Contract – Subcontractor fails to dismiss breach of contract suit

Where a general contractor plausibly alleged a subcontractor breached a subcontract, the subcontractors’ motion to dismiss was denied.

Background

Plaintiff HPM, Inc. brings this action based on defendant M.C. Dean‘s alleged breaches of the parties’ subcontract for general construction services. HPM further asserts that MCD and defendants Liberty Mutual Insurance Company and Arch Insurance Company executed payment bonds, as part of MCD’s obligations under the Miller Act. MCD and the surety defendants have filed motions to dismiss.

Condition precedent

MCD argues that the court lacks subject matter jurisdiction over this action because HPM failed to plead a condition precedent under the subcontract. Failure to expressly plead performance of a condition precedent, however, does not deprive the court of subject matter jurisdiction over a claim. A plaintiff’s failure to plead a condition precedent instead raises a question of whether a plaintiff has adequately stated a claim under Rule 12(b)(6).

Here, HPM’s timely notice to MCD that it planned to seek an equitable adjustment is therefore a condition precedent to HPM’s receipt of that adjustment. Not all of HPM’s breach of contract claims in Count One, however, implicate the condition precedent in § 6.6 of the subcontract.

The timely notice provision only applies to MCD’s duty to make equitable adjustments under § 6.6. The question thus becomes whether HPM has adequately alleged that it gave MCD timely notice under § 6.6 that it planned to seek equitable adjustments related to the escort and door issues. The answer is no.
HPM generally asserts that “HPM put MCD on notice of the lack of escorts numerous times through serial letters, emails, weekly status updates, and daily reports.”

But the only specific dates that HPM alleges are the government’s November 2022 change to the number of required escorts and HPM’s April 2024 change order request. HPM has not alleged that it provided notice to MCD about the lack of escorts within twenty days as required by the subcontract nor does HPM allege more generally that it satisfied all conditions precedent.

The court must therefore dismiss HPM’s claims in paragraph 77(c) and (d) that MCD breached the subcontract by failing to compensate HPM for additional expenses and approve change orders related to the lack of escorts. However HPM has properly pled that it satisfied the notice requirement with respect to its claims in paragraphs 77(c) and (e) that MCD breached the subcontract by refusing to issue a change order and additional compensation after it modified the project’s door requirements.

Breach of contract

HPM’s remaining breach of contract claims are that MCD (1) failed to provide adequate escorts; (2) interfered with HPM’s work; (3) failed to approve proper change orders for additional work HPM was forced to complete as a result of changes to the project’s doors and (4) failed to compensate HPM for additional expenses it incurred as a result of changes to the project’s doors.

First, the court finds that HPM has stated a breach of contract where HPM alleges: (i) MCD had a contractual duty to provide escorts; (ii) MCD failed to provide sufficient escorts and (iii) HPM was damaged by that failure through the increased time and money it was forced to spend on the project.
Second, HPM alleges that MCD impacted, delayed, and interfered with HPM’s work. HPM, however, concedes that this alleged breach does not identify a specific provision of the subcontract that MCD breached. By failing to identify a duty that MCD breached, HPM fails to state a claim.

Finally, HPM claims that MCD breached § 6.6 of the subcontract by failing to approve change orders and compensate HPM for additional work incurred as a result of changes to the project’s doors. HPM has alleged that, after MCD received notice that HPM believed it was entitled to additional compensation to address this change, MCD refused to make a change to the subcontract and refused to compensate HPM for those additional costs. These allegations are sufficient at this stage to allege a breach of subcontract § 6.6.

Good faith/fair dealing

HPM has not adequately alleged that MCD acted in bad faith in exercising its contractual rights. It claims only that MCD “improperly denied” HPM’s proposed change orders to the subcontract “without justification.” In other words, it alleges that MCD’s actions were “arbitrary” or “unfavorable” but not that MCD was “actually dishonest.” Accordingly, Count Two must be dismissed.

Miller Act

Because the breach alleged in paragraph 77(a) proceeds against MCD, so too does the Miller Act claim against the surety defendants. Accordingly, the surety defendants’ motion is denied with respect to Count Three.

Motion to amend

HPM has amended its complaint three times. More than two years have elapsed since the original complaint was filed, and HPM received notice of the deficiencies in its case before filing its most recent amended complaint. The court will therefore deny further leave to amend.

MCD’s motion to dismiss granted in part, denied in part. Surety defendants’ motion to dismiss denied. Plaintiff’s motion to amend denied.

HPM, Inc. v. M.C. Dean, Inc., Case No. 1:24-cv-01078, July 22, 2026. EDVA at Alexandria (Nachmanoff). VLW 026-3-315. 16 pp.

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