Court Opinion

ID: 2664571
Source: CourtListenerOpinion
Date Created: 2014-04-04 04:07:12.937726+00
Date Added: 2024-06-11T12:17:36.315747
License: Public Domain

UNITED STATES DISTRICT COURT
                        FOR THE DISTRICT OF COLUMBIA

 FUENTES-FERNANDEZ &                             )
 COMPANY, PSC, and                               )
                                                 )
 JOSEPH FUENTES,                                 )
                                                 )
               Plaintiffs and                    )   Civil Case No. 07-0846 (RJL)
               Third-Party Plaintiffs,           )
                                                 )
               v.                                )
                                                 )
 CABALLERO & CASTELLANOS,                        )
 PL,                                             )
         Defendants, Cross-                      )
         Plaintiffs, and Third-Party             )
         Plaintiffs,                             )
                                                 )
               v.                                )
                                                 )
 HOUSING AUTHORITY OF NEW                        )
 ORLEANS and                                     )
                                                 )
 DAVID GILMORE, TRUSTEE,                         )
                                                 )
               Cross- and Third-Party            )
               Defendants.                       )

                             MEMORAND~ OPINION
                                 (March~, 2011) [#70]

       Plaintiffs/third-party plaintiffs Fuentes-Fernandez & Company, PSC ("FFC") and

Joseph Fuentes ("Fuentes"), together with defendantlcross-plaintiff/third-party plaintiff

Caballero & Castellanos, PL ("C&C") (collectively, "plaintiffs"), bring this action

against cross- and third-party defendants Housing Authority of New Orleans ("HANO")

and David Gilmore ("Gilmore") (collectively, "defendants"), seeking damages for breach

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of contract, unjust enrichment, and negligent administration of a contract. Before this

Court is defendants' Motion To Dismiss. Upon consideration of the parties' pleadings,

relevant law, and the entire record herein, defendants' motion is GRANTED.

                                     BACKGROUND

         The Housing Authority of New Orleans ("HANO"), a state-created agency, is the

largest housing authority in Louisiana.) Cross-Compl. & Third-Party Compl. ,-r 3

("Third-Party Compl.") [Dkt. #68]. Although it provides housing services exclusively for

New Orleans residents, HANO is (and has been) in administrative receivership and, as a

result, is managed by the U.S. Department of Housing and Urban Development ("HUD").

Id. HANO's current receiver is third-party defendant Gilmore. 2 Id.

         HANO awards procurement and service contracts to vendors and specifically

encourages certified Disadvantaged Business Enterprises and Woman Business

Enterprises to compete for its contracts. Id. ,-r 4. According to the Third-Party

Complaint, HANO awarded an $8,526,524 contract to third-party plaintiff C&C in 2006.

Id. ,-r,-r 5,6, 8. Under the contract, C&C was tasked with providing Financial Operations

Recovery Services to HANO. C&C, in tum, awarded a $1,500,000 sub-contract to

plaintiffFFC,3 a minority-certified accounting and consulting company. Id. ,-r,-r 5, 7.

         Housing Authority of New Orleans, http://www.hano.org(lastvisitedMar.l1.
2011).

2     Plaintiffs allege that as receiver, Mr. Gilmore is "the party responsible for
executing [orders] to pay for ... completed work." Third-Party Compl.,-r 10.
3
     FFC is a Puerto Rican company authorized to conduct business in the District of
Columbia. Compl., May 8, 2007, ,-r 1 [Dkt. # 1].

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Plaintiffs FFC and Fuentes 4 were the intended minority participants under the sub-

contract. Id.   ~   5.

       According to plaintiffs, HANO paid C&C $7,182,237.63 for completed work but

failed to pay more than $350,000 under the contract. Id.            ~   6. At the same time, plaintiffs

also acknowledge that Elias Castellanos, a principal of C&C who HANO installed as its

Chief Financial Officer, pleaded guilty to violating 18 U.S.C. § 666(a)(1)(A) (theft

concerning a program receiving federal funds), and that HANO has refused to pay the

balance because of Mr. Castellanos' conduct and the restitution he owes pursuant to his

                             [d. ~~ 6, 9. Plaintiffs nevertheless allege that defendants breached the
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plea agreement.

contract between HANO and C&C, and between FFC and Fuentes as third-party

beneficiaries, id.       ~   13; that HANO was unjustly enriched, id.     ~   15; and that HANO

negligently administered the contract by placing Mr. Castellanos as Chief Financial

Officer, id. ~ 17. Plaintiffs filed the instant action on April 2, 2010, seeking $500,000 in

damages plus attorneys fees and costs. [d. at 5. Defendants move to dismiss this action

pursuant to Fed. R. Civ. P. 12(b)(2) and 12(b)(6).

                                                 ANALYSIS

       Under Rule 12(b)(2), a plaintiff bears the burden of "alleg[ing] specific facts on

which personal jurisdiction can be based; it cannot rely on conclusory allegations."

                                                                                        ~
4
       Mr. Fuentes is a certified public accountant. CompI., May 8, 2007,                   2.

      According to defendants, Mr. Castellanos embezzled more than $900,000 by,
among other things, submitting fraudulent time sheets to HANO. Mem. in Supp. of Mot.
by Third Party Defs. to Dismiss Third-Party Compi. ("Mem. in SUpp. ofDefs.' Mot. to
Dismiss") at 2 [Dkt. # 71].
                                                       3
Moore v. Motz, 437 F. Supp. 2d 88, 90-91 (D.D.C. 2006). Unlike a motion to dismiss

under Rule 12(b)(6), the Court is not required to treat as true all of plaintiffs' allegations

when determining whether personal jurisdiction exists. United States v. Phillip Morris,

Inc., 116 F. Supp. 2d 116, 120 n.4 (D.D.C. 2000) (internal citation omitted).

       Defendants also move to dismiss under Fed. R. Civ. P. 12(b)(6). A Rule 12(b)(6)

motion to dismiss shall be granted if a plaintiff fails to "state a claim upon which relief

can be granted." Fed. R. Civ. P. 12(b)(6). The Court must typically "assume the truth of

the facts alleged in the complaint, and may grant the motion only if it appears beyond

doubt that the complainant will be unable to prove any set of facts that would justify

relief.,,6 Moore, 437 F. Supp. 2d at 90 (internal citation omitted). But "the Court need

not accept factual inferences suggested by the plaintiff if those inferences are not

supported by facts alleged in the complaint, nor must the Court accept the complainant's

legal conclusions." Id. (internal citation omitted). Unfortunately for plaintiffs, even

taking as true all of the allegations in the complaint, each of the three counts must be

dismissed. How so?

       As an initial matter, plaintiffs' claims must be dismissed because plaintiffs cannot,

and do not, establish personal jurisdiction. To establish personal jurisdiction, plaintiffs

must (1) plead facts sufficient to show that jurisdiction is appropriate under the District of

Columbia's long-arm statute and (2) satisfy the "minimum contacts" demands of

6       Importantly, when evaluating a motion to dismiss, the Court may consider "the
facts alleged in the complaint, any documents attached to or incorporated in the
complaint, matters of which the court may take judicial notice, and matters of public
record." Arencibia v. 2401 Restaurant Corp., 699 F. Supp. 2d 318, 323 (D.D.C. 2010)
(internal citation omitted).
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constitutional due process. United States v. Ferrara, 54 F.3d 825, 828 (D.C. Cir. 1995)

(internal citation omitted). Plaintiffs satisfy neither requirement here. With respect to the

long-arm statute, plaintiffs do not allege that defendants HANO and Gilmore meet any of

the criterion - e.g., transacting business in, contracting services in, causing tortuous

injury in, regularly soliciting business in, engaging in a persistent course of conduct in, or

deriving substantial revenue from goods used or consumed in, Washington, D.C. - which

would confer personal jurisdiction in the District. D.C. Code § 13-423(a) (2010). Nor do

plaintiffs allege facts which would satisfy due process. That is, plaintiffs do not allege

that defendants HANO and Gilmore had minimum contacts "grounded in some act by

which the defendant[ s] purposefully avail [ed] [themselves] of the privilege of conducting

activities with the forum state, thus invoking the benefits and protections of its laws."

Agee v. Sebelius, 668 F. Supp. 2d 1, 5 (D.D.C. 2009) (internal citations and quotations

omitted). HANO is a state agency, and the HANO contract addressed work performed in

Louisiana and governed by Louisiana law. Conspicuously absent is any allegation that

HANO conducts business or any other activity in the District of Columbia.

       Moreover, allegations that HUD (a federal agency) manages HANO (a state

agency) in administrative receivership, Third-Party Compl. , 3; that HANO "works

through the office of Receivership Oversight" in Washington, D.C., PIs.' Opp'n to Mot.

to Dismiss, Aug. 19,2010, , 6 [Dkt. #75]; and that HUD has authority to approve HANO

contracts, id. , 7, fall into the "government contacts" exception to the long-arm statute

and do not establish personal jurisdiction. Coal. on Sensible Transp., Inc. v. Dole, 631 F.

Supp. 1382, 1384 (D.D.C. 1986). Under that exception, certain contacts with the federal

                                              5
government - such as meeting with federal officials in Washington, D.C., or receiving

federal funding - are insufficient to establish personal jurisdiction. Id. at 1384-85; see

also Siam Kraft Paper Co., Ltd. v. Parsons & Whittemore, Inc., 400 F. Supp. 810, 812

(D.D.C. 1975) (government-contacts principle denies personal jurisdiction for a "non-

resident[] whose only contact with this jurisdiction involves uniquely governmental

activities"). Because HANO's interactions with HUD are "uniquely governmental

activities," Siam Kraft Paper Co., Ltd., 400 F. Supp. at 812, they are exempt from the

D.C. long-arm statute and are insufficient, as a matter of law, to establish personal

jurisdiction. Accordingly, plaintiffs' claims must be dismissed.

       Even if this Court were to find personal jurisdiction, however, plaintiffs' claims of

breach, unjust enrichment, and negligent administration would still fail under Fed. Rule

Civ. P. 12(b)(6) because the plain language of the parties' contract - a contract that

plaintiffs do not dispute and one which plaintiffs seek to enforce - bars recovery. Under

the contract between plaintiff C&C and defendant HANO, all disputes "arising under or

relating to th[e] contract" must be resolved under the "disputes clause." Contract for

Servs. Between HANO and C&C, Sept. 15,2006 ("Contract"), Defs.' Ex. 3-C, ~ 3(a)

[Dkt. #71-3 at 17]. Importantly, that clause requires specific action before filing suit:

"[a]ll claims by the Contractor shall be made in writing and submitted to the [housing

authority]." Id. ~ 3(b).7 But plaintiffs offer no evidence that they complied with the

7      The Contract explains a full range of pre-litigation conditions precedent. For
example, after the Contractor submits a claim in writing, the housing authority must
render a decision within sixty days. A thirty-day internal-appeal process follows.
Contract, Defs.' Ex. 3-C, ~ 3(a)-(e).
                                              6
clear and unambiguous requirements of the Contract's disputes clause. 8 Accordingly,

their claims must fail. See United States v. Joseph A. Holpuch, Co., 328 U.S. 234, 240

(1946) (holding that a contract's disputes clause "is controlling as to all disputes

concerning questions arising under th[ e] contract unless otherwise specified in the

contract") (internal quotations omitted).

       Finally, paragraph 16 of the Contract plainly releases and "save[s] harmless"

HANO and its employees from "claims suits, actions and costs of every description

resulting from the Contractor's activities on behalf of the [housing authority] in

connection with this Agreement." Contract, Defs.' Ex. 3-C, ~ 16 [Dkt. #71-3 at 20]; see

also Supp. Contract Conditions, Defs.' Ex. 3-D at 1 [Dkt. #71-3 at 23]. Plaintiffs' claims

of breach of contract, unjust enrichment, and negligent administration with respect to

third-party plaintiff FFC directly relate to, and arise out of, C&C' s contract performance

with HANO.        Because defendants are released from claims relating to C&C's contract

performance, actions, or omissions, plaintiffs' claims are also barred by paragraph 16 of

the Contract. 9

        Plaintiff Fuentes' declaration that "on best information and belief[,] all invoices,
[sic] and claims were delivered to HANO by CC in written form and HANO has failed to
answer" does not satisfy the disputes clause. Decl. of Plaintiff Joseph Fuentes, President
ofFFC, Aug. 18,2010, PIs.' Ex. 1 at ~ 4 [Dkt. #75-1]. The contract at issue is between
C&C (not FFC) and HANO, and C&C has offered no evidence that it submitted claims to
HANO in writing.

9       Defendants also argue that plaintiffs' recovery is barred by the equitable doctrine
of in pari delicto - that is, where opposing parties are both to blame, neither can recover
for breach of contract. Although plaintiffs admit that Elias Castellanos pleaded guilty to
theft, Third-Party Compl. ~ 6, and that "HANO may have suffered injury" from his
criminal conduct, id. ~ 15, this Court need not decide whether the in pari delicto doctrine
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                                     CONCLUSION

       F or all of the foregoing reasons, the Court GRANTS the cross- and third-party

defendants' Motion to Dismiss Third Party Complaint [Dkt. #70] and DISMISSES the

action without prejudice. An order consistent with this decision accompanies this

Opinion.

                                                      United States District Judge

bars plaintiffs' recovery based on the facts of this case. Plaintiffs' claims are dismissed
for lack personal jurisdiction and because the plain language of the contract bars
recovery; whether in pari delicto also bars recovery is immaterial to the outcome here.

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