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United States v. David Boland, Inc.

United States District Court, D. Hawaii

November 20, 2019

UNITED STATES, for the use and benefit of KINGSTON ENVIRONMENTAL SERVICES, INC. Plaintiff,
DAVID BOLAND, INC., et al., Defendants.


          Derrick K. Watson District Judge.

         This action arises out of an infrastructure construction project at Wheeler Army Airfield in Oahu, Hawaii. The prime contractor hired by the federal government, Defendant David Boland, Inc., retained Plaintiff Kingston Environmental Services, Inc., as a subcontractor to perform part of the work. By all accounts, there were numerous problems during the construction. Kingston brings this lawsuit under the Miller Act, 40 U.S.C. Sections 3131-34, and holds Boland responsible for the construction delays that occurred and the losses it allegedly suffered as a result.

         In 2017, this Court granted in part Defendants' motion for summary judgment, stayed the case until Kingston had complied with the remedial administrative procedures in the subcontract, and reserved ruling on the issue of whether Kingston's claims were barred by the “no damages for delay” provision in the subcontract. Dkt. No. 145. Now that the stay has been lifted, this matter is before the Court on Defendants' renewed motion for summary judgment as to the enforceability of the “no damages for delay” provision. Dkt. No. 185. Because enforcement of the “no damages for delay” provision hinges on material facts disputed by the parties, Defendants' motion is DENIED.


         A. Relevant Factual Background

         On June 29, 2012, the United States Army Corps of Engineers (USACE or Government) entered into a contract with Defendant David Boland, Inc., (Boland), making Boland the primary contractor for a construction project known as the Combat Aviation Brigade Infrastructure, Phase I, Wheeler Army Airfield, Oahu, Hawaii (the Project).[1] In November of 2012, Boland and Plaintiff Kingston Environmental Services, Inc., (Kingston) entered into a subcontract agreement (the Subcontract), valued at more than $15.8 million. Dkt. No. 116-2 at 1. Under the Subcontract, Kingston agreed to perform part of the work on the Project and furnish the necessary labor, materials and equipment to do so. Dkt. No. 116-2 at 13.

         Roughly a month after mobilizing, Kingston encountered obstacles. First, Kingston was unable to use its preferred labor force. Dkt. No. 116-4, ¶ 13. In particular, an internal email at Kingston states:

We need the union agreement signed so we can supplement CAB/TEMF with our Seattle labor. Without some of our talents our [sic] in the machines and working/pushing the locals, we are and will continue to spend upwards of 50% more than necessary in my limited opinion.

Id. Second, Kingston ended up procuring rental equipment and labor at much higher rates than it had accounted for.[2] Kingston, for instance, rented a 25-ton truck at $94.13 per hour and an excavator at $84.69 per hour, when Kingston had bid, respectively, $50.71 per hour and $37.78 per hour. Dkt. No. 116-4 at ¶ 14. Further, on April 12, 2013, Kingston hired Delta Construction Company to perform part of its work and to be compensated on a “time and materials” basis. Id. at ¶ 15. Delta's hourly costs again substantially exceeded what Kingston had projected. Id. at ¶¶ 16- 17.[3] To make matters worse, Kingston installed sanitary sewer manholes that did not conform to the Project's specifications, and the USACE consequently rejected them, causing Kingston to have to replace them.[4] Kingston does not contest that these events occurred or that it incurred these costs. Dkt. No. 134, ¶¶ 11-13, 18. Nevertheless, Kingston maintains that Boland mismanaged the Project and hindered the progress of Kingston and other subcontractors. Dkt. No. 134, ¶ 10.[5] According to Kingston's expert, Boland caused Kingston to incur cost overruns of $6, 882, 738. Dkt. No. 134-3.

         By March 2014, Kingston had completed approximately 46% of the work it agreed to perform. Dkt. No. 134-2, ¶ 8. On March 6, 2014, Boland and Kingston revised the Subcontract by executing Change Order No. 10, under which, inter alia: (a) the scope of the work Kingston was to perform was reduced by over $8.4 million; and (b) Boland and Kingston “waiv[ed] and release[ed]” any claims they had against each other “resulting directly from delays in performance . . . and the schedule impacts of such delays caused [at] any time prior to the date” of Change Order No. 10.[6] The claims the contracting parties mutually released, however, did not include “any claims related to delays” for which Kingston had “previously notified [Boland] in writing . . .” Dkt. No. 116-3 at 9, Section X.

         Boland and Kingston later revised the Subcontract on at least three separate occasions by executing three additional Change Orders-Change Order Nos. 12, 13, and 14-which were respectively executed on June 20, 2014, September 5, 2014, and September 22, 2015.[7] The cumulative effect of Change Order Nos. 12-14 was to increase the amount Kingston was to be paid by $338, 357.95. See Dkt. No. 116-1 at 90-93. Each of these Change Orders stated that “[Kingston] acknowledges that all claims for additional time, impact, delay, and/or disruption have been included in the revised subcontract amount.” Id.

         B. Procedural History

         Kingston filed this action on April 29, 2016, seeking payment from Western Surety under its Miller Act bonds (Count I) and alleging that Boland breached the Subcontract (Count II). Dkt. No. 1, ¶¶ 38-50. Boland and Western Surety moved for partial summary judgment, arguing that: (1) Kingston failed to comply with the administrative remedial procedure mandated in Paragraph 13A of the Subcontract; and (2) Kingston's delay claims are barred by the “no damage for delay” clause in Paragraph 12.B of the Subcontract.[8] Dkt. No. 145 at 7; Dkt. No. 185 at 3-4. On August 30, 2017, the Court granted Defendants' motion as to the first issue, reserved ruling on the second issue, and stayed the case pending the outcome of the remedial procedure in Paragraph 13A of the Subcontract. Dkt. No. 145 at 8.

         Once the stay was lifted on June 28, 2019 (Dkt. No. 178), Defendants renewed their motion for partial summary judgment on the issue of the enforceability of the “no damages for delay” provision in the Subcontract, and incorporated the briefing and argument submitted as part of their initial motion for partial summary judgment. Dkt. No. 185 at 5. Plaintiffs agreed that the matter was “procedurally ripe” and should be decided on the briefing and oral argument previously ...

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