P. H. Glatfelter Co. v. Babcock
| Decision Date | 14 December 2020 |
| Docket Number | Civil No. 1:19-CV-02215 |
| Parties | P. H. GLATFELTER COMPANY, Plaintiff, v. BABCOCK & WILCOX POWER GENERATION GROUP, INC., Defendant. |
| Court | U.S. District Court — Middle District of Pennsylvania |
MEMORANDUM
Before the court is Defendant's motion to dismiss and to strike pursuant to Rules 12(b)(6) and 12(f) of the Federal Rules of Civil Procedure. (Doc. 14.) This action was brought by Plaintiff, P. H. Glatfelter Company ("Glatfelter"), to recover damages for, inter alia, the alleged breach of contract by Defendant, Babcock & Wilcox Power Generation Group, Inc. ("Babcock"), to replace Glatfelter's aging industrial boiler system used to power its paper manufacturing processes. (Doc. 1, pp. 1-4.)1 Babcock has moved to dismiss four of the five counts in the complaint, including Glatfelter's claims for fraud, negligent misrepresentation, promissory estoppel, and unjust enrichment.2 (Doc. 14.) The court finds that Glatfelter's claims for fraud and negligent misrepresentation are presently barred by the application of Pennsylvania's parol evidence rule; Glatfelter's claims forpromissory estoppel and unjust enrichment are properly pled in the alternative; Glatfelter's damages will be capped by the contract's limitation on liability clause if there is found to be a valid contract after discovery; and "Babcock & Wilcox Power Generation Group, Inc." will be dismissed from this case as a non-entity. The court will therefore deny the motion to strike, and grant in part and deny in part the motion to dismiss. (Doc. 14.)
According to its complaint, Glatfelter is a global supplier of engineered materials that previously owned a paper mill ("the Mill") in Spring Grove, Pennsylvania used to produce a variety of paper products. (Doc. 1, pp. 5-6.) The Mill generates its own power from three interconnected boiler systems. (Id. at 6.) These systems produce steam necessary for the papermaking process and energy to power the Mill, the excess of which is sold to third parties in the regional power grid. (Id.) To generate this steam, the Mill relied on coal-fired boilers. (Id. at 7.)
In 2013, the United States Environmental Protection Agency ("EPA") issued new regulations intended to reduce emissions from industrial facilities utilizing boilers. (Id.) In pertinent part, these regulations required industrial facilities, like the Mill, to comply with more stringent emissions metrics by January 27, 2017. (Id.) Glatfelter alleges that these regulations foreclosed its use of coal-fired boilers and necessitated a new boiler system and infrastructure. (Id.) To comply with theEPA's requirements, Glatfelter claims that it created a detailed plan for the construction and installation of new, natural gas-powered boilers and the infrastructure needed to harness the steam for use in its papermaking processes. (Id. at 7-8.) In September 2014, Glatfelter issued a request for proposals for the "design, fabrication, and installation of two natural gas-powered boilers that would meet Glatfelter's specifications and could be installed under Glatfelter's schedule." (Id. at 8.)
Glatfelter asserts that Babcock, a steam-generating boiler manufacturer with significant experience in the industry, submitted a response to Glatfelter's request on October 31, 2014. (Id.) After a lengthy negotiation period, Glatfelter claims that the parties entered into a construction agreement on May 15, 2015 for the design, fabrication, and installation of the boilers at the Mill. (Id. at 9.) Glatfelter alleges that Babcock's proposal was not the least expensive option, but it selected Babcock based on its proposal, its representation that it had "significant experience in the design and fabrication of the precise types of boilers that Glatfelter was seeking," and Glatfelter's understanding that Babcock would manufacture the boilers at its facility in West Point, Mississippi. (Id.)
Under the agreement, Babcock would provide all labor, materials, and services necessary for the design, fabrication, delivery, and installation of the boilers and related equipment, and was solely responsible for the methods, means,techniques, and sequencing of construction. (Id. at 10.) The parties' contract states that Babcock would conform to Glatfelter's specifications, provide professional quality work, and perform its obligations within specific deadlines, noting that "time is of the essence" for the construction. (Id. at 10-11.) After the work was installed under the agreement such that Glatfelter could use the boilers for its manufacturing operations, Babcock agreed to meet continuing performance metrics for the boilers to ensure their ongoing use. (Id. at 11-12.) In total, the contract provided that Glatfelter would pay Babcock $11,705,601, plus any agreed-upon changes, over a period of installments for the project. (Id. at 12.)
The agreement also provided a number of remedies for Glatfelter in the event of breach by Babcock. For instance, if Babcock breached or defaulted under the agreement, Glatfelter "may, without prejudice to other remedies Glatfelter may have," correct such breach, and then deduct the reasonable costs to correct the breach from payments otherwise owed to Babcock. (Doc. 1-2, pp. 5, 15.) In addition, Glatfelter reserved the right to request that Babcock correct nonconforming work. (Id.) Glatfelter also reserved the right to withhold payment from Babcock "to such extent as may be necessary to protect itself from loss" due to a variety of conditions, including, inter alia, defective work that had not been remedied, Babcock's failure to cure a breach of the agreement, or evidence of Babcock's financial insecurity that could jeopardize completion. (Id. at 17-18.)Glatfelter retained the right to terminate its agreement with Babcock, "in whole or in part for any reason whatsoever upon no less than thirty (30) days prior written notice." (Id. at 22.) This provision also set forth the process for dissolution of the parties' relationship and withdrawal from the contract in the event that Glatfelter was dissatisfied with Babcock's performance, or for any other reason. (Id. at 22-23.) Finally, Glatfelter retained the right to bring suit in either the York County Court of Common Pleas or the Middle District of Pennsylvania for "all claims and causes of action, whether in contract, tort, breach of warranty or otherwise[.]" (Id. at 27-28.)
In addition, the contract contains mutual limitation of liability clauses, appearing in all capital letters. (Id. at 25.) These clauses provide as follows:
The parties' contract also includes an integration clause, stating that:
This Agreement represents the entire agreement between the Parties with respect to the subject matter hereof, [and] supersedes all prior contracts, correspondence, negotiations, discussions or understanding as well as any terms and conditions which may be attached to or incorporated in [Babcock's] quotation(s), offer(s) or invoice(s). Amendments to this Agreement must be in a writing that specifies it is an amendment to this Agreement and must be signed by duly authorized representatives of the Parties.
(Id. at 28.)
Glatfelter alleges that the parties "held a kick-off meeting at the Mill" on June 26, 2015, and that Babcock began the design and planning process for the two boilers. (Doc. 1, p. 12.) Meanwhile, Glatfelter claims that it began work on the other aspects of construction, including demolition and disposition of the existing boilers and boiler house, and construction of a new, three-story boiler facility. (Id.) On May 9, 2016, Glatfelter alleges that Babcock sent notice that it had stopped fabrication of the boilers one month before installation was set to begin because Babcock's West Point, Mississippi facility, where the boilers were being manufactured, was being shut down. (Id. at 13.) Babcock had allegedlydesignated the remaining work to third-party contractors. (Id.) While Glatfelter asserts that this transition was unplanned and gave rise to some concern, the pending project deadlines and sunk costs of almost $8 million motivated it to continue its relationship with Babcock. (Id.) In mid-May 2016, Babcock attempted to deliver and install a portion of one of the boilers, but Glatfelter claims that the boilers had been "fabricated at a larger size and would not fit within the boiler facility as designed." (Id. at 14.) Glatfelter alleges that the facility to house the boilers was already under construction and needed to be...
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