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Marisco, Ltd. v. Gl Engineering & Construction PTE. Ltd.

United States District Court, D. Hawaii

October 3, 2019

MARISCO, LTD., a Hawaii Corporation, Plaintiff,
v.
GL Engineering & Construction PTE., LTD, a Singapore Corporation; LIM SING TIAN; and RAYMOND GAN, Defendants.

          ORDER DENYING MOTION TO COMPEL ARBITRATION AND/OR MEDIATION AND JOINDER THEREIN

          SUSAN OKI MOLLWAY UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION.

         Plaintiff Marisco, Ltd., hired Defendant GL Engineering & Construction, Pte., Ltd. (“GLEC”), to construct and deliver a dry dock. Marisco says that GLEC did not timely complete and deliver the dry dock and instead left Marisco with an unfinished dry dock that did not meet specifications. Marisco further asserts that GLEC's principals, Defendants Lim Sing Tian and Raymond Gan, misrepresented their experience and ability.

         GLEC moves to compel Marisco to arbitrate its claims. Alternatively, GLEC says that Marisco should have attempted to mediate this matter before filing suit and that this court should dismiss the First Amended Verified Complaint or stay the case pending mediation. See ECF No. 9. Tian and Gan substantively join in the motion. See ECF No. 11. This court is unpersuaded by the motion and joinder and denies them.

         II. FACTUAL BACKGROUND.

         Marisco wanted a floating dry dock in Hawaii. See First Amended Verified Complaint ¶ 18, ECF No. 6, PageID # 226. On December 17, 2015, GLEC submitted a bid for the construction of the dry dock. Id. ¶ 24, PageID # 228.

         On December 30, 2015, Marisco sent GLEC $50, 000 Singapore dollars to rent a location in Indonesia to build the dry dock, with the understanding that the funds would be applied toward the outstanding balance owed on the down payment of the contract price. Id. ¶ 30, PageID # 229.

         On January 4, 2016, Tian and Gan met with Marisco representatives in Hawaii. Marisco says that Tian and Gan falsely represented 1) that GLEC had the experience, skill, and manpower to construct the dry dock per its specifications; and 2) that the Indonesia location was suitable for the construction and launching of the dry dock. Id. ¶¶ 31-37, PageID # 229-31.

         A few days later, on January 7, 2016, Marisco told GLEC that the dry dock absolutely had to be completed and delivered by a “drop-dead date” of September 30, 2016. Id. ¶ 41, PageID # 232.

         On January 9, 2016, GLEC increased its bid to build the dry dock by $690, 000. In seeking this additional amount, Tian and Gan promised that they would personally ensure completion and delivery of the dry dock by September 30, 2016. Id. ¶ 44, PageID # 233. Marisco says it relied on that promise when it agreed to have GLEC build the dry dock and when it agreed to the increased price. Id. ¶ 45.

         During the January 2016 meetings, Marisco told GLEC that the dry dock had to be built at a place where the water was at least five meters deep, so the dry dock could eventually be launched without damaging it. Id. ¶ 48, PageID # 234. Tian and Gan represented that they understood the depth requirement and that they would each personally ensure that it would be met so that the dry dock could be launched properly. Id.

         On January 20, 2016, Marisco and GLEC entered into the agreement to build the dry dock. Id. ¶ 49, PageID # 234-35; ECF No. 6-1 (copy of Dry Dock Construction Agreement). GLEC agreed to build and perform all the work required by the dry dock plans. Agreement ¶ 1.1, ECF No. 6-1, PageID # 272. In return, Marisco agreed to pay a total of $9 million, with $1.8 million due immediately, followed by eight progress payments of $900, 000, each progress payment to be paid upon completion of an additional 12.5% of the construction of the dry dock. Agreement ¶ 2.3(a), ECF No. 6-1, PageID # 274.

         GLEC warranted that, when the dry dock was tendered for delivery, it would be free from defects in workmanship, would conform to the specifications, would be in a finished condition, and would be fit for its intended purpose. Agreement ¶ 4.1, ECF No. 6-1, PageID # 277. Section 4.4 of the agreement required GLEC to promptly correct nonconforming work after being notified of any defect and after GLEC had inspected the work to confirm the defect.

         Section 16 of the agreement concerns “Dispute Resolution” and states:

16.1 Reference to a Surveyor.
The Parties must use the procedure set forth in Section 2.[5[1] for arbitration by an agreed surveyor to resolve disputes over contract administration, materials, and workmanship. The disputes referable to the agreed surveyor under the procedure outlined in Section 2.5 are: (a) status of work for progress payments under Section 2.5; (b) impact of Force Majeure on contract performance under Section 3.5; and (c) impact of any change orders on contract Sum and Delivery under Section 6.
16.2 Negotiation; Mediation; Litigation.
For any dispute that may arise out of this Agreement, the Parties are to meet and use their best efforts to resolve the dispute by agreement. The Parties are to meet to discuss the possibility of a mutually agreed upon procedure to resolve any specific dispute that has arisen. The procedure may be streamlined or simplified in any manner the parties determine. If no mutual agreement of the Parties is affected, then the dispute resolution will proceed as follows. Any dispute that may be referred to a surveyor as provided in Section 16.1 but cannot be resolved by such reference and good faith efforts of the Parties to resolve such dispute, and any other dispute, controversy, or claim arising out of or relating to this Agreement, including any question regarding breach, termination, or invalidity thereof, is to be resolved by litigation under Section 18.6[, which requires litigation in the state or federal courts in Hawaii].

         Section 2.5 of the ...


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