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American Elec. Co., LLC v. Parsons RCI, Inc.

United States District Court, D. Hawaii

February 27, 2015

AMERICAN ELECTRIC CO., LLC, Plaintiff,
v.
PARSONS RCI, INC., Defendant. COVANTA HONOLULU RESOURCE RECOVERY VENTURE, Plaintiff,
v.
PARSONS RCI, INC., Defendant

For American Electric Co., LLC, Plaintiff, Counter Defendant (1:13-cv-00471-BMK): Daniel T. Kim, Kale Feldman, LEAD ATTORNEYS, Chee Markham & Feldman, Honolulu, HI; Erik D. Eike, LEAD ATTORNEY, Erik D. Eike - Attorney At Law, Honolulu, HI.

For Covanta Honolulu Resource Recovery Venture a Hawaii general domestic partnership (Plaintiff in member case CV 14-00020 SOM-BMK ), Consol Plaintiff (1:13-cv-00471-BMK): Andrew James Lautenbach, Lindsay E. Orman, Terence J. O'Toole, LEAD ATTORNEYS, Starn O'Toole Marcus & Fisher, Honolulu, HI.

For Parsons RCI, Inc., Defendant, ThirdParty Plaintiff (1:13-cv-00471-BMK): John C. Dippold, LEAD ATTORNEY, Carney Badley Spellman, Seattle, WA; John R. Welch, LEAD ATTORNEY, PRO HAC VICE, Carney Badley Spellman, Seattle, WA; Jordon Jun Kimura, Robert G. Klein, Troy J.H. Andrade, LEAD ATTORNEYS, McCorriston Miller Mukai MacKinnon LLP, Honolulu, HI.

For Parsons, RCI, Inc. a Washington corporation (Defendant in member case CV 14-00020 SOM-BMK), Consol Defendant (1:13-cv-00471-BMK): Jordon Jun Kimura, LEAD ATTORNEY, McCorriston Miller Mukai MacKinnon LLP, Honolulu, HI.

For Covanta Honolulu Resource Recovery Venture, Movant, ThirdParty Defendant, Counter Defendant, Counter Claimant (1:13-cv-00471-BMK): Andrew James Lautenbach, Lindsay E. Orman, LEAD ATTORNEYS, Starn O'Toole Marcus & Fisher, Honolulu, HI.

For Parsons RCI, Inc., Counter Claimant, Counter Defendant (1:13-cv-00471-BMK): John C. Dippold, John R. Welch, LEAD ATTORNEYS, Carney Badley Spellman, Seattle, WA; Jordon Jun Kimura, Robert G. Klein, Troy J.H. Andrade, LEAD ATTORNEYS, McCorriston Miller Mukai MacKinnon LLP, Honolulu, HI.

For Covanta Honolulu Resource Recovery Venture a Hawaii general domestic partnership, Plaintiff (1:14-cv-00020-BMK): Andrew James Lautenbach, Lindsay E. Orman, Terence J. O'Toole, LEAD ATTORNEY, Starn O'Toole Marcus & Fisher, Honolulu, HI.

Page 1080

ORDER DENYING DEFENDANT PARSONS RCI, INC.'S MOTION FOR PARTIAL SUMMARY JUDGMENT AGAINST COVANTA HONOLULU RESOURCE RECOVERY VENTURE ON ITS CLAIMS AND COUNTERCLAIMS FOR LIQUIDATED DAMAGES

Barry M. Kurren, United States Magistrate Judge.

Before the Court is Defendant/Third-Party Plaintiff Parsons RCI, Inc.'s (" Parsons" ) Motion for Partial Summary Judgment against Covanta Honolulu Resource Recovery Venture on its Claims and Counterclaims for Liquidated Damages (the " Motion" ). (Doc. no. 153.) Parsons seeks partial summary judgment against Covanta Honolulu Resource Recovery Venture (" Covanta" ) on the grounds that Covanta is not entitled to liquidated damages, because the claims and counterclaims for damages are not supported by Hawaii law and are factually unsupported. Additionally, Parsons seeks summary judgment on its counterclaim against Covanta for breach of contract, as Covanta has allegedly conceded that it has failed to pay Parsons for change-order work that the latter performed.

The Motion came on for hearing before the Court on February 11, 2015.[1] After careful consideration of the Motion, the supporting and opposing memoranda, and the arguments of counsel, the Court hereby DENIES the Motion.

BACKGROUND

I. FACTUAL BACKGROUND

The facts of this case are well known to the Court and the parties. (See Order (1) Denying Covanta Honolulu Resource Recovery Venture's Motion for Partial Summary Judgment re Disallowed Claims (Doc. no. 113) and (2) Denying Covanta Honolulu Resource Recovery Venture's Motion for Partial Summary Judgment re Parsons, RCI, Inc.'s Duty to Defend and, With Respect to the Disallowed Claims, to Indemnify (Doc. No. 122).) Accordingly, the Court only addresses the facts pertinent to the present Motion.

Page 1081

A. Liquidated Damages Provisions in Article 3.3 and Change Order 28

Article 3.3 of the General Contract (" Contract" ) between Covanta and Parsons provides for an award of liquidated damages to Covanta if Parsons fails to meet certain milestones.[2] (Covanta's Concise Statement of Facts (" CSF" ), Exh. B, Contract art. 3.3.) Article 3.3 was subsequently modified in part by Change Order 28. Change Order 28 provides that:

3.3.3 In the event Contractor fails to achieve (a) the Mechanical Completion Milestone by the Scheduled Mechanical Milestones Completion Date or (b) Construction Completion by the Scheduled Construction Completion Date, in either case, Contractor agrees to pay Covanta as liquidated damages (and not as a penalty nor subject to any proof of such loss) the amounts set forth in Exhibit K-1; provided, however that the aggregate amount of liquidated damages payable hereunder shall never exceed the sum of Twenty-Five Thousand Dollars ($25,000.00) per calendar day. . . .
3.3.4 The Parties agree that the words " Readiness for First Refuse Fire prior to April 21, 2012" shall be substituted for the words " Mechanical Completion prior to March 4, 2012" in Change Order No. 9 to this Contract. Readiness for First Fire is defined in Exhibit K-1. Contractor further agrees that it will in no event request or claim that it is entitled to an extension or modification of the April 21, 2012 date in order to obtain a bonus under Change Order No. 9.
3.3.5 The Parties agree that the amount of liquidated damages provided in this Contract is neither a penalty nor a forfeiture, and Contractor expressly waives its right to assert or plead that the liquidated damages provided for in this Contract are a penalty, forfeiture, or are unconscionable, unreasonable, disproportionate in amount, capable of being calculated and proven in a precise amount, otherwise void or unenforceable, or that Covanta has not incurred or will not incur actual damages as a result of the Contractor's failure to complete the Work on time.

Page 1082

(Covanta's CSF, Exh. C, Change Order 28 (emphasis added).)

Exhibit K-1 to Change Order 28 mandated a $20,000-per-calendar-day penalty for Parsons's failure to meet the stated milestones. Exhibit K-1 sets April 21, 2012 as the milestone date for the Readiness for First Refuse Fire, and the Construction Completion Date is designated as 30 days after the First Refuse Fire. (Id. at Exh. K-1.)

B. Parsons's Alleged Failure to Meet the Milestones

In its First Amended Complaint against Parsons[3], Covanta alleges that Parsons failed to meet both the Readiness for First Refuse Fire milestone, as well as the Construction Completion milestone. (Covanta's First Am. Compl. ¶ ¶ 52-57.) Covanta claims that, even though it extended the Readiness for First Refuse Fire milestone deadline from April 21, 2012 to May 5, 2012, Parsons did not meet the Readiness for First Refuse Fire until approximately May 31, 2012.[4] (Mem. in Opp'n at 6, 9.) Covanta further argues that, even though Parsons was required to meet the Construction Completion milestone deadline by July 1, 2012[5], it failed to do so, and Construction Completion did not occur until as late as February 15, 2013. (Mem. in Opp'n at 9.) Thus, Covanta claims that Parsons was 26-days late in meeting the Readiness for First Refuse Fire milestone, and approximately sevenmonths late in meeting the Construction Completion milestone.[6]

Under the terms of Change Order 28, then, it appears that Covanta could be owed approximately $520,000 for Parsons's failure to meet the Readiness for First Fire milestone, and up to approximately $4.2 million for Parsons's failure to meet the Construction Completion milestone.

C. Covanta's Retroactive Bonus from the City & County of Honolulu

Parsons alleges that Covanta invoiced Project owner City and County of Honolulu (the " City and County" ), claiming an early completion bonus in the amount of $1,569,879.98. The bonus was supposedly premised on the City and County's acceptance of the Project on August 4, 2012. (Mot. at 11.) However, Covanta points out that the City and County retroactively accepted the Project only after Covanta agreed to undertake certain modifications at its own expense. (Mem. in Opp'n at 10-13.) Covanta states that the City and County actually rejected Covanta's Acceptance Test on July 23, 2012. (Id. at 11.) Covanta claims that, in order for it to meet the City and County's retroactive Acceptance Date, it expended over $2 million fixing work performed by Parsons. (Id. at 13.)

Page 1083

D. Covanta's Alleged Breach of Contract

Parsons claims that Article 7 of the Contract requires Covanta to issue a change order with any directive that will cause a material increase or decrease in the Contract price or time. (Mot. at 12.) Even if the parties disagreed on the change order, Parsons was to continue with the directed work, and Covanta was to compensate Parsons for the changed work. (Id.) Specifically, Article 7.6 provides that Covanta will continue to work on the Project:

notwithstanding that a Change Order has not been issued or that agreement has not been reached on the effects, if any, of a proposed change to the Contract Price or Completion date. Although it is the intent of the Parties to agree on such matters in advance of the changed Work being performed, in the event Covanta and Contractor are unable to agree on the amount of any cost or credit to Covanta resulting from a change in the Work or if the work constitutes a change, the Contractor shall promptly proceed with, and diligently prosecute, the changed Work and the cost or credit to Covanta resulting therefrom shall be compensated on a cost basis pending resolution of Contractor's proposed Change Order, or at Covanta's option, resolved under Article 11.5; provided, however, that Covanta shall timely pay Contractor for all changed Work costs not subject to dispute. . . .

( Contract art. 7.6.)

Parsons claims that Covanta has not paid it for 33 Change Order Requests (" COR" ) with an approximate value of ...


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