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Pacific Commercial Services, LLC v. LVI Environmental Services, Inc.

United States District Court, D. Hawaii

June 26, 2017

PACIFIC COMMERCIAL SERVICES, LLC, a Hawaii limited liability company, Plaintiff,
v.
LVI ENVIRONMENTAL SERVICES, INC., nka NORTHSTAR CONTRACTING GROUP, INC., a California corporation; NORTHSTAR RECOVERY SERVICES, INC., a Delaware corporation, Defendants.

         ORDER: (1) GRANTING IN PART AND DENYING IN PART PLAINTIFF'S AMENDED MOTION FOR PARTIAL SUMMARY JUDGMENT, ECF NO. 80; (2) DENYING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT ON COUNTS I AND II OF COMPLAINT, ECF NO. 46; AND (3) GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT ON COUNTS III, IV, AND V OF COMPLAINT, ECF NO. 90

          J. MICHAEL SEABRIGHT CHIEF UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         Plaintiff Pacific Commercial Services, LLC (“PCS”) agreed to serve as a subcontractor for Defendants LVI Environmental Services, Inc. (“LVI”) and Northstar Recovery Services, Inc. (“Northstar Recovery”) (collectively, “Defendants”) in two separate projects: (1) the deactivation of the Honolulu Electric Company (“HECO”) Honolulu Power Plant (the “HECO Project”); and (2) the demolition and remediation of the building housing the Battery Energy Storage System (“BESS”) at the Kahuku Wind Farm (the “Kahuku Project”). Northstar Recovery and LVI share the same parent company, Northstar Group Holdings, LLC.

         PCS brought suit against Defendants alleging claims for breach of contract and unjust enrichment related to both the HECO Project and the Kahuku Project. Compl., ECF No. 1-3. LVI then filed a Counterclaim against PCS, also alleging claims for breach of contract and unjust enrichment, but only concerning the HECO Project. Countercl., ECF No. 8-1.

         Presently before the court are three motions: (1) PCS's Amended Motion for Partial Summary Judgment (“PCS's HECO Motion”), ECF No. 80; (2) Defendants' Motion for Partial Summary Judgment on Counts I and II of Complaint (“Defendants' HECO Motion”), ECF No. 46; and (3) Defendants' Amended Motion for Partial Summary Judgment on Counts III, IV, and V of Complaint (“Defendants' Kahuku Motion”), ECF No. 90. For the reasons that follow, the court: (1) GRANTS in part and DENIES in part Plaintiff's HECO Motion; (2) DENIES Defendants' HECO Motion; and (3) GRANTS in part and DENIES in part Defendants' Kahuku Motion.

         II. BACKGROUND

         A. Factual Background

         1. The HECO Project

         In 2011, LVI was preparing to bid for the prime contract on the HECO Project, and solicited PCS to submit a subcontractor proposal for waste removal services. Chang Decl. ¶ 5, ECF No. 81-1 (“First Chang Decl.”). LVI had no prior work history with HECO, but PCS had worked on over one hundred HECO projects at the time. Ex. 40, ECF No. 81-42; First Chang Decl. ¶ 6. PCS submitted a subcontractor proposal to LVI on July 23, 2011. Ex. 2, ECF No. 81-4. LVI submitted its bid for the HECO Project on July 29, 2011, and was awarded the prime contract on December 15, 2011. Ex. 35, ECF No. 81-37; Ex. 36, ECF No. 81-38.

         In LVI's proposal to HECO, LVI listed PCS as one of four subcontractors, describing the scope of PCS's work as “Asbestos, Hazardous, Regulated and Universal Waste Materials Hauling and Disposal” and “Hazardous and Regulated Materials Cleaning and Removal.” Ex. 35 at 12, ECF No. 81-37. LVI described the work of the other three listed subcontractors as (1) “Scaffolding”; (2) “Painting”; and (3) “Plumbing/Roof Drains.” Id. PCS began completing the work outlined in its subcontractor proposal before any purchase order was completed. First Chang Decl. ¶ 16.

         On March 23, 2012, LVI employee Chad Maddock (“Maddock”) emailed a draft purchase order to PCS's General Manager Jingbo Chang (“Chang”). Ex. 11, ECF No. 81-13. Later that day, Chang addressed concerns with the draft purchase order in two reply emails to Maddock. Ex. 12, ECF No. 81-14; Ex. 13, ECF No. 81-15. In particular, Chang was concerned with “Line Item 4” of the purchase order, which stated that the transportation and disposal of “Hazardous Solids” would cost $700 per ton. Ex. 12, ECF No. 81-14; Ex. 11 at 4, ECF No. 81-13. That price assumed that PCS would be handling “bulk solid at large volume to Chem Waste.” Ex. 12, ECF No. 81-14. But because the waste stream was “mixed with asbestos and liquid too at small quantity, ” PCS would need to send it to “Clean Harbors” instead of “Chem Waste, ” resulting in “a much higher price.” Id.

         On April 4, 2012, Maddock sent Chang another email, listing seven proposals aimed at resolving Chang's concerns. Ex. 14, ECF No. 81-16. In response to Chang's comments on line item 4, Maddock said: “Leave line item 4 as is with the understanding that this pricing is for volume loads in container amounts. Smaller volume will require appropriate adjustment. Additionally, if characterization changes due to contents of material, there could be price adjustments.” Id. That same day, Chang replied to Maddock and said: “We accept what you proposed below. Please revise it and send it to me for signature.” Ex. 15, ECF No. 81-17.

         On April 23, 2012, LVI employee Damariz Quezada (“Quezada”) sent a revised purchase order (the “Subcontract”) to Chang, requesting that he sign and return it. Ex. 16, ECF No. 81-18. Line item 4 of the Subcontract still priced hazardous solids at $700 per ton, but added the following language: “Smaller volume will require appropriate adjustment. Additionally, if characterization changes due to contents of material, there could be price adjustments.” Id. at 4. Chang did not sign the Subcontract.[1] But PCS continued to prepare Waste Manifest Forms for the HECO Project and handle the transportation and disposal of waste. First Chang Decl. ¶¶ 25-26. And in total, LVI paid PCS $526, 376.04 for its services on the HECO Project. Id. ¶ 38; Ex. 32, ECF No. 81-34.

         In early 2013, LVI began to use other firms for the HECO Project's waste transportation and disposal services. PCS only learned of this when it received copies of Waste Manifest Forms that it had prepared for LVI, but PCS's name was crossed out and replaced in writing with the name of another firm. First Chang Decl. ¶ 34; Ex. 28, ECF No. 81-30. The forms have dates ranging from January 2013 to March 2013. Ex. 28, ECF No. 81-30. On February 5, 2013, Michael Moore (“Moore”), President of LVI, emailed Chang to notify him that LVI “went direct to [another waste disposal firm] and struck a deal for disposal, ” but that LVI “definitely want[s] to use [PCS] for the remaining haz removal/disposal if [PCS is] willing.” Ex. 29, ECF No. 81-31.

         On August 14, 2013, Moore emailed Chang alleging that two of PCS's invoices -- Invoice 7864-01 and Invoice 7864-05 -- incorrectly billed LVI at a rate of $700 per drum instead of $700 per ton. Ex. 23, ECF No. 81-25. Chang disagreed, stating that the price adjustment was correctly calculated pursuant to line item 4. Id. Moore mailed Chang a letter dated August 28, 2013, noting that the (allegedly) incorrectly billed activity occurred on July 17, 2012, and April 9, 2013, and resulted in a total overbilling of $25, 200. Ex. 24, ECF No. 81-26.

         At no time did LVI send written notice to PCS terminating PCS's involvement in the HECO Project.

         2. The Kahuku Project

         Defendants hired Plaintiff to provide waste removal and transportation services for the Kahuku Project. Second Chang Decl. ¶ 3, ECF No. 98-1. Plaintiff's work on the Kahuku Project occurred in two phases: environmental control and evidence investigation (“Phase 1”) and demolition and disposal of the BESS building (“Phase 2”). Id. ¶ 8.

         a. Phase 1

         Plaintiff performed work in Phase 1 pursuant to three purchase orders that Defendants issued to Plaintiff. Id. ¶ 9; Exs. 1-3, ECF No. 98. Although Plaintiff performed the services within the scope of the purchase orders, Defendants have refused to pay eleven invoices covering that work. Second Chang Decl. ¶ 11. Separately, Plaintiff performed work outside of the scope of the purchase orders, and Defendants have refused to pay three invoices covering that work. Id. ¶ 12; Exs. 15-17, ECF No. 98. Collectively, Defendants have refused to pay invoices totaling $66, 518.31 for these services (the “Phase 1 Work”).

         The purchase orders each contain the following “pay-if-paid” provision:

Upon written approval by Contractor and the Owner, Subcontractor's invoice shall be paid, in the net amount of its request, if and only if, Contractor receives payment from the Owner for said invoice. Contractor's receipt of payment from Owner for Subcontractor's invoice is an express condition precedent to Contractor's obligation to make payment to Subcontractor. If Contractor does not receive payment from the Owner for said invoice, notwithstanding whether same was approved, the Contractor shall have no further obligation to pay Subcontractor. If Contractor has withheld retention, same shall be paid to the Subcontractor after approval and acceptance of the entire project by the Owner. Subcontractor's [sic] acknowledges its payment is contingent upon the Owner paying the Contractor.

Ex. 1 at 3, ECF No. 98-3. Defendants claim that they did not pay Plaintiff for the Phase 1 Work because Xtreme Power -- the “Owner” -- did not pay Defendants. Bruce Decl. ¶¶ 8-9, ECF No. 91-1.

         b. Phase 2

         Northstar Recovery and PCS entered into a subcontract for hauling and disposing of materials from the BESS building (the “Phase 2 Work”) in September 2012, but Northstar Recovery was never awarded the prime contract for demolition of the BESS building and PCS never performed any of the Phase 2 Work.[2] Id. ¶¶ 3-4; Second Chang Decl. ¶¶ 15-16. The prime contract was awarded to GZA GeoEnvironmental, Inc. (“GZA”), which subcontracted part of the work to NCM Contracting Group, LP (“NCM Contracting”) in January 2013. Bruce Decl. ¶¶ 5-6. At that time, NCM Contracting was a competitor to Defendants. Id. ¶ 6. Later, in April 2014, Defendants' affiliate acquired NCM Contracting. Answer ¶ 40, ECF No. 103. Defendants did not receive money or benefit from the BESS building contract. Bruce Decl. ¶ 7.

         B. Procedural Background

         On April 19, 2016, PCS filed its Complaint in the Circuit Court of the First Circuit, State of Hawaii, and on May 18, 2016, Defendants filed a Notice of Removal. ECF No. 1-3; ECF No. 1. Defendants filed a Counterclaim on May 26, 2016, and PCS ...


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