U.S. Composite Pipe South, LLC v. Frank Coluccio Construction Company, Inc. et al

Filing 130

ORDER GRANTING DEFENDANT/COUNTERCLAIM PLAINTIFF FRANK COLUCCIO CONSTRUCTION COMPANY'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON THE ISSUE OF SUBJECT MATTER JURISDICTION, DOC. NO. 90 re 90 , 129 - Signed by JUDGE J. MICHAEL SEABRIGHT on 7/30/201 4. "The court GRANTS Defendant/Counterclaimant Frank Collucio Construction Co.'s Motion for Partial Summary Judgment, Doc. No. 90. Accordingly, the court STRIKES the City's tenth defense in its Answer to the Amended C ounterclaim regarding lack of federal subject matter jurisdiction." (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
U.S. COMPOSITE PIPE SOUTH,
LLC,

)
)
)
Plaintiff,
)
)
vs.
)
)
FRANK COLUCCIO
)
CONSTRUCTION COMPANY, and )
SAFECO INSURANCE COMPANY )
OF AMERICA,
)
)
Defendants.
)
_______________________________ )
FRANK COLUCCIO
)
CONSTRUCTION COMPANY,
)
)
Counterclaimant,
)
)
vs.
)
)
U.S. COMPOSITE PIPE SOUTH,
)
LLC,
)
)
Counterclaim Defendant,
)
)
and
)
)
WESTCHESTER FIRE INSURANCE )
COMPANY, and CITY AND
)
COUNTY OF HONOLULU,
)
)
Additional Counterclaim
)
Defendants.
)
_______________________________ )

CIVIL NO. 12-00538 JMS-KSC
ORDER GRANTING
DEFENDANT/COUNTERCLAIM
PLAINTIFF FRANK COLUCCIO
CONSTRUCTION COMPANY’S
MOTION FOR PARTIAL SUMMARY
JUDGMENT ON THE ISSUE OF
SUBJECT MATTER JURISDICTION,
DOC. NO. 90

ORDER GRANTING DEFENDANT/COUNTERCLAIM PLAINTIFF
FRANK COLUCCIO CONSTRUCTION COMPANY’S MOTION FOR
PARTIAL SUMMARY JUDGMENT ON THE ISSUE OF SUBJECT
MATTER JURISDICTION, DOC. NO. 90
I. INTRODUCTION
Currently before the court is one of several pending motions in this
procedurally and factually-complicated action stemming from a $37 million sewer
construction contract (the “Beachwalk Contract”) between the City and County of
Honolulu (“City”) and Frank Coluccio Construction Company (“FCCC”).
Defendant/Counterclaimant FCCC’s Motion for Partial Summary Judgment, Doc.
No. 90, seeks affirmatively to establish that the court has subject matter jurisdiction
over its Amended Counterclaim against both Plaintiff/Counterclaim Defendant
U.S. Composite Pipe South, LLC (“Composite Pipe”) and Additional Counterclaim
Defendant City. That is, FCCC’s Motion seeks to strike the City’s tenth defense
(lack of subject matter jurisdiction) from the City’s Answer to FCCC’s Amended
Counterclaim. Based on the following, the Motion is GRANTED.
II. BACKGROUND
A.

The Beachwalk Contract, Composite Pipe’s Complaint, and FCCC’s
Amended Counterclaim
Aside from this Motion, four other Motions (and related joinders)

concerning the substantive aspects of this case are currently pending hearing on
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September 29, 2014. See Doc. Nos. 87, 94, 106, 114, & 121. Those Motions deal
extensively with the merits of the dispute, and describe the complex facts at issue.
The present Motion, however, is restricted to a relatively narrow issue regarding
subject matter jurisdiction, primarily as to FCCC’s Amended Counterclaim against
the City. Accordingly, the court sets forth only the essential factual background
necessary to place the issues regarding subject matter jurisdiction into context.
The June 23, 2009 Beachwalk Contract between the City and FCCC
was for construction of a “Beachwalk Wastewater Pump Station to Ala Moana
Park Sewer -- Force Main System.” Doc. No. 1, Compl. ¶ 7. Among other things,
the Beachwalk Contract involved sewage piping from Waikiki to a station near Ala
Moana Park, and required installation of a specialized double-curved section of
pipe to be placed under the Ala Wai Canal.
For this purpose, Composite Pipe provided a $3.5 million “Meyer
Pipe” to FCCC pursuant to a November 13, 2011 purchase order between
Composite Pipe and FCCC. Composite Pipe was to be paid in installments: Fifty
percent upon signing of the purchase order, twenty five percent upon delivery to
the job site, and twenty five percent after installation and pressure testing. Id. ¶ 12.
Allegedly, FCCC paid the first installment to Composite Pipe, but has refused or
wrongfully delayed payment of the second and third installments. Id. ¶¶ 28, 30.
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Composite Pipe filed this diversity action to recover over $1.8 million as payment
of the contracted amounts with interest, as well as attorney’s fees and costs. Id.
¶ 34.
As part of its defense, FCCC filed an Amended Counterclaim,
essentially contending it need not make final payments because (1) the Meyer Pipe
did not meet certain specifications and/or was defective; (2) FCCC is entitled to
certain liquidated damages because the Meyer Pipe was delivered late; and
(3) FCCC is entitled to a large offset because of a breach of contract and
negligence by Composite Pipe and/or the City. See Doc. No. 42, First Am.
Counterclaim. FCCC thus filed the Amended Counterclaim under Federal Rule of
Civil Procedure 13 against Composite Pipe, and added the City as a Additional
Counterclaim Defendant. FCCC contends that the Amended Counterclaim is
compulsory as arising out of the same transaction or occurrence as Composite
Pipe’s Complaint. Doc. No. 90-1, Mot. at 5. FCCC later filed suit against the City
in the First Circuit Court of the State of Hawaii, making nearly identical
allegations.
There is much more to the story, the details of which are raised in the
other pending Motions. In short, the Amended Counterclaim makes allegations
about how and why the Meyer Pipe was chosen -- it was a replacement for an “Al
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Watari Pipe” from a Kuwaiti firm that was described in bidding documents when
FCCC originally bid on the Beachwalk Contract. The Amended Counterclaim
alleges in detail the circumstances (e.g., change orders, negotiations, and
communications with the City’s retained managing agent, etc.) which FCCC
believes establish that the City was responsible for negotiating the November 2011
purchase order, and choosing, approving and/or later accepting the Meyer Pipe. It
alleges that the Meyer Pipe was defective, leading to other construction difficulties
because of the characteristics or condition of the Meyer Pipe. And it describes
further problems that arose after the Meyer Pipe was installed, leading to questions
as to who was responsible for those problems and whether FCCC is entitled to
consequential or other damages as a result. See generally Doc. No. 42, First Am.
Counterclaim at 7-21.
B.

Contractual and Statutory Jurisdictional or Venue Provisions
The Beachwalk Contract specifically incorporates “General

Conditions,” applicable to City contracts. See, e.g., Doc. No. 109-3, Coluccio Dep.
at 97. As to remedies for certain disputes, the General Conditions provide, in
relevant part:
All controversies between the Officer-in-Charge and the
Contractor which arise under, or by virtue of, the contract
and which are not resolved by mutual agreement between
the Officer-in-Charge and the Contractor, shall be
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decided by the Contracting Officer in writing, within the
time limitations below, after receipt of a written request
from the Contractor for a final decision[.]
Doc. No. 109-4, City’s Ex. C. at 50, ¶ 8.6(a). They also include a section regarding
“governing law,” as follows:
Governing law. The contract shall be construed under
the laws of the State of Hawaii and Contractor consents
to the exercise of personal jurisdiction over Contractor by
the courts of the State of Hawaii.
Id. at 51, ¶ 8.6(e). The Conditions further provide:
Decision. The Contracting Officer shall immediately
furnish a copy of the decision to the Contractor, by
certified mail, return receipt requested, or by any other
method that provides evidence of receipt. Any such
decision shall be final and conclusive, unless fraudulent,
or unless the Contractor brings an action seeking judicial
review of the decision in a circuit court of this State
within the six months from the date of receipt of the
decision.
Id. at 51, ¶ 8.6(g).
Additionally, the Conditions include the following clause,
incorporating other laws and regulations:
The Contractor shall be fully informed of all present and
new laws, regulations, and ordinances which affect the
contact and the performance thereof, including but not
limited to:
(1) Chapter 103, HRS, relating to expenditure of public
money;
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(2) Chapter 103D, HRS, relating to Hawaii procurement
code;
(3) Chapter 104, HRS, relating to wages and hours of
employees on public works;
(4) Chapter 378, HRS, relating to fair employment
practices;
(5) Chapter 386, HRS, relating to worker’s
compensation;
(6) Chapter 396, HRS, relating to occupational safety
and health; and
(7) Chapter 444, HRS, relating to licensing of
contractors.
The Contractor shall comply with all such present and
new laws, regulations and ordinances, including the
giving of all notices necessary and incident to the
performance of the contract.
Id. at 31, ¶ 4.21 (emphasis added). In turn, the Hawaii Procurement Code contains
the following provisions regarding remedies and “contract controversies:”
Authority to resolve contract and breach of contract
controversies.
(a) This section applies to controversies between a
governmental body and a contractor which arise under,
or by virtue of, a contract between them, including,
without limitation, controversies based upon breach of
contract, mistake, misrepresentation, or other cause for
contract modification or rescission.
HRS § 103D-703 (emphasis added). The Procurement Code describes an initial
resolution procedure before a “chief procurement officer” before resorting to
judicial action.
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The procedures and remedies provided for in this part,
and the rules adopted by the policy board, shall be the
exclusive means available for persons aggrieved in
connection with the solicitation or award of a contract, a
suspension or debarment proceeding, or in connection
with a contract controversy, to resolve their claims or
differences.
HRS § 103D-704. It then provides for a layer of administrative proceedings for
review. See HRS § 103D-709.
And as for “judicial review” or “judicial action,” the Procurement
Code provides:
(a) Only parties to proceedings under section 103D-709
who are aggrieved by a final decision of a hearings
officer under that section may apply for judicial review
of that decision. The proceedings for review shall be
instituted in the circuit court of the circuit where the case
or controversy arises.
HRS § 103D-710 (emphasis added).
(b) A person aggrieved by a decision issued pursuant to
section 103D-703 by a county chief procurement officer
or a designee may initiate an action under, or by virtue
of, the contract in controversy in the circuit court.
(c) A governmental body aggrieved by a decision issued
pursuant to section 103D-703 by a state or county chief
procurement officer or a designee may initiate an action
under, or by virtue of, the contract in controversy in the
circuit court.
HRS § 103D-711 (emphases added).
Similarly, regarding circuit court decisions under § 103D-710, the
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Procurement Code provides:
Any party aggrieved by the decision of the circuit court
may appeal in accordance with part I of chapter 641
[regarding appeals to Hawaii appellate courts] and the
appeal shall be given priority.
HRS § 103D-710(f).
C.

Procedural Background
On May 30, 2014, FCCC filed its Motion for Partial Summary

Judgment on the Issue of Subject Matter Jurisdiction. Doc. No. 90. The City filed
its Opposition on July 8, 2014, Doc. No. 109, joined by Composite Pipe on July 9,
2014. Doc. No. 111. FCCC filed its Reply on July 15, 2014. Doc. No. 124. The
court heard the Motion on July 28, 2014.
III. DISCUSSION
FCCC’s Motion for Partial Summary Judgment seeks to strike the
City’s tenth defense from the City’s Answer to its counterclaim.1 That defense
provides: “The claims for relief of the First Amended Counterclaim are barred by
lack of personal and/or subject matter jurisdiction.” Doc. No. 59, City’s Answer

1

FCCC’s Motion is proper under Federal Rule of Civil Procedure 56(a), even if it is
moving to “strike” a defense. See, e.g., Cabasug v. Crane Co., --- F. Supp. 2d ----, 2013 WL
6824925, at *3 n.2 (D. Haw. Dec. 27, 2013) (“Plaintiffs’ Motion is proper under Rule 56(a),
which allows a party to move for summary judgment on a ‘claim or defense.’ This language was
included in the 2010 amendments ‘to make clear at the beginning that summary judgment may
be requested not only as to an entire case but also as to a claim, defense, or part of a claim or
defense.’”) (citations omitted).
9

¶ 38. The Motion is thus directed only at federal subject matter jurisdiction.
FCCC, having filed a compulsory counterclaim under Rule 13, seeks to confirm
that the court has jurisdiction over the First Amended Counterclaim as to the City
as well as to Composite Pipe. Doc. No. 90-1, Mot. at 9.
The parties do not dispute that jurisdiction over the entire action is
otherwise proper under 28 U.S.C. § 1332 based on diversity of citizenship
(whether or not the City is a proper party to this action) -- Plaintiff is a Louisiana
limited liability company, with member residents in Texas and California, Doc.
No. 10-1; Both Defendants (FCCC and Safeco Ins. Co.) are Washington
corporations with its principal places of business in Seattle, Washington, Doc.
No. 1, Compl. ¶¶ 2-4; and Additional Counterclaim Defendant Westchester Fire
Ins. Co. is a New York corporation with principal place of business in
Pennsylvania. Doc. No. 42, Am. Counterclaim ¶ 3. But the City asserts two bases
for arguing that the court lacks subject matter jurisdiction: (1) provisions of the
Hawaii Procurement Code, HRS § 103D et seq., and (2) the “forum selection
clause” in the Beachwalk Contract. It contends that disputes alleged in the
Amended Counterclaim are “contract controversies” that “arise under, or by virtue
of” the Beachwalk Contract between FCCC and the City -- and thus must be
brought in a state circuit court, both as a matter of statute and contract. Doc. No.
10

109, City’s Opp’n at 1-2.
But federal caselaw holds that neither state statute nor contract can
constitutionally be interpreted to deprive this court of subject matter jurisdiction in
this case. See, e.g., Albert Trostel & Sons Co. v. Notz, 679 F.3d 627, 629 (7th Cir.
2012) (“Treating the [Wisconsin] statute as a claim by a state to oust the
jurisdiction of the federal courts would simply render it unconstitutional, for no
state may contract jurisdiction created by an Act of Congress.”) (citations omitted);
Superior Beverage Co. v. Schieffelin & Co., 448 F.3d 910, 917 (6th Cir. 2006)
(“[A] state may not deprive a federal court of jurisdiction merely by declaring in a
statute that it holds exclusive jurisdiction.”); Kamm v. Itex Corp., 568 F.3d 752,
754 (9th Cir. 2009) (“[A] forum selection clause does not deprive a federal court of
subject matter jurisdiction.”) (citing M/S Bremen v. Zapata Off-Shore Co., 407
U.S. 1, 12 (1972)).
It follows that the City’s defense of lack of subject matter jurisdiction
is meritless. Even if the Amended Counterclaim “arises under, or by virtue of” the
Beachwalk Contract, the state statutory scheme cannot dictate whether a federal
court has diversity jurisdiction.2 Schieffelin & Co., 448 F.3d at 917. Nor does the
2

The City raises Office of Hawaiian Affairs v. Department of Education, 951 F. Supp.
1484, 1491 (D. Haw. 1996), for the proposition that a state statute may limit jurisdiction to its
own courts -- but the principle is based on Eleventh Amendment immunity whereby a state may
(continued...)
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parties’ choice of forum (assuming, without deciding, that the Amended
Counterclaim is otherwise covered by the clause in the Beachwalk Contract) affect
the court’s subject matter jurisdiction. Kamm, 569 F.3d at 754. The court has
subject matter jurisdiction based upon 28 U.S.C. ¶ 1332, and neither the statute,
nor the contract, can deprive this court of such jurisdiction. The court thus
GRANTS FCCC’s Motion and strikes the City’s tenth defense as it pertains to
subject matter jurisdiction.3
The court also denies the City’s alternate request for the court to

2

(...continued)
consent to be sued in state court but not in federal court. See id. (“[I]n HRS § 662 the state
consents to be sued in tort actions [but] this provision . . . does not operate as a waiver [of
Eleventh Amendment immunity] in this case to suit in federal court.”). The State is not a
Defendant here, and the principle does not apply to the City, a municipality. See, e.g., Pittman v.
Or., Emp’t Dep’t, 509 F.3d 1065, 1071 (9th Cir. 2007) (“[A]n unconsenting State is immune
from suits brought in federal courts by her own citizens as well as by citizens of another State.
Municipalities, in contrast, are not entitled to sovereign immunity in federal court.”) (citations
and quotation marks omitted).
3

Whether the venue or forum is proper is a different question. See, e.g., Eldee-K Rental
Props., LLC v. DIRECTV, Inc., 748 F.3d 943, 949 (9th Cir. 2014) (“Venue and subject matter
jurisdiction are distinct concepts.”); United States v. Park Place Assocs., 563 F.3d 907, 929 n.14
(9th Cir. 2009) (“The forum-selection clause . . .is, at best, consent to personal jurisdiction and
venue. The clause cannot confer subject matter jurisdiction on California courts, federal or
state.”) (citations omitted); Kamm, 568 F.3d at 754 (“[A] forum selection clause does not deprive
a federal court of subject matter jurisdiction.”); New Moon Shipping Co. v. MAN B & W Diesel
AG, 121 F.3d 24, 28 (2d Cir. 1997) (“[P]arties have no power by private contract to oust a
federal court of jurisdiction otherwise obtaining.”). Although the parties have discussed issues
related to forum or venue in their papers, the Motion is directed only to subject matter
jurisdiction. Likewise, this Order addresses only subject matter jurisdiction.
12

decline supplemental jurisdiction under 28 U.S.C. § 1367(c).4 See, e.g., Acri v.
Varian Assocs., 114 F.3d 999, 1000 (9th Cir. 1997) (en banc) (“[A] federal district
court with power to hear state law claims has discretion to keep, or decline to keep,
them under the conditions set out in § 1367(c)”). Assuming for these purposes that
the claim against the City falls under the court’s supplemental jurisdiction,5 the
court nonetheless concludes, in its discretion, that judicial economy would clearly
be best served by retaining jurisdiction (at least at this stage of the litigation),
rather than splitting the action between state and federal court. See Satey v.
JPMorgan Chase & Co., 521 F.3d 1087, 1091 (9th Cir. 2008) (upholding a
decision retaining jurisdiction under § 1367(c), reasoning that “[j]udicial economy

4

Section 1367(c) provides:
(c) The district courts may decline to exercise supplemental
jurisdiction over a claim under [§ 1367] subsection (a) if -(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or
claims over which the district court has original
jurisdiction,
(3) the district court has dismissed all claims over which it
has original jurisdiction, or
(4) in exceptional circumstances, there are other
compelling reasons for declining jurisdiction.

5

“The traditional rule is that federal courts have supplemental jurisdiction over
compulsory counterclaims, because a plaintiff would otherwise lose his opportunity to be heard
on those claims.” Sparrow v. Mazda Am. Credit, 385 F. Supp. 2d 1063, 1066 (E.D. Cal. 2005)
(citation omitted). And because “[t]he § 1367 test for supplemental jurisdiction is broader than
the test for compulsory counterclaims . . . counterclaims that are compulsory under the ‘same
transaction or occurrence’ test automatically pass the § [1367] ‘same Article III case or
controversy’ test.” Id. at 1067.
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and convenience to the parties were better accommodated by retaining the state law
claim at that juncture, and the district court did not abuse its discretion by so
doing.”) (citation omitted).
IV. CONCLUSION
The court GRANTS Defendant/Counterclaimant Frank Collucio
Construction Co.’s Motion for Partial Summary Judgment, Doc. No. 90.
Accordingly, the court STRIKES the City’s tenth defense in its Answer to the
Amended Counterclaim regarding lack of federal subject matter jurisdiction.
IT IS SO ORDERED.
DATED: July 30, 2014.

/s/ J. Michael Seabright
J. Michael Seabright
United States District Judge

U.S. Composite Pipe South, LLC v. Frank Coluccio Constr. Co., et al., Civ. No. 12-00538 JMSKSC, Order Granting Defendant/Counterclaim Plaintiff Frank Coluccio Construction Company’s
Motion for Partial Summary Judgment on the Issue of Subject Matter Jurisdiction, Doc. No. 90

14