United States District Court, W.D. Pennsylvania
September 9, 2005.
ZTS INVEST, A.S., Plaintiff,
TIPPINS FIELD SERVICES, INC. and TIPPINS, INCORPORATED, Defendants.
The opinion of the court was delivered by: WILLIAM STANDISH, Senior District Judge
In this diversity action, plaintiff, ZTS Invest, A.S. ("ZTS"),
asserted claims against defendant Tippins Field Services, Inc.
("TFS") for breach of contract, unjust enrichment and account
stated, arising out of a project for the construction of a steel
rolling mill in Ostrava, Czech Republic. ZTS filed a motion for
summary judgment pursuant to Fed.R.Civ.P. 56, which resolved its
claims against TFS and resulted in a determination that TFS is
liable to ZTS in the principal amount of $193,039.32.*fn1
The only remaining issue before the Court is the amount of
interest to which ZTS is entitled,*fn2 and, after hearing the arguments of counsel and receiving additional evidence, the
Court makes the following Findings of Fact and Conclusions of
Law. For the reasons stated therein, interest in the amount of
$102,822.52 will be awarded to ZTS.
Findings of Fact
1. In 1998, Nova Hut A.S. ("Nova Hut"), a steel maker, hired
ICF Kaiser Netherlands B.V. ("ICF Kaiser") to serve as general
contractor for the construction of a steel rolling mill in the
Czech Republic ("the Nova Hut project"). Thereafter, ICF Kaiser
entered into a subcontract with Tippins, Inc. for the design of
the steel rolling mill and a subcontract with TFS for the
installation of the steel rolling mill. In turn, both Tippins,
Inc. and TFS entered into several hundred subcontracts for the
Nova Hut project.
2. ZTS is in the business of manufacturing and selling
industrial and hydraulic equipment, including steel finishing
equipment. Pursuant to TFS Purchase Order Nos. 21900-240025
(dated March 13, 1998) and 21900-240065 (dated August 25, 1998),
ZTS manufactured and supplied certain industrial equipment to TFS
for the Nova Hut project. (ZTS Exhs. 2 and 3). Both purchase
orders issued to ZTS by TFS state that the Terms and Conditions
set forth on the reverse side of the purchase orders are
subservient to the Standard General Conditions applicable to the
Nova Hut project. (ZTS Exh. 2, pp. 3-4, Exh. 3, p. 2). 3. ZTS fully complied with its obligations under the two
purchase orders issued by TFS, and TFS paid a total of
$523,431.05 to ZTS, resulting in a balance due of $281,074.95.
4. The Nova Hut project was plagued with problems, including
ICF Kaiser's financial difficulties and lack of expertise in
installing steel rolling mills which required TFS to exceed the
scope of its subcontract with ICF Kaiser. In the summer of 1999,
ICF Kaiser went bankrupt and stopped paying its subcontractors,
including Tippins, Inc. and TFS. The cessation of payments from
ICF Kaiser adversely affected the ability of Tippins, Inc. and
TFS to pay their respective subcontractors.
5. Michael Smarto, Tippins, Inc.'s Executive Vice President and
Chief Financial Officer, assigned Robert Simmers, Tippins, Inc.'s
Purchasing Manager, the responsibility of dealing with the
subcontractors of Tippins, Inc. and TFS who were no longer being
paid due to ICF Kaiser's cessation of payments to Tippins, Inc.
and TFS.*fn3 Negotiations between Mr. Simmers and the
principals of ZTS resulted in the execution of an Irrevocable
Payment Commitment (the "IPC") on August 31, 1999, which covered
$78,035.63 of the balance due and owing to ZTS by TFS. (ZTS Exh. 4).*fn4 With respect to the remaining balance of $203,039.32
that is owed to ZTS, as contemplated by the IPC, on January 17,
2000, TFS and ZTS entered into an agreement regarding a payment
schedule. (ZTS Exh. 5).
6. Pursuant to the terms of the January 17, 2000 agreement
between TFS and ZTS, on February 8, 2000, TFS wired a $10,000
payment to Account No. 130027197 at the Republic National Bank of
New York in New York, New York. (Tippins Exh. A). However, no
further payments have been wired to ZTS by TFS. Thus, the
principal balance that remains owing to ZTS by TFS under the
January 17, 2000 agreement is $193,039.32.
Conclusions of Law
7. As noted previously, the sole remaining issue in this case
is the appropriate rate of interest to be awarded to ZTS on the
balance of $193,039.32 that remains due and owing from TFS under
the January 17, 2000 agreement. ZTS has calculated interest in
accordance with the second to last paragraph of the January
17th agreement, which provides for interest at the rate of 1.5% per month (ZTS Exh. 9),*fn5 and, after
consideration, the Court agrees with TFS that ZTS's use of the
interest rate set forth in the January 17, 2000 agreement is
8. The second to last paragraph of the January 17, 2000
agreement also provides that "[i]n the event two (2) months would
elapse without a payment being made by Tippins, this Agreement is
considered null and void and ZTS/B.E.A. shall the right to pursue
its legal remedies under the original contract for the full
amount then due and owing plus interest and any other damages
that may pertain." (ZTS Exh. 5). Contrary to ZTS's position, the
Court concludes that this provision is clear and unambiguous and,
therefore, interest will be calculated in accordance with the
provisions of the purchase orders issued to ZTS by TFS.
9. Section 7 of the Standard General Conditions applicable to
the Nova Hut project purchase orders provides, in relevant part,
that "[l]ate payments shall bear interest at the annual rate of
LIBOR . . . plus 3%."*fn6 (Tippins Exh. C). Based on the
evidence submitted by TFS, the Court finds that the applicable LIBOR rate of interest is 5.303%. (Tippins Exh. B)
Thus, the rate of interest to be applied from April 1, 1999 (the
date on which the parties agree that interest began to accrue on
the unpaid balance owed to ZTS by TFS) through August 5, 2005
(the date of the Court's decision following the non-jury trial of
the remaining claim against Tippins, Inc.) is 8.303%. From August
6, 2005 through the issuance of this decision, the Court agrees
with TFS that the applicable interest rate is the rate provided
by Pennsylvania law or 6%.
10. Based on the Court's calculations, ZTS is entitled to the
following interest on the principal balance owed to it by TFS:
4/1/99 to 8/5/05 $101,730.44
8/6/05 to 9/9/05 $ 1,092.08
An order follows. ORDER
AND NOW, this 9th day of September, 2005, in accordance
with the foregoing Findings of Fact and Conclusions of Law, it is
hereby ORDERED that plaintiff, ZTS Invest, A.S., is entitled to
an award of interest in the total amount of $102,822.52.
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