Guarantee Elec. Co. v. Big Rivers Elec. Corp.

• Decision Date: 24 September 1987
• Docket Number: Civ. A. No. 85-0031-O(CS).
• Citation: 669 F. Supp. 1371
• Parties: GUARANTEE ELECTRIC COMPANY, Plaintiff, v. BIG RIVERS ELECTRIC CORPORATION; Burns and Roe, Inc., et al., Defendants.
• Court: U.S. District Court — Western District of Kentucky

669 F. Supp. 1371

GUARANTEE ELECTRIC COMPANY, Plaintiff, v. BIG RIVERS ELECTRIC CORPORATION; Burns and Roe, Inc., et al., Defendants.

Civ. A. No. 85-0031-O(CS).

United States District Court, W.D. Kentucky, at Owensboro.

September 24, 1987.

COPYRIGHT MATERIAL OMITTED

Byron E. Francis, Richard A. Oertli, Francine I. Katz, St. Louis, Mo., Richard S. Taylor, Miller, Taylor, Burlew & Meyer, Owensboro, Ky., for plaintiff.

Morton Holbrook, Lizbeth Ann Tully, Holbrook, Gary, Wible & Sullivan, Owensboro, Ky., for defendant, Big Rivers Elec. Corp.

Kent McElwain, John M. Bush, Stites and Harbison, Louisville, Ky., for defendants, Automatic Sprinkler Corp. of America, Figgie Intern., Inc., The American Ins. Co.

Michael A. Owsley, English, Lucas, Priest & Owsley, Bowling Green, Ky., for defendant, Burns & Roe, Inc.

MEMORANDUM OPINION

SIMPSON, District Judge.

This action involves a contract dispute arising from the construction of the D.B. Wilson Station, (hereinafter "Station") a 440 megawatt coal-fired generating unit. In its complaint, Guarantee Electric Company (hereinafter "GECO"), a subcontractor, alleges various claims in contract and tort against Big Rivers Electric Company (hereinafter "BREC"), owner of the Station; Burns and Roe, Inc. (hereinafter "BRI"), an engineering firm retained by BREC to supervise and manage construction of the Station; and, Automatic Sprinkler Corporation of America (hereinafter "ASCA"), the prime contractor of BREC for construction of the fire protection system at the Station. This matter is before the Court on separate motions by BREC and BRI for summary judgment in their favor pursuant to Rule 56, Fed.R.Civ.P. Jurisdiction exists pursuant to 28 U.S.C. § 1332 based on diversity of citizenship and an amount in controversy in excess of $10,000.00.

Interpreting the evidence in a light most favorable to GECO,¹ the facts may be stated as follows. In the late 1970s, BREC began to plan for the construction of the Station to be located in Centertown, Kentucky. The proposed Station would include two 440 megawatt coal-fired generating units (hereinafter "Unit I" and "Unit II"). In 1978, BREC entered into an engineering service contract for the design and construction of the generating plant with BRI, "Contract No. 559A". Among its other responsibilities, BRI agreed to supervise and manage its construction.

In 1980, an employee of BREC approached GECO for the purpose of inquiring whether or not GECO would submit a bid for electrical work related to the construction of a fire protection system to be built for both Units I and II. GECO responded affirmatively and its name was placed on a list of prospective bidders.

GECO formally submitted its bid for electrical work to ASCA by letter. ASCA incorporated GECO's bid with its own and submitted a bid to BREC for the complete construction of a fire protection system for both Units. This complete bid was ultimately accepted by BREC and a contract for construction of the fire protection system was executed between BREC and ASCA on August 14, 1981. This contract was known as "Contract 624".

On October 7, 1981, Henry E. Bartoli, an employee of BRI and Project Manager for construction of the Station, notified ASCA by letter and at the direction of BREC, that Unit II of the construction project was on indefinite hold. This written communication was acknowledged by ASCA.

In December of 1981, ASCA issued a Purchase Order to GECO. This Purchase Order is the contract between ASCA and GECO for electrical work to be performed in connection with the fire protection systems at both Units I and II.

BREC and ASCA later executed Amendment No. 3 to Contract 624 confirming that Unit II was on indefinite hold in August of 1982. The amendment acknowledges a letter agreement between BREC and ASCA on October 7, 1981, which suspended work on Unit II and officially designated the letter agreement as formal notice that Unit II was on hold. BRI also signed the amendment.

On October 29, 1982, GECO began to mobilize labor and material at the Station site for both Unit I and Unit II, and simultaneously performed electrical work on both Units. GECO first learned that Unit II was on indefinite hold from ASCA on July 11, 1983. GECO later received a copy of Amendment No. 3 to Contract 624 on August 10, 1983. Thereafter, GECO brought this action.

For its cause of action against BREC, GECO asserts that BREC may be liable to GECO for breach of contract or, in the alternative, under the doctrine of unjust enrichment. In addition, GECO alleges that BRI was the agent of BREC and, as principal, BREC may be held liable for BRI's breach of its duty to supervise construction at the Station due to the negligent failure of BRI to notify GECO that BREC had eliminated Unit II from the construction project. Lastly, GECO alleges negligence in connection with its breach of contract claim. As against BRI, GECO alleges that BRI was negligent in the performance of its duties as construction supervisor/manager, and breached a duty owed to GECO by failing to notify GECO that construction on Unit II had been put on hold prior to the commencement of work by GECO.

As parties moving for summary judgment, BREC and BRI have the initial burden of proving the nonexistence of any genuine issues of material fact and their entitlement to summary judgment as a matter of law. Anderson v. Liberty Lobby, 106 S.Ct. at 2511; Heheman v. E. W. Scripps Co., 661 F.2d 1115, 1128 (6th Cir. 1981), cert. denied, 456 U.S. 991, 102 S.Ct. 2272, 73 L.Ed.2d 1286 (1982). Once the defendants have sustained their initial burden, then it is incumbent on the non-movant to "set forth specific facts showing there is a genuine issue for trial." Anderson, 106 S.Ct. at 2514. With these standards in mind, the Court must review the record to determine whether or not summary judgment in favor of either BREC or BRI is proper.

BREACH OF CONTRACT; UNJUST ENRICHMENT

GECO asserts its entitlement to recovery for breach of contract by virtue of an alleged contractual relationship with BREC based upon various provisions of the contracts between the parties to this action. Alternatively, GECO alleges that it enjoys the status of a third-party beneficiary with regard to Contracts 559A and 624. Finally, GECO alleges that BREC may be liable under the doctrine of unjust enrichment.

In support of GECO's claim of a contractual relationship with BREC, GECO has directed this Court to certain provisions of the agreements between the parties. The Purchase Order executed between GECO and ASCA states as follows:

Subcontractor GECO shall observe and be bound by all provisions set forth in the contract between contractor ASCA and owner BREC, including but not limited to ...

Article VI of the Contractor's ASCA Proposal made a part of the contract between BREC and ASCA states, in pertinent part, that:

The Bidder ASCA shall not enter into any subcontract ... without the approval in writing of the Owner BREC.... If the Bidder shall enter into a subcontract with any other subcontractor for the performance of any part of this contract Contract 624, the Bidder shall be as fully responsible to the Owner and Administrator for the acts and omissions of such subcontractor and of persons employed by such subcontractor as the Bidder would be for its own acts and omissions and those of persons directly employed by it. Bidder shall prepare all subcontracts on REA Form 282 actually 232 included herein. The written approval of the Owner, for purposes of this section, shall be deemed fulfilled when the Owner executes Form 282 232.

Contract 624, Subcontracts, Section 8.

REA Form 232 is prefaced as an agreement between the contractor and the subcontractor, and states, in pertinent part, as follows:

Section 2. The subcontractor agrees that all of the work to be done hereunder shall be carried out as directed by the Engineer BRI of the Owner BREC in full accordance with its terms and provisions of this contract.

Section 5. The work to be performed hereunder shall be completed to the satisfaction of the Contractor ASCA and the owner ...

Section 7. This agreement shall not become effective until consented to and approved in writing by the Owner.... Approval by the Owner ... shall in no way operate to release the Contractor from the Contractor's duties and obligations under the Contract Contract 624.

The Purchase Order and REA Form 232 represent agreements exclusively between GECO and ASCA. They are the only contracting parties to the agreements. The provision of requiring GECO to abide by the provisions of Contract 624 as expressed in both agreements inures solely to the benefit of ASCA in the event that GECO were not to comply with the design and construction requirements established by BRI. Article VI of ASCA's proposal to BREC specifically provides that ASCA is liable to BREC for all acts or omissions of its subcontractors and their employees. REA Form 232, Section 7 confirms that the contractor may be liable for the acts of the subcontractor by virtue of the specific disclaimer against interpretation as a release in favor of the contractor from the broad liability provision of Contract 624.

With regard to GECO's contention that privity exists as between BREC and itself solely on the language contained in the Purchase Order, there is no basis and GECO has not cited any law that would allow a third-party to be bound by a contract merely by mention of another contract therein to which the third-party is bound. It is obvious that BREC did not intend to become a party to any contract between a contractor and his subcontractor. Article VI and REA Form 232 merely evidence an intent by BREC to be empowered to either authorize or not authorize the actual making of the agreements as between contractors and their subcontractors, not join in their contracts. In addition, BREC did not seek an additional cause of action against subcontractors. Rather, BREC sought to preserve...