Cent. Okla. Pipeline, Inc. v. Hawk Field Servs., LLC

• Decision Date: 12 April 2012
• Docket Number: No. 11–992.,11–992.
• Citation: 2012 Ark. 157,400 S.W.3d 701
• Parties: CENTRAL OKLAHOMA PIPELINE, INC., d/b/a CenOk Pipeline, Inc., Appellant v. HAWK FIELD SERVICES, LLC; Petrohawk Operating, Inc., a Wholly Owned Subsidiary of Petrohawk Energy Corporation; Petrohawk Operating Company; Petrohawk Operating Company, LLC; Lee Hallmark; John Doe 1; John Doe 2; and John Doe 3, Appellees.
• Court: Arkansas Supreme Court

2012 Ark. 157
400 S.W.3d 701

CENTRAL OKLAHOMA PIPELINE, INC., d/b/a CenOk Pipeline, Inc., Appellant
v.
HAWK FIELD SERVICES, LLC; Petrohawk Operating, Inc., a Wholly Owned Subsidiary of Petrohawk Energy Corporation; Petrohawk Operating Company; Petrohawk Operating Company, LLC; Lee Hallmark; John Doe 1; John Doe 2; and John Doe 3, Appellees.

No. 11–992.

Supreme Court of Arkansas.

April 12, 2012.

[400 S.W.3d 703]

Martin W. Bowen, Bowen Law Firm, PLLC, Little Rock, for appellant.

R. Scott Morgan, Perkins & Trotter, PLLC, Little Rock, Mitchell L. Herren, Hinkle Law Firm LLC, Wichita, KS, for appellees.

COURTNEY HUDSON GOODSON, Justice.

[2012 Ark. 1]Appellant Central Oklahoma Pipeline, Inc., d/b/a/ CenOk Pipeline, Inc., appeals the grant of summary judgment on its claims against appellees Hawk Field Services, LLC; Petrohawk Operating, Inc., a wholly owned subsidiary of Petrohawk Energy Corporation; Petrohawk Operating Company; Petrohawk Operating Company, LLC; Lee Hallmark; and John Does 1, 2, and 3. For reversal, appellant asserts that the circuit court erred (1) by ruling that Arkansas Code Annotated section 17–25–103(d) (Repl.2010) barred its claims for breach of contract and a violation of the Arkansas Deceptive Trade Practices Act (ADTPA); (2) in ruling that section 17–25–103(d) does not violate article 2, section 13 of the Arkansas Constitution; (3) by ruling that Arkansas Code Annotated section 17–25–313 (Repl.2010) [2012 Ark. 2]does not impose a tort duty on engineers who fail to inform prospective bidders that they must have a contractor's license; (4) in ruling that section 17–25–103(d) bars its negligence claims against appellee Hallmark and the

[400 S.W.3d 704]

John Doe defendants and its tort claims against the Hawk defendants based on respondeat superior; and (5) by ruling that its constitutional claim and tort claims are barred by principles of res judicata.

Procedural History and Factual Background

On March 18, 2009, appellant filed suit against Hawk Field Services, LLC; Petrohawk Operating, Inc.; Petrohawk Operating Company; Petrohawk Operating Company, LLC (collectively “Hawk” or “Hawk defendants”); and Crafton, Tull, Sparks & Associates, Inc. (“CTS”). In its complaint, appellant asserted against Hawk claims for breach of contract, a violation of the ADTPA, and for the establishment of a mechanics' and materialmen's lien, as well as a miners' lien. According to the complaint, in July 2008, Hawk publicly solicited and later accepted appellant's bids for the construction of a twelve-mile, natural-gas pipeline located partially in Conway County (“South Section Project”) and partially in Conway and Van Buren Counties (“North Section Project”) on easements held by Petrohawk Operating Company. Subsequently, the parties modified the contract for the North Section Project, wherein Hawk engaged appellant to build the “Phase One” and “Loop” pipelines in Van Buren County. Appellant alleged that it had provided substantial amounts of labor and materials for the completion of the projects, which included, among other things, clearing the pipeline right of way; digging ditches; breaking, blasting, and cutting rock; welding pipe; installing pipe fittings; burying pipe; and installing tie-ins. In addition, appellant asserted that [2012 Ark. 3]substantial amounts of labor and materials were provided by subcontractors that it hired in connection with its performance of the contracts.

As its claim for breach of contract, appellant asserted that Hawk terminated without cause its contract to construct the Phase One pipeline project on December 16, 2008, and that Hawk ordered it to cease all operations on January 31, 2009, for the stated reason that appellant was not licensed to perform work as a contractor, as required by section 17–25–103. Appellant alleged that Hawk subsequently terminated both the North Section and the South Section contracts on February 2, 2009, because appellant was not licensed by the Arkansas Contractors Licensing Board and that Hawk took the position, in reliance on section 17–25–103(d), that it would not pay amounts owed for labor and materials because appellant did not possess a contractor's license. Appellant claimed that Hawk had refused to pay $7,469,917.21 for work it had completed.

Appellant asserted that Hawk violated the ADTPA by treating appellant in a deceptive and unconscionable manner. In this regard, appellant alleged that, during a meeting held on January 13, 2009, Hawk asserted that appellant would be penalized for not completing work on the projects on time but that, several days later, Hawk assured appellant that penalties would not be imposed and that appellant would be paid for the sums it was owed. Appellant stated that, based on these assurances, it continued to work on the projects. It alleged that Hawk actually had no intention of foregoing penalties and of paying appellant and that Hawk made these assurances in an effort to keep appellant working without pay. Appellant contended that Hawk behaved in a deceptive and unconscionable manner by stringing it [2012 Ark. 4]along under the false promise of pay and waiting until near the completion of the work to assert that it would not be paid because it did not have a contractor's license.

[400 S.W.3d 705]

As its claim against CTS, appellant alleged that CTS prepared contract drawings for the projects and that it was the engineer on the projects. Appellant asserted that CTS had a duty to inform it of the necessity of having a contractor's license under the provisions of section 17–25–313 and that CTS was negligent for failing to give notice of this requirement. ¹

Hawk Field Services, LLC, filed a separate answer disputing the material allegations of the complaint. Pleading affirmatively, it alleged that, based on section 17–25–103(d), appellant was barred from asserting claims for breach of contract and a violation of the ADTPA because appellant failed to obtain a contractor's license from the Arkansas Contractors Licensing Board. Hawk Field Services also asserted a counterclaim for breach of contract, alleging that appellant overcharged for its services and that it did not complete the projects by the deadlines set forth in the contracts because it failed to supply sufficient labor, equipment, and materials for the projects. It contended that, as a result, it was required to employ other contractors to complete the work at considerable expense. Petrohawk Operating, Inc., and Petrohawk Operating Co. answered the complaint and also alleged, as an affirmative defense, that appellant's claims were barred by section 17–25–103(d) because appellant did not hold a contractor's license.

The Hawk defendants subsequently filed a joint motion for summary judgment on the ground that section 17–25–103(d) barred appellant's claims for relief. Along with their motion [2012 Ark. 5]and brief, they submitted the affidavit of Lee Hallmark, the Director of Operations for Hawk Field Services, LLC. Hallmark averred that the pipeline was constructed on right-of-way easements obtained from private landowners along the pipeline route and that no land upon which the pipeline traverses is owned by the Hawk defendants with the exception of a small section measuring 8,162.29 feet that is owned by One Tec, a subsidiary of Petrohawk Energy Company. Further, Hallmark stated that the pipeline is utilized by other companies to transport natural gas, such as Chesapeake Energy, which leases space on the pipeline to transport natural gas. In its response, appellant argued that, based on Arkansas Code Annotated section 17–25–101(a)(1) (Repl.2010), for the statutory bar to apply the work must be done “on public or private property for lease, rent, resale, public access, or similar purpose” and that Hawk had failed to prove that the easements in question were leased. Appellant also contended that, if a license was required, Hawk's engineers had an affirmative duty to inform it about this requirement based on section 17–25–313.

On April 1, 2010, appellant filed an amended complaint to assert that section 17–25–103(d) is unconstitutional as a violation of article 2, section 13 of the Arkansas Constitution.² Thereafter, on May 14, 2010, the circuit court held a hearing on Hawk's motion for summary judgment. At the conclusion of the hearing, the circuit court took the matter under advisement.

On July 22, 2010, appellant filed a second amended complaint adding Lee Hallmark and John Does 1, 2, and 3 as defendants. Appellant alleged that Hallmark was the project [2012 Ark. 6]engineer for the Hawk

[400 S.W.3d 706]

defendants and that he prepared the construction specifications provided to contractors when the bids were solicited. Appellant also alleged that the John Doe defendants were engineers who provided engineering specifications for the projects and the July 2008 Invitation to Bid. Appellant contended that Hallmark and the John Doe defendants had a duty under section 17–25–313 to notify it that a contractor's license was required and that their failure to inform it of this requirement constituted negligence. Further, appellant alleged that Hallmark and the John Doe defendants were employees of the Hawk defendants and that their negligence was imputed to the Hawk defendants under the doctrine of respondeat superior.³

On July 23, 2010, the circuit court entered an order granting Hawk's motion for summary judgment. In this order, the court found that appellant was a “contractor” as defined by section 17–25–101(a)(1); that the contracts entered into by the parties were for labor and materials exceeding $20,000; that the undisputed facts revealed that appellant did not have a contractor's license; and that section 17–25–103(d) precluded appellant from bringing the causes of action set forth in its complaint. Further, the circuit court found that Hallmark's affidavit constituted proof that the pipeline constructed by appellant for the Hawk defendants clearly brought...