The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
AT BLUEFIELD
S.B.,
Plaintiff,
v. CIVIL ACTION NO. 1:19-00773
DAVID R. WILSON, ET AL.,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending before the court is a motion to dismiss filed by
defendant Nakamoto Group, Inc. See ECF No. 56. For the reasons
expressed below, that motion is GRANTED in part and DENIED in
part.
I. Background
On January 13, 2014, plaintiff S.B. began serving a 70-
month sentence at Federal Prison Camp Alderson (“Alderson”) in
Alderson, West Virginia. See Amended Complaint at ¶ 17 (ECF No.
45). She alleges that, while at Alderson, she was subjected to
“repeated episodes of sexual abuse and sexual battery” at the
hands of a prison official, former Captain Jerrod Grimes
(“Grimes”). Id. at ¶ 2. On or about December 21, 2017, Grimes
resigned from Alderson. Id. at ¶ 97. He was later indicted and
pled guilty to multiple counts of sexual abuse of a ward and
abusive sexual contact, in violation of 18 U.S.C. § 2243(b) and
2244(a)(4). Id. at ¶ 98.
On October 23, 2019, S.B. filed her first complaint in this
matter. See ECF No. 1. Named as defendants were Grimes, the
United States of America, and numerous other employees at
Alderson. Count One of the three-count complaint alleged a
violation of the Eighth Amendment against Grimes for sexual
abuse, battery, and sexual harassment. Count Two alleged a
violation of the Eighth Amendment by the other prison officials
named as defendants for their failure to intervene. Count Three
stated a claim for negligence against the United States under
the Federal Tort Claims Act.
On October 1, 2020, the Amended Complaint was filed. It
asserted claims of negligence and breach of contract against
Nakamoto Group, Inc. (“Nakamoto”). Pursuant to a contract with
the Bureau of Prisons (BOP), Nakamoto audited the BOP’s
compliance with the Prison Rape Elimination Act (“PREA”). The
specific allegations as to Nakamoto include:
169. At all times relevant to this amended complaint,
Nakamoto was the auditor for inspecting, monitoring
and oversight of BOP compliance with PREA standards at
FPC Alderson.
170. The BOP contracted with Nakamoto to carry out
inspections of FPC Alderson in accordance with the
standards mandated by PREA. Nakamoto was
contractually obliged to carry out those inspections
2
as part of the auditing process required by PREA for
the benefit of all inmates in the custody of FPC
Alderson.
171. Nakamoto contractors conducted audits of FPC
Alderson in 2015 and 2017.
172. Nakamoto negligently performed the auditing
functions under PREA and breached its contractual
and/or legal obligations as more specifically below.
173. The PREA audits conducted by Nakamoto were
materially incomplete, as auditors failed to properly
conduct required systematic reviews of documents held
by FPC Alderson relating to sexual abuse and sexual
harassment allegations and failed to properly
interview inmates and/or staff that were involved in
or witness to PREA violations by defendant Grimes or
any other correctional officer.
174. The failure of Nakamoto to conduct a thorough
audit of FPC Alderson and investigate allegations of
staff sexual misconduct allowed Grimes to stay in his
position and have unfettered access to inmates,
including S.B., rather than facing termination from
employment or removal from his duties at FPC Alderson.
* * *
185. Nakamoto failed to use reasonable care and
diligence to hire, train, and supervise its auditor
staff to obtain sufficient facts to support all
statements, conclusions, and findings of the audits
performed at FPC Alderson.
186. Nakamoto consistently failed to conduct thorough
examinations of critical facility functions FPC
Alderson.
187. Nakamoto failed to review appropriate records
and/or failed to note discrepancies, irregularities or
problems that should have been readily apparent from
the well known activities of defendant Grimes and/or
other staff at FPC Alderson.
188. Nakamoto generally failed to conduct its audits
at FPC Alderson with the level of care imposed upon it
by law and consequently breached its duty of care to
the inmates there, including plaintiff in particular.
189. Some or all of Nakamoto’s breaches of its duty
of care to plaintiff occurred prior to defendant
Grimes’ sexual misconduct against plaintiff.
190. Had Nakamoto fulfilled its duty of care,
defendant Grimes’ sexual misconduct against plaintiff
would not have occurred.
191. Nakamoto knew or should have known that a
failure on its part to fulfill its auditing duty of
care would result in the commencement and/or
continuation of sexual misconduct perpetrated by
correctional officers such as defendant Grimes against
female inmates such as plaintiff.
192. As a proximate result of Nakamoto’s failure to
meet its duty of care, and the associated and/or
consequential failure to identify and address obvious
signs of endemic sexual abuse at FPC Alderson, S.B.
and other female inmates at FPC Alderson sustained
injuries and damages.
* * *
200. S.B. at all times relevant to the allegations
herein was a federal inmate and thus an individual to
be protected “from prison rape.”
201. S.B. as an inmate is a member of the class of
persons the PREA auditing function was designed to
protect.
202. The contract between Nakamoto and the BOP was
made and intended for the benefit of plaintiff as a
member of the class definitely and clearly within the
terms of the contract.
203. Nakamoto breached the contract, including by
failing to conduct appropriate and meaningful PREA
audits and to make appropriate and meaningful reports
4
which would have provided the BOP with the necessary
information to take corrective action to not only
fulfill the purpose of the PREA “to protect
individuals from prison rape” but to also help fulfill
their mandated duty to “provide for the safekeeping,
care, . . . of all persons charged with or convicted
of offenses against the united states” and to “provide
for the protection . . . Of all persons charged with
or convicted of offenses against the united states”
under 18 U.S.C. § 4042(a)(2)-(3).
204. As a direct and proximate result of Nakamoto’s [
] breach of the contract between Nakamoto and the BOP,
S.B. was injured and damaged. . . .
Amended Complaint 31-36.
Nakamoto moved to dismiss both counts. That motion is
fully briefed. Plaintiff sought leave to file a surreply, see
ECF No. 67, and that motion is GRANTED.
II. Standard of Review
“[A] motion to dismiss for failure to state a claim for
relief should not be granted unless it appears to a certainty
that the plaintiff would be entitled to no relief under any
state of facts which could be proved in support of his claim.”
Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d 324, 325 (4th
Cir. 1989) (citation omitted) (quoting Conley v. Gibson, 355
U.S. 41, 48 (1957), and Johnson v. Mueller, 415 F.2d 354, 355
(4th Cir. 1969)). “In considering a motion to dismiss, the
court should accept as true all well-pleaded allegations and
should view the complaint in a light most favorable to the
plaintiff.” Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130,
1134 (4th Cir. 1993); see also Ibarra v. United States, 120 F.3d
474, 474 (4th Cir. 1997).
In evaluating the sufficiency of a pleading, the cases of
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v.
Iqbal, 556 U.S. 662 (2009), provide guidance. When reviewing a
motion to dismiss, under Federal Rule of Civil Procedure
12(b)(6), for failure to state a claim upon which relief may be
granted, a court must determine whether the factual allegations
contained in the complaint “give the defendant fair notice of
what the . . . claim is and the grounds upon which it rests,”
and, when accepted as true, “raise a right to relief above the
speculative level.” Twombly, 550 U.S. at 555 (quoting Conley,
355 U.S. at 47; 5 Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 1216 (3d ed. 2004)). “[O]nce a
claim has been stated adequately, it may be supported by showing
any set of facts consistent with the allegations in the
complaint.” Id. at 563. As the Fourth Circuit has explained,
“to withstand a motion to dismiss, a complaint must allege
‘enough facts to state a claim to relief that is plausible on
its face.’” Painter’s Mill Grille, LLC v. Brown, 716 F.3d 342,
350 (4th Cir. 2013) (quoting Twombly, 550 U.S. at 570).
According to Iqbal and the interpretation given it by our
appeals court,
6
[L]egal conclusions, elements of a cause of action,
and bare assertions devoid of further factual
enhancement fail to constitute well-pled facts for
Rule 12(b)(6) purposes. See Iqbal, 129 S.Ct. at 1949.
We also decline to consider “unwarranted inferences,
unreasonable conclusions, or arguments.” Wahi v.
Charleston Area Med. Ctr., Inc., 562 F.3d 599, 615 n.
26 (4th Cir. 2009); see also Iqbal, 129 S. Ct. at
1951-52.
Ultimately, a complaint must contain “sufficient
factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’” Iqbal, 129
S.Ct. at 1949 (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929
(2007)). Facial plausibility is established once the
factual content of a complaint “allows the court to
draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id. In other
words, the complaint's factual allegations must
produce an inference of liability strong enough to
nudge the plaintiff's claims “‘across the line from
conceivable to plausible.’” Id. at 1952 (quoting
Twombly, 550 U.S. at 570, 127 S.Ct. 1955).
Satisfying this “context-specific” test does not
require “detailed factual allegations.” Id. at 1949-
50 (quotations omitted). The complaint must, however,
plead sufficient facts to allow a court, drawing on
“judicial experience and common sense,” to infer “more
than the mere possibility of misconduct.” Id. at
1950. Without such “heft,” id. at 1947, the
plaintiff's claims cannot establish a valid
entitlement to relief, as facts that are “merely
consistent with a defendant's liability,” id. at 1949,
fail to nudge claims “across the line from conceivable
to plausible.” Id. at 1951.
Nemet Chevrolet, LTD v. Consumeraffairs.com, Inc., 591 F.3d 250,
255-56 (4th Cir. 2009); see also Midgal v. Rowe Price-Fleming
Int’l, Inc., 248 F.3d 321, 326 (4th Cir. 2001) (“The presence of
a few conclusory legal terms does not insulate a complaint from
dismissal under Rule 12(b)(6) when the facts alleged in the
complaint cannot support the legal conclusion.”).
III. Analysis
A. Breach of Contract
Citing West Virginia Code § 55-8-12, Nakamoto argues that
plaintiff’s third-party breach of contract claim fails under
West Virginia law. That statute provides that if a contract:
be made for the sole benefit of a person with whom it
is not made, or with whom it is made jointly with
others, such person may maintain, in his own name, any
action thereon which he might maintain in case it had
been made with him only, and the consideration had
moved from him to the party making such covenant or
promise.
W. Va. Code § 55-8-12. According to Nakamoto, its contract with
the BOP was not made for plaintiff’s sole benefit and,
therefore, her breach of contract claim is barred as a matter of
law.
In her opposition to the motion to dismiss, plaintiff
maintains that her breach of contract claim is not subject to
dismissal because she is bringing her claim as a representative
of a class of persons (female prisoners) benefitting from the
contract. In so doing, she relies on the following passage from
United Dispatch v. E.J. Albrecht Co.:
We think a consideration of the authorities in this,
as well as other, jurisdictions leads to the
conclusion that a person not a party to a contract may
8
maintain an action thereon when such contact is made
and intended for his sole benefit; and, likewise, an
action may be maintained if the contract is made and
intended for the benefit of a class of persons
definitely and clearly shown to come within the terms
of the contract. The intent of the contracting
parties must appear from the contract or be shown by
necessary implication; and be in accordance with the
parol evidence rule when the contract under
consideration is in writing.
62 S.E.2d 289, 296 (W. Va. 1950).
Nakamoto maintains that plaintiff’s argument misses the
mark entirely. According to Nakamoto, even if plaintiff is
representing a class of female prisoners, that class is not the
sole beneficiary of Nakamoto’s contract with the BOP. The BOP
is the primary beneficiary of its contract with Nakamoto;
therefore, plaintiff (or even a class of female prisoners that
includes plaintiff) cannot be its sole beneficiary.
In her surreply, plaintiff argues for the first time that
federal, not West Virginia, law controls whether she is a third-
party beneficiary of the BOP/Nakamoto contract.1 Nakamoto has
not yet responded to this argument given that it was raised for
the first time in a surreply.
1 See ECF No. 110 at 5 (“To date, the Court has only received
briefing on this issue under West Virginia law, which is not the
correct standard, per Mathis, as federal common law controls the
interpretation of the contract, and no other choice of law
exists per the terms of the contract produced by Nakamoto.”).
There appears to be some merit to plaintiff’s argument.
See Mathis v. GEO Group, Inc.2, No. 2:08-CT-21-D, 2009 WL
10736631, at *18 (E.D.N.C. Nov. 9, 2009) (“Because the federal
government is a party to the contract, federal common law
controls the interpretation of the contract.”); Chickaloon-Moose
Creek Native Ass’n, Inc. v. Norton, 360 F.3d 972, 980 (9th Cir.
2004) (“Federal law governs the interpretation of contracts
entered pursuant to federal law where the government is a
party.”); Audio Odyssey, Ltd. v. U.S., 255 F.3d 512, 520 (8th
Cir. 2001) (“[F]ederal common law applies to the determination
of [ ] status as a third-party beneficiary.”). And, as one
court recently explained, determining whether a plaintiff is a
third-party beneficiary of a federal contract requires
consideration of several factors:
Federal common law governs civil liabilities arising
out of a private contractor’s performance of federal
procurement contracts. See Sec’y of State for Def. v.
Trimble Navigation Ltd., 484 F.3d 700, 705–06 (4th
Cir. 2007) (citing Boyle v. United Techs. Corp., 487
U.S. 500, 504–05 (1988)). To qualify as a third-party
beneficiary under federal common law, a plaintiff must
show that “the contract reflects the express or
implied intention of the parties to benefit the third
party.” Trimble, 484 F.3d at 706 (internal quotations
omitted). “The intent of the parties to the contract
is therefore the cornerstone of a claim for third-
party beneficiary status.” Flexfab, L.L.C. v. United
2 Plaintiff erroneously contends that Mathis is a case from
the United States Court of Appeals for the Fourth Circuit. See
ECF No. 110 at 4-5.
10
States, 424 F.3d 1254, 1259 (Fed. Cir. 2005). As a
result, courts must examine the “precise language of
the contract for a clear intent to rebut the
presumption that the [third parties] are merely
incidental beneficiaries” who lack standing to sue for
breach of contract. GECCMC 2005-C1 Plummer St. Off.
Ltd. P’ship v. JPMorgan Chase Bank, Nat’l Ass’n, 671
F.3d 1027, 1033–34 (9th Cir. 2012) (applying federal
common law) (internal quotations omitted; alterations
in original). The moving party can accomplish this by
showing that “the [government] contracting officer
[was] put on notice, by either the contract language
or the attendant circumstances, of the relationship
between prime contractor and the third-party . . . so
that an intent to benefit the third party is fairly
attributable to the contracting officer.” Flexfab,
424 F.3d at 1263. This is true even when the putative
third-party beneficiary is seeking to recover from the
private contractor and not the government. See
Trimble, 484 F.3d at 707–08 (evaluating the intent of
the government to decide whether a third-party could
bring a breach of contract suit against the
contractor).
Third-party beneficiary status is exceptional in the
law and “should not be granted liberally,” Flexfab,
424 F.3d at 1259, and courts must take a stringent
approach to recognizing such exceptional status, see
Trimble, 484 F.3d at 709 (recognizing that inquiry
into third-party beneficiary status is ordinarily not
ripe for resolution in the context of a Rule 12
motion, but noting that where the relevant documents
are properly before the court and “the contracts in
question were executed under a federal statutory
scheme,” resolution of the third-party beneficiary
issue is proper at the motion to dismiss stage).
Moreover, third-party beneficiary status is
particularly difficult to prove in connection with a
federal government contract. See Flexfab, 424 F.3d at
1260–63 (explaining the unique context of government
contracts and noting that, while limited exceptions to
the requirement of privity as a prerequisite for a
breach of contract claim exist, “the government does
not lightly consent to suit”).
In analyzing whether a litigant possesses rights to
enforce a contract as a third-party beneficiary, in
addition to probing the intent of the contractor and
the U.S. government as evidenced by contractual
language, courts also look to whether granting third-
party beneficiary status would frustrate the intent
behind an underlying federal statutory scheme. See,
e.g., Trimble, 484 F.3d at 706–07 (affirming dismissal
on third-party beneficiary grounds, where recognizing
the plaintiff's third-party beneficiary status “would
be contrary to the intent and structure of the [Arms
Export Control Act]”).
In Trimble, the United Kingdom brought an action
against Trimble, a domestic contractor who
manufactured chips for use in GPS technology, alleging
that Trimble breached its contract with the United
States and that this breach caused harm to the United
Kingdom as a third-party beneficiary of the Trimble-
United States contract. See id. at 705. Pursuant to
the Foreign Military Sales (“FMS”) program, as
authorized by the Arms Export Control Act (“AECA”),
the United Kingdom had its own contract with the
United States, under which the United Kingdom agreed
to purchase Trimble's chips. Id. at 703. The
agreement between the United States and United Kingdom
included a clause, providing that claims relating to
product discrepancies must be raised with the United
States and channeled through a certain administrative
procedure known as the Supply Discrepancy Report
(“SDR”) process. Id. at 704, 708. The SDR process
did not contemplate litigation by the FMS purchaser
against the United States, even in the event that the
United States failed to resolve the issue with the
domestic contractor. Id. Even before considering
whether contractual provisions evidenced an intent of
the United States and Trimble to convey third-party
beneficiary status on the United Kingdom, and they did
not, the court began its analysis with the AECA
statutory scheme. The court found that implying a
direct relationship between the United Kingdom and
Trimble would be “contrary” to the method of purchase
contemplated by the AECA. See id. at 707 (“To
recognize such a right of action would allow the
foreign purchaser to hold the contractor directly
12
liable for the purchased goods, a level of
accountability” that was not contemplated by the FMS
transaction). In short, “any recognition of third-
party rights in [the United Kingdom] would be an end-
run around the AECA and is prohibited.” Id.
Accordingly, the Trimble court held that the United
Kingdom was a mere incidental beneficiary to the
Trimble-United States contract and could not sue to
enforce it. Id.
Hencely v. Fluor Corp., Civil Action No. 6:19-00489-BHH, 2021 WL
3604781, at *5-6 (D.S.C. Aug. 13, 2021). Ultimately, the
Hencely court granted defendant’s motion for judgment on the
pleadings, finding that plaintiff had “not adequately pled
third-party beneficiary status[.]” Id. at *11.
Given the difficulty in proving third-party beneficiary
status in connection with federal government contracts, see
Mathis, 2009 WL 10736631, at *18 (“[P]laintiff bears an
exceptional burden to prove that he (a nonsignatory to the
federal government contract) is entitled to recover for breach
of the government contract between the BOP and GEO under a
third-party beneficiary theory.”) (internal quotation marks
omitted), the court is doubtful that plaintiff will ultimately
prevail on her claim. However, the only briefing and argument
on the breach of contract issue discusses state law and Nakamoto
seeks dismissal thereunder. Given the foregoing discussion, the
court is not convinced that Nakamoto’s motion is well-taken.
Therefore, insofar as Nakamoto seeks dismissal of the breach of
contract claim pursuant to West Virginia Code § 55-8-12, the
motion is DENIED without prejudice. If it chooses, Nakamoto may
renew its motion to dismiss and explain (1) why federal common
law does not control the issue of third-party beneficiary
status; or (2) why dismissal is appropriate under the federal
common law.
B. Negligence
The gist of the action doctrine seeks “to prevent the
recasting of a contract claim as a tort claim.” Gaddy Eng’g Co.
v. Bowles Rice McDavid Graff & Love, LLP, 746 S.E.2d 568, 577
(2013). “Succinctly stated, whether a tort claim can coexist
with a contract claim is determined by examining whether the
parties' obligations are defined by the terms of the contract.”
Id. This doctrine will bar an action in tort if a party
establishes any of the following:
(1) where liability arises solely from the contractual
relationship between the parties; (2) when the alleged
duties breached were grounded in the contract itself;
(3) where any liability stems from the contract; and
(4) when the tort claim essentially duplicates the
breach of contract claim or where the success of the
tort claim is dependent on the success of the breach
of contract claim.
Id. (quoting Star v. Rosenthal, 884 F. Supp.2d 319, 328–29 (E.D.
Pa. 2012)). “The ‘gist of the action’ doctrine requires
plaintiffs seeking relief in tort to identify a non-contractual
14
duty breached by the alleged tortfeasor.” Dan Ryan Builders,
Inc. v. Crystal Ridge Dev., Inc., 783 F.3d 976, 980 (4th Cir.
2015).
In arguing that the gist of the action doctrine does not
bar her negligence claim, plaintiff maintains that her
negligence cause of action is grounded in “the federal
regulations comprising the PREA audit standards.” ECF No. 101
at 8. Plaintiff admits that her “entire negligence claim is
based on Nakamoto allegedly failing to meet the PREA audit
standards.” Id. at 9. However, plaintiff conveniently ignores
the fact that, but for the contract, Nakamato has no duty to
comply with PREA audit standards. In other words, Nakamoto’s
alleged duties under the federal regulations arise because of
the contract and not independent of it. In rejecting a similar
argument, Judge Chambers explained why plaintiff’s argument
fails:
Plaintiffs argue their claim of negligent
investigation arises under the statutory duties
imposed under the UTPA, not their contracts. Thus,
Plaintiffs insist the “gist of the action” doctrine
does not apply. However, even if it does apply,
Plaintiffs additionally argue they are permitted to
allege both tort and contract claims in the
alternative. . . .
Although there are instances in which a tort claim may
arise apart from the parties’ contractual
relationship, the problem with Plaintiffs’ argument in
this case is that, but for the existence of the
insurance contracts between Nationwide and Plaintiffs,
Nationwide would have no obligation under the UTPA to
investigate the claims and provide a fair
determination of coverage and damages. Nationwide’s
duty to investigate the claim arises solely from the
fact that the parties have a contractual relationship.
Without the contract, Nationwide would have no duty to
investigate. In other words, Plaintiffs’ negligent
investigation claim is dependent upon the existence of
the contract and, thus, falls with the “gist of the
action” doctrine.
Gue v. Nationwide Ins. Co. of America, CIVIL ACTION NO. 3:21-
0123, at *6 (S.D.W. Va. Aug. 12, 2021) (Chambers, J.). Indeed,
plaintiff admits that Nakamoto’s duties under the federal
regulations arise out of the contract. See ECF No. 101 at 13
(“For Nakamoto the test is whether it met the standards
contained in a number of specific requirements outlined in over
50 pages in 28 C.F.R. § 115.401 which are part of the contract.
. . .”) (emphasis added).
Based upon the foregoing, the court grants Nakamoto’s
motion to dismiss plaintiff’s negligence claim pursuant to the
gist of the action doctrine.3
3 Given the court’s conclusion that the plaintiff’s negligence
claim is barred by the gist of the action, it does not reach
Nakamoto’s alternative argument that the negligence claim is
barred by the statute of limitations.
16
IV. Conclusion
Nakamoto’s motion to dismiss the negligence count is
GRANTED. The motion to dismiss the breach of contract claim is
DENIED without prejudice.
The Clerk is directed to send a copy of this Memorandum
Opinion and Order to counsel of record and to any unrepresented
party.
IT IS SO ORDERED this 30th day of September, 2021.
BNTER:
Raut O Dabo
David A. Faber
Senior United States District Judge