Giw Industries, Inc. v. Jerpeg Contracting, Inc., CV 106-127.

• Decision Date: 10 January 2008
• Docket Number: No. CV 106-127.,CV 106-127.
• Parties: GIW INDUSTRIES, INC., Plaintiff, v. JERPEG CONTRACTING, INC., Jerry Soultz, Margaret Soultz, and Alvin Quackenbush, Defendants.
• Court: U.S. District Court — Southern District of Georgia

Page 1323

530 F.Supp.2d 1323

GIW INDUSTRIES, INC., Plaintiff, v. JERPEG CONTRACTING, INC., Jerry Soultz, Margaret Soultz, and Alvin Quackenbush, Defendants.

No. CV 106-127.

United States District Court, S.D. Georgia, Augusta Division.

January 10, 2008.

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James W. Purcell, Michael N. Loebl, Fulcher Hagler, LLP, Augusta, GA, for Plaintiff.

Christopher A. Cosper, William James Keogh, III, Hull, Towill, Norman, Barrett & Salley, PC, Augusta, GA, for Defendants.

ORDER

LISA GODBEY WOOD, District Judge.

This matter comes before the Court on Defendants' motions for summary judgment. (Doc. nos.41, 57.) Upon the following, Defendants' motions are GRANTED IN PART and DENIED IN PART.

I. STATEMENT OF THE CASE

GIW Industries, Inc. ("GIW") brought this dispute against its former employee, Alvin Charles Quackenbush, its former contractor, JerPeg, Inc. ("JerPeg"), and JerPeg's owners, Jerry and Margaret ("Peg") Soultz. In its complaint, GIW alleges that JerPeg breached nineteen purchase order ("PO") contracts by failing to perform, either partially or entirely, under the terms of the contracts. (Compl. ¶ 23.) Next, GIW alleges that JerPeg and the Soultzes committed fraud by submitting invoices and otherwise making representations that the work was completed satisfactorily under the aforementioned PO contracts. (Id. ¶¶ 27-29.)

As to Defendant Quackenbush, GIW alleges two claims. First, GIW alleges Quackenbush defrauded GIW by approving the JerPeg invoices for payment on projects he knew or should have known were incomplete or not done. (Id. ¶¶ 30-31.) In addition, GIW alleges that, by approving these invoices, Quackenbush breached his duty of loyalty and good faith. (Id. ¶ 36.) As required at this stage in the proceedings, the following facts are viewed in a light most favorable to GIW, the nonmovant.

II. FACTUAL BACKGROUND

On April 15, 2003, GIW, a slurry pump manufacturer, hired Quackenbush as Plant Engineer for its Grovetown and Thomson Georgia plants. In this capacity, Quackenbush was charged with overseeing various capital projects involving plant maintenance. Quackenbush was also authorized to prepare bid documentation and contracts to carry out this work. (See Harris Dep. at 10-11, Ex. 1.) For a service contract, because the work performed does not normally go through receiving, Quackenbush was required to sign the invoices to attest that the work was completed in a workmanlike manner. (Harris Decl. ¶¶ 5, 14.) Quackenbush's signature directed GIW's accounting employees to pay the invoice. (Harris Dep. at 121.)

JerPeg is an Indiana corporation owned by Jerry and Peg Soultz. Mr. and Ms. Soultz are the only officers of JerPeg, and they are JerPeg's sole shareholders. (Soultz Dep. at 18-19.¹) Quackenbush first worked with JerPeg on a project around 1986. Since that time, Quackenbush and the Soultzes maintained an ongoing social relationship. The Soultzes attended a Quackenbush wedding and graduation. (Id. at 40.) After taking the job as Plant Engineer with GIW, Quackenbush contacted Mr. Soultz about some of the projects he was in charge of for GIW. (Id. at 32.) As a result, from July 2003 until November 2005 JerPeg worked on multiple projects at GIW, including the nineteen POs which are at issue in this case. (See Compl. ¶¶ 10-16.)

GIW's PO contracts contain language explicitly stating: "MODIFICATION OF AGREEMENT. This purchase agreement may not be modified except by a writing signed by both Buyer and Seller."² (Harris Decl. ¶ 11, Ex. A.) Thus, pursuant to the plain terms of the POs, any modifications to the PO contracts were required to be in writing. Nevertheless, during the course of JerPeg's performance, there were times when Quackenbush would change the scope of the work after the purchase order had been issued and "trade out" work of equivalent value. (Soultz Dep. at 81; Quackenbush Dep. at 121-22.) Quackenbush believes that all swapped work "balanced out." (Quackenbush Dep. at 270-71.)

For example, PO G-45886 called for JerPeg to "remove gantry across driveway and install air compressor dense phase sand system." (Defs.' Ex. 1.) Mr. Soultz acknowledged that JerPeg did not do the work on this PO "in whole or in part." (Soultz Dep. at 76-77.) Instead, JerPeg invoiced for work to "fabricate and install additional transporter; tie B tank together & all remedial work necessary as per [e]gineering." (Defs.' Ex. 2.) The amount JerPeg invoiced under this PO matches precisely the amount set forth in the PO, even though JerPeg performed completely different work. (Soultz Dep. at 80-81.) Quackenbush testified that he did not issue change orders for this work because he claims no one at GIW ever "told me to do a change order or how to do a change order." (Id. at 144-45.) Charles Harris, Quackenbush's supervisor, filed an affidavit which contradicted Quackenbush's testimony. Specifically, Harris stated:

I informed Quackenbush that if the scope of the work changed he had to get a revised quote from the vendor. I also informed Quackenbush that if a change was outside the original amount of the [p]urchase [o]rder, a change order should be issued.

(Harris Decl. ¶ 12.)

Another disputed issue with respect to the PO contracts involves invoicing. According to JerPeg, Quackenbush suggested it use the language on the invoices that followed the language of the PO, even when the actual work performed varied from the PO description. (Quackenbush Dep. at 121-22 ("[W]e traded off some work, and I told them to just follow the wording on the purchase order.")) Contrarily, GIW points to the fact that Quackenbush also testified that "I never told [JerPeg] how to actually word an invoice. It was, normally just copied off the purchase order." (See id. at 121.) In fact, when asked why he would tell contractors to follow the language of the PO, Quackenbush clarified, "I [] would tell them, hey, write down what we did, write it down." (Id.) Regardless, JerPeg's invoice description usually mirrored that of the PO, even if the work performed was different than the PO description.³ In many instances, JerPeg also noted on its invoices that the work had been done "AS PER AL QUACKENBUSH" (or some similar language) to indicate that Quackenbush had directed what was to be done. (See generally Defs.' Ex.App.)

For example, PO G-52473 called for JerPeg to "fabricate four load stands certified for 35,000 lbs each to be used for Toshiba tablet[.][T]able weight 105,000," which is exactly what JerPeg invoiced. (See Defs.' Exs. 20, 21.) However, the stands JerPeg provided were never certified to hold the requisite weight. In fact, Mr. Soultz acknowledged in deposition that anyone at GIW relying solely on the PO or invoice would have no way of knowing that the stands were not certified. (Soultz Dep. at 118-19.)

One of GIW's biggest projects with JerPeg, encompassing seven of the nineteen POs at issue in this case, concerned the foundation required for installation of a specific machine. (See Defs.' Exs. 23-35.) Mr. Soultz acknowledged that JerPeg (1) invoiced GIW for "preparatory work on drawings and PE stamp for Toshiba machine foundation as per our proposal"; (2) charged $67,750 for that work; (3) received payment; and (4) never provided a PE stamp to GIW. (Soultz Dep. at 130, Defs.' Ex. 26.) Although Mr. Soultz claims that "he did as [Quackenbush] told [him] to do", when specifically asked about this invoice in deposition, Mr. Soultz acknowledged that it was a "lie" that he provided $67,750 in drawing work or PE stamps, as indicated on invoice 05-JP-124 for Purchase Order G-54592. (Soultz Dep. at 133-34.)

On multiple occasions, Harris voiced his concerns to Quackenbush, that several projects under contract to JerPeg appeared incomplete.⁴ (Harris Dep. at 12-13.) In response, Quackenbush always reassured Harris that the projects would be completed in due course. (Id. at 16.) Quackenbush responded similarly to other GIW employees when they brought concerns to his attention. (Sterzen Dep. at 18; Neal Dep. at 35, 41-42.)

A. Brief Summary of the Disputed Contracts

GIW Purchase Order G-45886: On or about September 16, 2003, GIW and JerPeg entered into this contract for JerPeg to remove a gantry across a driveway and install an air compressor dense phase sand system. When asked about this work, Mr. Soultz admitted "[w]e did not do [the work for Purchase Order 0-45886] in whole or in part." (Soultz Dep. at 77, 78, 81; see also Harris Dep. at 41, 45-46.)

GIW Purchase Order T-14438: On or about March 28, 2005, GIW and JerPeg entered into this contract for JerPeg to install a ten ton Shawbox crane, underhung bridge, electric rails, and supports. In deposition, Mr. Soultz admitted that JerPeg left the job incomplete. (Soultz Dep. at 101; see also Baggett Dep. at 39-40.)

GIW Purchase Order T-14484: On or about May 12, 2005, GIW and JerPeg entered into this contract for JerPeg to install ten columns with footers and main beams for this ten ton Shawbox crane. According to GIW, JerPeg never completed installation and the work that JerPeg did has been condemned as unsafe. (See generally Harris Decl. ¶ 19; Compl. ¶ 11.)

GIW Purchase Order T-14514: On or about June 17, 2005, GIW and JerPeg entered into this contract for JerPeg to cut and install end trucks, shorten the crane span, and install this ten ton Shawbox crane. According to GIW personnel, JerPeg's modifications caused the crane to interfere with the building, the crane modifications were not square, the crane wheels did not stay in contact with the rails, and the modifications were not certified or to specification. (Haggett Dep. at 39-40; Baggett Decl. Ex. 1 at ¶ 5(a); Sterzen Dep. at 31-32.)

GIW Purchase Order G-52321: On or about February 18, 2005, GIW and JerPeg entered into "this contract for JerPeg to remove the Toshiba crane support and install a new 40-foot cress support beam, in addition to completing a core bore, checking the footers, and...