EMTA Insaat Taahhut ve Ticaret A.S. v. Cosmopolitan Inc.
| Decision Date | 15 October 2020 |
| Docket Number | Civil Action No. ELH-20-1457 |
| Parties | EMTA INSAAT TAAHHUT VE TICARET A.S., Plaintiff v. COSMOPOLITAN INCORPORATED, Defendant. |
| Court | U.S. District Court — District of Maryland |
Plaintiff EMTA Insaat Taahhut ve Ticaret A.S. ("EMTA"), a Turkish construction company, filed suit against defendant Cosmopolitan Incorporated ("Cosmopolitan" or "COSMO"), a general contractor, alleging breach of contract. ECF 1 (the "Complaint"). Cosmopolitan retained EMTA to act as a subcontractor with respect to a federal construction project administered by the U.S. Department of State Overseas Building Operations (the "OBO"). COSMO allegedly failed to pay EMTA for its services and refused to reimburse EMTA for advances that it made on Cosmopolitan's behalf. Id.
The Complaint contains three counts: breach of contract (Count I); specific performance (Count II); and violation of the Prompt Pay Act (the "PPA"), 31 U.S.C. § 3901 et seq. (Count III). ECF 1 at 7-9.1 The suit is supported by two exhibits. ECF 1-2; ECF 1-3.
Cosmopolitan has answered the Complaint as to Counts I and II and asserted a counterclaim for breach of contract. ECF 15. Cosmopolitan has also moved to dismiss Count III under Fed. R. Civ. P. 12(b)(6). ECF 15 (the "Motion"). EMTA has answered defendant's counterclaim (ECF 19) and opposes the Motion (ECF 18), supported by a memorandum. ECF 18-1 (collectively, the "Opposition"). Defendant has replied. ECF 24.
No hearing is necessary to resolve the motion. See Local Rule 105.6. For the reasons that follow, I shall grant the Motion.
EMTA is a Turkish company with its principal place of business in Ankara, Turkey. ECF 1, ¶ 1. It is "engaged in the business of construction subcontracting and logistics in Turkey and the Middle East." Id.
Cosmopolitan is a Maryland corporation with its principal place of business in Colombia, Maryland. Id. ¶ 2. In 2017, Cosmopolitan entered into a contract with the OBO under Contract No. SAQMMA17F0152 (the "Prime Contract") for a project called the "Adana HATS Project" (the "Project"). Id. ¶ 5. "HATS" is an acronym for "hardened trailer systems" which are "a type of office trailer system." Id. The Project involved the installation of HATS at the U.S. Consulate in Adana, Turkey. Id. And, the Prime Contract was a "design-build contract under which Cosmopolitan was responsible to develop the detailed design for the work and the construct the work." Id. ¶ 7.
On July 17, 2017, Cosmopolitan and EMTA executed a "Subcontract Agreement." ECF 1-2 (the "Subcontract"). The parties amended the Subcontract twice—on or about January 20, 2018 and April 25, 2018—"to expand EMTA's scope of work." ECF 1, ¶ 8.
Pursuant to the Subcontract, EMTA was responsible for the installation of certain HATS trailers after their delivery to Turkey. ECF 1-2 at 2. This responsibility included setting the trailers and installing utilities in accordance with the Subcontract and the designs developed by Cosmopolitan. Id.
The Subcontract incorporates the Prime Contract. The Subcontract states, ECF 1-2 at 2: "[T]he US Department of State Overseas Building Operations... and COSMO has entered into ... [the Prime Contract] and Statement of work and attachments...are hereby incorporated by reference and are among the Final Contract Documents." Further, the Subcontract provides that "EMTA shall perform all work per the [OBO's] or COSMO's requirements described in the Final Contract Documents." Id. And, "[e]xcept as may be specifically provided otherwise by the terms of this Subcontract Agreement, EMTA shall have only the rights which COSMO has under [the OBO Contract]." Id.
The Subcontract also establishes the terms for payment. Section 3.3, "Time of Payment," provides that "COSMO shall make monthly progress payments to EMTA following COSMO's receipt of payment from [OBO] within seven (7) working days." ECF 1-2 at 4. Further, it states, id.:
It is specifically understood and agreed that payment to EMTA will be directly related to EMTA's scope of work. COSMO's payment to EMTA for its scope of work will also be contingent upon COSMO's receipt of payment from the [OBO] for the same. EMTA specifically acknowledges and agrees and assumes the risk of nonpayment by the [OBO] to COSMO, including retainage, for EMTA's scope of work; provided, however, that the [OBO]'s nonpayment is based upon EMTA's failure to perform its work in a timely and workmanlike manner. Should the [OBO] withhold payment from COSMO because of EMTA's failure to perform its work in a timely and workmanlike manner, EMTA acknowledges that it will not make any claims against COSMO for payment. For purposes of clarity, the parties agree that EMTA does not assume the risk of nonpayment by the [OBO] if said nonpayment is due to delays or improper performance by COSMO or others.
Under Section 3.4, Cosmopolitan retains the right to withhold payment from EMTA as follows, id.: "Upon justifiable and reasonable evidence from the [OBO] of default in any degree by EMTA, COSMO may withhold amounts otherwise due under this Subcontract or due under any other contractual arrangement between the parties to compensate COSMO for costs COSMO has incurred or may incur for which EMTA may be responsible hereunder or otherwise."
Section 5.2 of the Subcontract, titled "COSMO Caused Delays," is also relevant. It provides, id. at 5:
If construction is delayed because of COSMO's act or omission, EMTA shall be entitled to the reasonable costs associated with this delay, including but not limited to, extended supervision, extended general conditions costs, extended overhead, labor inefficiencies, material escalation costs, acceleration costs, and attorney fees. Notwithstanding the foregoing, EMTA shall not be entitled to delay damages incurred due to the delay in completing the design and/or purchase & delivery of HATS for [the Project].
When the Subcontract was executed, Cosmopolitan allegedly had not completed the final construction drawings for the Project. ECF 1, ¶ 7. Plaintiff contends that "Cosmopolitan assured EMTA that construction would be consistent with other similar projects which it allowed EMTA to tour, and consistent with the preliminary drawings and specifications upon which EMTA based its bid." Id. EMTA maintains that it "relied upon these assurances and documentation." Id.
Plaintiff asserts that Cosmopolitan "failed to properly staff and supervise the Project;" "failed to design the work in accordance with the contract documents;" and its drawings and plans "were internally inconsistent." Id. ¶¶ 9, 10. Further, EMTA alleges that OBO often rejected Cosmopolitan's designs for failure to conform to its design criteria. Id. ¶ 10. And, EMTA claims that it "timely raised these issues with Cosmopolitan" and notified Cosmopolitan of the "delays and damages that were occurring as a result." Id. ¶¶ 9 ,10.
EMTA contends that Cosmopolitan's failures and mistakes created added costs to the Project and caused delays and inefficiencies. ECF 1, ¶¶ 9, 10. According to plaintiff, pursuant to Section 5.2, EMTA "is entitled to recover its costs associated with delay caused by Cosmopolitan including its extended supervision, extended general conditions, escalation, and attorney's fees." Id. ¶ 11.
EMTA asserts that Cosmopolitan first "failed and refused to pay" EMTA in a timely manner for the payment that was due in May 2018. Id. ¶ 12. Then, "after EMTA's June 2018 payment application, Cosmopolitan failed to pay EMTA at all." Id. According to plaintiff, Cosmopolitan claimed that it was not paying EMTA because it was not getting paid by OBO. Id. However, Cosmopolitan apparently assured plaintiff "that payment would be forthcoming, and requested that EMTA continue to perform" under the Subcontract. Id. Plaintiff claims that, in reliance on Cosmopolitan's promise, it completed its work under the Subcontract. Id. ¶ 13. And, EMTA asserts that both Cosmopolitan and OBO "accepted the work performed by EMTA." Id.
Plaintiff contends that Cosmopolitan "regularly submitted its own payment application" to the OBO under the Prime Contract, "which included payment for the work completed by EMTA." Id. ¶ 14. And, in doing so, Cosmopolitan "certified to OBO that all work covered by the payment applications was completed satisfactorily, that Cosmopolitan had paid its subcontractors from previous payment applications to the OBO and would timely pay its subcontractors with the proceeds received from the current payment application, and that Cosmopolitan was not invoicing the OBO for amounts it intended to withhold from its subcontractors." Id. ¶ 14. However, plaintiff claims that this certification was false because Cosmopolitan had not paid EMTA and "did not pay EMTA for the work that Cosmopolitan was invoicing to OBO." Id.
After the completion of the Project, Cosmopolitan claimed that it had been charged for liquidated damages by OBO for failing to timely complete the Project and "was passing those liquidated damages through to EMTA." Id. ¶ 16. Cosmopolitan also alleged that "EMTA was responsible for additional delay damages under the Subcontract." Id. And, therefore, Cosmopolitan told plaintiff that it owed Cosmopolitan approximately $1.4 million but Cosmopolitan did not owe EMTA anything. Id.
However, plaintiff alleges that Cosmopolitan only made these claims "in an effort to avoid its payment obligations to EMTA." Id. ¶ 17. And, EMTA claims that Cosmopolitan owes EMTA "in excess of $600,000 in unpaid invoices and retainage from prior progress payments, plus over $800,000 in additional damages due to the numerous delays for which Cosmopolitan was ultimately responsible." Id.
In addition, Cosmopolitan asked EMTA to assign an EMTA quality control engineer to assist Cosmopolitan in fulfilling its quality control responsibilities under the Prime Contract. Id. ¶ 15. In return, Cosmopolitan agreed to pay EMTA the monthly salary of that engineer. Id. The parties signed a...
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