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Warnock Engineering, LLC v. Canton Municipal Utilities

United States District Court, S.D. Mississippi, Northern Division

December 21, 2018




         BEFORE THE COURT are Defendant Canton Municipal Utilities' Motion [126] to Dismiss and its Motion [206] for Summary Judgment, which both seek dismissal of all claims advanced against it by Plaintiffs Warnock Engineering, LLC, and Rudolph M. Warnock, Jr. After due consideration of the Motions [126], [206], related pleadings, the record, and relevant legal authority, the Court finds that Defendant's Motion [206] for Summary Judgment should be granted in part and denied in part, and that Defendant's Motion [126] to Dismiss should be denied as moot. Plaintiffs' claims for copyright infringement, RICO violations, injunctive relief, negligence, open account, misappropriation, and breach of contract should be dismissed. Plaintiffs' claims for wrongful discharge and for retaliation in violation of the First Amendment under 42 U.S.C. § 1983 will proceed.[1]

         I. BACKGROUND

         A. Factual background

         According to the Third Amended Complaint [118], which is the operative pleading in this case, Plaintiff Warnock Engineering, LLC (“Warnock Engineering”), is an engineering firm owned by Plaintiff Rudolph M. Warnock, Jr. (“Mr. Warnock”).[2] 3d Am. Compl. [118] at 4. Warnock Engineering and Mr. Warnock (collectively, “Plaintiffs” or “Warnock”) began providing engineering services to Defendant Canton Municipal Utilities (“CMU”) in January 2016 and worked on a number of projects for CMU. Id. CMU is a public utility commission within the City of Canton, Mississippi, and is managed by a five-member Board of Commissioners. See Pls.' Mem. [212] at 1.

         Plaintiffs allege that Warnock Engineering entered into three written contracts with CMU: (1) an agreement for “General Engineering Services, ” effective January 4, 2016 (the “General Engineering Services Agreement”); (2) an agreement for “Sewer and Water System Improvements” entered into on November 8, 2016 (the “Sewer/Water Agreement”); and (3) an agreement for “Water & Sewer System Facility Improvements” that was part of a “Five Point Plan” submitted by Warnock Engineering, and which became effective October 7, 2016 (the “Five Point Plan Agreement”). 3d Am. Compl. [118] at 4. Plaintiffs assert that the Board of Commissioners of CMU (the “CMU Board”) terminated CMU's arrangements with all engineers other than Plaintiffs in August 2016, making Mr. Warnock the exclusive engineer for CMU. Id. at 5. The Third Amended Complaint claims that Cleveland Anderson (“Mr. Anderson”) was appointed to the CMU Board on June 7, 2016, and was later removed in June 2017. Id. at 4-5. At some point before he was removed, Mr. Anderson became Chairman. Id. at 10.

         Plaintiffs maintain that during a meeting with Mr. Warnock on September 18, 2016, Mr. Anderson offered to arrange the murder of a journalist in exchange for $10, 000.00. Later, on September 25, 2016, Mr. Anderson allegedly offered to arrange the murder of the mayor of Madison, Mississippi, also for $10, 000.00. Id. at 4-5. Plaintiffs allege that prior to Mr. Warnock proposing the Five Point Plan Agreement to the CMU Board, Mr. Anderson asked Mr. Warnock “if Anderson could get paid for his vote to approve the agreement, ” a request which Mr. Warnock refused. Mr. Anderson allegedly subsequently requested a $200, 000.00 kickback for supporting the Five Point Plan Agreement in a meeting held on October 6, 2016. Id. at 6. Mr. Warnock again refused. Id. Plaintiffs assert that they did not adjust the price of the proposed $1, 474, 000.00 Five Point Plan Agreement, and that it was approved by unanimous vote of the CMU Board at its meeting held on October 7, 2016. Id. at 7.

         In September 2016, the CMU Board unanimously voted to place Mr. Warnock on the CMU Personnel Committee. Id. Mr. Anderson also served on this committee. Id. According to Plaintiffs, Mr. Anderson was heavily involved in restructuring the CMU, including adding new departments and new positions, and “insisted that CMU hire his wife in a newly created General Counsel Department.” Id. When outside counsel advised Mr. Anderson that hiring his wife at CMU would be illegal, he withdrew her name from consideration for possible employment. Id.

         Mr. Warnock asserts that he expressed frustration to City of Canton officials over Mr. Anderson's attempts to solicit kickbacks and other improper benefits. Id. at 8. Mr. Anderson allegedly retaliated by influencing other CMU Commissioners and making motions to fire outside counsel and terminate Plaintiffs from all CMU engineering and personnel work. Id. at 9. As a result, Mr. Warnock was informed by letters dated December 29, 2016, and January 17, 2017, that the CMU Board had voted to terminate its contracts with Warnock Engineering. Id. at 10. Plaintiffs accuse Mr. Anderson, as Chairman of the CMU Board, of orchestrating the termination, id. at 10, because Mr. Warnock had “refused to provide bribes and kickbacks, and consent to the illegal and improper hiring of relatives and friends, demanded by [Mr.] Anderson, ” id. at 11.

         According to the Third Amended Complaint, after terminating its contracts with Plaintiffs, Mr. Anderson and CMU continued to use and distribute Plaintiffs' work product, even though CMU had not paid invoices for work performed prior to, and contract fees resulting from, the termination. Id. Plaintiffs allege that CMU has no license or other right to use Warnock Engineering's copyrights, work product, or other intellectual property, unless and until all outstanding amounts are paid by CMU. Id. At the time CMU terminated the contracts, it purportedly owed Warnock Engineering $2, 369, 477.28 for services performed prior to the termination, exclusive of interest, costs, and attorneys' fees, and also owed Warnock Engineering fees in accordance with the termination provisions contained in the Agreements. Id. at 11.

         B. Procedural history

         Plaintiffs filed the original Complaint [1] in this case on March 9, 2017, and have amended their Complaint three times. The Third Amended Complaint [118] asserts claims against CMU for copyright infringement, vicarious and contributory infringement, wrongful discharge, breach of contract, open account, negligence, defamation, misappropriation of advertising/commercial materials, and violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1962(b), and the First Amendment under 42 U.S.C. § 1983. See 3d Am. Compl. [118] at 19-23, 24-26.[3] The Third Amended Complaint [118] seeks a declaratory judgment that

(i) until full and final payment is made, Warnock and Warnock Engineering are entitled to the full protection and ownership of its work product under United States copyright law, 17 U.S.C. § 101 et seq., and (ii) to the extent Warnock and/or Warnock Engineering have licensed any such work product to CMU, such licenses have terminated and expired because of CMU's failure to comply with their payment terms.

Id. at 23.

         CMU has filed a Motion [126] to Dismiss, asking the Court to dismiss all of Plaintiffs' claims pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). CMU's Mot. [126] at 1.[4] Although Plaintiffs have opposed this Motion, see Pls.' Resp. [150] & Mem. [151], they have dismissed their defamation claim, see Notice [134] at 1.

         CMU subsequently filed a Motion [206] for Summary Judgment pursuant to Federal Rule of Civil Procedure 56, again seeking dismissal of Plaintiffs' claims. CMU's Mot. [206] at 1-2. CMU states that it filed this Motion “with the understanding that the relief sought in its Motion to Dismiss the Third Amended Complaint is not waived, ” and it reserves the right to answer the Third Amended Complaint and raise any affirmative or other defenses once the Motion to Dismiss is resolved. Id. at 2.

         Plaintiffs have filed a Response [211] and Memorandum [212] in opposition to the Motion [206] for Summary Judgment conceding some, but not all, claims. Plaintiffs maintain that the Motion [126] to Dismiss “is essentially mooted and superseded by CMU's Motion for Summary Judgment in that the parties have now presented materials outside of the pleadings for consideration.” Pls.' Mem. [212] at 4 n.2.


         A. CMU's request for hearing

         CMU has requested that the Court conduct a hearing on its Motion [206] for Summary Judgment. See CMU's Mot. [206] at 1. The Court finds that a hearing would not be helpful in resolving CMU's Motion [206] and is not necessary. Pursuant to Local Uniform Civil Rule 7(b)(3), the Court will deny CMU's request for a hearing on its Motion [206] for Summary Judgment.

         B. CMU's Motion [126] to Dismiss

         CMU's Motion to Dismiss, filed pursuant to Federal Rule of Civil Procedure 12(b)(1), was premised upon Plaintiffs' purported lack of standing as to the copyright claims and was otherwise based upon Rule 12(b)(6) for failure to state a claim. Plaintiffs have since conceded the copyright and several other claims. As for the remaining claims, the Motions to Dismiss and for Summary Judgment argue substantially the same bases for dismissal. For this reason, CMU's Motion to Dismiss is moot in light of the Court's resolution of the Motion for Summary Judgment.

         C. CMU's Motion [206] for Summary Judgment

         1. Relevant legal standard

         Under Federal Rule of Civil Procedure 56(a), a “court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” if it is one that might affect the outcome of the suit under governing law, and a dispute is “genuine” if a jury could return a verdict for the non-movant based upon the evidence in the record. Renwick v. PNK Lake Charles, L.L.C., 901 F.3d 605, 611 (5th Cir. 2018).

         If the party seeking summary judgment shows the non-movant's case lacks support, the non-movant is tasked with coming forward with “specific facts” showing a genuine factual issue for trial. Id. A court considering a summary judgment motion must “view the evidence in the light most favorable to the non-moving party, drawing all justifiable inferences in the non-movant's favor.” Id. (quotation omitted). However, if a non-movant's evidence is “merely colorable” or “not significantly probative, ” summary judgment remains appropriate. Certain Underwriters at Lloyd's of London v. Lowen Valley View, L.L.C., 892 F.3d 167, 170 (5th Cir. 2018) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)).

         2. Claims conceded by Plaintiffs

         On March 27, 2018, Plaintiffs filed a Notice [134] of Dismissal of their defamation claim pursuant to Federal Rules of Civil Procedure 41(a)(1)(A)(i) and 15(a)(2). Because no Defendant had filed an answer or motion for summary judgment at that time, the defamation claim was voluntarily dismissed.

         In response to CMU's Motion [206] for Summary Judgment, Plaintiffs have conceded several other claims, including their claims for copyright infringement, RICO violations, injunctive relief, negligence, open account, and misappropriation. See Pls.' Mem. [212] at 4.[5] CMU's Motion [206] for Summary Judgment will be granted as unopposed as to these claims, which will be dismissed. This leaves for the Court's resolution Plaintiffs' claims under state law for breach of contract and wrongful discharge, and under 42 U.S.C. § 1983 for violation of the First Amendment.

         3. Plaintiffs' breach of contract claims under state law

         a. The parties' arguments

         Plaintiffs assert that CMU breached three contracts with Warnock Engineering for engineering services: (1) the General Engineering Services Agreement; (2) the Sewer/Water Agreement; and (3) the Five Point Plan Agreement. 3d Am. Compl. [118] at 33.

         CMU argues that no valid and binding contracts existed between it and Plaintiffs. According to CMU, “[t]he alleged contracts were not attached to the board minutes and . . . were kept in a file that is separate and apart from the minutes. Additionally, there were no terms mentioned in the board minutes. Consequently, a contract or agreement between CMU and Warnock Engineering does not exist.” CMU's Mem. [207] at 27. CMU further posits that Plaintiffs cannot establish a breach of these purported contracts because the invoices that were submitted to CMU were for work performed by a different legal entity, Warnock & Associates LLC, as opposed to Warnock Engineering, the Plaintiff in this case. Id. at 28.

         Plaintiffs dispute CMU's assertion that the three contracts do not sufficiently appear in CMU's minutes, see Pl.'s Mem. [212] at 18, 21-23, and insist that they are entitled to recovery for their services under Mississippi Code § 31-7-57(2), id. at 18-21. Plaintiffs additionally argue that CMU is equitably estopped from denying the contracts. Id. at 23-25.

         b. The validity of contracts with public boards

         Under Mississippi law, a claim for breach of contract has two elements: “(1) the existence of a valid and binding contract, and (2) a showing that the defendant has broken, or breached it.” Maness v. K & A Enterprises of Mississippi, LLC, 250 So.3d 402, 414 (Miss. 2018), reh'g denied (Aug. 9, 2018) (quotation omitted).

         In Mississippi, “[a] public board ‘speaks and acts only through its minutes.'” Kennedy v. Claiborne Cty. by & through its Bd. of Supervisors, 233 So.3d 825, 829 (Miss. Ct. App. 2017), reh'g denied (Aug. 15, 2017), cert. denied, 230 So.3d 1023 (Miss. 2017) (quoting Wellness, Inc. v. Pearl River Cty. Hosp., 178 So.3d 1287, 1290 (Miss. 2015)). “The minutes are the sole and exclusive evidence of what the board did and must be the repository and the evidence of their official acts.” Id. (quotation omitted).

         Contracts awarded by a board or commission consisting of three or more members such as CMU “must be determined or decided upon only in or at a lawfully convened session, and the proceedings must be entered upon the minutes, of the board or commission.” Lange v. City of Batesville, 972 So.2d 11, 18-19 (Miss. Ct. App. 2008) (quoting Thompson v. Jones Cty. Cmty. Hosp., 352 So.2d 795, 796 (Miss. 1977)).

The reasons for the requirements aforesaid are: (1) That when authority is conferred upon a board, the public is entitled to the judgment of the board after an examination of a proposal and a discussion of it among the members to the end that the result reached will represent the wisdom of the majority rather than the opinion or preference of some individual member; and (2) that the decision or order when made shall not be subject to the uncertainties of the recollection of individual witnesses of what transpired, but that the action taken will be evidenced by a written memorial entered upon the minutes at the time, and to which all the public may have access to see what was actually done.

Id. at 19 (emphasis in original).

         Under Mississippi law, it is the responsibility of the entity contracting with a public board, and not of the board itself, to ensure the contract is legal and properly recorded in the minutes. Wellness, Inc., 178 So.3d at 1291. “[P]lacing a contract in a book other than the minute book or in a person's office is insufficient to meet the minutes requirement.” Dhealthcare Consultants, Inc. v. Jefferson Cty. Hosp., 232 So.3d 192, 194 (Miss. Ct. App. 2017), reh'g denied (Aug. 29, 2017), cert. denied, 229 So.3d 714 (Miss. 2017). Moreover, “simply placing a contract . . . in the side pocket of the minute book at some later date is insufficient to meet the ...

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