Cable First Construction Inc. v. Lepetiuk Engineering Corp.

Background

The opinion resolved motions in two related federal cases arising from an alleged breach of an October 2019 services contract between Cable First Construction Inc. and Lepetiuk Engineering Corp. Under the contract, Lepetiuk Engineering agreed to provide aerial cable-construction services for a New York project. The alleged dispute also involved nondisclosure and noncompete covenants.

Cable First alleged that Lepetiuk Engineering left fiber-optic cables unattended, overbilled for services, used paid materials on other projects, damaged and improperly installed cables, and continued trespassing on property after the contract was terminated. It also alleged that Dmytro Lepetiuk filed a false police report concerning John Quaranta and that materials were used for a competitor’s project. Lepetiuk Engineering alleged that Cable First failed to pay for services provided after January 19, 2020. It also alleged that Cable First and Quaranta tried to change the contract terms, refused to pay, solicited Lepetiuk Engineering’s employees, and that Quaranta damaged property and called Lepetiuk Engineering’s principal a “liar.”

The Removed Action, No. 20 Civ. 6679

Cable First and Quaranta asserted claims for fraud, breach of contract, specific performance, unjust enrichment, declaratory judgment, and an injunction against Lepetiuk Engineering and Dmytro Lepetiuk. Lepetiuk Engineering and Dmytro Lepetiuk moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim. They sought dismissal of the fraud, specific-performance, unjust-enrichment, declaratory-judgment, and injunction claims, as well as all claims brought by Quaranta and all claims against Dmytro Lepetiuk.

The court noted that removal violated the federal forum-defendant rule because Dmytro Lepetiuk was identified as a New York resident. The court held that this was a waivable procedural defect, rather than a jurisdictional defect, and that it had been waived because Cable First and Quaranta had not raised it.

The court held that Quaranta was not a party to the contracts and was not a third-party beneficiary. His ownership of Cable First did not give him the right to sue for injuries to the company. The court therefore dismissed all of Quaranta’s claims against Lepetiuk Engineering and Dmytro Lepetiuk.

The court also dismissed all claims against Dmytro Lepetiuk. The complaint did not allege that he was a party to the contracts and identified him only as an owner and shareholder of Lepetiuk Engineering and as the person who filed the allegedly false police report. Because the complaint did not assert a claim based on that report, the court found no sufficient basis for claims against him.

The court dismissed Cable First’s fraud claim because the alleged fraud concerned statements about future contractual performance rather than a separate fraudulent inducement, and the complaint did not identify particular false statements made before the contract was formed. The court also stated that the fraud allegations did not meet the ordinary plausibility standard or the heightened requirement that fraud be pleaded with particularity.

The court dismissed the specific-performance claim because Cable First did not identify which of three contracts it sought to enforce, did not allege sufficient facts about its own performance, and did not adequately explain why money damages would be insufficient. It dismissed the declaratory-judgment claim as duplicative of the breach-of-contract claim. Although unjust enrichment may be pleaded as an alternative when contract enforceability is disputed, the court found that Cable First had not adequately alleged that Lepetiuk Engineering was enriched or that fairness required restitution. The court dismissed the injunction claim because Cable First had not pleaded facts showing irreparable harm.

The court stated that Counts I and III through VI were dismissed and granted Cable First leave to refile consistent with the order, including by specifying which claims related to which contracts.

The Federal Action, No. 20 Civ. 5894

Lepetiuk Engineering brought claims against Cable First and Quaranta for breach of contract, payment for the reasonable value of services, account stated, property damage, breach of the implied covenant of good faith and fair dealing, and slander. Cable First and Quaranta moved to dismiss for lack of subject-matter jurisdiction. They argued that the court should decline to hear the case because of a parallel state-court proceeding and that complete diversity of citizenship was absent because Lepetiuk Engineering’s principal place of business was allegedly in New York.

The court found complete diversity. It explained that a corporation is a citizen of its state of incorporation and its principal place of business. The materials before the court identified Lepetiuk Engineering as incorporated in Florida, with its principal place of business identified in the filings as Florida or Virginia, while Cable First was identified as a Virginia corporation with its principal place of business in Virginia and Quaranta as a New Jersey citizen. The court therefore found that the parties were citizens of different states. The court also declined to abstain because the allegedly parallel state-court case had been removed to federal court and was no longer a separate state proceeding.

The court concluded, however, that the claims in the Federal Action arose from the same facts as the Removed Action and should have been asserted as compulsory counterclaims. A compulsory counterclaim is a claim arising from the same transaction or occurrence as the opposing party’s claim. The court dismissed the Federal Action with leave for Lepetiuk Engineering to assert its claims as counterclaims in the Removed Action. The court also stated that unargued motions based on personal jurisdiction and failure to state a claim were waived.

Disposition

Judge Alvin K. Hellerstein granted Lepetiuk Engineering Corp.’s motion to dismiss and denied Cable First Construction Inc.’s motion to dismiss. The court allowed the plaintiffs to replead claims in the Removed Action by February 26, 2021. The clerk was instructed to dismiss civil case No. 20 Civ. 5894 without prejudice and without costs, and to dismiss Dmytro Lepetiuk as a party in No. 20 Civ. 6679 with prejudice and with costs. The opinion’s caption and text contain a numbering inconsistency concerning the injunction claim, but the final disposition states that Counts I and III through VI were dismissed.