Welded Constr., L.P. v. Williams Cos. (In re Welded Constr., L.P.)

• Decision Date: 16 October 2019
• Docket Number: Case No. 18-12378 (KG) (Jointly Administered),Adversary No. 19-50194 (KG)
• Citation: 609 B.R. 101
• Parties: IN RE: WELDED CONSTRUCTION, L.P., et al., Debtors. Welded Construction, L.P., Plaintiff, v. The Williams Companies, Inc., Williams Partners Operating LLC, and Transcontinental Gas Pipe Line Company, LLC, Defendants.
• Court: U.S. Bankruptcy Court — District of Delaware

609 B.R. 101

IN RE: WELDED CONSTRUCTION, L.P., et al., Debtors.Welded Construction, L.P., Plaintiff,

v.The Williams Companies, Inc., Williams Partners Operating LLC, and Transcontinental Gas Pipe Line Company, LLC, Defendants.

Case No. 18-12378 (KG) (Jointly Administered)

Adversary No. 19-50194 (KG)

United States Bankruptcy Court, D. Delaware.

Signed October 16, 2019

YOUNG CONAWAY STARGATT & TAYLOR, LLP, Sean M. Beach, Esquire (DE Bar No. 4070) (sbeach@yest.com), Kevin A. Guerke, Esquire (DE Bar No. 4096) (kbuerke@yest.com), Michael S. Neiburg, Esquire (DE Bar No. 5275) (mneiburg@yest.com), Travis G. Buchanan, Esquire (DE Bar No. 5595) (tbuchanan@yest.com), Rodney Square, 1000 North King Street, Wilmington, DE 19801, Telephone: 302-571-6600, Counsel to the Debtors

SAUL, EWING ARNSTEIN & LEHR LLP, Lucian B. Murley, Esquire (DE Bar No. 4892), 1201 North Market Street, Suite 2300, P. O. Box 1266, Wilmington, DE 19899, Telephone: 302-421-6898, luke.murley@saul.com, HALL ESTILL, Steven Soulé, Esquire, John F. Heil, III, Esquire, 320 South Boston Avenue, Suite 200, Tulsa, OK 74103-3706, Telephone: 918-594-0466/0480, ssoule@hallestill.com, jheil@hallestill.com, Counsel for Defendants The Williams Companies, Inc., Williams Partners Operating LLC, and Transcontinental Gas Pipe Line Company, LLC

Re: D.I. 24

KEVIN GROSS, UNITED STATES BANKRUPTCY JUDGE

Introduction

A complex contractual payment mechanism and a robust disagreement as to the interpretation it should be afforded lie at the heart of this multi-million-dollar dispute that allegedly plunged Debtors into chapter 11. Resolution of the issues presented today will determine whether the Court will hear and decide this Adversary Proceeding and, if so, which specific causes of action the Court will evaluate when making a determination on the merits.

Before the Court is a three-part motion by the Defendants seeking to have the Court either abstain from exercising jurisdiction, transfer venue, or altogether dismiss certain claims asserted by the Debtor in connection with the parties' pre-petition actions. For the reasons discussed below, the Court will deny Defendants' Motion to Abstain and Motion to Transfer Venue and will grant, in part, and deny, in part, Defendants' Motion to Dismiss.

Facts ¹

The Debtors² filed their bankruptcy petitions on October 22, 2018. Compl. ¶ 62.

Debtor Welded Construction, L.P. ("Welded", "Debtor", or "Plaintiff") commenced the instant Adversary Proceeding on May 3, 2019 against Defendants Transcontinental Gas Pipe Line Company, LLC ("Defendant Transco" or "Transco"), Williams Partners Operating, LLC ("Defendant Williams Partners" or "Williams Partners"), and The Williams Companies, Inc. ("Defendant Williams Co." or "Williams Co.") (collectively, the "Defendants" or "Williams").³ Welded initiated the Adversary Proceeding with its complaint (the "Complaint" or "Compl.") alleging several causes of action against the Defendants as well as objections to two proofs of claim filed by Transco. In response to the Complaint, Defendants have moved for the Court to either abstain from jurisdiction, transfer venue, or dismiss certain counts found in the Complaint.

Contractual Relationship

Welded's relationship with Defendants arise out of Welded's contract with Transco. On or about November 5, 2015, Welded and Transco executed a letter of intent for Welded to construct a portion of the Atlantic Sunrise pipeline, a natural-gas pipeline connecting gas-producing regions in Pennsylvania to markets in the Mid-Atlantic and southern states (the "Pipeline"). Compl. ¶ 11. On or about August 10, 2016, Welded and Transco executed a construction contract (the "Contract"). Compl. ¶ 14. Pursuant to the Contract, Welded was responsible for the construction of three contiguous segments of the Pipeline—Spreads 5, 6, and 7—which covered more than half the length of the entire Pipeline, approximately 96 miles total. Compl. ¶ 17. Included in the Contract is a choice of law provision and forum selection clause stating that Oklahoma law governs the Contract and that jurisdiction and venue shall lie exclusively with the appropriate courts of Tulsa County, Oklahoma. Compl. Ex. 2, § I, Alt. 35.

Pipeline Completion

Welded achieved mechanical completion of Spreads 5, 6, and 7 on September 19, 2018. Compl. ¶ 19. On October 4, 2018, Williams received FERC approval to put the Pipeline into full service. Compl. ¶ 19. The Pipeline was placed into full service on October 6, 2018. Compl. ¶ 20. Completion of the Pipeline increased the capacity of the Transco pipeline by approximately 12%, or 1.7 billion cubic feet per day, and provides Transco with $35 million in revenue per month. Compl. ¶¶ 20–21.

Contract Payment Mechanism

The Contract contains a detailed payment mechanism in Appendix G. Compl. ¶ 30.⁴ Under the Contract, each month Welded would send Transco an invoice with an estimate of the funds required for the following month (the "Pay Month"). Compl. ¶ 31. This invoice was to be sent to Transco by the fifth day of the month. Compl. Ex. 2, Appendix G, § 1.2.2. On or before the fifth day of the Pay Month, Transco was to pay Welded the undisputed amounts invoiced. Compl. ¶ 32; Compl. Ex. 2, Appendix G, § 1.2.3. Within thirty days of the Pay Month, Welded would provide Transco with a written reconciliation of its actual verses estimated expenditures and Welded would then true-up the amounts owed or owing in future invoices. Compl. ¶ 38; Compl. Ex, 2, Appendix G, § 1-2.4.

The Contract anticipated disputes over invoicing. Section 1.2.3 of Appendix G to the Contract states,

"On or before the fifth day of the Pay Month, Company will pay Contractor the undisputed amounts invoiced. In the event that Company disputes a portion of Contractor's invoice, the Parties will work diligently to resolve any disputed amounts prior to the date for payment of such invoice. Any amounts that are not resolved within ten business (10) days of the date on which payment of the invoice was due will immediately be escalated to senior management for a discussion as soon as reasonably possible. If the matter remains unresolved after the senior management discussion, the matter will be resolved in accordance with the provisions of Article 37 of Section I of the Contract and paid in accordance with the terms of such resolution."

Compl. Ex. 2, Appendix G, § 1.2.3. Article 37 of Section I of the Contract states, "Company and Contractor shall give good faith consideration to using alternative dispute resolution prior to or in lieu of litigation to resolve disputes arising under or in connection with this Contract." Compl. Ex 2, Article 37.

The Contract also contemplated disputes regarding the reconciliation mechanism found in the Contract. Section 1.2.5 of Appendix G to the Contract states, "Any differences between the Parties related to verifying actual expenditures or invoices and adjusting against forecast and funded amounts shall be reconciled within one pay period, provided, however, that such differences will not interrupt the payment of Contractor's undisputed invoices, as set out herein." Compl. Ex. 2, Appendix G, § 1.2.5.

Dispute Over Whether Certain Fees are Properly Billable under the Contract

For the first ten months, Welded was paid for their invoices without dispute. Compl. ¶¶ 41–43. However, on July 3, 2018, R. Christopher Springer, Transco's Atlantic Sunrise Project Director ("Mr. Springer"), sent a letter to Stephen Hawkins, Welded's President and CEO ("Mr. Hawkins"), stating that Transco was releasing payment to Welded under protest. Compl. ¶ 44. In the email, Mr. Springer indicated the payment was under protest due to "(1) Welded's failure to meet expectations on productivity, work quality, and safe work practices; (2) questions and concerns about the accuracy of billing and Welded's compliance with contract obligations; and (3) uncontrolled growth in Welded's estimate cost of completion." Compl. ¶ 44. The letter further stated, "[T]his payment and any payment made by Transco from this point forward in time are made under protest and shall not be construed as concurrence that Welded has earned invoiced amounts nor that ‘true-ups’ accurately reflect amounts owed and/or are payable by Transco." Compl. ¶ 44. In his response, Mr. Hawkins sought to understand the basis for Mr. Springer's concern about alleged inaccurate billing and expressed concern that the dispute was not following the agreed upon escalation path found in the Contract. Compl. ¶ 45. Defendants did not respond to Mr. Hawkins' letter or provide any information about the alleged inaccurate billing. Compl. ¶ 46.

In July of 2018, Defendants engaged Oil and Gas Contract Services ("OGCS") to perform an audit to support its accusation of inaccurate billing. Compl. ¶ 47. On July 24 and 25 of 2018, two OGCS employees visited Welded's office and met with Welded's personnel. Compl. ¶ 48. Throughout July, August, and September 2018, Welded worked with OGCS, responding to numerous requests and providing thousands of pages of records, invoices, receipts, paystubs, and other documents. Compl. ¶ 48.

Contract Dispute Leads to Transco Withholding Funds

On October 4, 2018, Transco informed Welded that it was withholding $23,563,538. Compl. ¶ 22. In a letter from Mr. Springer to Mr. Hawkins, Mr. Springer claimed the notice of withholding was given "in accordance with the Contract Audit provisions, Section VIII and Appendix G" of the Contract. Compl. ¶ 54. In justifying the withholding, Mr. Springer remarked, "Based on the ongoing review of Welded's advance payment requests, Welded has erroneously billed Transco for fees and costs in excess of those allowed under the Contract and has failed to properly reconcile the overbillings as contemplated by the Contract." Compl. ¶ 54. Mr. Springer then listed examples that he claimed "represent charges that are disputed by Transco, which have been identified to date." Compl. ¶ 54. The letter further claimed that Welded "owed...