UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Androscoggin Valley Regional Refuse Disposal District
v.
R.H. White Construction Co., Inc.
Civil No. 15-cv-434-LM Opinion No. 2017 DNH 093
Sanborn, Head & Associates, Inc. et al.
O R D E R
Androscoggin Valley Regional Refuse Disposal District (the
“District”) brings suit against R.H. White Construction Co.,
Inc. (“R.H. White”) alleging claims arising out of an agreement
between the parties that provided for R.H. White to design and
build a landfill gas processing facility. R.H. White filed a
third-party complaint (doc. no. 4) against nine entities that
were also involved in the building and design of the facility,
including Sanborn, Head & Associates, Inc. (“SHA”). SHA
answered the third-party complaint and asserted three third-
party counterclaims against R.H. White. See doc. no. 42. R.H. White moves to dismiss three claims asserted by the
District, arguing that they fail to adequately state a claim for
relief. See doc. no. 91. R.H. White also moves to dismiss two
of the third-party counterclaims asserted by SHA on the same
ground. See doc. no. 92.
Standard of Review
Under Rule 12(b)(6), the court must accept the factual
allegations in the complaint as true, construe reasonable
inferences in the plaintiff’s favor, and “determine whether the
factual allegations in the plaintiff’s complaint set forth a
plausible claim upon which relief may be granted.” Foley v.
Wells Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014)
(citation omitted). A claim is facially plausible “when the
plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009).
Background1
The District owns and operates the Mount Carberry Landfill
in Success, New Hampshire. On September 12, 2011, the District
1 These facts are drawn from the allegations in the District’s amended complaint (doc. no. 77) and R.H. White’s third-party complaint (doc. no. 4).
2 and R.H. White entered into an agreement (the “Agreement”) in
which R.H. White agreed to design and build a landfill gas
compression and treatment facility (the “LFG Facility”) at the
Mount Carberry Landfill. The purpose of the LFG Facility was to
treat and transport the landfill gas through a pipeline to the
Gorham Paper and Tissue Mill, which would purchase the gas from
the District.
In order to induce the District to enter into the
Agreement, R.H. White made several representations in its
response to the District’s Request for Proposal (“RFP”) and in
the Agreement itself. Those representations included statements
about R.H. White’s expertise and ability to build and design the
LFG Facility in accordance with the District’s needs.
In 2012, R.H. White contracted with several companies to
provide design and/or engineering services in connection with
the construction of the LFG Facility. On July 5, 2012, R.H.
White entered into an agreement with SHA (the “subcontract”),
pursuant to which SHA was responsible for much of the overall
engineering and design of the LFG Facility.
Under the terms of the Agreement and after several agreed-
upon extensions, R.H. White was obligated to substantially
complete its work on or before October 22, 2012. On November 5,
3 2012, R.H. White commenced startup of the LFG Facility, and the
first day of landfill gas sales occurred on November 7, 2012.
The LFG Facility ran intermittently from November 7, 2012
through December 20, 2012. On December 21, 2012, the facility
was shut down entirely because it was not working properly.
From December 2012 through March 2014, the LFG Facility
experienced frequent unexpected shutdowns caused by multiple
failing components, including the regeneration cooler, the air
heat exchanger on the compressor skid, the glycol cooler, the
compressor motor, and the odorant system.
R.H. White asked SHA to perform an analysis of the LFG
Facility to identify the cause of the problems. SHA determined
that at least part of the problem arose when some of the
landfill gas being sent through a part of the system, the
dessicant dryer, was recycled back through the system (the
“regeneration gas”).
In early 2014, based on SHA’s recommendation and design,
R.H. White installed a “side flare” to divert and “burn off” the
regeneration gas before it was sent through the LFG Facility.
The purpose of the side flare was to determine if the
regeneration gas was causing the clogging and corrosion problems
in the various components of the system.
4 In March 2014, the side flare began operating, and the LFG
Facility stayed “on line” consistently thereafter. R.H. White
asked the District to deem the side flare a “permanent solution”
to the problems the facility had experienced and an acceptable
change to the original design. R.H. White also asked the
District to pay it the $496,000 retainage fee it had held back
pending completion of the project. The District did not deem
the side flare an acceptable permanent solution, because it
reduced the amount of landfill gas that was supposed to be
treated and eventually sold, and did not pay R.H. White the
retainage fee.
While the District and R.H. White attempted to resolve the
dispute, the District noticed staining of soil, metal roofs, and
equipment in the area immediately beneath and surrounding the
side flare. The District tested the stained soil, which showed
elevated levels of certain heavy metals, including arsenic,
chromium, lead, and nickel. The contamination levels are
highest at the point of the side flare, which is consistent with
the side flare being the cause of the contamination.
The District informed the New Hampshire Department of
Environmental Services (“DES”) of its soil testing findings.
Based on initial discussions with DES, the District expects that
it will need to remediate the contaminated topsoil around the
5 side flare and that it will likely need to discontinue the side
flare or redesign it to preclude further contamination. The
District’s engineers have begun trying to redesign the side
flare, but even if successful, some landfill gas will still be
diverted from the pipeline, leaving the District with less gas
to sell than what was contemplated under the Agreement.
Under the original terms of the Agreement, the District was
obligated to pay R.H. White $2,108,130, plus an additional
$160,000 for ledge removal. After several “change orders,” the
total price under the Agreement rose to $3,275,508.40.
Discussion
R.H. White moves to dismiss three of the District’s claims
(doc. no. 91) and two of SHA’s third-party counterclaims (doc.
no. 92). The court addresses these motions separately below.
I. Motion to Dismiss District’s Claims
The District asserts nine claims against R.H. White in its
amended complaint: (1) Breach of Contract (Count I); (2) Breach
of the Implied Covenant of Good Faith and Fair Dealing (Count
II); (3) Breach of the Implied Warranty of Fitness for a
Particular Purpose (Count III); (4) Negligence (Count IV); (5)
Violation of the New Hampshire Consumer Protection Act (“CPA”),
N.H. Rev. Stat. Ann. (“RSA”) Ch. 358-A (Count V); (6) Breach of
Express Warranty (Count VI); (7) Breach of Implied Warranty of
6 Good Workmanship (Count VII); (8) Negligent Misrepresentation
(Count VIII); and (9) Unjust Enrichment/Quantum Meruit (Count
IX). R.H. White moves to dismiss Counts V, VIII, and IX. The
District objects.
A. Violation of the CPA (Count V)
R.H. White moves to dismiss the District’s CPA claim,
asserting that the allegations underlying the claim simply
restate a breach of contract claim, and that the allegations
fail to meet the well-recognized “rascality test.” In response,
the District contends that the rascality test does not apply
here, because it is alleging that R.H. White committed one of
the acts specifically proscribed by RSA 358-A:2, not that R.H.
White’s conduct was an otherwise unspecified “unfair method of
competition or unfair or deceptive act or practice.”
The CPA makes it “unlawful for any person to use any unfair
method of competition or any unfair or deceptive act or practice
in the conduct of any trade or commerce within this state.” RSA
358-A:2. Beyond that, the CPA specifically proscribes 16
different deceptive acts or practices, including “[r]epresenting
that goods or services have . . . characteristics . . . or
quantities that they do not have or that a person has a
sponsorship, approval, status, affiliation, or connection that
such person does not have,” RSA 358-A:2, V, and “[r]epresenting
7 that goods or services are of a particular standard, quality, or
grade . . . if they are of another,” RSA 358-A:2, VII. The
District asserts that it is relying on these two provisions for
its CPA claim in Count V, and not on another unspecified act or
practice that would be subject to the New Hampshire Supreme
Court’s rascality test. See Beer v. Bennett, 160 N.H. 166, 171
(2010) (“The rascality test is used to determine ‘which
commercial actions, not specifically delineated, are covered by
the [CPA].’” (quoting ACAS Acquisitions v. Hobert, 155 N.H. 381,
402 (2007))).
In order to state a claim under RSA 358-A:2, V or RSA 358-
A:2, VII, a plaintiff must allege that a defendant made a
representation, “with actual knowledge of its falsity or
reckless disregard for its truth, with the intent to induce” the
plaintiff to enter into a transaction. Brace v. Rite Aid Corp.,
No. 10-cv-290-LM, 2011 WL 635299, at *3 (D.N.H. Feb. 4, 2011)
(discussing Kelton v. Hollis Ranch, LLC, 155 N.H. 666 (2007) and
Beer, 160 N.H. 166). In its objection, the District asserts
that it has sufficiently alleged a violation of RSA 358-A:2, V
and RSA 358-A:2, VII, because the amended complaint alleges:
that R.H. White promised that the LFG Facility would be of a particular standard or grade (i.e., a fully functioning LFG Facility) and that the LFG Facility it built would have the characteristics, uses and benefits of a fully functioning LFG Facility; however, the plant R.H. White actually built was not of that
8 standard and did not have those characteristics, uses, or benefits.
Doc. no. 93 at 7-8 (citing paragraphs 50-52 and 54 of the
amended complaint). In other words, in support of its CPA
claim, the District alleges that R.H. White represented that it
could and would construct the LFG Facility according to certain
standards, but that it failed to do so.
Missing from the District’s CPA claim is an allegation that
R.H. White made a misrepresentation with actual knowledge of its
falsity or reckless disregard for its truth, with the intent to
induce the District to enter into the Agreement. Though the
amended complaint alleges in support of the CPA claim that R.H.
White represented that it could build the LFG Facility in
accordance with the terms of the Agreement and that it failed to
do so, it does not allege that R.H. White knew or was reckless
in not knowing that it could not do so at the outset of the
Agreement. Thus, those allegations fail to give rise to a CPA
claim. See Private Jet Servs. Grp., Inc., No. 05-cv-98-JD, 2006
WL 2864057, at *5 (D.N.H. Oct. 5, 2006) (“An ordinary breach of
contract claim does not present an occasion for the remedies
under the Consumer Protection Act.” (quoting Barrows v. Boles,
141 N.H. 382, 390 (1996))); see also Brace, 2011 WL 635299, at
*5 (“[I]t is not a CPA violation to sell bad goods or services;
the CPA is implicated only when a seller induces the purchase of
9 such goods through the use of deception.”).2 Accordingly, Count
V is dismissed.
B. Negligent Misrepresentation (Count VIII)
R.H. White moves to dismiss the District’s negligent
misrepresentation claim, asserting that the amended complaint
fails to allege any specific misrepresentations apart from the
alleged misrepresentations in the Agreement. R.H. White
contends that a negligent misrepresentation claim based on
statements in a contract is duplicative of a breach of contract
claim and must be dismissed. In response, the District asserts
that it has alleged that R.H. White made certain
misrepresentations about its ability and expertise without which
the District would not have entered into the Agreement.
2 As discussed below, the District alleges in support of its negligent misrepresentation claim that R.H. White knew or should have known that it could not provide the District with a functioning LFG Facility. See doc. no. 77 at ¶ 73. Even if that allegation could support a CPA claim, it is not the basis of the District’s CPA claim as alleged in the amended complaint. The District does not reference that allegation with regard to its CPA claim in its objection or its surreply, and characterizes its CPA claim as being based on R.H. White’s failure to deliver on its promise to build a functioning LFG Facility. Because the District does not advance the argument in its objection or surreply that this subsequent allegation could support or is the basis for its CPA claim, the court does not address that argument here. See Coons v. Indus. Knife Co., Inc., 620 F.3d 38, 44 (1st Cir. 2010) (The First Circuit has “emphasized that judges are not obligated to do a party's work for him, ‘searching sua sponte for issues that may be lurking in the penumbra of the motion papers.’” (quoting United States v. Slade, 980 F.2d 27, 31 (1st Cir. 1992))).
10 Under New Hampshire common law, the elements of a claim for
negligent misrepresentation “are a negligent misrepresentation
of a material fact by the defendant and justifiable reliance by
the plaintiff.” Wyle v. Lees, 162 N.H. 406, 413 (2011) (citing
Snierson v. Scruton, 145 N.H. 73, 78 (2000)). Moreover, “[i]t
is the duty of one who volunteers information to another not
having equal knowledge, with the intention that he will act upon
it, to exercise reasonable care to verify the truth of his
statements before making them.” Id.
A plaintiff cannot recover damages in tort for a
negligently performed contract.3 See Plourde Sand & Gravel v.
JGI Eastern, Inc., 154 N.H. 791, 794 (2007). However, “New
Hampshire law recognizes that the procuring of a contract or
conveyance by means of fraud or negligent misrepresentation is
an actionable tort . . . .” Van Der Stok v. Van Voorhees, 151
N.H. 679, 681–82 (2005) (quoting Nashua Trust Co. v. Weisman,
122 N.H. 397, 400 (1982)). Thus, when “the plaintiff alleges
that the defendant’s misrepresentations induced him to enter the
contract . . . the claim does not duplicate a breach of contract
claim” and a plaintiff’s negligent misrepresentation claim is
viable. Johnson v. Capital Offset Co., No. 11-cv-459-JD, 2013
3 This rule is generally known under New Hampshire law as the economic loss doctrine. See Wyle, 162 N.H. at 410.
11 WL 5406613, at *3 (D.N.H. Sept. 25, 2013) (citing Wyle, 162 N.H.
at 411).
The amended complaint alleges that R.H. White represented
both in its response to the District’s RFP and in the Agreement
itself that “it had the necessary experience and ability to
complete the Work and to provide the District with a fully
functional and reliable LFG Facility.” Doc. no. 77 at ¶ 71. It
also alleges that the “District reasonably and foreseeably
relied upon R.H. White’s representations in its RFP to enter in
the Design/Build Agreement with R.H. White.” Id. In addition,
the amended complaint alleges that “R.H. White knew or should
have known that its representations were not correct and it
could not provide the District with an LFG Facility that was
functional and reliable.” Id. at ¶ 73.
The District’s allegations support a cause of action for
negligent misrepresentation separate from a breach of contract
action. See Deutsche Bank Nat’l Trust Co. v. Fadili, No. 09-cv-
385-LM, 2011 WL 4703707, at *17 (D.N.H. Oct. 4, 2011).
Therefore, R.H. White’s motion to dismiss is denied as to the
negligent misrepresentation claim in Count VIII.
C. Unjust Enrichment/Quantum Meruit (Count IX)
R.H. White moves to dismiss Count IX of the amended
complaint, asserting that the parties’ relationship was governed
12 by the Agreement, which precludes a quasi-contract claim such as
unjust enrichment or quantum meruit. In its objection, the
District asserts that it is entitled to plead alternative
theories of recovery and that it can recover in quasi-contract
even when there is an express agreement governing the parties’
rights.
“A valid claim in quantum meruit requires that (1) services
were rendered to the defendant by the plaintiff; (2) with the
knowledge and consent of the defendant; and (3) under
circumstances that make it reasonable for the plaintiff to
expect payment.” Gen. Insulation Co. v. Eckman Constr., 159
N.H. 601, 612 (2010) (internal quotation marks omitted). “A
plaintiff is entitled to restitution for unjust enrichment if
the defendant received a benefit and it would be unconscionable
for the defendant to retain that benefit.” Id. at 611 (internal
quotation marks omitted). Unjust enrichment and quantum meruit
are equitable remedies that are not available if the parties’
relationship is controlled by an express contract. See, e.g.,
Turner v. Shared Towers VA, LLC, 167 N.H. 196, 202 (2014).
As discussed above, the District alleges, and R.H. White
agrees, that the parties entered into the Agreement which set
forth R.H. White’s obligations to build the LFG Facility.
“Because that transaction was made pursuant to a contract, the
13 equitable remedy of restitution does not apply.”4 Moulton v.
Bane, No. 14-cv-265-JD, 2015 WL 7274061, at *9 (D.N.H. Nov. 16,
2015) (citing Turner, 167 N.H. at 202 and Coldwell Banker Real
Estate, LLC v. Brian Moses Realty, Inc., 752 F. Supp. 2d 148,
169 (D.N.H. 2010)); see also Lovy v. Fed. Nat’l Mortg. Ass’n,
No. 13-cv-399-SM, 2014 WL 1669137, at *8 (D.N.H. Apr. 28, 2014).5
Therefore, Count IX is dismissed.
D. Summary
Accordingly, R.H. White’s motion to dismiss (doc. no. 91)
is granted as to Counts V and IX, but denied as to Count VIII.6
4 The District’s assertion that it may plead inconsistent theories of recovery is misplaced. There is no dispute in this case that the parties entered into the Agreement and that the Agreement governed the subject matter of the case. The District does not allege that R.H. White performed any work outside of the scope of the Agreement. Because R.H. White concedes that the parties had a valid contract as the District alleges, there is no basis for the District’s quasi-contract theory.
5 The District cites Bushkin Assoc., Inc. v. Raytheon Co., 815 F.2d 142, 149 (1st Cir. 1987) in support of its theory that a plaintiff can recover under quantum meruit despite the existence of a valid contract. Bushkin, however, holds that under Massachusetts law, “restitution on quasi-contractual grounds often enters into the remedial calculus in a contractual context.” Id. In other words, Bushkin holds that a plaintiff can, in certain circumstances, recover for the fair value of his services as a remedy for a breach of contract claim. It does not hold that a separate quasi-contract claim can proceed despite the existence of a valid contract.
6 The District contends that R.H. White has brought counterclaims for unjust enrichment/quantum meruit and negligent misrepresentation against the District and, if the court dismisses either Count VIII or Count IX, it should similarly
14 II. Motion to Dismiss Third-Party Counterclaims
SHA asserts three third-party counterclaims against R.H.
White: (1) Breach of Contract (Counterclaim I); (2) Unjust
Enrichment/Quantum Meruit (Counterclaim II); and (3)
Indemnification (Counterclaim III). R.H. White moves to dismiss
Counterclaims II and III to the extent Counterclaim III is based
on a theory of implied-in-law indemnification. SHA objects.
A. Unjust Enrichment/Quantum Meruit (Counterclaim II)
R.H. White moves to dismiss Counterclaim II, asserting that
its relationship with SHA was governed by the subcontract, which
precludes a quasi-contract claim such as unjust enrichment or
quantum meruit. In its objection, SHA repeats the District’s
arguments regarding its right to recover under a quasi-contract
theory despite the existence of a valid agreement. It also
notes that it has alleged that it performed services for R.H.
White outside the scope of the subcontract.
For the reasons discussed above, because the parties agree
that they entered into the subcontract which set forth SHA’s
obligations to provide services related to the design of the LFG
dismiss the corresponding counterclaims. The District did not move to dismiss R.H. White’s counterclaims, and its attempt to do so summarily in its objection is improper.
15 Facility, SHA cannot recover under a quasi-contract theory for
that work. Therefore, to the extent SHA seeks to recover in
Counterclaim II for any work performed under the subcontract
with R.H. White, that counterclaim is dismissed.
However, “[u]njust enrichment may be available to
contracting parties . . . where the benefit received was outside
the scope of the contract.” Clapp v. Goffstown Sch. Dist., 159
N.H. 206, 211 (2009) (citing Restatement of Restitution § 107(1)
(1937) and Restatement (Third) of Restitution and Unjust
Enrichment § 2 comment c at 16 (Discussion Draft, 2000)). SHA
alleges that it has provided R.H. White “with additional
services since the Project was substantially completed” and that
it did so “in reliance on the representations of [R.H. White]
that the services would be paid for.” Doc. no. 42 at 20. SHA
further alleges that R.H. White has not paid it for those
services. Thus, SHA alleges that it performed services for R.H.
White outside the scope of the subcontract, and it may seek to
recover the fair value of those services under a quasi-contract
theory.
Accordingly, R.H. White’s motion to dismiss is granted as
to Counterclaim II to the extent SHA seeks to recover in quasi-
contract for work performed pursuant to the subcontract. R.H.
16 White’s motion to dismiss is denied as to the remainder of
Counterclaim II.
B. Implied Indemnification
In Counterclaim III, SHA alleges that R.H. White “has a
duty, as implied in law, and as expressly set forth in the
Subconsultant Agreement with SHA, to indemnify, defend and hold
SHA harmless from all damages, losses, or claims associated with
[R.H. White’s] negligence and that of its agents and subcon-
tractors on the project.” Doc. no. 42 at 21. R.H. White moves
to dismiss Counterclaim III to the extent it is based on a
theory of implied indemnification, because the subcontract has
an express indemnification provision.
In response to R.H. White’s motion, SHA asserts that it is
entitled to plead inconsistent theories of recovery. There is
no dispute, however, that SHA and R.H. White entered into the
subcontract that expressly defined R.H. White’s indemnification
obligation. Because the parties expressly included an
indemnification provision in their agreement, that provision
supplants an implied-in-law duty of indemnification. See, e.g.,
CSX Transp., Inc. v. Mass. Bay Transp. Auth., 697 F. Supp. 2d
213, 225 (D. Mass. 2010) (holding that an indemnification
provision in the parties’ agreement supplants the common-law
duty of indemnification because, were “this not the case, much
17 of [the indemnification provision] would be meaningless, because
a party could seek indemnification under common-law principles
even if it was not entitled the indemnification under the
express and specific terms of the agreement”).7
As noted above, however, SHA alleges that it performed work
for R.H. White outside the scope of the subcontract. To the
extent SHA may have liability based on that work, it would not
be governed by the indemnification provision in the subcontract.
Therefore, SHA’s implied-in-law indemnification claim asserted
in Counterclaim III may proceed to the extent it is based on
indemnification for liability for work performed outside of the
subcontract.
Accordingly, R.H. White’s motion to partially dismiss
Counterclaim III is granted to the extent it seeks to dismiss
the implied-in-law indemnification claim based on work performed
pursuant to the subcontract, and is otherwise denied.
7 As the parties note, the New Hampshire Supreme Court has not addressed the specific issue of whether a written agreement containing an indemnity provision displaces the parties’ rights to implied-in-law indemnity. Despite the absence of a controlling decision by the New Hampshire Supreme Court, New Hampshire law regarding the effect of explicit contractual provisions is sufficiently clear to allow this court to predict how the New Hampshire Supreme Court would rule on the issue. See, e.g., Porter v. Countrywide Home Loans, Inc., No. 13-cv- 429-JD, 2014 WL 4450043, at *1 (D.N.H. Sept. 10, 2014).
18 Conclusion
For the foregoing reasons, R.H. White’s motion to dismiss
claims asserted in the amended complaint (doc. no. 91) is
granted as to Counts V and IX, but denied as to Count VIII.
R.H. White’s motion to dismiss third-party counterclaims
asserted in SHA’s third-party complaint (doc. no. 92) is granted
as to Counterclaim II and Counterclaim III to the extent those
Counterclaims are based on work performed pursuant to the
parties’ agreement, and is otherwise denied.
SO ORDERED.
__________________________ Landya McCafferty United States District Judge
May 8, 2017
cc: All counsel of Record