618 F.3d 253 (3rd Cir. 2010), 09-1182, EBC, Inc. v. Clark Bldg. Systems, Inc.

Docket Nº:09-1182.
Citation:618 F.3d 253
Opinion Judge:CHAGARES, Circuit Judge.
Party Name:EBC, INC.; State Steel Supply, Inc. v. CLARK BUILDING SYSTEMS, INC.; American Compost Corporation; A & M Composting, Inc.; Solid Waste Services, Inc., State Steel Supply, Inc., Appellant.
Attorney:Jennifer L. Gardner, Esq., Margaret M. Metzinger, Esq., Stewart D. Roll, Esq., Climaco Law Firm, Cleveland, OH, Paul R. Rosenberger, Esq., Persky, Shapiro & Arnoff, Beachwood, OH, for Appellant. Albert A. DeGennaro, Esq., Audobon, PA, William F. Fox, Jr., Esq., J.P. Mascaro & Sons, Harleysville, ...
Judge Panel:Before: SCIRICA and CHAGARES, Circuit Judges, and RODRIGUEZ [*], District Judge.
Case Date:August 18, 2010
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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618 F.3d 253 (3rd Cir. 2010)

EBC, INC.; State Steel Supply, Inc.


CLARK BUILDING SYSTEMS, INC.; American Compost Corporation; A & M Composting, Inc.; Solid Waste Services, Inc., State Steel Supply, Inc., Appellant.

No. 09-1182.

United States Court of Appeals, Third Circuit.

August 18, 2010

Submitted Under Third Circuit LAR 34.1(a) Feb. 23, 2010.

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Jennifer L. Gardner, Esq., Margaret M. Metzinger, Esq., Stewart D. Roll, Esq., Climaco Law Firm, Cleveland, OH, Paul R. Rosenberger, Esq., Persky, Shapiro & Arnoff, Beachwood, OH, for Appellant.

Albert A. DeGennaro, Esq., Audobon, PA, William F. Fox, Jr., Esq., J.P. Mascaro & Sons, Harleysville, PA, for Appellees.

Before: SCIRICA and CHAGARES, Circuit Judges, and RODRIGUEZ [*], District Judge.


CHAGARES, Circuit Judge.

In April 2004, now-defunct Clark Building Systems, Inc. (" Clark" ) entered into a contract with appellee A & M Composting, Inc. (" A & M" ), under which Clark would fabricate and deliver components for a large steel building to be assembled at A & M's facility. Clark, in turn, subcontracted with appellant State Steel Supply, Inc. (" State Steel" ) to supply raw steel for the project. When State Steel was not paid for a significant portion of the steel that it supplied, it brought this diversity action against A & M in the United States District Court for the Western District of Pennsylvania. The District Court granted A & M's motion for summary judgment in part, rejecting State Steel's claims for breach of contract and an account stated. It denied summary judgment on State Steel's claims of unjust enrichment and fraudulent inducement, and a bench trial ensued. The District Court thereafter granted A & M's motion for judgment on partial findings pursuant to Rule 52(c) of the Federal Rules of Civil Procedure, and entered final judgment. State Steel now appeals. We will affirm.



A & M operates a composting facility in Lancaster, Pennsylvania.1 In February 2003, a severe snowstorm caused the roof of its building to collapse, requiring replacement of the entire structure. On April 14, 2004, A & M engaged Clark in a contract (the " Contract" ) to fabricate a 465,000-square-foot facility composed of three steel buildings (collectively, the " Project Buildings" ) to replace the original. Joint Appendix (" JA" ) 320-21. A & M agreed to pay Clark a fixed price of $2,418,476, to be paid according to the following schedule:

Initial Down Payment Upon Execution of the Agreement: $ 90,000
Second Down Payment Seven Days After Execution of the Agreement: $ 507,619
Phased Payments Upon Delivery of Fabricated Buildings According to Phased Delivery Schedule: $1,820,857

JA 322-23. The Contract did not itemize expenses for project components, but the second payment was to be deposited into a joint checking account and was specifically " to be used to pay suppliers of the raw materials necessary for Clark to fabricate Page 259 the Project Buildings." JA 323. Upon delivery of each segment of the Project Buildings, Clark was to invoice A & M, and A & M was to satisfy the invoice within seven days. JA 41, 323-24. The Contract, under which time was of the essence, required Clark to fabricate the steel materials at its own facility and deliver them to A & M for assembly. Selected third parties would be responsible for the following: erecting the buildings, galvanizing the component steel materials, and supplying the necessary anchor bolts. JA 40, 322. Clark also represented that it " ha[d] the ability to secure and ha[d] made the necessary arrangements to secure the raw materials required for the fabrication of the Project Buildings...." JA 325. To that end, Clark entered into subcontracts with, among others, State Steel and EBC, Inc. (" EBC" ) to provide the raw materials. Pursuant to these agreements, EBC was to supply purlins, roofing, and siding materials, and State Steel was to deliver shipments of raw steel to Clark's facility. JA 273, 278, 308-09. A & M was not a party to these subcontracts. A & M paid Clark the initial down payment ($90,000) and thereafter deposited the second down payment ($507,619) into the joint checking account established for Clark's suppliers. EBC was paid from this account a deposit of $110,000 on April 23, 2004. JA 392-93. State Steel was also paid from this account a deposit of $100,000 on May 7, 2004. JA 337-38, 565-66. On May 26, 2004, A & M's General Counsel, William Fox, sent a letter to State Steel's President, Adrienne Chizek,2 which read in relevant part:

Re: Your Contract with Clark Building Systems, Inc. For Web Materials for Further Processing by ClarkI am General Counsel for Solid Waste Services, Inc. d/b/a J.P. Mascaro & Sons and its affiliated companies (" Mascaro" )[,] one of which is A & M Composting, Inc., the owner of the A & M Composting facility in Lancaster County, Pennsylvania.

Mascaro is a large regional company headquartered in Montgomery County, Pennsylvania, that engages in the collection, recycling, processing, transportation, disposal[,] and composting of solid waste. Mascaro has been in business for 35 years, it competes successfully with the national waste companies, it has strong, long-term bonding and banking relationships[,] and it is rated 5-A-1 by Dunn & Bradstreet.

Mascaro has contracted with Clark Building Systems, Inc. to provide a large fabricated steel building (i.e. approximately 465,000 square feet) related to the reconstruction of the A & M Compost facility. Clark has previous experience in providing this type of building to Mascaro, the last of which was a 250,000 square foot fabricated building for use at Mascaro's Wetzel County Compost facility in 2002.

We understand that Clark has contracted with your company to provide web materials for the A & M reconstruction project. We also understand that the amount of their contract with your company is approximately $450,000 and that Clark has made a substantial down payment to your company.

I am writing to advise you that under our contract with Clark, we make payment to Clark within seven days of the building material delivery for each completed phase, without defect, to our site. With respect to any balance that Clark may owe your company for the web

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materials, [our] company is willing, with Clark's permission, to pay you directly or by joint check made payable to Clark and your company within the seven day period, as long as our payment is credited by Clark against the amount due under our contract with Clark. It is our understanding that Clark is agreeable to this arrangement.

I am providing a copy of this letter to Sol Wansor and Jeff Smith, the President and Controller of Clark, and if you have any questions, please feel free to contact either of them or me.

JA 308-09. Fox sent identical letters to EBC and another subcontractor with whom Clark had entered into a supply agreement. JA 309A-D. The letter (the " Fox Letter" ) underpins this dispute. From May through November of 2004, State Steel delivered to Clark's facility a series of steel shipments, and it invoiced Clark accordingly. JA 42-43, 267. On August 4, 2004, Clark sent a request to A & M to forward a payment of $90,000 directly to State Steel for materials for which Clark had not yet paid. JA 568-70. A & M did so the following day. JA 49, 567. On September 24, 2004, Clark again requested that A & M forward $90,000 to State Steel for steel that had yet to be paid for, and A & M forwarded the payment to State Steel on September 27, 2004. JA 49-50, 571-72. These direct payments did not come from the joint checking account, and A & M made them with the understanding that its balance to Clark would be deducted accordingly. JA 49-50, 290. In all, A & M paid State Steel $280,000. JA 48. Clark fell behind schedule in delivering the fabricated steel components to A & M. On September 2, 2004, Fox wrote to Clark's President, Sol Wansor, detailing Clark's " serious failure to adhere to the delivery and completion schedule" set forth by the Contract. Supplemental Appendix (" SA" ) 8. He explained that A & M was unable to operate without the new buildings, and that Clark's delay jeopardized a $200 million composting contract with a governmental entity. Id. A & M ultimately hired mitigation subcontractors to complete the work for which Clark had been responsible under the Contract. JA 335-36; SA 11-15. This mitigation cost increased the total purchase price by $119,459.22, and was reflected in a Change Order form. JA 53, 336; SA 15. In a letter to Wansor dated October 7, 2004, Fox stated: " As a follow up to earlier correspondences, I have executed your form Change Order regarding the subcontractors that are now performing a portion of your work under the above-referenced contract. As indicated in my earlier letters, we have agreed to pay the subcontractors directly for the work they do." JA 335. Delivery of the fabricated steel components was completed in January 2005, and the buildings were assembled by March 2005. JA 55. On July 11, 2005, Wansor wrote to Mascaro about outstanding balances that A & M purportedly owed to Clark's subcontractors. Wansor attached an earlier memorandum written by Jefferey Smith (Clark's Controller) indicating that A & M owed State Steel an additional $214,958.20 and EBC an additional $117,781.95. JA 347. A & M vigorously denied that it owed anything more to either of these subcontractors. JA 56-57. Though it had invoiced Clark for steel materials valued at $489,902.15, it is undisputed that State Steel received only three payments totaling $280,000. JA 55. EBC, too, never received full compensation for the materials that it had supplied. Clark ultimately went out of...

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