Jostes Concrete, Inc. v. MDC Holdings, Inc.

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT MAY 23 2014
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
JOSTES CONCRETE, INC., an Arizona No. 12-15717
corporation, on behalf of itself and all
others similarly situated, D.C. No. 2:11-cv-01011-SRB
Plaintiff - Appellant,
MEMORANDUM*
v.
MDC HOLDINGS, INC., a Delaware
corporation; RICHMOND AMERICAN
CONSTRUCTION, INC., a Delaware
corporation; RICHMOND AMERICAN
HOMES OF ARIZONA, INC., a Delaware
corporation; RICHMOND AMERICAN
HOMES OF COLORADO, INC., a
Delaware corporation; RICHMOND
AMERICAN HOMES OF DELAWARE,
INC., a Colorado corporation;
RICHMOND AMERICAN HOMES OF
ILLINOIS, a Colorado corporation;
RICHMOND AMERICAN HOMES OF
FLORIDA, LP, a Colorado limited
partnership; RICHMOND AMERICAN
HOMES OF MARYLAND, INC., a
Maryland corporation, DBA Richmond
Homes of California, Inc.; RICHMOND
AMERICAN HOMES OF NEVADA,
INC., a Colorado corporation;
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
RICHMOND AMERICAN HOMES OF
NEW JERSEY, INC., a Colorado
corporation; RICHMOND AMERICAN
HOMES OF PENNSYLVANIA, INC., a
Colorado corporation; RICHMOND
AMERICAN HOMES OF TEXAS, INC.,
a Colorado corporation; RICHMOND
AMERICAN HOMES OF UTAH, INC., a
Colorado corporation; RICHMOND
AMERICAN HOMES OF VIRGINIA,
INC., a Virginia corporation; JOHN AND
JANE DOES, 1-100; XYZ
CORPORATIONS, 1-10; ABC
PARTNERSHIPS, 1-10; BLACK AND
WHITE UNINCORPORATED
ASSOCIATIONS, 1-10,
Defendants - Appellees.
Appeal from the United States District Court
for the District of Arizona
Susan R. Bolton, District Judge, Presiding
Argued and Submitted May 14, 2014
San Francisco, California
Before: GRABER, W. FLETCHER, and PAEZ, Circuit Judges.
Plaintiff Jostes Concrete, Inc. (“Jostes”), appeals the district court’s order
dismissing with prejudice Counts One, Two, and Seven of its First Amended
Complaint (“FAC”) against defendants. We have jurisdiction under 28 U.S.C.
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§ 1291. We reverse. We remand with instructions to grant Jostes leave to file a
second amended complaint.
The district court properly dismissed Count One (breach of contract), Count
Two (wrongful termination), and Count Seven (alter-ego liability) of the FAC as
pled. Count One fails because Jostes did not adequately allege that any of
defendants’ modifications applied retroactively to work that Jostes had already
completed. See Rubenstein v. Sela, 672 P.2d 492, 493 (Ariz. Ct. App. 1983).
Count Two fails because Jostes’s allegations do not provide fair notice of its claim
that defendants breached the covenant of good faith and fair dealing. See Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007). The district court properly dismissed
Count Seven because Jostes did not adequately plead any substantive cause of
action.
However, the district court erred in dismissing Counts One, Two, and Seven
without giving Jostes an opportunity to amend the FAC. Jostes requested an
opportunity to amend in its response to defendants’ motion to dismiss. The FAC
was the first complaint to which defendants responded, and amendment would not
clearly be futile. See AE ex rel. Hernandez v. Cnty. of Tulare, 666 F.3d 632, 636
(9th Cir. 2012); Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1034
(9th Cir. 2008).
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The district court should have allowed Jostes to amend Count One to allege
that defendants retroactively provided reduced payments that they owed for
completed work. Such allegations could state a claim under Arizona law. State v.
Gregg, 157 P. 227, 228 (Ariz. 1916); see also Demasse v. ITT Corp., 984 P.2d
1138, 1144 n.3 (Ariz. 1999).
The district court should have allowed Jostes to amend Count Two because
it is not clear that Jostes could not plead a claim for breach of the covenant of good
faith and fair dealing under Arizona law. See Bike Fashion Corp. v. Kramer, 46
P.3d 431, 434–35 (Ariz. Ct. App. 2002) (“[A] party can breach the implied
covenant of good faith and fair dealing both by exercising express discretion in a
way inconsistent with a party’s reasonable expectations and by acting in ways not
expressly excluded by the contract’s terms but which nevertheless bear adversely
on the party’s reasonably expected benefits of the bargain.”).
We decline to reach the merits of Count Seven. If Jostes amends Counts
One and Two, it is free to re-plead its claim for alter-ego liability. The district
court may then consider the merits of that claim in the first instance.
REVERSED and REMANDED.
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