U.S. Composite Pipe S., LLC v. Frank Coluccio Constr. Co., & Safeco Ins. Co. of Am.,

• Decision Date: 07 October 2014
• Docket Number: CIVIL NO. 12-00538 JMS-KSC
• Citation: U.S. Composite Pipe S., LLC v. Frank Coluccio Constr. Co., CIVIL NO. 12-00538 JMS-KSC (D. Haw. Oct 07, 2014)
• Parties: U.S. COMPOSITE PIPE SOUTH, LLC, Plaintiff, v. FRANK COLUCCIO CONSTRUCTION COMPANY, and SAFECO INSURANCE COMPANY OF AMERICA, Defendants. FRANK COLUCCIO CONSTRUCTION COMPANY, Counterclaimant, v. U.S. COMPOSITE PIPE SOUTH, LLC, Counterclaim Defendant, and WESTCHESTER FIRE INSURANCE COMPANY, and CITY AND COUNTY OF HONOLULU, Additional Counterclaim Defendants.
• Court: U.S. District Court — District of Hawaii

U.S. COMPOSITE PIPE SOUTH, LLC, Plaintiff, v. FRANK COLUCCIO CONSTRUCTION COMPANY,and SAFECO INSURANCE COMPANY OF AMERICA, Defendants.

FRANK COLUCCIO CONSTRUCTION COMPANY, Counterclaimant, v. U.S. COMPOSITE PIPE SOUTH, LLC, CounterclaimDefendant,andWESTCHESTER FIRE INSURANCE COMPANY,and CITY AND COUNTY OF HONOLULU, Additional CounterclaimDefendants.

CIVIL NO. 12-00538 JMS-KSC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

October 7, 2014

ORDER GRANTING IN PART AND DENYING IN PART MOTIONS FOR SUMMARY JUDGMENT, OR FOR PARTIAL SUMMARY JUDGMENT

I.INTRODUCTION

Currently before the court are several Motions for Summary Judgment, or for Partial Summary Judgment, in this diversity action stemming from a $37 million sewer construction contract (the "Beachwalk Contract") between Counterclaim Defendant City and County of Honolulu(the "City") and Defendant/Counterclaimant Frank Coluccio Construction Company("FCCC").

At one level, the dispute is relatively simple -- is PlaintiffU.S. Composite Pipe South, LLC("Composite Pipe") entitled to full payment from FCCC for specialized sewage pipe that Composite Pipe supplied for the Beachwalk Contract, or, on the other hand, is FCCC entitled to damages and to withhold payment because of problems with the pipe?But in addressing those questions, the case becomes highly complex, both procedurally and factually.The Motions from all sides raise a variety of issues ranging from contractual interpretation and civil engineering to possible applications of provisions of Hawaii's Uniform Commercial Code("UCC").

After considerable effort reviewing the lengthy evidentiary record, the court readily concludes that a myriad of genuine issues of material fact exist.Accordingly, except as to one issue, the Motions are DENIED.The evidence is undisputed, however, that Composite Pipe is entitled at this stage to the second (of three) installment payments for the pipe at issue, and Composite Pipe's Motion is GRANTED to that extent.

II.BACKGROUND

Before setting forth the basic background, it bears emphasizing that the record contains obvious disputes of fact as to many salient points -- for example, the precise contractual obligations of the parties; the circumstances leading to the change in pipe at issue; whether the pipe met proper standards; whether the pipe was delivered late; responsibility for the July 2012 flooding of the sewage shaft; and whether that inundation caused damage to FCCC's equipment that, in turn, caused foreseeable consequential damages regarding a different sewage construction contract at Ala Moana Beach Park between FCCC and the City.

The parties -- with counsel experienced in commercial and construction litigation -- know that the court cannot resolve disputes of material fact at the summary judgment stage.See, e.g., McGinest v. GTE Serv. Corp., 360 F.3d 1103, 1113 n.5(9th Cir.2004)("[I]t is axiomatic that disputes about material facts and credibility determinations must be resolved at trial, not on summaryjudgment.").In that sense, it is not helpful for the parties to argue, as they sometimes do here, that opposing testimony is false or not credible.See, e.g., Dominguez-Curry v. Nev. Transp. Dep't, 424 F.3d 1027, 1036(9th Cir.2005)("[T]he judge does not weigh disputed evidence with respect to a disputed material fact.Nor does the judge make credibility determinations with respect to statements made in affidavits, answers to interrogatories, admissions, or depositions.")(quotingT.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630(9th Cir.1987)).

With this background, the court sets forth the details of the action only as necessary to establish the key disputes of fact, and to make certain rulings of law that might focus further proceedings in this matter (including the non-jury trial currently set to begin on December 9, 2014).

A.The Beachwalk Contract and Composite Pipe's Complaint

The June 23, 2009 Beachwalk Contract between the City and FCCC was for construction of a "Beachwalk [Wastewater Pump Station] to Ala Moana Park Sewer: Phase 1 -- Force Main System[.]"Doc. No. 1, Compl.¶ 7.Among other things, the Beachwalk Contract involved the placement of sewage piping from Waikiki to a station near Ala Moana Park, and required installation of a specialized double-curved section of pipe to be placed under the Ala Wai Canal.The project was necessitated by a consent decree between the City and the Environmental Protection Agency resulting, at least in part, from a well-publicized sewage failure in 2006.

For this purpose, Composite Pipe provided $3.5 million worth of "Meyer Pipe"(manufactured by a German company, Meyer Rohr + Schacht, which is now insolvent) to FCCC pursuant to a November 13, 2011 Purchase Order (the "Purchase Order") between Composite Pipe and FCCC.¹(That Purchase Order led to "Change Order No. 4" of the Beachwalk Contract.)Composite Pipe was to be paid in installments by FCCC: fifty percent upon signing of the Purchase Order, twenty five percent upon delivery to the job site, and twenty five percent after installation and pressure testing.Id.¶ 12.Allegedly, Composite Pipe delivered the pipe to FCCC, FCCC installed it, and the City eventually accepted the Beachwalk Contract project after pressure testing.FCCC paid the first installment to Composite Pipe, but has allegedly refused or wrongfully delayed payment of the second and third installments.Id.¶¶ 28, 30.²Composite Pipe filed this action to recover over $1.8 million as payment for those installments with interest, as well as attorneys' fees and costs.Id.¶ 34.

B. FCCC's Amended Counterclaim

As part of its defense, FCCC filed an Amended Counterclaim against Composite Pipe, joining the City as an "Additional Counterclaim Defendant" under Federal Rules of Civil Procedure 13(a) and (h).FCCC contends it need not make the final payments because (1) the pipe did not meet certain specifications and/or was defective; (2) FCCC is entitled to liquidated damages because the pipe was delivered late; and (3) FCCC is entitled to a large offset (or related damages from the City) because of a breach of contract and negligence by Composite Pipe and/or the City.See generallyDoc. No. 42, Am. Counterclaim.

The Amended Counterclaim makes detailed allegations about how and why the Meyer Pipe was chosen -- it was selected by the City as a replacement for "Al Watari Pipe" from a Kuwaiti firm that was described, and relied upon, in City bidding documents when FCCC originally bid on the Beachwalk Contract.The Amended Counterclaim alleges some of the specific circumstances (e.g., change orders, negotiations, and communications with the City and its retainedmanaging agent, AECOM Technology Corporation) which FCCC believes establish that the City is responsible for negotiating the November 2011 Purchase Order, and choosing, approving, and/or later accepting the Meyer Pipe.³

FCCC alleges that the Meyer Pipe was defective and did not meet engineering specifications set forth in the Purchase Order and/or Beachwalk Contract (including Change OrderNo. 4).And it describes further problems that arose during and after installation, leading to questions as to who was responsible for those problems and whether FCCC is entitled to consequential or other damages as a result.See generallyid. at pp. 7-21.

In particular, FCCC alleges that during installation of the pipe, a "catastrophic" failure occurred on or about July 7, 2012, resulting in an inundation and flooding of "the shaft and pipe train."Id.¶ 62.This failure "caused property damage to FCCC's microtunneling boring machine and other equipment, and overtwo months of delay for dewatering and repair operations."Id.Composite Pipe and the City dispute that there was anything wrong with the Meyer Pipe, and proffer evidence (in turn, disputed by FCCC) that the July 7, 2012 inundation was not caused by any problem with the pipe, but rather was caused by FCCC's own installation errors.

Separately, FCCC alleges that "Meyer PipeNo. 19 . . . was used with an Intermediate Jacking Station and broke during initial coupling on Saturday, September 15, 2012."Id.¶ 68."The broken pipes caused delays as the broken pipe was removed and the situation analyzed to determine the cause."Id."The damages caused by the delays [to FCCC] were in an amount not less than $119,609.84."Id.¶ 73.The parties dispute whether the cause of this September 15, 2012 breakage was FCCC's installation error (as Composite Pipe and the City contend), or the result of Composite Pipe's inadequate or improper notification or labeling as to the characteristics of different pieces of pipe.Id.¶¶ 70-72.

And FCCC seeks consequential damages resulting from the loss of use of its specialized microtunneling boring machine (or related delay), and in particular, costs related to a separate October 2011 sewage construction contract between FCCC and the City (the "Ala Moana Contract").Id.¶¶ 78, 116.The theory is that damage to the machine, or delay resulting from the inundation, inturn affected FCCC in its implementation of the Ala Moana Contract.The City "through oral discussions was aware that FCCC was planning on using the same [microtunneling boring] machine on both [the Beachwalk and Ala Moana] projects, which was why the Ala Moana Bid [by FCCC] was over 25 million dollars below the next lowest bid."Doc. No. 145-1, Don BergmanDecl. ¶ 3.

The Amended Counterclaim consists of five causes of action against Composite Pipe, Westchester, or the City.Count One alleges "breach of contract and breach of warranty" against Composite Pipe as follows:

83.FCCC has performed all of its obligations under the Purchase Order.

84.[Composite Pipe] has breached the Purchase Order by reason of its (a) failure to timely deliver the [Composite Pipe] Meyer Pipe; (b) delivery of pipe that did not conform to the requirements of the Purchase Order; (c) breach of express and implied

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