Skanska USA Building, Inc. v. Smith Management Construction, Inc.

JAMES R. EYLER, Judge. This case turns on the interpretation of dispute resolution provisions in a subcontract relating to federal procurement. The contract relates to the construction of a biomedical re ⁶⁶¹ search facility (“the project”), on property owned by FSK Land Corporation (“FSK”), located on the Johns Hopkins University Bayview campus, and leased to the National Institutes of Health of the federal Department of Health and Human Services. (“NIH”).

On December 31, 2001, FSK entered into a contract, entitled the Development Management Services Agreement (“DMSA”), with Smith Management Construction, Inc. (“SMCI”), an appellee, pursuant to which SMCI agreed to serve as “Development Manager” for the project. BRC Lease Co., LLC (“BRC”), another appellee, was formed for the sole purpose of entering into a long term lease with NIH. FSK assigned its interests under the lease and the DMSA to BRC. On May 20, 2004, SMCI entered into a contract with Skanska USA Building, Inc. (“Skanksa”), appellant, pursuant to which appellant agreed to serve as construction manager for the project.

The contract consisted of an “Agreement for Construction Services” (“the Agreement”) and a “Supplement to the Agreement for Construction Services” (“Supplement”) (collectively, “the Contract”). Section 7.6.1 of the Supplement expressly incorporated, along with other documents, the lease with NIH and the DMSA, expressly including the dispute resolution provisions contained in the DMSA. Appellant asserts that, after it began work, SMCI made substantial changes in the project for which appellant was not adequately compensated. Ultimately, on August 30, 2007, appellant filed suit against appellees in the Circuit Court for Baltimore City.

SMCI and BRC filed motions to dismiss, asserting primarily that the court lacked subject matter jurisdiction. The circuit court, by order and memorandum opinion dated February 6, 2008, granted, without prejudice, SMCI’s motion to dismiss, and by order dated March 14, 2008, granted, without prejudice, BRC’s motion to dismiss, on the ground that the court lacked subject matter jurisdiction. Appellant filed a motion to alter or amend judgment. The court denied it, and appellant noted this appeal. ⁶⁶² The resolution of this case turns on the interpretation of the Contract and DMSA, specifically, the dispute resolution provisions.

The issue is whether appellant is required to pursue its claims under the procedure applicable to federal procurement contracts, specifically, the Contract Disputes Act of 1978, as amended, 41 U.S.C. §§ 601-613 and Federal Acquisition Regulation (“FAR”) § 52.233-1, 1 or whether appellant can proceed in this civil action. The circuit court held that the court lacked subject matter jurisdiction, directed the parties to proceed under the Contract Disputes Act, and dismissed the complaint without prejudice. We agree with the circuit court that appellant may not pursue its claims in this action at this time, but conclude that the court erred in dismissing the complaint. We shall vacate the orders dismissing the complaint and remand the case to circuit court with the direction that the circuit court enter an order staying any further proceedings on the merits pending the completion of proceedings under the Contract Disputes Act. 2 We see no need to address the remaining contentions of the parties.

Background In its complaint, appellant alleged that, pursuant to the Contract, it was to be paid costs plus a fee, the total not to exceed the guaranteed maximum price (“GMP”) in the amount of $168,276,652.00, as adjusted by various events, including ⁶⁶³ approved changes in the work. The adjusted figure was designated the “Contract Sum.” Changes in the project were reflected by “construction change directives” (“CCDs”), and “change orders” (“CO”). Appellant alleged that it complied with CCDs and CCs but did not receive a time extension or increase in the Contract Sum. Appellant alleged 20 specific instances in which SMCI breached the Contract and engaged in grossly negligent and intentional conduct.

Appellant included counts for breach of contract, breach of fiduciary duty, promissory estoppel/detrimental reliance, quantum meruit, and unjust enrichment against SMCI. Appellant expressly alleged that all non-contract counts were pled as alternatives to the contract count. Appellant also included counts for quantum meruit and unjust enrichment against BRC. Appellant requested monetary damages, interest, costs, attorney’s fees, and an extension of the completion date under the Contract through the date of actual substantial completion.

The Contract, a CCD log, and pending COs were filed as exhibits to the complaint and incorporated therein. The Agreement provides that SMCI serves in the capacity of “owner” of the project but recognizes that it is not the true owner, reciting that FSK/BRC is the owner and lessor and NIH is the lessee. The Agreement further provides that SMCI serves as the contractor, responsible for all construction services necessary to fulfill SMCI’s obligations under the DMSA. Section 7.6.1 of the Supplement provides, in part: “For disputes involving NIH or Lessor [BRC], Contractor [SMCI] shall adhere to the dispute resolution provisions contained in the DMSA.” Section 10.2 of the DMSA provides, in pertinent part: 10.2 Disputes.

All claims, disputes or other matters in controversy between Lessor [3] and Development Manager [4] relating to or arising out of the performance of this Agreement and the Project (“Disputes”) and not resolved pursu ⁶⁶⁴ ant to the ADR Procedures shall be resolved in accordance with the provisions of this Section 10.2. (a) Disputes Involving NIH. Disputes for which Lessor or Development Manager contend that the NIH may be responsible (the “Government Disputes”) shall be resolved pursuant to the Disputes Clause, FAR [Federal Acquisition Regulations] § 52.233-1. Both Lessor and Development Manager agree to cooperate in the presentation and prosecution or defense of Government Disputes.

If Development Manager requests an extension of time or additional compensation and alleges that the event causing the delay or additional compensation is the responsibility of the Government, then Lessor will cooperate with and assist Development Manager in timely presenting a request for an extension of time or additional compensation to the Government, including sponsoring a claim against the Government. Such assistance may include, with Lessor’s consent (which consent shall not be unreasonably withheld) and to the extent permitted by applicable law, permitting Development Manager to present and negotiate the proposal directly with NIH. In the event that the proposal for adjustment fails to result in a satisfactory resolution or Lessor does not consent to Development Manager’s direct negotiation with NIH, Lessor shall sponsor a claim by Development Manager for the relief denied in the proposal for adjustment. Sponsoring a claim shall mean that Lessor shall permit Development Manager to bring a claim in Lessor’s name, pursue it in Lessor’s name through the full appeals process permitted by the Contract Disputes Act of 1978, as amended, 41 U.S.C. §§ 601-613 , and to the extent (in Lessor’s sole discretion) such claim does not otherwise affect Lessor or Development Manager, Development Manager shall be solely responsible for presenting and directing the course of proceedings (including consideration of settlement).

To the extent deemed possible by Lessor in its sole discretion, the proposals for adjustment and claims sponsored by Lessor for Development Manager shall be presented separately from any other claims presented to NIH by Lessor. In the ⁶⁶⁵ event Lessor fails to cooperate with the Development Manager in presenting a claim to the Government, then Development Manager shall have the right to proceed with such claim against the Government in the name of the Lessor to the extent permitted by law. 3. Development Manager and Lessor agree to stay the prosecution of any claim, including without limitation any claim against the performance or payment bond, they may have relating to this Project and to waive the benefit of the continued running of any applicable statute of limitation during the period of such stay so long as the claim relates in whole or in part to a claim being asserted against the Government by Lessor and Lessor is presenting Development Manager’s claim diligently and in good faith. Development Manager and Lessor agree to the issuance of a stay order by a court having jurisdiction to effectuate the intent of this subparagraph.

If the Government is found to be at fault, Development Manager agrees to accept the monetary and temporal relief awarded for its claims in full satisfaction of those claims following appeal, or expiration of the time for appeal. Development Manager will cause all its subconsultant contracts to contain a provision binding its subconsultants to stay any claims and accept resolution of those claims in accordance with Section 10.2. (b) Disputes Not Involving NIH. All disputes other than Government Disputes shall, after Section 10.1 ADR Procedures have been utilized and have failed to resolve the matter, be resolved in accordance with this Paragraph 10.2.2 (“Non-Government Disputes”).

All Non-Government Disputes shall be resolved by litigation in a court of competent jurisdiction in the State of Maryland. Each party shall bear its own costs and expenses in connection with Non-Government Disputes. ⁶⁶⁶ On October 25, 2007, SMCI filed a motion to dismiss the complaint. SMCI contended that disputes, including those for which SMCI or BRC contend that NIH may be responsible, had to proceed as pass-through claims pursuant to the dispute resolution provisions, 5 the Contracts Disputes Act, and implementing regulations. Accordingly, according to SMCI, the circuit court lacked subject matter jurisdiction and/or venue.

SMCI also contended that appellant failed to state a claim upon which relief can be granted because appellant failed to comply with the Contract’s mandatory dispute resolution provisions; failed to exhaust administrative remedies under the Contract Disputes Act; failed to join NIH, a necessary party; failed to adhere to the Contract’s forum selection; and finally, that the breach of fiduciary duty count and the quasi-contractual counts failed to contain legally cognizable causes of action. SMCI attached the DMSA, an affidavit by a vice president of SMCI, and various letters as exhibits to its motion. On October 24, 2007, BRC filed a motion to dismiss or, in the alternative, for summary judgment. In essence, BRC made the same contentions as SMCI with respect to the dispute resolution provisions and also contended the quasi-contract claims were barred as a matter of law.

BRC attached the DMSA, an amendment to the DMSA dated May 20, 2004, and an affidavit by the president of BRC as exhibits to its motion. Appellant filed an opposition to each motion and attached a supplemental affidavit and letters. SMCI filed a reply and attached a supplemental affidavit and letters. By order and memorandum opinion dated February 6, 2008, the court granted SMCI’s motion and dismissed appellant’s complaint without prejudice on the ground that the Contract ⁶⁶⁷ Disputes Act preempted subject matter jurisdiction.

The court explained: The contract between Skanska [appellant] and SMCI expressly incorporates the DMSA which provides that any dispute for which SMCI contends NIH may be responsible shall be resolved pursuant to the Federal Acquisition Regulation, which requires that resolution of disputes under the CDA [6] and with exclusive jurisdiction in the United States Court of Federal Claims or the relevant Federal agency Board of Contract Appeals. Therefore, under the plain language of the parties governing agreement, SMCI need only contend that NIH may be responsible to place this dispute within the purview of the CDA. Although the court finds that language overly broad, this court finds that § 10.2(a) of the DMSA nevertheless controls the issue associated with the extant motions. This court does not find merit in Skanska’s [appellant’s] argument that a “certified” claim must be submitted in order for the claim to be characterized as a “government dispute.” If the parties intended to define a “government dispute” as those for which a “certified” claim has been submitted to NIH, the DMSA or other document would have expressly included that requirement.

Accordingly, this court finds that the CDA preempts subject matter jurisdiction in this court. In that context, the plain language of the DMSA compels a finding that SMCI’s contention that NIH may be responsible is sufficient to find that subject matter jurisdiction does not properly vest in this court. As a result, SMCI’s motion to dismiss is hereby granted without prejudice, and the parties are directed to proceed under the Contract Disputes Act, 41 U.S.C. §§ 601-613 , and its implementing regulations, Federal Acquisition Regulation § 52.233-1. On February 25, 2008, appellant filed a motion to alter or amend the judgment, reasserting its earlier position, and ⁶⁶⁸ emphasizing that, absent a revision in the court’s opinion relating to the interpretation of the relevant documents, the action should be stayed and not dismissed.

On March 14, 2008, the court granted BRC’s motion and dismissed appellant’s complaint as to it “[f]or the reasons stated in this Court’s opinion dated February 6, 2008 ...” and also denied appellant’s motion to alter or amend. This appeal followed. Standard of Review Ordinarily, when a motion to dismiss based on failure to state a claim is filed, and matters outside of the pleadings are attached to the motion and/or other pleadings in opposition to or in support of such a motion, the motion is converted to a motion for summary judgment. Maryland Rule 2-322(c).

Nevertheless, with respect to failure to state a claim, it is clear that the circuit court based its ruling on the Contract and the DMSA, which were incorporated into the complaint, determined that they were unambiguous, and ruled as a matter of law. Thus, the court did not rely on matters outside of the complaint, and neither shall we. See Maryland Rule 2 — 303(d); Samuels v. Tschechtelin, 135 Md.App. 483, 521 , 763 A.2d 209 (2000) (documents incorporated by reference in a complaint are part of the complaint). 7 As we recently stated in Zimmer-Rubert v. Board of Education of Baltimore County, 179 Md.App. 589 , 947 A.2d 135 (2008), in reviewing a motion to dismiss, ‘we accept all well-pled facts in the complaint, and reasonable inferences drawn from them, in a light most favorable to the non-moving party.’ Converge Servs. Group, LLC v. Curran, 383 Md. 462, 475 , 860 A.2d 871 (2004).

We will only find that dismissal was proper ‘if the alleged facts and permissible inferences, so viewed, would, if proven, nonetheless fail to ⁶⁶⁹ afford relief to the plaintiff.’ Sprenger v. Public Serv. Comm’n of Maryland, 400 Md. 1, 21 , 926 A.2d 238 (2007). Thus, our task is confined to determining whether the trial court was legally correct in its decision to dismiss. Id.

Zimmer-Rubert, 179 Md.App. at 593 , 947 A.2d 135 . Contentions Appellant Appellant contends that the court erred in concluding that a Government Dispute existed, within the meaning of the Contract. Appellant argues the mere contention by appellees that NIH may be responsible is insufficient, and in order to have a Government Dispute, SMCI and BRC had to present a certified claim to the NIH contracting officer. Appellant points out that it sought damages caused by SMCI’s negligent and intentional conduct and breach of contract, itemizing approximately 20 specific instances.

Appellant’s position is that what is required to constitute a Government Dispute under the Contract is the same as that required to invoke jurisdiction under the Contract Disputes Act, i.e., the filing of a certified claim. Appellant also observes that if a mere contention that NIH may be liable is sufficient to constitute a Government Dispute, it would render meaningless the provisions in the Contract permitting appellant to sue SMCI in Maryland courts with respect to disputes between the parties herein. Appellant argues that this case is governed by §§ 7.6.3 and 7.8.1 of the Supplement. Section 7.6.3 provides that SMCI shall be liable for its own gross negligence, intentional misconduct and material breach of contract.

Section 7.8.1 of the Supplement provides that, except as set forth in § 7.6.1, disputes between appellant and SMCI shall be subject to mediation and, if necessary, litigation. In the event of litigation, the section further provides that appellant and SMCI consent to jurisdiction and venue in the courts of Maryland. Second, appellant contends that, even if a Government Dispute existed, the court erred in concluding that it did not have subject matter jurisdiction because (1) the Contract ⁶⁷⁰ Disputes Act does not extend to disputes between parties who do not have a contract with the federal government, and (2) parties cannot by contract change the scope of a court’s subject matter jurisdiction. Appellant argues that BRC is the contractor under the Contract Disputes Act and, thus, is the only party that can assert a viable claim against the NIH.

Third, in the alternative, appellant contends that the court erred in dismissing the complaint rather than staying the action pending the outcome under the federal procurement procedures, thus enabling the court to resolve any remaining claims. Appellant explains that neither the Board of Contract Appeals nor the Court of Federal Claims will resolve any disputes between the parties that are independent of NIH’s liability. As to BRC, appellant contends that the court erred by basing its decision on the Contract because BRC is not a party to the Contract. Thus, according to appellant, BRC is not entitled to the benefits or defenses of the Contract.

Lastly, appellant contends the court erred in denying its motion to alter or amend judgment. SMCI SMCI’s position, in essence, is that the relevant documents are clear and unambiguous and because SMCI contends that NIH may be responsible for appellant’s claims, the Government Dispute provisions apply. SMCI also observes that, in addition to the mere contention by SMCI that NIH may be liable for appellant’s claims, the claims clearly fall within the realm of matters subject to NIH’s control. SMCI points to the structure of the contractual arrangements, specifically the pass-through mechanism for handling government claims and the reasons for that mechanism.

SMCI also points out, relying on several provisions in the documents, that NIH controlled all aspects of the design and