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Metro Foundation Contractors, Inc v. Arch Insurance Company

May 31, 2011

METRO FOUNDATION CONTRACTORS, INC.,
PLAINTIFF,
v.
ARCH INSURANCE COMPANY,
DEFENDANT.
ARCH INSURANCE COMPANY,
THIRD-PARTY PLAINTIFF,
v.
MARCO MARTELLI & ASSOCIATES, INC., ET AL.
THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: John G. Koeltl, District Judge:

OPINION AND ORDER

The plaintiff, Metro Foundation Contractors, Inc. ("Metro"), brought this action for damages against Arch Insurance Company ("Arch"). Metro claimed that it was entitled to recover on a payment bond issued by Arch. Arch, the defendant/third-party plaintiff, filed a third-party complaint for indemnification against Marco Martelli Associates, Inc., Martelli Real Estate, Inc., Marco Martelli, Madeline Martelli, Ronald Kuhlman, and Patrick Quigley (collectively "MMA" or "third-party defendants"), the third-party defendants. Arch claimed that it was entitled to be indemnified by MMA for any payments that it was required to pay to Metro. MMA then filed breach of contract claims against Metro in its Amended Answer to the complaint brought by Arch. MMA claimed that Metro had breached various contracts and was therefore not entitled to recover the amounts it claimed under the payment bond. Metro now moves to dismiss MMA's claims for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). Alternatively, Metro asks the Court to decline to exercise supplemental jurisdiction over MMA's claims pursuant to 28 U.S.C. § 1367(c). MMA and Arch oppose the motion. In addition, MMA moves for a default judgment against Metro pursuant to Federal Rule of Civil Procedure 37, an Order of Contempt and sanctions against Metro for noncompliance with this Court's January 6, 2011 Order, and an Order requiring Metro to pay the reasonable expenses incurred by MMA because of Metro's failure to comply with the January 6, 2011 Order.

I.

In defending a motion to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Procedure 12(b)(1), the plaintiff bears the burden of proving the Court's jurisdiction by a preponderance of the evidence.*fn1 In considering such a motion, the Court generally must accept the material factual allegations in the complaint as true. See J.S. ex rel. N.S. v. Attica Cent. Schs., 386 F.3d 107, 110 (2d Cir. 2004). The Court does not, however, draw all reasonable inferences in the plaintiff's favor. Id.; Graubart v. Jazz Images, Inc., No. 02 Civ. 4645, 2006 WL 1140724, at *2 (S.D.N.Y. Apr. 27, 2006). Indeed, where jurisdictional facts are disputed, the Court has the power and the obligation to consider matters outside the pleadings, such as affidavits, documents, and testimony, to determine whether jurisdiction exists. See Anglo-Iberia Underwriting Mgmt. Co. v. P.T. Jamsostek (Persero), 600 F.3d 171, 175 (2d Cir. 2010); APWU v. Potter, 343 F.3d 619, 627 (2d Cir. 2003); Filetech S.A. v. France Telecom S.A., 157 F.3d 922, 932 (2d Cir. 1998); Kamen v. Am. Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986). In so doing, the Court is guided by that body of decisional law that has developed under Federal Rule of Civil Procedure 56. Kamen, 791 F.2d at 1011; see also Leyse v. Bank of Am., N.A., No. 09 Civ. 7654, 2010 WL 2382400, at *1 (S.D.N.Y. June 14, 2010).

II.

The following facts are undisputed, unless otherwise noted.

Hills, 259 F.3d 123, 126 (2d Cir. 2001). No party has raised this issue and the standards under Rule 12(c) are the same as under Rule 12(b)(6). See Cleveland v. Caplaw Enters., 448 F.3d 518, 521 (2d Cir. 2006).

In 2008 MMA was the general contractor/construction manager for the construction of a nursing home in New York City (the "Project"). Arch issued a bond to MMA in the amount of $29,292,754 (the "Payment Bond"), which was intended to cover the costs of labor and material for the Project. (DeMartino Decl. ¶¶ 3-5.)

MMA and Metro entered into a series of subcontracts and change order agreements in which Metro agreed to perform construction work on the Project in exchange for payments totaling $4,616,944.40, subject to adjustments for extra work or alterations to the work. (DeMartino Decl. ¶¶ 6-13.) Metro performed work and furnished materials for the Project from February 2008 to January 2009. Based on the work performed, Metro asserts that it is entitled to more than $1.7 million, which MMA has refused to pay. (DeMartino Decl. ¶¶ 14-16.) Metro claimed that it was a beneficiary of the Payment Bond and requested that Arch, as the issuer of the Payment Bond, pay the amount allegedly owed under the subcontracts. Arch denied Metro's claim.

Sometime prior to April 7, 2009, Metro filed an action against MMA in the New York State Supreme Court, New York County, in which it seeks to recover directly against MMA for the amounts it claims are due for the work it allegedly performed on the construction subcontracts. (Ha Decl. Ex. E.)

Metro then filed its complaint in this action against Arch on July 30, 2009. It claims that Arch breached its contract by failing to pay the amount due under the Payment Bond and that Arch breached the covenant of good faith and fair dealing when it allegedly denied Metro's claim without conducting an independent investigation. (Ha Decl. Ex. A ("Metro Complaint")

¶¶ 34-48.) On September 14, 2009, Arch filed an answer to Metro's complaint and a third-party complaint for indemnification against MMA and other defendants. (Ha Decl.

Exs. B & C.) MMA filed an Amended Answer to the third-party complaint brought by Arch on June 10, 2010. The Amended Answer alleged that Metro breached the subcontracts and asserted claims for breach of contract, indemnification, and attorney's fees against Metro. (Ha Decl. Ex. D.) MMA alleges, among other things, that Metro breached the construction subcontracts by failing to perform its work in a timely and workmanlike manner and by failing to complete its work under the subcontracts. MMA claims that Metro is liable for the cost of completing the subcontract work. MMA also alleges that claims against Arch were improper and that it is entitled to indemnification for having to defend itself against Arch. Metro now argues that the claims alleged by MMA in the Amended Answer should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction.

Throughout the course of this litigation, Metro has failed to comply with discovery requests by MMA. Following refusals by Metro to produce documents responsive to MMA's Rule 34 request for documents, on September 2, 2010, this Court issued an Order requiring Metro to produce all documents responsive to outstanding discovery requests and to answer all outstanding interrogatories by September 17, 2010. (Metro Found. Contractors, Inc. v. Arch Ins. Co., Order, Sept. 2, 2010, Docket No. 27 (the "September 2 Order").) Metro failed to comply with this Order, and, as a result, in an order dated January 6, 2011 (the "January 6 Order"), the Court imposed sanctions by prohibiting Metro from introducing documents that were responsive to the document requests and were not produced, and awarded costs and attorneys' fees in the amount of $3,850 to MMA. Metro Found. Contractors, Inc. v. Arch Ins. Co., No. 09 ...


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