Virginia Lawyers Weekly VA Lawyers Weekly
Where two companies alleged a third company failed to pay them for medial staffing services to the states of Idaho and Washington to alleviate hospital staffing and supply shortages caused by COVID-19, they plausibly alleged claims for fraud and conversion.
Background
This case arises out of an agreement between three entities (plaintiffs AB Staffing Solutions LLC and World Wide Medical and defendant ACI Federal) to provide medical staffing services to the states of Idaho and Washington to alleviate hospital staffing and supply shortages caused by COVID-19. This matter comes before the court on the parties’ cross-motions to dismiss.
ACI’s motion
In Count One, plaintiffs allege that defendant breached the contractor teaming agreement, or CTA, in several ways. Defendant argues that the CTA merely represents an unenforceable “agreement to agree.” Because the CTA has definite obligations, the court finds the CTA sufficiently definite to constitute an enforceable contract. Nevertheless the court does not find that it encompasses the broad scope of conduct that plaintiffs advance.
Plaintiffs generally allege that defendant failed to forward their invoices to the states and failed to remit the payment to plaintiffs that defendant had received from the states. Yet, defendant’s obligations with respect to invoicing on behalf of plaintiffs and remitting payment to plaintiffs find no footing in the CTA.
Plaintiffs next attempt to bring defendant’s invoicing and collections breaches under the CTA by alleging a breach of the covenant of good faith and fair dealing. This claim fails plaintiffs do not allege that defendant acted arbitrarily or unfairly in the exercise of any discretion bestowed upon it by the CTA. Nor does plaintiff allege that defendant dishonestly exercised a right bestowed upon it by the CTA.
In Count Four, plaintiffs allege that defendant breached its fiduciary duties that it owed plaintiffs under the CTA. Plaintiffs argue that by taking on the invoicing duties, defendants assumed a fiduciary duty. Setting aside whether this could suffice to create a fiduciary duty, plaintiffs’ allegations do not manifest their consent to this agency relationship.
Additionally, plaintiffs’ claim in Count Six for an accounting in equity stems from their allegation that defendant owed plaintiffs a fiduciary duty. Because the court finds that plaintiff has not properly pled the existence of a fiduciary duty, the court will grant defendant’s motion as to Count Six as well. However, the court finds that plaintiffs have plausibly pleaded a claim for conversion in Count Five. Plaintiffs have alleged that the states paid defendant for work performed by plaintiffs, and that defendant failed to remit that payment to plaintiffs.
In Count Seven, plaintiffs ask the court to declare that “[p]ursuant to the CTA, Plaintiffs are entitled to separately invoice the States of Washington and Idaho directly for the services rendered by Plaintiffs.” Defendant argues the states are indispensable parties necessary to resolve this claim, but the Eleventh Amendment bars this court from asserting jurisdiction over state governments. Because plaintiffs offer no real response, Count Seven is dismissed. Finally, regarding the fraud claims in Counts Eight and Nine, the court finds that these are sufficiently pleaded and that plaintiffs have stated a claim for fraud despite the existence of a contractual relationship between the parties.
Plaintiffs’ motion
In Count One of its counterclaim, defendant alleges breaches of enforceable subcontracts that existed between defendant and plaintiffs to perform some of the work orders issued by the states. Defendant alleges that these subcontracts arose as implied-in-fact contracts. However, defendant does not allege the specifics of these terms, such that the court can ascertain the terms of the contract.
In Count Two, defendant alleges that plaintiffs interfered with defendant’s contracts by falsely accusing defendant of not paying their invoices, by directly invoicing for the work that they performed on the purported subcontracts and by performing work that the government had already ordered from defendant. The court finds that defendant has properly alleged that plaintiffs used improper methods.
In Count Three, defendant alleges that plaintiffs tortiously interfered with their business expectancy. Plaintiffs move to dismiss this count, arguing that defendant has failed to plausibly allege a valid business expectancy. The court disagrees. In Count Four, defendant alleges that plaintiffs defamed it by publishing libelous statements about it to government agencies. The court finds that defendant has alleged sufficient factual information to state a claim for defamation that is plausible on its face.
Count Five of the counterclaim is dismissed, however, because defendant has not contested that Virginia’s business conspiracy statute does not apply to extraterritorial conduct that gave rise to the alleged conspiracy.
Plaintiffs’ motion to dismiss granted in part, denied in part. Defendant’s motion to dismiss granted in part, denied in part.
AB Staffing Solutions LLC v. ASEFI Capital Inc., Case No. 3:22-cv-32, Oct. 31, 2022. EDVA at Richmond (Novak). VLW 022-3-491. 45 pp.
