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L. W. Matteson, Inc v. Sevenson Environmental Services

November 16, 2011

L. W. MATTESON, INC., PLAINTIFF,
v.
SEVENSON ENVIRONMENTAL SERVICES, INC., DEFENDANT.



The opinion of the court was delivered by: William M. Skretny Chief Judge United States District Court

DECISION AND ORDER

I. INTRODUCTION

In this action, Plaintiff L. W. Matteson, Inc. ("Matteson") brings suit against Defendant Sevenson Environmental Services, Inc. ("Sevenson") claiming that Defendant breached its contract with Plaintiff by failing to pay the agreed upon amount following Plaintiff's completion of dredging services on Defendant's behalf. Defendant counterclaims alleging Plaintiff negligently misrepresented its ability to perform the contract. Defendant also makes a cross-motion for sanctions claiming that Plaintiff destroyed evidence critical to its defense. Presently before this Court is Plaintiff's Motion for Summary Judgment on its breach of contract and prompt payment claims.*fn1 Also before this Court is Defendant's Cross-Motion for Sanctions.*fn2 Additionally, this Court has before it Plaintiff's Motion for Status Conference and Suggestions in Support.*fn3 For the reasons discussed below, Plaintiff's Motion for Summary Judgment is granted in part and denied in part, Defendant's Cross-Motion for Sanctions is denied, and Plaintiff's Motion for Status Conference and Suggestions in Support is denied as moot.

II. BACKGROUND

A. Facts

Plaintiff Matteson is an Iowa corporation with its principal place of business in Burlington, Iowa. (Complaint ("Comp."), Docket No. 1, ¶ 1.) Matteson is in the business of dredging materials from waterways and major bodies of water throughout the United States, in the role of general contractor, subcontractor, and lessor. (Plaintiff L. W. Matteson's Reply to Defendant's Response to the Statement of Material Facts in Support of Matteson's Motion for Summary Judgment ("Statement"), Docket No. 54, ¶ 1.) Defendant Sevenson is a New York corporation with its principal place of business in Niagara Falls, New York. Sevenson is in the business of environmental remediation projects and acts as a general contractor. (Id. at ¶ 2; Comp. ¶ 2.)

The TVA is a corporate agency and instrumentality of the United States engaged in electrical power generation. (Statement ¶ 4.) The TVA had been storing fly ash waste in a storage cell adjacent to the Emory River. (Id. ¶¶ 5, 6.) This storage cell failed on December 22, 2008, releasing fly ash into the Emory River, prompting the TVA to issue a Request for Proposal for dredging the Emory River of fly ash. (Id. ¶ 7, 9.)

Sevenson submitted a proposal which included the use of two dredging vessels, as well as a third vessel as needed, to meet the TVA's specifications that an average minimum of 9,000 cubic yards be dredged per day, for a total of 1.5 million cubic yards over the course of the project. (Id. ¶¶ 10, 11, 12.) Sevenson and the TVA entered into a contract on July 15, 2009 for dredging operations in the Emory River, with an effective date of July 1, 2009. (Id. ¶ 16.)

Prior to entering the contract with the TVA, Sevenson executed a Purchase Order ("PO") with Matteson, in which Matteson agreed to provide a dredging vessel, equipment, and personnel, and perform dredging work as directed by Sevenson at a per hour unit price. (Id. ¶¶ 20, 23.) The PO provided that Matteson would provide good and merchantable equipment, and would repair and replace equipment that Sevenson found faulty or defective. (Id. ¶ 23.) The PO also included a series of rental rates that set a payment schedule dictating how Matteson would be paid. (Id. ¶ 24.) Pursuant to this schedule, Matteson would be paid 100% "pay time" ($2,100) per hour its dredge was in operation with the cutterhead turning and the main pump moving material through the pipeline. (Id.) Matteson would be compensated 70% ($1,470) per hour while it was moving anchors, cleaning swing lines, or other similar work. (Id.) Finally, Matteson would only receive 40% ($840) per hour the dredge was down due to inclement weather, and 0% for any time relating to operating repairs and mechanical breakdowns in excess of 2 hours per event. (Id.) A similar percentage breakdown was calculated for use of a booster pump. (Id. ¶ 26.) The PO estimated 2000 hours of dredging at a 100% payment rate, 500 hours at a 70% rate, and 200 hours at a 40% rate. (Id.) However, the PO also stated that Matteson would be paid a unit price regardless of whether the final quantities were more or less than the estimated quantities. (Id.) Additionally, Matteson was to receive lump payments of $625,000 and $310,000 for mobilization and demobilization of the drill, respectively. (Id. ¶ 25.)

Sevenson retained the right to terminate the contract for any reason and did so on February 1, 2010 after dredging operations were completed. (Id. ¶ 35.) Matteson calculated that the total hours of operation under the 100%, 70%, and 40% pay categories added up to a final cost of $5,173,273.50. (Id. ¶ 44.) This included 1,709.96 hours at 100% pay time, 776.01 hours at 70% pay time, and 85.42 hours at 40% pay time. (Id.) Sevenson reevaluated Matteson's calculations and paid Matteson only $2,931,587.11. (Id. ¶¶ 44, 47.) Matteson brings this action to recover the difference, plus interest. (Comp. ¶ 53.) Sevenson counterclaims alleging that Matteson misrepresented its ability to dredge 1.5 million cubic yards of fly ash at an average daily rate of 12,000 - 20,000 in situ cubic yards. (Answer with Counterclaim, Docket No. 8, ¶ 15.)Sevenson also claims Matteson was responsible for the destruction of evidence crucial to Sevenson's defense. (Memorandum of Law in Opposition to Plaintiff's Motion for Summary Judgment and in Support of Defendant's Cross-Motion for Sanctions ("Def.'s Opp'n), Docket No. 52, 14.)

B. Procedural History

Plaintiff commenced this action on March 2, 2010 by filing a complaint in the United States District Court for the Western District of New York. On April 5, 2010, Sevenson filed an Answer and Counterclaim. Matteson responded with its Reply on April 26, 2010 and this Court referred non-dispositive pre-trial matters to the Honorable H. Kenneth Schroeder, Jr., United States Magistrate Judge. After a series of amended case management orders, discovery was set to close by June 1, 2011. Immediately prior to the close of discovery, Sevenson moved Judge Schroeder to grant an extension of time to complete discovery, as well as a motion to amend/correct its Answer to include a recalculation of damages and clarification of its negligent misrepresentation counterclaim. The motions were fully briefed. Before Judge Schroeder could issue a decision resolving Sevenson's motions, Matteson filed its Motion for Summary Judgment. This Court stayed Judge Schroeder's amended case management order of March 4, 2011 pending resolution of Plaintiff's motion. Sevenson filed its Opposition to Matteson's motion on August 12, 2011, including a Cross-Motion for Sanctions. Matteson filed a reply to Sevenson's Opposition on September 2, 2011, and a Response to Sevenson's cross-motion on September 6, 2011. Sevenson filed an Affidavit in reply on September 16, 2011. Most recently, on October 27, 2011 Matteson filed a Motion for Status Conference and Suggestions in Support, requesting that this Court set a trial date.

III. DISCUSSION AND ANALYSIS

A. Summary Judgment Standard

Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment is warranted where the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A "genuine issue" exists "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). A fact is "material" if it "might affect the outcome of the suit under governing law." Id.

In deciding a motion for summary judgment, the evidence and the inferences drawn from the evidence must be "viewed in the light most favorable to the party opposing the motion." Addickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S. Ct.1598, 1609, 26 L. Ed. 2d 142 (1970). "Only when reasonable minds could not differ as to the import of evidence is summary judgment proper." Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir. 1991). The function of the court is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249.

B. Plaintiff's Motion for Summary Judgment

Matteson's dispositive motion raises three primary issues: (1) whether Sevenson breached its contract with Matteson; (2) whether Sevenson's affirmative defenses preclude summary judgment in Matteson's favor; and (3) whether Matteson is entitled to summary judgment on Sevenson's counterclaim. These issues are discussed below.

1. The Existence of Disputed Issues of Material Fact Precludes Summary Judgment in Plaintiff's Favor on its Breach of Contract Claim

Matteson argues that it is entitled to summary judgment because the PO requires payment according to the number of hours Matteson's equipment is used. Matteson asserts that on top of the $2,931,587.11 Sevenson previously paid, Matteson is entitled to an additional $3,926,760.92, plus pre-judgment interest, for its work. Sevenson disputes the accuracy of Matteson's calculations and alleges that Matteson improperly charged a 100% payment rate anytime the dredge pumps were running, instead of reducing the payment rate whenever the dredge pumps were only pumping water.

Under New York law, a plaintiff alleging a breach of contract must establish (1) the existence of a contract; (2) performance of the contract by one party; (3) breach by the other party; and (4) resulting damages. Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir. 1994).*fn4 The parties do not dispute that the PO constitutes a contract between them. The second element is the source of Sevenson's affirmative defenses, and is discussed later. Therefore the principal issue to resolve is whether Sevenson underpaid Matteson, or whether Matteson inflated the payment rate it was due.

The parties' agreement, detailed in the PO, calls for a 100% payment rate of $2,100 for every hour the dredge pumps were active and pumping material. (Statement ΒΆ 24.) "Material" is defined as anything over the density of water. (Def.'s Opp'n 4.) Because the density of water is 1.0 grams per cubic centimeter, anything over that number would constitute material. (Id.) Fly ash, the specific material Matteson was dredging for, ranged from 1.0001 to 1.4 grams per cubic centimeter. (Id.) The parties agree that whenever the dredges were pumping water, or 1.0 grams per cubic centimeter, and not material,that a reduced payment rate ...


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