Court Opinion

ID: 1004038
Source: CourtListenerOpinion
Date Created: 2013-07-04 18:35:17.281284+00
Date Added: 2024-06-11T15:12:03.071146
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

JEFFREY M. BROWN ASSOCIATES,           
INCORPORATED,
               Plaintiff-Appellant,
                 v.                              No. 00-1763
ROCKVILLE CENTER, INCORPORATED;
PAVILION PARTNERS, INCORPORATED,
              Defendants-Appellees.
                                       
           Appeal from the United States District Court
            for the District of Maryland, at Baltimore.
               Frederic N. Smalkin, District Judge.
                          (CA-99-3514-S)

                      Argued: January 25, 2001

                         Decided: April 3, 2001

 Before WILKINSON, Chief Judge, WILKINS, Circuit Judge, and
   James H. MICHAEL, Jr., Senior United States District Judge
    for the Western District of Virginia, sitting by designation.

Affirmed by unpublished per curiam opinion.

                              COUNSEL

ARGUED: Timothy          Francis Brown, ARENT, FOX, KINTNER,
PLOTKIN & KAHN,          PLLC, Washington, D.C., for Appellant. Mar-
tin Joseph Jaron, Jr.,   HOLLAND & KNIGHT, LLP, Washington,
D.C., for Appellees.     ON BRIEF: Barbara G. Werther, ARENT,
2                     BROWN v. ROCKVILLE CENTER
FOX, KINTNER, PLOTKIN & KAHN, PLLC, Washington, D.C., for
Appellant. C. Dennis Southard, IV, HOLLAND & KNIGHT, LLP,
Washington, D.C., for Appellees.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                               OPINION

PER CURIAM:

   This case involves a dispute over a construction contract between
Plaintiff-Appellant Jeffrey M. Brown Associates, Incorporated
("JMB"), and Defendants-Appellees Rockville Center, Incorporated
("RCI") and Pavilion Partners, Incorporated ("PPI"). The district court
dismissed JMB’s amended complaint pursuant to Federal Rule of
Civil Procedure 12(b)(6), and JMB appeals. For the reasons discussed
below, we affirm.

                                    I.

   JMB is a general contractor that designs and builds construction proj-
ects.1 In 1997, it entered into a "fast track" contract (the "Contract")
with RCI, to design and build a retail pavilion and theater on land RCI
owned in Rockville, Maryland. RCI later conveyed the land to PPI.
Under the Contract, JMB was to be paid its actual cost and a 5.1%
fee, not to exceed a Guaranteed Maximum Price ("GMP"). The Con-
tract provided that "time was of the essence," (J.A. at 455), because
the defendants had to meet an occupancy schedule for their incoming
tenants. (See J.A. at 467.)

    Work began in January 1997. JMB completed enough work on the
    1
    The facts are taken from the amended complaint and from the exhibits
attached to it, or to which it refers and relies upon. (See Part II.A, note
2, and the text accompanying note 2, infra.)
                     BROWN v. ROCKVILLE CENTER                         3
theater portion of the project to receive a temporary occupancy permit
from the city, while work on the retail portion of the project contin-
ued. At some point, disputes arose concerning the quality of JMB’s
work and delays in construction. RCI filed a demand for arbitration,
alleging breach of contract.

   RCI hired consultants to determine the scope of the deficiencies
and to recommend solutions. After a seven-month review of the
building structure, the consultants prepared a "Deficiency List,"
which identified many construction defects, including problems with
the glass exterior walls on the east end of the retail pavilion ("curtain
walls"). The Deficiency List did not specify what remedial work was
required to fix the curtain walls.

   To ensure completion of the project and to settle the arbitration, the
parties entered into a "Amendment to Contract and Partial Settlement
Agreement" ("Settlement Agreement") on August 3, 1999. Under the
Settlement Agreement, the defendants agreed to dismiss their arbitra-
tion demand, and JMB agreed to complete its work—including the
Deficiency List items—by a fixed date.

   Specifically, JMB had to achieve "Substantial Completion" of its
work within ninety days of the Settlement Agreement’s effective date,
i.e. by November 1, 1999. A fifteen-day "cure period" allowed JMB
to cure any breaches by November 16, 1999, which also was the date
JMB had to achieve "Final Completion."

  "Substantial Completion" was defined as:

    (1) all Work must be completed and must be accepted by
    RCI and PPI . . . with the exception of minor punch list
    work, for which the cost to complete shall not exceed
    $25,000 (the punch list content and cost to complete shall be
    determined by Warner [Construction Consultants, Inc.,
    RCI’s consultant] . . .);

    (2) all other conditions of the Contract, as amended, includ-
    ing but not limited to all conditions of this Agreement, must
    be met by JMB; and
4                    BROWN v. ROCKVILLE CENTER
    (3) all necessary governmental building, inspection and
    other approvals, certifications, temporary (but not final) cer-
    tificate of occupancy, and permits and permissions for any
    and all Work (including but not limited to the corrective and
    remedial work as set forth in the Deficiency List), must be
    obtained and all Work must be completed by JMB and
    accepted/approved by the City of Rockville.

(J.A. at 346-47.)

   "Final Completion" was defined as "having achieved Substantial
Completion plus completion of all punch list work and issuance of a
final certificate of occupancy for the Project from the City of Rock-
ville . . . within one hundred and five (105) days of the effective date
of this Agreement," (J.A. at 348 (emphasis added)), i.e. by November
16, 1999.

   The Settlement Agreement provided that JMB "expressly acknowl-
edges that if it fails to achieve Final Completion within the aforesaid
time period it shall be in default and may be terminated with no notice
or opportunity to cure." (J.A. at 348.) The parties again agreed that
"time [was] of the essence." (J.A. at 368.)

   "If" JMB met all of its deadlines and other obligations under the
Settlement Agreement, (J.A. at 356), the parties agreed that the GMP
would be stipulated to be approximately $14 million. The parties fur-
ther agreed that the defendants already paid JMB approximately $12
million, and that the balance of the stipulated GMP was approxi-
mately $1.4 million, which the defendants placed in escrow.

   JMB did not have the right to withdraw the escrowed funds "unless
and until" JMB satisfied "all requirements of the [Settlement Agree-
ment]," which requirements were "understood to be express condi-
tions precedent to payment." (J.A. at 359.) "If" and "only when" JMB
performed the conditions precedent, (J.A. at 361, 359), the defendants
would disburse the escrowed funds to JMB. However, the parties
agreed that "in the event of a default by JMB," JMB would not be
entitled to the escrowed funds, and the escrow agent would "immedi-
ately and without further notice" return the escrowed funds to the
defendants. (J.A. at 361, 376.)
                      BROWN v. ROCKVILLE CENTER                         5
   JMB promptly began working on the Deficiency List. In September
1999, the parties met at the site with the curtain wall consultants and
manufacturer. The manufacturer said the installation was satisfactory,
with minor modifications that could be accomplished by the Novem-
ber deadlines. The defendants’ consultant subsequently notified JMB
that it preferred remedial work far beyond the minor work identified
by the manufacturer. JMB thought the extra work was unnecessary,
but the defendants insisted JMB perform the added work. The defen-
dants would not extend the time deadlines prescribed by the Settle-
ment Agreement.

   On November 1, 1999, the defendants notified JMB that it had not
achieved "Substantial Completion." This triggered the 15-day cure
period, which meant JMB had to achieve both "Substantial" and
"Final" Completion by November 16. On November 12, the city
inspectors sent JMB an inspection report approving the project for
occupancy. On November 14, RCI’s consultant (Warner) prepared a
report indicating that $36,000 in "punch list" work remained as of that
date. On November 16—the final deadline date—the city’s chief
inspector wrote a letter to the defendants to say that a final certificate
of occupancy would not be issued until a defect in an expansion joint
was repaired.

   Based on the chief inspector’s letter and on Warner’s report, the
defendants deemed JMB to be in default. The defendants claimed that
they had no obligation to release to JMB the $1.4 million in escrowed
funds, that liquidated damages were accruing, and that JMB was
required to assign to them any claims JMB had against its subcontrac-
tors and designers. Despite JMB’s willingness to work into the eve-
ning hours, the defendants ordered it off the site and refused to allow
it to do any additional work.

   JMB sued the defendants in the United States District Court for the
District of Maryland on November 19, 1999. The amended complaint
asserts five claims for relief: (1) breach of contract; (2) declaratory
judgment; (3) conversion; (4) quantum meruit; and (5) unjust enrich-
ment. On May 22, 2000, the district court granted the defendants’
motion to dismiss all counts pursuant to Rule 12(b)(6), and dismissed
the case.
6                    BROWN v. ROCKVILLE CENTER
   JMB filed a timely notice of appeal on June 9, 2000. It appeals the
dismissal of the first three counts of its amended complaint, but does
not appeal the dismissal of its quantum meruit and unjust enrichment
claims.

                                   II.

                                   A.

   We review a Rule 12(b)(6) dismissal de novo, and accept as true
the facts alleged in the amended complaint. See Eastern Shore Mkts.,
Inc. v. J.D. Assocs. Ltd. P’ship, 213 F.3d 175, 180 (4th Cir. 2000).
We also accept as true the facts set forth in the exhibits attached to
the complaint. See Fed. R. Civ. P. 10(c); Eastern Shore Mkts., 213
F.3d at 180 (examining lease attached to complaint). While constru-
ing those facts in a light most favorable to JMB, we need not accept
as true "the legal conclusions drawn from the facts. . . . [or] unwar-
ranted inferences, unreasonable conclusions, or arguments," id., such
as conclusory allegations in the complaint that are contradicted by the
attachments. See Fayetteville Investors v. Commercial Builders, Inc.,
936 F.2d 1462, 1465 (4th Cir. 1991) ("[I]n the event of conflict
between the bare allegations of the complaint and any exhibit attached
pursuant to Rule 10(c) . . . the exhibit prevails."); see also Sprewell
v. Golden State Warriors, 231 F.3d 520, 528 (9th Cir. 2000) (holding
that, by attaching arbitration agreement to complaint, the plaintiff
"ple[d] himself out of a claim by including unnecessary details con-
trary to his claims"). It is with these principles in mind that we exam-
ine the sufficiency of JMB’s amended complaint.

                                   B.

   JMB first assigns error to the district court’s consideration of alle-
gations in the original complaint to dismiss the amended complaint.
"As a general rule, an amended pleading ordinarily supersedes the
original and renders it of no legal effect." Young v. City of Mount
Ranier, 238 F.3d 567, 572 (4th Cir. 2001) (citation and internal quota-
tion marks omitted). We agree with JMB that the district court should
not have considered allegations in the original complaint to dismiss
the amended complaint. See Kelley v. Crosfield Catalysts, 135 F.3d
1202, 1204-05 (7th Cir. 1998). The error is harmless, however,
                     BROWN v. ROCKVILLE CENTER                         7
because our own de novo analysis of the amended complaint shows
JMB failed to state any claim upon which relief can be granted.

   We note that although we do not herein consider the allegations of
the original complaint, we may, and do, consider certain exhibits
attached to the original complaint that are "integral to and explicitly
relied on in the [amended] complaint," and whose authenticity is not
challenged, Phillips v. LCI Int’l, Inc., 190 F.3d 609, 618 (4th Cir.
1999), such as the Settlement Agreement and Deficiency List.2 Our
consideration thereof is consistent with the above-stated principle
regarding the superceding effect of an amended pleading. Such exhib-
its are not superceded if the amended complaint effectively integrates
them. Moreover, our consideration of exhibits that were attached to
the original complaint, omitted from the amended complaint, but still
referred to, integral to, and relied upon in the amended complaint, fur-
thers the policy of "[p]reventing plaintiffs from surviving a Rule
12(b)(6) motion by deliberately omitting . . . documents upon which
their claims are based." Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th
Cir. 1998), cited in Phillips, supra.

                                   C.

   JMB next argues that the district court erred in dismissing its
breach of contract claim. The amended complaint alleges the defen-
dants breached the Contract, as amended by the Settlement Agree-
ment, by terminating JMB and by refusing to pay JMB the escrowed
funds. The district court held that JMB’s breach of contract claim was
"fatally contaminated" by JMB’s admissions that it was itself in
breach of the Settlement Agreement, by failing to achieve "Substan-
  2
   JMB intended to attach certain exhibits to the amended complaint,
but, apparently through inadvertence, attached them only to the original
complaint. To its amended complaint, JMB purported to attach: (1) the
original Contract; (2) the Deficiency List; (3) the Settlement Agreement;
and (4) the city inspectors’ November 12 inspection report. However,
JMB actually attached the following to its amended complaint: (i) the
original Contract; (ii) Warner’s November 14 report; and (iii) the Escrow
Agreement. As is obvious, JMB intended to attach to its amended com-
plaint exhibits such as the Settlement Agreement and Deficiency List,
but simply failed to do so.
8                    BROWN v. ROCKVILLE CENTER
tial" or "Final" Completion by November 16. JMB’s principal argu-
ment on appeal is that it sufficiently alleged it achieved "Substantial
Completion" by November 16, and thus, should have been paid the
escrowed funds.

   We find JMB’s argument unpersuasive. The dispositive inquiry is
not whether JMB sufficiently alleged it achieved "Substantial" Com-
pletion, but whether it sufficiently alleged it achieved "Final" Com-
pletion. To achieve "Final" Completion, JMB was contractually
required to obtain a "final" certificate of occupancy by November 16.
(See J.A. at 346, 348.) JMB admitted in its amended complaint that
it did not obtain a final certificate of occupancy by November 16.
(See Am. Compl. ¶ 24, J.A. at 424-25.) Therefore, under JMB’s own
allegations, as supplemented by the documents it attached to the com-
plaint, JMB did not achieve Final Completion.3

   JMB alleges it failed to achieve Final Completion only because the
defendants expanded the scope of work contemplated by the Settle-
ment Agreement, and that, as a result, "[t]ime extensions per the Con-
tract and the [Settlement] Agreement would change the actual dates
for the milestones planned for November 1 and November 16." (Am.
Compl. ¶ 16, J.A. at 422.) Because the latter proposition is a legal
conclusion that is contradicted by the contracts sub judice, we do not
accept it as true. The Settlement Agreement contains no provisions by
which time could be extended, apart from the "cure" period provision,
which period ended on November 16, 1999. The original Contract
contains only one provision expressly governing extensions of time.
That provision states that if "changes ordered in the Work" caused
JMB to be delayed, time limits could be extended "by Change Order."
(J.A. at 455-56.) A Change Order was defined as "a written instru-
ment prepared by [JMB] and signed by [JMB and the defendants],
stating their agreement upon . . . the extent of the adjustment, if any,
in the Contract Time." (J.A. at 459.) Assuming arguendo that the time
extension provision of the original Contract survived the amendment,
JMB did not allege in its amended complaint or in its briefs that it
obtained a Change Order to which the parties had agreed. Because the
only means by which time could be extended under the time exten-
    3
   Counsel for JMB conceded this point at oral argument when he said
there is "no question we weren’t finally complete."
                      BROWN v. ROCKVILLE CENTER                         9
sion provision was by "Change Order," JMB did not sufficiently
allege that the time limits could be extended.

   In the alternative, JMB contends the defendants owed an implied
duty, such as the implied duty of good faith and fair dealing, to extend
the time limits. In Maryland, the implied duty of good faith and fair
dealing "prohibits one party to a contract from acting in such a man-
ner as to prevent the other party from performing his obligations
under the contract," Eastern Shore Mkts., Inc. v. J.D. Assocs. Ltd.
P’ship, 213 F.3d 175, 182-83 (4th Cir. 2000) (quoting Parker v.
Columbia Bank, 604 A.2d 521, 531 (Md. Ct. Spec. App. 1992)). JMB
argues it has a viable claim that the defendants breached this duty by
expanding the scope of the curtain wall work, preventing JMB from
performing its obligations within the allotted time period. We dis-
agree.

   Under Maryland law, implied duties cannot act as a substitute for
express contractual terms and cannot change the terms of the contract.
See, e.g., Suburban Hosp., Inc. v. Dwiggins, 596 A.2d 1069, 1076-77
(Md. 1991) (declining to extend an implied covenant of good faith
and fair dealing to an at-will employment contract); Waller v. Mary-
land Nat’l Bank, 620 A.2d 381, 388 (Md. Ct. Spec. App.) ("The
implied duty of good faith does not change the terms of the con-
tract."), vacated on other grounds, 631 A.2d 447 (Md. 1993); Parker,
604 A.2d at 531 ("[T]he duty of good faith . . . does not obligate a
[party] to take affirmative actions that the [party] is clearly not
required to take under its [contract].").

   Imposing an implied duty on the defendants to extend the time
deadlines because of the expansion in curtain wall work would con-
travene the express terms of the Settlement Agreement. The Settle-
ment Agreement expressly contemplated that the defendants could
supplement the curtain wall work, without providing an extension of
time. (See J.A. at 346 ("JMB acknowledges and agrees that [the
defendants] reserve the right to supplement the Deficiency List with
regard to the structural deficiencies and revisions in the east wing of
the Retail Pavilion building,[4] and . . . JMB will complete the work
  4
   The Deficiency List indicates the curtain wall deficiencies were in the
east wing of the retail pavilion.
10                   BROWN v. ROCKVILLE CENTER
as set forth in any such supplement(s) without . . . delay." (Emphasis
added)).) The defendants bargained for the express power to supple-
ment the curtain wall work without giving up their expectation that
the project would be complete within time limits they found accept-
able. Maryland law would not vitiate this bargained-for power by
imposing upon the defendants an implied obligation to extend the
time under these circumstances.

   The exhibits JMB attached to its complaint reveal that JMB was
not entitled to an extension of time. JMB accordingly was required to
achieve Final Completion by November 16, which it admits it failed
to do. The consequence of JMB’s failure to achieve Final Completion
by November 16 was that JMB would be "in default," and could be
"terminated with no notice or opportunity to cure." (J.A. at 348.) The
consequence of a default by JMB was that JMB would not be entitled
to the escrowed funds, and that the escrowed funds would be returned
to the defendants. (See J.A. at 361, 376.) Accordingly, the defendants
were free to terminate the contract and take back the escrowed funds
when JMB defaulted on November 16. It follows that the defendants
could not have breached the contract by doing so.

   JMB appears to interpret the Settlement Agreement as entitling it
to receive the escrowed funds if it achieved "Substantial" Completion
by November 16, even if it did not achieve "Final" Completion by
November 16. This interpretation would eliminate the requirement
that JMB achieve Final Completion. Since JMB would not be entitled
to receive the escrowed funds "in the event of a default by JMB,"
(J.A. at 361, 376), JMB’s interpretation necessarily assumes that fail-
ure to achieve Final Completion would not constitute a "default." This
assumption is contrary to the terms of the Settlement Agreement, in
which "JMB expressly acknowledge[d] that if it fails to achieve Final
Completion within the aforesaid time period it shall be in default,"
(J.A. at 348), i.e. it would not be entitled to the escrowed funds.

   We conclude that JMB "pled itself out of a claim" by attaching the
several contract documents to its complaint. When we assume the
truth of the facts alleged by JMB in its amended complaint, as supple-
mented by the facts contained in the attached exhibits, those facts per-
mit of no other conclusion except that JMB was in default under the
Settlement Agreement, and that the defendants were free to terminate
                     BROWN v. ROCKVILLE CENTER                       11
JMB and to take back the escrowed funds. Accordingly, the district
court properly found that JMB failed to state a claim for breach of
contract.

                                  D.

   Next JMB argues that the district court erred in dismissing its
declaratory judgment claim. By this claim, JMB seeks a declaration
that, to the extent the Settlement Agreement provides that JMB for-
feited the escrowed funds and its claims against JMB’s designers and
subcontractors, such forfeitures are unlawful penalties, contrary to the
public policy of Maryland, and hence, unenforceable.

   As part of the settlement of the parties’ disputes, including settle-
ment of the defendants’ arbitration claims against JMB, JMB agreed
to a vast release provision. In relevant part, it states:

       Except for claims that RCI or PPI have breached their
    payment obligations as set forth [herein] . . . JMB . . . does
    hereby release and forever discharge [the defendants] . . .
    from any and all claims, demands, debts, dues, damages,
    causes of actions, liabilities, losses, suits, fees (including
    attorney’s fees), costs, accounts, bonds, bills, covenants,
    contracts, controversies, agreements, promises, variances,
    damages, judgments, executions, mechanics’ or material-
    men’s liens, claims and demands whatsoever, whether
    known or unknown, arising in law or equity, of whatever
    nature (whether in contract, quasi-contract, tort or other-
    wise), that JMB . . . [has], had, may have had or may have
    in the future by reason of any facts, known or unknown . . .
    which in any way relate to or arise from the Contract, as
    amended, the Property and/or the Project.

(J.A. at 363.)

   In Maryland, releases are construed according to traditional con-
tract principles. See Bernstein v. Kapneck, 430 A.2d 602, 606 (Md.
1981). A release evidencing a settlement, like the release in this case,
"is a jural act of exhalted [sic] significance which without binding
12                    BROWN v. ROCKVILLE CENTER
durability would render the compromise of disputes superfluous, and
accordingly unlikely." Id. The language of the above-quoted release
plainly bars JMB from asserting "any and all" claims against the
defendants that "in any way relate to or arise from" the Contract and
Settlement Agreement, except for claims "that RCI or PPI have
breached their payment obligations." Only JMB’s breach of contract
claim falls within the exception. Accordingly, enforcement of this
release bars JMB’s declaratory judgment claim against the defen-
dants.

   Even if the release did not bar JMB’s declaratory judgment claim,
the claim was not sufficiently stated. JMB’s allegations indicate JMB
never had an ownership interest in the escrowed funds, and thus, did
not "forfeit" them. It was the defendants, not JMB, that initially
placed the funds into escrow. As discussed supra, the escrow agent
was entitled to return those funds to the defendants when JMB
defaulted. Since JMB never had an ownership or possessory interest
in those funds, it could not have "forfeited" them. Cf. Diep v. Rivas,
745 A.2d 1098, 1104 (Md. 2000) ("There can be no forfeiture without
first having beneficial use or possession. One cannot forfeit what he
never had." (quoting Price v. Hitaffer, 165 A. 470, 471 (Md. 1933)).
In none of the cases cited by JMB was it said that one forfeited some-
thing in which he had no ownership or possessory interest. Conse-
quently, there was no "forfeiture" provision in the Settlement
Agreement that could be construed as a "penalty."

    At bottom, it appears JMB is attempting to replead its quantum
meruit and unjust enrichment claims—the dismissal of which JMB
does not appeal—in the guise of a public policy claim. The Court of
Appeals of Maryland recently reaffirmed its long-standing reluctance
to strike down voluntarily agreed-upon contractual arrangements on
public policy grounds. See Dwayne Clay, M.D., P.C. v. Government
Employees Ins. Co., 739 A.2d 5 (Md. 1999). Given this reluctance,
the court held that Maryland courts would not nullify voluntary bar-
gains on public policy grounds unless the plaintiff could show: (1)
that the challenged provision is "patently offensive to the public good,
. . . [such that] the common sense of the entire community would . . .
pronounce it invalid," and (2) that the alleged public policy is "deduc-
ible . . . from constitutional or statutory provisions." Id. (citations and
internal quotation marks omitted). JMB has not indicated how the
                     BROWN v. ROCKVILLE CENTER                       13
challenged provisions are "patently offensive to the public good." Nor
has JMB pointed to any constitutional or statutory provisions from
which the alleged public policy is deducible. Accordingly, JMB did
not sufficiently allege that the challenged provisions can be rendered
unenforceable on public policy grounds. Its declaratory judgment
claim was properly dismissed.

                                  E.

   JMB’s final contention is that the district court erred in dismissing
its conversion claim. We agree with the district court that this claim
also is barred by the release.

   Regardless, JMB failed to state a claim for conversion. "A ‘conver-
sion’ is any distinct act of ownership or dominion exerted by one per-
son over the personal property of another in denial of his right or
inconsistent with it." Allied Inv. Corp. v. Jasen, 731 A.2d 957, 963
(Md. 1999) (quoting Interstate Ins. Co. v. Logan, 109 A.2d 904, 907
(Md. 1954)). Since the only conclusion reachable from JMB’s allega-
tions is that JMB had no ownership interest in or right to withdraw
the escrowed funds, there could not have been any wrongful conver-
sion of those funds.

                                  III.

  Because JMB failed to state any claim upon which relief can be
granted, the district court’s judgment is

                                                          AFFIRMED.