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Haines & Kibblehouse, Inc. v. Balfour Beatty Construction

June 1, 2011


The opinion of the court was delivered by: Dalzell, J.


Plaintiff Haines & Kibblehouse, Inc. (a Pennsylvania corporation) ("H&K") seeks declaratory relief and judgment in this diversity action against Balfour Beatty Construction, Inc. (a Delaware corporation with its principal place of business in Atlanta, Georgia) ("Balfour") in an amount in excess of $1 million. Compl. ¶ 143, 150, 158, 165, 178. Balfour moves to dismiss the case for failure to state a claim and/or to stay litigation pursuant to Fed. R. Civ. P. 12(b)(6) and Fed. R. Civ. P. 12(b)(7).*fn1

As will be seen, given the unusual procedural posture, we must embark on an extended analysis of relatively arcane areas of law in order to decide this motion.

I. Factual Background

Balfour was the general contractor for the Commonwealth of Pennsylvania's Department of Transportation ("PennDOT") for the construction of the Route 222 Bypass project (the "Project"). Compl. ¶ 13. On March 15, 2004, Balfour entered into a contract with PennDot to furnish work, labor, materials and services for the construction of the Project. Id. ¶ 15. Balfour's contract with PennDot involved about $57.7 million (the "Prime Contract"). Id. ¶ 16. On April 21, 2004, Balfour entered into a subcontract with H&K in the initial amount of $13,399,897.20 (the "Subcontract"). Id. ¶ 17. The Prime Contract included a special provision for project milestones. Id. ¶ 18.

The special provision required that all Project construction would be completed on or before July 7, 2006 or See Brief in Support of the Amended Motion to Dismiss and/or Stay Litigation ("MTD2"). H&K responded relying in large part on its original response ("Pl. MTD2 Resp."). Defendant thereafter replied (Def. MTD2 Repl."). Because the parties both rely on their previous motions and responses, this Memorandum addresses the arguments presented in both sets of motions to dismiss, the responses thereto, and the replies.

Balfour would be subject to PennDot's assessment of road user liquidated damages. Id. ¶ 19. Because PennDot did not issue the "Notice to Proceed" on the Project by the date the Prime Contract anticipated, PennDot granted a seventy-three-day extension to the Project milestone date. Id. ¶ 21. This extension revised the Project milestone date from July 7, 2006 to September 19, 2006. Id. ¶ 22.

H&K avers that Balfour knew that if Balfour failed to complete the predecessor work and did not provide H&K with unrestricted access to the worksite, H&K could not complete the work it was contracted to do and this would result in H&K's increased costs and expenses for which Balfour would be held accountable. Id. ¶ 36. H&K also avers that at no time prior to entering into the Subcontract did Balfour inform H&K that Balfour would be making unilateral changes to the sequence or durations of predecessor work that would directly affect H&K's work, but, instead, expressly and impliedly agreed "to efficiently progress the work." Id. ¶ 43 [sic].

H&K claims that Balfour "failed to commence, prosecute and complete the predecessor activities" in the prescribed sequences and within the specific timeframe agreed to with H&K and upon which H&K based its pricing. Id. ¶ 63. When Balfour notified H&K to proceed with its subcontract work, Balfour had not completed the predecessor work and had not yet procured the materials to complete the work H&K agreed to do. Id. ¶ 65. H&K claims that Balfour's failure to complete the predecessor work with diligence and with sufficient manpower and equipment, as well as its denial of full access to the site to H&K interfered with the planned sequence of operations by H&K and caused H&K to incur additional costs. Id. ¶ 68.

As of November of 2005, the Project was significantly behind schedule, the necessary predecessor work needed for H&K's placement of subbase and paving remained incomplete, and Balfour allegedly had made many unilateral changes to the schedule and sequence for the remaining work. Id. ¶ 92. Although the Project was supposed to be completed in late 2006, it was not completed until late 2007. Id. ¶ 96. Balfour has not yet fully paid H&K for the impacts of its poor scheduling on H&K's work. Id. ¶ 98. H&K claims that Balfour has also failed to make a claim to PennDot for the increased costs of H&K completing its work, including, but not limited to, the increase in the unit prices for the work H&K performed.*fn2 Id. ¶ 99.

H&K believes that as of September 19, 2006 PennDot began assessing liquidated damages against Balfour. Id. ¶ 111. PennDot never assessed damages against H&K. Id. ¶ 113. H&K estimates that the minimum impact of Balfour's failings on H&K's work exceeded ten million dollars. Id. ¶ 117.

II. Procedural History

The crux of this motion to dismiss will be found in the relationship between H&K and the courts rather than the relationship between the parties. On September 18, 2006, H&K filed a complaint against Balfour in the Montgomery County Court of Common Pleas. Balfour removed that case to federal court at C.A. No. 06-4807*fn3 and filed a motion to dismiss. Judge Golden dismissed without prejudice all of H&K's claims except H&K's claim for declaratory relief. Judge Golden remanded that claim back to state court on June 7, 2007. In doing so, Judge Golden relied upon Balfour's Subcontract-based defenses to the action, holding that:

The plain meaning of Article 2.2.20 is that any claim that the subcontractor (Plaintiff) has for performing extra work or arising out of a delay or any other claim, whether it be against PennDot or the Contractor (Defendant) must first be compensated by the Owner (PennDot) to the Contractor (Defendant) before Plaintiff can bring suit against the Defendant.

Haines & Kibblehouse, Inc. v. Balfour Beatty Constr., Inc., No. 06-4807, slip. op. at 4 (E.D. Pa. Jun. 7, 2007) (we shall refer to this case hereinafter as "Haines I") (emphasis in original). H&K filed a motion for reconsideration of that Order, which Judge Golden denied on July 27, 2007. Haines I, slip. op. at 1 (Jul. 27, 2007). Judge Golden also in that Order denied H&K's request to certify the Court's Memorandum Opinion for interlocutory appeal. Id.

H&K nevertheless on August 22, 2007 filed a Notice of Appeal from Judge Golden's July 27, 2007 Order in the hope of standing on its complaint and securing appellate review of the four counts that Judge Golden dismissed without prejudice. MTD1, Ex. 5 (Letter brief of Sept. 5, 2007 in C.A. No. 07-3520 (3d Cir.)). H&K declared that "there is no way for H&K to cure the 'defect' that the District Court found in the Complaint" because the condition precedent, as Judge Golden defined it, "will never be achieved." Id. at 3. Thus, H&K contended to the Court of Appeals that "H&K must stand on the allegations in the Complaint and the order denying the Motion for Reconsideration of the June 5, 2007 Order must be considered a final order." Id. at 5. On January 30, 2008, our Court of Appeals issued an order providing that although it was not appropriate at that time to dismiss the case based on a jurisdictional defect, that view did "not represent a finding that the Court has jurisdiction to hear the appeal in this case." Pl. MTD1 Resp., Ex. H (Order dtd. Jan. 30, 2008 in C.A. No. 07-3520 (3d Cir.)). The parties instead were ordered to address the effect of 28 U.S.C. § 1447(d)*fn4 on the Court's appellate jurisdiction. Id.

Thereafter -- but before our Court of Appeals set a briefing schedule -- the parties were obliged to participate in the Third Circuit's mandatory mediation program. Pl. MTD2 Resp. at 6 n.6. The mediation did not succeed. Id. The Mediation Program Director, however, did not inform the Case Manager that the mediation had failed, id., and so a briefing schedule did not promptly issue. Pl. MTD2 Resp., Ex. K (September 25, 2008 correspondence from Paul A. Logan, Esq., to Joseph A. Torregrossa, Esq.). H&K pressed our Court of Appeals to issue a scheduling order, which it ultimately did on September 29, 2008. Id., Ex. K; MTD1, Ex. 10.

H&K claims that before the briefing schedule could issue, it discovered that Balfour had failed to include H&K's claim in its Board of Claims complaint, despite Balfour's representations that it would include H&K's claims in that complaint. Pl. MTD2 Resp. at 6 n.7. Balfour indeed filed an amended complaint in the Board of Claims on November 9, 2007.

Id., Ex. N. H&K asserts that, as with the original complaint, Balfour's amended complaint to the Board of Claims also failed to mention H&K by name or include any of its claims. Id. at 7. On April 29, 2008, PennDot's litigation counsel, Jeffrey W. Davis, Esq., confirmed to H&K's counsel that the pleadings failed to identify any affirmative subcontractor claims, and PennDot invited Balfour to provide clear and specific evidence that Balfour presented any of H&K's claims to PennDot. Id., Ex. M.

H&K avers that once it learned from PennDot's counsel that Balfour had indeed not included its claims in Balfour's amended complaint to the Board of Claims, it informally sought to "withdraw" its appeal.*fn5 MTD1, Ex. 8, 10; Pl. MTD2 Resp., Ex. O.

H&K did not do this until November 5, 2008, one day after it had filed a new complaint in the Court of Common Pleas of Montgomery County. See generally plaintiff's complaint. As Balfour would not consent to such a "withdrawal" of H&K's appeal, it instead moved to dismiss H&K's appeal on December 3, 2008. Pl. MTD2 Resp., Ex. P. In response, on December 17, 2008 H&K moved to voluntarily dismiss its appeal. Id., Ex. Q. On January 22, 2009, our Court of Appeals granted H&K's motion to voluntarily dismiss its appeal. Id., Ex. R (Ord. of Jan. 22, 2009 in C.A. No. 07-3520 (3d Cir.)).

Meanwhile, Balfour removed H&K's second state court action to this court on November 24, 2008 ("Haines II"). This second complaint had the same parties, the same claims, and involved exactly the same set of alleged facts as the first action. Balfour promptly filed a motion to dismiss the complaint based, in part, on claim preclusion. Judge Golden heard oral argument on the motion to dismiss but did not rule on it before he died. Haines II was then transferred to our docket. As noted, given the long delay and the tortured history in the Court of Appeals, we denied the motion to dismiss without prejudice and afforded Balfour the right to file an amended motion to dismiss. Balfour thereafter filed an amended motion to dismiss and/or stay the litigation, which we now address.

III. Analysis

Balfour moves to dismiss this action pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim. It also moves under Rule 12(b)(7) for failure to join an indispensable party. In the alternative, Balfour moves to stay this action pending resolution of the dispute between it and PennDot. H&K responds that its discovery that Balfour had not included its claims in its amended complaint to the Board of Claims was a "watershed development" in the context of H&K's Third Circuit appeal and its Montgomery County remanded matter because it showed that the condition precedent Judge Golden ...

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