Scg America Group Inc. v. Starlight Security Inc. ( 2023 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SCG AMERICA GROUP, INC.,
Plaintiff,
v. Civ. Action No. 20-2877
(EGS)
STARLIGHT SECURITY INC.,
Defendant.
MEMORANDUM OPINION
I. Introduction
SCG America Group, Inc. (“SCG” or “Plaintiff”) brings this
action against Starlight Security Inc. (“SSI” or “Defendant”)
alleging breach of contract and negligence claims following a
redevelopment project at the consular residence building owned
by the Embassy of the People’s Republic of China and located in
the District of Columbia (the “District”). See Am. Compl., ECF
No. 9 ¶¶ 16, 43-53. 1
Pending before the Court is SSI’s Motion to Dismiss, ECF
No. 10. Upon careful consideration of the parties’ submissions,
1
When citing electronic filings throughout this Opinion, the
Court refers to the ECF page numbers, not the page numbers of
the filed documents.
1
the applicable law, and the entire record herein, the Court
hereby DENIES SSI’s motion.
II. Background
A. Factual
The People’s Republic of China (“China”) hired SCG as its
general contractor to complete a redevelopment project at the
consular residence building in Washington, D.C. (the “Project”).
See Am. Compl., ECF No. 9 ¶ 16. SCG’s parent company is Shanghai
Construction Group, a large, prominent construction company in
China. Id. ¶ 7. The Project is the only construction work SCG
has ever performed in the District. Id. ¶ 8.
On December 5, 2016, SCG entered into a contract with SSI,
a fire alarm subcontractor. Id. ¶¶ 10, 16 (citing Ex. A
(“Subcontract Agreement”), ECF No. 9-1). Pursuant to this
contract (the “Subcontract Agreement”), SSI was required to
furnish and install the fire alarm system at the Project for
$980,000.00. Id. ¶ 17. The parties agreed that SCG would make
payments on a progress basis. Id. ¶ 18. The parties also agreed
that SCG was entitled to withhold certain payments and/or
collect damages from SSI under certain circumstances. Id. ¶¶ 18-
22.
SCG alleges that, during the duration of the Subcontract
Agreement, SSI repeatedly defaulted on its contractual
obligations. See id. ¶¶ 23-24, 34-35. In an attempt to resolve
2
their disputes and complete the fire alarm installation, the
parties entered into two additional agreements: the First
Addendum to Subcontract and the Second Addendum to Subcontract.
See id. ¶¶ 26, 28 (citing Ex. B (“First Addendum”), ECF No. 9-2;
Ex. C (“Second Addendum”), ECF No. 9-3). Pursuant to these
addenda, SCG paid SSI $100,000 in exchange for SSI’s agreement
to complete its work on the Project. See id. ¶ 27.
SCG alleges that in December 2019, SSI again stopped work
on the Project and demanded payment. Id. ¶ 34. SCG then
determined that SSI “was not capable of completing the
contracted work” and sent SSI a Notice of Default as well as a
Notice of Termination of Subcontract Agreement in February 2020.
Id. ¶ 35 (citing Ex. D (“Notice of Default”), ECF No. 9-4; Ex. E
(“Notice of Termination of Subcontract Agreement”), ECF No. 9-
5).
SCG thereafter engaged a different subcontractor to
complete the fire alarm installation and to redo a significant
portion of SSI’s work. Id. ¶¶ 36-38. SCG alleges that it has
incurred significant additional expenses, including its payments
to the new subcontractor, the costs of amplifier panels withheld
by SSI, and other damages. Id. ¶¶ 39-41.
B. Procedural
SCG filed this lawsuit on October 8, 2020, see Compl., ECF
No. 1; and amended the Complaint later that year on December 29,
3
2020, see Am. Compl., ECF No. 9. On January 12, 2021, SSI filed
this Motion to Dismiss the Amended Complaint. See Def.’s Mot.
Dismiss Pl.’s Am. Compl. &, in the Alternative, Mot. Summ. J.,
ECF No. 10; Def. Starlight Security Inc.’s Mem. Supp. Mot.
Dismiss (“Def.’s Mot.”), ECF No. 10-1. SCG filed its opposition
brief on January 26, 2021, see Pl.’s Mem. P. & A. Opp’n Def.’s
Mot. Dismiss Am. Compl. & Summ. J. (“Pl.’s Opp’n”), ECF No. 11;
and SSI filed its reply brief on February 1, 2021, see Reply
Supp. Def.’s Mot. Dismiss & Mot. Summ. J. (“Defs.’ Reply”), ECF
No. 12. SSI’s motion is now ripe and ready for adjudication.
III. Legal Standard
A. Rule 12(b)(6) Motion to Dismiss
A motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6) tests the legal sufficiency of a complaint.
Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). A
complaint must contain “a short and plain statement of the claim
showing that the pleader is entitled to relief, in order to give
the defendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007) (citation and internal quotation marks
omitted).
Despite this liberal pleading standard, to survive a motion
to dismiss, a complaint “must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible
4
on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citation and internal quotation marks omitted). “In determining
whether a complaint fails to state a claim, [the 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 Sch., 117 F.3d 621, 624 (D.C. Cir.
1997). A claim is facially plausible when the facts pled in the
complaint allow the court to “draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Iqbal, 556
U.S. at 678. The standard does not amount to a “probability
requirement,” but it does require more than a “sheer possibility
that a defendant has acted unlawfully.” Id.“[W]hen ruling on a defendant’s motion to dismiss [pursuant
to Rule 12(b)(6)], a judge must accept as true all of the
factual allegations contained in the complaint.” Atherton v.
D.C. Off. of the Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009)
(citation and internal quotation marks omitted). In addition,
the court must give the plaintiff the “benefit of all inferences
that can be derived from the facts alleged.” Kowal v. MCI
Commc’ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994).
B. Rule 12(b)(3) Motion to Dismiss
Federal Rule of Civil Procedure 12(b)(3) authorizes a party
to move to dismiss a case for “improper venue.” Fed. R. Civ. P.
5
12(b)(3). “Whether venue is ‘wrong’ or ‘improper’ depends
exclusively on whether the court in which the case was brought
satisfies the requirements of federal venue laws.” Atl. Marine
Constr. Co. v. U.S. Dist. Ct. for W. Dist. of Tex., 571 U.S. 49,
55 (2013). The plaintiff bears the burden of establishing that
venue is proper. Ananiev v. Wells Fargo Bank, N.A., 968 F. Supp.
2d 123, 129 (D.D.C. 2013) (citations omitted).
In considering a motion to dismiss for improper venue, the
court “accepts the plaintiff’s well-pled factual allegations
regarding venue as true, draws all reasonable inferences from
those allegations in the plaintiff’s favor and resolves any
factual conflicts in the plaintiff’s favor.” McCain v. Bank of
Am., 13 F. Supp. 3d 45, 51 (D.D.C. 2014) (citations and internal
quotation marks omitted), aff’d sub nom. McCain v. Bank of Am.
N.A., 602 F. App’x 836 (D.C. Cir. 2015). “The Court, however,
need not accept the plaintiff’s legal conclusions as true, and
may consider material outside the pleadings, including
undisputed facts evidenced in the record, to determine whether
it has jurisdiction in the case.” Ananiev, 968 F. Supp. 2d at
129 (citations and internal quotation marks omitted).
IV. Analysis
A. SCG May Proceed with Its Breach of Contract Claim
SSI moves to dismiss Count I of the Amended Complaint,
which alleges breach of contract, because SCG was the general
6
contractor for the Project but failed to comply with local
licensing regulations. See Def.’s Mot., ECF No. 10-1 at 5-13.
For the reasons that follow, the Court DENIES SSI’s motion as to
this claim.
District of Columbia law requires that “individuals or
businesses engaged in general contracting or construction
management” obtain “[a] General Contractor/Construction Manager
License.” D.C. Code Ann. § 47-2851.03d(b). To comply, general
contractors 2 and construction managers 3 must apply to the
Department of Consumer and Regulatory Affairs to receive a basic
business license with a general contractor/construction manager
endorsement. D.C. Mun. Regs. tit. 17, § 3900.1. The District
prohibits “[a] person which is required under law to obtain a
license issued in the form of an endorsement to engage in a
business in the District of Columbia” from “engag[ing] in such
business in the District of Columbia without having first
2 District regulations define general contractor as “any person
who, for a fee, is contracted to do construction on real
property owned, controlled, or leased by another person of
commercial, industrial, institutional, governmental, residential
or accessory use buildings or structures. This also includes the
remodeling, repair, improvement or demolition of these buildings
or structures.” D.C. Mun. Regs. tit. 17, § 3999.
3 District regulations define construction manager as “any
person who, for a fee, is contracted to supervise and coordinate
the work of design professionals and multiple general
contractors, while allowing the design professionals and general
contractors to control individual operations and the manner of
design and construction.” D.C. Mun. Regs. tit. 17, § 3999.
7
obtained a basic business license and any necessary
endorsements.” D.C. Code Ann. § 47-2851.02(a).
Here, SSI argues that SCG is subject to the above licensing
scheme, has failed to comply, and therefore cannot enforce the
contract at issue. See Def.’s Mot., ECF No. 10-1 at 5-10. SSI
explains that SCG should have obtained the basic business
license with a general contractor/construction manager
endorsement because SCG was the general contractor for the
Project and the Project was located in the District. See id. at
8-10. SSI then reviews caselaw from the federal and local courts
in the District and determines that “courts have consistently
barred individuals and entities that violated licensing
requirements from asserting breach of contract and/or quantum
meruit actions.” Id. at 7 (collecting cases); see also id. at 5-
7 (collecting and discussing cases). SSI thus concludes that the
Subcontract Agreement is “void, unenforceable, illegal, and in
violation of [D.C.] public policy” because SCG did not have the
appropriate license at any time between execution of the
original contract and filing of the Amended Complaint. Id. at
10.
SCG disagrees that the District’s licensing laws apply
here. Id. at 11. SCG argues that a 2009 executive agreement (the
“Executive Agreement”) between China and the United States
governs the Project and allows China “to engage a general
8
contractor . . . without regard for local government
‘restrictions’ or licensure requirements.” Id. at 11-12 (citing
Decl. of Hongquan Li (“Li Decl.”), ECF No. 11-1 ¶¶ 3-4; Ex. A,
Agreement Between the United States of America and China
(“Executive Agreement”), ECF No. 11-2 ¶ 1.5). SCG reasons that
the Court must resolve the conflict between the Executive
Agreement and the District’s licensing laws in favor of the
Executive Agreement because it is federal law to which state law
must yield. See id. at 13 (citing Am. Ins. Ass’n v. Garamendi,
539 U.S. 396, 425-27 (2003)).
The Executive Agreement at issue here is the Agreement
Between the Government of the United States of America and the
Government of the People’s Republic of China on the Conditions
of Construction of Diplomatic and Consular Complexes in the
People’s Republic of China and the United States of America. See
generally Executive Agreement, ECF No. 11-2. This agreement
explicitly governs construction projects at the Chinese consular
building located at 2300 Connecticut Avenue in Washington, D.C.
Id. ¶¶ 1.5, 1.6. Having “entered into force” on August 20, 2009,
see id. at 4; it is “to be treated with similar dignity” as any
treaty, whose “supremacy . . . has been recognized from the
beginning,” United States v. Pink, 315 U.S. 203, 223 (1942)
(citation and internal quotation marks omitted). Accordingly,
the Executive Agreement “is not and cannot be subject to any
9
curtailment or interference on the part of the several states,”
and “state law must yield when it is inconsistent with or
impairs the policy or provisions” of the agreement. Id. at 223,
230-31 (citations and internal quotation marks omitted).
The Executive Agreement sets forth the two countries’
responsibilities with respect to construction at the consular
property. See generally Executive Agreement, ECF No. 11-2. Two
sections are relevant to this dispute. The first section—on
Construction Standards and Quality Safety Responsibilities—
states: “The Construction Party 4 shall be responsible for the
quality and safety of its project during construction. The Host
Country 5 shall not require the Construction Party to enter into
a contract with a local firm to supervise the construction.” Id.
¶ 5.3. The second section—on Personnel and Companies—states:
“The Construction Party shall have the right to select project-
related personnel and companies of its own choosing and of any
nationality (including from the Host Country, the Construction
Party or third countries) to perform all work in connection with
its project.” Id. ¶ 9.1.
SSI argues that these provisions do not absolve SCG from
complying with District licensing laws. See Def.’s Reply, ECF
No. 12 at 3. SCG interprets these provisions to “clearly mean[]
4 The Construction Party here is China.
5 The Host Country here is the United States.
10
that the Construction Party need not choose an existing local
contractor to fulfill the work,” but “does not . . . in any way
state that the contractor, once chosen and retained, is
relieve[d] from the express obligation to properly register as a
general contractor in the District of Columbia.” Id. The Court
is unpersuaded by this construction. Under the Executive
Agreement, China is wholly responsible for the quality and
safety of all its consular construction projects, including the
Project here. Executive Agreement, ECF No. 11-2 ¶ 5.3. The
agreement therefore grants China wide latitude over its
selection of contractors for its consular construction projects,
specifying that China need not retain a “local firm” to
supervise construction. Id. Imposing the District’s licensing
requirements would effectively require China to engage a local
general contractor and adhere to District safety standards. This
result directly conflicts with the terms of the Executive
Agreement.
SSI’s remaining arguments are similarly unpersuasive.
First, SCG contends that “the Executive Agreement repeatedly
establishes that it is subject to the laws of the Host country.”
Def.’s Reply, ECF No. 12 at 2-3 (citing Executive Agreement, ECF
No. 11-2 ¶¶ 2.1, 3.2, 3.6, 4.1, 4.2, 5.3). This summary is
misleading. The Executive Agreement makes clear that China must
comply with federal and local regulations for its consular
11
construction projects but only in certain instances. See, e.g.,
Executive Agreement, ECF No. 11-2 ¶¶ 4.1 (planning, design
review, and permits), 5.1 (inspections of equipment and lines at
utility interface points), 6.1 (use of temporary sites), 6.3
(obtaining easements), 10.8 (storage, use, and disposal of
hazardous materials), 12.4 (vehicle registration), 13.2 (local
work hour restrictions). For example, China must comply with
federal and local law in its installation and use of
telecommunications equipment, id. ¶ 3.6; but at the same time,
the agreement gives China complete discretion over its selection
of utility and service providers, id. ¶ 3.5. The Executive
Agreement does not contain any clear language requiring that
China comply with federal or state licensing for general
contractors, and the Court will not insert its own restriction.
SSI also argues that another federal law—the Foreign
Missions Act, 22 U.S.C. § 4301 et seq.—applies here and requires
China to comply with the District’s licensing laws in its
consular construction projects. See Def.’s Mot., ECF No. 10-1 at
11-12; Def.’s Reply, ECF No. 12 at 5. The Foreign Missions Act
“‘was designed to provide the Secretary of State with the
leverage necessary to remove unreasonable restraints and costs
on United States missions abroad’ by giving the federal
government a voice in local regulation of services provided to
foreign missions within this country.” Sturdza v. Gov’t of
12
United Arab Emirates, No. CV 98-2051 (CKK), 1999 WL 35643442, at
*4 (D.D.C. Dec. 22, 1999) (quoting Embassy of the People’s
Repub. of Benin v. Dist. of Columbia Bd. of Zoning & Adjustment,
534 A.2d 310, 314 (D.C. 1987)), aff’d in part, rev’d in part and
question certified sub nom. Sturdza v. United Arab Emirates, 281
F.3d 1287 (D.C. Cir. 2002), certified question answered, 11 A.3d
251 (D.C. 2011). As relevant here, the Act provides that “[t]he
Secretary [of State] shall require foreign missions to comply
substantially with District of Columbia building and related
codes in a manner determined by the Secretary to be not
inconsistent with the international obligations of the United
States.” 22 U.S.C. § 4306(g). However, it contains no provision
regarding contractor licensing requirements. As the Sturdza
court explained, the District’s building codes and licensing
requirements “are separate and distinct.” Sturdza, 1999 WL
35643442, at *4. The Foreign Missions Act is thus inapplicable
here.
Third, SSI contends that the licensing laws must apply to
SCG because the D.C. Code applies to other government
construction projects. Def.’s Reply, ECF No. 12 at 4 (citing
D.C. Mun. Regs. tit. 17, § 1735); id. at 6 (citing D.C. Mun.
Regs. tit. 17, § 3907.1); cf. id. at 4 (discussing SCG’s
registration and later correction of its registration). This
argument ignores supremacy principles, which dictate that “state
13
law must yield when it is inconsistent with or impairs the
policy or provisions” of federal law, including executive
agreements. Pink, 315 U.S. at 230-31. SSI’s citation to Sturdza
is equally unpersuasive. See Def.’s Reply, ECF No. 12 at 5. In
that case, the district court ruled that an unlicensed architect
could not bring her contract or quantum meruit claims against
the United Arab Emirates for her work on the country’s embassy
because she failed to comply with the District’s licensing
requirements. Sturdza, 1999 WL 35643442, at *4. That dispute did
not involve any executive agreement—and certainly not the
Executive Agreement here. See generally id. The Court therefore
cannot borrow the Sturdza court’s reasoning.
In sum, the Court concludes that the Executive Agreement
grants China the discretion to retain a general contractor of
its choice without regard to local licensing laws. Because the
Executive Agreement constitutes federal law and prevails over
state law, SCG may pursue its breach of contract claim despite
having been unlicensed during the Project. Accordingly, the
Court DENIES SSI’s Motion to Dismiss Count I of the Amended
Complaint. 6
6 The Court need not address SCG’s remaining contract defenses
because SSI raises only the licensing issue in its Motion to
Dismiss. Cf. Benton v. Laborers’ Joint Training Fund, 121 F.
Supp. 3d 41, 51 (D.D.C. 2015) (“[I]t is a well-settled
prudential doctrine that courts generally will not entertain new
arguments first raised in a reply brief.” (citations and
14
B. SCG May Maintain Its Negligence Claim
SSI next moves to dismiss Count II of the Amended
Complaint, which alleges negligence, for two reasons. See Def.’s
Mot., ECF No. 10-1 at 13-15. First, it argues that SCG has not
adequately pleaded the existence of a duty to bring a negligence
claim. See id. at 13-14. Second, SSI argues that the economic
loss doctrine bars this claim. See id. at 14-15. For the reasons
below, the Court DENIES SSI’s motion as to this claim.
1. SCG Has Adequately Alleged That SSI Owed a Duty
SSI first argues that the Court should dismiss the
negligence claim because it “does not owe SCG an independent
duty under the law of the District of Columbia.” Id. at 13.
Under District of Columbia law, “for a plaintiff to recover in
tort for conduct that also constitutes a breach of contract,
‘the tort must exist in its own right independent of the
contract, and any duty upon which the tort is based must flow
from considerations other than the contractual relationship.’”
Attias v. CareFirst, Inc., 365 F. Supp. 3d 1, 18 (D.D.C. 2019)
(quoting Choharis v. State Farm Fire & Cas. Co., 961 A.2d 1080,
1089 (D.C. 2008)), on reconsideration in part, 518 F. Supp. 3d
internal quotation marks omitted)). Additionally, the Court will
not address SSI’s argument, made in passing, that the Court
should grant summary judgment because SSI has not presented any
other arguments showing that it is entitled to judgment as a
matter of law. See Fed. R. Civ. P. 56(a); see also Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
15
43 (D.D.C. 2021). Here, SCG alleges that SSI owed a duty “to
perform its work on the [P]roject in a skillful, careful,
diligent, and workmanlike manner.” Am. Compl., ECF No. 9 ¶ 51.
SSI contends that this is “a near textbook example of an
unsupported legal conclusion” because SCG does not state “where
this legal duty is derived from under [D.C.] law.” Def.’s Mot.,
ECF No. 10-1 at 14. SSI thus concludes that its only legal duty
to SCG arises from the contract and the parties’ contractual
relationship. See id.In its opposition briefing, SCG argues that SSI “owed . . .
a duty to perform its work in a workmanlike manner.” Pl.’s
Opp’n, ECF No. 11 at 26. Citing authority from the District of
Columbia Court of Appeals (“D.C. Court of Appeals”), SCG
explains that this duty “exists independently from the terms of
the Subcontract Agreement.” Id. (citing Ehrenhaft v. Malcolm
Price, Inc., 483 A.2d 1192, 1200 (D.C. 1984)). SSI does not
address this caselaw in its reply briefing. See Def.’s Reply,
ECF No. 12 at 5-7.
The Court is persuaded that SCG has adequately pleaded the
existence of a duty. SSI is correct that “[t]he failure to
perform a contractual obligation typically does not give rise to
a cause of action in tort.” Attias, 365 F. Supp. 3d at 18
(quoting Jones v. Hartford Life & Accident Ins. Co., 443 F.
Supp. 2d 3, 5 (D.D.C. 2006)). However, District of Columbia law
16
has long “‘extended the tort liability for misfeasance to
virtually every type of contract where defective performance may
injure the promisee,’” thereby permitting a plaintiff who
alleges a breach of contract to maintain a tort claim. See
Ehrenhaft, 483 A.2d at 1200 (quoting W. Prosser, Law of Torts §
92, at 617 (4th ed. 1971)). Following this principle, the D.C.
Court of Appeals has permitted negligence claims against
contractors to proceed where plaintiffs allege a failure to
perform work properly. See id. (collecting cases). Here, SCG
alleges that SSI “(i) failed to complete its work on the Project
in a timely manner and (ii) produced deficient and defective
work on the Project, requiring a substitute contractor to repair
and redo a substantial portion of the work SSI was obligated to
complete.” Am. Compl., ECF No. 9 ¶ 52. Stated differently, SCG’s
negligence claim is based on SSI’s alleged failure to perform
work properly. This allegation is sufficient to bring a
negligence claim under District of Columbia law.
2. The Economic Loss Doctrine is Inapplicable
SSI also argues that SCG’s negligence claim is barred by
the economic loss doctrine. See Def.’s Mot., ECF No. 10-11 at
14-15. Under District of Columbia law, this doctrine “bars
recovery of purely economic losses in negligence, subject to
only one limited exception where a special relationship exists.”
Aguilar v. RP MRP Wash. Harbour, LLC, 98 A.3d 979, 986 (D.C.
17
2014). A special relationship exists where the defendant had an
obligation to care for the plaintiff’s economic well-being or an
obligation that implicated the plaintiff’s economic
expectancies. Whitt v. Am. Prop. Constr., P.C., 157 A.3d 196,
205 (D.C. 2017) (quoting Aguilar, 98 A.3d at 985).
Here, the parties agree, as they must, that SCG seeks
recovery of purely economic losses for its negligence claim. See
Def.’s Mot., ECF No. 10-1 at 15; Am. Compl., ECF No. 9 ¶ 53.
They dispute whether SCG has alleged a special relationship. SSI
contends that SCG alleges that “the only relationship whatsoever
between the parties is the December 2016 alleged agreement.”
Def.’s Mot., ECF No. 10-1 at 15 (citing Am. Compl., ECF No. 9 ¶
51 (“SSI was engaged to furnish and install a fire alarm system
for the Project.”)). SCG rejects this interpretation of the
Amended Complaint, see Pl.’s Opp’n, ECF No. 11 at 26-27;
explaining that the relationship between contractor and
subcontractor is a “paradigm” special relationship because SSI
“had an obligation . . . that implicated SCG’s economic
interests,” id. at 27 (citing Whitt, 157 A.3d at 206). SCG
further argues that the parties were in a special relationship
because they were in privity of contract. Id. at 26 (citing
Aguilar, 98 A.3d at 985; Commonwealth Land Title Ins. Co. v. KCI
Techs., Inc., 922 F.3d 459, 468 (D.C. Cir. 2019)).
18
The Court concludes that SCG has adequately alleged that
the parties were in a special relationship. Admittedly, “there
is limited legal authority in the District of Columbia
addressing the factual circumstances that may give rise to a
‘special relationship.’” Heidi Aviation, LLC v. Jetcraft Corp.,
573 F. Supp. 3d 182, 199 (D.D.C. 2021) (reviewing relevant
cases). The existing caselaw, however, suggests that a special
relationship exists where there is contractual privity or some
other close nexus between the parties. Aguilar, 98 A.3d at 985
n.3 (citation omitted). Here, SCG has alleged that it was in
privity of contract with SSI. Pl.’s Opp’n, ECF No. 11 at 27; Am.
Compl., ECF No. 9 ¶ 16. This contract clearly implicated SCG’s
economic expectancies. See Am. Compl., ECF No. 9 ¶¶ 34-41. The
Court is persuaded that this is sufficient to plead a special
relationship. Cf., e.g., Vantage Commodities Fin. Servs. I, LLC
v. Willis Ltd., 531 F. Supp. 3d 153, 177–79 (D.D.C. 2021) (no
“special relationship” because “[t]here was no ‘contractual
privity or its equivalent’” between the parties); McDowell v.
CGI Fed. Inc., No. CV 15-1157, 2017 WL 2392423, at *4–5 (D.D.C.
June 1, 2017) (plaintiff did not adequately allege a “special
relationship” because plaintiff did “not argue that she was in
contractual privity, or its equivalent” with defendant).
Because SCG has pleaded a special relationship between the
parties, the economic loss doctrine does not apply. The Court
19
therefore DENIES SSI’s Motion to Dismiss Count II of the Amended
Complaint.
C. Venue is Proper in the District of Columbia
Finally, SSI moves to dismiss this case for improper venue.
Def.’s Mot., ECF No. 10-1 at 15-17. For the following reasons,
the Court concludes that venue is proper in the District.
Pursuant to 28 U.S.C. § 1391(b), a lawsuit “may be brought
in” a judicial district (1) where “any defendant resides, if all
defendants are residents of the State in which the district is
located”; (2) where “a substantial part of the events or
omissions giving rise to the claim occurred”; or (3) if there is
no judicial district where the case may be brought as provided
by the first two categories, where “any defendant is subject to
the court’s personal jurisdiction.” 28 U.S.C. § 1391(b). “When
venue is challenged, the court must determine whether the case
falls within one of the three categories set out in § 1391(b).”
Atl. Marine Constr. Co., 571 U.S. at 56.
Here, SCG alleges that venue is proper in this judicial
district because (1) “a substantial part of the events or
omissions giving rise to the claim occurred” here, Am. Compl.,
ECF No. 9 ¶ 14 (citing 28 U.S.C. § 1391(b)(2)); and (2) the
District is “the exclusive venue for any dispute between the
parties” under the Subcontract Agreement, id. ¶ 15. SSI argues
that, “to the extent that the Court finds that the Project is
20
somehow exempt from [D.C.] regulations, that finding would
remove any substantial nexus between this forum and the
Project.” Def.’s Mot., ECF No. 10-1 at 17. This argument is
unpersuasive. The Project was located in the District. Am.
Compl., ECF No. 9 ¶ 16. The construction and contractual
activity at issue all occurred in the District. Id. ¶¶ 16-42.
The Court’s conclusion that the District’s licensing laws do not
apply to SCG’s work on the Project does not change the fact that
“a substantial part of the events or omissions giving rise to
the claim occurred” in the District. 28 U.S.C. § 1391(b)(2).
Venue is proper; accordingly, the Court DENIES SSI’s Motion to
Dismiss for improper venue.
V. Conclusion
For the foregoing reasons, the Court DENIES SSI’s Motion to
Dismiss. See ECF No. 10.
An appropriate Order accompanies this Memorandum Opinion.
SO ORDERED.
Signed: Emmet G. Sullivan
United States District Judge
March 15, 2023
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