Wartsila Nsd North America, Inc. v. Hill Intern., Inc.

• Decision Date: 29 October 2004
• Docket Number: Civil Action No. 99-4565(SSB).
• Citation: 342 F.Supp.2d 267
• Parties: WARTSILA NSD NORTH AMERICA, INC., Plaintiff, v. HILL INTERNATIONAL, INC., Defendant/Third-Party Plaintiff, v. John H. Clegg, Esquire, Daphne McNutt, Esquire, and Chaffe, McCall, Phillips, Toler & Sarpy, L.L.P., Third-Party Defendants.
• Court: U.S. District Court — District of New Jersey

342 F.Supp.2d 267

WARTSILA NSD NORTH AMERICA, INC., Plaintiff, v. HILL INTERNATIONAL, INC., Defendant/Third-Party Plaintiff, v. John H. Clegg, Esquire, Daphne McNutt, Esquire, and Chaffe, McCall, Phillips, Toler & Sarpy, L.L.P., Third-Party Defendants.

Civil Action No. 99-4565(SSB).

United States District Court, D. New Jersey.

October 29, 2004.

COPYRIGHT MATERIAL OMITTED

Richard Brennan, Esq., Michael Ochs Adelman, Esq., Drinker Biddle & Shanley LLP, Florham Park, NJ, for Plaintiff Wärtsilä NSD North America Inc.

David L. Braverman, Esq., M. Frances Ryan, Esq., Dechert, Price & Rhoads, Princeton, NJ, William H. Dengler, Esq. Marlton, NJ, David L. Richter, Esq., for Defendant Hill International, Inc.

OPINION REGARDING DEFENDANT HILL INTERNATIONAL'S MOTION FOR SUMMARY JUDGMENT

BROTMAN, District Judge.

Defendant Hill International Incorporated ("Hill") is a construction consulting firm in the business of providing expert advice and project management for major construction projects. Plaintiff Wärtsilä NSD North America, Inc ("Wärtsilä") is an engineering and construction company. Presently before the Court is Hill's motion seeking summary judgment as to the remaining claims in the Amended Complaint: negligence, fraud, and breach of contract. This litigation arises out of a business relationship between Wärtsilä Diesel, an engineering and construction company and the predecessor to Plaintiff, and Hill. Richard LeFebvre ("LeFebvre"), one of Hill's "expert" employees, was assigned to the Wärtsilä project, first as a Hill employee but later as an independent contractor on Wärtsilä's payroll. The parties later discovered that LeFebvre lacked the credentials claimed in his resume, as he did not hold either the engineering degrees or the professional certifications represented. Wärtsilä's Complaint alleges that the late discovery of these defects in LeFebvre's resume ultimately caused Wärtsilä to lose millions of dollars in arbitration claims and related litigation. The Court held oral argument on October 20, 2004.¹

I. FACTUAL AND PROCEDURAL BACKGROUND

In July 1994, Wärtsilä entered into a contract with Coastal Salvadorian Ltd. ("Coastal") wherein Wärtsilä agreed to design, engineer, procure, construct, start up and test a diesel engine power plant in Nejapa, El Salvador ("the Project"). Wärtsilä's business had focused primarily on the sale and maintenance of diesel engines, so it subcontracted much of the plant's construction to a variety of other entities, including Black & Veatch International ("BVI"). Within months, the Project fell behind schedule, resulting in numerous contractual disputes between Wärtsilä, BVI, and Coastal. (Pl. First Am. Compl. ¶ 6.) In an effort to get the project back on track, Wärtsilä sought the services of the Defendant, Hill International. (Id. ¶¶ 10, 34.)

According to Wärtsilä's First Amended Complaint, Hill submitted a proposal for the consulting position on January 18, 1995. (Id. ¶ 31.) In its proposal, Hill recommended that Richard LeFebvre ("LeFebvre"), one of the firm's senior consultants, be assigned to the Project to "collect, organize and evaluate ... factual information and report ... his findings as to the best way to proceed with the completion of the project." (Id. ¶ 33.) LeFebvre's responsibilities would include gathering information and materials related to the construction project, visiting the project site "to evaluate the adequacy of the plans and specifications," and comparing the actual performance of the construction work to Wärtsilä's obligations under its contract with Coastal. (Id.) Hill attached a copy of LeFebvre's professional resume to the proposal which represented that he had: (a) received a B.S. in electrical engineering from Penn State in 1966; (b) earned a B.A. in business administration from Duquesne University in 1969; (c) taken courses in business law at the University of North Florida in 1983; and (d) registered and was licensed as a professional engineer in Pennsylvania, New York, and Massachusetts. (Id. ¶ 32.)

On January 24, 1995, Wärtsilä and Hill entered into a written consulting agreement (the "agreement") that incorporated by reference the January 18 proposal. (Id. ¶ 34.) Pursuant to the terms of the agreement, Hill assigned Richard LeFebvre to work as a senior consultant on the Project. (Id. ¶ 35.) As part of his responsibilities, LeFebvre analyzed issues bearing on potential claims and defenses in contractual disputes between Wärtsilä and BVI. (Id. ¶¶ 38, 39.) LeFebvre was quickly promoted by Wärtsilä to the position of Project Manager and continued to work on the Project as a Hill employee until May 25, 1995. (Id. ¶¶ 37, 40.)

On June 1, 1995, with Hill's approval, Wärtsilä hired LeFebvre "as an independent contractor to provide assistance with construction and claims management on the Project." (Id. ¶ 41.) Relying on LeFebvre's analysis and recommendations, Wärtsilä decided in May 1996 to pursue claims against BVI before the American Arbitration Association and retained the Louisiana law firm of Chaffe, McCall, Phillips, Toler & Sarpy, L.L.P., and two of its attorneys, John H. Clegg, Esq., and Daphne McNutt, Esq., to initiate arbitration proceedings against BVI in Charlotte, North Carolina. (Id. ¶ 43; Third Party Compl. ¶ 11.) Due to his intimate and extensive knowledge of the facts underlying the dispute as well as his participation in drafting various "claim support" documents LeFebvre was considered a "key witness" in the proceedings. (Pl.'s First Am. Compl. ¶¶ 43-44.)

At the arbitration proceedings in September 1997, LeFebvre offered testimony regarding the academic and professional credentials listed on his resume. (Id. ¶ 47.) On September 8, 1997, counsel for BVI, toward the end of LeFebvre's direct testimony, requested that LeFebvre execute a release for his background academic information. (Id. ¶ 48.) Wärtsilä became aware, "for the first time," that there were questions concerning LeFebvre's educational and professional credentials. (Id.) Later that day, after the proceedings had been adjourned, LeFebvre admitted to Wärtsilä's attorneys that the statement on his resume concerning the business degree from Duquesne University was not accurate. (Id. ¶ 49.) He allegedly told Wärtsilä that Hill had asked him to overstate the extent of his training at Duquesne. (Id.)

The next morning, LeFebvre requested and received from Hill a revised resume. This one omitted any reference to a business degree from Duquesne or business law courses at North Florida and modified the date on which he claimed to have received an electrical engineering degree from Penn State. (Id. ¶ 50.) When the proceedings resumed later that day, BVI's attorneys subjected LeFebvre to a vigorous cross-examination, forcing him to acknowledge the obvious inconsistencies between the two resumes. LeFebvre nevertheless insisted that the revised resume was entirely accurate and truthful. (Id. ¶ 50(b).) However, by the conclusion of the day's proceedings, Wärtsilä's attorneys were forced to concede that a hasty investigation into LeFebvre's academic credentials had uncovered no evidence that he had ever received an engineering degree from Penn State or attended any of the other schools listed on his resume. (Id. ¶ 51.) Wärtsilä also found no evidence that LeFebvre had ever been licensed as a professional engineer in either New York, Pennsylvania, or Massachusetts. (Id.)

In light of this development, Wärtsilä's counsel withdrew LeFebvre's testimony and the arbitration panel granted Wärtsilä a short recess to restructure its case based on new witnesses. (Id. ¶ 53.) During that time, Wärtsilä re-examined materials prepared by LeFebvre and discovered that he had improperly altered original "claim support" documents. (Id. ¶ 53.) Consequently, Wärtsilä says it was forced to withdraw certain claims then before the panel. (Id.) On March 5, 1998, the arbitration panel issued a judgment in BVI's favor for $4.65 million. Wärtsilä attributes the award to the complete loss of credibility it allegedly suffered as a result of LeFebvre's misrepresentations, both on his resume and in his testimony before the arbitration panel. (Id. ¶ 52.)

In November 1997, shortly after LeFebvre's perjury was exposed, BVI brought claims in tort and contract against Wärtsilä in the United States District Court for the District of Kansas ("Kansas litigation"). (Id. ¶ 58, 60.) The lawsuit was based on Wärtsilä's "placement of an individual lacking in the necessary education, skills, professional licenses and trustworthiness as Project Manager charged with oversight of BVI's work." (Id. ¶ 59.) Wärtsilä ultimately settled this dispute with BVI for $850,000. It also subsequently initiated the present litigation against Hill in the United States District Court for the District of New Jersey.

Wärtsilä's Original Complaint asserted claims for Negligence (Count I), Fraud (Count II), Consumer Fraud (Count III), and Breach of Contract (Count IV). On September 29, 2000, the Court dismissed Counts I (Negligence) and III (Consumer Fraud) for failure to state a claim on which relief may be granted.² Wärtsilä NSD North America, Inc. v. Hill Int'l, Inc., No. 99-4565 (D.N.J. September, 2000)(unpublished disposition). However, the negligence claim was later reinstated.³ Presently, Wärtsilä's First Amended Complaint asserts claims for negligence, fraud, and breach of contract. Wärtsilä, therefore, seeks recovery of both compensatory and punitive damages for the harm resulting from Hill's misrepresentations of LeFebvre's academic and professional credentials.

On August 8, 2002, Third Party Defendants entered their first response to Hill's Complaint, challenging this Court's personal jurisdiction by filing a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2). This Court denied the Third Party Defendants' motion in an Opinion issued on June 18, 2003. See Wärtsilä NSD North America, Inc., v. Hill...