The United States of America for the Use and Benefit of TSI Tri-State Painting, LLC v. Federal Insurance Company
Filing
167
ORDER denying TSI's partial 130 Motion for Summary Judgment; denying Federal's 132 Motion for Summary Judgment. The parties are Ordered to file their proposed pretrial order by July 8, 2022. Signed by Judge Lisa G. Wood on 5/9/2022. (ca)
In the United States District Court
for the Southern District of Georgia
Brunswick Division
THE UNITED STATES OF AMERICA
for the Use and Benefit of TSI
TRI-STATE PAINTING, LLC,
Plaintiff/Counterdefendant,
CV 216-113
v.
FEDERAL INSURANCE COMPANY,
Defendant/Counterclaimant.
ORDER
Plaintiff TSI Tri-State Painting, LLC (“TSI”), dkt. no. 130,
and Defendant Federal Insurance Company (“Federal”), dkt. no. 132,
bring cross motions for summary judgment. For the reasons set forth
below, both motions are DENIED.
BACKGROUND
This case revolves around a project at the Naval Submarine
Base
in
Kings
Bay,
Georgia
(“the
Base”).
Dkt.
No.
1.
Specifically, this case is a contract dispute between TSI and
Sauer, Inc., the general contractor, after a building TSI agreed
to repaint at the Base was discovered to be coated in lead paint.
This lead paint, as well as issues with containment, led to
extensive delays and increased costs for TSI in this project.
In September 2011, Sauer, Inc. 1 entered into a contract (the
“Prime Contract”) with the federal government through NAVFAC 2 to
provide corrosion control repairs at Explosives Handling Wharf 2
building at the Base (the “Project”).
Dkt. Nos. 130-1 at 1; 150-
2 at 1-2; see also Dkt. No. 130-2 (the Prime Contract).
The
Project included removing existing protective coatings on certain
surfaces,
rehabilitating
and
refinishing
those
surfaces,
and
replacing the metal roof and wall panels, guardrails, and other
components of the building.
Dkt. Nos. 150-2 at 2; 130-2 at 5.
Soon after contracting, Sauer secured a payment bond from Federal
as part of its obligations under the Miller Act. Dkt. No. 85 ¶ 10;
40 U.S.C. § 3133 (2006). Federal is an insurance company which
provides surety bonds to companies entering into construction
contracts with the federal government. Dkt. No. 85 ¶¶ 2, 10.
In May 2012, Sauer requested that TSI submit a proposal to
perform the blasting and industrial coatings work on the Project.
Dkt. No. 150-2 at 2.
The next month, the two parties executed a
Federal is representing Sauer’s interests in this litigation. For
convenience, the Court refers to Federal and Sauer interchangeably in
this Order.
1
NAVFAC is the United States Naval Facilities Engineering Command, for
which Sauer and TSI performed work at the Kings Bay Naval Submarine Base.
NAVFAC was ultimately responsible for overseeing the Project.
2
2
contract for TSI to take on this work (the “Subcontract”).
Dkt. No. 130-5.
Id.;
In a letter attached to its proposal, TSI agreed
to perform this work for a base pay of roughly $6,500,000 founded,
in relevant part, on three assumptions: 1) the coating to be
removed
would
be
“lead
and
hazardous
free
per
the
proposal
request,” 2) the work would last from June 2012 to July 2013; and
3) TSI would require use of rental equipment for only eleven
months.
Dkt.
No.
130-5
at
36-38.
As
it
turns
out,
those
assumptions were not correct.
A. Lead in the Paint
In October 2011, soon after Sauer executed the Prime Contract
with NAVFAC, Sauer approached a subcontractor to perform the
coating work for the Project.
See Dkt. No. 72-7 at 2.
subcontractor
chip
performed
paint
laboratory
tests,
This
which
revealed the presence of lead in detectable concentrations well
above the levels requiring lead protocols.
Dkt. No. 72-6 at 16-
18 (indicating the presence of lead in concentrations between 21
and 28 parts per million (ppm)); see also Dkt. No. 142-6 (stating
the smallest concentration of lead that turned into a “lead job”
was 4 ppm). 3
The subcontractor shared these results with Sauer,
Federal contests this fact, arguing that this subcontractor did not
perform proof of performance (“POP”) tests on the paint chips, which “is
necessary for a party to definitively know whether a project contains
lead.” Dkt. No. 149 at 9 (citing Dkt. No. 142-6 at 125:21-126:2; 176:3177:4). The Court will address this argument in Section I.B infra.
3
3
dkt. no. 72-4 at 51:18-56:17, 61:9-23, and subsequently refused to
perform the blasting and painting work for the Project,
dkt. no.
72-5 at 19:8-23.
Sauer then approached TSI in May and June of 2012 to perform
the painting and blasting work, dkt. no. 72-4 at 80:6-10, but it
did not share the results of the prior paint chip laboratory tests
with TSI. Sauer provided TSI with existing Project documents which
showed the presence of lead in limited areas of the jobsite—
specifically, handrails which were to be removed prior to the
beginning of the Project.
Id. at 15:23-16:18.
But Sauer’s
management told its team—which was working with TSI to craft the
Subcontract between the two—not to “say anything about . . . doing
any lead swabs, lead tests, anything like that” when referring to
the cream-colored paint which covered the building and which TSI
would be working on.
Id. at 82:21-24.
TSI also asked if Sauer or
the prior subcontractor had performed any lead tests on the paint,
and Sauer did not acknowledge the lead tests it had in its
possession.
Dkt. No. 142-7 at 13:1-25, 62:7-17.
As such, TSI
priced its bid on the assumption that only very limited areas of
the jobsite contained lead.
As required by industry practice, though, TSI would perform
its own test of the paint to determine the existence of lead.
No. 130-5 at 36.
Dkt.
“Should the sample test results show the coating
4
to contain lead,” TSI explained, “a price adjustment will be
necessary from the owner.”
Id.
Upon executing the subcontract, TSI performed a POP test to
determine
material.
whether
the
paint
contained
Dkt. No. 150-2 at 6.
any
lead
or
hazardous
After the second and third POP
tests confirmed the presence of lead in the paint to be blasted,
NAVFAC issued a Stop Work Order in October 2012.
B. The Change Order Negotiations
Upon
discovery
of
the
lead,
TSI
and
Id. at 7.
Sauer
engaged
in
negotiations which produced a number of “Change Orders” in an
effort to acknowledge the added costs of handling lead paint. Dkt.
No. 142-4 ¶¶ 2-4.
The first of these, issued in June 2013, was
Change Order 7, in which Sauer agreed to pay TSI 49.22% of the
lead-related
funds
it
received
from
the
government
once
the
government issued its own unilateral modification to the Prime
Contract.
Id. at 7-8.
The government did in fact issue this
unilateral modification, id. ¶ 5, disbursing $5,770,790.14 to
Sauer for lead-related issues with the Project, id. at 17.
Upon
issuing this modification, the government directed Sauer to resume
performance, and in July 2013,
TSI began work on the Project again
after lead paint protocols were agreed upon.
¶¶ 49, 52, 57-59.
5
See Dkt. No. 85
In October 2013, Sauer and TSI began negotiations on Change
Order 10, which purported to clarify the exact amount of funds TSI
was due from Sauer as a result of the government’s unilateral
modification.
Dkt. Nos. 134 at 5; 134-1 at 7-10.
Federal and TSI
disagree as to the import of Change Order 10, with Federal claiming
it “increased TSI’s contract price by $2,840,383.00,” dkt. no. 134
at
5,
while
TSI
argues
Change
Order
10
“did
not
offer
any
additional compensation or other consideration to TSI, but only
sought
to
create
additional
terms
concerning
how
the
49.22%
recovery . . . would be paid and to remove protections accorded
TSI in Change Order 7.”
Dkt. No. 142 at 13.
It is further disputed whether Change Order 10 was ever agreed
to at all.
Early in October 2013, a version of Change Order 10
was signed by TSI’s President, Irene Pescinski.
9.
Dkt. No. 142-3 ¶
TSI claims this signature was done by mistake due to an
administrator’s error and cites to a number of communications sent
to Sauer seeking to undo this mistake, as well as continued
negotiations between the two parties.
See Dkt. No. 142 at 5-6
(citing Dkt. Nos. 142-4 ¶¶ 12-13; 142-5 ¶ 9; 142-2 ¶ 6; 142-3 ¶¶
10-11).
These negotiations continued, TSI contends, but the
parties never agreed on final terms for Change Order 10 in TSI’s
view.
Dkt. No. 142 at 7 (citing Dkt. Nos. 142-4 at 34-36, 39, 41,
43, 45, 48-49, 51; 142-5 ¶ 11).
Federal does not dispute these
6
communications but notes that Ms. Pescinski herself “did not
provide any written direction to Sauer to withdraw” Change Order
10, and that Change Order 10 was the only change order that listed
the amounts TSI was due.
Dkt. No. 149 at 3.
Federal further notes
that the $2,840,383.00 sum sent to TSI (due according to Change
Order 10, Federal argues) was never returned or rejected, id., to
which TSI responds that it was entitled to that sum based on Change
Order 7, not 10.
Dkt. No. 142 at 8.
In any event, TSI and Sauer
continued work on the Project in late 2013 and early 2014. (Cite).
C. Containment Issues
After work resumed on the Project in July 2013, TSI ran into
a number of other difficulties in its work to finish coating the
jobsite with new paint.
Due to a lack of proper containment
protocols, water entered areas where TSI was working, affecting
TSI’s ability to wash, blast, prime, and finish the different
enclosures on the jobsite.
Dkt. No. 130-9 at 28, 34, 38, 43, 45.
Water would enter the containment area, forcing TSI to “vacuum and
remove all water from the containment, dry the surfaces that were
otherwise ready for prime, dry out abrasive intended for re-use,
re-blast steel exposed to oxidation, and repaint (stripe) as
required.” Dkt. No. 130-1 at 5 (citing Dkt. No 130-9 at 38).
These issues led to further delays and increased costs for
TSI’s work on the Project.
Id.
7
D. TSI’s Use of Rental Equipment
Over the course of the Project, TSI used rental equipment
from
a
company
(“Trimerica”).
named
Trimerica
Dkt. No. 142-5 ¶ 5.
Equipment
Rental,
LLC
TSI included the cost of this
rental equipment in its claim to Sauer and Federal, seeking to
recover for the added cost of using this equipment beyond the
eleven months stated in the Subcontract.
127; 142-1 ¶¶ 5-7.
See Dkt. Nos. 85 ¶¶ 121,
However, as Federal points out, TSI owns some
of the equipment used during the Project, see dkt. no. 132-2 ¶ 20,
for which it cannot recover under the Miller Act, and all equipment
rented from Trimerica is similarly ineligible because Trimerica
and TSI have common ownership and numerous other connections making
Trimerica an “alter ego” of TSI.
See Dkt. No. 150 at 5-6.
For
example, the two companies share an address, dkt. no. 132-2 ¶¶ 2024, Trimerica’s corporate registration lists TSI’s phone number as
contact information, dkt. nos. 149-1, 149-2, 149-3, and Trimerica
and TSI have joint general liability and worker’s compensation
insurance policies, dkt. no. 149-4 ¶¶ 10-11.
Federal and TSI dispute whether Trimerica and TSI are alter
egos, but both agree that the cost of the rental equipment from
Trimerica is a “sum or sums justly due” to TSI only if they are
not alter egos.
See Dkt. Nos. 134 at 23-24; 142 at 25-26; see
also 40 U.S.C. § 270b(a) (1986).
8
E. The Parties’ Dispute and Sauer’s Claim to NAVFAC
In the ensuing years after work resumed from 2013 through
2015,
TSI
and
Sauer
encountered
substantial
difficulties
in
completing the Project, and in March 2016, two months after NAVFAC
reported substantial completion on the Project, TSI submitted to
Sauer a claim for payment.
Dkt. No. 150-2 at 7.
TSI submitted
this same claim for payment to Federal about a month later.
at 7-8.
Id.
After not receiving a response from either, TSI commenced
this suit in August 2016.
Id. at 8; see also Dkt. No. 1.
Two years later, in August 2018, Sauer in its own capacity
submitted a certified Contract Disputes Act claim pursuant to the
Prime
Contract
to
NAVFAC
seeking
recovery
for
additional
compensation due to time extensions and higher costs related to
the delays and problems which occurred during the Project.
No. 150-2 at 8.
Dkt.
Made without any input or consent from TSI,
Sauer’s claim requested an increase of $18,611,616.10 to the
contract price and noted that $8,965,299 from TSI’s claim to Sauer
is “appropriate for pass-through to the Government”—in essence,
stating that TSI is due $8,965,299 in additional compensation.
Id. at 12-13 (citing Dkt. No. 130-9 at 58).
It specifies the basis
for the added amount for TSI is due to the unanticipated presence
of lead in the paint, as well as the containment issues and delays
in
the
Project,
and
acknowledges
9
that
“TSI[
]
was
the
most
significantly
impacted
[subcontractor]
unforeseen conditions on the Project.”
by
the
lead
and
other
Dkt. No. 130-9 at 23.
Sauer certified that its claim was made in good faith, dkt.
no. 130-9 at 2, and is currently using this claim as the basis for
litigation against NAVFAC before the Armed Services Board of
Contract Appeals.
Dkt. No. 130-10 at 142:14-143:21. Federal, as
Sauer’s surety, does not dispute the good-faith basis of Sauer’s
claim
but
stated
that
it
is
not
clear
whether
TSI
is
owed
additional compensation, and thus this issue is one for “the courts
to determine[.]” Id. at 33:5-16, 52:4-22.
F. Alleged Fraudulent Misrepresentations
In early 2014, TSI received information showing Sauer may
have known of the presence of lead in the paint covering the
jobsite.
Dkt. No. 72-8 ¶ 11.
Sauer denied any such knowledge,
though, and TSI tabled the issue and continued performance.
Id.
In early 2019, during the course of discovery in this case,
TSI deposed Sauer’s former superintendent, Richard Davidson.
Dkt.
No. 72-4. Davidson, along with another Sauer official, Harry
Angenendt, disclosed for the first time that Sauer knew about the
results of the prior subcontractor’s lead tests and Sauer officials
told employees not to disclose this information. Dkt. Nos. 72-4 at
15:23-16:18, 61:9-65:23; 72-5 at 71:3-22.
* * *
10
Both parties have filed motions for summary judgment, see
dkt. nos. 130-1, 134, which revolve around whether TSI is due
additional compensation due to the unanticipated presence of lead
on the Project and the numerous delays which occurred.
The issues
have been fully briefed, see dkt. nos. 130-1, 134, 142, 149, 150,
154, and the matter is ripe for review.
LEGAL STANDARDS
A. Summary Judgment
Summary judgment “shall” be granted if “the movant shows that
there is no genuine dispute as to any material fact and that the
movant is entitled to judgment as a matter of law.”
P. 56(a).
Fed. R. Civ.
A dispute is “genuine” where the evidence would allow
“a reasonable jury [to] return a verdict for the nonmoving party.”
FindWhat Inv. Grp. v. FindWhat.com, 658 F.3d 1282, 1307 (11th Cir.
2011) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)).
A fact is “material” only if it “might affect the outcome
of the suit under the governing law.”
Id. (quoting Anderson, 477
U.S. at 248).
The moving party bears the initial burden of demonstrating
the absence of a genuine issue of material fact.
v. Catrett, 477 U.S. 317, 323 (1986).
See Celotex Corp.
The movant must show the
court that there is an absence of evidence to support the nonmoving
party’s case.
See id. at 325.
If the moving party discharges
11
this burden, the burden shifts to the nonmovant to go beyond the
pleadings and present affirmative evidence to show that a genuine
issue of fact does exist.
See Anderson, 477 U.S. at 257.
The nonmovant may satisfy this burden in one of two ways.
First, the nonmovant “may show that the record in fact contains
supporting evidence, sufficient to withstand a directed verdict
motion, which was ‘overlooked or ignored’ by the moving party, who
has thus failed to meet the initial burden of showing an absence
of evidence.”
Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1116
(11th Cir. 1993) (quoting Celotex Corp., 477 U.S. at 332 (Brennan,
J., dissenting)).
Second, the nonmovant “may come forward with
additional evidence sufficient to withstand a directed verdict
motion at trial based on the alleged evidentiary deficiency.”
at 1117.
Id.
Where the nonmovant attempts to carry this burden with
nothing more “than a repetition of his conclusional allegations,
summary judgment for the [movant is] not only proper but required.”
Morris v. Ross, 663 F.2d 1032, 1034 (11th Cir. 1981) (citing Fed.
R. Civ. P. 56(e)). On cross motions for summary judgment, the Court
views the facts in the light most favorable to the non-movant on
each motion.
Chavez v. Mercantil Commercebank, N.A., 701 F.3d
896, 899 (11th Cir. 2012).
B. The Miller Act
Under the Miller Act, 40 U.S.C. §§ 3131-34, a prime contractor
must furnish to the relevant government entity a payment bond “with
12
a surety satisfactory to the officer for the protection of all
persons supplying labor and material in carrying out the work
provided for in the contract for the use of each person.”
§ 3131(b)(2).
protect
Id. at
“The purpose of a Miller Act payment bond is to
subcontractors
and
suppliers
who
provide
labor
and
material for a federal project, because federally owned lands or
buildings are exempt from the liens that would normally secure
these parties' rights under state law.”
United States f/u/b/o
Pertun Constr. Co. v. Harvesters Grp., Inc., 918 F.2d 915, 917
(11th
Cir.
1990) (citing
United
States
f/u/b/o
Sherman
v.
Carter, 353 U.S. 210, 216 (1957)).
A subcontractor who has provided labor or material in carrying
out work provided for in a contract furnished under the Miller
Act, and who has not been paid in full within ninety days after
finishing performance, has the right to bring a civil action on
the payment bond.
40 U.S.C. § 3133(b)(1).
Upon being sued, “a
Miller Act surety stands in the shoes of its principal and is
[thus] entitled to assert all the defenses that its principal may
assert.”
United States f/u/b/o Jack Daniels Constr., Inc. v.
Liberty Mut. Ins. Co., No. 8:12-cv-2921, 2015 WL 9460115, at *8
(M.D. Fla. Dec. 28, 2015) (citing Moore Bros. Co v. Brown & Root,
Inc., 207 F.3d 717, 728 (4th Cir. 2000)); see also Centraal
Stikstof Verkoopkantoor, N.V. v. Ala. State Docks Dep’t, 415 F.2d
13
452, 458 (5th Cir. 1969) (explaining that these principles “are
common rubrics of the law of suretyship.”).
DISCUSSION
TSI and Federal bring cross motions for summary judgment, in
essence
arguing
about
whether
TSI
is
entitled
to
additional
compensation from Sauer (and by extension, Federal) for its work
and material used on the Project. Because there are genuine issues
of material fact as to whether TSI is entitled to these additional
funds, both motions are DENIED.
I. Federal’s Motion for Summary Judgment
Federal makes four arguments in support of its motion: 1)
Change Order 10 constituted an accord and satisfaction, dkt. no.
134
at
9-12,
2)
TSI
cannot
establish
any
fraudulent
misrepresentations by Sauer, id. at 16-21, 3) TSI cannot recover
in
quantum
meruit
because
it
continued
to
perform
under
the
Subcontract, id. at 12-16, and 4) TSI cannot recover the cost of
the rental equipment because it owned some of the equipment it
used, and it rented the rest from its alter ego Trimerica (meaning
it essentially rented equipment from itself), id. at 21-24.
All
four of these arguments do not merit judgment as a matter of law
in Federal’s favor.
14
A. It is a jury question whether Change Order 10 constitutes
an accord and satisfaction.
Federal first argues that Change Order 10, which purported to
send
$2,840,383.00
to
TSI
according
to
Change
Order
7
and
unilateral modification 6, resolved any disputes regarding the
unanticipated presence of lead.
order
expressly
limited
Dkt. No. 134 at 9.
recovery
due
to
lead
This change
paint
to
the
$2,844,383.00 paid to TSI at that time and stated that this
adjustment “constitute[d] full and equitable adjustment for the
change described herein and any associated delay, acceleration,
rescheduling, disruption impact and cumulative impact with other
changes.”
Dkt. No. 134-1 at 10.
TSI contends that Change Order 10 was never agreed to because
Ms. Pescinski’s signature was accidental, and numerous emails show
there was never a meeting of the minds.
Dkt. No. 142 at 11-12.
TSI further argues that there was no consideration for Change Order
10, and that even if it was agreed to, it should be rescinded under
the doctrine of unilateral mistake.
Id. at 12-16.
Under Georgia law, 4 accord and satisfaction occurs “where the
parties to an agreement, by a subsequent agreement, have satisfied
the former agreement, and the latter agreement has been executed.”
4 The Court pauses to note that this dispute centers on determining
whether a contract was agreed to, and as a matter of substantive law the
Court applies Georgia law, the state where this dispute arose, in
resolving it. See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
15
O.C.G.A. § 13-4-101.
Such agreements are generally found valid
and binding on the parties, but in order to execute the latter
agreement, there must be a meeting of the minds.
Strickland, 567 S.E.2d 90, 92 (Ga. Ct. App. 2002).
Moreno v.
This requires
“[a] definite offer and complete acceptance, for consideration[.]”
Id. (citing Herring v. Dunning, 446 S.E.2d 199 (Ga. Ct. App.
1994)).
“As
a
general
rule,
whether
there
is
accord
and
satisfaction is a question for the jury,” Woodstock Road Investment
Properties v. Lacy, 254 S.E.2d 910, 912 (Ga. Ct. App. 1979)
(citation omitted), and the existence of mutual assent for an
accord and satisfaction is ordinarily a jury question as well,
see Mayer v. Turner, 234 S.E.2d 853, 855 (Ga. Ct. App. 1977).
Here, taking all reasonable inferences in favor of the nonmoving party, it appears that despite Ms. Pescinski’s signature on
Change Order 10, neither party believed there to be a meeting of
the minds in the time before or after Ms. Pescinski’s action.
Federal argues that Ms. Pescinski’s signature on Change Order 10
should be the beginning and end of the discussion, but of course
this is not a matter of contract interpretation.
Rather, this
dispute centers around whether Change Order 10 was agreed to at
all,
and
“[i]n
making
that
determination,
‘the
circumstances
surrounding the making of the contract, such as correspondence and
discussions, are relevant in deciding if there was mutual assent
16
to an agreement, and courts are free to consider such extrinsic
evidence.’”
Frickey v. Jones, 630 S.E.2d 374, 376 (Ga. 2006)
(quoting Cox Broadcasting Corp. v. National Collegiate Athletic
Ass’n, 297 S.E.2d 733, 737 (Ga. 1982)).
This extrinsic evidence shows a genuine issue of material
fact exists as to whether the two parties believed there was mutual
assent at the time Ms. Pescinski signed Change Order 10.
In
support of mutual assent is a declaration by James Rossini, a Sauer
official,
who
states
he
executed
Change
Order
10
and
sent
$2,840,383.00 to TSI once he received the signed copy, and that
this sum was due purely because of Change Order 10.
1 ¶¶ 4-6.
Dkt. No. 134-
In opposition to mutual assent is Peter Lignos, a
Project Administrator for TSI who handled negotiations on Change
Order 10, and Irene Pescinski’s declarations, as well as emails
between TSI and Sauer before and after Ms. Pescinski signed Change
Order 10.
See Dkt. Nos. 142-3, 142-4.
Mr. Lignos states Ms.
Pescinski signed Change Order 10 due to an administrator’s error
while he was out of the office, dkt. no. 142-4 ¶ 11, and that upon
his return he immediately sought to undo this supposed mistake,
id. ¶¶ 12-14.
same.
Ms. Pescinski, in her own declaration, says the
Dkt. No. 142-3 ¶¶ 9-10.
Mr. Lignos and Ms. Pescinski go on to state that a Sauer
employee returned the signed Change Order 10 and the two parties
17
engaged in further negotiations.
¶¶ 15-21.
Dkt. Nos. 142-3 ¶¶ 11-12; 142-4
These negotiations were ultimately unsuccessful, id.,
and Mr. Lignos states (and the emails show) a belief that the two
parties believed Change Order 10 was never agreed to.
Federal argues that these declarations and emails notably do
not include any written directions from Ms. Pescinski to Sauer
that her signature was mistaken.
Dkt. No. 149 at 4-5.
Federal
further argues that TSI never returned the $2,840,383 that Federal
sent due to Change Order 10, showing that Change Order 10 must
have been agreed to.
Id. at 3.
TSI responds that it is entitled
to those funds due to Change Order 7, and as such does not need to
return those funds in order to repudiate the existence of Change
Order 10. 5
See Dkt. No. 142 at 13.
These arguments both have
The Court acknowledges Federal’s back-up argument that Change Order 7,
by itself, acts as a full and equitable adjustment for the lead-related
impact on the Project.
Dkt. No. 149 at 6-7.
This argument fails,
though, because Change Order 7 expressly included a full reservation of
claim rights by TSI that it should have been paid more than what was
paid under unilateral modification 6. See Dkt. No. 142-4 at 7. Notably,
Change Order 10 did not contain this language. Id. at 17-20. And to
the extent the release language in Change Order 7 contradicts the
reservation-of-rights provision earlier in the change order, the Court
notes that the reservation-of-rights provision controls.
5
Where there exists a conflict between two provisions in a contract, “a
limited or more specific provision will prevail over one that is more
broadly inclusive.”
Hearn v. Old Dominion Freight Lines, 324 S.E.2d
517, 518 (Ga. Ct. App. 1984).
As such, the reservation-of-rights
provision, which names the parties and the government and refers to a
specific instance in which TSI reserves its right to sue later on,
controls over the more general language at the end of Change Order 7.
Compare Dkt. No. 142-4 at 7, with id. at 8.
18
merit and show a clear and lively dispute about a material fact:
whether Change Order 10 was agreed to or not.
A reasonable juror
could find either there was mutual assent or there was not.
It is
improper to grant summary judgment to Federal at this time, and,
as such, Federal’s motion for summary judgment is DENIED on this
ground. 6
B. TSI properly
fraud.
alleges
fraudulent
misrepresentation
and
Federal next argues that TSI cannot recover because its only
right of recourse is under the Subcontract, and TSI does not allege
evidence establishing fraud or fraudulent misrepresentations on
Sauer’s part.
Dkt. No. 134 at 16-20.
Under Georgia law, the tort
of false misrepresentation has five elements.
TSI must show (1)
that Sauer made false representations, (2) that Sauer knew those
representations were false at the time, (3) that Sauer made the
representations intending to deceive TSI and induce it to perform
the painting and blasting work on the Project, (4) that TSI
justifiably
relied
upon
those
representations,
and
(5)
that
Sauer’s misrepresentations resulted in damages and loss to TSI.
See Grand Master Contracting, LLC v. Lincoln Apt. Mgmt., LP, 724
S.E.2d 456, 458 (Ga. Ct. App. 2012). Acknowledging that this Court
The Court also notes that TSI and Federal dispute whether Change Order
10 could be rescinded under the unilateral mistake doctrine. See Dkt.
Nos. 142 at 13-16; 149 at 5-6. Since summary judgment is denied on the
ground of mutual assent, it is not yet clear whether there was a contract
to rescind, so the Court need not resolve this dispute presently.
6
19
earlier found TSI had properly alleged these two claims, see dkt.
no. 84 at 10, Federal argues that this Court can still consider
whether TSI has shown enough evidence for a claim of fraud or
fraudulent misrepresentation.
See Dkt. No. 149 at 8-9 (discussing
the “law of the case” principle).
The Court agrees that Federal
is not barred from arguing TSI’s claims are baseless.
See Castro
v. United States, 540 U.S. 375, 384 (2003) (holding the “law of
the case” doctrine does not “limit the courts’ power”).
But
because TSI has produced evidence showing Sauer officials may have
known of the presence of lead in the paint and affirmatively hid
this knowledge from TSI when TSI was preparing its bid, Federal’s
motion for summary judgment is DENIED on this ground.
As to the first two elements of false representation, there
is at least a genuine dispute over whether Sauer knowingly made
false representations.
Deposition testimony shows that before
submitting its bid on the Project, TSI officials inquired about
whether the paint to be blasted contained lead and Sauer employees
withheld relevant information.
61:9-65:23,
depositions
80:11-83:13;
show
that
72-5
Sauer
See Dkt. Nos. 72-4 at 15:23-16:18,
at
71:3-22.
was
aware
Sauer
that
a
officials’
potential
subcontractor had conducted a “lead swab test” on paint which
covered the jobsite and found it contained lead.
56:1-17.
Dkt. No. 72-4 at
Sauer and the subcontractor tested the paint in two
20
different locations, id., and those results were shared with Jim
Kleipzig, Sauer’s project manager.
Id. at 61:9-23.
When TSI
officials inquired about whether the paint contained lead, though,
Sauer did not acknowledge the lead tests it had in its possession.
Dkt. No. 142-7 at 13:1-25, 62:7-17.
Further, Sauer employees were
told by Sauer officials not to disclose this information to TSI
when TSI requested information about the Project.
Dkt. Nos. 72-4
at 15:23-16:18, 80:11-83:13. This evidence could lead a reasonable
juror to find that Sauer affirmatively made false representations
to TSI (that the Project did not contain lead paint, except in a
few cordoned-off areas), and that it did so knowing they were false
(knowing the paint covering the jobsite did, in fact, contain
lead).
Federal makes a doomed argument that Sauer’s officials did
not know the paint contained lead because the only way “for a party
to definitively know whether a project contains lead” is through
a POP test, which occurred only after TSI executed the Subcontract.
Dkt. No. 149 at 9. “Simply put,” Federal concludes, “until the POP
was performed, there was no knowledge to withhold.”
(emphasis added).
Id. at 10
This argument fails because it is of no matter
that testing was not done to conclusively prove the presence of
lead in the paint—that is not what Sauer misrepresented.
Sauer
misrepresented its knowledge of the strong likelihood of lead in
21
the paint, a fact which would have likely pushed TSI to conduct
its own testing on the paint before submitting its bid.
As such,
a reasonable juror could find the first two elements satisfied.
As to the third element of false representation, there are
facts
which
support
the
conclusion
that
Sauer
made
false
representations with the intent to induce TSI into submitting a
bid for work on the Project.
Indeed, the deposition testimony
shows Sauer officials told employees not to disclose the lead
information just before TSI came onto the jobsite for the purpose
of ensuring TSI’s site visit, which would have been the time for
TSI to conduct its own lead testing, did not add another hurdle to
the bid submission process.
Id. at 80:11-81:1.
As such, a
reasonable juror could find Sauer intended to hide this knowledge
when TSI was preparing its bid so that TSI would submit a bid.
Next, the Court addresses the matter of reasonable reliance
upon said false representations. Federal points to the Subcontract
itself, arguing that TSI couldn’t have reasonably relied upon
representations that there was not lead in the paint because the
Subcontract states:
4. TSI expects the coating to be lead and hazardous free
per the proposal request. However, as required by SSPC
QP2, TSI will submit a paint chip sample for analysis to
confirm this before we commence surface preparation.
Should the sample test results show the coating to
contain lead, a price adjustment will be necessary from
the owner.
22
Dkt. No. 130-5 at 36; Dkt. No. 134 at 20-21.
This argument is
belied by the fact that TSI likely would not have been able to
obtain surety bond credit for the Project had it made its bid as
a lead paint job, instead of a lead-free paint job.
See Dkt. No.
142 at 4 (citing Dkt. Nos. 142-6 at 29:2-30:23, 147:10-148:10;
142-7 at 61:4-13).
TSI made its bid without any knowledge of the
lead, and, indeed, TSI needed there to be no knowledge of the lead
in order to even make a bid in good faith.
Id. (citing Dkt. Nos.
142-6 at 147:10-148:10; 142-7 at 60:16-61:13).
Federal’s argument
that TSI was able to make a change order due to the above-quoted
language does not defeat TSI’s claim because it is possible for a
party to rely upon a representation while retaining the right to
later negotiate in case that representation turns out to be false.
Finally, the Court addresses the matter of damages.
Federal
looks, again, to Change Order 10 and argues TSI has already
received payment for any damages flowing from the discovery of
lead.
Dkt. No. 149 at 14.
This Court, having already found a
jury question as to whether the parties actually agreed to Change
Order 10, repeats this conclusion and finds that there is a genuine
dispute of material fact as to whether Change Order 10 actually
constitutes a full and equitable adjustment for the discovery of
the lead.
only to
It must be noted, though, that TSI’s damages can relate
the
presence
of
the
lead—TSI’s
23
claim
for
fraudulent
misrepresentation necessarily cannot include damages related to
alleged water containment breaches because those did not flow from
the discovery of lead.
See Conner v. Hart, 555 S.E.2d 783, 788
(Ga. Ct. App. 2001) (noting a party must show actual damages which
flowed from the fraud alleged).
In sum, TSI—the non-movant—has pointed to evidence which, in
taking
all
reasonable
reasonable
juror
misrepresentation.
inferences
in
find
Sauer
to
its
favor,
could
committed
lead
a
fraudulent
As such, Federal’s motion for summary judgment
is DENIED on this ground.
C. TSI could recover in quantum meruit
Federal next argues that TSI cannot recover in quantum meruit
because there is evidence showing TSI affirmed the contract, and
thus its only avenue for relief is suing based on the contract.
Dkt.
No.
134
acknowledge
at
that,
12-16.
reading
This
all
argument,
reasonable
however,
inferences
does
in
not
TSI’s
favor, TSI did not discover Sauer’s allegedly fraudulent acts until
2019, and thus it is not foreclosed from rescinding the contract
and recovering in quantum meruit.
“Two actions are available to one who was fraudulently induced
by misrepresentations into entering a contract: he can affirm the
contract and sue for breach or seek to rescind and sue in tort for
fraud and deceit.”
Carpenter v. Curtis, 395 S.E.2d 653, 655 (Ga.
24
Ct. App. 1990); see also Kobatake v. E.I. DuPont De Nemours and
Co., 162 F.3d 619, 625 (11th Cir. 1998).
ways,
though—rescinding
the
contract
One cannot have it both
gives
up
those
benefits
bargained for in the contract, but affirming the contract prevents
a party from attaining damages outside of the contractual remedies
available.
Kobatake, 162 F.3d at 625.
And in order to make such a decision, a party must have “full
knowledge of all the material circumstances of the case.”
Flair
Fashions, Inc. v. SW CR Eisenhower Drive, Inc., 427 S.E.2d 56, 57
(Ga. Ct. App. 1993).
Upon attaining this “full knowledge,”
the
party must promptly rescind the contract or risk waiving their
right to do so.
identifiable:
Id.
Some material circumstances are easily
for example, the names of a tenant’s neighbors,
id., or the square footage of the space the tenant is occupying,
Nguyen v. Talisman Roswell, LLC, 585 S.E.2d 911, 913 (Ga. Ct. App.
2003). In circumstances like these, a party must immediately
rescind the contract in order to sue based on fraud.
However,
where, as here, TSI’s claim concerns Sauer’s internal discussions
and decision to allegedly withhold material information from TSI
during the bidding process, it is likely that TSI did not have
“full knowledge of all material circumstances of the case” until
those discussions were known by both sides.
S.E.2d at 57.
25
Flair Fashions, 427
Federal’s arguments turn on whether TSI had “full knowledge”
of the fraud in 2014 or 2019: if in 2014, TSI definitively affirmed
the contract by proceeding with performance; if 2019, though, TSI
promptly rescinded the contract.
Federal argues that TSI’s letter
stating it believed Sauer “likely had knowledge of the widespread
presence of lead containing materials on this Project prior to the
submission of [TSI’s] bid” is enough to determine as a matter of
law that TSI had full knowledge of the fraud.
(emphasis in original); 149 at 10.
the
letter
acknowledges
the
Dkt. Nos. 72-9
This argument has some merit—
possibility
that
Sauer
had
some
knowledge of the presence of lead in the paint covering the
jobsite, and as it turns out that was exactly the case.
However,
the fatal issue with this argument is that Sauer strongly denied
this accusation.
In its response to TSI’s letter, Sauer listed a chronology of
facts about lead testing done at the jobsite, stating “[t]his
chronology demonstrates that Sauer had no knowledge of the lead in
the beige colored paint prior to the receipt of the [first POP
test].”
Dkt. No. 72-10 at 3 (emphasis added).
Sauer sent another
letter a month later again denying any knowledge of the presence
of lead, stating “the facts are abundantly clear that Sauer was
not aware this was a lead abatement project until August of 2012,”
and that TSI “has failed to provide any meaningful document or
26
other source of information to support its ridiculous allegation
that ‘Sauer had knowledge’” of the presence of lead in the paint.
Dkt.
No.
72-11
at
6
(emphasis
added).
Making
a
reasonable
inference in TSI’s favor, these letters put the matter to bed, and
it was not until TSI deposed Richard Davidson and Harry Angenendt
(two Sauer officials) in early 2019 that TSI could demonstrate
“full knowledge” of Sauer’s alleged misrepresentations.
Because there is a genuine dispute of material fact as to
whether TSI’s suspicions amounted to “full knowledge” of the
alleged fraud, Federal’s motion for summary judgment is denied as
to TSI’s claim to recover in quantum meruit.
D. A jury question exists as to whether TSI and Trimerica are
alter-egos
Finally, Federal argues that TSI cannot recover the cost of
rental equipment because 1) TSI owns some of the rental equipment,
and 2) Trimerica is an “alter ego” of TSI, and thus TSI also owns
Trimerica’s rental equipment.
Relying on the notion that the use-
value of owned equipment is more akin to “lost profits” than
“actual
expenditures
for
labor
or
materials
utilized
in
the
performance of the subcontract,” and thus not recoverable under
the Miller Act, Federal argues TSI should not be able to recover
for either type of expenditure.
See U.S. f/u/b/o Pertun Constr.
Co., 918 F.2d at 915; Dkt. No. 134 at 23-24.
27
This argument has
merit
as
to
the
owned
equipment
that
was
not
“substantially
consumed” during the Project. See United States f/u/b/o J.P. Byrne
& Co. v. Fire Ass’n of Philadelphia, 260 F.2d 541, 544 (2d Cir.
1958). But since the evidence shows that all owned equipment was
substantially consumed, and because a jury question exists as to
whether TSI and Trimerica are alter egos of one another, summary
judgment must be DENIED on this ground.
1. The Owned Equipment
The Miller Act enables a subcontractor to recover the cost of
labor and material supplied on a federal government project.
U.S.C. § 3133.
40
A wide variety of materials can form the basis of
a Miller Act payment claim, including consumed equipment and the
cost of rental equipment, but not the cost of tools or equipment
that was not “substantially consumed” during the construction
project.
See United States f/u/b/o Bros. Builders Supply Co. v.
Old World Artisans, Inc., 702 F. Supp. 1561, 1565-66 (N.D. Ga.
1988).
Federal argues that TSI is seeking to recover for tools
and equipment it already owns, dkt. no. 134 at 23, but TSI explains
these charges and costs are “small tools and vehicles used by TSI
employees for transportation to and from the jobsite,” dkt. no.
142 at 9, and since the cost related to the vehicles is included
in TSI’s overall general conditions costs that form TSI’s field
overhead expense, the small tools are what Federal takes issue
28
with.
As such, this argument turns on whether these small tools
were “material” as opposed to “tools” under the Miller Act.
See
Old World Artisans, 702 F. Supp. at 1565-66.
Starting with general principles, it is well-settled that in
interpreting the Miller Act, “courts have refrained from an allinclusive definition of ‘material furnished in the prosecution of
the work.’”
Id. at 1565 (citing Fire Ass’n of Philadelphia, 260
F.2d at 544). As such, “[w]hile material provided for the work is
recoverable,
‘the
cost
of tools may
not
be
claimed
under
the Miller Act’ because they are equipment which the subcontractor
may continue to use and are not consumed in the public project.”
Id. (quoting Ibex Indus., Inc. v. Coast Line Waterproofing, 563 F.
Supp. 1142, 1146 (D.D.C. 1983)).
What makes the difference is
whether the tool “may reasonably be expected to be removed by the
contractor and used in subsequent jobs[.]”
United States f/u/b/o
Sunbelt Pipe v. United States Fidelity, 785 F.2d 468, 470 (4th
Cir. 1986).
Large equipment, such as a crane, would be properly
classified as capital equipment (and not recoverable), whereas
something “reasonably expected to be consumed, or substantially
consumed, in the performance of the work” is properly classified
as materials.
Old World Artisans, 702 F. Supp. at 1566 (quoting
United States f/u/b/o Sunbelt Pipe v. United States Fidelity, 785
29
F.2d 468, 470 (4th Cir. 1986)).
the supplier’s point of view.
This determination is made from
Id.
Here, the small tools Federal takes issue with are, according
to TSI, “purchased on a per-project basis and generally do not
last from job to job.”
¶ 6).
Dkt. No. 142 at 9 (citing Dkt. No. 142-1
Federal does not refute this declaration with any evidence
of its own, but the Court need not rely on that—it is enough to
show that, from TSI’s point of view, a several year comprehensive
project to blast existing paint and coat a submarine base with new
paint is extensive enough to wear out most of, if not all, the
small tools used in the project.
See Mass. Bonding & Ins. Co. v.
United States f/u/b/o Clarksdale Mach. Co., 88 F.2d 388, 389 (5th
Cir. 1937) (holding replacement parts for trucks were considered
material and comparing them to “shovels, drill points, and the
like, [which] though equipment in a sense, because they wear out
quickly and break often, are more like materials consumed in, but
not built into, the work”).
As such, TSI may be able to recover
for the cost of these small tools.
2. Trimerica as an Alter Ego
Federal next argues that Trimerica and TSI share enough
corporate formalities to be considered alter egos of one another.
Dkt. No. 134 at 23-24.
As such, Federal claims, TSI owns the
capital equipment it rented from Trimerica, and thus it cannot
30
recover these costs.
Federal’s argument, at bottom, concerns a
matter of state law as to whether TSI and Trimerica are “alter
egos” of one another.
Under Georgia law, the corporate form may be disregarded “when
it is shown that the corporate form has been abused.”
Baillie
Lumber Co. v. Thompson, 612 S.E.2d 296, 299 (Ga. 2005).
“[I]t is
necessary to show,” under this doctrine, “that the [parent company]
disregarded the corporate entity and made it a mere instrumentality
for the transaction of their own affairs; that there is such unity
of interest and ownership that the separate personalities of the
corporation and the owners no longer exist.”
Id. (quoting Heyde
v. Xtraman, Inc., 404 S.E.2d 607 (Ga. Ct. App. 1991)).
caution
should
be
exercised
when
disregarding
the
“Great
corporate
entity,” and as such this determination is “a fact question which
should ordinarily be submitted to the jury[.]”
Najran Co. for
Gen. Contracting & Trading v. Fleetwood Enters., Inc., 659 F. Supp.
1081, 1096 (S.D. Ga. 1986) (quoting
Bank, 309 S.E.2d 850 (1983);
Bass v. Citizens & So. Nat.
Luckett v. Bethlehem Steel Corp., 618
F.2d 1373, 1379 (10th Cir. 1980)).
Federal points to several pieces of evidence in support of
its claim: 1) TSI and Trimerica have the same owners, 2) they share
the same address, and 3) Trimerica allegedly charges TSI a higher
rate for renting equipment than it typically charges and at rates
31
which exceed the rates set forth in the contract between Trimerica
and TSI.
See Dkt. No. 149 at 15-16 (citing Dkt. No. 133 at 15-
20). 7
Starting with the third piece of evidence, the alleged rate
hikes, Federal claims Trimerica charged as much as four times the
agreed-upon rate to TSI for certain equipment during the contract.
Id.
at 16. This fact, as TSI notes, needs context.
It is true
that TSI was charged $33,000 for one month of rental equipment
after Trimerica and TSI earlier agreed on $8,500.
17.
Dkt. No. 133 at
But this change, according to Eric Pescinski, TSI’s project
manager, was due to “a change in the [scope of the] contract.”
Id.
And since “rates change and they vary all the time, depending
on how busy the economy is,” the $33,000 rate was “what the current
market will bear.”
Id. at 18-19.
Mr. Pescinski noted, at least
twice, that he does not control the rates at Trimerica, and that
TSI and Trimerica are “two separate businesses.”
Id. at 18-20.
Reading all reasonable inferences in TSI’s favor, as the Court
The Court notes that Federal also argues much of Trimerica’s business
involves leasing equipment to TSI and its affiliates, citing to a
deposition of Gerard Rancourt, a specialty coatings manager for TSI who
is testifying as an expert in this case on the effect lead had on the
Project. See Dkt. Nos. 134 at 7; 149 at 16. Upon reviewing the portion
of the deposition Federal submitted with its motion for summary judgment,
the Court cannot find any mention of the alleged affiliate, “Advanced
Marine Protection,” or indeed any mention of Mr. Rancourt testifying
about TSI’s rental equipment. See Dkt. No. 133 at 22-30. Neither party
has submitted the full transcript of Mr. Rancourt’s deposition, and TSI
has disputed this fact, see dkt. no. 143 at 7, so the Court will not
consider Federal’s argument in ruling on its motion for summary judgment.
7
32
must do at this stage, a reasonable juror could find Mr. Pescinski
credible and thus find that Trimerica and TSI have not abused the
corporate
form.
It
is
well-settled
determinations are left to the jury.
that
credibility
Anderson, 477 U.S. at 255.
Because the evidence does not show as a matter of law that
TSI attempted to “work an injustice” such that disregarding the
corporate entity is warranted, Baillie Lumber Co., 612 S.E.2d at
299, Federal’s motion for summary judgment is DENIED on this
ground.
II. TSI’s Partial Motion for Summary Judgment
In its partial motion for summary judgment, TSI argues that
neither
Sauer
$8,965,299.
nor
Federal
dispute
Dkt. No. 130-1 at 1-2.
that
TSI
is
entitled
to
That is incorrect, though, so
TSI’s motion must also be DENIED.
TSI
first
argues
that
it
is
entitled
to
a
judgment
of
$8,965,299 in its favor because Sauer has submitted a certified
claim
to
the
government
requesting
exactly
that
amount
as
“appropriate for pass-through” to TSI as payment for the multiple
delays during the Project.
Dkt. No. 130-1 at 13-15.
Indeed, TSI
notes, Federal has allegedly adopted Sauer’s positions on TSI’s
claim, and thus TSI argues the matter is beyond dispute.
15-16.
Id. at
This “adoption” merits explanation, though, as Federal’s
33
arguments contesting TSI’s motion for summary judgment imply a
disagreement between the two parties.
In support of its argument, TSI points to deposition testimony
from
Derek
Popeil,
a
designated
corporate
representative
for
Federal. Id. at 15-16. TSI’s claims about Mr. Popeil’s testimony,
however, lack context.
Mr. Popeil explained that Federal does not
dispute that “there’s a basis for a claim, not necessarily the
dollar amounts attached to it.”
Dkt. No. 130-10 at 100:1-2.
Simply put, Federal does not dispute that there’s a good-faith
basis for Sauer to file a claim to the government for increased
compensation, but does dispute whether TSI is due any of that
additional compensation.
Mr. Popeil reaffirms this understanding
in his testimony, stating “ultimately the government is gonna make
a determination as to the validity of this entire claim. And when
that, we get that, there’ll be the apportionment . . . we can
determine what, if anything, falls down to [TSI.]”
21.
Id. at 110:16-
This case is being litigated separate and apart from Sauer’s
claim before the Armed Services Board of Contract Appeals, and due
to the factual disputes presented in this case the issue of whether
TSI is due additional compensation is, in Federal’s view, a “bona
fide dispute between the claimant and the [ ] principal.” Id. at
33:13-14.
34
Reading all reasonable inferences in Federal’s favor, there
is a genuine dispute of material fact as to whether TSI is entitled
to any additional compensation, much less the alleged “undisputed”
sum of $8,965,299.
Apart from Mr. Popeil’s testimony, Federal
makes three main counterarguments: 1) the accord and satisfaction
argument, 2) the failure to rescind argument, and 3) the alter ego
argument.
A. Change Order 10 as an accord and satisfaction
Federal first counters that TSI is not due any additional
compensation as a result of the lead discovery because Change Order
10 constitutes an accord and satisfaction.
Dkt. No. 150 at 8.
TSI responds twofold: 1) making the same argument it makes in
Federal’s motion for summary judgment, that the mistaken signature
meant there was no meeting of the minds, and 2) that this argument
would necessarily mean Sauer made its claim to the government in
bad faith, amounting to fraud.
Severin
v
United
States,
99
Dkt. No. 154 at 4-5; see also
Ct.
Cl.
435
(1943)
(holding
a
contractor may sue the government only for damages incurred by its
subcontractor for which the contractor is liable).
The evidence
shows a reasonable juror could find TSI did not act reasonably in
attempting to rescind the mistaken signature on Change Order 10.
Further, this issue isn’t so clear that it is appropriate for the
35
Court to summarily determine Sauer’s motives behind making its
claim to the government.
Focusing on the evidence at issue, it is undisputed that 1)
Change Order 10 was at one point signed by Irene Pescinski, the
President of TSI; 2) Change Order 10 was the only order to mention
the $2,840,383 dollar amount which Sauer sent to TSI; 3) Ms.
Pescinski’s subordinates communicated with employees at Sauer to
rescind the allegedly mistaken signature, but 4) Ms. Pescinski
herself never wrote anything to her employees or Sauer attempting
to rescind said signature.
While these facts could be interpreted, as the Court did in
Section I.A, to mean that Change Order 10 was never executed and
TSI was due these funds under Change Order 7, the facts are capable
of a different interpretation.
Taking all reasonable inferences
in Federal’s favor, Change Order 7 could be viewed as merely an
agreement to negotiate the exact amount TSI was due, and Change
Order 10 was the agreement to actually send the funds to cover the
lead in the paint.
And while Ms. Pescinski allegedly told her
subordinates to rescind her signature and continue negotiating,
“[a] person who signs a contract without reading it is bound to
its terms unless [she] can show an inability to read, an emergency,
or the occurrence of some type of fraud which prevented [her] from
reading the documents.”
Malin v. Servisco, Inc., 323 S.E.2d 278,
36
279 (Ga. Ct. App. 1984).
Of course, the concern over whether
Change Order 10 boils down to a question of a meeting of the minds,
not whether Ms. Pescinski could not read, signed it during an
emergency, or under the influence of some type of fraud—so the
doctrine espoused in Malin cannot answer the question squarely in
Federal’s favor, either.
Simply put, whether Change Order 10 was executed or not boils
down
to
weighing
the
credibility
of
Ms.
Pescinski,
her
subordinates, and Sauer’s employees, and analyzing the Change
Orders.
And while it is unlikely that Sauer would submit a claim
in bad faith to the government seeking damages it is not entitled
to,
such
a
finding
is
based
on
Sauer’s
credibility.
Such
determinations are firmly within the province of the jury, and as
such it would be improper for the Court to conclude TSI is entitled
to
additional
compensation
for
lead-related
delays
at
this
juncture.
B. TSI’s alleged failure to rescind
TSI
argues,
additional
however,
compensation
for
that
is
lead-related
alleged containment breaches, too.
Dkt. No. 142 at 23-24).
it
not
just
delays,
entitled
but
also
to
to
Dkt. No. 154 at 4 n.3 (citing
TSI seeks to rescind the contract and
attain damages through quantum meruit.
37
Here, again, the Court looks to the evidence submitted in
support of Federal’s motion for summary judgment.
The evidence
shows that in April 2014, TSI sent a letter stating as follows:
We have recently become aware of records, however,
indicating that Sauer likely had knowledge of the
widespread presence of lead containing materials on this
Project prior to the submission of our bid. Moreover, it
appears that Sauer had planned to treat the Project as
a lead job before permitting TSI to submit a bid with
the assumption that our work would not require the
handling of lead or other hazardous materials.
Dkt. No. 72-9 at 2.
The letter went on to state TSI would conduct
its own investigation into the matter.
Id.
Sauer sent two
different responses forcefully denying the accusations, to be
sure, but a jury could find that at this point TSI was at least
suspicious of Sauer and was dealing with the matter at arm’s
length.
Id. (stating TSI would conduct its own investigation into
the matter).
Where a party is suspicious of fraud, it cannot
refuse to learn more in hopes of keeping the window open to rescind
the contract on the basis of said fraud years later.
See, e.g.,
Liberty Capital, LLC v. First Chatham Bank, 789 S.E.2d 303, 30809 (Ga. Ct. App. 2016) (finding that in order to show justifiable
reliance on a defendant’s misrepresentations, a plaintiff must
show he exercised his duty of due diligence); Rainey v. GAFVT
Motors, Inc., 604 S.E.2d 840, 842-43 (Ga. Ct. App. 2004) (holding
the same in a fraud context).
38
Casting all reasonable inferences in Federal’s favor as the
non-movant, a jury could find
that TSI was dealing with Sauer at
arm’s length in April 2014, such that it had the duty to conduct
its own investigation independent of Sauer’s assurances.
Further,
a jury could find that discussions with the potential subcontractor
likely would have turned up knowledge that they had shared this
information with Sauer, bringing full knowledge of the alleged
fraud to light.
As such, a reasonable juror could find that TSI
did not act reasonably in taking Sauer at its word in April 2014
and thus affirmed the contract and foreclosed its quantum meruit
claim.
Summary judgment must be DENIED on this claim.
C. TSI and Trimerica as alleged alter egos
Finally, Federal counters TSI’s motion by arguing that TSI
and Trimerica are alter egos, and thus TSI cannot recover the cost
of any rental equipment from Trimerica.
Dkt. No. 150 at 13.
The
Court, having found this determination is at bottom a credibility
issue that should be submitted to the jury, see supra, Section
I.D, DENIES summary judgment on this ground as well.
CONCLUSION
For the above reasons, TSI’s partial motion for summary
judgment, dkt. no. 130, and Federal’s motion for summary judgment,
dkt. no. 132, are both DENIED.
The parties’ are ORDERED to file
their proposed pretrial order by __July 8, 2022____.
39
SO ORDERED this 9th day of May, 2022.
_________________________________
HON. LISA GODBEY WOOD, JUDGE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
40
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