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GIBBS & HILL, INC. v. HARBERT INTERN.

September 29, 1990

GIBBS & HILL, INC., PLAINTIFF,
v.
HARBERT INTERNATIONAL, INC., DEFENDANT.



The opinion of the court was delivered by: Sweet, District Judge.

OPINION

Plaintiff Gibbs & Hill, Inc. ("Gibbs") has moved by order to show cause for a stay of defendant Harbert International, Inc. ("Harbert") from prosecuting an action commenced in the United States District Court for the Northern District of Alabama (the "Alabama Action"). The motion to stay is denied. The opposition to this motion has been considered a motion to transfer to Alabama and has been granted for the reasons set forth below.

Prior Proceedings

By order to show cause dated September 12, the Gibbs motion was set for a hearing on September 18, 1990, the day before depositions were to take place. Between the filing of the order and the hearing on the stay, the Honorable Robert B. Propst in the Alabama Action stayed the depositions pending a resolution in open court in New York on the 18th. After hearing argument the opposition to this motion was treated as a motion to transfer, granted orally on September 19 and as set forth below.

Facts

Gibbs is a construction engineering and consulting firm with its principal place of business in New York, and is responsible for providing the joint venture in dispute with design and engineering work which it performs from its Manhattan offices.

Harbert is a Delaware corporation with its principal place of business in Birmingham, Alabama. In addition to its responsibility for directing the efforts of the joint venture, Harbert is responsible for the procurement and construction work on behalf of the joint venture.

The parties formed the joint venture for the purpose of obtaining and entering into a contract with an owner for a project known as the Compressed Air Energy Storage Plant (the "Project") to be built in McIntosh, Alabama. The Project involves the design and construction of a 110 megawatt power plant with air driven turbines utilizing compressed air stored in an underground cavern.

In August 1988 the joint venture entered into an agreement with the owner to engineer and construct the Project for the lump sum price of $50,963,907. As of July 1990, change orders amounting to $1,859,024 were approved by the owner. As a result the current value of the contract is $52,822,931. Gibbs has alleged that it had performed 97.0% of its work as of July 1990.

As of the end of July 1990, Harbert forecasted that there would be a loss on the Project of $6,263,852. The Project is currently almost two months behind schedule. Under the contract with the owner the joint venture may be liable for substantial consequential damages to the extent that the Project is delayed beyond its schedule March 31, 1991 completion date. Gibbs has overdue unpaid invoices to the joint venture, some as old as nine months.

During the course of the Project Gibbs was concerned that Harbert failed to meet its responsibility to manage the joint venture and filed a complaint in the Southern District for authorization of payment that Harbert has withheld for the invoices and alleging Harbert's mismanagement of the joint venture.

Harbert and Gibbs disagree about whether Gibbs is obligated to make additional contributions to the capital of the joint venture. On or about April 24, 1990 the Executive Committee of the joint venture met and at that time Harbert informed Gibbs that additional capital would be required. Harbert furnished an invoice and payment schedule to Gibbs thereafter and Gibbs has made no additional capital contributions nor has Gibbs referred the matter of the dispute over the capital call to arbitration. Gibbs has demanded that it be paid out of the joint venture's operating capital, and Harbert has refused to do so and ceased to make distributions to itself and to Gibbs.

After failing to extract additional payments and after refusing to make further capital contributions, Gibbs withheld from Harbert and the joint venture certain electrical, instrumentation, and control drawings, revised cable and raceway schedules, revised flow diagrams, and the line, valve and instrument lists prepared by Gibbs for the Project. These documents are needed to permit construction on the project to proceed. Among other things, Gibbs has refused to allow Harbert to review the documents or to obtain or copy them for their use on the project unless Harbert meets Gibbs' demand for payment. These documents were to be the subject of the deposition scheduled for September 18 and then stayed by Judge Propst pending the outcome of this motion at the hearing held on the 19th.

On the morning of August 28, 1990 Harbert telecopied a formal notice to Gibbs complaining of Gibbs' default under the Agreement and demanding that the default be cured by August 31, 1990. Within hours after receiving Harbert's notice, Gibbs filed this action in the Southern District of New York. Notwithstanding its dispute over its contractual obligation to arbitrate disputes with Harbert under Alabama law, Gibbs sought a declaratory judgment from this court that Gibbs is not in default of its joint venture obligations and damages for ...


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