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Continential Transport Corp. v. Engineering Remediation Resources Group, Inc.

United States District Court, D. Hawaii

August 12, 2019

CONTINENTIAL TRANSPORT CORPORATION, Plaintiff,
v.
ENGINEERING REMEDIATION RESOURCES GROUP, INC., Defendant.

          ORDER DENYING DEFENDANT'S MOTION TO TRANSFER VENUE PURSUANT TO SECTION 1404(a), OR IN THE ALTERNATIVE, TO DISMISS THE COMPLAINT

          JILL A. OTAKE, UNITED STATES DISTRICT JUDGE

         This action involves a dispute between a contractor and subcontractor for a public works project in American Samoa. The subcontractor, Plaintiff Continental Transport Corporation, asserts breach of contract, fraudulent misrepresentation, negligent misrepresentation, and quantum meruit claims against Defendant Engineering Remediation Resources Group, Inc. Defendant moves to transfer the case to the Northern District of California, or in the alternative, to dismiss the misrepresentation counts (Counts II and III) of the Complaint.

         For the reasons stated below, the Motion is DENIED.

         I. BACKGROUND

         A. Facts

         i. Facts as Alleged in the Complaint

          The American Samoa Power Authority (the “Power Authority”) hired Defendant to construct the New Wells Nos. 1, 2, and 3 Water System Connection Project (the “Project”) in Malaeimi Valley, American Samoa. Compl. ¶ 1. Defendant entered into a Construction Services Agreement (the “Prime Contract”) with the Power Authority on July 13, 2016. Id. ¶ 1. Defendant hired Plaintiff to “execute all phases of field work” for the Project, and the parties executed a Subcontract on July 8, 2016. Id. ¶¶ 1-2. Plaintiff bid on the Project without seeing final design plans, basing its bid on Defendant's representations regarding the Project. Id. ¶ 3. Defendant provided final design plans after bid closing, and Plaintiff realized that the work required for the Subcontract exceeded its bid. Id. Plaintiff began construction anyway, allegedly because Defendant assured Plaintiff that the Power Authority would approve a change order to fund the additional work. Id.

         Time passed without a change order and Plaintiff stopped work in November 2017. Id. ¶ 4. On February 23, 2018, Defendant and the Power Authority reached an agreement, and Plaintiff, Defendant, and the Power Authority executed agreements on March 13, 2018 (the “Letter Agreement”) and on May 8, 2018 (the “Payment Agreement”). Id. ¶ 6. Plaintiff alleges that it completed all work under the Subcontract and Payment Agreement, but that it is still due money because Defendant failed to pay or authorize the Power Authority to pay. Id. ¶¶ 43-51. Plaintiff also claims that Defendant made misrepresentations that induced Plaintiff to enter into the Subcontract, begin work, and later enter into the Payment Agreement. Id. ¶¶ 52-67.

         ii. The Agreements

         The Prime Contract, Subcontract, and Payment Agreement contain governing law provisions. The Prime Contract states:

15. Governing Law. The validity of this Contract and any of its terms or provisions, as well as the rights and duties of the parties to this Contract, shall be governed by the laws of the Territory of American Samoa. The Venue for any action at law or in equity to enforce or interpret the provisions of this Contract shall be the U.S. Federal Court in Honolulu, Hawaii.
49. Applicable Law: Jurisdiction. This Agreement shall be construed according to the laws of the State of Hawaii. The Venue for any action at law or in equity to enforce or interpret the provisions of this Contract shall be the U.S. Federal Court in Honolulu, Hawaii. Should either Party to this Agreement bring legal action against the other, the case shall be handled by the U.S. Federal Court in Honolulu, Hawaii, and the Party prevailing in such action shall be entitled to reasonable attorney's fees which shall be fixed by the judge hearing the case, and such fees shall be included in the judgment, together with all costs.

ECF No. 26-5 ¶¶ 15, 49.

         The Subcontract indicates:

4.12 Governing Law
Except for disputes related to this AGREEMENT that are subject to dispute resolution under the PRIME CONTRACT, which shall be governed by the governing laws of the PRIME CONTRACT, this AGREEMENT shall be governed by the laws of the state of California without giving effect to the principles thereof relating to conflicts of law.
5.1 Dispute Resolution
5.1.1 [Plaintiff] and [Defendant] shall attempt to resolve any disputes by good faith negotiation. In the event they cannot reach a negotiated agreement, the dispute resolution process shall be litigation in any court of appropriate jurisdiction. [Plaintiff] agrees that in the event [the Power Authority] and [Defendant] become engaged in a dispute resolution process under procedures required by the PRIME CONTRACT, [Defendant] may, in its sole discretion, join the [Plaintiff] in the PRIME CONTRACT dispute resolution proceeding, if [Defendant] alleges that the matter being addressed in said proceeding involves work that is the subject of this Subcontract. In the event it is joined in a dispute resolution process under the PRIME CONTRACT, [Plaintiff] agrees to be bound by all terms of the PRIME CONTRACT dispute resolution process and any resulting ruling, order, award, or judgment.

ECF No. 16-3 ¶¶ 4.12, 5.1.1.

         Finally, the Payment Agreement states:

WHEREAS [Defendant] wishes for [the Power Authority] to pay [Plaintiff] directly from the Construction Proceeds in order to satisfy [Defendant's] payment obligation to [Plaintiff] under the Subcontract Agreement.
WHEREAS the Parties executed a letter agreement, dated March 13, 2018 (the “Letter Agreement”), that included, among other things, the Parties' express agreement that [the Power Authority] would pay [Plaintiff] directly for future services on the [Power Authority] Project.
4.7 Venue. This agreement shall be governed by the laws of American Samoa, and any disputes arising out of this agreement shall be heard in the U.S. Federal Court in Honolulu, Hawaii.

ECF No. 26-6 at 1, ¶ 4.7.

         B. Procedural History

         Plaintiff initiated this action on March 5, 2019, asserting breach of contract (Count I), fraudulent misrepresentation (Count II), negligent misrepresentation (Count III), and quantum meruit (Count IV) claims. ECF No. 1. Plaintiff prays for liquated, compensatory, consequential, and punitive damages; attorneys' fees; and any other relief deemed appropriate. Id. at 24.

         On April 24, 2019, Defendant filed the instant Motion to Transfer Venue Pursuant to Section 1404(a), or in the alternative, to Dismiss the Complaint. ECF No. 16. Plaintiff filed an opposition, ECF No. 26, and Defendant responded with a reply, ECF No. 27. The Court asked for supplemental briefing to address questions regarding choice of law. ECF No. 28. Defendant responded to the Court's inquiry, ECF No. 30, and Plaintiff replied, ECF No. 31.

         II. ...


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