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Alstom Power, Inc. v. RMF Industrial Contracting

March 2, 2006

ALSTOM POWER, INC., PLAINTIFF/ COUNTERCLAIM DEFENDANT,
v.
RMF INDUSTRIAL CONTRACTING, INC., DEFENDANT/ COUNTERCLAIM PLAINTIFF.
ALSTOM POWER, INC., CONSOLIDATED AT PLAINTIFF,
v.
AMERICAN INDUSTRIAL ASSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge

MEMORANDUM OPINION AND ORDER OF COURT

Before the Court for consideration and disposition is PLAINTIFF ALSTOM POWER, INC.'S MOTION FOR PARTIAL SUMMARY JUDGMENT, with attached brief in support ("Motion" and "Brief") (Document No. 37). The issues have been fully briefed, and the matter is ripe for disposition. See Document Nos. 44 & 49. For the reasons which follow, the Motion will be granted in part and denied in part.

Background

Plaintiff Alstom Power, Inc. ("Alstom") entered into a consortium with Duke/ Flour Daniel ("DFD," and collectively "the Consortium") to submit a bid to Reliant Energy for the construction of a coal-fired power plant at the site of the existing Seward Power Plant in Indiana County, Pennsylvania (the "Project"). Pltf's Stmt. of Facts at ¶ 1. Reliant Energy accepted the Consortium's bid. Id. at ¶ 2. On January 17, 2001, Reliant Energy and the Consortium entered into an engineering, procurement and construction contract (the "EPC Contract"). Id. The guaranteed completion date for the Project was May 1, 2004. Id. Under the EPC Contract, the Consortium agreed to provide engineering, procurement, construction, startup, demonstration and testing for the repowering of the existing Seward Power Plant. Id. at ¶ 3. The repowering of the Seward Power Plant was to be accomplished by constructing a new power plant adjacent to the existing facility which would incorporate the existing exhaust stack from the old plant. Id. at ¶ 4.

Under the EPC Agreement, Alstom was responsible for designing, procuring and constructing two new Circulating Fluidized Bed Boilers ("CFB Boilers") and other ancillary components. Pltf's Stmt. of Facts at ¶ 5. Alstom decided to subcontract the actual erection of the CFB Boilers, the ancillary equipment and the structural steel to other entities. Id. at ¶ 6. On August 3, 2001, Alstom sent a "Request for Quotation for the Mechanical Erection of Circulating Fluidized Bed Steam Generators and Ancillary Equipment" (the "RFQ") to defendant RMF Industrial Contracting, Inc. ("RMF") and other companies. Id. at ¶ 7. The RFQ solicited bids for the erection of the CFB Boilers and ancillary components. Id. The RFQ contained an Equipment Summary Sheet which identified the various components and the approximate quantities and weights of the components. Id. On August 24, 2001, Alstom sent to RMF and others an addendum ("the Addendum") to the RFQ which included a revised Equipment Summary Sheet. Pltf's Stmt. of Facts at ¶ 8.

RMF submitted a bid in response to the RFQ and the Addendum on September 20, 2001. Id. at ¶ 9. RMF's bid included the erection of the CFB Boilers and ancillary equipment for the price of $48,039,896.00. Id. According to John Miehle, RMF's lead estimator, RMF estimated the man hours necessary to complete its scope of work on the Project based on the quantities and weights listed in the revised Equipment Summary Sheet. Id. at ¶¶ 10-11. On November 2, 2001, Alstom issued a letter of award to RMF in which Alstom stated its intention to award a purchase order to RMF for the mechanical erection, i.e. the erection of the CFB Boilers and ancillary equipment, for the price of $45,888,000.00. Id. at ¶ 12. On January 15, 2002,*fn1 RMF and Alstom executed Purchase Order No. 73060 (the "Purchase Order" or "Agreement"), which provided that RMF would erect the two CFB Boilers and ancillary equipment for the price of $46,168,000.00. Pltf's Stmt. of Facts at ¶ 14.*fn2

Additionally, Philip Services Corporation ("PSC"), RMF's parent company, provided a $5,000,000.00 letter of credit (the "Letter of Credit") to Alstom. Id. at ¶ 14.

The Purchase Order provided that RMF's work was to be completed by March 1, 2004, but also provided that "said date may be adjusted by this Agreement." RMF's Stmt. of Facts at ¶ 15. In the absence of any adjustments, RMF was required to achieve certain "milestones" by certain dates: 25% complete by October 25, 2002; 50% complete by January 3, 2003; 75% complete for Unit 2 by May 1, 2003; and 75% complete for Unit 1 by May 27, 2003.*fn3 Pltf's Stmt. of Facts at ¶ 16.

RMF personnel arrived at the site of the Project in January of 2002. Pltf's Stmt. of Facts at ¶ 19. However, according to RMF the site was not properly prepared for RMF to proceed with construction. RMF's Stmt. of Facts at ¶ 19. RMF contends that conditions at the site were generally not good and did not improve, and that performance of its duties under the Purchase Order was hampered by various problems. Some of the problems were allegedly caused by Alstom (i.e., insufficient laydown area, lack of site maintenance, schedule delay and scope growth), while others (i.e., an extremely harsh winter) were beyond the control of anyone involved with the Project. See RMF's Brief at 2-3; RMF's Stmt. of Facts at ¶¶ 53-134 (describing RMF's difficulties with the Project).

It is undisputed that RMF experienced difficulties in the achievement of the "milestones" described above. RMF missed the 50% completion date (January 3, 2003), but contends that it was generally not at fault due to the problems encountered as mentioned above. Pltf's Stmt. of Facts at ¶ 21; RMF's Stmt. of Facts at ¶ 21. Additionally, William Harrington, RMF's Project Executive, testified that based upon "a certain scope of work" RMF was not on schedule in the Spring of 2003. RMF's Stmt. of Facts at ¶ 22.

An issue in this case is whether RMF properly followed the notice provisions established by the Purchase Order when alleged needs arose regarding additional work, additional costs, expenses and the like. During the course of RMF's performance, it submitted various letters to Alstom stating that it would request an extension of time to meet certain milestone dates. Pltf's Stmt. of Facts at ¶ 20. According to Alstom, there is no evidence that RMF ever submitted anything more than said letters with no supporting documentation which is not in conformance with the express requirements of the Purchase Order. Id. RMF, on the other hand, contends that it "provided Alstom with substantial notice and documentation of the problems it experienced on site." RMF's Stmt. of Facts at ¶ 20.

On February 20, 2003, after having experienced numerous problems and delays, RMF submitted an "as-impacted" schedule to Alstom which indicated that RMF would complete its scope of work on the Project six months later than contractually required. Pltf's Stmt. of Facts at ¶ 23. The "as-impacted" schedule was not meant to be a detailed schedule analysis, but RMF expected that submission to "start a dialogue" with Alstom regarding the problems that RMF had experienced. Id. at ¶ 33. On March 11, 2003, in response to RMF's "as-impacted" schedule, Alstom dispatched correspondence to RMF which stated, in part:

Based on our analysis we have found that your "as impacted schedule" submittal fails to provide any justification for granting a time extension to RMF. In accordance with the contract the milestone dates remain unchanged unless and until you provide us with the proper bases for a time extension.

Id. at ¶ 36. RMF apparently interpreted this letter, as well as later communications, as a rejection of all of RMF's claims for schedule extension and additional compensation. See Harrington dep. at 153, 332, 402-03.

Regarding its claims for scope growth, RMF submitted numerous Scope Change Order Notices*fn4 to Alstom in order to begin the contractually required process for adjustments to the contract price. RMF's Stmt. of Facts at ¶¶ 135-165. RMF did not submit a formal Scope Change Order Notice to request a six-month schedule extension. Pltf's Stmt. of Facts at ¶ 31. However, there is evidence that Alstom was informed on numerous occasions of the difficulties and schedule delays that RMF allegedly experienced due to a force majeure event, insufficient laydown area, lack of site maintenance, schedule delay and scope growth. See RMF's Brief at 9-11; RMF's Stmt. of Facts at ¶¶ 54-114, 119-134.

On April 7, 2003, Alstom notified RMF that it was in default of the Agreement. Pltf's Stmt. of Facts at ¶ 25. The notice of default specified that RMF failed to maintain a proper level of manpower at the site, and failed to provide a plan to restore progress and schedule compliance. Id. On April 23, 2003, James Boggs ("Boggs"), President of RMF, spoke with Gerald Barcikowski ("Barcikowski"), General Manager of Alstom, regarding the problems that RMF and Alstom experienced on the Project. Pltf's Stmt. of Facts at ¶ 26. The sum and substance of their conversation was as follows: Boggs asked Barcikowski whether additional money would be available to compensate RMF for its additional expenses (scope growth, the alleged force majeure event and the like), Barcikowski responded that at that time there was no conclusive evidence that RMF was entitled to additional compensation, and Boggs replied that without the possibility of additional compensation RMF would not continue to work. See RMF's Stmt. of Facts at ¶ 26; Pltf's Stmt. of Facts at ¶ 26. Apparently, as a result of this conversation, RMF began to demobilize from the site at the end of April, 2003. RMF's Stmt. of Facts at ¶ 27; Pltf's Stmt. of Facts at ¶ 27. By correspondence of April 30, 2003, Alstom terminated its Agreement with RMF. Pltf's Stmt. of Facts at ¶ 28. Among other alleged defaults, Alstom cited that its termination of RMF was due to RMF's failure to supply a sufficient number of skilled workers, materials and equipment to meet its required completion dates, and RMF's abandonment of its work on the Project. Id.*fn5

RMF later delivered to Seward Trust*fn6 a notice of its intention to assert a mechanic's lien on the power plant property in an amount equivalent to that which RMF alleges Alstom owes RMF. Complaint at ¶ 7; Answer at ¶ 7. RMF followed through with its stated intention and filed two mechanic's liens on the power plant property in Indiana County in the amount of $35,900,000.00, but later RMF voluntarily reduced the lien amounts to $29,235,060.00.*fn7

Alstom drew upon the letter of credit provided by PSC in the full amount of $5,000,000.00. See RMF's Brief at 23-24.

On May 2, 2003, Alstom filed a Complaint against RMF for breach of contract at civil action number 03-627. Alstom seeks "(i) recovery of damages caused by RMF's breaches and default under its purchase order with Alstom; and (ii) a declaration that RMF's notice of its intention to claim a mechanic's lien is legally and factually unsupported and, therefore, null and void." Complaint at ¶ 8. RMF filed an Answer and Counterclaim against Alstom for breach of contract (Count I), breach of contract - cardinal change (Count II), breach of implied warranty (Count III), breach of the implied covenant of good faith and fair dealing (Count IV), unjust enrichment (Count V), and violation of the Pennsylvania Contractor and Subcontractor Payment Act (Count VI). In the instant Motion Alstom seeks summary judgment on RMF's claims for breach of contract, breach of implied warranty, unjust enrichment and the alleged violation of the Pennsylvania Contractor and Subcontractor Payment Act. For the reasons which follow, the Motion will be granted in part and denied in part.

Standard of Review

Rule 56(c) of the Federal Rules of Civil Procedure reads, in pertinent part, as follows: [Summary Judgment] shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

An issue of material fact is genuine only if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The court must view the facts in a light most favorable to the non-moving party, and the burden of establishing that no genuine issue of material fact exists rests with the movant. Celotex, 477 U.S. at 323. The "existence of disputed issues of material fact should be ascertained by resolving all inferences, doubts and issues of credibility against the moving party." Ely v. Hall's Motor Transit Co., 590 F.2d 62, 66 (3d Cir. 1978) (quoting Smith v. Pittsburgh Gage & Supply Co., 464 F.2d 870, 874 (3d Cir. 1972)). Final credibility determinations on material issues cannot be made in the context of a motion for summary judgment, nor can the district court weigh the evidence. Josey v. John R. Hollingsworth Corp., 996 F.2d 632 (3d Cir. 1993).

The task of interpreting a contract is a function of the court. The goal of that task is to ascertain the intent of the parties as manifested in the language of the written instrument. Standard Venetian Blind Co. v. American Empire Insurance Company, 469 A.2d 563, 566 (1983). An ambiguity exists when a questionable term or language, viewed in the context of the entire contract, is reasonably susceptible of different constructions and capable of being understood in more than one sense. J.C. Penney Life Insurance Co. v. Pilosi, 393 F.3d 356, 360 (3d Cir. 2004). However, a court should interpret the contract to avoid ambiguities and give effect to all of its provisions, and refrain from torturing the language of a contract to create ambiguities where none exist. Pilosi, 393 F.3d at 363.*fn8

Discussion

A. Breach of ...


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