Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_17-cv-04568/USCOURTS-cand-5_17-cv-04568-2/pdf.json

Nature of Suit Code: 130
Nature of Suit: Miller Act
Cause of Action: 28:1352 Miller Act

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Case No.: 5:17-cv-04568-EJD

ORDER GRANTING MOTION TO DISMISS SECOND COUNT; DENYING MOTION TO 

DISMISS FOURTH COUNT

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

TROMBLEY ENTERPRISES, LLC,

Plaintiff,

v.

SAUER, INC., et al.,

Defendants.

Case No. 5:17-cv-04568-EJD 

ORDER GRANTING MOTION TO 

DISMISS SECOND COUNT; DENYING 

MOTION TO DISMISS FOURTH 

COUNT

Re: Dkt. No. 69

I. INTRODUCTION

This lawsuit arises out of the construction of the Operational Readiness Training Complex 

at Fort Hunter Liggett located in Monterey County, California (“Project”). The United States 

Army Corps of Engineers awarded a contract to Sauer, Inc. (“Sauer”) to design and build the 

Project. Sauer entered into a subcontract with Plaintiff Trombley Enterprises, LLC, dba Trombley 

Painting Company (“Trombley”), to perform painting and related work on the Project.

Pending before the Court is Sauer’s motion to dismiss the second and fourth counts of the 

Third Amended Complaint (“Complaint”) pursuant to Rule 12(b)(6) of the Federal Rules of Civil 

Procedure. At issue is the legal sufficiency of Trombley’s claims for negligent misrepresentation 

and breach of the covenant of good faith and fair dealing. The Court finds it appropriate to take 

the motion under submission for decision without oral argument pursuant to Civil Local Rule 7-

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ORDER GRANTING MOTION TO DISMISS SECOND COUNT; DENYING MOTION TO 

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1(b). For the reasons set forth below, Sauer’s motion to dismiss is granted in part and denied in 

part.

II. BACKGROUND1

In February of 2014, the United States Army Corps of Engineers (“USACE”) awarded a 

contract to Sauer to design and build the Project. Complaint ¶ 7. On June 1, 2015, Sauer and 

Trombley entered into a painting subcontract for the Project for $516,975.00. Id. ¶ 9, Exhibit 3. 

Trombley calculated its bid based upon Sauer’s representation that the painting portion of the 

Project would commence immediately and would end no later than March of 2016 or a period of 

11 months. Id. ¶ 11. Trombley would not have submitted the bid that was accepted if Trombley 

had known that the painting portion would not commence and end as Sauer had represented. Id. 

Trombley alleges that when Sauer entered into the subcontract, Sauer knew or should have 

known that the Project was already delayed and that the Project would not be ready for painting 

until 2016. Id. ¶ 12. Trombley alleges that Sauer’s knowledge of the delay may be inferred from 

the fact that the Project schedule provided to Trombley after the parties had already entered into 

the subcontract indicated that the painting should have started a couple months earlier in April of 

2015. Id. ¶¶ 12, 14.

The parties exchanged emails regarding the schedule and Sauer provided its subcontractors 

with an updated project schedule on June 25, 2015. The updated schedule indicated that Trombley 

was to have commenced work on June 20, 2015 and was to complete work by May 27, 2016. Id. 

¶¶ 15-17.

Over the next several months, Trombley sent several emails to Sauer asking Sauer to 

provide an accurate start date. Id. ¶ 19. On July 17, 2015, Sauer sent Trombley and the other 

subcontractors an updated project schedule that moved the “late start” date for painting production

to early August of 2015 but maintained the May 27, 2016 Project completion date. Id. Trombley 

 

1 The Background is a summary of the allegations in the Complaint.

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emailed Sauer several times to express concerns about the schedule, but Sauer never responded. 

Id. ¶¶ 20-22. 

As of November 10, 2015, Sauer knew, but failed to inform Trombley, that the Project 

completion date had been moved to October of 2016, and that the buildings would not be ready for 

painting until June of 2016. Id. ¶¶ 22-25. On December 30, 2015, Trombley again asked Sauer 

for the anticipated start date. Id. ¶ 26. Sauer told Trombley that the anticipated start date would 

be in February of 2016, but that Sauer was not certain. Id. ¶ 26. 

On January 12, 2016, Sauer directed Trombley to begin painting the mechanical rooms and 

Trombley immediately mobilized a 10-man crew to the Project site. Id. ¶ 27. When Trombley 

arrived at the Project site the next day, Trombley learned that only three of the four mechanical 

rooms were ready for painting. Id. ¶¶ 27-28. 

On February 12, 2016, Sauer directed Trombley to begin “production painting work.” Id. 

¶ 29. When Trombley arrived at the Project site a few days later, Trombley found that the 

buildings were only partially complete. Id. ¶ 30. Trombley began painting, but the work was 

inefficient and costly because other trades were still working on the Project. Id. ¶ 31. Trombley 

alerted the Project manager of the situation and was told to “stand down its crew” until the other 

trades had completed their work. Id. 

On February 23, 2016, Trombley sought direction from Sauer on how to proceed because 

the buildings were not ready for painting. Id. ¶ 32. In response, Sauer told Trombley to return to 

the jobsite immediately and to begin painting interior walls. Id. ¶ 33. From February 23, 2016 

through March 3, 2016, Trombley had a fully manned and equipped crew on-site that was 

“unused.” Id. ¶ 34. As of March 3, 2016, the only portions of the buildings that were ready for

painting were the “vaults”; the drywall on the interior walls still had not been completed. Id. ¶ 35. 

As of March 16, 2016, only portions of two buildings were ready for production painting. Id. ¶ 

37. At this point, Trombley learned from speaking to the Project fire captain that the USACE had 

extended the completion date for the Project. Id. ¶ 38. Sauer confirmed that that it had been given 

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an extension for completion of the Project but refused to tell Trombley the new completion date. 

Id. Despite the delays and despite the extension, Sauer kept pressuring Trombley to finish 

production painting by the end of March of 2016 or else face liability for liquidated damages. Id. 

¶ 38. 

Over the next several months, Sauer would notify Trombley that portions of the buildings 

were ready for production painting and demand that Trombley have a full crew at the worksite. 

Id. ¶¶ 39-40. Upon arrival, however, Trombley’s crew would stand idle because the buildings 

were not, in fact, ready for painting. Id. One of the causes of delay was that Sauer’s own building 

inspector would either not respond or delay responding when Trombley submitted a Request of 

Inspection (“RFI”). Pursuant to the terms of the parties’ contract, Sauer’s inspector was required 

to inspect and clear (or “release”) an area before Trombley could begin painting. Id. ¶¶ 36, 42-43, 

46. 

The priming and painting progressed in a piece-meal manner as various rooms, levels and 

buildings were ready. Id. ¶¶ 37, 39-49. In mid-June of 2016, Sauer told Trombley that it would 

essentially have to complete the painting on a compressed schedule, working while other trades 

were on the job site, and would not get paid “extra” for working under the compressed schedule. 

Id. ¶ 50. Eventually on June 20, 2016, Sauer notified Trombley for the first time that the updated 

Project completion date was October 13, 2016 and directed Trombley to provide the necessary 

manpower to meet that deadline. Id. ¶ 55. In response, Trombley gave Sauer an outline of the 

various issues that were causing delays to the painting schedule, which primarily consisted of 

unfinished drywall and Sauer’s failure to timely respond to Trombley’s many RFIs. Id. ¶ 58. 

Nevertheless, Sauer directed Trombley to complete production painting by October 13, 2016. Id. 

¶ 59. After Trombley protested, Sauer agreed to pay for the additional cost of labor to meet the 

deadline. Id. ¶ 61. Trombley alleges that Sauer made this representation with the intent to induce 

Trombley to commit additional resources; that Sauer knew it would not be paying for Trombley’s 

change orders; that Sauer knew Trombley would be obligated to incur significant costs; that 

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ORDER GRANTING MOTION TO DISMISS SECOND COUNT; DENYING MOTION TO 

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Trombley reasonably relied on Sauer’s representation; and that the principal and owner of 

Trombley took out loans against his personal assets to meet payroll and tax obligations 

necessitated by the additional labor requirements. Id. ¶ 62. 

Delays at the construction site continued to delay Trombley’s work. Id. ¶¶ 65-79. On July 

13, 2016, Sauer agreed to pay for the costs associated with the delays, overlapping trades working 

on the Project and changes in schedule. Id. ¶ 80. Sauer allegedly “knew or should have known 

that it would never pay for these additional costs.” Id.

Trombley continued to encounter delays due to overlapping trades working at the jobsite 

and the unfinished drywalls. Id. ¶¶ 82-90, 95. Trombley submitted change orders for the 

additional costs, but Sauer did not approve or pay for the change orders. Id. ¶¶ 83, 84, 89, 90, 95. 

Even though Sauer had more than $200,000 in outstanding unpaid change orders, Sauer demanded 

that Trombley increase its manpower and meet Sauer’s deadlines for finishing certain buildings. 

Id. ¶ 91. Trombley increased its manpower (id. ¶¶ 92, 94), but objected to the deadlines and 

proposed an alternative schedule. Id. ¶ 92-93. When Trombley refused to have his crews work on 

the weekend, Sauer approved payment for overtime. Id. ¶ 94. 

 Trombley ultimately completed its work by the October 13, 2016 deadline and later 

completed the “punch list items” at Trombley’s own expense. Id. ¶¶ 96, 101. Sauer has not paid 

Trombley for any of the change orders. Id. ¶ 103. Trombley contends that Sauer owes at least 

$1,045,234.14 for labor, services, materials, equipment, and supplies furnished by Trombley for 

the Project. Id. ¶ 111. 

Trombley asserts claims for recovery on a Miller Act Payment Bond (count 1), negligent 

misrepresentation (count 2), breach of contract (count 3), breach of the covenant of good faith and 

fair dealing (count 4), “account stated” (count 5), “open book account” (count 6),“Work, Labor 

and Materials” (count 7) and quantum meruit (count 8). Dkt. Nos. 38, 45. 

III. STANDARDS

Under Federal Rule of Civil Procedure 12(b)(6), a complaint may be dismissed if it fails to 

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state a claim upon which relief can be granted. In deciding whether to grant a motion to dismiss, 

the court generally “may not consider any material beyond the pleadings.” Hal Roach Studios, 

Inc. v. Richard Feiner & Co, 896 F.2d 1542, 1555 n.19 (9th Cir. 1989). In considering a motion 

pursuant to Rule 12(b)(6), the court must accept as true all “well-pleaded factual allegations.” 

Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1950 (2009). The court must also construe the 

alleged facts in the light most favorable to the plaintiff. Love v. United States, 915 F.2d 1242, 

1245 (9th Cir. 1989). “[T]o survive a motion to dismiss, a complaint must contain sufficient 

factual matter, accepted as true, ‘to state a claim to relief that is plausible on its face.’” Iqbal, 556 

U.S. at 678 (internal citations omitted); see also Fed. R. Civ. P. 8(a).

IV. DISCUSSION

A. Negligent Misrepresentation

Sauer contends that the negligent misrepresentation claim should be dismissed because the 

claim is based upon representations about future events—as opposed to representations of past or 

present material facts—which are not actionable. In response, Trombley contends that its claim is 

based upon misrepresentations of present fact.

The elements of negligent misrepresentation are “(1) a misrepresentation of a past or 

existing material fact, (2) without reasonable grounds for believing it to be true, (3) with intent to 

induce another’s reliance on the fact misrepresented, (4) ignorance of the truth and justifiable 

reliance thereon by the party to whom the misrepresentation was directed, and (5) damages.” Fox 

v. Pollack, 181 Cal. App. 3d 954, 962 (1986). Claims for negligent misrepresentation must meet 

the particularity requirement of Rule 9(b) of the Federal Rules of Civil Procedure. Neilson v. 

Union Bank of California, N.A., 290 F. Supp. 2d 1101, 1141 (C.D. Cal. 2003). To satisfy Rule 

9(b), claims sounding in fraud must be “specific enough to give defendants notice of the particular 

misconduct which is alleged to constitute the fraud charged so that they can defend against the 

charge and not just deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 

727, 731 (9th Cir. 1985). In other words, “[a]verments of fraud must be accompanied by ‘the 

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who, what, when, where, and how’ of the misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 

317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir.

1997)).

Trombley alleges two types of negligent misrepresentations. First, Trombley alleges that 

Sauer made misrepresentations regarding the schedules for the Project. In response, Sauer 

characterizes the Project schedules as predictions and expectations for the future which are not 

actionable. Second, Trombley alleges that Sauer negligently misrepresented that it would pay 

Trombley in the future. 

Sauer is correct that to be actionable, claims for negligent misrepresentation must 

ordinarily be as to representations of past or existing material facts. Tarmann v. State Farm Mut. 

Auto. Ins. Co., 2 Cal. App. 4th 153, 158, 2 Cal. Rptr. 2d 861 (1991). Here, the alleged 

misrepresentations relate to future events: Sauer will complete construction of the Project in 

accordance with the timeline set forth in the Schedules; Sauer will give Trombley eleven months

to complete the painting; and Sauer will pay Trombley for its work. The timeline and Schedules 

are forecasts or predictions about how the construction of the Project will progress. The promise 

to pay is also a promise to perform an act in the future. See Tarmann v. State Farm Mut. Auto. 

Ins. Co., 2 Cal. App. 4th 153, 158–159, 2 Cal. Rptr. 2d 861 (1991) (insurer’s representation that it 

would pay plaintiff for repairs upon completion of the repairs was a promise of future 

performance).

Although these representations relate to future events, Trombley appears to argue that the 

timeline and Schedules conveyed an implied representation about the state of the Project existing 

at the time Sauer provided the timeline and Schedules. Trombley appears to argue that Sauer 

made an implied representation that the state of the Project had progressed to a point that Sauer’s 

timeline and Schedules were feasible, when in fact, Sauer knew that the Project had already been 

delayed such that the timeline and Schedules could not possibly be met. See Trombley’s 

Opposition (Dkt. No. 73), p. 4. The law of negligent misrepresentation, however, cannot “be 

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stretched so thin” as to encompass implied representations. Byrum v. Brand, 219 Cal. App. 3d 

926, 942 (1990); see also Wilson v. Century 21 Great Western Realty, 15 Cal. App. 4th 298, 306 

(1993) (implied assertion or representation “is not enough” to support claim for negligent 

misrepresentation); Evan F. v. Hughson United Methodist Church, 8 Cal. App. 4th 828, 840 n.2 

(1992). Therefore, Trombley’s claim is subject to dismissal.

Nevertheless, the court will grant Trombley leave to amend because certain broken 

promises of future conduct may be actionable as fraud. More specifically, a promise, made 

without any intention of performing it is actionable under California Civil Code § 1710. Tarmann 

v. State Farm Mut. Auto. Ins. Co., 2 Cal. App. 4th at 158–159; see also Motohouse Intern., LLC v. 

PPG Industries, Inc., No. 09-1265 MJL, 2010 WL 476652, at *2 (S.D. Cal. Feb. 4, 2010) (“an 

action based on a false promise is simply a type of intentional misrepresentation, i.e., actual 

fraud); Lothlen v. Wells Fargo Bank., N.A., No. 13-922 SI, at *5 (N.D. Cal. March 27, 2014) 

(promise to perform in the future could be actionable as a type of intentional misrepresentation if 

plaintiff is able to allege “that the promisor did not intend to perform at the time he or she made 

the promise and that it was intended to deceive or induce the promisee to do or not do a particular 

thing”). 

Accordingly, Sauer’s motion to dismiss the negligent misrepresentation claim is granted

with leave to assert a claim for fraud, provided there is a factual basis for doing so.2

B. Breach of the Implied Covenant of Good Faith and Fair Dealing against Sauer

Sauer contends that the claim for breach of the implied covenant of good faith and fair 

dealing should be dismissed because Trombley has (1) failed to allege a breach that is independent 

from the alleged breaches of contract and (2) failed to allege that Sauer’s conduct interfered with 

 

2

 Because Trombley has failed to state a claim for negligent misrepresentation, the court finds it 

unnecessary to consider at this time Sauer’s argument that Trombley has failed to allege the 

elements of reliance and damages. 

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Trombley’s performance of the subcontract. In response, Trombley argues that its claim for 

breach of the implied covenant is based upon Sauer’s many alleged misrepresentations and that 

these misrepresentations interfered with Trombley’s performance of the subcontract.

“Every contract imposes on each party a duty of good faith and fair dealing in each 

performance and in its enforcement.” Careau & Co. v. Security Pacific Business Credit, Inc., 222 

Cal. App. 3d 1371, 1393 (1990) (citing Rest. 2d, Contracts, §205 and collecting cases). “The 

implied covenant protects the reasonable expectations of the contracting parties based on their 

mutual promises.” Digerati Holdings, LLC v. Young Money Entertainment, LLC, 194 Cal. App.

4th 873, 885 (2011). The implied covenant “imposes upon each party the obligation to do 

everything that the contract presupposes they will do to accomplish its purpose.” Id. (quoting 

Schoolcraft v. Ross, 81 Cal. App. 3d 75, 80 (1978)). “Both the duty not to hinder and the duty to 

cooperate are aspects of the implied duty of good faith and fair dealing.” Metcalf Const. Co. v. 

United States, 742 F.3d 984 (Fed. Cir. 2014) (quoting Precision Pine & Timber, Inc. v. United

States, 596 F.3d 828, 820 n. 1 (Fed. Cir. 2010). 

A breach of the implied covenant involves “something beyond breach of the contractual 

duty itself.” Careau, 222 Cal. App. 3d at 1394; see also California Shoppers, Inc. v. Royal Globe 

Ins. Co., 175 Cal. App. 3d 1, 54 (1985) (“the authorities hold that breach of the implied covenant 

of good faith and fair dealing involves something beyond breach of the contractual duty itself”). 

“Thus, allegations which assert such a claim must show that the conduct of the defendant, whether 

or not it also constitutes a breach of a consensual contract term, demonstrates a failure or refusal to 

discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or 

negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed 

common purposes and disappoints the reasonable expectations of the other party thereby depriving 

that party of the benefits of the agreement.” Careau, 222 Cal. App. 3d at 1395. “Just what 

conduct will meet these criteria must be determined on a case by case basis and will depend on the 

contractual purposes and reasonably justified expectations of the parties.” Id. 

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Here, Trombley alleges that Sauer breached the covenant of good faith and fair dealing by 

engaging in actions which include, but are not limited to:

 

Intentionally or negligently misrepresenting the commencement date 

and completion date for the painting portion of the Project, failing to 

respond to [Trombley’s] inquiries regarding scheduling, providing 

[Trombley] with an unworkable schedule in order to complete the 

Project, failing to coordinate the work of the other trades on the 

Project, failing to competently manage the Project, failing to 

properly administer the schedule, failing to pay progress payments 

when due, intentionally or negligently representing that it would pay 

change orders submitted by [Trombley] for work created by 

[Sauer’s] mismanagement of the Project and the compressed 

timeline, failing to approve change orders, providing a severely 

compressed timeline for [Trombley] to complete the Project, 

misrepresenting the schedules and timelines of the Project, causing 

delays in access to the work coupled with later accelerations of the 

work, stacking trades on the Project which prevented [Trombley] 

from completing its work (or requiring it to remobilize to complete 

the work), causing numerous and continuous changes to the 

sequence and order of the work which caused damage to 

[Trombley’s] finished work, wrongfully assessing Liquidated 

Damages against [Trombley], and failing to pay [Trombley] in full 

for the costs it incurred on the Project.

Complaint ¶ 152. 

These allegations continue to overlap substantially with the allegations in support of 

Trombley’s claim for breach of contract. Nevertheless, the newly added allegations of 

misrepresentation are sufficient to distinguish the breach of implied covenant claim from the 

breach of contract claim at the pleading stage. The breach of contract claim is based upon Sauer’s 

alleged failure to approve change orders, whereas the breach of the implied covenant claim is 

based upon Sauer’s alleged verbal representation that it would approve the change orders with no 

actual intention of doing so. Further, these allegations are more than sufficient to describe how 

Sauer interfered with Trombley’s ability to perform the contract in a reasonable, orderly and 

efficient manner within the 11-month period Trombley anticipated it would have to complete 

painting and for the contractually agreed upon sum of $516,975.00. Sauer’s motion to dismiss the 

breach of implied covenant claim is denied.

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V. CONCLUSION

For the reasons set forth above, Sauer’s motion to dismiss is GRANTED as to the second 

count for negligent misrepresentation and DENIED as to the fourth count for breach of the 

covenant of good faith and fair dealing. Trombley shall file and serve an amended complaint 

consistent with this order no later than February 22, 2019.

IT IS SO ORDERED.

Dated: February 5, 2019

______________________________________

EDWARD J. DAVILA

United States District Judge

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