United States ex rel. Pileco, Inc. v. Slurry Sys., Inc., Case No. 09 C 7459.
| Decision Date | 08 February 2012 |
| Docket Number | Case No. 09 C 7459. |
| Citation | 872 F.Supp.2d 710 |
| Parties | UNITED STATES of America, for the use and benefit of PILECO, INC., Plaintiff, v. SLURRY SYSTEMS, INC. and Fidelity and Deposit Insurance Company of Maryland, Defendants. Slurry Systems, Inc., Third Party Plaintiff v. Bauer Maschinen Gmbh, Third Party Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
OPINION TEXT STARTS HERE
Steven J. Kadison, Thomas M. Craig, Kamenear, Kadison, Shapiro & Craig, Chicago, IL, for United States of America, for the use and benefit of Pileco, Inc. and Bauer Maschinen GMBH.
Michael M. Lorge, David Allen Shapiro, Michael Aaron Zalay, Bronson & Kahan, LLC, Chicago, IL, for Slurry Systems, Inc. and Fidelity and Deposit Insurance Company of Maryland.
Cornelius F. Riordan, William James Cotter, Jr., Riordan, McKee, & Piper, LLC, Chicago, IL, Regina E. Gaebel, Elmhurst, IL, for Fidelity and Deposit Insurance Company of Maryland.
Richard P. Tauras, Swanson Martin & Bell LLP, Chicago, IL, for Bosch Rexroth Corporation.
MEMORANDUM OPINION AND ORDERIn this lawsuit, the United States Government, on behalf of Pileco, Inc.,1 has sued Slurry Systems, Inc. (“SSI”) and its surety, Fidelity and Deposit Company of Maryland (“F & D”), seeking to recover money allegedly owed on a contract executed in connection with a reservoir project undertaken by the Army Corps of Engineers in Willow Springs, Illinois. In its complaint, Pileco alleged two counts: Count One, asserted under the Miller Act, seeks payment on a payment bond, issued by F & D, in connection with the project; and Count Two alleges breach of contract and seeks monetary damages in excess of $4 million from SSI. SSI answered the complaint, and, along with its answer, filed a counterclaim against Bauer Maschinen and Pileco, alleging that, in connection with the reservoir project, it subcontracted with Pileco and Bauer to provide certain equipment necessary to the job, that the equipment never worked properly, that Pileco and Bauer breached their agreement with SSI, and that SSI paid Pileco all that it was due under the contract.
The case is before the Court on a number of motions, all of which are denied.
Slurry Systems, Inc. is a speciality foundation contractor which constructs slurry walls and installs earth retention systems for a variety of private and public construction projects. In connection with one such project—a project known as the Chicago Underflow Program (“CUP”)/McCook Reservoir/Stage 2 Cutoff Wall—SSI submitted a bid to the Army Corps of Engineers to build a cutoff wall, and won. On January 18, 2006, the Army Corps of Engineers and SSI entered into a contract, whereby SSI was to perform certain tasks in connection with the CUP Reservoir project (namely, digging through 35 to 60 feet of soil, cutting into the underlying bedrock a depth of 2 to 5 feet for the construction of a soil-bentonite cutoff wall. As is generallythe case with government projects, SSI was required to supply a bond as a prerequisite for bidding on the job, and it did so. On January 24, 2006, F & D issued a payment bond in accordance with the Miller Act, with SSI as principal, the United States of America as obligee, and F & D as surety.
SSI determined that it was necessary to subcontract certain equipment to complete its work on the project, and, on December 7, 2006, SSI and Pileco entered into a rental agreement, whereby Pileco agreed to provide to SSI a BC40 Trench Cutter, as well as other equipment necessary to the CUP Reservoir project, and SSI agreed to pay Pileco a rental fee in the amount of $88,800 per month; the agreement was backdated, with an effective date of October 19, 2006.
Actually, there is a larger back story to the rental agreement. Even before SSI submitted its bid for the CUP Reservoir Project, it asked Bauer Machinen, Pileco's parent company, to get involved. According to SSI, SSI contacted Bauer on or about October 25, 2005, shortly after the Army Corps of Engineers solicited bids for the CUP McCook Reservoir Project, and asked Bauer to assist it in preparing its bid. According to SSI, Bauer recommended the necessary equipment to complete the Project and was instrumental in helping it figure out exactly what it needed to perform the work required for the project. According to SSI, Bauer “became actively involved in the Project bid preparation and supplied extensive information to SSI for the submission of SSI's bid for the Project.” SSI's Second Amended Counterclaim and Third–Party Complaint, ¶ 12. Bauer “specifically recommended that SSI use a BC40 Cutter” and “selected for SSI a large, commercial crane manufactured by Liebherr (Model 885) .... which is necessary to hold, lift and operate the Cutter.” Id. Bauer provided preliminary quotations for the necessary equipment, but advised SSI that it planned to have its wholly-owned subsidiary, Pileco, actually issue and sign the final contract. Id., 519–20. Apparently, no one questioned this decision, and there does not appear to be anything in the record to disclose the reasons for this arrangement. But, in any event, this is exactly what occurred: on or about May 9, 2006, Bauer provided to SSI—on Pileco letterhead—the final quote for the lease of the cutter and related equipment, which the parties signed on December 7, 2006, with an effective date of October 19, 2006. Id., ¶ 20. Despite the introduction of Pileco, SSI continued to deal directly with Bauer, and, even Pileco's people admitted that Bauer controlled the deal. George Smith, Pileco's CEO at the time and the man who signed the agreement on behalf of Pileco, testified that Bauer negotiated and drafted the agreement and that Bauer “owned the business, they controlled everything.” Deposition of George Smith, p. 29 ().
The cutter was delivered to the job site and SSI began cutting operations in October of 2006. SSI and F & D contend that the cutter was a lemon from the start; even Pileco concedes that the cutter was inoperable for more than 120 days. The parties went back and forth about parts, operations, repairs, credits, etc. Some issues were covered under warranty and some were not; Bauer and Pileco credited SSI for some repairs and parts, and invoiced SSI for others.
The CUP Reservoir project wrapped up in January 2009, and SSI released and returned the rental equipment to Pileco on January 23, 2009. According to Pileco, SSI received more than $16 million for its work on that project; yet it made only sporadic payments under the rental agreement.According to Pileco, SSI owed it, under the terms of the contract, almost $5 million, yet SSI paid Pileco just $532,800.00. SSI disputes that it owes Pileco anything and has counterclaimed for breach of contract, among other state law claims.
The parties attempted to resolve their disputes. And, on December 1, 2009, Pileco filed this lawsuit. The parties consented to proceed before a United States Magistrate Judge, and the case was reassigned to this Court on January 21, 2011. The case is currently before the Court on a plethora of motions: Pileco has moved for summary judgment on its complaint and on SSI's counterclaim; F & D has moved for summary judgment on Pileco's Miller Act claim; and Bauer has moved to dismiss certain counts of SSI's Third Party Complaint and for summary judgment on the others. And these motions led to additional motions: Pileco has moved to strike the Statement of Facts filed in response to both of its summary judgment motions, as has Bauer; most recently, F & D filed a motion to dismiss Pileco's and Bauer's motions for failure to prosecute. The Court considers each below.
In Pileco's view, this is a simple and straightforward breach of contract case, an appropriate candidate for summary judgment because liability is clear and damages are easily calculated. SSI has attempted to make the case much more complicated, bringing in not only its own breach of contract claim, but also numerous state law claims. Both sides miss the mark. At its core, this is a contract case. But it is not a simple, straightforward one. The contract is short, but not clear. And there are so many issues of fact concerning potential breaches by both sides and inexactness about damage calculations that it was clear to this Court from the start that summary judgment was not appropriate. And the defendants' attempts to bring in iffy state law claims hasn't helped the situation; the parties' conduct throughout their relationship and this lawsuit has made this case far more complicated than it needs to be. Even at its best, however, it would not be as simple as Pileco would like to think. Having said that, the Court turns to the parties' motions.
In its complaint, Pileco alleges two counts: a breach of contract count against SSI, seeking to recover rental payments and other amounts it claims it is owed under the rental agreement, and a Miller Act claim against F & D, in which Pileco seeks to recover the same amounts under the payment bond issued in connection with the CUP Reservoir Project.
Summary judgment is granted when the movant shows that there is “no genuine dispute as to any material fact” and that it is “entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). On a motion for summary judgment, the Court considers the evidentiary record in the light most favorable to the nonmovant and draws all reasonable inferences in its favor. E.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir.2002). “[T]o avoid summary judgment, a nonmovant ‘must produce more than a scintilla of evidence to support his position’ that a genuine issue of material fact exists.” Safari Circuits, Inc. v. Chicago School Reform Board of Trustees, 474 F.Supp.2d 993,...
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