Deluxe Building Systems, Inc. v. Constructamax, Inc.

94 F. Supp. 3d 601, 2013 WL 1737354
CourtDistrict Court, D. New Jersey
DecidedApril 19, 2013
DocketCiv. Nos. 2:06-cv-02996 (KM)(MAH), 2:06-cv-6288
StatusPublished
Cited by3 cases

This text of 94 F. Supp. 3d 601 (Deluxe Building Systems, Inc. v. Constructamax, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. New Jersey primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Deluxe Building Systems, Inc. v. Constructamax, Inc., 94 F. Supp. 3d 601, 2013 WL 1737354 (D.N.J. 2013).

Opinion

MEMORANDUM OPINION

KEVIN McNULTY, District Judge:

This motion comes before the Court upon the motion of Arch Insurance Company and Arch Reinsurance Company (collectively “Arch”) to dismiss these consolidated cases for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1), Fed.R.Civ.P. See also Fed.R.Civ.P. 12(h)(3) (court has ongoing duty to reexamine subject matter jurisdiction). To distinguish between the consolidated cases, Case No. 06 cv 02996 is here deemed the “Deluxe Action,” and Case No. 06 cv 6288 is deemed the ‘Whitlock Action.” The motion to dismiss is granted in part, as to the Whitlock Action only. In short, although Arch has a point, that point does not have the far-reaching consequences Arch ascribes to it. This opinion amounts to the dotting of a jurisdictional “i”; it leaves the essence of the claims intact.

Arch, a citizen of New Jersey, argues that the presence of intervenor, the New Jersey Housing and Mortgage Finance Agency (the “Agency”), destroys diversity subject matter jurisdiction and requires that these consolidated cases be dismissed in their entirety. Arch has made this argument before. Chief Judge Brown, to whom this case was previously assigned, rejected a similar contention in June 2011 when he permitted the Agency to intervene in the consolidated cases pursuant to Rule 24(b)(1)(B) (permissive intervention where a party “has a claim or defense that shares with the main action a common question of law or fact”). (Docket No. 284.) According to Arch, recent developments now make it clear that the Agency and Arch — both citizens of New Jersey— are “directly and unavoidably adverse.” That being so, their dispute would constitute a “matter in controversy,” but not one “between ... citizens of different States.” 28 U.S.C. § 1332(a)(1). Complete diversity, and therefore diversity jurisdiction, would therefore be lacking, unless the non-diverse claims fit under the court’s supplemental jurisdiction. See 28 U.S.C. § 1367(a).

For reasons explained more fully below, the supplemental jurisdiction statute is asymmetrical; the availability of supplemental jurisdiction depends on whether the Agency is a plaintiff. The Agency intervened, pursuant to Rule 24, after the actions were consolidated, and may be considered a defendant in the consolidated case. Viewing the actions separately, however, it is clear that the Agency would be a defendant in one, but a plaintiff in the other. That seems to be where the confusion arises.

I hold that I may assert supplemental jurisdiction in the Deluxe action, in which the Agency is a defendant. I am required, however, to dismiss the Whitlock Action, in which the Agency is a plaintiff. In the end, however, it probably makes little difference. Whitlock also asserts its dismissed claims in the Deluxe Action. And the Agency, too, asserts the dismissed claims in the Deluxe Action, in its capacity as defendant, not plaintiff. (See Docket Nos. 213, 287.) Thus the parties’ claims, in their full scope, remain before the court.

[604]*604The jurisdictional wrangling here may have little significance other than to illustrate the pitfalls of trying to bring a complex, shifting, multiparty state law case to federal court. The purpose of this ruling is to remedy a jurisdictional flaw that might have furnished grounds to attack the final judgment in this case, whatever it may be.

I. BACKGROUND

A. The Whitlock Mills Project

The facts and procedural history of the consolidated cases are well known to the parties. In 2004, Whitlock was the owner of a 330-unit rental housing development under construction in Jersey City known as Whitlock Mills (the ‘Whitlock Mills Project”). Whitlock and Constructamax, Inc. (“Cmax”) entered into a construction contract (the “Construction Contract”) under which Cmax would serve as the general contractor for the Whitlock Mills Project. In connection with the Construction Contract, Cmax obtained from its surety, Arch, a payment and performance bond in the penal sum of $34,581,371 (the “Arch Bond”). Whitlock financed the Whitlock Mills Project primarily through a loan from the Agency. Thus both Whitlock and the Agency had interests to protect, and both were made obligees under the Arch Bond.

Part of the Whitlock Mills Project involved pre-fabricated modular buildings known as I-Buildings. On November 3, 2004, Cmax and Deluxe Building Systems, Inc. (“Deluxe”) entered into an agreement (the “Subcontract”), later amended by the •parties on January 6, 2006. Under the Subcontract, Deluxe would manufacture the I-Buildings at its manufacturing facility in Berwick, Pa. and deliver them to the Whitlock Mills Project site. Cmax was then obligated under the Construction Contract to perform all site work, including the laying of concrete foundations, relating to the I-Buildings.

By all accounts, the Whitlock Mills Project was a flop. In April and May of 2006, Cmax failed to pay $928,720.66 that it allegedly owed Deluxe under the Subcontract. On June 16, 2006, Cmax abandoned work on the Whitlock Mills Project. In response, Whitlock, as obligee under the Arch Bond, made a demand on Arch as obligor. Negotiations ensued and, on February 13, 2007, Arch and Whitlock entered into a Takeover Agreement. That Takeover Agreement required Arch to complete the work under the Construction Contract on or before October 13, 2007. It is undisputed that the work was not completed within that nine-month deadline. Indeed, some 34 months after the date of the Takeover Agreement, Arch still had not completed the work. On December 11, 2009, Arch announced that it was terminating the Takeover Agreement and informed Whitlock that it intended to cease work on December 20, 2009.

B. The Deluxe Action

The procedural morass currently before this court had a much simpler origin: On May 17, 2006, Deluxe filed a breach of contract action in New Jersey Superior Court, Hudson County, alleging that Cmax had breached the Subcontract. On June 29, 2006, Cmax removed that Deluxe Action to this court, invoking diversity jurisdiction under 28 U.S.C. § 1332. (It is that removed action, assigned Civil No. 06-02996 ip this court, that has now been deemed the “Deluxe Action.”) On October 13, 2006, Deluxe filed an Amended Complaint which added Arch as a defendant. In the Amended Complaint, Deluxe asserted that Arch, as Cmax’s surety, was obligated to pay the subcontractors, including itself, that Cmax had failed to pay. On November 16, 2006, Cmax filed an Answer [605]*605to the Amended Complaint with a Counterclaim against Deluxe for damages it allegedly suffered as a result of Deluxe’s deficient performance under the Subcontract. On the same day, Cmax filed a Third-Party Complaint against Whitlock and against Deluxe’s surety, Travelers Casualty & Surety Company of America (“Travelers”). Travelers had issued a Performance Bond and Payment Bond (collectively, the “Travelers Bond”) to Deluxe for its work as a subcontractor on the Whit-lock Mills Project. In the Third-Party Complaint, Cmax alleged that Travelers as surety was liable for damages caused by Deluxe’s breach of the Subcontract.

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Bluebook (online)
94 F. Supp. 3d 601, 2013 WL 1737354, Counsel Stack Legal Research, https://law.counselstack.com/opinion/deluxe-building-systems-inc-v-constructamax-inc-njd-2013.