (Dkt. 11-1, p. 2.)

         There are three separate types of agency, any one of which is sufficient to bind the principal to a contract entered into with a third party, provided the agent has acted within the course and scope of the authority granted by the principal.[4]Clark v. Gneiting, 501 P.2d 278 (Idaho 1972); American West Enter., Inc. v. CNH, LLC, 316 P.3d 662, 669 (Idaho 2013). The three types of agency are: (1) express authority (a form of agency commonly referred to as actual authority); (2) implied authority (also referred to as actual authority); and (3) apparent authority. Id.; see also Hieb v. Minn. Farmers Union, 672 P.2d 572, 575 (Idaho 1983).

         “Express authority” refers to the authority a principal has explicitly granted the agent to act in the principal's name. American West, 316 P.3d at 669. “Implied authority refers to that authority which is necessary, usual, and proper to accomplish or perform the express authority delegated to the agent by the principal.” Id. (quoting Bailey v. Ness, 708 P.2d 900, 902-03 (Idaho 1985)). Finally, apparent authority “is created when the principal voluntarily places an agent in such a position that a person of ordinary prudence, conversant with the business usages and the nature of a particular business, is justified in believing that the agent is acting pursuant to existing authority.” Id. Although the existence of an agency relationship is a question of fact, the party claiming an agency relationship existed must still adequately plead the grounds upon which an allegation of authority rests. Id. at 670 (finding ...


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