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Genon Mid-Atlantic, LLC & Genon Chalk Point, LLC v. Stone & Webster

April 18, 2012

GENON MID-ATLANTIC, LLC & GENON CHALK POINT, LLC, PLAINTIFFS,
v.
STONE & WEBSTER, INC.,
DEFENDANT AND THIRD PARTY PLAINTIFF,
v.
SIEMENS WATER TECHNOLOGIES CORP., THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge:

OPINION & ORDER

Before the Court are three motions for partial summary judgment brought by Plaintiffs GenOn Mid-Atlantic, LLC and GenOn Chalk Point, LLC (collectively, "GenOn"), Defendant Stone and Webster, Inc. ("Shaw") and Third-Party Defendant Siemens Water Technologies Corp. ("Siemens"). Also before the Court are GenOn's Motion to Strike the Declaration of Lawrence F. Ranallo ("Ranallo Declaration") proffered by Shaw, Shaw's Motion to Strike Portions of the Declaration of Patrick A. McGeehin ("McGeehin Declaration") proffered by GenOn, and Siemens' Motion to Strike the Declaration of Paul Monte ("Monte Declaration") proffered by Shaw. For the reasons set forth below GenOn's Motion to Strike the Ranallo Declaration is GRANTED, Shaw and Siemens' Motions to Strike are DENIED, GenOn's Motion for Partial Summary Judgment is DENIED in part and GRANTED in part, Shaw's Motion for Partial Summary Judgment is DENIED, and Siemens' Motion for Partial Summary Judgment is GRANTED.

I. BACKGROUND*fn1

In July 2006, GenOn undertook the upgrade of the air quality control systems at three of its power plants to comply with a new Maryland environmental law. GenOn 56.1 ¶ 1. GenOn and Shaw entered into the Alliance Agreement in June 2006, whereby "Shaw agreed to develop a firm scope of work, prepare schedules and estimate the cost of the work." Id. at ¶ 3. On July 30, 2007, GenOn and Shaw entered into an engineering procurement and construction agreement ("EPC Agreement") based, in part, on the Alliance Agreement. Id. at ¶ 4; Shaw Response to GenOn 56.1 ¶ 4. Pursuant to the EPC Agreement, Shaw agreed to design and build four flue gas desulfurization ("FGD") systems ("scrubbers") at the three plants.*fn2 Shaw MSJ 1. Shaw also undertook the design and installation of a wastewater treatment system ("WWTS") at each plant. Siemens 56.1 ¶ 3. To fulfill this portion of the EPC Agreement, Shaw issued three purchase orders ("Purchase Orders") to Siemens under which Siemens agreed to supply wastewater treatment equipment, ancillary engineering and limited start-up services. Siemens 56.1 ¶ 4.

Compensation under the EPC Agreement was determined by a formula including: (1) the target costs set out in the contract ("Target Costs"); and (2) the total amount of reimbursable costs incurred by the contractor to complete the work, or the actual costs ("Actual Costs"). GenOn Mid-Atlantic, LLC v. Stone & Webster, Inc. (GenOn I), 11 Civ. 1299, 2011 WL 2207513, at *1 (S.D.N.Y. June 6, 2011). The Target Costs were also subject to modification by "change order."*fn3 The EPC Agreement established a Target Cost of $957,174,000. GenOn 56.1 ¶ 7. Under the EPC Agreement, if Shaw's Actual Costs exceeded the Target Costs, Shaw's fee for performance of the work was lowered in most cases, and if Shaw's Actual Costs were less than the Target Costs, Shaw's fee for performance of the work was enhanced in most cases. Id. at ¶¶ 9, 10; Shaw Response to GenOn 56.1 ¶¶ 9-10.

Exhibit 8 to the EPC Agreement included a full estimated price for the project developed by Shaw. GenOn 56.1 ¶ 12. The total estimated price was $1,110,321,000, which included the $957,174,000 Target Cost, Shaw's fees, and a $95,717,000 contingency fund ("Contingency"). GenOn56.1, Ex. 2 Target Price.The Contingency fund was to be used in the event of cost overruns for performance of the work that increased the Actual Cost beyond Shaw's estimate. GenOn 56.1 ¶ 14; Shaw Response to GenOn 56.1 ¶ 14. The EPC Agreement describes the conditions governing Shaw's access to the Contingency. GenOn 56.1 ¶ 15; Shaw Response to GenOn 56.1 ¶ 15.

II. MOTIONS TO STRIKE

A. Legal Standard for Motion to Strike

"An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." Fed. R. Civ. P. 56(c)(4). The personal knowledge requirement is relaxed for experts who "may base an opinion on facts or data in the case that the expert has been made aware of or personally observed" provided that other experts in the field would "reasonably rely" on similar information. Fed. R. Civ. P. 703; see also Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 592 (1993) (explaining that an expert is "permitted wide latitude to offer opinions, including those that are not based on firsthand knowledge or observation"). Courts also allow attorneys to submit declarations in support of a motion for summary judgment as a vehicle to introduce evidence produced in discovery into the record in a cohesive manner. See, e.g., Degelman Indus. Ltd. v. Pro-Tech Welding & Fabrication, Inc., No. 06-CV-6346T, 2011 WL 6752565, at *3 (W.D.N.Y. Dec. 23, 2011).

B. Shaw's Motion to Strike Portions of the Declaration of Patrick A. McGeehin

GenOn relies on the McGeehin Declaration in support of its motion for partial summary judgment. McGeehin is the Senior Managing Director at FTI Consulting, Inc. ("FTI"), a consulting group hired by GenOn to serve as accountants pursuant to the EPC Agreement. Shaw first argues that Paragraphs 5, 6 and 10(f)*fn4 are inadmissible because they are not based on personal knowledge. Paragraphs 5 and 6 describe the efforts of the FTI team, which McGeehin oversaw, to determine Shaw's Actual Costs based on the documents submitted as Shaw's Final Accounting and are in essence allowable information that present the tasks performed by McGeehin's team at FTI. Shaw also asserts that McGeehin's reference to the conclusions of Neil Gaudion, also of FTI, that Shaw had caused some of its own cost increases, "improperly attempts to adopt the personal knowledge of others as his own." Shaw Motion to Strike at 2. Gaudion's conclusions are not offered for the truth of the matter asserted but "provide[] a reason for reviewing Shaw's final accounting," GenOn Opp. 7, and as such are admissible.

Shaw's argument that Paragraphs 8 and 9, which summarize the relevant provisions of the EPC Agreement, are impermissible legal interpretations of Shaw's obligations under the EPC Agreement, is also without merit. Iacobelli Constr. Inc. v. Cnty of Monroe, 32 F.3d 19, 25 (2d Cir. 1994) (noting that the experts summarized and analyzed the contract in forming their opinions). Finally, Shaw argues that paragraphs 6 and 10-12 impermissibly present McGeehin's opinion that the information provided by Shaw was insufficient to determine Shaw's Actual Costs. McGeehin, like the experts in Iacobelli, has sufficiently identified the facts on which he bases his conclusions. Shaw's Motion to Strike the McGeehin Declaration is denied.

C. GenOn's Motion to Strike the Declaration of Lawrence F. Ranallo

In its memorandum opposing GenOn's Motion for Partial Summary Judgment, Shaw proffered the Ranallo Declaration to rebut the McGeehin Declaration. GenOn moves to strike the Ranallo Declaration in its entirety, claiming it contains no facts or basis for its stated conclusions.*fn5 In contrast to the McGeehin Declaration, which explicitly lists the documents McGeehin reviewed and on which he relied, the Ranallo Declaration does not "state the facts upon which the expert allegation is based." Iacobelli, 32 F.3d at 25; see also Mid-State Fertilizer Co. v. Exch. Net. Bank of Chi.,877 F.2d 1333 (7th Cir. 1989). Because I find the Ranallo Declaration woefully lacking in support, GenOn's Motion to Strike Ranallo's declaration is granted.*fn6

D. Siemens' Motion to Strike the Declaration of Paul Monte

The Monte Declaration was proffered by Shaw in opposition to Siemens' Motion for Partial Summary Judgment. Siemens asserts that the Declaration should be stricken because it is not based on personal knowledge and contains legal conclusions and argumentative mischaracterizations of the evidence rather than statements of facts.

Because the Monte Declaration introduces evidence into the record for summary judgment, the personal knowledge requirement is not a strong basis to strike the Declaration. See Degelman Indus. Ltd., 2011 WL 6752565, at *3. However, Siemens makes a persuasive argument that portions of the Monte Declaration resemble "an adversarial memorandum [more] than a bona fide affidavit." Hollander v. Am. Cyanamid Co., 172 F.3d 192, 198 (2d Cir. 1999), abrogated on other grounds by Pacenza v. IBM Corp., 363 Fed. Appx. 128 (2d Cir. 2010). As one example, in paragraph 7, the Monte Declaration states that Exhibit D establishes Siemens fault for GenOn's withholding of incentive bonuses to Shaw. Monte Decl. ΒΆ 7. However, the exhibit provided to establish this fault is inconclusive at best. See Monte Decl., Ex. D (noting that the WWTS had problems but not ...


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