Pacific Commercial Services, LLC v. LVI Environmental Services, Inc.; et al.
Filing
170
FINDINGS OF FACT AND CONCLUSIONS OF LAW. Signed by CHIEF JUDGE J. MICHAEL SEABRIGHT on 8/10/2018. Summary and Excerpt of conclusion: Pacific Commercial Services, LLC ("PCS") is entitled to an award in the amount of $767,053.14 plus additional prejudgment interest. The counterclaim filed by LVI Environmental Services, Inc. ("LVI") is dismissed with prejudice. "PCS is to submit a supplemental filing with a proposed final calculation of the amounts for prejudment interest as of today, August 10, 2018. (Although Judgment will not enter until the amount of prejudgment interest is known, such interest will stop accruing as of today.)This supplemental filing is due by August 24, 2018. Because the rates of prejudgment interest are known, the parties are to meet and confer regarding these calculations and attempt to obtain a stipulation to the total amount." LVI's amended counterclaim: ECF 105 . Non-Jury Trial held 1/17/2018 and 1/18/2018. Minutes of NJT: ECF nos. 154 and 155 , respectively. (afc)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
PACIFIC COMMERCIAL SERVICES,
LLC, a Hawaii limited liability
company,
Civ. No. 16-00245 JMS-KJM
FINDINGS OF FACT AND
CONCLUSIONS OF LAW
Plaintiff,
vs.
LVI ENVIRONMENTAL SERVICES,
INC., nka NORTHSTAR
CONTRACTING GROUP, INC., ET
AL.,
Defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
I. INTRODUCTION
Plaintiff Pacific Commercial Services, LLC (“PCS”) filed this action
for breach of contract and unjust enrichment against Defendants LVI
Environmental Services, Inc. (“LVI”) and Northstar Recovery Services, Inc.
(“NRS”) (collectively, “Defendants”)1 related to two projects: the first involves
1
As indicated in the Findings to follow, LVI is now known as Northstar Contracting
Group, Inc. (“NCG”). NCG and NRS are affiliates of Northstar Group Holdings, LLC. See
Stipulated Facts for Trial (“Stip. Facts”) ¶ 6, ECF No. 140. The court sometimes refers to
Defendants collectively as LVI where the distinction is not relevant.
1
services relating to deactivation of the Hawaiian Electric Company’s (“HECO”)
Honolulu Power Plant (the “HECO Project”); the second relates to a building that
was destroyed by a 2012 fire at HECO’s Kahuku Wind Farm (the “Kahuku
Project”). Stip. Facts ¶ 7. In response, LVI filed a Counterclaim for
reimbursement of certain payments. After substantial pre-trial litigation and an
order resolving some issues at the summary-judgment stage, the court conducted a
non-jury trial of the remaining issues on January 17-18, 2018, followed by posttrial briefing.
Pursuant to Federal Rule of Civil Procedure 52(a), the court issues
these Findings of Fact (“Findings”) and Conclusions of Law (“Conclusions”). To
the extent any Findings may also be deemed to be Conclusions, they shall also be
considered Conclusions. Similarly, to the extent any Conclusions may be deemed
to be Findings, they shall be considered Findings. See In re Bubble Up Del., Inc.,
684 F.2d 1259, 1262 (9th Cir. 1982) (“The fact that a court labels determinations
‘Findings of Fact’ does not make them so if they are in reality conclusions of
law.”) (citation omitted).
The court finds and concludes that Plaintiff has proven by a
preponderance of the evidence that LVI breached provisions of the HECO
Subcontract and the Kahuku Subcontracts (as those terms are described in the
2
Findings) and that Plaintiff is entitled to damages and, separately, recovery for
unjust enrichment. LVI failed to prove its Counterclaim by a preponderance of the
evidence, and Plaintiff did not breach the HECO Subcontract first. Plaintiff is
entitled to recover damages and restitution against Defendants in the amount of
$767,053.14, plus prejudgment interest to be calculated based on a supplemental
filing. After entry of Judgment, Plaintiff is also entitled to submit an application
for reasonable attorneys’ fees and costs in accordance with the court’s local rules.
II. SUMMARY
For convenience of the parties, the court begins by summarizing
(without citations to the record) the key points, which are detailed and supported in
the Findings and Conclusions that follow. The parties know the issues in dispute
and the specific evidence in question, and thus will understand this summary even
if a casual reader would not without first reviewing the Findings and Conclusions
for context.
LVI breached the HECO Subcontract by violating its obligation to use
PCS exclusively for waste transportation and disposal services for the HECO
Project, such as by contracting directly with Waste Management for removal of
asbestos containing material (“ACM”) beginning in January of 2013. For this
breach, PCS is entitled to damages of $699,044.74 for ACM work and $22,478.25
3
for “other non-hazardous solid waste” (performed by Tajiri), along with
prejudgment interest to be determined in a supplemental filing.
But PCS failed to prove its claim for $284,978.10 in damages related
to 518,142 gallons of “oily water” removed by Unitek beginning in March 2013.
The scope of such work was not contemplated in the HECO Subcontract and was
the subject of a change order to the main LVI-HECO Prime Contract that resulted
in a much lower unit price than in potentially-applicable line items in the HECO
Subcontract (i.e., 69 cents per gallon paid to Unitek versus $1.50 per gallon in a
line item in the HECO Subcontract). It is entirely speculative whether PCS would
have been awarded such work under a change order (and if so, at what price) even
if LVI had not breached the HECO Subcontract and LVI had offered responsibility
for the oily-water task to PCS. Indeed, PCS (as a waste broker) probably would
not have performed the task itself and would have lost money if it had done so at
69 cents per gallon.
On the Counterclaim (and in defense of Plaintiff’s claims),
Defendants failed to prove that PCS breached the HECO Subcontract first when
PCS charged LVI $700 per drum instead of $700 per ton for the sludge disposal.
The per-drum unit price falls within the “small font” provision of Line Item 4 of
Exhibit A to the HECO Subcontract. In this regard, the court accepts and relies
4
upon the testimony of PCS managing director Jingbo Chang, whose manner of
testifying was credible and believable. On the other hand, the testimony of
Defendants’ witness, former LVI branch manager Michael Moore, was evasive and
inconsistent as to key points in this particular area (such as whether he knew or
should have known that PCS was charging $700 per drum), and thus the court
finds against Defendants on this issue. Accordingly, Defendants’ Counterclaim —
seeking a refund regarding amounts LVI paid for 48 drums of waste — fails, as
does their “first to breach” defense to Plaintiff’s claim for breach of the HECO
Subcontract. Defendants have also failed to prove that the HECO Subcontract was
terminated by operation of the other asserted Terms and Conditions of the HECO
Subcontract (i.e., note 2/paragraph 17, paragraph 4, or paragraph 10).
PCS is also entitled to $13,472.51 on its unjust enrichment claim
related to the HECO Project for time and materials related to mercury component
disposal (as set forth in Invoice 7864-06). It is also entitled to prejudgment interest
on this amount at a per diem rate to be determined in a supplemental filing.
But PCS has not met its burden of proof as to the $25,000 it claimed
under Invoice 7864-07 for “mobilization, demobilization, and waste
documentation” from January 2012. These specific tasks were not included in the
scope of the HECO Subcontract (or would have been included in the unit prices),
5
and were not claimed until October 15, 2014 — well over two years after they
would have been performed.
As for the Kahuku Project, PCS is entitled to recover for the unpaid
invoices 8246-13, -14, -15, -18, and -19 (totaling $23,942.46) — invoices which
are not excused by the “pay if paid” clauses. Prejudgment interest is also awarded
as set forth in the table at page 58 of Plaintiff’s Proposed Findings of Fact and
Conclusions of Law, ECF No. 164 at 62 (and as incorporated in the Findings
below).
Finally, PCS is entitled to $8,115.18 in demurrage charges outside the
scope of the Kahuku Contracts, as set forth in Invoices 8246-16 and 8246-17.
Prejudgment interest is awarded at the per diem rates set forth on pages 58 and 59
of Plaintiff’s Proposed Findings and Conclusions, ECF No. 164 at 62-63 (and as
incorporated in the Findings below).
The total amount of damages/restitution is summarized as follows:
Basis of Award
Count I (ACM work to Waste
Management)
Count I (Non-hazardous solids to
Tajiri)
Count II (Mercury component
removal)
Count III (Kahuku project invoices)
Count IV (Demurrage charges)
Total
6
Damages/Restitution
$ 699,044.74
$ 22,478.25
$ 13,472.51
$ 23,942.46
$ 8,115.18
$ 767,053.14
III. PROCEDURAL HISTORY
PCS filed this lawsuit against LVI in the Circuit Court of the First
Circuit, State of Hawaii, on April 19, 2016. ECF No. 1-3. The Complaint alleged
claims for breach of contract and unjust enrichment with respect to the HECO
Project (Counts I and II) and the Kahuku Project (Counts III, IV, and V). Id. LVI
removed the action to this Court on May 18, 2016, based on diversity of
citizenship, 28 U.S.C. § 1332. ECF Nos. 1, 6.
On May 26, 2016, LVI and NRS filed their Answer to the Complaint,
and LVI asserted a Counterclaim for a refund from PCS for alleged overpayments.
ECF No. 8. And on June 9, 2016, PCS filed an Answer to the Counterclaim. ECF
No. 12.
On February 21, 2017, PCS filed a Motion for Partial Summary
Judgment on the liability of LVI for PCS’s claims pertaining to the HECO Project,
ECF No. 44, and Defendants filed two Motions for Partial Summary Judgment —
one as to PCS’s claims pertaining to the HECO Project, ECF No. 46, and one as to
PCS’s claims pertaining to the Kahuku Project, ECF No. 47. On April 27, 2017,
PCS filed an Amended Motion for Partial Summary Judgment, ECF No. 80, and an
Amended Complaint, ECF No. 82, to correct certain allegations in the original
Complaint. The court heard the Motions on May 30, 2017. ECF No. 108.
7
On June 26, 2017, the court entered an “Order: (1) Granting in Part
and Denying in Part Plaintiff’s Amended Motion for Partial Summary Judgment,
ECF No. 80; (2) Denying Defendants’ Motion for Partial Summary Judgment on
Counts I and II of Complaint, ECF No. 46; and (3) Granting in Part and Denying in
Part Defendants’ Motion for Partial Summary Judgment on Counts III, IV, and V
of Complaint, ECF No. 90” (the “MSJ Order”). See ECF No. 111; Stip. Facts ¶ 13;
Pac. Commercial Servs., LLC v. LVI Envtl. Servs., Inc., 2017 WL 2817883 (D.
Haw. June 26, 2017).
The MSJ Order determined as a matter of law that on or about April
23, 2012, LVI and PCS entered into the HECO Subcontract — a valid and
enforceable subcontract for waste transportation and disposal services. Stip. Facts
¶ 13. It determined that the HECO Subcontract bound LVI to use PCS exclusively,
and was not terminable at will by LVI. 2017 WL 2817883, at *6-7. It also
determined that LVI breached the HECO Subcontract by diverting work away
from PCS, but left for trial the duration of the breach and the amount of damages
resulting from the breach. Id. at *7. The MSJ Order also did not resolve issues
related to PCS’s claims for unjust enrichment, as well as questions regarding LVI’s
Counterclaim and LVI’s other defenses. Id. at *8-10. After the MSJ Order was
8
issued, the parties agreed upon a modified trial process, and stipulated to certain
alternative trial procedures. See ECF Nos. 125 & 139.
On January 17 and 18, 2018, the court held a non-jury trial on matters
remaining after the MSJ Order, and after the parties stipulated to a set of
uncontested facts for trial. See ECF No. 140. Many of the remaining issues were
submitted based on extensive briefing and stipulated documentary evidence, with
only two witnesses — Chang for PCS, and Moore for LVI — testifying in person
as to key issues at trial. Following trial, the parties submitted proposed findings of
fact and conclusions of law, along with supplemental briefing and evidence. See
ECF Nos. 160, 161, 163, 164, 166 & 168.
Along with the stipulated facts and trial testimony, the evidence
consists of declarations, exhibits, and deposition transcripts filed in conjunction
with the respective trial briefs, see ECF Nos. 141, 142, 143, 144, 145 & 146,
although not all of the proffered exhibits were admitted into evidence. 2 To
summarize the exhibits: (1) Exhibits P-1 to P-91, P-62A to P-67A, D-1 to D-38, D-
2
The trial transcripts consist of two volumes, one for each day. The page numbering for
the first day is denoted with a prefix “1-“ and similarly for the second day with a prefix “2-“
(e.g., Tr. at 1-2, or Tr. at 2-1). When indicated, line numbers of testimony are indicated by a
colon (e.g., lines 3 through 6 of testimony on page 2 of volume 1 would be indicated by “Tr. at
1-2:3-6”). The transcript for January 17, 2018 is at ECF No. 157, and for January 18, 2018 is at
ECF No. 158.
9
40 to D-42, and D-52, are in evidence; but (2) Defendant’s proffered exhibits D-39
and D-43 to D-51 are not (although some of those proffered exhibits duplicate
other exhibits that were admitted).3 Plaintiff also separately submitted deposition
designations and excerpts, which, without objection, are also in evidence. ECF
No. 144.
IV. FINDINGS OF FACT
A.
The Parties
1. Plaintiff PCS is a limited liability company organized under the
laws of the State of Hawaii. Stip. Facts ¶ 1. It provides services relating to
transportation and disposal of hazardous and other waste materials. Stip. Facts ¶ 2.
PCS has two members, Jingbo Chang (“Chang”) and his wife, Wendy. ECF No. 6
at 3; ECF No. 6-6; Chang Dep., Ex. P-2 at 10. Both are residents of Hawaii, and at
all times between the filing of the original Complaint on April 19, 2016 through
the present, have been residents of Hawaii. ECF Nos. 166-1 & 166-2.
3
In particular, all of Plaintiff’s proffered exhibits at ECF Nos. 141, 142, 143 and 146 are
in evidence (although some exhibits were superseded, see ECF Nos. 146-4 to 146-9).
Defendants’ exhibits at ECF No. 145 are in evidence, along with Exhibits D-40, D-41, D-42, and
D-52 at ECF No. 150. Defendant’s proffered exhibits D-39 and D-43 to D-51 were stricken. See
Pl.’s Statement Regarding Evidentiary Objections, ECF No. 162; see also Tr. at 1-7 to 1-11
(transcript of court granting Plaintiff’s Motion to Strike Amended Trial Exhibit List, without
prejudice, and explaining process for objections to evidence). Most of the exhibits were formally
admitted into evidence at trial, but some are in evidence because no objections were filed after
being proffered with the trial briefs. See Tr. at 1-10 to 1-11; see also ECF No. 139.
10
2. Chang is the general manager and senior environmental scientist of
PCS, where he has overall responsibility for the company’s daily operations. Tr. at
1-17 to 1-18. He has a bachelor’s degree in chemistry, a master’s degree focusing
on biochemistry, and a Ph. D. focusing on computer simulation. Id. at 1-18. He
came to the United States from China in 1986. Ex. P-2 at 11; Tr. at 1-86 to 1-87.
As the court observed while Chang testified at trial, he speaks with a heavy accent.
See, e.g., Tr. at 1-25. Although Chang demonstrated fluency in English, both
conversationally and in scientific areas (both during trial testimony and as evident
in the trial exhibits), some of his written emails contain minor grammatical
mistakes that may affect their meaning, as discussed below. See, e.g., Ex. P-32.
3. Defendant LVI is a corporation organized under the laws of the
State of California. Stip. Facts ¶ 3. On or around July 2014, LVI changed its name
to Northstar Contracting Group, Inc. (“NCG”). Stip. Fact ¶ 4. NCG is organized
under the laws of the State of California, with its principal place of business in
California. ECF No. 6 at 4.
4. Defendant NRS is a corporation organized under the laws of the
State of Delaware. Stip. Facts ¶ 5. Its principal place of business is in Austin,
Texas. ECF No. 6 at 4.
11
5. NCG and NRS are affiliates of Northstar Group Holdings, LLC,
which is a limited liability company organized under the laws of the State of
Delaware. Stip. Facts ¶ 6.
B.
The HECO Project and the HECO Subcontract
6. The HECO Project consisted of the deconstruction of two
generating units, Units 5 and 7, at HECO’s power plant in downtown Honolulu.
Each unit consisted of two large oil-fired boilers, condensers, and turbine
generators. The project included the abatement and demolition of those
components and associated piping, cleaning of the project site, painting, and some
metal fabrication. Waste generated from the demolition and abatement work also
needed to be disposed of properly by characterizing, labeling, transporting, and
transferring it to appropriate facilities. Tr. at 2-6:5-13, 2-8:8-15.
7. In connection with its bid on the HECO Project, LVI solicited PCS
to submit a subcontractor proposal for waste transportation and disposal and
cleaning services relating to the HECO Project. Stip. Facts ¶ 8.
8. On July 23, 2011, PCS submitted to LVI a proposal to be a
subcontractor for transportation and disposal of certain waste materials from the
HECO Project. Stip. Facts ¶ 9; Ex. P-6.
12
9. On July 29, 2011, LVI submitted a corresponding proposal to
HECO to be the prime contractor for the HECO Project. Stip. Facts ¶ 10; Ex. P-7.
10. LVI used PCS’s proposal in preparing its proposal to HECO for
the prime contract. Stip. Facts ¶ 11.
11. HECO accepted LVI’s proposal and entered into a prime contract
with LVI for the HECO Project (the “HECO Prime Contract”). Ex. P-8; Tr. at 216:13-16. The HECO Prime Contract was a firm fixed-price contract. Ex. P-8 at
2.
12. PCS and LVI entered into a subcontract (the “HECO
Subcontract”) for transportation and disposal of waste for the HECO Project. The
terms of the HECO Subcontract are memorialized in the attachments to an email
dated April 23, 2012 from Damariz Quezada (“Quezada”) of LVI to Chang of
PCS. Exhibit P-12 is a true and correct copy of the HECO Subcontract. Stip.
Facts ¶ 13; see also Ex. P-11; Tr. at 1-22:7-23.
13. Chad Maddock (“Maddock”), the LVI project manager for the
HECO Project until June 2012, negotiated the HECO Subcontract with PCS.
Moore, president and branch manager of LVI, was not involved in the negotiations.
Tr. at 2-22:15-24, 2-118:8-22; Moore Dep., Ex. P-1 at 36:15-16, 37:3-7; Stip. Facts
¶ 20.
13
14. PCS’s role in the HECO Project was as a waste broker. A waste
broker assists the waste generator with various tasks including identifying and
characterizing waste; researching and selecting a disposal facility; packaging and
labeling waste; preparing waste and shipping documentation; transporting waste
containers from the project site to the ocean carrier for mainland shipping;
arranging for hauling by rail to final disposal facilities for disposition; and
compliance with federal, state, and local regulations. See Trial Declaration of
Jingbo Chang, ECF No. 141-1 (“Chang Decl.”) ¶ 4; Tr. at 1-21:4-22.
15. As the court determined previously at summary judgment, the
HECO Subcontract obligated LVI to use PCS exclusively for the waste
transportation and disposal services listed in the HECO Subcontract. Stip. Facts
¶ 16.
16. As the court determined previously at summary judgment, LVI
breached the HECO Subcontract by diverting work away from PCS, and was in
breach as of the initial diversion beginning approximately in January 2013. MSJ
Order at 18; Pac. Commercial Servs., 2017 WL 2817883, at *7.
17. LVI did not invoke any of the termination provisions of the
HECO Subcontract. Ex. P-1 at 67:14 to 68:5. LVI never sent a notice to PCS
terminating the HECO Subcontract. See Ex. P-89 (LVI’s Response to Plaintiff’s
14
First Request for Admissions), Response to No. 9. Moore believed that he did not
need to notify PCS because he thought (incorrectly) that there was no contract
between LVI and PCS. Tr. at 2-128:23-25.
18. In total, LVI paid PCS $526,376.04 for PCS’s work on the
HECO Project. Stip. Facts ¶ 18.
19. In June or July 2012, Moore conducted a cost analysis of the
HECO Project and determined that the project was behind schedule and over
budget. Tr. 2-23:22 to 2-24:6. LVI implemented measures to increase production
and efficiency and control abatement costs. Tr. at 2-24:7 to 2-25:3.
C.
Diversion of Asbestos-Containing Material Work
20. As the demolition work in the HECO Project progressed, LVI
encountered a problem with disposal of brick encasing two boilers inside Unit 5.
The bricks were surrounded by asbestos-containing insulation. Tr. at 2-25:424.
21. PCS was LVI’s subcontractor for transportation and disposal of
the Asbestos-Containing Material (“ACM”). Stip. Facts ¶ 17.
22. In December 2012, HECO considered segregating the asbestos
from the brick waste and disposing the material as two separate waste streams —
15
friable (low density) ACM and non-friable (high density) ACM. Ex. P-18 at 2; Ex.
P-19 at 3.
23. The HECO Prime Contract identifies two categories of ACM
waste, i.e., friable (low density) and non-friable (high density). Ex. P-8, Part C at
PageID #5412 (Line Items 35-36), ECF No. 143-2 at 96. In turn, the HECO
Subcontract identifies the same two categories of ACM waste. Ex. P-12 at 4 (Line
Items 1-2).
24. Friable (low density) ACM is very light material that contains
asbestos and includes materials like thermal insulation, foam, ceiling tiles, or
drywall. Ex. P-1 at 71:5-9; Ex. P-3 at 36:18-24; Tr. at 1-25:21 to 1-26:3.
25. Non-Friable (high density) ACM is very heavy material that
contains asbestos and includes materials like bricks and Transite concrete pipes.
Ex. P-1 at 71:8-9; Ex. P-3 at 36:14-16, 38:1-8; Tr. at 1-26:8-14.
26. PCS charged $825 per ton for friable ACM compared to $425 per
ton for non-friable ACM. Ex. P-12 at 4.
27. If HECO separated the waste streams, it would incur higher costs
to remove friable asbestos on the surface of the non-friable materials, but it would
pay less in disposal costs because it could take advantage of the cheaper rate to
dispose of non-friable ACM. Ex. P-3 at 39:6-16. Conversely, not separating the
16
non-friable ACM into two waste streams would increase disposal costs but lower
abatement costs. See id.
28. LVI self-performed the asbestos abatement work. Tr. at 2-8:1-7.
LVI charged HECO on a lump sum basis for abatement. Ex. P-7 at 150-51, Line
Items 15-17, 22-24; Tr. at 2-145:2-3.
29. One reason for the large cost differential for disposal between
friable and non-friable ACM is the difference in weight and density. The cost of
shipping ACM in a container is the same regardless of the weight of the material
being shipped in the container. Tr. at 1-26:20 to 1-27:1; Ex. P-18 at 1. Friable
ACM tends to be lighter than non-friable ACM but less dense, so it can fill up a
container more easily. Ex. P-18 at 1-2; Ex. P-2 at 116:7-11; Chang Decl. ¶ 15.
30. HECO, not PCS, decided that ACM disposal would be charged
by the ton. Tr. at 1-27:8-12. Because shipping costs are fixed, while
transportation and disposal charges increase with weight, PCS’s cost per ton for
ACM transport and disposal is inversely related to the weight of the load. As the
weight increases, the cost per ton decreases, and as the weight decreases, the cost
per ton increases. As a result, PCS’s profit margin increases as the weight of the
load increases, and decreases as the weight of the load decreases. Tr. at 1-27:18 to
1-28:4.
17
31. For each category of ACM, PCS made assumptions about the
weight of each load. PCS assumed that each container of friable ACM would be
10 tons, and that each container of non-friable ACM would be 20 tons. Based on
those assumptions and the rates in the HECO Subcontract, PCS expected to charge
$8,250 for a full container of friable ACM ($825 per ton times 10 tons) and $8,500
for a full container of non-friable ACM ($425 per ton times 20 tons). Tr. at 1-29:7
to 1-30:15.
32. Another reason for the cost differential between disposal of
friable and non-friable ACM is that the two types of ACM need to be disposed of
in different facilities. Friable ACM is disposed of at the landfill operated by
Chemical Waste Management (“Waste Management”), and non-friable ACM goes
to the Columbia Ridge landfill. Ex. P-3 at 37:3-23; Chang Decl. ¶ 16; Ex. P-18 at
1-2.
33. If a waste stream contains both friable and non-friable ACM, the
entire waste stream must be classified as friable ACM because any waste
containing friable ACM must go to the landfill operated by Waste Management.
Ex. P-3 at 37:3 to 38:18; Tr. at 2-28:19 to 2-29:7.
34. HECO ultimately decided to dispose of the brick together with
the asbestos. Tr. at 1-33:10 to 1-34:19, 2-28:11-12.
18
35. On December 20, 2012, Moore informed Chang: “Good news for
us, HECO has agreed to not scrutinize the cleanliness of the brick and ship all as
friable waste.” Ex. P-20 at 2.
36. HECO’s decision not to segregate the brick waste into separate
waste streams and dispose of it all as friable ACM tremendously increased the
quantity of this low density ACM in the HECO Project and created a more
profitable situation for whoever handled this waste disposal. Chang Decl. ¶ 19; Tr.
at 1-34:23 to 1-35:1. That is, HECO’s decision not to segregate the brick waste,
thus generating significant quantities of heavy waste to be categorized as friable
ACM, dramatically increased the profitability of the ACM work.
37. HECO’s decision created an unexpected increase in the volume
(tonnage) of expensive, friable ACM work. See Tr. at 1-28:22-24; Chang Decl.
¶ 19; Ex. P-2 at 115:22 to 116:16. At the same time, HECO’s decision lowered
abatement costs, which LVI performed on a lump sum basis. See supra Finding
28.
38. After deciding not to segregate the brick waste, HECO continued
to ask LVI about the differences in cost for ACM disposal, which prompted Moore
to ask Chang to look into cost-savings options for ACM disposal, perhaps by
19
sending the ACM to a different disposal facility. Ex. P-20 at 1-2; Ex. P-2 at
142:24 to 143:4.
39. Chang checked alternative disposal sites and determined that the
Waste Management disposal facility was still the cheapest. Chang informed
Moore of the results of his inquiry. Ex. P-2 at 142:17 to 143:7; Tr. at 1-35:22 to 136:12. Chang also told Moore: “We are losing money for some of the line items,
but will be compensated with some other line items.” Ex. P-20 at 1.
40. In a December 21, 2012 email to Chang, Moore wrote, in
pertinent part:
I don’t want PCS to eat any costs, period. My intent was
to have you squeeze your vendors. . . . Again Jingbo, do
not cut PCS costs. This should be a good, long term
project for both of us.
Id.
41. On January 7, 2013, Moore wrote an internal email to Mark
Sampson of LVI stating, in pertinent part: “Mark — WM pricing is why our
vendor PCS is so high.” Ex. P-19 at 1. What Moore meant was that “Waste
Management[’s] pricing is why our vendor [PCS’s price] is so high.” Ex. P-1 at
87:3-4; see also Tr. 2-131:4-11 (“PCS’s price is high because its sub-vendor,
[Waste Management’s] prices are high”). Moore made this statement after
obtaining a proposal from Waste Management to perform the work directly (i.e.,
20
not through PCS), Ex. P-22 at 1, 6-8, and conducting a cost analysis that he
testified had led him to believe that PCS was supposedly “grossly overcharging”
LVI for the ACM work. See Tr. at 2-130:11 to 2-132:6.
42. When Moore obtained Waste Management’s proposal, the HECO
Project was behind schedule and budget, LVI was losing money, and it had
exhausted efforts to control production costs. Tr. at 2-41:23 to 2-42:7.
43. Moore gave inconsistent testimony regarding whether he
attempted to renegotiate PCS’s rates for ACM work. In a February 21, 2017
declaration, Moore stated:
I had several conversations with Jingbo Chang of PCS
regarding the rates that PCS was charging for hauling and
disposing of asbestos materials and the markups that it
was applying to the charges to its subcontractors but was
not able to reach an agreement with PCS that brought its
charges down for that service down to a market level that
could be sustained for the HECO Project.
Ex. P-21 at 3, ¶ 5. At his deposition, Moore could not recall trying to negotiate
PCS’s rates for ACM work and disavowed the correctness of paragraph 5 of his
February 21, 2017 declaration. See Ex P-1 at 76:7 to 77:22. At trial, however,
Moore stood by his declaration notwithstanding that he stated it was inaccurate at
his deposition. See Tr. at 2-134:2 to 2-138:7.
21
44. Moore did not attempt to renegotiate PCS’s rates for ACM other
than to ask Chang to try to find a cheaper disposal facility. Tr. at 1-37:1-4.
Similarly, Moore did not ask Chang to lower PCS’s rate charged to LVI for ACM
disposal. Tr. at 2-133:2-4.
45. Moore testified that when he compared Waste Management’s
proposal with PCS’s rates, he learned that PCS was charging “[m]ultiple times the
market rate.” Tr. at 2-39:17-24. Moore understood, however, that Waste
Management, as a disposal facility, provides different services than a waste broker
like PCS, and that PCS’s prices are a markup of Waste Management’s prices. Tr.
at 2-127:14 to 2-128:3.
46. PCS’s charges for its services as a waste broker are factored into
its unit rates. Tr. at 1-22:4-6.
47. On January 8, 2013, Moore accepted and signed Waste
Management’s proposal for ACM disposal in the HECO Project. Ex. P-23 at 6.
48. LVI did not give PCS any more ACM work to handle after
January 7, 2013. Ex. P-27 (Invoice 7864-04) at 2.
49. Waste Management began directly handling ACM disposal for
LVI on January 17, 2013. Ex. P-72-2 at 1 (Manifest 19453).
22
50. On February 28, 2013, LVI and Waste Management executed a
formal Subcontract Agreement for the disposal of friable ACM for an amount not
to exceed $300,000.00. Stip. Facts ¶ 37; Ex. P-26.
51. In an email exchange dated February 5, 2013 Moore confirmed to
Chang that LVI would be using Waste Management for asbestos disposal instead
of PCS and would be “going direct on trucking” until the end of Unit 5 abatement.
Stip. Facts ¶ 26; Ex. P-24. Moore did not purport to exercise any right of
termination in the HECO Subcontract in sending this email. Tr. at 2-128:14 to 2129:9.
52. On February 28, 2013, Moore followed up with Chang and asked:
“Jingbo — in light of the asbestos shipping, let me know if you were still intending
to service the balance of the hazmat for the project. I am pre-planning for the next
couple months.” Ex. P-25 at 1. Chang replied: “We want to do whatever are [sic]
on the contract. We do not want to breach the contract agreement. LVI can make
any decision what to do, but we honor the agreement.” Id.; Tr. at 1-38:8 to 1-39:7.
53. Although LVI was losing money on the HECO Project as a
whole, it was not losing money on line items that were charged on a unit rate basis.
Ex. P-1 at 27:23-28:1; Tr. at 2-140:6-18.
23
54. Later, in an August 15, 2013 email, Moore told Chang: “The
reason LVI chose to go direct with [Waste Management] was because there was no
money being made for the light loads.” Ex. P-33 at 1. “Light loads” refers to low
density ACM. Ex. P-1 at 26:21 to 27:6.
55. The unit price that LVI charged HECO for ACM transportation
and disposal was a markup of the unit price that PCS charged LVI. Ex. P-1 at
43:12-16, 82:22 to 83:10, 97:19 to 99:20; Tr. at 2-142:4-7.
56. LVI charged HECO $1,170 per ton for transportation and
disposal of low density ACM. The price did not change throughout the HECO
Project. Ex. P-7 at 152, Line Item 35; Tr. at 2-140:24 to 2-142:3.
57. In a July 23, 2013 email to Quezada, Moore estimated the profits
LVI earned to date from ACM disposal after going direct to Waste Management:
Damariz — based on what Johnny is wanting, my
records show loads invoiced direct from WM from
1/9/13 to 5/16/13 total 447 tons. At 27 total loads that
avg 16 tons x inv to heco $1,170/ton is $18,720 less cost
of $5,174.30/container = $13,545.70 in our pocket.
Total inv $505,440 less cost $139,706.10 = $365.733.90
profit.
Ex. P-30 at 1; Ex. P-1 at 101:1 to 105:5.
58. It is readily apparent, then, that LVI increased its profits
substantially by contracting directly with Waste Management, rather than using
24
PCS for ACM work as the HECO Subcontract requires. Table 1 below compares
the profitability of ACM transportation and disposal for LVI when it subcontracted
with PCS versus when it contracted directly with Waste Management.
Table 1
Choice of ACM
Vendor
Loads
PCS
34
WM
97
Tons
LVI Billings
to HECO
536.26
$627,424.20
1,432.08 $1,675,533.60
Vendor
LVI Profit
Cost
$457,833.22 $169,590.98
$501,907.10 $1,173,626.50
Average LVI
profit/load
$4,987.97
$12,099.24
As set forth in Table 1, when LVI used PCS, it earned an average profit per load of
$4,987.97 of friable ACM. 4 When LVI used Waste Management, its average
profit per load increased to $12,099.24 per load of friable ACM.5
4
PCS handled 34 loads of ACM for a total of 536.26 tons. Ex. P-62; P-62A. PCS
charged LVI $825 per ton, with a minimum charge of $8,250 per load (i.e., each load is charged
a minimum of 10 tons). See Ex. P-12 at 4, Line Item 1. LVI charged HECO $1,170 per ton
without a minimum charge. See Ex. P-7 at 152, Line Item 35; Ex. P-87 at 4, Line Item 35; Ex.
P-30 at 1. LVI’s unit price for low density ACM transportation and disposal did not change
throughout the HECO Project. See Tr. at 2-140:24 to 2-142:3. Thus, LVI charged HECO
$627,424.20 (536.26 tons times $1,170 per ton) and incurred costs of $457,833.22, for a profit of
$169,590.98. (The incurred costs of $457,833.22 are based on PCS’s actual billings, Ex. P-62A,
which, because of the minimum per-load charge, are higher than simply multiplying the number
of tons by $825 per ton.) This equals an average profit of $4,987.97 per load for LVI
($169,590.98 divided by 34 loads).
5
Waste Management handled 97 loads of ACM for a total of 1,432.08 tons. Ex. P-65A
at 6, ECF No. 146-7 at 1; Chang Decl. ¶ 61. Waste Management charged LVI $5,174.30 per
container load. Ex. P-26 at 2; Ex. P-30 at 1. LVI’s unit price for low density ACM
transportation and disposal to HECO was $1,170 per ton. LVI charged HECO $1,675,533.60
(1,432.08 tons times $1,170 per ton) and incurred costs of $501,907.10 ($5,174.30 per load times
97 loads), for a profit of $1,173,626.50. This equals an average profit of $12,099.24 per load for
LVI ($1,173,626.50 divided by 97 loads).
25
59. It is more likely than not that LVI diverted the ACM work to
Waste Management because LVI wanted to offset its losses on the lump sum work
in the HECO Project by obtaining a larger share of the profits that would be
generated due to HECO’s decision to not segregate the brick waste — work that
otherwise would have gone to PCS under the terms of the HECO Subcontract.
60. As a measure of damages to PCS for this diversion of work from
PCS to Waste Management, PCS calculates that it would have earned $699,044.75
in profits if LVI had given it the work. PCS bases this calculation on the amount it
would have charged LVI for 1432.08 tons ($1,215,885) minus the estimated costs
it would have incurred for the work ($516,840.25). See Ex. P-65A. The estimated
costs are based on an average of the actual costs PCS incurred for the 34 loads of
ACM work that it actually handled before the diversion. See Ex. P-62A. The
parties have stipulated that these calculations are correct based on the
corresponding documentary evidence (e.g., waste manifests, timesheets, invoices)
that are part of the record at Exhibits P-69 to P-83). See ECF No. 159
(stipulation); Ex. P-64A; ECF No. 145 at 67-69. (To be clear, however, the parties
have not stipulated to the fact of any damages to PCS — only to the calculations
and methodology, if the court determines that PCS is entitled to damages for such
26
work. See ECF No. 159.) The court accepts this stipulation and therefore does not
independently calculate the amount of potential damages for this diversion.
D.
Hazardous Solid Waste (“Sludge”) Transportation and Disposal
1.
The “Small Font” Provision of Item 4 of the HECO Subcontract
61. HECO estimated that 10 tons of hazardous solid waste would
need to be transported and disposed of in the HECO Project. Ex. P-7 at 152, Item
38; Tr. at 2-14:2-15. The hazardous waste stream was small in quantity relative to
other waste streams in the HECO Project. See Ex. P-6 at 7-8, Line Items 35-45;
Ex. P-7 at 152, Line Items 35-45; Tr. at 1-43:21-23.
62. PCS’s July 23, 2011 subcontract proposal to LVI for the HECO
Project listed a unit price of $700 per ton for transportation and disposal of
hazardous solid waste. Ex. P-6 at 7, Line Item 38. The proposal listed “360” as an
estimated quantity. Id. Maddock sent the initial draft of the HECO Subcontract to
Chang on March 23, 2012. Ex. P-9 at 1. Consistent with PCS’s earlier proposal,
the draft HECO Subcontract stated in Line Item 4 that transportation and disposal
of hazardous solid waste would be charged at $700 per ton. Id. at 4, Line Item 4.
63. PCS based its unit price of $700 per ton for hazardous solids on
the assumption that PCS would be given full container loads (i.e., 20 tons per
27
container) of hazardous solid waste to handle. Tr. at 1-40:23 to 1-41:4; 1-48:1116.
64. After submitting its bid, PCS had learned that the hazardous solid
waste would come “like sludge in drums” and in “small quantit[ies].” Tr. at 143:25 to 1-44:11. On March 23, 2012, Chang wrote back to Maddock after
receiving the initial draft of the HECO Subcontract, commenting on Line Item 4
that the bid was based on “bulk solid at large volume.” Ex. P-10 at 1. He was
responding because PCS had learned that the hazardous solids waste stream would
also be mixed with asbestos and liquid and would be small in volume, thus
requiring disposal at a different facility than originally thought and would be much
more expensive. Chang Decl. ¶ 9; see also Tr. at 1-45:7-17. Specifically, Chang
told Maddock as to Line Item 4:
You may want to send an RFI to HECO. We were
bidding on bulk solid at large volume to send to Chem
Waste, but looks like the waste stream is not only RCRA
hazardous, but also mixed with asbestos and liquid too at
small quantity at a time. Chem Waste is not able to
accept the [waste stream], and we have to send it to
Clean Harbors. Clean Harbors will charge this waste
stream at a much higher price.
Ex. P-10 at 1.
65. Chang expressed concern about the $700 per ton unit price
because the cost of shipping waste, which is the major determinant of the total cost
28
of waste transportation and disposal, is affected by the volume of waste involved.
The $700 per ton pricing assumes, among other things, shipping full containers
using 20 foot or 40 foot containers (approximately 40,000 pounds of hazardous
waste per container). PCS’s shipping vendor, Matson, charges a minimum of
40,000 pounds regardless of the container size used. When this waste stream is in
non-bulk packaging such as drums, and the quantity is small, the shipping and
handling cost and disposal cost are much higher than in bulk packaging in a full
container. PCS accordingly wanted to have flexibility to use the most appropriate
shipping and handling method based on the characterization and volume of the
waste stream. Chang Decl. ¶ 9.
66. In response to Chang’s concern, Maddock proposed the following
to Chang in an April 4, 2012 email:
Leave line item 4 as is with the understanding that this
pricing is for volume loads in container amounts.
Smaller volume will require appropriate adjustment.
Additionally, if characterization changes due to contents
of material, there could be price adjustments.
Ex. P-11 at 1 (numbered item 2); see also Tr. at 1-47:21 to 1-49:3.
67. Chang accepted Maddock’s proposal. Ex. P-11 at 1. The
language in Maddock’s April 4, 2012 proposal was reproduced verbatim (starting
with “Smaller volume will require . . .”) in small font in Line Item 4 of Exhibit A
29
to the HECO Subcontract (the “Small Font Provision”), next to the $700 per ton
price. Ex. P-12 at 4, Line Item 4 (reproduced below). The Small Font Provision is
part of the HECO Subcontract. 2017 WL 2817883, at *8.
68. Chang understood that the process for price adjustments under the
Small Font Provision entails PCS sending a price quote to LVI followed by
negotiations. Tr. at 1-49:18 to 1-50:5. As the MSJ Order concluded, “the
provision invites further discussion or negotiations to determine the ‘appropriate
adjustment’ — it does not allow PCS to unilaterally increase the price without
LVI’s consent.” 2017 WL 2817883, at *8 (emphasis omitted).
2.
The July 2012 Load of Seven Drums
69. On July 17, 2012, PCS arranged for the transportation and
disposal of sludge and sediment mixed with lead and asbestos in connection with
the HECO Project. Stip. Facts ¶ 19; Ex. P-14 at 4; Ex. P-15. This load of sludge
and sediment came in seven drums and contained liquid. Tr. at 1-52:21 to 1-53:8.
The billing and payment for this task led to (at least initial) confusion, and is an
important part of this case.
30
70. Because the sludge was semi-solid and contained liquid, it was
packed into drums, which is considered non-bulk packaging. Ex. P-2 at 58:1-20;
Tr. at 1-53:7-19.
71. On August 28, 2012, Moore sent an email to Chang (and others)
with a subject line “Re: heco waste and manifests.” Ex. P-13 at 2. It stated in part:
Jingbo — manifests received for initial drums of sludge
shipped in June [sic – July]. However, there are no drum
weights and that is how we invoice. Let me know if you
have weights per drum.
Id.
72. On August 29, 2012, Chang sent a reply email (consistent with
the Small Font Provision of the HECO Subcontract) to Moore stating:
[Normally] the disposal facility charge by drum for waste
in drum (non-bulk), not by weight. As far as the weight
on the manifest is less than 10% difference, they don’t
change it to the actual weight. We have to provide
change order to HECO for those drums. Our price was
based on large quantity and can be shipped in full 40’
container to the one disposal facility, but so far we got
only 7 drums. Bulk and non-bulk price is much different.
Thanks.
Ex. P-13 at 1.
73. The next day, Moore replied: “Let me know the cost difference.
Thanks.” Id. At his deposition, Moore explained what he meant by his response
31
— “[a]pparently I was trying to help the guy out with moving a container.” Ex. P1 at 53:16-17.
74. On September 4, 2012, Chang responded to Moore: “The price
for transportation and disposal of 55-gallon drums of sludge/sediment with
asbestos and heavy metals is $750/drum.” Ex. P-13 at 1.
75. Moore did not respond to Chang’s September 4, 2012 email
quoting the non-bulk price of $750 per drum. Chang understood this to mean that
the $750 per drum price was acceptable to LVI. Tr. at 1-57:2-6; Ex. P-2 at 65:817.
76. Moore understood that the price per drum far exceeds that of
price per ton given the volume of waste. Tr. at 2-81:17-21. Moore also
understood that PCS needed to ship a full container based on the pricing in Line
Item 4, and because the July 2012 load consisted of a small quantity of drums (not
a full container), PCS would lose money on the load. See Ex. P-1 at 53:6-56:17.
77. On September 18, 2012, Chang sent an email to Moore attaching
an initial (draft) version of Invoice 7864-01. Stip. Facts ¶ 20; Ex. P-14. Chang
sent this version of Invoice 7864-01 to LVI for its review and to provide an
opportunity to make objections or revisions before the invoice is finalized. See Tr.
at 1-51:2 to 1-52:10.
32
78. The initial version of Invoice 7864-01 that Chang sent to Moore
on September 18, 2012 included, among other items, a charge of $5,250 for
“Transportation and Disposal of sludge/sediment with lead and asbestos, manifest
No 009256911JJK.” With respect to this charge, the number “7” was listed in the
“Quantity” column of the invoice and “750.00” was listed in the “Price” column.
Ex. P-14 at 4. This was the seven drums of sludge and sediment that was the
subject of the email discussion between Moore and Chang from August 28 to
September 4, 2012. Ex. P-13 at 1-2.
79. The manifest form corresponding to the seven drums of sludge
and sediment was not included with the draft invoice, but PCS had sent a copy of it
to LVI earlier. Tr. at 1-114:6-19.
80. PCS uses Intuit Quickbooks accounting software to prepare its
invoices. Quickbooks’ invoice format does not have a column for unit of measure.
Tr. at 1-57:18 to 1-58:21; Chang Rebuttal Decl. (Dec. 27, 2017), ECF No. 146-1
¶ 3. None of the invoices PCS issued in the HECO Project lists the unit of measure
in the “Quantity” Column. See, e.g., Ex. P-14; Ex. P-88; Ex. P-27; Ex. P-28; Ex.
P-39; Ex. P-41.
33
81. Moore has never told PCS that the format of its invoices was
confusing to read, or complained that its invoices did not list the unit of
measurement for quantity. Tr. at 2-154:1-7.
82. On October 9, 2012, Moore sent an email to Chang stating:
Amounts charged in Invoice 7864-01 were approved with
exception to the sludge/sediment. Unit price should be
$700/ton per PCS pricing sheet item 38. You billed
$750. Please revise last sheet of invoice only.
Stip. Facts ¶ 21; Ex. P-16. Moore was apparently quoting from PCS’s original bid
proposal for the HECO Subcontract, not from the actual HECO Subcontract,
because he thought there was no signed subcontract. Tr. at 2-75:9-23.
83. Chang did not read Moore’s October 9, 2012 email very
carefully. Ex. P-2 at 72:3-9, 74:12-15; Tr. at 1-59:24 to 1-60:12. As for the
drums, Chang believed Moore agreed with changing the $700 per ton price stated
in the HECO Subcontract to a price more appropriate for non-bulk quantities. See
Rebuttal Chang Decl. ¶ 4, ECF 146-1.
84. Before Chang read Moore’s October 9, 2012 email, he had a
telephone conversation with Moore. Moore told Chang that the initial version of
Invoice 7864-01 was fine except that the last line item should be changed from
“750” to “700.” Tr. at 1-60:1 to 1-61:5. They did not specifically discuss charging
by tons versus by drums. Tr. at 2-160:3-6.
34
85. Chang understood Moore’s instruction to change “750” to “700”
to refer to per drum pricing because Chang had quoted $750 per drum to him and
he did not ask for a change in the quantity. That is, Chang thought that Moore was
reducing the price from $750 to $700 per drum (and not $750 to $700 per ton). Tr.
at 1-59:12 to 1-60:12, 1-61:7-9.
86. On October 9, 2012, Chang sent an email to Moore forwarding a
revised version of Invoice 7864-01. Stip. Facts ¶ 22; Ex. P-16. The revised
version of Invoice 7864-01 charged the seven drums of sludge and sediment at
$700 per drum instead of $750 per drum as in the initial invoice, for a revised
charge of $4,900. Like the initial version of the invoice, the description of the
work in the revised invoice referenced manifest no. 009256911JJK. Ex. P-16 at 5.
87. The $700 per drum price in the revised Invoice 7864-01 was close
to the market price and was not based on any specific percentage of cost mark-up
nor designed to achieve any specific profit margin. Tr. at 1-62:3-9. Under PCS’s
standard rate schedule for 2012, PCS would have charged the aggregate rate of
$750 per drum to handle the load of hazardous solids described in Invoice 786401. See Rebuttal Chang Decl. ¶ 5, ECF No. 146-1; Ex. P-79 at 2 (Price Code
“SS02” listing $625 per drum for disposal and $125 per drum for transportation).
35
88. Chang credibly testified that he was not attempting to fool LVI
into paying the $700 per drum price. He testified “I want to maintain good
relations with any customer. You know, I try to fool a customer, that’s — that will
be stupid.” Tr. at 1-61:17-22.
89. Moore is familiar with waste manifest forms and their format,
knows how to read them, and regularly read such forms in his work at LVI. Tr. at
2-150:5-15. Moore is aware that manifests typically state the weight and quantity
of drums. Ex. P-1 at 52:17 to 53:5.
90. PCS’s general practice is to send manifests along with its invoices
to LVI. PCS and LVI would receive a copy of the manifest when PCS picks up a
waste load. LVI can ask PCS for a copy of a manifest if LVI did not receive it. Tr.
at 1-66:22 to 1-67:23, 1-114:20-22, 2-151:9-17. Moore confirmed that it would
not be difficult to obtain a copy of a manifest. Tr. at 2-156:22 to 2-157:2. The
“Container” box on the waste manifest form (Item 10) would not be left blank on
the copy of the manifest available at the time of pickup. Tr. at 2-153:9-25.
91. Moore’s standard practice is to personally conduct a thorough
review of every subcontractor invoice. Tr. at 2-146:11 to 2-147:5. Moore would
verify the cost, quantities, and prices billed based on the manifests, unit pricing
sheets, and the schedule. Ex. P-1 at 14:6-11, 15:2-6; Tr. at 2-149:13 to 150:4.
36
Moore would review the pricing again when LVI bills HECO to catch
inconsistencies between the price a subcontractor charges LVI and the amount LVI
bills HECO. Ex. P-1 at 15:20-16:9. An LVI administrator would also conduct a
review of every invoice that goes to HECO to ensure there is consistency between
what LVI believes is the correct price from the subcontractor and what it bills
HECO. Id. at 16:10-17:5.
92. The number in the “Quantity” column of Invoice 7864-01, the
unit price in the “Price” column, and the dollar figure in the “Amount” column
provided the information needed to determine that PCS was charging by the drum
for the hazardous solids work in Invoice 7864-01. Ex. P-16 at 5.
93. On manifest 009256911JJK (referenced in the invoices), the
number “007” is printed in the “No.” column of Box 10 (labeled “Containers”) and
the notation “DM” is printed in the “Type” column. Ex. P-15. This information
on the manifest discloses that the waste stream was packed in seven “DM” or
drums. Ex. P-2 at 70:13-71:10.
94. Moore testified that he could not specifically recall how carefully
he reviewed Invoice 7864-01, but when reviewing it he would have focused on the
last item regarding the unit pricing because that was the item he had identified as
problematic in the initial version of the invoice. Tr. at 2-157:14-22.
37
95. In an email dated October 10, 2012 to Quezada, Moore approved
revised Invoice 7864-01 for payment. Stip. Facts ¶ 24; Ex. P-17 at 6. LVI paid the
revised Invoice 7864-01 in full by check dated November 16, 2012. Stip. Facts
¶ 25; Ex. P-17 at 2.
96. Moore testified that he thought that the revised Invoice 7864-01
charged by tons instead of by drum, believing that it reflected seven tons worth of
drums. Tr. at 2-73:14-20. He assumed that seven meant tons and not drums, but
he did not verify his assumption. Tr. at 2-158:6-11.
97. Moore testified that he thought Chang had quoted him a price of
$750 per ton in the email exchange on September 4, 2012, rather than $750 per
drum as Chang’s email stated. Tr. at 2-82:3-18, 2-158:1 to 2-159:11. This
testimony is not credible. Moore’s testimony was equivocal — he initially testified
that “it was probably my understanding per ton.” Tr. at 2-82:5 (emphasis added).
And Moore was asking for a cost difference in response to Chang’s concern that
the small quantity of drums did not fill a container. Chang had specifically
explained to Moore that pricing per drum is more expensive than pricing per ton,
and Moore understood PCS was in a “bind” in handling a small quantity of
hazardous solids at a $700 per ton rate, and was “trying to help [Chang] out with
moving a container.” Ex. P-1 at 53:12-17. Moore’s regular practice of thoroughly
38
reviewing subcontractor invoices and supporting documentation would have made
it clear that, when PCS submitted the revised invoice, PCS was charging $750 per
drum per Chang’s earlier price quote. Moore had the information and experience
necessary to know that the number “007” in the “Quantity” column referred to
drums. And his review of the revised version of the invoice would have focused
on the issue because he had specifically flagged the pricing of that item in an email
exchange.
98. Moore testified that he learned “maybe a couple billing cycles
later” after receiving revised Invoice 7864-01 in October 2012 that the invoice
referred to seven drums instead of seven tons. Tr. at 2-73:23 to 2-74:13. A billing
cycle is 30 days. Tr. at 2-168:16-17. He thus knew at least by December 2012 that
PCS billed $700 per drum. Tr. at 2-169:6-16. Moore, however, did not question
Chang about this alleged discrepancy, or request a credit from PCS for an
overpayment, until eight months later, when Moore sent an August 14, 2013 email
seeking a credit in conjunction with a similar dispute. Ex. P-31.
99. At his deposition, Moore could not recall why he waited so long
before making an issue of the alleged overpayment of revised Invoice 7864-01.
Ex. P-1 at 60:3 to 62:5. But at trial, Moore testified that he did not ask for a refund
or credit from PCS when he first discovered the alleged overpayment because LVI
39
was in the midst of change order negotiations and “a $4900 charge frankly wasn’t
at the top of [his] list to pursue.” Tr. at 2-84:9-14.
100. The preponderance of the credible evidence demonstrates that,
when LVI paid the revised version of Invoice 7864-01, Moore knew or should
have known that PCS was charging $700 per drum for the seven drums of sludge
and sediment. The charge of $700 per drum falls within the Small Font Provision
of the HECO Subcontract. And, regardless, Moore knew at least by December of
2012 that PCS was charging LVI at a rate of $700 per drum and not $700 per ton
for the hazardous solid/semisolid waste. Tr. at 2-169:6-16.
3.
The April 2013 Load of 41 Drums
101. On April 9, 2013, PCS arranged for the transportation and
disposal of 41 drums of sludge and sediment in connection with the HECO Project.
Stip. Facts ¶ 27. Moore or a superintendent ordered the pickup of the 41 drums.
Either way, Moore would have known about the order. Tr. at 2-161:10 to 2-162:9.
Forty-one drums of sludge and sediment is a non-bulk quantity. Tr. at 1-68:10-14.
102. On May 4, 2013, Chang sent an email to Moore attaching
Invoice 7864-05, which was for service rendered by PCS on April 9, 2013
described as: “Transportation and Disposal of sludge/sediment with lead and
asbestos, manifest No. 008801608JJK from HECO Honolulu Plant.” Stip. Facts
40
¶ 28; Ex. P-28 at 2. The “Quantity” column of the invoice stated “41.” Ex. P-28 at
2.
103. PCS charged $28,700 for the 41 drums at the rate of $700 per
drum. Id. PCS charged $700 per drum because Chang understood that LVI’s prior
payment of Invoice 7864-01 (regarding the seven drums) indicated LVI’s
agreement to that price per drum for non-bulk quantities of hazardous solids, and
PCS was trying to be consistent in its pricing. It is not PCS’s practice to negotiate
the rate for each load of waste it handles. Ex. P-2 at 77:2 to 80:5; 141:7-23; Tr. at
1-68:22 to 1-69:6, 1-70:4-15.
104. The number in the “Quantity” column of Invoice 7864-05, the
unit price in the “Price” column, and the dollar figure in the “Amount” column
provided LVI with the information it needed to determine that PCS was charging
by the drum for the hazardous solids work in Invoice 7864-05. Ex. P-28 at 2.
105. Based on the description of the waste in Invoice 7864-05 as
“sludge/sediment with lead and asbestos,” Moore knew or should have known that
the waste was packaged in drums. Tr. at 2-66:19 to 2-68:9.
106. If the load of sludge and sediment that PCS handled in April
2013 had been 41 tons instead of 41 drums, it would have filled two shipping
containers because a full container weighs approximately 20 tons. Tr. at 1-55:25 to
41
1-56:10, 1-126:2-7. If a waste load had two containers, Moore would have
expected to see two manifests, but only one was listed on the invoice. Tr. at 2165:13-18.
107. A 55-gallon drum weighs approximately 500 pounds (or a
quarter ton). Forty-one drums therefore would have weighed approximately 10.25
tons. Tr. at 1-69:15-20, 2-57:23 to 2-58:7.
108. It would have cost PCS approximately $14,000 to ship a full
container. If PCS applied the unit price of $700 per ton for the load of 41 drums,
PCS would have charged LVI $7,175 for the load (10.25 tons time $700 per ton).
Tr. at 1-69:21 to 1-70:3.
109. On June 6, 2013, Moore approved Invoice 7864-05 for payment.
Stip. Facts ¶ 29; Ex. P-29 at 3. And LVI paid Invoice 7864-05 in full by check in
the amount of $28,700 dated June 12, 2013. Stip. Facts ¶ 30; Ex. P-29 at 1.
110. Moore testified that, when LVI paid the invoice, he thought the
“41” referred to tons not drums. Tr. at 2-52:12-16, 2-59:24-25 to 2-60:1. He
testified that “[i]n layman’s terms, I screwed up and approved an invoice that had
the incorrect unit of measure.” Tr. at 2-63:6-7.
111. At his deposition, Moore did not remember when he noticed the
alleged overpayment of Invoices 7864-01 and 7864-05 except that it was after the
42
invoices had been paid. Ex. P-1 at 46:17-25, 57:7-9. At trial, Moore explained
that he became aware of the alleged overpayments when “the invoice was kicked
back” from a HECO consultant. Tr. at 2-60:9-11.
112. On June 14, 2013 — eight days after Moore approved payment
of Invoice 7864-05 and two days after LVI paid the invoice — Moore sent an
email to Chang with the subject line: “HECO – 41 drums sediment.” In the email,
Moore states: “Hi Jingbo – checking on disposition and signed manifest status for
these drums. Thanks.” Ex. D-1 at 2.
113. Chang responded about 10 minutes after Moore’s email was
sent, stating: “See attached. Thanks.” Id. at 1. Chang had attached a manifest to
the email. Tr. at 2-62: 15-17. Moore responded shortly thereafter, asking Chang:
“Was there a weight ticket? Client’s asking how weight was determined. Does
facility weigh it?” Ex. D-1 at 1. Chang responded “For[] drum waste, the disposal
facility charge by drum not by weight. If the weight difference is within 10%, they
don’t change the estimate weight.” Id.
114. Moore testified at his deposition that LVI would not pay a
subcontractor before receiving money from HECO that could cover the
subcontractor’s invoice, that it “would always get paid from HECO first before it
paid the sub,” and that he was not aware of any deviations from that practice. Ex.
43
P-1 at 46:8-16. At trial, Moore testified that he vaguely recalled deviations “on a
small scale” that happened “very rarely.” Tr. at 2-122:6-24.
115. There are numerous inconsistencies in Moore’s testimony about
how and when he discovered the alleged overpayment of Invoice 7864-05 such
that his testimony in this regard is not credible:
• At trial, Moore testified that he discovered the alleged overpayment
of Invoice 7864-05 when he billed HECO for the work on the 41 drums of sludge
and sediment and HECO “kicked back” the invoice. Tr. at 2-60:2-11, 2-166:14-24.
In this regard, Moore testified that he billed HECO for $10,000 using tons as the
unit of measurement. Tr. at 2-64:23-25. The unit rate for hazardous solids in the
HECO Prime Contract was $990 per ton. Tr. at 2-55:20-23; 2-56:14-19. At that
rate, a $10,000 charge corresponds to approximately 10 tons of hazardous solids,
which is the weight of the 41 drums. Tr. at 2-57:17 to 58:7. At times, he testified
that he put down 10 tons in the bill to HECO. Tr. at 2-59:3-6. But Moore could
not adequately explain how he knew to charge for 10 tons given that, before billing
HECO, he thought the “41” in the PCS invoice referred to tons instead of drums.
Tr. at 2-58:18 to 2-60:11, 2-62:21 to 2-63:25, 2-64:17 to 2-65:20. Moore later
testified that he billed HECO for 41 tons of sludge and sediment. See Tr. at 2-
44
65:22-23, 2-167:1-14. The charge for 41 tons at the rate of $990 per ton would
have been $40,590, not $10,000 as stated by Moore.
• Moore testified on direct examination that HECO “kicked back” his
bill prior to his email exchange with Chang on June 14, 2013. Tr. at 2-65:22 to 266:2. On redirect examination, Moore testified that he had not billed HECO as of
the June 14, 2013 email exchange, and that the billing would have occurred at the
end of the month. Tr. at 2-190:1-22. The reason Moore sent the June 14, 2013
email to Chang was to obtain a copy of the fully executed manifest, which he
needed to bill HECO. Tr. at 2-190:23 to 2-191:25; Ex. D-1. Thus, Moore could
not have billed HECO before his email exchange with Chang on June 14, 2013,
and correlatively, it is unclear how HECO could have “kicked back” the bill before
that date.
• Moore testified that HECO did not say anything about the quantity
of materials in his invoice to them for the 41 drums. Tr. at 2-66:3-6. Shortly later,
Moore testified that HECO questioned the quantity. Tr. at 2-66:11-12.
• Moore testified that HECO questioned the total amount in the
invoice. Tr. at 2-66:7-10. If Moore billed approximately $10,000 for 41 tons as he
testified that he did, the invoice total would not have been questionable because it
would have been correct.
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116. Even if Moore initially thought the “41” meant tons instead of
drums, the preponderance of the credible evidence establishes that he knew, or
should have known, it meant drums when the invoice for the 41 drums was paid.
Moore knew that the waste was packaged in drums because Invoice 7864-05
referenced “sludge/sediment” in the description. Moore knew that PCS previously
charged by the drum (at $700 per drum) for the seven drums of similar waste. The
invoice provided the information needed to determine that PCS was charging by
the drum. The manifest for the load, which the invoice referenced, confirmed that
“41” referred to drums. Moreover, if the load had consisted of 41 tons, Moore
would have expected to see two manifests because 41 tons would fill two
containers. A cursory review of the invoice (which contains just a single item)
would have resolved any ambiguity about the quantity. Moore’s awareness that
“41” meant drums is confirmed by Moore’s email to Chang sent two days after
LVI paid Invoice 7864-05 with the subject line: “HECO — 41 drums sediment.”
4.
LVI’s Demand for Credit from PCS
117. On August 14, 2013, Moore sent an email to Chang requesting a
credit for Invoices 7864-01 and 7864-05, in which LVI claimed PCS incorrectly
billed transportation and disposal of hazardous solids at $700 per drum instead of
$700 per ton. Stip. Facts ¶ 31; Ex. P-31.
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118. On August 14, 2013, Chang replied to Moore’s request for a
credit with an email stating:
The $700/ton is based on 360 tons bulk solid (e.g.
supersacks or triwall boxes). It is impossible for
hazardous waste drums disposal to be charged at
$700/ton.
Mike, you can see it here. It is very difficult to bid.
Some items are right and some items are under and some
items are over. LVI took away the items are better than
estimated. When you bid job, you just have to take risk.
When the gravy is taken away, all other prices are not
valid anymore. But you can justify the drum price to
HECO. When we bid the disposal we are based on solid
on bulk containers and shipped directly to Chem Waste
in Oregon in full containers. Hope you understand it.
Thanks.
Stip. Facts ¶ 32; Ex. P-32 at 1. These comments are consistent with the
negotiations that led to the Small Font Provision.
119. In his August 14, 2013 email to Moore, Chang conveyed to
Moore that PCS might have been able to issue LVI a credit based on the bulk price
of $700 per ton and absorb the loss if LVI had not taken away the more profitable
work (i.e., ACM disposal). Ex. P-2 at 118:25 to 120:1; 132:24 to 133:21; see also
Ex. P-38 at 1. Chang was emotionally upset when he sent this email and was
trying to explain the difficulty of adhering to the $700 per ton price in light of LVI
taking away the profitable ACM work. Tr. at 1-75:2-12.
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120. In stating that “all other prices are not valid anymore,” Chang
was not repudiating all of the prices in the HECO Subcontract. Ex. P-2 at 123:721; Tr. at 1-75:13-15. Rather, PCS would have honored the prices in the HECO
Subcontract if LVI had given PCS more work after this exchange, which LVI did
not. Tr. at 1-75:16-22.
121. Chang’s statement that it is “impossible for hazardous waste
drums disposal to be charged at $700/ton” referred to the “impossibility” of
charging $700 per ton, not the “impossibility” of packaging hazardous waste in
drums. Tr. at 1-74:19 to 1-75:1.
122. On August 15, 2013, Moore responded to Chang’s August 14,
2013 email, stating:
I understand your position on the hauling. However, the
reason each line item for disposal was separate was to
enable each to be a stand alone price in the event the
quantities varied or specific items were deleted from the
contract. No one price should have been assumed to
carry the others. The reason LVI chose to go direct with
WM was because there was no money being made for the
light loads. LVI was not made aware at the time of bid
the minimum tonnage requirements.
There is still ample work to be done and think it
unfortunate if we cannot work together. I am simply
asking for a credit for monies that were overpaid as a
matter of error and hope you honor the previously
agreed-to price.
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Your consideration is appreciated.
Stip. Facts ¶ 33; Ex. P-33 at 1.
123. When Moore sent the August 15, 2013 email to Chang, LVI had
not made a decision about whether to give PCS more work for the HECO Project if
the credit had been issued as requested. The decision remained open while the
dispute over the credit was unresolved. Tr. at 2-173:8 to 2-174:3.
124. On August 15, 2013, Chang further replied to Moore’s August
14, 2013 email requesting a credit for Invoices 7864-01 and 7864-05, stating:
I think that you shall get a change order for the drums of
semi-liquid from HECO. The item 38 is for hazardous
solids. The drums shall fall into at least item 42. Semi
liquid waste price shall be higher than that. I think that
when we picked up the first 7 drums, I discussed it with
you.
Stip. Facts ¶ 34; Ex. P-34 at 1.
125. In a letter dated August 28, 2013, LVI formally demanded a
$25,200 credit for Invoice 7864-01 and Invoice 7864-05. LVI demanded that the
credit be issued by September 16, 2013. Stip. Facts ¶ 35; Ex. P-37.
126. When Moore sent the August 28, 2013 demand letter, his
intention was to stop using PCS if he did not receive a favorable response from
49
PCS. Tr. at 2-89:6-11. Moore testified at trial that LVI had not decided whether to
continue using PCS for the HECO Project before the September 16, 2013 deadline
given in the letter. Tr. at 2-175:1-9.
127. But on August 21, 2013 — before LVI sent the formal demand
letter to PCS — Moore told a different potential subcontractor that he had “finally
convinced heco not to use pcs for the remainder of this project.” Ex. P-36 at 3; Tr.
at 2-176:1-25. Moore was negotiating with Cameron Chemical Corporation
(“Cameron”) for mercury disposal work listed on a PCS manifest, and within the
scope of PCS’s HECO Subcontract. Ex. P-36 at 3; Tr. 2-177:17-19.
128. A Cameron representative asked Moore “How much was [PCS]
charging you for this, I want to save you $$$.” Ex. P-36 at 2. Moore responded
“$4,000/ton and this is our first round. Attached bid form includes his pricing.
You didn’t see this though.” Id. at 1-2.
129. In a letter to LVI dated September 25, 2013, PCS denied LVI’s
demand for a credit. Stip. Facts ¶ 36; Ex. P-40.
5.
LVI’s Arguments Challenging the Agreement on Price
130. LVI argues that there was no valid agreement to modify the unit
price of $700 per ton for hazardous solids to $700 per drum because the change
order procedures in certain provisions of the HECO Subcontract were not
50
followed. The provisions relied upon by LVI are contained in the standard Terms
and Conditions drafted by LVI that were attached to and made part of the HECO
Subcontract (“Terms and Conditions”), or in notes to Exhibit A to the HECO
Subcontract. Exhibit A is reproduced in full on the next page.
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a.
Note 2 and Paragraph 17
131. Note 2 in Exhibit A to the HECO Subcontract provides:
“Notification should be made within 3 ‘business days’ if there are additional costs
to the unit prices listed.” Ex. P-12 at 4. Note 2 was negotiated separately, and is
listed, along with other notes, at the bottom of the Exhibit A.
132. Paragraph 17 of the standard Terms and Conditions provides in
part: “All claims for additional costs shall be submitted to the Contractor within
three (3) days of the basis for the claim becoming apparent, or as otherwise
required so that the Contractor may comply in the manner provided in the Contract
Documents for like claims by the Contractor.” Id. at 7. It is part of the Terms and
Conditions included in the draft contract that Maddock initially sent to Chang on
March 23, 2012. Ex. P-9 at 7-8. Note 2 and Paragraph 17 relate to the same
subject matter.
133. Note 2 was the result of negotiations over Paragraph 17 of the
Terms and Conditions. After Chang received the first draft of the HECO
Subcontract from Maddock, Chang asked PCS’s risk manager, Kevin Lam, to
review and comment on the draft. Among other things, Lam commented:
“Paragraph 17 – Note that contractor requires PCS to submit additional costs to
contractor within 3 days or it will be deemed waived by PCS. Is 3 days standard?
53
I would suggest at least changing 3 ‘business’ days.’” Ex. P-11 at 2. Chang
forwarded Lam’s comments to Maddock. Id. Maddock replied: “As these are unit
prices, I wouldn’t anticipate additional costs being an issue. However, notification
should be made within the 3 ‘business days’ if there are additional costs (Paragraph
17).” Ex. P-11 at 1. The second sentence of that statement was incorporated into
HECO Subcontract as Note 2. Ex. P-12 at 4.
134. The “additional costs” language in Note 2 applies to changes in
the total contract amount. The HECO Subcontract has unit pricing, not a fixed
lump sum price. Tr. at 1-23:8 to 1-24:5. Note 2 is not applicable to unit prices.
See Tr. at 1-108:7-21. That is, the “additional costs” language in Note 2 and
Paragraph 17 refer to cost categories (e.g., special packaging fees that are expressly
excluded from the unit price in Line Item 4 of the HECO Subcontract) different
from those under the unit rate or costs in addition to the total contract price.
135. A change to the unit price is not an “additional cost” within the
meaning of Note 2 and Paragraph 17. PCS and LVI agreed to modify the unit rate
itself, not add on cost components different from those accounted for in the unit
rate. Accordingly, the price change from $700 per ton to $700 per drum was not
an “additional cost” subject to the notification procedure set forth in Note 2.
54
b.
Paragraph 10
136. Paragraph 10 of the HECO Subcontract’s Standard Terms and
Conditions provides, in pertinent part:
Subcontractor shall make all changes from the original
plans and specifications when ordered to do so by
Contractor without nullifying the original
Subcontract/Purchase Order, and shall promptly submit
to Contractor its Change Order proposal before
performing these changes.
Ex. P-12 at 6 (emphasis added).
137. The “plans and specifications” language in paragraph 10 refers
to plans and specifications for construction work, not for waste disposal. A change
in the unit price for transportation and disposal of waste does not constitute a
change in “plans and specifications” within the meaning of paragraph 10.
c.
Paragraph 4
138. Paragraph 4 of the HECO Subcontract’s Standard Terms and
Conditions provides:
Requested revisions to Subcontractor’s Contract Price are
not to be included in its billings until Subcontractor
receives Contractor’s signed Change Order. Authorized
charges must be shown, but not billed separately and are
to be added or deducted from the Contract Price.
Ex. P-12 at 6.
55
139. The reference to “the Contract Price” in paragraph 4 signals that
the provision applies to changes to the fixed price of the contract, if there is one.
As the HECO Subcontract had unit prices rather than a fixed contract price,
paragraph 4 does not apply.
E.
Diversion of Other Waste Streams
140. After filing this lawsuit, PCS learned that LVI used other
vendors or subcontractors for work, in addition to ACM work, that it contends are
diversions fitting within line items in the HECO Subcontract. Tr. at 1-39:8 to 140:2. It seeks recovery for two diversions —“oily wastewater” and “nonhazardous solid waste.”
1.
“Oily Wastewater” Handled by Unitek Solvent Services, Inc.
(“Unitek”)
141. PCS is claiming $284,978.10 for lost profits on work performed
by Unitek in connection with removal and disposal of “oily wastewater” pursuant
to a subcontract that LVI formally entered into with Unitek on May 17, 2013, Ex.
P-35, although Unitek began disposing of oily wastewater as early as March 2013,
see, e.g., Ex. P-75-1; Ex. P-64A (stipulated amount of PCS’s damage claim for the
HECO Project). This work ultimately consisted of disposal of approximately
518,000 gallons, for which LVI paid Unitek a total of $376,987.80. Tr. 2-93:4-11;
Ex. P-83. PCS is claiming that LVI should have allowed PCS to perform that work
56
at the rate of $1.50 per gallon or $2.50 per gallon under existing line items in its
HECO Subcontract.
142. PCS’s subcontract proposal to LVI contemplated 10,000 gallons
of “Liquids, petroleum containing,” and 500 gallons of “Liquids, other specify.”
Ex. P-6 at 7-8, line items 41 & 43; Tr. at 1-157:13-22. When it submitted its
proposal and entered into the HECO Subcontract, PCS did not contemplate work
consisting of the approximately 518,000 gallons of water that was disposed of by
Unitek. Tr. at 1-158:2-17. Chang admitted that he does not know anything about
the 518,000 gallons of water other than what he has learned through the invoices
produced in discovery. Tr. at 1-158:18-21.
143. The water removed and disposed of by Unitek was rainwater
and water from filtration of asbestos abatement that was not in the building at the
time LVI submitted its proposal. Tr. at 2-103:16-23. The original plan for
disposal of such wastewater was for LVI to pump it into a sanitary sewer line
instead of hauling away and disposing of it somewhere else. Tr. at 2-103:24 to 2104:10. Consequently, there was no specific line item for disposal of the waste
water that Unitek handled in LVI’s proposal to HECO, and in LVI’s HECO Prime
Contract. Tr. at 2-102:18 to 103:4.
57
144. Moore testified that the procedure for disposing of wastewater
changed because of HECO’s concerns over the volume of the water, the permitted
flow rates and its fear of overcharging the sewer system. Thus, HECO agreed to
pay to have it shipped and removed offsite. Tr. at 2-104:15 to 105:3. HECO
characterized the water as oil-containing. Tr. at 2-94:22 to 2-95:11. LVI had to
obtain a change order in its HECO Prime Contract to add off-site disposal of this
wastewater. Tr. at 2-105:4-24.
145. For this type of work performed solely by a subcontractor, LVI’s
contract with HECO required that LVI obtain a detailed breakdown of the labor
and material charges from the subcontractor and submit that breakdown with LVI’s
price to HECO using the subcontractor’s total price plus a 10 percent markup for
LVI for both overhead and profit. Ex. P-8 at 35; Tr. at 2-105:16 to 106:17. LVI
submitted the PCS pricing of $2.50 per gallon for “Liquids, other” (item 43 in its
proposal), and $1.50 for “Liquids, petroleum containing” (item 41 in its proposal),
but HECO required multiple subcontractor bids. Tr. at 2-106:21 to 107:19.
146. LVI solicited a quote from Unitek which proposed to perform
the work for $0.69 per gallon for “rainwater/oily water,” as stated in the
subcontract that LVI subsequently entered into with Unitek. Ex. P-35 at 1; Tr. at
2-107:20 to 108:2, 109:1-10. LVI submitted the Unitek proposal to HECO, which
58
approved Unitek as the subcontractor for this task and a total charge by LVI of
$0.74 per gallon for Unit 5 and $0.72 per gallon for Unit 7. Tr. at 2-109:11-21.
Accordingly, LVI’s HECO Prime Contract was then amended to add 493,000
gallons of wastewater at those rates. Tr. at 2-109:22 to 2-110:3.
147. The change order was not formally executed until October 2013.
Tr. at 2-183: 21-24, 2-195:1-4. But HECO had approved it earlier in 2013 at about
the time that Unitek began removing the wastewater. Tr. at 2-195: 15-20.
148. It is wholly speculative whether PCS would have performed the
work under a change order (and at what price) if LVI had offered responsibility for
the work to PCS at a renegotiated price. Chang testified that, as a waste broker,
PCS would not have handled the 518,000 gallons of wastewater for $0.69 per
gallon (as Unitek did). Tr. at 1-160:7-13. To do so, he estimated that PCS would
have incurred costs at about $0.95 per gallon. Tr. at 1-160:14-16. At those rates,
PCS would have lost money if paid $0.69 per gallon.
2.
Non-hazardous Solid Waste
149. LVI used Tajiri Demolition and Disposal LLC (“Tajiri”)
between August 1, 2013 and May 28, 2017 to transport and dispose of mixed
waste, rock, and dirt (i.e., non-hazardous solid waste) totaling 264.45 tons in
connection with the HECO Project. Stip. Facts ¶ 39; Ex. P-1 at 119:19-21; Exs. P-
59
76-1 to P-76-22; P-67A. Such work falls within Line Item 6 of the HECO
Subcontract at a rate of $150 per ton. Chang Decl. ¶ 68; Ex, P-12 at 4. PCS
calculates that it would have earned $22,478.25 if it had performed this work, and
the parties have stipulated that that amount was correctly calculated (although, as
with the ACM work, they have not stipulated that PCS is entitled to it as damages).
See ECF No. 159; Ex. P-67A. The court accepts the stipulation, and therefore does
not independently calculate this amount of proposed damages.
F.
PCS Work on the HECO Project Outside the Scope of the HECO
Subcontract
1.
Mercury Component Removal
150. PCS seeks recovery on an unjust enrichment basis for work it
performed for LVI that was related to, but outside the scope of, the HECO
Subcontract. On September 7, 2013, PCS sent Invoice 7864-06 to LVI for
$14,435.86. Ex. P-39. The invoice was for time and materials relating to mercury
component removal for the HECO Project that does not fall within any specific
line item in the HECO Subcontract. Chang Decl. ¶ 39; see also Ex. P-39 at 1
(“Provide mercury component removal (T & M ordered by Mike Moore) at HECO
Power Plant”). The invoice also included a charge for transportation and disposal
of ten drums of hazardous oil, which is also outside the scope of the HECO
Subcontract. Tr. at 1-162:2 to 164:17; Ex. P-39 at 2. Chang attests that PCS
60
charged its standard labor and equipment rates for the work. Chang Decl. ¶ 39; See
Ex. P-82 (standard rates).
151. LVI admits that it has not paid Invoice 7864-06, and PCS has
not received payment for the invoice from LVI. Ex. P-86 (Request For
Admissions No. 11); Chang Decl. ¶ 39.
152. Moore testified that he did not approve Invoice 7864-06 for
payment because there was no substantiation of the work described in the invoice.
Tr. at 2-112:19-22. LVI admits, however, that PCS performed all the work
described in Invoice 7864-06. See Ex. P-86 (Requests for Admission Nos. 9 &
10).
153. The line item in Invoice 7864-06 for “Transportation and
Disposal of hazardous oil” is listed with a quantity of “10” at “750,” for an amount
of $7,500. Ex. P-39 at 2. The corresponding documentation confirms that this
refers to 10 drums of hazardous oil. Ex P-39 at 11. The PCS rate of $750
(although apparently supported by standard PCS prices, see, e.g., Ex. P-79 at 2), is
nevertheless inconsistent with the lower rate of $700 per drum of hazardous sludge
that PCS charged LVI in July 2012 (for 7 drums) and in April 2013 (for 41 drums).
Accordingly, a rate of $700 (not $750) per drum is the more appropriate rate for
this line item in Invoice 7864-06, for a total of $7,000 (not $7,500).
61
154. The list of PCS’s standard rates for labor and equipment
provided at Ex. P-82 substantiates most of the other line items in Invoice 7864-06.
The following items, however, are not listed in the standard prices in Ex. P-82, and
the court is otherwise unable to confirm (and would thus be unable to award) these
amounts: (1) “Transportation and Disposal of non-hazardous empty bags” (2 at
$150 for a total of $300); (3) “pipe wrench” (3 at $15 for a total of $45); and
(4) “tool set” (3 at $25 for a total of $75). In this regard, Chang’s testimony was
too vague and non-specific to meet PCS’s burden to prove the costs for these
specific items. See Tr. at 1-82:15 to 1-83:22; Chang Decl. ¶ 39.
155. The total of the unsubstantiated amounts in Invoice 7864-06 at
Ex. P-39 is $920 ($500 plus $300 plus $45 plus $75). The Invoice listed
$13,786.25 as the subtotal. Subtracting $920 from $13,786.25 results in a revised
subtotal of $12,866.25. Hawaii general excise tax at 4.712% on this amount is
$606.26. Thus, the total substantiated amount for Invoice 7864-06 is $13,472.51
($12,866.25 plus $606.26).
2.
Mobilization, Demobilization, and Documentation
156. PCS also seeks $25,000 for mobilization, demobilization,
preparation of a waste management plan, and waste documentation. It sought this
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amount in Invoice 7864-07 dated October 15, 2014. Ex. P-41. This invoice was
submitted almost two years after the services would have been performed.
157. Chang admitted at trial that PCS issued the October 2014
invoice in preparation for filing a complaint. Tr. at 1-165:17-19. And Chang’s
explanation at trial was confusing; he testified that “normally we’ll bill the
demobilization or mobilization either at the beginning like a certain percentage, but
we never bill. So that’s why when come to the dispute [with LVI], so we send out
this invoice to cover . . . those line items.” Tr. at 1-165: 12-16.
158. The evidence does not support PCS’s entitlement to any
recovery for tasks in this October 2014 invoice (Invoice 7864-07). Specifically:
• Moore testified that (1) he never agreed to pay PCS $7,500 for
mobilization and can’t identify anything PCS did to “mobilize” other than drive to
the jobsite (Tr. 2-114:6-15), (2) any mobilization relating to the mercury cleaning
services should have been included in the cost-plus invoice for those services that
PCS issued one year earlier in September of 2013, Ex. P-39 (Tr. at 2-200:19 to 2201:13), and (3) there is no evidence to support that the reasonable value of the
mobilization services provided is $7,500.00;
• Moore testified that he never agreed to pay PCS $5,000 for a waste
management plan, and never saw a plan. Tr. at 2-114:16-24. Indeed, Chang
63
admitted that there is no document that he can identify as a waste management
plan. Tr. at 1-168:11-17; and
• Chang admitted that the $5,000 charge for waste documentation
was for the waste manifests (Tr. at 1-168:4-8), but Moore testified that he never
agreed to pay $5,000 for preparation of waste manifests (Tr. at 2-114:25 to 2115:11) and that preparation of waste manifests was included in the unit prices for
hauling and disposal of the various materials (Tr. at 2-115:12-21).
G.
Recovery Claimed by PCS for the HECO Project
159. Count I of the Amended Complaint asserts that LVI breached
the HECO Subcontract by using vendors other than PCS to perform waste
transportation and disposal services in the HECO Project. For Count I, PCS seeks
damages of $1,006,501.10, which consist of the profits PCS claims it would have
earned if LVI had given it all the waste transportation and disposal work that was
diverted to other vendors. PCS calculates that it would have earned $699,044.75 in
profits for the ACM work that was diverted to Waste Management; $284,978.10 in
profits for the oily wastewater work that was diverted to Unitek; and $22,478.25 in
profits for non-hazardous solid waste work that was diverted to Tajiri. These
claimed amounts are summarized at Ex. P-64A, as supported by other Exhibits.
See Ex. P-62A; P-63B; Ex. P-65A; Ex. P-66A; Ex. P-67A; see also Chang Decl.
64
¶¶ 56-71. As discussed in Finding 60, the parties stipulated that PCS’s calculations
for these claimed damages are correct, although they did not stipulate that PCS is
actually entitled to any damages. See ECF No. 159.
160. PCS also seeks prejudgment interest on damages for Count I at a
statutory interest rate of 10% per annum set forth in Hawaii Revised Statutes
(“HRS”) § 478-2, with interest beginning to accrue 60 days from either: (a) the
date of the invoice from the vendor who handled the waste stream in question, or
(b) if no invoice is available, the date of service for the waste stream. The parties
stipulated to this commencement date for prejudgment interest calculations. See
Chang. Decl. ¶ 62; Elijah Yip Decl. of Dec. 6, 2017 (“Yip Decl.”) ¶ 26, ECF No.
141-2; ECF No. 159.
161. The parties have also stipulated that, as of October 1, 2017, a
total of $373,347.69 in prejudgment interest has accrued with respect to the
claimed damages for Count I, broken down as follows: $264,860.24 for the
claimed lost profits for ACM work; $102,722.89 for the claimed lost profits for the
oily wastewater work; and $5,764.55 for claimed lost profits for disposal of nonhazardous solid waste. See ECF No. 159; Ex. P-64A. The claimed per diem
prejudgment interest amounts corresponding to each diverted waste load are
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summarized at Ex. P-64A, as supported by Exhibits P-62A, P-63B, P-65A, P-66A,
and P-67A; see also Chang Decl. ¶¶ 56-71; Yip Decl. ¶ 26.
162. Count II of the Amended Complaint asserts that LVI was
unjustly enriched by PCS’s work on the HECO Project as described in PCS
Invoices 7864-06 for $14,435.86 and 7864-07 for $25,000. PCS seeks restitution
of the invoiced amounts. See Ex. P-39; Ex. P-41.
163. For the restitution claim in Count II, PCS seeks prejudgment
interest on the amounts stated in Invoices 7864-06 and 7864-07 at 10% per annum
under HRS § 478-2. As stipulated, prejudgment interest commences accruing sixty
days after the dates of the invoices. If the full amount of Invoice 7864-06 is
awarded, PCS proffers that prejudgment interest has been accruing at the per diem
rate of $3.96 as of November 6, 2013. And if the full amount of Invoice 7864-07
is awarded, PCS proffers that prejudgment interest on Invoice 7864-07 has been
accruing at the per diem rate of $6.85 as of December 14, 2014. See ECF No. 141
at 64-65. Recovery for these two invoices was addressed in Findings 153 through
158.
H.
The Kahuku Project and the Kahuku Subcontracts
164. The Kahuku Project began with a fire in a Battery Energy
Storage System Building (“BESS Building”) at the wind generation facility
66
operated by First Wind Energy, LLC (“First Wind”) in Kahuku in the summer of
2012. Defendants understood that Xtreme Power, Inc. (“Xtreme Power”) was the
contractor for the BESS Building. Lynn Bruce Decl. ¶ 4, ECF No. 145-2.
165. The work on the Kahuku Project was divided into roughly two
categories: (1) Phase 1: Environmental Control and Evidence Investigation, and
(2) Phase 2: Demolition and Disposal of the BESS Building. Stip. Facts ¶ 40.
166. With respect to Phase 1 of the Kahuku Project, PCS and NRS
entered into three Subcontracts/Purchase Orders (collectively, the “Kahuku
Subcontracts”):
• Subcontract/Purchase Order No. 23465 dated September 5,
2012 for $125,000 plus taxes (“PO 23465”). Ex. P-42.
• Subcontract/Purchase Order No. 23538 dated September 25,
2012 for $34,000.00 plus taxes (“PO 23538”). Ex. P-43.
• Subcontract/Purchase Order No. 23797 dated December 17,
2012 for $53,528.77 plus taxes (“PO 23797”). Ex. P-49.
Stip. Facts ¶ 41.
167. All of the Subcontract/Purchase Orders for the Kahuku Project
contain the following “pay-if-paid” provision:
Upon written approval by Contractor and the Owner,
Subcontractor’s invoice shall be paid, in the net amount
of its request, if and only if, Contractor receives payment
from the Owner for said invoice. Contractor’s receipt of
payment from Owner for Subcontractor’s invoice is an
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express condition precedent to Contractor’s obligation to
make payment to Subcontractor. If Contractor does not
receive payment from the Owner for said invoice,
notwithstanding whether same was approved, the
Contractor shall have no further obligation to pay
Subcontractor[.]
Stip. Facts ¶ 42.
1.
PCS’s Work on the Kahuku Subcontracts
168. The subject of Count III for breach of contract relating to the
Kahuku Subcontracts includes the following invoices issued by PCS:
a. PCS submitted Invoice 8246-13 dated May 4, 2013 to LVI in the
amount of $3,560.21 for work performed by PCS pursuant to PO 23797. PCS
performed the services stated in the invoice. Stip. Facts ¶ 49; Ex. P-57 at 2.
b. PCS submitted Invoice 8246-14 dated May 4, 2013 to LVI in the
amount of $3,350.78 for work performed by PCS pursuant to PO 23538. PCS
performed the services stated in the invoice. Stip. Facts ¶ 50; Ex. P-57 at 3.
c. PCS submitted Invoice 8246-15 dated May 4, 2013 to LVI in the
amount of $6,240.84 for work performed by PCS pursuant to PO 23465. PCS
performed the services stated in the invoice. Stip. Facts ¶ 51; Ex. P-57 at 5.
d. PCS submitted Invoice 8246-18 dated August 3, 2013 to LVI in
the amount of $5,450.26 for work performed by PCS pursuant to PO 23465. PCS
performed the services stated in the invoice. Stip. Facts ¶ 55; Ex. P-59 at 3.
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e. PCS submitted Invoice 8246-19 dated August 3, 2013 to LVI in the
amount of $5,340.31 for work performed by PCS pursuant to PO 23797. PCS
performed the services stated in the invoice. Stip. Facts ¶ 56; Ex. P-59 at 6.
169. Within the scope of work of PO 23538 is provision of a 40 foot
container to store materials at the site of the BESS building fire. Ex. P-43 at 2.
The price of PO 23538 was not to exceed (“NTE”) $34,000. Id.
170. On September 27, 2012, PCS and NRS executed Change Order
23538-1, which increased the price of PO 23538 by $20,000 to NTE $54,000. The
basis for Change Order 23538-1 included loading evidence from the site of the fire
into a 20 foot container and shipping it to Menlo Park, California. Ex. P-44 at 2.
171. On behalf of Defendants, PCS shipped a container of evidence
to an engineering firm in Menlo Park that First Wind hired. See Lynn Charles
Bruce, Jr. Dep. (“Bruce Dep.”), Ex. P-4, at 30:11 to 31:1.
172. On October 8, 2012, PCS submitted to NRS its first invoice
(Invoice 8246-03) for work done pursuant to PO 23538. Ex. P-47. Invoice 824603 charged $53,926.68 for the following work: “Provided equipment, labor and
materials to secure and shipping evidence to US Mainland (Kahuku Wind Farm).”
Id. at 3.
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173. On October 9, 2012, Lynn Bruce, a Senior Project Manager at
NRS, approved Invoice 8246-03 for payment. Bruce noted in an email to the NRS
accounts payable department: “I have also compared this invoice to our change
order #2 scope of work and the PO issued to the sub (NTE $54k).” Ex. P- 48 at 1.
174. The container of evidence that was shipped to Menlo Park was
not unloaded, causing PCS to incur monthly demurrage charges beyond the
amount originally expected. At the end of December 2012, PCS alerted
Defendants that demurrage charges were adding up. Ex. P-50; Chang Decl. ¶ 48.
175. On January 2, 2013, Bruce wrote an email to the owner of the
Kahuku Project, Xtreme Power, stating: “Is it possible to get the evidence
unloaded from the container sent to Exponent? The demurrage is adding up from
the extended time and is about to get extremely expensive. We need to have the
container emptied so it can be returned.” Ex. P-51 at 1.
176. By February 2013, the container still had not been unloaded.
Ex. P-52; Chang Decl. ¶ 49.
177. On February 8, 2013, Moore instructed Chang to “[s]hoot
[Bruce] your final invoice for all costs since your last billing so we can provide
client a final package to include container.” Ex. P-52 at 1.
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178. On February 21, 2013, Chang sent an email to Bruce attaching
Invoice 8246-09 for $6,492.14 and stating: “Attached is the invoice through
2/25/13 for the container demurrage. $1,550/month plus 4.712% tax for any
demurrage forward.” Ex. P-54 at 1; Ex. P-55 at 2.
179. On February 25, 2013, PCS and NRS entered into Change Order
23538-2, which increased the price of PO 23538 by $6,492.14 — the same amount
as Invoice 8246-09 — for a total of NTE $60,492.14. The stated basis for Change
Order 23538-2 is: “Dust fence, steel plates, tents, and connex all on site longer than
initially proposed.” Ex. P-56. Thereafter, PCS and NRS did not execute any more
change orders to PO 23538 for demurrage charges. Chang Decl. ¶ 52.
180. PCS sent two more invoices to NRS for additional demurrage
charges. On May 4, 2013, PCS sent to NRS Invoice 8246-16 in the amount of
$4,869.11 for demurrage charges from February 26, 2013 to May 25, 2013. Ex. P57 at 6. On August 3, 2013, PCS sent to NRS Invoice 8246-17 in the amount of
$3,246.07 for demurrage charges from May 26, 2013 to July 25, 2013. Ex. P-59 at
2. These invoices, which have not been paid, exceeded the price in Change Order
23538-2 of NTE $54,000, and were not covered by any change order. Chang Decl.
¶ 55.
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2.
Defendants’ Collection Efforts
181. Defendants did not issue invoices to First Wind and/or Kahuku
Wind Power LLC for the services that are the subject of certain PCS Invoices,
including 8246-13, 8246-14, 8246-15, 8246-16, 8246-17, 8246-18, and 8246-19
(collectively, the “Unsubmitted Kahuku Invoices”). Stip. Facts ¶ 58.
182. Defendants have no explanation for why they did not submit the
Unsubmitted Kahuku Invoices to Xtreme Power or First Wind for payment. See
Trial Declaration of Michael Thompson ¶ 16 (“Thompson Decl.”), ECF No. 145-3.
183. Defendants’ employees noted in an internal email dated April
22, 2013 that PCS invoices had not been sent to Xtreme Power “because we didn’t
know who to send our invoice[s] to.” Ex. D-30. This email, however, referred to
different invoices than the Unsubmitted Kahuku Invoices, and the unpaid PCS
invoices up to April 22, 2013 were sent to Xtreme Power or First Wind for
payment. See Thompson Decl. ¶ 11.
184. In a letter dated June 18, 2013, Defendants sent a demand letter
to First Wind Energy, LLC and Kahuku Wind Power LLC demanding payment of
$4,473.56 for services performed on the Kahuku Project. Stip. Facts ¶ 52; Ex. D31.
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185. In a letter dated June 28, 2013, First Wind Energy, LLC refused
to pay LVI $4,473.56. Stip. Facts ¶ 54; Ex. D-33.
186. The amount demanded in the June 18, 2013 letter corresponds to
Invoice 1001731B that NRS sent to First Wind on April 24, 2013, which sought
payment for PCS Invoice 8246-12 plus NRS’s markup. Ex. D-26.
187. By letter of June 19, 2013 to Extreme Power, Inc. and Kahuku
Wind Power LLC, Defendants demanded payment of $41,268.21 for services
performed on the Kahuku Project. Stip. Facts ¶ 53; Ex. D-32.
188. The amount demanded in the June 19, 2013 letter corresponds to
Invoice 242029G dated March 7, 2013 and Invoice 242029H dated April 24, 2013
that LVI sent to Xtreme Power. Invoice 242029G was for $5,676 for a demolition
permit application. See Ex. D-29 at 1. Invoice 242029H was for $35,592.21, and
it sought payment for, among other things, PCS Invoices 8246-06, 8246-04, 824609, 8246-07, 8246-11, and 8246-10. See Ex. D-24 at 1-2.
189. Three of the Unsubmitted Kahuku Invoices (8246-13, 8246-14,
and 8246-15) were dated May 4, 2013, before Defendants sent the demand letters
to First Wind and Xtreme Power. The amounts of these three invoices, however,
were not included in the demand letters.
73
190. As of May 4, 2013, First Wind had not denied responsibility for
PCS’s invoices. In an email dated April 12, 2013 to Bruce, First Wind told
Defendants that “discussions continue between First Wind and Xtreme Power.”
Ex. D-17 at 1.
I.
Recovery Claimed by PCS for the Kahuku Project
191. Count III of the Amended Complaint asserts that Defendants
breached the Kahuku Subcontracts by failing to pay certain PCS invoices for work
PCS performed on the Kahuku Project. PCS seeks recovery of the amounts for
which Defendants did not seek payment from Xtreme Energy or First Wind,
specifically PCS Invoices 8246-13, 8246-14, 8246-15, 8246-18, and 8246-19,
which total $23,942.46.
192. PCS also seeks prejudgment interest on the amounts of the five
unpaid invoices. Applying a statutory interest rate of 10% per annum provided in
HRS § 478-2 and based on the parties’ stipulation that prejudgment interest begins
accruing 60 days after the invoice date, prejudgment interest begins accruing at the
following per diem rates and dates:
Invoice
Invoice Date
Per Diem
8246-13
05/04/13
$0.98/day
Commencement
Date
07/03/13
8246-14
05/04/13
$0.92/day
07/03/13
74
8246-15
05/04/13
$1.71/day
07/03/13
8246-18
08/03/13
$1.49/day
10/02/13
8246-19
08/03/13
$1.46/day
10/02/13
193. Count IV of the Amended Complaint asserts that Defendants
were unjustly enriched by PCS incurring demurrage charges outside the scope of
the Kahuku Contracts or any applicable change order. PCS seeks restitution of the
amounts billed in Invoices 8246-16 ($4,869.11) and 8246-17 ($3,246.07), which
total $8,115.18. See Ex. P-57 at 6; Ex. P-59 at 2.
194. PCS also seeks prejudgment interest on the amounts stated in
Invoices 8246-16 and 8246-17 at the statutory interest rate of 10% per annum.
Prejudgment interest commences accruing sixty days after the dates of the
invoices. Prejudgment interest on Invoice 8246-16 has been accruing at the per
diem rate of $1.33 as of July 3, 2013. Prejudgment interest on Invoice 8246-17 has
been accruing at the per diem rate of $0.89 as of October 2, 2013.
J.
Provisions for Attorney’s Fees and Costs
195. The HECO Subcontract contains an attorney’s fees clause
regarding “All claims, disputes and other matters in question between the parties,”
providing that “The prevailing party in any such litigation . . . shall be entitled to
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recover reasonable attorney’s fees, costs and expenses incurred in litigating . . . the
dispute.” Ex. P-12 at 9 ¶ 25.
196. The Kahuku Subcontracts contain nearly identical attorney’s
fees clauses as in the HECO Subcontract. See Ex. P-42 at 6 ¶ 25; Ex. P-43 at 7
¶ 25.
V. CONCLUSIONS OF LAW
A.
Federal Jurisdiction
1. PCS is a limited liability company, whose citizenship for purposes
of 28 U.S.C. § 1332 is that of its members and owners. See, e.g., Johnson v.
Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006) (“[A]n LLC is
a citizen of every state of which its owners/members are citizens.”).
2. PCS’s members are both residents of Hawaii, and were Hawaii
residents at all relevant times. See Finding 1. Citizenship for purposes of 28
U.S.C. § 1332 is determined by domicile (not residence). See, e.g., Kanter v.
Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001) (“[A] natural person’s
state citizenship is then determined by her state of domicile, not her state of
residence. A person’s domicile is her permanent home, where she resides with the
intention to remain or to which she intends to return.”) (citation omitted).
Nevertheless, “[i]t is a longstanding principle that the place where a person lives is
76
taken to be his domicile until facts adduced establish the contrary.” NewGen, LLC
v. Safe Cig, LLC, 840 F.3d 606, 614 (9th Cir. 2016) (citations and quotation marks
omitted); see also, e.g., Mondragon v. Capital One Auto Fin., 736 F.3d 880, 886
(9th Cir. 2013) (recognizing that “numerous courts treat a person’s residence as
prima facie evidence of the person’s domicile”) (citing cases). And, here, no
evidence indicates that either of PCS’s members is not domiciled in Hawaii.
Indeed, Defendants removed this action from state court — and thus Defendants
had at least the initial burden to establish diversity — and they affirmatively
alleged that PCS’s members appear to be Hawaii citizens for purposes of § 1332.
See ECF No. 6 at 3.
3. LVI and NCG are citizens of California, and NRS is a citizen of
Delaware and Texas, for purposes of § 1332. See Findings 3 and 4. None of the
Defendants has the same citizenship as PCS.
4. Well over $75,000 is in controversy. Accordingly, the court has
subject matter jurisdiction based on complete diversity of citizenship under § 1332.
B.
PCS Count I (Breach of Contract — HECO Project) and LVI’S
Counterclaim
1.
LVI Materially Breached the HECO Subcontract
5. The HECO Subcontract is valid and enforceable. MSJ Order at 14;
Pac. Commercial Servs., 2017 WL 2817883, at *6.
77
6. LVI breached the HECO Subcontract by violating its obligation to
use PCS exclusively for waste transportation and disposal services in the HECO
Project. Id. at 18; 2017 WL 2817883, at *7. The exclusivity requirement is
essential to the HECO Subcontract. See Aickin v. Ocean View Invs. Co., 84 Haw.
447, 460, 935 P.2d 992, 1005 (1997) (stating that a material breach must “defeat
the object of the parties in making the agreement”) (emphasis and citation
omitted); Bishop Trust Co., Ltd. v. Kamokila Dev. Corp., 57 Haw. 330, 334, 555
P.2d 1193, 1196 (1976) (noting that material breach goes to the “essence” of the
contract).
7. LVI committed a material breach of the HECO Subcontract when
it contracted directly with Waste Management for ACM transportation and
disposal beginning as early as January 2013.
8. LVI committed another material breach of the HECO Subcontract
when it used Tajiri for transportation and disposal of non-hazardous solid waste
beginning in August 2013. That is, LVI diverted work to Tajiri that was within the
scope of the HECO Subcontract in violation of LVI’s contractual obligation to use
PCS for all transportation and disposal of waste in the HECO Project.
78
9. PCS failed to prove by a preponderance of the evidence that LVI
breached the HECO Subcontract when LVI used Unitek for disposal of “oily
wastewater” for the HECO Project.
2.
Duration of LVI’s Breach
10. LVI argues that PCS is not entitled to recover its lost profits due
to LVI’s diversion of waste transportation and disposal work to other vendors
because, according to LVI, PCS was the first to breach the HECO Subcontract. It
relies on the principle that a party who has materially breached a contract is not
entitled to require the other party to perform its duties under the contract. See PR
Pension Fund v. Nakada, 8 Haw. App. 480, 491, 809 P.2d 1139, 1146 (1991)
(“However, as a general rule, ‘a party cannot recover for a breach of contract if he
fails to comply with the contract himself[.]’”). “A party who first commits a
material breach cannot enforce the contract. Otherwise stated, a party who has
materially breached a contract is not entitled to recover damages for the other
party’s subsequent nonperformance of the contract, since the latter party’s
performance is excused.” 23 Williston on Contracts § 63:3 (4th ed. 2011)
(footnotes omitted).
79
11. To the extent LVI argues that the first-to-breach rule excused it
from honoring its contractual obligations to PCS’s material breach of the contract,
LVI asserts an affirmative defense. See LVI’s First Amended Answer to Amended
Complaint, ECF No. 105, ¶ 84 (asserting defense of Plaintiff’s material breach of
contract); see also, e.g., Frank Lloyd Wright Found. v. Kroeter, 697 F. Supp. 2d
1118, 1133 (D. Ariz. 2010) (noting that claim of material breach excusing further
performance is an affirmative defense); Centex Constr. v. Acstar Ins. Co., 448 F.
Supp. 2d 697, 714 (E.D. Va. 2006) (describing first material breach of contract as
an affirmative defense).
12. LVI has the burden of proving the validity of an affirmative
defense by a preponderance of the evidence. See Carvalho v. RaybestosManhattan, Inc., 794 F.2d 454, 456 (9th Cir. 1986) (“Under Hawaii law the
defendant has the burden of proof on all affirmative defenses.”); Parris v.
Wyndham Vacations Resorts, Inc., 979 F. Supp. 2d 1069, 1081 (D. Haw. 2013)
(reasoning that an affirmative defense must be proven by a preponderance of the
evidence); World Fuel Servs., Inc. v. John E. Retzner Oil Co., Inc., 234 F. Supp. 3d
1234, 1238-39 (S.D. Fla. 2017) (dismissing affirmative defense of material breach
because defendant offered no evidence to explain how plaintiff materially breached
the contract).
80
13. None of the theories LVI relies on in asserting the first-to-breach
rule as an affirmative defense are viable. Each theory is addressed as follows:
a.
Charging the $700 per drum unit price
14. LVI claims that PCS materially breached the HECO Subcontract
by charging it $700 per drum for hazardous solid waste transportation and disposal,
and that this breach occurred before LVI began diverting the ACM work to Waste
Management in January 2013. This argument fails for multiple reasons.
(1) LVI agreed to the $700 per drum unit price
15. Under Hawaii law, the existence of mutual assent or intent to
accept is determined by an objective standard. United Pub. Workers, AFSCME,
Local 646 v. Dawson Int’l, Inc., 113 Haw. 127, 141, 149 P.3d 495, 509 (2006).
“[T]he intent to incur mutual obligations is implied from the actions of the
parties.” Kemp v. Haw. Child Support Enf’t Agency, 111 Haw. 367, 391, 141 P.3d
1014, 1038 (2006) (emphasis in original).
16. “Under Hawai‘i law, an implied contract is formed when ‘the
intention of the parties is not express, but an agreement in fact, creating an
obligation, is implied or presumed from their acts, as in the case where a person
performs services for another, who accepts the same . . . or where a person
performs services for another on request.’” Queen’s Med. Ctr. v. Kaiser Found.
81
Health Plan, Inc., 948 F. Supp. 2d 1131, 1146 (D. Haw. 2013) (quoting Durette v.
Aloha Plastic Recycling, Inc., 105 Haw. 490, 504, 100 P.3d 60, 74 (2004)).
17. LVI and PCS mutually assented to amend the HECO Subcontract
with respect to the unit price for transportation and disposal of non-bulk quantities
of hazardous solids (Line Item 4). PCS and LVI engaged in negotiations over a
price adjustment for Line Item 4 as contemplated by the Small Font Provision.
The credible evidence establishes that LVI knew or should have known that PCS
was charging $700 per drum instead of $700 per ton in revised Invoice 7864-01 for
seven drums of sludge and sediment. See Finding 100. Therefore, LVI’s approval
and payment of the invoice, coupled with its failure to object to the price until
eight months later, constitutes objective manifestation of its assent to the $700 per
drum unit price used in the invoice. Accordingly, PCS did not materially breach
the HECO Subcontract by charging $700 per drum for seven drums of sludge and
sediment in revised Invoice 7864-01.
18. LVI’s belated objection to the $700 per drum rate in August 2013
— eight months after LVI assented to the rate — did not negate its earlier assent to
the rate. See Barwick Pac. Carpet Co. v. Kam Haw. Constr., Inc., 2 Haw. App.
253, 257, 630 P.2d 638, 641 (1981) (holding that contractor was contractually
obligated to pay for upgraded materials that supplier shipped to it where it made
82
partial payment and did not object to goods until nearly a year after the last
shipment); Hew v. Aruda, 51 Haw. 451, 459, 462 P.2d 476, 481 (1969) (“Certainly
silence in the light of previous dealings between parties may operate as assent.”);
see also Horizon Sec. & Vault Complex v. BFI Waste Sys. of N. Am., 2003 WL
22872097, at *2 (E.D. La. Dec. 1, 2003) (holding that plaintiff consented to price
increases for waste disposal services when it continued to pay the periodically
increasing invoices without question or complaint for nine years).
19. PCS’s use of the $700 per drum unit rate for 41 drums of sludge
and sediment in 2013 — another non-bulk load of hazardous solids — did not
constitute a breach of the HECO Subcontract because of the prior agreement to use
that unit rate for non-bulk quantities of hazardous solids. The use of the $700 per
drum rate in June 2013 was consistent with the prior course of dealing between
PCS and LVI. See Stewart v. Brennan, 7 Haw. App. 136, 143, 748 P.2d 816, 821
(1988) (noting that a trier of fact may consider the course of dealing between the
parties in construing the obligations of a contract). “A course of dealing can create
a contractual expectation.” Univ. of Haw. Prof’l Assembly v. Cayetano, 183 F.3d
1096, 1102 (9th Cir. 1999) (citing Stewart).
20. The credible evidence establishes that LVI knew or should have
known that PCS was charging $700 per drum in Invoice 7864-05 for the 41 drums
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of sludge and sediment. See Finding 116. Its approval and payment of the invoice
constitutes objective manifestation of its assent to the $700 per drum unit price
used in the invoice. Accordingly, PCS did not materially breach the HECO
Subcontract by charging $700 per drum for 41 drums of sludge and sediment in
Invoice 7864-05.6
(2) Change Order Procedure Provisions Do Not Apply
21. LVI argues that an agreement to modify the $700 per ton rate to
the $700 per drum rate was subject to change order procedures in various
provisions of the HECO Subcontract. The Court rejects this argument.
a.
Note 2 of the HECO Subcontract
22. As the court has found, Note 2 in the HECO Subcontract
provides: “Notification should be made within 3 ‘business days’ if there are
additional costs to the unit prices listed.” See Finding 131. Note 2 resulted from
PCS’s concerns about Paragraph 17 of the Terms and Conditions of the HECO
6
The court has briefly considered whether doctrines of mistake or mutual mistake might
apply, but concludes that they do not because, as argued by LVI in supplemental briefing, “the
mistake must relate to contract formation and not performance.” ECF No. 160 at 4 (citing ITT
World Directories, Inc. v. CIA Editorial de Listas, S.A., 525 F.2d 697, 700 n.4 (2d Cir. 1975) and
United States v. Heatley, 39 F. Supp. 2d 287, 309 (S.D.N.Y. 1998)). See also, e.g., Restatement
(Second) of Contracts § 152(1) (“Where a mistake of both parties at the time a contract was
made as to a basic assumption on which the contract was made has a material effect on the
agreed exchange of performances, the contract is voidable by the adversely affected party unless
he bears the risk of the mistake under the rule stated in § 154”) (emphasis added).
84
Subcontract. See Finding 133. The Court construes Note 2 and Paragraph 17
together due to their similar subject matter and the history of the negotiations.
23. Note 2 was negotiated separately from the standard Paragraph 17,
and separately negotiated (or added) terms are given more weight than
standardized terms or other terms not specifically negotiated. See, e.g., In re 604
Columbus Ave. Realty Tr., 968 F.2d 1332, 1358 (1st Cir. 1992). Moreover,
specific provisions in a contract control general provisions where the two conflict.
Kaiser Haw. Kai Dev. Co. v. Murray, 49 Haw. 214, 227, 412 P.2d 925, 932 (1966);
U.S. Composite Pipe S., LLC v. Frank Coluccio Constr. Co., 2014 WL 5023489, at
*10 (D. Haw. Oct. 7, 2014) (“In the interpretation of a promise or agreement or a
term thereof, . . . specific terms and exact terms are given greater weight than
general language.”) (citing Restatement (Second) of Contracts § 203 (1981) (other
citations omitted)).
24. The starting point for analyzing the applicability of Note 2 and
Paragraph 17 to the price change is an examination of its plain and ordinary
meaning. See Brown v. KFC Nat’l Mgmt. Co., 82 Haw. 226, 240, 921 P.2d 146,
160 (1996). “[I]n construing a contract, a court’s principal objective is to ascertain
and effectuate the intention of the parties as manifested by the contract in its
entirety. If there is any doubt, the interpretation which most reasonably reflects the
85
intent of the parties must be chosen.” Id. (internal citation and quotation marks
omitted).
25. As the court has found, Note 2 is not a valid defense because the
price change from $700 per ton to $700 per drum was not an “additional cost”
subject to the notification procedure set forth in Note 2. See Finding 135.
26. Moreover, the notification provision in Note 2 states that
“[n]otification should be made within 3 ‘business days’” Ex. P-12 at 4 (Emphasis
added). As such, the notification provision is precatory rather than mandatory.
See McDonnell Douglas Corp. v. Islamic Republic of Iran, 758 F.2d 341, 346 (8th
Cir. 1985) (rejecting argument that word “should” in clause stating that claims
“should be settled through Iranian courts” is the equivalent of “shall or “must”); cf.
Conant v. Wells Fargo Bank, N.A., 60 F. Supp. 3d 99, 117-18 (D.D.C. 2014)
(surveying cases interpreting words “may” and “should” and concluding that
contract stating that “Lender may send [Plaintiff] a written notice” does not impose
mandatory obligation); Routh v. Bank of Am., N.A., 2013 WL 427393, at *10
(W.D. Tex. Feb. 4, 2013) (language in agreement stating “that no further transfers
of the note should occur after the closing date” may have been precatory, so court
could not reasonably infer that transfers after closing date were void).
86
27. The precatory nature of Note 2 is reinforced by the fact that
words of a mandatory nature like “must” and “shall” are used elsewhere in the
HECO Subcontract, such as in Notes 3 and 5 of Exhibit A to the HECO
Subcontract and numerous provisions in the Terms and Conditions. See Jama v.
Immigration & Customs Enforcement, 543 U.S. 335, 346 (2005) (“The word ‘may’
customarily connotes discretion. That connotation is particularly apt where, as
here, ‘may’ is used in contraposition to the word ‘shall’” (citation omitted)); PCH
Mut. Ins. Co. v. Cas. & Sur., Inc., 750 F. Supp. 2d 125, 144 (D.D.C. 2010)
(“Nevertheless, as a general matter of contract law, the word ‘may’ is viewed as a
permissive, rather than mandatory, term, particularly when used in contraposition
to the word ‘shall.’”).
28. LVI was the drafter of the HECO Subcontract in general, and
Note 2 and Paragraph 17 in particular. As such, even if the clauses are ambiguous,
the Court construes Note 2 and Paragraph 17 against LVI. See Hunt Wesson
Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 78 (9th Cir. 1987) (“Another
fundamental rule of contract interpretation is that where language is ambiguous the
court should construct the language against the drafter of the contract.”); Mokulele
Air Grp., Inc. v. Mesa Airlines, Inc., 2009 WL 10677190, at *5 (D. Haw. Jan. 22,
2009) (construing ambiguous clause as permissive because party seeking to
87
enforce clause drafted the agreement). Further, the HECO Subcontract does not
contain a clause prohibiting any provision in the contract to be construed against
the drafter of the agreement. In short, LVI has failed to prove an affirmative
defense based on Note 2 or Paragraph 17.
b.
Paragraph 10
29. Paragraph 10 of the Terms and Conditions of the HECO
Subcontract pertains to change order procedures for “changes from the original
plans and specifications.” Ex. P-12 at 6 ¶ 10. The change order procedures in
Paragraph 10 apply to changes in plans and specifications for construction work,
not waste disposal. See Finding 137. A change in the unit price for transportation
and disposal of sludge/sediment does not constitute a change in “plans and
specifications” within the meaning of the paragraph, and the change order
procedures of that paragraph therefore did not apply to the change of the unit rate
to $700 per drum.
c.
Paragraph 4
30. Paragraph 4 of the Terms and Conditions of the HECO
Subcontract provides: “Requested revisions to Subcontractor’s Contract Price are
not to be included in its billings until Subcontractor receives Contractor’s signed
88
Change Order. Authorized charges must be shown, but not billed separately and
are to be added or deducted from the Contract Price.” Ex. P-12 at 6 ¶ 4.
31. Paragraph 4 applies to changes to the fixed price of the contract,
if there is a fixed price contract. See Finding 139. The HECO Subcontract had
unit prices rather than a fixed contract price. Accordingly, the requirements of
Paragraph 4 do not apply to the HECO Subcontract.
d.
Waiver
32. Although Note 2 and Paragraphs 4, 10 and 17 of the Terms and
Conditions of the HECO Subcontract are inapplicable to the change in unit pricing
for non-bulk quantities of hazardous solids from $700 per ton to $700 per drum,
even if the procedures in those provisions are applicable, LVI waived enforcement
of them.
33. “Waiver is the intentional relinquishment of a known right, or
such conduct as warrants an inference of such surrender, and it is not essential to
its application that prejudice results to the party in whose favor the waiver
operates.” Wilart Assocs. v. Kapiolani Plaza, Ltd., 7 Haw. App. 354, 359, 766
P.2d 1207, 1210 (1988) (quoting Hewahewa v. Lalakea, 35 Haw. 213, 219 (1939)).
“[A] waiver ‘may be expressed or implied,’ and ‘it may be established by express
statement or agreement, or by acts and conduct from which an intention to waive
89
may reasonably be inferred.’” Id.at 359-60, 766 P.2d at 1210-11 (citing 28 Am.
Jur. 2d Estoppel and Waiver § 160 at 845 (1966)) (some editorial marks omitted).
34. Under Hawaii law, procedures in a construction contract
governing changes are subject to waiver by conduct inconsistent with the
procedures. See Stewart v. Spalding, 23 Haw. 502, 511 (1916); Saiki v. Lee Sing,
27 Haw. 399, 406-07 (1923); E. E. Black, Ltd. v. State, 50 Haw. 267, 269, 439 P.2d
213, 215 (1968).
35. PCS told LVI that a price adjustment for non-bulk quantities of
sludge and sediment was necessary. When PCS received seven drums of sludge
and sediment in 2012, PCS suggested to LVI that it get a change order from
HECO. PCS submitted the revised version of Invoice 7864-01 to LVI with the
adjusted price of $700 per drum, and it was paid. In 2013, PCS submitted a second
invoice with the same price, and again, LVI paid the invoice with no objection.
Such conduct by LVI evinced its intention to waive strict compliance with the
change procedures (if applicable) in the HECO Subcontract.
b.
PCS did not repudiate the HECO Subcontract
36. LVI argues that PCS repudiated the HECO Subcontract. The
basis for this argument is Chang’s August 14, 2013 email to Moore in which he
stated, in pertinent part: “Some items are right and some items are under and some
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items are over. LVI took away the items are better than estimated. When you bid
job, you just have to take risk. When the gravy is taken away, all other prices are
not valid anymore.” Ex. P-32 at 1. Chang made this statement to express the
difficulty of adhering to the $700 per ton price in light of LVI taking away the
profitable ACM work. His statement was not a repudiation of all of the prices in
the HECO Subcontract. Chang expressly confirmed that PCS would honor the
HECO Subcontract despite LVI’s diversion of the ACM Work. Based on these
facts, the Court concludes that PCS did not repudiate the HECO Subcontract in
August 2013.
37. Even if Chang’s August 14, 2013 email to Moore constituted a
repudiation of all of PCS’s ongoing obligations under the HECO Subcontract, LVI
still materially breached the HECO Subcontract first when it initially diverted the
ACM work to Waste Management in January 2013. LVI therefore may not avail
itself of the first-to-breach rule. See Conclusion 10.
c.
LVI Did Not Terminate the HECO Subcontract in Whole or in
Part
38. LVI could not have partially terminated the HECO Subcontract
when it informed PCS on February 5, 2013 that it had contracted directly with
Waste Management for ACM transportation and disposal. LVI had no basis to
terminate the HECO Subcontract for cause pursuant to paragraph 21(a) of the
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Terms and Conditions of the contract. Thus, LVI could only have terminated PCS
without cause in accordance with Paragraph 21(b) of the Terms and Conditions.
39. Unlike the termination for cause provision of the HECO
Subcontract, the termination without cause provision does not allow LVI to
terminate the contract “in whole or in part.” Compare Ex. P-12 at 8 ¶ 21(b) with
id. ¶ 21(a). The inclusion of a right to partial termination in Paragraph 21(a) and
the omission of such a right in Paragraph 21(b) is deemed to be intentional. See
Santiago v. Tanaka, 137 Haw. 137, 155, 366 P.3d 612, 630 (2016) (“Under
principles of contract interpretation, an agreement should be construed as a whole
and its meaning determined from the entire context and not from any particular
word, phrase, or clause.”).
C.
Damages for Count I
40. PCS is entitled to an award of damages for Count I of its
Amended Complaint for breach of contract in the amount of $721,522.99. This
amount comes from $699,044.74 for ACM work diverted to Waste Management,
plus $22,478.25 for non-hazardous solid waste diverted to Tajiri. See Findings 60,
149. It excludes the claimed amount for “oily wastewater” tasks done by Unitek.
See Findings 141 to 148.
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41. PCS is entitled to prejudgment interest on this award at the rate of
10% per annum accruing from sixty days after the date of each invoice identified
in Exhibits P-65A, P-66A, and P-67A to the date of entry of judgment. Generally,
“[i]n diversity actions, state law determines the rate of prejudgment interest, and
postjudgment interest is governed by federal law.” Am. Tel. & Tel. Co. v. United
Computer Sys., Inc., 98 F.3d 1206, 1209 (9th Cir. 1996) (citing Northrop Corp. v.
Triad Int’l Mktg., S.A., 842 F.2d 1154, 1155 (9th Cir. 1988) (per curiam)). Under
Hawaii law, the award of prejudgment interest is within the discretion of the court.
See HRS § 636-16; Schmidt v. Board of Dirs. of Ass’n of Apartment Owners of
Marco Polo Apartments, 73 Haw. 526, 533, 836 P.2d 479, 483 (1992). Where the
contract at issue does not specify the rate of interest, the statutory rate of 10% per
annum applies. See HRS § 478-2; Eastman v. McGowan, 86 Haw. 21, 28, 946
P.2d 1317, 1324 (1997).
42. As stipulated, the amount of prejudgment interest for Count I (as
of October 1, 2017) is $270,624.79, which is the total of $264,860.24 accrued on
the $699,044.74 for ACM work and $5,764.55 accrued on the $22,478.25 for the
non-hazardous solid work. See Ex. P-64A. PCS, however, is entitled to additional
prejudgment interest from October 1, 2017 until the date of judgment for this
amount (as well as other amounts of prejudgment interest as set forth in these
93
Findings and Conclusions). An award for this additional amount is subject to a
supplemental filing by PCS, and so — rather than awarding prejudgment interest
piecemeal — the court will wait until the final amount of prejudgment interest is
calculated before specifying the amount of prejudgment interest.
D.
LVI’s Counterclaim
43. LVI asserts a counterclaim against PCS for reimbursement of
charges that LVI alleged it overpaid. The counterclaim is based on LVI’s
allegation that PCS should have charged $700 per ton instead of $700 per drum for
transportation and disposal of seven drums of sludge/sediment in 2012 and 41
drums of sludge/sediment in 2013.
44. LVI’s counterclaim fails in light of the determination that LVI
and PCS agreed by objective standards to change the unit price for transportation
and disposal of non-bulk quantities of hazardous solids from $700 per ton to $700
per drum. See Findings 100, 116; Conclusion 20.
E.
Count II (Unjust Enrichment – HECO Project)
45. “To recover on an unjust enrichment claim, a plaintiff must
prove: (1) the defendant received a benefit without adequate legal basis; and
(2) unjustly retained the benefit at the expense of the plaintiff.” Balboa v. Haw.
Care & Cleaning, Inc., 105 F. Supp. 3d 1165, 1174 (D. Haw. 2015).
94
46. There is no dispute that PCS performed the work described in
Invoice 7864-06, and no dispute that LVI has not paid that Invoice.
47. It would be unjust for LVI to pay nothing for the services
described in Invoice 7864-06.
48. PCS, however, has failed to prove it is entitled to recovery for
unjust enrichment as to Invoice 7864-07. As established in Findings 156 through
158, this invoice was submitted late with an unsatisfactory explanation by PCS,
and it is unclear that PCS actually performed the work in the invoice (or if it was
performed, it was paid as part of the unit prices in the HECO Subcontract).
49. PCS is entitled to an award of restitution for Count II of its
Amended Complaint for unjust enrichment regarding Invoice 7864-06 in the
amount of $13,472.51 plus additional prejudgment interest from November 6, 2013
to the date of entry of judgment, to be determined in subsequent proceedings. See
Findings 153 to 155. (The proffered prejudgment interest per diem rate of $3.96
discussed in Finding 163 was based on a different amount, and is thus
inapplicable.)
F.
Count III (Breach of Contract – Kahuku Project)
50. Defendants claim that they are not liable to pay the outstanding
invoices issued by PCS for its work on the Kahuku Project due to the inclusion of a
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“pay-if-paid” clause in the Kahuku Subcontracts.
51. Pay-if-paid clauses are strictly construed. See 8 Williston on
Contracts § 19.59 (4th ed. 2011). Pay-if-paid clauses make payment of the general
contractor a condition precedent to payment of the subcontractor. See id.
Therefore, Defendants’ reliance on the failure of the pay-if-paid clause to be
satisfied constitutes an affirmative defense to liability for breach of contract.
See Brown, 82 Haw. at 246, 921 P.2d at 166; see also United States ex rel. U.S.
Glass, Inc. v. Patterson, 2014 WL 442853, at *2 (E.D. Pa. Feb. 4, 2014)
(construing defendants’ reliance on pay-if-paid clause as affirmative defense);
Liberty Mut. Ins. Co. v. Sumo-Nan LLC, 2015 WL 6755212, at *16 (D. Haw. Nov.
4, 2015) (construing argument of failure of condition precedent as a defense).
52. Defendants failed to submit the seven Unsubmitted Kahuku
Invoices to Xtreme Power or First Wind for payment. Five of the seven
Unsubmitted Kahuku Invoices are for work within the scope of one of the Kahuku
Subcontracts. (Defendants also failed to submit PCS Invoices 8246-16 and 824617 for payment, but those invoices are the subject of PCS’s unjust enrichment
claim (Count IV) rather than the breach of contract claim). The Kahuku Invoices
within the scope of the contract are as follows:
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Invoice
Invoice Date PO
Amount
Exhibit
8246-13 05/04/13
23797 $3,560.21 P-57
8246-14 05/04/13
23538 $3,350.84 P-57
8246-15 05/04/13
23465 $6,240.84 P-57
8246-18 08/03/13
23465 $5,450.26 P-59
8246-19 08/03/13
23797 $5,340.31 P-59
Total:
$23,942.46
53. A condition precedent can be waived or excused if the promisor
prevents or hinders fulfillment of the condition. Ikeoka v. Kong, 47 Haw. 220,
228, 386 P.2d 855, 860 (1963) (“[N]o one can avail himself of the nonperformance
of a condition precedent, who has himself occasioned its non-performance.”).
54. The “pay-if-paid” clauses in the Kahuku Subcontracts condition
payment of PCS invoices on Defendants receiving payment from Xtreme Power
and/or First Wind for the work covered by such invoices. Fulfillment of this
condition precedent was entirely under Defendants’ control. Because Defendants
did not attempt to seek payment for five of the Unsubmitted Kahuku Invoices, they
are precluded from enforcing the “pay-if-paid” clauses as a condition to
performance of their obligation to pay the invoices.
55. As found above, Defendants have no explanation for why they
did not submit the Unsubmitted Kahuku Invoices to Xtreme Power or First Wind
97
for payment. See Finding 182. In particular, Defendants cannot explain why three
of the Unsubmitted Kahuku Invoices that were dated May 4, 2013 (8246-13, 824614, and 8246-15), were not included in Defendants’ demand letters to First Wind
and Xtreme Power dated June 18 and 19, 2013, respectively.
56. Therefore, Defendants are liable for the amounts stated in PCS
Invoices 8246-13, 8246-14, 8246-15, 8246-18, and 8246-19. PCS is entitled to an
award of damages for Count III of its Amended Complaint for breach of contract
in the amount of $23,942.46. See Finding 191.
57. PCS is entitled to prejudgment interest at the per diem rates
accruing from the commencement dates as identified in Finding 192, and as
reiterated here:
Invoice
Invoice Date
Per Diem
8246-13
05/04/13
$0.98/day
Commencement
Date
07/03/13
8246-14
05/04/13
$0.92/day
07/03/13
8246-15
05/04/13
$1.71/day
07/03/13
8246-18
08/03/13
$1.49/day
10/02/13
8246-19
08/03/13
$1.46/day
10/02/13
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G.
Count IV (Unjust Enrichment – Kahuku Project)
58. PCS seeks recovery for unjust enrichment for demurrage charges
as set forth in Findings 168 through 180. PCS sent Invoices 8246-16 and 8246-17
for these demurrage charges, and Defendants have not paid these invoices.
59. Invoices 8246-16 and 8246-17 are not subject to the “pay-if-paid”
clause because they are not within the scope of any of the Kahuku Subcontracts or
change orders thereto. Defendants’ receipt of payment from Xtreme Power or First
Wind for the demurrage charges covered in these invoices is not a condition
precedent to Defendants’ payment of the invoices.
60. It would be unjust for Defendants not to pay PCS for the
demurrage charges in Invoices 8246-16 and 8246-17. See, e.g., Balboa, 105 F.
Supp. 3d at 1174. Accordingly, PCS is entitled to restitution of the amounts stated
in Invoices 8246-16 and 8246-17 under Count IV of its Amended Complaint for
unjust enrichment in the amount of $8,115.18. See Finding 193.
61. PCS is entitled to prejudgment interest at the following per diem
rates: (a) for Invoice 8246-16, $1.33 from July 3, 2013 to the date of entry of
judgment; and (b) for Invoice 8246-17, $0.89 from October 2, 2013 to the date of
entry of judgment.
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H.
Attorney’s Fees and Costs
62. PCS is the prevailing party in this action. It is entitled to an
award of reasonable attorney’s fees, expenses, and costs pursuant to the terms of
the Subcontracts. See Findings 195 & 196.
VI. CONCLUSION
PCS is entitled to an award in the amount of $767,053.14 plus
additional prejudgment interest. This amount is broken down as follows:
LVI is liable to PCS on Count I for breach of the HECO Subcontract.
PCS is entitled to an award of $721,522.99 (the total of $699,044.74 plus
$22,478.25) plus prejudgment interest to be determined in supplemental
proceedings. See Conclusion 40.
LVI is liable to PCS on Count II for unjust enrichment with respect to
work performed by PCS on the HECO Project that is beyond the scope of the
HECO Subcontract. PCS is entitled to an award of $13,472.51 plus prejudgment
interest to be determined in supplemental proceedings. See Conclusion 49.
LVI is liable to PCS on Count III for breach of the Kahuku
Subcontracts. PCS is entitled to an award of $23,942.46 plus prejudgment interest
to be determined in supplemental proceedings. See Conclusion 52.
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LVI is liable to PCS on Count IV for unjust enrichment with respect
to work performed by PCS on the Kahuku Project that is beyond the scope of the
Kahuku Subcontracts. PCS is entitled to an award of $8,115.18 plus an amount of
prejudgment interest to be determined in supplemental proceedings. See
Conclusion 60.
These amounts are summarized in the following table:
Basis of Award
Count I (ACM work to Waste
Management
Count I (Non-hazardous solids to
Tajiri)
Count II (Mercury component
removal)
Count III (Kahuku project invoices)
Count IV (Demurrage charges)
Total
Damages/Restitution
$ 699,044.74
(Conclusion 40)
$ 22,478.25
(Conclusion 40)
$ 13,472.51
(Conclusion 49)
$ 23,942.46
(Conclusion 52)
$ 8,115.18
(Conclusion 60)
$ 767,053.14
LVI’s counterclaim is dismissed with prejudice.
PCS is to submit a supplemental filing with a proposed final
calculation of the amounts for prejudgment interest as of today, August 10, 2018.
(Although Judgment will not enter until the amount of prejudgment interest is
known, such interest will stop accruing as of today.) This supplemental filing is
due by August 24, 2018. Because the rates of prejudgment interest are known, the
101
parties are to meet and confer regarding these calculations and attempt to obtain a
stipulation to the total amount.
After entry of Judgment, PCS may also submit an application for
reasonable attorney’s fees, expenses, and costs in accordance with the court’s local
rules.
IT IS SO ORDERED.
DATED, Honolulu, Hawaii, August 10, 2018.
/s/ J. Michael Seabright
J. Michael Seabright
Chief United States District Judge
Pac. Commercial Servs., LLC v. LVI Envt’l Servs, Inc., Civ. No. 16-00245 JMS-KJM, Findings
of Fact and Conclusions of Law
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