Winmar Construction, Inc. v. Iron Kingdom, Inc.

• Court: District Court, District of Columbia
• Decided: July 9, 2024
• Docket: Civil Action No. 2024-0968
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

WINMAR CONSTRUCTION, INC.,

Plaintiff, v. Civil Action No. 24-968 (JEB) IRON KINGDOM, INC., et al.,

Defendants.

MEMORANDUM OPINION

Defendant Iron Kingdom, Inc. is in the business of fabricating steel for use in

commercial construction projects. Along with its lawyer, Defendant Angela Richie, the

company is accused in this suit of fabricating something else as well — namely, a pair of

fraudulent mechanic’s liens designed to extract money from Plaintiff Winmar Construction, Inc.

After Iron Kingdom was terminated as a subcontractor on two of Winmar’s projects, it recorded

these liens to recoup the value of its improvements to the properties in question. Winmar,

contending that Iron Kingdom is entitled to no payment under the subcontracts and that it in fact

owes Winmar because it performed its work without proper licensure, views the liens as

fraudulent instruments of extortion. Not content with a well-aimed proportionate suit, Plaintiff

instead wheels out a howitzer, alleging that Defendant’s actions violate the Racketeer

Influenced and Corrupt Organizations Act and also give rise to various state-law claims based in

contract. Defendants now move to dismiss the RICO causes of action. Without weighing in on

Plaintiff’s dubious strategic choice, the Court finds that Winmar lacks standing to assert a RICO

claim. It will thus dismiss those counts and decline to exercise supplemental jurisdiction over

the remaining state-law claims.

1 I. Background

At this stage, the Court sets forth the facts as pled in the Amended Complaint and its

exhibits, assuming them to be true. See Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113

(D.C. Cir. 2000).

In need of a subcontractor to perform structural steel work, prime contractor Winmar

hired Iron Kingdom on two of its projects in 2022. See ECF No. 9 (Am. Compl. & Exhs.), ¶¶ 1,

3, 21–22. The first was the construction of a hotel here in Washington at 1337 Connecticut

Avenue, N.W., which Plaintiff undertook on behalf of the hotel’s owner, 1320 Penelope, LLC.

Id., ¶ 1; id. at 137–43 (Hotel Lien). The second was to build an American Express lounge in the

Ronald Reagan Airport (better known to Washington old-timers as National Airport) in

Arlington, Virginia. That work was done pursuant to a prime contract with the property’s

leaseholder, AmEx. Id., ¶ 3; id. at 148–52 (AmEx Lien).

Despite hiring Iron Kingdom twice, Winmar did not end up finding the relationship an

easy one. On the hotel project, Plaintiff alleges that for its money, it received “defective shop

drawings, manpower deficiencies causing delays to the Project, and out-of-sequence work by

other subcontractors on the Project.” Id., ¶ 5. Iron Kingdom caused “many of the same

problems” on the AmEx lounge project, in addition to having a habit of “submitting numerous

improper and unsupported change orders, which were rejected.” Id., ¶ 6. Things became so

untenable on the hotel-construction front that Winmar ultimately terminated the subcontract.

Id., ¶ 5. Plaintiff nevertheless paid Iron Kingdom all of the money that it received from each

project’s owner for the steel work. Id., ¶ 39.

Winmar had not heard the last from Iron Kingdom, however. In February 2024, the

steel company — purportedly with Richie’s assistance as counsel — recorded a mechanic’s lien

2 on each property seeking to collect unpaid money for its labor and materials. Id., ¶¶ 7–9; Hotel

Lien; AmEx Lien. For the hotel work, Defendants sought $448,402; for the lounge,

approximately $113,662. See Hotel Lien; AmEx Lien. They sent notice of the liens to the

project owners (whose property the liens attached to) and copied Plaintiff on the

communication. See Hotel Lien; AmEx Lien.

The hotel lien states that Iron Kingdom “provided structural and misc. metals and related

work” on the project “pursuant to its written subcontract . . . and the directions and instructions

provided by” Winmar. See Hotel Lien. By signing the lien, Iron Kingdom’s representative

affirmed that “the contents of this notice are true and correct to the best of [his] information and

belief, that [Iron Kingdom] has the right to recover the Amount Claimed.” Id. In accordance

with the document’s instructions to include a copy of the recorder’s “current license to do

business issued by the D.C. Department of Consumer and Regulatory Affairs,” Defendants

attached a “General Service and Repair — Home Improvement Contractor” license. Id.

As for the AmEx lien, it states that Iron Kingdom “[f]abricate[d] and install[ed] steel

beams, angles, sill angle, flat embed plates with studs, welded and bolted connections, and other

necessary pieces” for the lounge. See AmEx Lien. Defendants also included a contractor

license number; the document states that if no such number is provided, “the claimant certifies

that such a valid license or certificate is not required by law for the work done.” Id. By signing

the lien, Iron Kingdom swore that AmEx “is justly indebted to claimant in the sum of

§113,662.11 dollars, for the consideration stated in the foregoing memorandum, and that the

same is payable as therein stated.” Id.

Plaintiff identifies two falsehoods in Defendants’ liens. To start, it says, Iron Kingdom

was not in possession of the correct licenses to perform the work in question, meaning that it is

3 not entitled to recover anything for its work. Id., ¶¶ 25–28, 35, 41. In fact, Winmar claims, Iron

Kingdom must repay the sum that it has already received from Plaintiff. Id., ¶¶ 102–03. In a

similar vein, Plaintiff maintains that the terms of the subcontracts preclude further recovery by

Iron Kingdom. Specifically, both subcontracts contain a “pay-if-paid” provision limiting

Winmar’s liability to Iron Kingdom to the amount the former received as payment from the

projects’ owners for the latter’s work. Id., ¶¶ 37–40. As Plaintiff has remitted all the money it

has received from each owner, it alleges, Iron Kingdom has no right to further payment from

Winmar, thereby giving the lie to its liens. Id., ¶ 41.

According to Winmar, Defendants filed the false liens knowing that doing so “would

effectively stop or severely interfere with the funding of both Projects unless Winmar paid Iron

Kingdom the extortionate sums being sought.” Id., ¶ 10. There are no allegations in the

Amended Complaint expanding on what exactly did occur in the aftermath of Defendants’

actions. The most Plaintiff says on the matter is that its “business and/or property interests have

been injured” by Defendants’ conduct, that it “has suffered and continues to suffer damage to its

business and reputation,” and that “Defendants are liable to Plaintiff in an amount in excess of

$600,000.” Id., ¶¶ 73, 75–76.

The lack of clarity regarding any harm notwithstanding, Winmar filed suit in April 2024.

See ECF No. 1 (Compl.). It amended its Complaint a month later, keeping the same causes of

action. See Am. Compl. Counts I and II allege RICO and RICO-conspiracy violations,

respectively. Id., ¶¶ 55–94. Count III requests a declaratory judgment that Iron Kingdom has

no right to recover from Winmar, that its liens are false and void, and that Winmar is entitled to

a refund for all money already paid to Iron Kingdom. Id., ¶¶ 95–103. Count IV claims breach

of contract. Id., ¶¶ 104–07. Winmar states that its basis for bringing this action in federal court

4 is federal-question jurisdiction pursuant to 28 U.S.C. § 1331, as well as supplemental

jurisdiction under 28 U.S.C. § 1367. Id., ¶¶ 15–16. Defendants have now moved to dismiss

Counts I and II. See ECF No. 10 (MTD).

II. Legal Standard

Rule 12(b)(6) provides for the dismissal of an action where a complaint fails to “state a

claim upon which relief can be granted.” Although “detailed factual allegations” are not

necessary to withstand a Rule 12(b)(6) motion, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555

(2007), “a complaint must contain sufficient factual matter, accepted as true, to state a claim to

relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal

quotations marks and citation omitted). In weighing a motion to dismiss, a court “may consider

only the facts alleged in the complaint, any documents either attached to or incorporated in the

complaint[,] and matters of which [the court] may take judicial notice.” EEOC v. St. Francis

Xavier Parochial School, 117 F.3d 621, 624 (D.C. Cir. 1997). The court “must treat the

complaint’s factual allegations as true and must grant [the] plaintiff ‘the benefit of all inferences

that can be derived from the facts alleged.’” Sparrow v. United Air Lines, Inc., 216 F.3d 1111,

1113 (D.C. Cir. 2000) (quoting Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979))

(internal citations omitted). It need not accept as true, however, “a legal conclusion couched as

a factual allegation” or an inference unsupported by the facts set forth in the complaint.

Trudeau v. FTC, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478 U.S. 265,

286 (1986)).

III. Analysis

Defendants assert a congeries of defenses to Plaintiff’s RICO claims, some of which are

stronger than others. Fortunately for Iron Kingdom and Richie, consideration of the present

5 Motion can begin and end with just one of them: standing. The Court proceeds accordingly,

beginning with whether Winmar has sufficiently alleged a concrete injury to invoke this Court’s

subject-matter jurisdiction. Concluding that it has not, the Court then declines to exercise

supplemental jurisdiction over what remains.

A. Constitutional Standing

To maintain standing, a plaintiff must meet three criteria. She must show that she “(1)

suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant,

and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins,

578 U.S. 330, 338 (2016). The “injury in fact” must be both “(a) concrete and particularized

and (b) actual or imminent, not conjectural or hypothetical.” Friends of the Earth, Inc. v.

Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180 (2000). A “deficiency on any one of the

three prongs suffices to defeat standing.” US Ecology, Inc. v. U.S. Dep’t of Interior, 231 F.3d

20, 24 (D.C. Cir. 2000).

Somewhat conflating jurisdiction and the merits, Defendants principally argue that

Winmar lacks standing because legal remedies are available to void the allegedly false liens,

which makes its injuries inherently speculative. See MTD at 30–31 (citing caselaw holding that

“[a] RICO injury must be ‘concrete’ or ‘tangible’”) (citation omitted). The Court is not tied to

this framing of the matter, however, as it must assure itself of its jurisdiction over the case.

Indeed, Article III of the United States Constitution limits the jurisdiction of federal courts to

resolving “Cases” and “Controversies.” U.S. Const. art. III, § 2, cl. 1. A party’s standing “is an

essential and unchanging part of the case-or-controversy requirement of Article III.” Lujan v.

Defs. of Wildlife, 504 U.S. 555, 560 (1992). Standing therefore represents a “predicate to any

6 exercise of [the court’s] jurisdiction.” Florida Audubon Soc’y v. Bentsen, 94 F.3d 658, 663

(D.C. Cir. 1996) (en banc).

Winmar most clearly falters by not pleading a concrete injury tied to its RICO causes of

action — not because it could resort to other legal remedies, but because it simply has not

alleged any injury whatsoever. To be fair, a concrete injury does undergird its declaratory-

judgment and breach-of-contract claims — i.e., Plaintiff’s payment to Iron Kingdom was

improper because the latter was not properly licensed to perform steel-installation work. See

Am. Compl., ¶ 103. But that injury has nothing to do with Winmar’s RICO claims: most

plausibly, that Defendants committed mail fraud twice over by making false statements in the

recorded liens. Because “a plaintiff must demonstrate standing for each claim he seeks to

press,” Winmar must establish some other injury that confers standing to bring its RICO

allegations specifically. See DaimlerChrisler Corp. v. Cuno, 547 U.S. 332, 352 (2006).

The first candidate for making out a concrete injury flowing from the liens is harm to

Plaintiff’s property interest. This seems a promising lead, given that an outstanding mechanic’s

lien might reasonably be thought to reduce the value of the real property to which it is attached.

But as Defendants repeatedly point out — and Plaintiff conspicuously ignores in its Opposition

— the liens run against the property interests held by each project’s owner, not against any of

Winmar’s as a mere contractor. See MTD at 8, 20, 26. That is enough to count out harm to

property.

The next possibility is straightforward monetary loss from the liens’ existence. This

time, Plaintiff’s problem is that allegations of pecuniary harm related to the liens are nowhere to

be found in the Amended Complaint. To be sure, Winmar gestures at such harm when it claims

that Defendants recorded their liens knowing that doing so “would effectively stop or severely

7 interfere with the funding of both Projects unless Winmar paid Iron Kingdom the extortionate

sums being sought.” Am. Compl., ¶ 10. Yet readers waiting for the narrative payoff on this

foreshadowing are sure to be disappointed: Plaintiff never maintains in the Amended Complaint

that funding for either project actually dried up. Instead, it falls back on entirely boilerplate

recitations that the liens caused it to “suffer damage to its business,” and that “Defendants are

liable to Plaintiff in an amount in excess of $600,000.” Id., ¶¶ 73, 75–76. These “conclusory

statements[] do not suffice” to stave off a motion to dismiss. Iqbal, 556 U.S. at 678. Perhaps

recognizing this gaping hole in its factual allegations, Plaintiff states in its Opposition that

“because of the false lien filed by Defendants on the DC Hotel Project seeking $448,402.00, . . .

$560,502.50 in funding is being withheld from Winmar on the DC Hotel Project.” Opp. at 14.

Because a plaintiff may not amend its complaint by including facts in an opposition to a motion

to dismiss, however, this cannot save Winmar. See Durand v. Dist. of Columbia, 38 F. Supp.

3d 119, 129 (D.D.C. 2014).

The final possibility is that Plaintiff has suffered reputational damage from the liens.

See Am. Compl., ¶ 75 (“Plaintiff has suffered and continues to suffer damage to its business and

reputation.”) (emphasis added). The D.C. Circuit has recognized that reputational injury can

provide a basis for standing. See McBryde v. Comm. to Rev. Cir. Council Conduct &

Disability Ords. of Jud. Conf. of U.S., 264 F.3d 52, 57 (D.C. Cir. 2001). Such harm typically

gives rise to a cognizable injury in one of two situations. The first is when the harm causes a

“loss of clients or other business” — i.e., economic injury. See Morgan Drexen, Inc. v. CFPB,

785 F.3d 684, 692–93 (D.C. Cir. 2015). The second situation involves an individual whose

reputation is damaged as a result of public stigmatization. See Foretich v. United States, 351

8 F.3d 1198, 1214 (D.C. Cir. 2003). There, the reputational harm itself is a concrete and

particularized injury.

Winmar’s passing reference to its reputation falls short under this framework. “As [a]

profit-based enterprise[], [Winmar] presumably” alleges “economic harm to [its] business[],

rather than stigmatic harms.” Statewide Bonding, Inc. v. U.S. Dep’t of Homeland Sec., 2019

WL 689987, at *4 (D.D.C. Feb. 19, 2019). Yet there are no facts in the Amended Complaint

that “substantiate or explain what economic effects the reputational harms are causing” Plaintiff.

Id. No doubt, a prime contractor might stand to lose goodwill if its subcontractors go unpaid

and file liens against project owners. But Winmar does not connect its purported reputational

hit to any allegation that it has actually lost business, as required for standing. This last

glimmer of hope thus blinks out. As Plaintiff has alleged no concrete injury, it has no standing

to bring a RICO action based on Defendants’ liens. Lacking subject-matter jurisdiction over

such claims, the Court must dismiss them.

B. State-Law Claims

The Court will also decline to exercise supplemental jurisdiction over Winmar’s state-

law claims. Federal district courts are given supplemental (or “pendent”) jurisdiction over state

claims that “form part of the same case or controversy” as federal claims over which they have

original jurisdiction. See 28 U.S.C. § 1367(a). By the same token, they “may decline to

exercise supplemental jurisdiction over [such] claim[s] . . . if . . . the district court has dismissed

all claims over which it has original jurisdiction.” Id. § 1367(c)(3). The decision of whether to

exercise supplemental jurisdiction where a court has dismissed all federal claims is left to the

court’s discretion as “pendent jurisdiction is a doctrine of discretion, not of plaintiff’s right.”

United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966); see also Shekoyan v. Sibley

9 Int’l, 409 F.3d 414, 423 (D.C. Cir. 2005). When deciding whether to exercise supplemental

jurisdiction over state claims, federal courts should consider “judicial economy, convenience,

fairness, and comity.” Shekoyan, 409 F.3d at 424 (quoting Carnegie-Mellon Univ. v. Cohill,

484 U.S. 343, 350 n.7 (1988)). When all federal claims are eliminated before trial, however,

those factors “will point toward declining to exercise jurisdiction over the remaining state-law

claims.” Carnegie-Mellon, 484 U.S. at 350 n.7; see also Edmondson & Gallagher v. Alban

Towers Tenants Ass’n, 48 F.3d 1260, 1267 (D.C. Cir. 1995) (finding the discretion set out in

Carnegie-Mellon “unaffected by the subsequent enactment of 28 U.S.C. § 1367(d), in the

Judicial Improvements Act of 1990”).

These factors weigh against retention here. This case is still in its early stages, the Court

is dismissing the federal claims against Defendants on jurisdictional grounds, and, as a result, it

has developed no familiarity with the additional issues presented. Cf. Schuler v.

PricewaterhouseCoopers, LLP, 595 F.3d 370, 378 (D.C. Cir. 2010) (holding that district court

appropriately retained pendent jurisdiction over state claims where it had “invested time and

resources” in the case). The state-law counts will thus be dismissed without prejudice, and

Plaintiff is free to file in the appropriate state or local court if it so desires.

* * *

Today’s ruling follows from the fact that the Amended Complaint has not established a

concrete injury sufficient to confer standing. To the extent that Plaintiff might seek to vacate

the dismissal and attempt to amend its Complaint, however, the Court warns that it anticipates

additional difficulties ahead for these rather unusual RICO causes of action. As Defendants

note in their Motion, for instance, a RICO claim requires a pattern of racketeering activity —

that is, of criminal conduct specifically designated as actionable by the RICO statute. See MTD

10 at 22–26; see also Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985) (setting out RICO

elements); 18 U.S.C. § 1961(1) (defining “racketeering activity”). What is more, a RICO

plaintiff must establish an injury to his “business or property,” 18 U.S.C. § 1964(c), that bears a

“direct relation” to the predicate acts of racketeering. Holmes v. Sec. Inv. Protection Corp., 503

U.S. 258, 268 (1992); see also Solomon v. Dechert LLP, 2023 WL 6065025, at *9–12 (D.D.C.

Sept. 18, 2023) (dismissing RICO claim predicated on acts of wire fraud for lack of proximate

cause). It would be prudent for Winmar to bear this in mind when determining which course to

next pursue.

IV. Conclusion

For the foregoing reasons, the Court will grant Defendants’ Motions to Dismiss. A

separate Order to that effect will issue this day.

/s/ James E. Boasberg JAMES E. BOASBERG Chief Judge

Date: July 9, 2024