The opinion
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT BLUEFIELD
C.L.,
Plaintiff,
v. CIVIL ACTION No. 1:19-00792
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. 96. For the reasons
expressed below, that motion is GRANTED in part and DENIED in
part.
I. Background
On May 31, 2016, plaintiff C.L. began serving a 37-month
sentence at Federal Prison Camp Alderson (“Alderson”) in
Alderson, West Virginia. See Amended Complaint at ¶ 9 (ECF No.
73). She alleges that, while at Alderson, she was subjected to
“repeated episodes of sexual abuse, coerced sex, sexual assault,
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 ¶ 109.
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 ¶ 110.
On November 1, 2019, C.L. 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 September 29, 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:
158. 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.
159. 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 as part of the
auditing process required by PREA for the benefit of
all inmates in the custody of FPC Alderson.
160. Nakamoto contractors conducted audits of FPC
Alderson in 2015 and 2017.
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161. Nakamoto negligently performed the auditing
functions under PREA and breached its contractual
and/or legal obligations as more specifically below.
162. 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.
163. 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 C.L., rather than facing termination
from employment or removal from his duties at FPC
Alderson.
* * *
174. 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.
175. Nakamoto consistently failed to conduct
thorough examinations of critical facility functions
FPC Alderson.
176. 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.
177. 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.
178. Some or all of Nakamoto’s breaches of its
duty of care to plaintiff occurred prior to defendant
Grimes’ sexual misconduct against plaintiff.
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179. Had Nakamoto fulfilled its duty of care,
defendant Grimes’ sexual misconduct against plaintiff
would not have occurred.
180. 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.
181. 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, C.L. and
other female inmates at FPC Alderson sustained injuries
and damages.
* * *
189. C.L. at all times relevant to the
allegations herein was a federal inmate and thus an
individual to be protected “from prison rape.”
190. C.L. as an inmate is a member of the class
of persons the PREA auditing function was designed to
protect.
191. 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.
192. Nakamoto breached the contract, including by
failing to conduct appropriate and meaningful PREA
audits and to make appropriate and meaningful reports
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).
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193. As a direct and proximate result of
Nakamoto’s [ ] breach of the contract between Nakamoto
and the BOP, C.L. was injured and damaged. . . .
Amended Complaint ¶¶ 158-93.
Nakamoto moved to dismiss both counts. That motion is
fully briefed. Plaintiff sought leave to file a surreply, see
ECF No. 107, 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
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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,
[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
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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:
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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 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
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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.
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
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.”).
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.
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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 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
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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
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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
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
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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.
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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
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
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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
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.
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.
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The Clerk is directed to send copies of this Memorandum
Opinion and Order to all counsel of record and unrepresented
parties.
IT IS SO ORDERED this 30th day of September, 2021.
ENTER:
David A. Faber
Senior United States District Judge
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