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Lydon Millwright Services, Inc v. Ernest Bock & Sons

May 7, 2013


The opinion of the court was delivered by: Gene E.K. Pratter,j.


In this unfortunate construction project melee, Lydon Millwright Services, Inc. ("Lydon") has sued Ernest Bock & Sons, Inc. ("Bock") for breach of contract and unjust enrichment. In response, Bock moves for summary judgment. Bock asks the Court to rule as a matter of law that Lydon's claims are barred by releases that Lydon, as Bock's subcontractor, signed and by a "pay-if-paid" provision in the parties' contract. For the following reasons, the Court denies the motion.

I. Factual Background*fn1

The Philadelphia International Airport currently is undertaking a construction project that includes the installation of a baggage handling system. When this lawsuit commenced, Bock was the general contractor for the project. In March 2008, Lydon had contracted with Bock and agreed to install the mechanical portion of the baggage handling system.

Lydon and Bock signed a Purchase Order that required Lydon to submit a "monthly release of liens and claims" with its monthly applications for payments. Over the course of the project, Lydon submitted 54 such applications with releases to Bock. The parties dispute whether these releases preclude Lydon from suing Bock. The Purchase Order also contained a "pay-if-paid" clause that provides:

"Payment by Owner to the General Contractor for the work/materials invoiced by the Subcontractor . . . shall be a condition precedent to General Contractor's obligation to pay Subcontractor. . . . Accordingly, Subcontractor . . . agrees and understands that it shall bear the risk of non-payment by the Owner and shall be entitled to no compensation from the General Contractor in the event of non-payment by the Owner for its work/materials."

The relationship between the City and Bock has deteriorated to the point of heated litigation between them in the Court of Common Pleas. Bock is no longer working on the project. For the foreseeable future, amicable resolution of the myriad of disputes and claims is not expected to take off any time soon.

The baggage handling system portion of the project was segmented into five phases. For each phase, third-party defendant G&T Conveyor Company was expected to deliver baggage handling system equipment to Lydon. Following these deliveries, Lydon was to install the baggage handling system, other subcontractors hired by Bock were to connect electrical power to the system, and Lydon was then to perform a mechanical check of the system.

The airport project was originally scheduled for completion on November 20, 2009. However, the project has suffered numerous delays, and the project has not been completed. In January 2009, Bock and G&T met to discuss the delays in the project. Bock attributed the delays to the City of Philadelphia and G&T's failures to make timely deliveries of equipment. G&T, however, stated that Bock was at least partially responsible for the delays because Bock failed to effectively manage and coordinate the project. Neither Bock nor G&T attributed the delays to Lydon.

Around this same time in early 2009, Lydon and Bock also discussed the delays in the project. Lydon told Bock that it was preparing a detailed schedule analysis that would document the delays caused by others on the project, as well as Lydon's efforts to mitigate those delays. In response, Bock stated that such analysis was unnecessary, and that Bock simply wanted Lydon to provide a list of issues that had delayed and/or were delaying Lydon's work on the project. Bock explained that it would incorporate Lydon's delays into own schedule analysis.

Lydon continued to work on the project in 2009 and 2010. Significant delays occurred during those years, but there is no allegation that Lydon was responsible for these delays. On November 18, 2009, G&T filed a complaint in state court seeking a declaration that Bock was responsible for the delays in the project. Bock filed a counterclaim against G&T for breach of contract on August 12, 2010.

In early 2011, Lydon and Bock met in Philadelphia to discuss their claims for delay damages related to the project. At the meeting, Bock proposed that Lydon join it in suing the City of Philadelphia and other entities involved in the project. On May 4, 2011, Bock sued Lydon, G&T, and the City of Philadelphia in state court. Bock's suit sought a declaratory judgment with respect to the liability and indemnification obligations of G&T, the City of Philadelphia, and Lydon. The state court subsequently dismissed Bock's claims against G&T as duplicative of its pending counterclaim, and dismissed Bock's claims against Lydon on ripeness grounds.

On September 15, 2011, Lydon submitted a Request for Equitable Adjustment ("REA") to Bock. The REA sought to increase the Purchase Order by $1,961,775 because of impacts on Lydon's costs incurred during the project. Bock has yet to receive any payment from the City of Philadelphia for Lydon's delay damages.

II. Procedural Background

On November 9, 2011, Lydon filed the original complaint in this action, invoking the Court's diversity jurisdiction. The complaint alleged that Bock breached its contract with Lydon by causing delays in Lydon's work. Count 1 of Lydon's complaint is for breach of contract and Count 2 is for unjust enrichment.

On January 24, 2012, Bock filed a third-party complaint against the City of Philadelphia, G&T Conveyor Company, and Mulhern Electric Company. The third-party complaint includes allegations that all three third-party defendants breached their respective contracts with Bock by causing delays in the airport contract. On March 2, 2012, G&T filed a motion to stay the third-party litigation, on the grounds that in the Philadelphia Court of Common Pleas it was already litigating the issues newly alleged in the federal court third-party complaint. The Court subsequently granted the motion, which was joined by the other third-party defendants, and, for the time-being, stayed the third-party litigation.

Bock has moved for summary judgment against Lydon's claims. Bock argues that: (i) Lydon's claims are barred by a release; and (ii) a "pay-if-paid" provision bars Lydon from recovering damages against Bock. The Court permitted supplemental discovery on issues related to Bock's motion for summary judgment. The parties recently submitted supplemental briefing based on their additional discovery, as well as another round of briefing based on the Court's questions during the recent oral argument.

III. Standard of Review

A court shall grant a motion for 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). An issue is "genuine" if there is a sufficient evidentiary basis on which a reasonable jury could return a verdict for the non-moving party. Kaucher v. Cnty. of Bucks, 455 F.3d 418, 423 (3d Cir. 2006) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A factual dispute is "material" if it might affect the outcome of the case under governing law. Id. (citing Anderson, 477 U.S. at 248). Under Rule 56, the Court must view the evidence presented in the motion in the light most favorable to the non-moving party. See Anderson, 477 U.S. at 255. However, ...

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