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Senior Housing Managers, LLC v. Highway 2 Development, LLC

United States District Court, D. Nebraska

September 25, 2019

SENIOR HOUSING MANAGERS, LLC, an Oregon limited liability company, Plaintiff and Counterclaim Defendant,
v.
HIGHWAY 2 DEVELOPMENT, LLC, d/b/a Pemberly Place, a Nebraska limited liability company, Defendant and Counterclaimant.

          MEMORANDUM AND ORDER

          JOHN M. GERRARD CHIEF UNITED STATES DISTRICT JUDGE

         This dispute involves the construction and management of an assisted living center in Lincoln, Nebraska. The defendant, Highway 2 Development, LLC, contracted with the plaintiff, Senior Housing Managers, LLC, to provide certain management and oversight services during the construction, opening, and operation of Pemberly Place, a new assisted living facility owned and operated by Highway 2.

         Senior Housing sued Highway 2 alleging breach of contract, violation of the Nebraska Uniform Deceptive Trade Practices Act (UDTPA), and unjust enrichment after Highway 2 terminated the parties' Management Agreement (filing 1-1). Highway 2 counterclaimed alleging contract, tort, and statutory claims related to actions taken by Senior Housing during the construction and opening of Pemberly Place.

         This matter is before the Court on Senior Housing's motion to dismiss Highway 2's amended counterclaim (filing 19) pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons set forth below, the Court will grant Senior Housing's motion with respect to Highway 2's negligence and UDTPA claims and deny the remainder of the motion.

         I. BACKGROUND

         Senior Housing is an Oregon limited liability company specializing in the development, operation, management and marketing of senior living facilities. See generally filing 13; see also filing 1-3 at 5. Christian Mason is the President and CEO of Senior Housing. Filing 13 at 6. It appears that Senior Housing and Highway 2 began working together sometime in 2015. See filing 13 at 7. However, the only written agreement between the parties is the Management Agreement executed on October 21, 2016. Filing 1-1; see also filing 1 at 2; filing 13 at 6.

         The Management Agreement outlined the mutual obligations of the parties regarding management and operation of Pemberly Place. Id. It was effective beginning January 1, 2017 and had a term of five years. Filing 1-1 at 1, 7. Under the Management Agreement, Senior Housing had sweeping authority over personnel, regulatory compliance, operation and admissions policies, financial management, selection of legal counsel, facility maintenance, and marketing. Id. at 2-5. In exchange for Senior Housing's services, Highway 2 agreed to pay Senior Housing a management fee. Id. at 9.

         According to Highway 2, in addition to responsibilities explicitly listed in the Management Agreement, Senior Housing "took on additional duties and responsibilities for the project" subject to Sections 2.1.20 and 2.1.17 of the Management Agreement. Filing 25 at 7-8, 10-11. Section 2.1.20 of the Management Agreement provides:

Advisory Support. [Senior Housing] shall provide timely assistance without additional compensation with respect to special requests for graphs, charts, and information assimilation, market analysis, business plans, program planning and analysis relating to [Pemberly Place] and reasonably requested by [Highway 2].

Filing 1-1 at 5. Highway 2 asserts that the plain language of the agreement and, indeed, the understanding of the parties was that Senior Housing would act as an advisor to Highway 2 throughout the term of the agreement without additional compensation. Filing 25 at 7-8.

         Highway 2 also relies on Section 2.1.17:

Ancillary Services. Consistent with budgets approved by [Highway 2], [Senior Housing] will arrange for the provision of ancillary services not covered by this Agreement to [Pemberly Place] as needed, including without limitation marketing and promotion, training, construction, and care-related consultants, which may include nurse consultants, dietary consultants, occupational health nurses, physician/medical director and activities, social services and religious consultants.

Filing 1-1 at 4. Highway 2 describes this provision as a "catch-all" provision, which by its plain language obligated Senior Housing to provide services regarding "marketing and promotion" and "construction." See filing 25 at 10-11.

         Highway 2 points to conduct by Senior Housing that supports its reading of Sections 2.1.20 and 2.1.17. Highway 2 alleges that Mason first prepared a Project Overview in November 2015 with "design considerations extending to exterior appearance and parking, market demand trends and analysis, financial considerations and projections, and marketing projections and goals setting forth timetables so 'we can hit the ground running Day 1'" Filing 13 at 7. Furthermore, Highway 2 alleges that throughout 2016 and 2017 Senior Housing was integral in the planning, design and construction of Pemberly Place. Id. at 7-9. For example, Senior Housing recommended that Highway 2 "purchase more real property for the [p]roject, " helped select an architect and general contractor and regularly communicated with both, and "participated in various walk-throughs during [] construction." Id. at 8-9.

         Highway 2 claims that it began to discover problems with the project in December 2016. Id. at 8. And at some point, the relationship between the two parties broke down completely. In a succinct letter dated April 26, 2018 (filing 1-2) Highway 2 terminated the Management Agreement "pursuant to Section 6.1.6 of the Agreement."[1] In a subsequent letter dated May 16, 2018 (filing 1-3) Highway 2 also asserted that Senior Housing was guilty of gross mismanagement and therefore it was terminating the agreement under Section 6.1.4.[2]

         For its part, Senior Housing contends that it performed all its obligations under the Management Agreement, which contains "the only obligations owed by [Senior Housing] to [Highway 2]." Filing 20 at 1; see also filing 1 at 2.Furthermore, Senior Housing alleges that the April and May letters were the only times it was notified about any problems with its performance. Filing 1 at 2-3. Senior Housing also suggests that if Highway 2 did in fact terminate the contract due to mismanagement, [3] then Senior Housing was entitled to notice and an opportunity to cure under Section 6.1.2 of the Management Agreement.[4] Filing 20 at 4.

         Currently before the Court is Senior Housing's motion to dismiss Highway 2's amended counterclaims for failure to state a claim upon which relief can be granted. Specifically, Highway 2 asserts six theories of recovery: (1) breach of contract, (2) negligence, (3) breach of the implied covenant of good faith and fair dealing, (4) negligent misrepresentation, (5) violations of the Nebraska UDTPA, and (6) unjust enrichment. The Court will deny Senior Housing's motion in part, and grant it in part, as set forth below.

         II. STANDARD OF REVIEW

         A complaint must set forth a short and plain statement of the claim showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2). This standard does not require detailed factual allegations, but it demands more than an unadorned accusation. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The complaint need not contain detailed factual allegations, but must provide more than labels and conclusions; and a formulaic recitation of the elements of a cause of action will not suffice. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). For the purposes of a motion to dismiss a court must take all of the factual allegations in the complaint as true, but is not bound to accept as true a legal conclusion couched as a factual allegation. Id.

         And to survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must also contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Iqbal, 556 U.S. at 678. A claim has facial plausibility when the plaintiff pleads factual content that allows the Court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. Where the well-pleaded facts do not permit the Court to infer more than the mere possibility of misconduct, the complaint has alleged-but has not shown-that the pleader is entitled to relief. Id. at 679.

         Determining whether a complaint states a plausible claim for relief will require the reviewing court to draw on its judicial experience and common sense. Id. The facts alleged must raise a reasonable expectation that discovery will reveal evidence to substantiate the necessary elements of the plaintiff's claim. See Twombly, 550 U.S. at 545. The Court must assume the truth of the plaintiff's factual allegations, and a well-pleaded complaint may proceed, even if it strikes a savvy judge that actual proof of those facts is improbable, and that recovery is very remote and unlikely. Id. at 556.

         When deciding a motion to dismiss under Rule 12(b)(6), the Court is normally limited to considering the facts alleged in the complaint. If the Court considers matters outside the pleadings, the motion to dismiss must be converted to one for summary judgment. Fed.R.Civ.P. 12(d). However, the Court may consider exhibits attached to the complaint and materials that are necessarily embraced by the pleadings without converting the motion.Mattes v. ABC Plastics, Inc.,323 F.3d 695, 697 n.4(8th Cir. 2003). Documents necessarily embraced by the pleadings include those whose contents are alleged in a complaint and ...


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