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Arizona Boyz Towing and Transport LLC v. Town of Gilbert

United States District Court, D. Arizona

February 15, 2019

Arizona Boyz Towing and Transport LLC, Plaintiff,
Town of Gilbert, et al., Defendants.


          Honorable John Z. Boyle United States Magistrate Judge.

         Following the termination of a contract by Defendant Town of Gilbert, Plaintiff Arizona Boyz Towing and Transport filed this action in Maricopa County Superior Court to recover damages for breach of contract, breach of the covenant of good faith and fair dealing, declaratory relief, and violation of due process. (Doc. 1-2 at 4-9.) The action was removed to this court. (Doc. 1.) Defendant has filed a Motion for Summary Judgment (doc. 20), Plaintiff has filed a Response (doc. 22), and Defendant has filed a Reply (doc. 24). The Court will grant Defendant's Motion.

         I. Background.

         On or around May 17, 2016 Arizona Boyz Towing and Transport, LLC (“Plaintiff” or “Contractor”) entered into a three-year Towing Services Contract (the “Contract”) with the Town of Gilbert (the “Town”). (Doc. 1-3 at 12-34.) By signing the Contract, the parties elected to continue a relationship they had established some 15 years before. (See Id. at 48 (Notice of Claim by Arizona Boyz).) The Contract laid out the obligations of the parties and granted Plaintiff the non-exclusive right to perform towing services for the Town. (Id. at 13 (Section II(3)).) The Town reserved the right to terminate the Contract for any reason - “either for the Town's convenience or because of the failure of the Contractor to fulfill his contract obligations.” (Id. at 26 (Section XI(1)).)

         On January 31, 2018, a Gilbert Fire Department crew member overheard Plaintiff's employees using profanity and racial slurs at an accident scene and in the presence of at least one member of the public. (Doc. 1-2 at 6 (Complaint in Superior Court at ¶25.) The use of “profane or vulgar language in a public area while performing Work” is a violation of the terms of the Contract and grounds for termination of the Contract. (Doc. 1-3 at 17 (Section VI(10)).) The incident was documented in a Gilbert Police Department memorandum dated Feb 15, 2018. (Doc. 1-3 at 37-39.)

         On February 20, 2018, the Town attempted to exercise its right to terminate the Contract. (Id. at 36 (Notice of Termination).) Under the terms of the Contract, prior to termination, the Town is obligated to provide seven-days' notice of termination to Plaintiff via written notice delivered either in person or sent via registered or certified mail to the address specified in Section XIII(34) of the Contract. (Doc. 1-3 at 26 (Section XI(1)).) Here, instead of sending written notice to the address in Section XIII(34) of the Contract, the Town sent notice of termination to Plaintiff's email, which was listed under a different section of the Contract. (Doc. 23 at 4.) Specifically, the email was listed in the “Contractor Communications” provision of the Contract as the address to be used “for correspondence with the Town” and to handle transactions/business matters related to the Work performed” under the Contract. (Doc. 1-3 at 22 (Section X(1)(a)).) The emailed Notice of Termination listed the reasons for termination and stated that the contract would be terminated on February 27, 2018. (Id. at 36.)

         On February 26, 2018, Plaintiff responded to the Notice, stating that the termination notice contained “improper accusations” and was “procedurally unsound” because it did not comply with notice requirements in Section XII of the Contract. (Id. at 43 (Contractor's Response to Notice of Termination.) Plaintiff added that “it is our position that the Contract is in full-force-and-effect and will remain so until proper notice is given.” (Id.)

         On March 5, 2018, Plaintiff sent a Notice of Claim to the Town, seeking to have its claims submitted to the Town Council under Section XIII(3) of the Contract, which states:

Contractor Claims: The laws of the State of Arizona shall control this Contract. In the event of any disagreement as to the proper interpretation of Contractor's duties and obligations under the Contract, the matter shall be submitted to and decided by the Town's elected governing Council or designee. The decision of the Town Council will be final. All Contractor claims against Town, financial or otherwise, shall be made in writing to the address listed in Section XIII(34) of this Contract. All such claims must be submitted within thirty (30) calendar days of the date when the claim arose or they will be deemed to have been waived by the Contractor.

(Doc. 1-3 at 28.) (See also Id. at 49 (Notice of Claim).) Plaintiff stated its basis for requesting a hearing as follows:

In attempting to cancel the Towing Service Contract, the Town failed to comply with its contractual obligations. Instead of complying with Section XII(2), the Town sent “notice” to terminate the Towing Service Contract in a way not authorized in the Towing Service Contract Section XIII(34) and (35). This represents a material breach by the Town and demonstrates an effort by the Town to undermine the requirements of the Towing Service Contract.

         Because of this alleged material breach, Plaintiff offered to settle its claim for “not less than $350, 000.00, ” which Plaintiff estimated was the revenue for the remainder of the Towing Services Contract. (Id. at 49) On March 8, 2018, the Town, in another attempt to terminate the Contract, mailed a second copy of the Notice of Termination - this time to the correct address, as listed in Section XIII(34) of the Contract. (Doc. 23 at 5, ¶ 11 (Plaintiff's Response to Defendant's Separate Statement of Facts.)

         On April 27, 2018, the Town denied Plaintiff's request for a Town Council hearing. (Doc. 1-3 at 51-54.) The Town provided five reasons for the denial: (1) Contractor did not deny use of a racial slur in violation of the Contract; (2) the Town had the indisputable right to terminate the Contract for cause or for convenience with seven days' notice; (3) Contractor did not deny that it received the Town's first Notice of Termination; (4) regardless of whether the first Notice was valid, a second Notice of Termination was sent to the proper address under the Contract on March 8, 2018; (5) therefore, any claims of improper termination of the Contract would fail. (Id.) The Town also disputed that the failure to send the claim to the correct address amounted to a material breach because any resulting damages were de minimis. (Id.) Finally, the Town interpreted Section XIII(3) of the Contract to authorize petitions to the Town Council only for disputes over “the proper interpretation of Contractor's duties and obligations under the Contract.” (Id.) (See also Id. at 28 (Section XIII(3)).) According to the Town's reading of the provision, the Contractor was not entitled to appear before the Town Council because it did not dispute its duty not to use a racial slur, but rather contested the right of the Town to terminate the contract. (Id. at 53.)

         On June 13, 2018, Plaintiff filed this action in Maricopa County Superior Court, requesting a declaration of the terms of parties' agreement, a declaration that the Town breached the terms of the agreement, damages (compensatory, incidental, consequential and punitive), attorneys' fees and costs, and pre- and post-judgment interest. (Doc. 1-2 at 4-9.) In its Complaint, Plaintiff asserts four Counts against the Town, labeled as follows: (1) Breach of Contract, (2) Breach of Covenant of Good Faith and Fair Dealing, (3) Declaratory Relief, and (4) Violation of Due Process 42 U.S.C. § 1983. (Id.)

         II. Legal Standards.

         Summary judgment is appropriate where there is no genuine dispute about any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the burden of establishing that there are no genuine disputes of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A material fact is one that may affect the outcome of the case, and a dispute over a material fact is genuine only if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). If the moving party is able to meet its burden, the burden then shifts to the non-moving party to “set forth specific facts showing there is a genuine issue for trial” without simply resting on the pleadings. Id. at 256. A judge's function is not “to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Id. at 249. However, the court must view the evidence in the light most favorable to the non-moving party. Tolan v. Cotton, 572 U.S. 650, 657 (2014).

         III. Analysis.

         A. ...

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