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Lane Construction Corp. v. Hayward Baker, Inc.

United States District Court, E.D. Tennessee, Knoxville

June 26, 2017

THE LANE CONSTRUCTION CORPORATION, Plaintiff,
v.
HAYWARD BAKER, INC., Defendant.

          MEMORANDUM AND ORDER

         This case is before the undersigned pursuant to 28 U.S.C. § 636(c), Rule 73(b) of the Federal Rules of Civil Procedure, and the consent of the parties, for all further proceedings, including entry of judgment [Doc. 22].

         Now before the Court is the Defendant's Motion to Dismiss [Doc. 11]. The Plaintiff has responded in opposition [Doc. 19], and the Defendant filed a Reply [Doc. 20]. The Motion is now ripe for adjudication. Accordingly, for the reasons more fully explained below, the Defendant's Motion [Doc. 11] is DENIED.

         I. BACKGROUND

         The Complaint in this matter was originally filed on October 24, 2016, [Doc. 1] and later amended [Doc. 10] on December 14, 2016. The First Amended Complaint (“Complaint”) alleges that the Plaintiff entered into a construction contract with the United States Department of Transportation, Federal Highway Administration (“FHWA”), whereby the Plaintiff served as the general contractor and agreed to construct five bridges for a project known as the Foothills Parkway “Missing Link” Project (“Project”). [Doc. 10 at ¶ 5]. The Plaintiff entered into a Subcontract Agreement with the Defendant, whereby the Defendant would furnish and install micropiles for the construction of the Project (“Work”). [Id. at ¶ 8].[1] In addition, the Complaint alleges that, as part of its Work, the Defendant agreed to provide micropile testing for the Project and provide temporary and permanent shoring for slope stability. [Id.].

         The Complaint states that the construction of the modular block walls for the Project required the use of select backfill material for stability. [Id. at ¶ 9]. The Complaint states that as a cost-saving measure, the Plaintiff created this backfill material by screening and crushing material excavated from the Project site and that the Plaintiff's contract with FHWA was based on the Plaintiff being able to use the excavated material instead of purchasing imported stone materials to be used as the backfill. [Id. at ¶¶ 9, 11]. Further, the Complaint alleges that during the course of the Project and pursuant to the terms of the Subcontract Agreement, the Plaintiff directed the Defendant to perform its Work in accordance with certain progress schedules. [Id. at ¶ 16].

         The Complaint alleges that the Defendant failed to commence and perform its Work in accordance with the Plaintiff's progress schedules, thereby breaching Articles 6 and 10 of the Subcontract Agreement. [Id. at ¶¶ 17-18]. In addition, the Complaint avers that the Defendant breached Article 23 of the Subcontract Agreement by failing “to supply the labor, materials, equipment, supervision and other things required of it in sufficient quantities and of sufficient quality to perform the Work with skill, conformity, promptness, and diligence required hereunder.” [Id. at ¶ 19]. The Complaint contends that pursuant to Article 23 of the Subcontract Agreement, if the Defendant “at any time” caused “stoppage or delay of or intervene with the Project work, ” such conduct constituted a breach/default of the Subcontract Agreement and that the Defendant agreed to be “responsible for any delays incurred as a direct result of [its] negligence.” [Id. at ¶ 21]. The Complaint alleges that the Plaintiff provided verbal notice to the Defendant of its failure to timely perform the Work in accordance with the Subcontract progress schedules. [Id. at ¶ 23]. Further, the Complaint states that the Defendant was provided timely written notice of its breach, default, delay, and negligence. [Id. at ¶ 25]. Specifically, the Complaint references an email dated December 15, 2015, from Plaintiff's Assistant Project Engineer to the Defendant, which provides as follows:

As you are aware, Hayward Baker was scheduled to remobilize to the Foothills Parkway Project the week of December 7, 2015, to begin drilling micropiles at Bridge 7 Abutment 1 on December 14, 2015. As of this morning, no equipment has been delivered to the site and no micropile work has been started at Bridge 7 Abutment 1. Failure to begin work immediately will impact our project schedule as micropile installation at Bridge 7 Abutment 1 lies on the critical path. Lane will expect to be compensated by Hayward for any additional costs associated with this impact.
Please provide a date when you expect to begin your work at Bridge 7 Abutment 1.

         [Doc. 10-3 at 1]. The Complaint states that notwithstanding Plaintiff's notice and written notice to the Defendant and over 30 days to cure the breach, default, delay, and negligence, the Defendant never cured the breach, default, delay, and negligence. [Doc. 10 at ¶ 27]. The Complaint states that the Defendant's failure to maintain its work schedule caused the following: (1) the construction was delayed into the unfavorable weather months requiring the Plaintiff to purchase imported stone material to be suitable for the excavated moisture-sensitive material; (2) the Plaintiff had to expedite construction to maintain its schedule for the Project; (3) the Plaintiff had to remove and haul away some of the backfill; and (4) the construction of a bridge was delayed, which resulted in additional time and labor costs. [Id. at ¶¶ 28-21]. Further, the Complaint alleges that the Defendant breached the contract and committed negligence. [Id. at ¶¶ 35-51]. Finally, in the Complaint, the Plaintiff requests its attorney's fees in prosecuting this action. [Id. at 9].

         II. POSITIONS OF THE PARTIES

         The Defendant moves to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6) and (c), the Plaintiff's breach of contract claim and the requests for attorney's fees. For grounds, the Defendant argues that as indicated in paragraph 8 of the Complaint, the parties' relationship is governed by a written Subcontract Agreement. The Defendant argues that Section 23 of the Subcontract Agreement confers special rights and remedies upon the Plaintiff in the event the Defendant commits a default as defined in Section 23. Specifically, the Defendant states that the Plaintiff is only entitled to avail itself of the remedies outlined in Section 23 “after giving Subcontractor notice of default and seven (7) days (48) hours [sic] within which to cure.” [Doc. 11 at 3]. The Defendant asserts that Section 23 makes clear that notice of default and opportunity to cure are condition precedents to the Plaintiff holding the Defendant liable for any damages resulting from a default under the Subcontract Agreement.

         The Defendant continues that paragraph 24 of the Complaint suggests that the Plaintiff satisfied Section 23 of the Subcontract Agreement, but verbal notice that the Defendant is behind schedule is not akin to providing a notice of a default sufficient to allow the Plaintiff to avail itself the remedies afforded by Section 23 of the Subcontract Agreement. The Defendant asserts that such notice must give it warning that the Plaintiff will assert its rights under the contract if it failed to cure a default. The Defendant contends that paragraph 24 of the Complaint does not allege that the verbal notice provided to it conveyed the message that the Plaintiff was initiating steps necessary to assert its legal rights or that if the default was not cured, the Plaintiff would take final action as provided in the Subcontract Agreement. Further, the Defendant argues that the allegations contained in paragraph 25 of the Complaint do not satisfy the requirements in Section 23 of the Subcontract Agreement. The Defendant continues that the referenced email does not convey the message that the Plaintiff is initiating the steps to assert its legal rights. Finally, the Defendant asserts that if the Plaintiff's breach of contract claim is dismissed, then there is no contractual, statutory, or other basis upon which the Plaintiff can recover its attorney's fees.

         The Plaintiff responds [Doc. 19] that the Defendant's Motion to Dismiss does not meet the standards pursuant to Rule 12(b)(6). The Plaintiff argues that in the Complaint, it provided the Defendant with detailed and adequate notice of the grounds upon which its claims rest. Further, the Plaintiff asserts that it has specifically and factually pled all the requisite elements for its claims. The Plaintiff states that the Defendant does not complain about the absence of allegations supporting a cause of action but that the Defendant actually raises a perceived defense (lack of notice) and seeks dismissal on the grounds that its claimed defense negates the Plaintiff's Article 23 claim. Further, the Plaintiff argues that the Defendant's Motion is not supported by the facts or applicable law. The Plaintiff contends that it provided proper notice under Article 23 and that Article 23 does not state that the requisite notice must contain the word “default.” The Plaintiff states that it sent an email notice to the Defendant and that its email can only be interpreted one way (i.e., that the Defendant “had failed to perform a contractual duty and that it was responsible for ‘delay of or interference with Project work'”) [Doc. 19 at 7]. The Plaintiff submits that its email was proper notice of the default under Article 23.

         In addition, the Plaintiff responds that its actions are consistent with Tennessee law. The Plaintiff asserts that in Tennessee, contractual obligations should be interpreted by reasonableness standards and that in the instant matter, the Plaintiff provided the Defendant the requisite notice of the default/breach and provided it well in excess of seven days to cure such breach/default. Moreover, the Plaintiff avers that neither the Subcontract Agreement or Tennessee law requires that a notice of breach or default contain specific language to be ...


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