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Sti Oilfield Services, Inc. v. Access Midstream Partners

United States District Court, M.D. Pennsylvania

September 22, 2014

STI OILFIELD SERVICES, INC., Plaintiff,
v.
ACCESS MIDSTREAM PARTNERS, et al., Defendants.

MEMORANDUM OPINION

ROBERT D. MARIANI, District Judge.

I. Introduction

Presently before the Court is a Motion to Dismiss (Doc. 12), filed by the four Defendants in this case: Access Midstream Partners, LP ("Access"), Appalachia Midstream Services, LLC ("Appalachia"), Chesapeake Operating, Inc. ("con, and Chesapeake Energy Corporation ("CEC"). The Motion seeks dismissal of Plaintiffs claims for Unjust Enrichment (Counts II and VII), Quantum Meruit (Counts III and VIII), Promissory Estoppel (Counts IV and IX), Fraud/Fraud in the lnducment (Count XI), and punitive damages. For the reasons discussed below, the Court will grant the Motion in part and deny it in part.

II. Factual Allegations and Procedural History

Plaintiffs Complaint alleges the following well-pleaded facts. Plaintiff, STI Oilfield Services ("STIOS") "is an oilfield and pipeline contractor whose primary focus is providing oilfield and pipeline related services throughout the United States." (Compl., Doc. 1, at ¶ 9.)

In or about early November 2011, it entered into a Master Service Agreement ("MSA") with 001, for the purpose of becoming an approved vendor of COI's parent company, CEC. ( Id. at ¶ 11.) Subsequently, "in January and May of 2012, respectively, CEC and/or its affiliate, COI, contracted with STIOS to perform certain pipeline improvements in Bradford County, Pennsylvania, more specifically identified as the Rome and Oilcan projects." ( Id. at ¶ 12.) "STIOS dutifully performed its obligations under the contracts for the Rome and Oilcan projects by constructing the pipeline improvements as required.." ( Id. at ¶ 14.)

Plaintiff further alleges that, during this time, "Access, a separate and distinct entity from CEC and 001, contacted STIOS to request that STIOS provide proposals for the Projects being constructed by Access in Northeastern Pennsylvania, " and that STIOS agreed to do so. ( Id. at ¶¶ 16-17.) "[E]ach of these Projects was a separate component of a primary pipeline project being constructed within the northeast quadrant of the state of Pennsylvania." ( Id. at ¶ 18.)

However, STIOS then alleges a series of problems related to the various Defendants' performance under the contract. These alleged problems caused damages in excess of two million dollars attributable to the Chesapeake Defendants (i.e., CEC and COI), ( see id. at pp. 13-18), and in excess of forty million dollars attributable to the Access Defendants (i.e., Access and Appalachia), ( see id, at pp. 19-26).

As to the Chesapeake Defendants, Plaintiff alleges that CEC and/or COI "agreed to pay for each time a work crew and related equipment needed to be moved from one work-site to another (hereinafter the move-arounds')." ( Id. at ¶ 13.) Not only did the Chesapeake Defendants not provide full payment for the work that STIOS "dutifully performed" for the Rome and Oilcan Projects, ( see id. at ¶ 14), but it also "failed to pay STIOS for the complete amount owed for the move-arounds, ( see id. at ¶ 15).

The allegations against the Access Defendants are more extensive. In general, STIOS alleges that it agreed to provide bids on the Access Projects "[b]ased upon numerous representations and warranties that were made to STIOS by Access." ( Id. at ¶ 17.) However, the Access Defendants allegedly failed to live up to these representations and warranties.

The first of the Access Defendants' alleged failures relates to so-called "winter contingencies." While STIOS prepared proposals for the Access Projects, it determined that "a substantial percentage of the projects would be completed during the winter months." ( Id. at ¶ 19.) "[I]n the northeast portion of the United States where the Projects were to be completed, completion of said pipeline projects during winter months generally involves issues that are outside of the norm for completion of pipeline projects generally, including issues arising out of or relating to frozen ground conditions." ( Id. at ¶ 20.) Accordingly, "it is the general course and conduct of pipeline contactors... operating in the northeast quadrant of the United States where these particular projects were ongoing, to increase the standard rates in order to accommodate and account for winter contingencies." ( Id. at ¶ 21.) "Alternatively, the owner and/or operator of a pipeline may request that the contractor exclude winter contingencies in their bid processes in order to limit and/or control costs, " in which case it is the industry practice that the risks of weather-related costs and delays are borne by the pipeline owner-operator and not the contractor. ( Id. at ¶¶ 23-24.) Consistent with these practices, STIOS first submitted a set of bids to Access that incorporated the costs of winter contingencies. ( Id. at ¶ 26.) However, upon receiving these proposals, Access representative Keith Edmonds instructed STIOS to resubmit its bids without the winter contingencies, informing it that Access was willing to accept the risk of winter-related costs and delays. ( Id. at ¶¶ 27, 29.) In compliance with these instructions, STIOS submitted a second bid that excluded winter contingencies and, upon acceptance of the proposals by Access, began work on the various Projects. ( Id. at ¶¶ 28, 30-31.)

"Almost immediately following the commencement of construction on the Projects... STIOS encountered substantial weather related delays and increased costs and expenses." ( Id. at ¶ 32.) In reliance on Access's previous representations, STIOS then submitted a series of "change order requests" over the course of the months that it worked on the Projects to account for these costs and delays. ( See id. at ¶¶ 37-39.) However, in September 2013, despite having been led to believe in the interim that the change order requests would be paid, "STIOS receive[d] notice that Access was contemplating denying virtually all of the weather related contingencies submitted by STIOS." ( See id, at ¶¶ 49-50.)[1]

Nor were STIOS's alleged costs limited to the weather itself. It further alleges that "in or around January of 2013, in recognition of the weather issues being encountered by STIOS, Appalachia, in conjunction with or on behalf of its affiliate, Access, issued a Winter Construction and Stabilization Plan.. that substantially changed the specifications for winter work." ( Id. at ¶ 34.) This change caused STIOS to incur "significant costs and expenses.. including additional costs for, inter alia, snow removal, backfilling, and the provision of heating equipment and environmental material." ( Id. at ¶ 35.) STIOS also allegedly incurred other unspecified non-weather-related "additional costs related to the performance of work arising on the field site that was outside the original contracts." ( Id. at ¶ 36.) As with the winter contingencies, Access indicated that it would pay all of these extra costs throughout the course of STIOS's performance, but ultimately paid only an unacceptable lesser portion of them. ( See id. at ¶¶ 38-41, 43-49, 57.) "Additionally, Access and/or Appalachia, without a basis in law or in fact, wrongfully retained a percentage of the monies to STIOS for the work that STIOS submitted for payment, " which it never returned. ( Id. at ¶ 42, 59.)

Finally, STIOS alleges that

Access, either individually or in concert with its authorized agents and representatives, issued a "work stoppage" that shut down all of the projects involved in the entirety of the overall pipeline projects being completed in the northeast quadrant of the United States, including, but not limited to, the Projects being performed by STIOS.
This "work stoppage" was purportedly due to safety issues associated with various contractors.

( Id. at ¶¶ 53-54.) The work stoppage was "improperly and unnecessarily" imposed on STIOS, causing it "substantial additional costs." ( Id. at ¶ 55.) STIOS submitted change orders to Access for the additional costs related to the work stoppage, but these also "received delayed treatment and analysis" and, ultimately, only a portion were approved. ( Id. at ¶¶ 56-57.)

STIOS then filed a Complaint against the four Defendants. The Counts alleged therein are roughly divisible into two parts: those alleged against the Chesapeake Defendants and those against the Access Defendants. Against the former, STIOS alleges Breach of Contract (Count I), Unjust Enrichment (Count II), Quantum Meruit (Count III), Promissory Estoppel (Count IV), and Violation of Pennsylvania's Contractor and Subcontractor Payment Act (Count V). It alleges these same causes of action against the Access Defendants (Counts VI, VII, VIII, IX, and X, respectively), as well as a claim styled "Fraud/Fraud in the Inducement" (Count XI), which includes a request for punitive damages, ( see id. at ¶ 118).

In response, all four Defendants-who are jointly represented by the same counsel-filed the instant Motion to Dismiss. That Motion does not attack the Breach of Contract or Contractor Payment Act claims. Instead, it only argues for dismissal of all of the quasi-contract claims, the fraud claim, and the request for punitive damages. Oral argument was held on the Motion on April 23, 2014 and a follow-up conference call was held on May 16 to discuss other issues raised at ...


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