Lepetiuk Engineering Corp. v. Cable First Construction Inc.

Background

The opinion resolves motions in two related cases concerning an alleged October 2019 contract under which Lepetiuk Engineering Corp. (LEC) agreed to provide aerial cable construction services to Cable First Construction Inc. for a New York project. The dispute also involved alleged non-disclosure and non-compete covenants.

Cable First alleged that LEC left fiber-optic cables unattended, overbilled for services, used paid materials on other projects, and caused or improperly repaired damage to fiber-optic cables. Cable First said it terminated the services contract and that LEC continued entering its property and using its materials for a competitor’s project. It also alleged that Dmytro Lepetiuk filed a false police report concerning John Quaranta.

LEC alleged that Cable First had not paid for services provided after January 19, 2020. LEC also alleged that Cable First and Quaranta tried to change the contract terms, refused to pay, misled LEC employees, solicited those employees, damaged LEC property, and made statements harming LEC’s reputation.

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 LEC and Lepetiuk. LEC and Lepetiuk moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim, seeking dismissal of the fraud, specific-performance, unjust-enrichment, declaratory-judgment, and injunction claims. They also sought dismissal of all claims brought by Quaranta and all claims asserted against Lepetiuk.

The court noted that removal violated the federal forum-defendant rule because Lepetiuk was alleged to be a New York resident. The court held that this was a waivable procedural defect, not a jurisdictional defect, and that Cable First and Quaranta had waived it by not raising 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. It also dismissed all claims against Lepetiuk because he was not alleged to be a party to the contracts, and the complaint did not assert a claim based on the allegedly false police report.

The court dismissed Cable First’s fraud claim because the alleged fraud concerned contractual promises, the complaint did not identify a false statement made before the contract was signed, and the allegations did not satisfy the heightened requirement for pleading fraud. It dismissed the specific-performance claim because Cable First did not identify which contract it sought to enforce and did not adequately allege that it had performed its own obligations or that money damages were inadequate.

The court dismissed the declaratory-judgment claim as duplicative of Cable First’s breach-of-contract claim. It recognized that unjust enrichment may be pleaded in the alternative when the enforceability of a contract is disputed, but dismissed that claim because Cable First did not sufficiently allege that LEC was enriched or that fairness required restitution. The court dismissed the injunction claim because Cable First did not allege facts showing irreparable harm.

The court stated that Counts I and III through VI were dismissed and granted Cable First leave to refile its claims consistently with the order, including by specifying which claims related to which contracts. The opinion does not state that those claim dismissals generally were with prejudice. In the final instructions, however, the court directed the Clerk to dismiss Dmytro Lepetiuk as a party in this case with prejudice and with costs taxed by the Clerk.

The Federal Action: No. 20 Civ. 5894

LEC asserted claims for breach of contract, quantum meruit, account stated, property damage, breach of the implied covenant of good faith and fair dealing, and slander against Cable First and Quaranta. Cable First and Quaranta moved to dismiss for lack of subject-matter jurisdiction, arguing that the court should abstain because of a parallel state proceeding and that complete diversity of citizenship did not exist because LEC’s principal place of business was allegedly in New York.

The court rejected the jurisdictional argument. It found that the documentary evidence did not support the assertion that LEC’s principal place of business was in New York. The court found complete diversity based on the allegations that LEC was a Florida corporation with its principal place of business in Florida, Cable First was a Virginia corporation with its principal place of business in Virginia, and Quaranta was a New Jersey citizen.

The court also declined to abstain because the allegedly parallel state proceeding had been removed to federal court, so there was no parallel state-court proceeding requiring abstention. The court therefore denied Cable First and Quaranta’s motion to dismiss for lack of subject-matter jurisdiction.

The court nevertheless dismissed the Federal Action because its claims arose from the same facts as the Removed Action and should have been brought 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 LEC to assert its claims as counterclaims in the Removed Action.

Disposition

Judge Alvin K. Hellerstein directed the Clerk to dismiss civil case 20-cv-5894 without prejudice and without costs, along with all open motions in that case. The court allowed plaintiffs to replead claims in the Removed Action by February 26, 2021, consistent with the order and the requirement of a short and plain statement of the breach-of-contract claim. The court also directed dismissal of Dmytro Lepetiuk as a party in case 20-cv-6679 with prejudice and with costs taxed by the Clerk.