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Hagen Construction, Inc. v. The Whiting-Turner Contracting Co.

United States District Court, D. Maryland

February 4, 2019

HAGEN CONSTRUCTION, INC., Plaintiff
v.
WHITING-TURNER CONTRACTING CO., Defendant

          MEMORANDUM

          James K. Bredar. Chief Judge

         I. Background

         Initially filed in New Jersey state court, this lawsuit was brought by Plaintiff Hagen Construction, Inc. (“Hagen”), against Defendant Whiting-Turner Contracting Co. (“W-T”) after Hagen had served as a subcontractor on the construction of Nemours - Alfred I. DuPont Hospital for Children Outpatient Center (the “Project”) in Deptford, New Jersey. (Compl., ECF No. 1-1.) The case was removed to the United States District Court for the District of New Jersey which granted a change of venue to this Court based on a forum selection clause in the subcontract. (Notice of Removal, ECF No. 1; Order, Apr. 24, 2018, ECF No. 32.)

         Hagen's complaint contains three counts: Count I, breach of contract; Count II, violation of New Jersey's Prompt Pay Act; and Count III, unjust enrichment. The case has proceeded through discovery and the filing of W-T's motion for partial summary judgment as to Hagen's labor inefficiency claim, which is part of Count I. (W-T's Mot. Partial Summ. J. (“W-T's Mot.”), ECF No. 55.) The motion has been briefed (ECF Nos. 62, 64) and is ready for decision. Hagen has also filed a motion for leave to file a surreply (ECF No. 66), and that, too, has been briefed (ECF No. 67) and is ripe. No. hearing is required. Local Rule 105.6 (D. Md. 2018). W-T's motion will be granted, and Hagen's motion will be denied.

         II. Standard for Summary Judgment

         “The court shall grant 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); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing predecessor to current Rule 56(a)). The burden is on the moving party to demonstrate the absence of any genuine dispute of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). If sufficient evidence exists for a reasonable jury to render a verdict in favor of the party opposing the motion, then a genuine dispute of material fact is presented and summary judgment should be denied. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). However, the “mere existence of a scintilla of evidence in support of the [opposing party's] position” is insufficient to defeat a motion for summary judgment. Id. at 252. The facts themselves, and the inferences to be drawn from the underlying facts, must be viewed in the light most favorable to the opposing party, Scott v. Harris, 550 U.S. 372, 378 (2007); Iko v. Shreve, 535 F.3d 225, 230 (4th Cir. 2008), who may not rest upon the mere allegations or denials of his pleading but instead must, by affidavit or other evidentiary showing, set out specific facts showing a genuine dispute for trial, Fed.R.Civ.P. 56(c)(1). Supporting and opposing affidavits are to be made on personal knowledge, contain such facts as would be admissible in evidence, and show affirmatively the competence of the affiant to testify to the matters stated in the affidavit. Fed.R.Civ.P. 56(c)(4).

         III. Governing Documents

         Two documents govern the Court's analysis of W-T's motion. The first is the Subcontract signed by both parties. (W-T's Mot. Ex. 2, ECF No. 55-6.) The second is the Subcontractor's Partial Release Waiver of Lien and Affidavit, attached as Exhibit I to the Subcontract and made a part thereof. (ECF No. 55-6 at p. 49 (for this document, the Court utilizes the pagination generated by CM/ECF).)

         In the Subcontract are several pertinent provisions:

• ARTICLE 5. PAYMENT- . . .
(b) . . . As a condition precedent to the payment of any application, the Subcontractor shall (1) produce waivers of mechanics lien rights and claim releases in the form required by Contractor by Subcontractor and all persons supplying labor or materials to the Subcontractor on the Project through the period covered by the application, or (2) exhibit such other evidence as the Contractor may require that charges for all labor and material have been paid.
. . .
• ARTICLE 6. ADDITIONAL OR OMITTED WORK-
(a) In the event that the Contractor directs Subcontractor to perform additional work, Subcontractor agrees that it will promptly perform and diligently complete such work whether or not Contractor and Subcontractor have agreed on the cost of such work. Subcontractor shall submit to Contractor a lump sum proposal for such work, which proposal shall include a detailed cost breakdown for each component of the work, indicating both quantities and unit prices, and such proposal shall be submitted to Contractor not later than 7 days after Contractor directs Subcontractor to perform extra or additional work or such lesser period if required by the Contract between Owner and Contractor. If a lump sum price or unit price for the additional work cannot be agreed upon, or Subcontractor fails to submit such proposal within 7 days after Contractor directs Subcontractor to perform extra or additional work, Subcontractor agrees to do the work on the basis of its actual cost plus percentage fees for overhead and profit as set forth in Article 10. The Contractor shall not be liable for payment for any additional work performed by the Subcontractor unless such work is first expressly authorized by the Contractor in writing and payment is made by the Owner to the Contractor for such extra work, payment by Owner to Contractor being a condition precedent for Contractor to pay Subcontractor for such work. Both authorization in writing by the Contractor and actual payment by the Owner to the Contractor for such extra work shall be conditions precedent to Contractor's obligation to pay Subcontractor for such additional work. Any additional compensation or time to be given to Subcontractor shall be set forth in a Subcontract supplement and shall constitute a full and final equitable adjustment of compensation, time or any other alleged entitlement, known or unknown, arising in connection with the facts and circumstances described in and which gave rise to such contract supplement and Subcontractor waives all damages, direct, indirect and consequential, relating to such facts and circumstances, including, but not limited to, impact, reduced productivity, interference by other trades, lack of coordination of the work by Contractor, inefficiencies, acceleration, delays, extended overhead, diminished bonding capacity or lost profits.
. . .
(d) In the event of any dispute, controversy, or claim for additional compensation or time extensions, except for payment for extra or additional work expressly directed by Contractor in accordance with Section 6 (a) of this Subcontract, the compensation for which shall be fully and finally governed by Section 6 (a) of this Subcontract and for which no further claim can or shall be made, notice in writing shall be given to the Contractor no later than seven (7) days following the occurrence on which such claim is based, unless the notice provision in the General Contract between the Owner and Contractor is less than seven (7) days, in which case, Subcontractor shall give notice to Contractor within 2 days less than the time required for Contractor to give notice to the Owner according to the notice provision in the General Contract. Such notice shall describe the dispute, controversy or claim in detail so as to allow Contractor to review its merits. Such notice shall also provide detailed information to substantiate such claim including supporting documentation and calculations, and including any information requested by Contractor. Any claim not presented within such time period shall be deemed waived by Subcontractor.
. . .
• ARTICLE 8. RELEASES OF CLAIMS AND WAIVER OF LIENS-
Subcontractor agrees to provide to Contractor, and to provide and obtain from its subcontractors and suppliers of all tiers, executed releases of claims and/or waivers of liens and lien rights in the form required by Contractor and at such times as may be requested by Contractor.

         The Subcontractor's Partial Release Waiver of Lien and Affidavit provided in pertinent part:

The undersigned Subcontractor, in consideration of the payments previously made and payment for the period covered by the current invoice set forth above, hereby waives and releases all mechanic's, materialman's or other liens and, to the fullest extent permitted by law, all rights to file any such liens in the future, and all claims and demands against Contractor, Owner, their sureties and the real property on which the project is located, in any manner arising out of work, labor, services, equipment or materials, performed or furnished by Subcontractor, its subcontractors, and suppliers, in connection with the Project and subcontract, through the period covered by the current invoice and all previous invoices. The release does not apply to retention, nor to extra work which Subcontractor has been authorized to proceed with by the Contractor, but for which payment has not yet been approved.
Except as noted below, Subcontractor acknowledges and represents that for the period and work covered by all previous invoices for which Subcontractor has received payment:
1. Subcontractor has paid in full all amounts for subcontract, labor, materials and rented equipment.
2. Subcontractor has properly applied previous payments to pay all outstanding invoices related to the Project.
3. Subcontractor is aware of no claims nor any circumstances that could give rise to any future claims against Contractor, Owner, Architect or other Subcontractor on the Project.
4. All payroll, withholding, sales and other taxes, union benefits, insurance premiums and any other amount required by law, regulation or agreement to be paid in connection with labor, materials, and equipment for the Project have been paid in full.
List exceptions, if any:
. . .
I hereby certify, under penalties of perjury, that the facts, information and representations set forth above are true and accurate to the best of my knowledge, information and belief.
BY:
(Name of Subcontractor) BY:
(Signature, Printed Name and Title), Duly Authorized Agent of Subcontractor

         IV. Evidence

         The Subcontract under which Hagen agreed to provide the labor and materials required to complete the drywall and rough carpentry for the Project was executed on or about July 29, 2015. (Subcontract 9.) (Although Hagen and W-T also executed another agreement in January 2016 for Hagen to complete millwork and casework installation on the Project, only the drywall subcontract is at issue in this case.) The amount to be paid to Hagen under the Subcontract was $2, 400, 000; in addition, pursuant to Article 10 of the Subcontract, W-T agreed to pay Hagen its actual costs and certain percentage fees for overhead and profit for extra work authorized in writing under Article 6. (Subcontract 8.)

         According to Rebecca Reeves, W-T's project manager for the Project, Hagen began work under the Subcontract in September 2015 and achieved substantial completion of its work by June 30, 2016.[1] (Reeves Decl. ¶ 13, W-T's Mot. Ex. 1, ECF No. 55-5.) For each progress payment application on the Subcontract, Hagen submitted a signed Partial Release Waiver of Lien and Affidavit (“Partial Release”). (Id. ¶¶ 14-16.) Hagen submitted a total number of 16 payment applications and Partial Releases.[2] (Id.) On none of the Partial Releases did Hagen list any exceptions. (Id. ¶ 18.) In the first payment application numbered “14, ” which covers the time period after May 31, 2016, and up to August 31, 2016, Hagen certified it was 100% complete with its original work under the Subcontract. (Id. ¶ 20; Payment App'n 14, W-T's Mot. Ex. 4, ECF No. 55-8 at pp. 95-101 (using CM/ECF pagination).) Four additional payment applications were submitted after that one, with dates of October 31, 2016 (the second application numbered “14”), November 30, 2016 (application numbered “15), November 30, 2016 (application numbered “16”), and February 28, 2017 (application numbered “17”). (Id. Ex. 4, ECF No. 55-8 at pp. 102-29.) Reeves states the latter four payment applications “requested payment for additional work subject to bilaterally executed contract supplements and the release of retention.” (Reeves Decl. ¶ 22.) Reeves states W-T paid Hagen in full for applications numbered 1-17. (Id. ¶ 19.)

         Reeves states, “Throughout the summer of 2017, W-T and Hagen were negotiating close-out of the several open Hagen change order requests which totaled $123, 499 and did not include any labor inefficiency claims and several W-T backcharges against Hagen (the ‘Open Items').” (Id. ¶ 24.) The Court interprets this statement as indicating W-T and Hagen were negotiating during the Summer of 2017 the settlement of several open Hagen change order requests and several W-T backcharges against Hagen; further, the Court interprets Reeves's statement to mean the open Hagen change order requests did not include any labor inefficiency claims.

         On May 12, 2017, Reeves emailed George Jackson, who was Hagen's project manager on the Project, and attached a copy of W-T's “logs showing all open items at this time.” (W-T's Mot. Ex. 7, ECF No. 55-11.) She also said,

With regards to the “Rejected” log, the majority of these items are items that were submitted to Nemours through the change order process and returned “not approved”. We will need to review each item in detail to resolve how they will be addressed. Additionally, the Pending log is a list of open/pending backcharges. I will compile the back-up for the miscellaneous issues and send that to you in a separate email. . . .
. . .
At this point, I'd like to get through everything that we can to issue a contract supplement early next week, even if there are still a few items, including the HSJ charges that are not yet finalized.
Please review and let me know your availability to discuss next week. . . .

(Id.)

Jackson responded the next day,
Rebecca there is a lot of rejected and partial payments that we need time to go through and identify what is happening and where. I would like some time to review and then perhaps a meeting to try and resolve? There is a lot to go through over the phone. Let me know what you think. Thank you.

(Id.)

On May 17, 2017, Reeves responded,
I will likely put a supplement together of the approved items to get those cleaned up. Please let me know some dates that you may be available to review-I want to get something on our calendars before we both get booked up.

(Id.)

On June 1, 2017, Jackson emailed Reeves and said,
Rebecca please review the attached response from Hagen Construction. At this point Rebecca we are looking to get a final change order and simply move on with some recognition of our efforts. We can meet to discuss if you would like but we believe the attached is fair for what we have been through on this project. Anything falling short of this mark will need to be resolved at a different level. Please contact us to discuss further. Thank you.

(Id.) Attached to Jackson's email message was a log entitled “Change Order Resolution” in which he provided comments to Reeves's proposed resolution of change order requests and backcharges, noting those with which Hagen either agreed, agreed after modification, or disagreed. (Id.) In his deposition, Jackson was asked about this log; specifically, W-T's counsel posed the question, “Now, in these logs is there any inefficiency claim identified being asserted by Hagen Construction?” (Jackson Dep. 129:3-4, W-T's Mot. Ex. 5, ECF No. 55-9.) Jackson responded, “No, there is nothing on here for the COR on that.” (Id. 12:5-6.)

         Jackson was asked in his deposition, “Were there any delays or impacts to Hagen, it bases its inefficiency claim on, after June 30, 2016?” (Id. 74:5-6.) He answered, “Not that I can remember or that I am aware of.” (Id. 74:7.) He was also asked, “So as of June, say the end of June 2016, Hagen would have been aware of those events that would have given rise to impact to their performance relating to these items that you identify. Is that correct?” (Id. 80:6-9.) He answered, “Yes.” (Id. 80:10.) In response to the question, “Did Hagen submit a Change Order Request relating to those items?, ” Jackson said, “Not at that time. No.” (Id. 80:11-13.) A few moments later, W-T's counsel asked him, “My question is specific though, whether Hagen submitted a change order request for those items?, ” and Jackson responded, “No, we did not.” (Id. 80:22-24.)

         Patti Ford, Hagen's accounts receivables manager, signed payment applications 10 through 17 and their accompanying Partial Releases. (W-T's Mot. Ex. 4.) In her deposition, she acknowledged no exceptions had been noted on the Partial Releases she had signed. (Ford Dep. 19:13-30:9, W-T's Mot. Ex. 6, ECF No. 55-10.) When asked if she had been aware of an inefficiency claim that Hagen was asserting on the Project, she responded in the negative. (Id. 26:21-23.) She testified that neither Jackson nor Hagen's president, Alfred Hagen, had communications with her about claims Hagen was asserting against W-T on the Project. (Id. 27:8-23.)

         On August 14, 2017, Reeves sent an email message to Jackson proposing resolution of outstanding amounts:

Hi George-
As discussed, we have resolved the outstanding items with Nemours which now allows us to work toward a final resolution of your Subcontract change orders and amount.
Based on our discussion this morning, below is Whiting-Turner's ...

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