McCarty Corp. v. Pullman-Kellogg, Civ. A. No. 80-505-A.
| Decision Date | 28 June 1983 |
| Docket Number | Civ. A. No. 80-505-A. |
| Citation | 571 F. Supp. 1341 |
| Parties | McCARTY CORPORATION v. PULLMAN-KELLOGG. |
| Court | U.S. District Court — Middle District of Louisiana |
Wesley W. Steen, Baton Rouge, La., for plaintiff.
Daniel Lund, New Orleans, La., for defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In this diversity action, plaintiff, an insulation subcontractor, claims that the general contractor, Pullman-Kellogg, breached the contract, causing him damage, also claims that the contract should be nullified because of error as to the principal cause of the contract and further alleges fraudulent misrepresentations by the defendant causing damage. The defendant denies plaintiff's claims and asserts a counterclaim alleging that plaintiff failed to do certain work for which it was paid and further alleges deficient work in some respects. The matter has been tried to the court without a jury and the following will constitute the court's findings of fact and conclusions of law required by Rule 52, Fed. R.Civ.P.
The following facts are undisputed and have been stipulated.
1) Plaintiff in this action is the McCarty Corporation, a Louisiana corporation having its principal place of business in Port Allen, Louisiana.
2) The defendant in this action is Pullman-Kellogg, Division of Pullman, Incorporated, is a Delaware corporation with its principal place of business in Houston, Texas.
3) McCarty is an insulation contractor that specializes in all phases of the engineering, distribution and application of commercial and industrial thermal insulation materials.
4) At the time that the subcontract which forms the subject matter that this law suit was awarded, McCarty had over twenty years experience in commercial and industrial insulation work.
5) McCarty has performed insulation work in such areas as Seattle, Washington, and San Juan, Puerto Rico; however, McCarty voluntarily limits most of its insulation work to the geographical boundaries of the state of Louisiana.
6) The gross volume of McCarty's insulation work has ranged between eight and twelve million dollars per year over the past five years.
7) Prior to McCarty's performance of the instant subcontract at the Shell-Norco facility located near Norco, Louisiana, McCarty had intermittently performed the work at the Shell-Norco plant for over twenty years.
8) As a result of McCarty's prior work experience at the Shell-Norco plant, McCarty was familiar with the working conditions at the Shell-Norco jobsite at the time it submitted its bid on the subject subcontract.
9) On three separate occasions prior to the subject subcontract, McCarty had contracted with the defendant, Pullman-Kellogg, for the application of industrial insulation materials.
10) The largest of the three prior subcontracts which McCarty performed for Pullman-Kellogg was the GO-1 job located at the same Shell-Norco facility on which the instant insulation subcontract work was performed.
11) The approximate dollar value of the GO-1 job was $3,100,000.00.
12) The GO-1 job was started in 1973 and completed in 1975.
13) McCarty performed the GO-1 job and each of its other two prior subcontracts with Pullman-Kellogg to Pullman-Kellogg satisfaction and none of the three prior projects resulted in litigation. McCarty submitted two claims for additional compensation on GO-1.
14) Pullman-Kellogg is engaged, inter alia, in the business of engineering and constructing industrial plants, including oil refineries.
15) On or about the sixth day of January, 1977, Pullman-Kellogg entered into a prime contract with the Shell Oil Company to perform certain work and services for Shell pursuant to an expansion program which Shell was conducting at its Norco manufacturing complex near Norco, Louisiana.
16) The prime contract is entitled:
Contract No. 152-01 Project OL-5 and Project OFH/S-2 OP-5 Expansion Program
17) The expansion program is called "The OP-5 Expansion Program" and the prime contract is referred to as "OP-5."
18) Pursuant to the contract, Pullman-Kellogg was required to design, engineer, construct, furnish all material and equipment, and perform all home office services (including construction planning) for an olefins unit and its auxiliary facilities (called Project OL-5) and for a feed hydrotreater and sulphur plant (called Project OFH/S-2), both of which were portions of the OP-5 Expansion Program at Shell's Norco Manufacturing Complex.
19) Pullman-Kellogg was to be compensated for the work it performed and the services it rendered on a cost-plus basis.
20) It was pursuant to the OP-5 contract that Pullman-Kellogg awarded McCarty the thermal insulation subcontract which forms the subject matter of the instant action.
21) Shell is the owner of the 800 acre refinery facility near Norco at which McCarty performed certain insulation work pursuant to its subcontract with Pullman-Kellogg.
22) Shell is not a party to the law suit and has no pecuniary interest in its outcome.
23) In about May, 1978, Shell and Pullman-Kellogg discussed the placement of a subcontract for the insulation of the pipe and equipment which was being constructed in the following sections of the OP-5 Expansion Project:
24) Shell desired an expedited placement of the insulation subcontract in order to take advantage of the depressed economic conditions then existing in the insulation industry.
25) Pursuant to discussions, Pullman-Kellogg recommended to Shell that a formal Invitation to Bid be issued by the end of May, 1978, requesting firm unit prices for the insulation work from the prospective bidders.
26) The bidders were to formulate their unit prices for the insulation materials based on the preliminary bill of materials which would be given to the bidders at the time the Invitation to Bid was issued.
27) The preliminary bill of materials which was to be compiled by Pullman-Kellogg was to indicate to the bidders:
28) Upon receipt of the bids, Pullman-Kellogg would apply the unit prices which it obtained from the bidders against the Pullman-Kellogg/Foster Wheeler's (Foster Wheeler was the design engineer for Units 03 and 04 of the project) estimated material quantities and the Unit costs would be extended.
29) These extended costs would be analyzed and a total projected cost would be developed for each bidder for each section of the project.
30) The bidder/bidders submitting the most attractive bids/bids (price and other factors considered) would then be awarded the various sections of the insulation work.
31) In order to calculate the actual contract price which the successful bidder would receive, the successful bidder would be required to perform his own bill of materials when the actual drawings and specifications became available and to apply this take-off against the agreed upon unit prices as set out in the subcontract.
32) The successful bidder would then submit these calculations to Pullman-Kellogg for auditing purposes.
33) The Engineering Division of Pullman-Kellogg would verify material quantities and the Procurement Division of Pullman-Kellogg would verify unit costs.
34) Upon the issuance of Pullman-Kellogg's approval of the successful bidder's calculations, the unit price subcontract would then be converted to a lump sum agreement.
35) By utilizing the plan described in the above paragraphs for placing the insulation subcontract, Shell and Pullman-Kellogg anticipated that they would:
36) Pullman-Kellogg initially projected that the insulation work for the OP-5 Expansion Project work would cost $19,792,170.00 and take 594,000 manhours to complete.
37) Pullman-Kellogg's internal projection of manhours and cost per unit was as follows:
Unit Manhours Costs
01 Ethylene 395,000 13,125,000.00
01 Common Offsites 113,000 3,792,000.00
02 OFH 40,000 1,335,500.00
03 BDU 26,000 863,000.00
04 GHT 20,500 676,670.00
38) Because of the large volume of work to be performed, Pullman-Kellogg recommended to Shell that the Invitation to Bid be issued only to the following experienced insulation applicators:
39) In August, 1978, Pullman-Kellogg estimated that the insulation work would cost $17,667,070.00 and take 594,500 manhours and that the common offsites would take 50,800 manhours.
40) On September 6, 1978, Mr. W.T. Smith of Pullman-Kellogg informed each of the above named insulation companies by Telex that Pullman-Kellogg was considering them as a possible source of supply and...
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McCarty Corp. v. Pullman-Kellogg, Div. of Pullman, Inc.
...and Pullman-Kellogg and awarded McCarty recovery of $490,497.92 plus interest from the date of judicial demand. McCarty Corp. v. Pullman-Kellogg, 571 F.Supp. 1341 (M.D.La.1983). McCarty, the plaintiff in the district court, appeals, claiming that the court erred in failing to award McCarty ......