Fisk Electric Company v. DQSI, L.L.C., et al

Filing 76

ORDER AND REASONS GRANTING 45 Motion for Summary Judgment. Signed by Judge Ivan L.R. Lemelle on 1/10/2017. (mmv)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
FISK ELECTRIC COMPANY

CIVIL ACTION

VERSUS

NO. 15-2315

DQSI, LLC AND WESTERN
SURETY COMPANY

SECTION “B”(3)

ORDER AND REASONS

I.

NATURE OF MOTION AND RELIEF SOUGHT
Before the Court is Defendants’, DQSI, L.L.C. (“DQSI”) and

Western Surety Company (“Western”) “Motion for Summary Judgment”
(Rec. Doc. 45) and Plaintiff’s, Fisk Electric Company (“Fisk”),
opposition thereto (Rec. Doc. 49). Additionally, Defendants have
filed a reply to Plaintiff’s Opposition (Rec. Doc. 64). For the
reasons set forth below, IT IS ORDERED that Defendants’ Motion for
Summary Judgment is GRANTED.
II.

FACTS AND PROCEDURAL HISTORY
Fisk contracted to perform electrical work on July 29, 2010

with DQSI, the prime contractor with the United States Army Corps
of

Engineers

(“USACE”),

for

a

storm

proofing

project

(the

“Project”). (Rec. Doc. 1 at 3). Prior to that date, but in
contemplation of the Project, Western issued a Miller Act payment
bond on the Project on behalf of DQSI. (Rec. Doc. 1 at 3). The
original completion date for the Project under Fisk and DQSI’s
contract was July 12, 2011, with a maximum completion date of

August 1, 2011; however, because of significant delays that were
not caused by Fisk, the completion date was prolonged another 464
days. (Rec. Doc. 1 at 3).
Under

the

terms

of

Fisk’s

contract

with

DQSI,

Fisk

was

permitted to assert monetary claims for unforeseen delays not
caused by the subcontractor. (Rec. Doc. 1 at 3). As a result of
the

delayed

completion

date,

Fisk

alleges

that

it

incurred

significant additional expenses, which it invoiced to DQSI, but
was not paid. (Rec. Doc. 1 at 4). Fisk subsequently sent a demand
letter to DQSI and Western on March 27, 2013, and thereafter met
with DQSI on several occasions in 2013 in an effort to resolve the
claims amicably. (Rec. Doc. 1 at 5).
After failure to resolve Fisk’s claims, Fisk filed suit
against DQSI and Western pursuant to 40 U.S.C. § 3131, et seq.
(the “Miller Act”) and for breach of contract, in the action
entitled Fisk Electric Co. v. DQSI, L.L.C., No. CV-13-6157 (E.D.
La. filed Oct. 15, 2013). Fisk and DQSI mediated this case on April
17, 2014 and entered into the Memorandum of Agreement, which was
later enforced by this Court on September 17, 2014. (Rec. Doc. 1
at 5, 7; Rec. Doc. 1-1). In addition to other conditions for Fisk
releasing its claims, the parties agreed that DQSI would submit a
Request for Equitable Adjustment (“REA”) to the USACE for the delay
damages alleged by Fisk, as Fisk would not be permitted to submit

2

its claims directly as a subcontractor, but must rely on its
contractor to adequately present them. (Rec. Doc. 1 at 5).
Fisk alleges that the ability to pursue the delay damages
from USACE was imperative in settling, and settlement would not
have been agreed upon in the absence of the promise by DQSI to
submit the REA. (Rec. Doc. 1 at 6). Fisk alleges that it confronted
DQSI prior to filing the original lawsuit and again at mediation
regarding concerns that DQSI may have waived its rights to seek
additional compensation from the USACE for delays, but relied on
DQSI’s representations that it had not. (Rec. Doc. 1 at 6). Fisk
prepared its REA with supporting documentation pursuant to the
Memorandum of Agreement and DQSI ultimately, pursuant to this
Court’s order enforcing that agreement, submitted an REA to the
USACE, which may or may not be identical to what Fisk prepared.
(Rec. Doc. 1 at 6-7). 1 Thereafter, Fisk and DQSI finalized their
settlement with the Mutual Release and Compromise of Claims,
executed on December 11, 2014. (Rec. Doc. 1 at 7; Rec. Doc. 1-2).
On February 13, 2015, Fisk received correspondence from the
USACE via DQSI to suggest that, contrary to the alleged assurances
from DQSI that it had not already received delay payment that would
involve Fisk’s delay claims, all claims for the delays had been
paid and the rights of DQSI’s subcontractors had been waived. (Rec.

1

Fisk alleges that it has not seen a copy of the REA that DQSI submitted to
the USACE. (Rec. Doc. 1 at 7).
3

Doc. 1 at 7; Rec. Doc. 1-3). Fisk subsequently met with USACE and
DQSI on March 31, 2015, and alleges that USACE made clear that any
claims for damages related to project delays had previously been
paid

and

addressed

in

connection

with

the

original

contract

modifications requested by DQSI such that Fisk’s rights to seek
additional compensation had been waived. (Rec. Doc. 1 at 8). Fisk
alleges that, at the time of mediation and settlement, DQSI knew
that it had waived Fisk’s rights but assured Fisk that it had not.
(Rec. Doc. 1 at 8). Fisk further alleges that it agreed to settle
based on these representations. (Rec. Doc. 1 at 8).
On June 25, 2015, Fisk filed a law suit seeking rescission of
the release on the basis of fraud and damages for breach of
contract, and additionally adopted all of the claims from its
original lawsuit. (Rec. Doc. 1 at 2). Jurisdiction in this matter
is based upon diversity of citizenship pursuant to 28 U.S.C. §
1332 and is also proper pursuant to 28 U.S.C. § 1352 and 28 U.S.C.
§ 1367(a), insomuch as Fisk requests relief under the Miller Act
and all state law claims arise out of the same case or controversy.
(Rec. Doc. 1 at 2).
Defendants filed a Motion to Dismiss, a Motion to Enforce
Settlement and a Motion for Summary Judgment. In this Court’s
November 2, 2015 Order and Reasons (Rec. Doc. 31), all three of
the Defendants’ motions were denied. The Plaintiffs filed an
Amended

Complaint

on

November

17,
4

2015

and

the

Defendants’

initiated

the

instant

matter

by

filing

a

motion

for

summary

judgment on December 6, 2016.
III.

FACTUAL AND LEGAL FINDINGS
Summary judgment is proper if the pleadings, depositions,

interrogatory

answers,

and

admissions,

together

with

any

affidavits, show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a matter
of law.

Fed. R. Civ. P. 56; see also Celotex Corp. v. Catrett,

477 U.S. 317, 327 (1986).
would

allow

nonmovant.
(1986).

a

A genuine issue exists if the evidence

reasonable

jury

to

return

a

verdict

for

the

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

Although the Court must consider the evidence with all

reasonable inferences in the light most favorable to the nonmoving
party, the nonmovant must produce specific facts to demonstrate
that a genuine issue exists for trial.

Webb v. Cardiothoracic

Surgery Assocs. of N. Texas, 139 F.3d 532, 536 (5th Cir. 1998).
The

moving

party

bears

the

initial

responsibility

of

informing the district court of the basis for its motion. Celotex,
477 U.S. at 323. The movant must point to “portions of ‘the
pleadings, depositions, answers to interrogatories, and admissions
on file, together with affidavits’ which it believes demonstrate
the absence of a genuine issue of material fact.” Id. (citing Fed.
R. Civ. P. 56). If and when the movant carries this burden, the
nonmovant must then go beyond the pleadings and use affidavits,
5

depositions,

interrogatory

responses,

evidence to establish a genuine issue.

admissions,

or

other

Matsushita Elec. Indus.

Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). “[W]here the
non-movant bears the burden of proof at trial, the movant may
merely point to an absence of evidence, thus shifting to the nonmovant the burden of demonstrating by competent summary judgment
proof that there is an issue of material fact warranting trial. .
. . Only when ‘there is sufficient evidence favoring the nonmoving
party for a jury to return a verdict for that party’ is a full
trial on the merits warranted.” Lindsey v. Sears Roebuck and Co.,
16 F.3d 616 (5th Cir. 1994). Accordingly, conclusory rebuttals of
the

pleadings

are

insufficient

to

avoid

summary

judgment.

Travelers Ins. Co. v. Liljeberg Enter., Inc., 7 F.3d 1203, 1207
(5th Cir. 1993).
Defendants argue that they are entitled to summary judgment
because the Plaintiff cannot demonstrate that its consent to the
Settlement Agreement was vitiated by fraud. The enforceability or
validity of a settlement agreement is determined by federal law
when the substantive rights and liabilities of the parties derive
from federal law. Mid-S. Towing Co. v. Har-Win, Inc., 733 F.2d
386, 389 (5th Cir. 1984) (citations omitted). Because the claims
in this case are premised on the Miller Act, federal law governs
the validity of the Agreements and thus any fraud claim that might
invalidate them.
6

When a settlement agreement is induced by fraud, a court may
set it aside and “[t]he essential elements of fraudulent inducement
into a settlement are no different from any action on fraud.” In
re DEEPWATER HORIZON, 786 F.3d 344, 362 (5th Cir. 2015) (quoting
15B

Am.

Jur.

2d

Compromise

and

Settlement

§

32

(2014)).

Accordingly, Plaintiff must prove: “(1) a misrepresentation of a
material fact; (2) made with intent to deceive; and (3) causing
justifiable reliance with resultant injury.” Culotta v. Sodexo
Remote Sites P’ship, 864 F. Supp. 2d 466, 473 (E.D. La. 2012).
In order to grant summary judgment, the evidence must show
that there is no genuine issue as to any material fact and that
the moving party is entitled to judgment as a matter of law.
R. Civ. P. 56.

Fed.

A genuine issue exists if the evidence would allow

a reasonable jury to return a verdict for the nonmovant. Anderson,
477 U.S. at 248.

Although the Court must consider the evidence

with all reasonable inferences in the light most favorable to the
nonmoving party, the nonmovant must produce specific facts to
demonstrate that a genuine issue exists for trial.

Webb, 139 F.3d

at 536. With this standard in mind, this Court finds that there
are no genuine issues of disputed material facts regarding an
essential element of the fraud claim.
The Plaintiff cannot demonstrate that there was justifiable
reliance on the Defendants’ representations that form the basis of
the First Amended Complaint. Defendants argue that the Plaintiff
7

knew that that the Settlement Agreement waived the Plaintiff’s
delay claims. Defendants’ cite a letter dated December 10, 2013,
from Fisk’s Vice President, Pat Clyne. (Rec. Doc. 45-2). The
letter, sent one year prior to the Mutual Release and Compromise
of Claims, states in relevant part: “It appears from the documents
that

we

received,

that

Fisk

was

foreclosed

from

seeking

compensation from the [USACE] before Fisk and DQSI even began
negotiations.” (Rec. Doc. 45-2).
The letter from the FISK vice president is evidence that the
Plaintiff was aware of the waiver of the delay claims and therefore
could

not

have

representations.
had

also

received

justifiably

relied

on

the

Defendants

Furthermore, the Plaintiff admitted that they
a

copy

of

the

contract

modifications

and

amendments in connection with a FOIA request (Rec. Doc. 49 at 2
and Rec. Doc. 45-4). The modifications themselves found in Exhibit
C (Rec. Doc. 45-4) should have informed the Plaintiff that the
delay claims were waived before they entered into the Settlement
Agreement. Plaintiff argues that these documents were unsigned and
incomplete

(Rec.

Doc.

49

at

3).

However,

even

unsigned

and

incomplete documents that failed to include delay claims should
have put the Plaintiff on notice that they were waived. If the
Plaintiff was aware that the delay claims were waived, Plaintiff
could not have justifiably relied on any representation by the

8

Defendants or make their Settlement Agreement contingent on such
remedy.
In addition, the plain language of the Settlement Agreement
demonstrates that the Plaintiff should not have justifiably relied
on any outside assurances or promises that were not memorialized
in

the

Settlement

Agreement.

The

Settlement

Agreement

itself

expressly states that it contains the “entire agreement between
the

parties”

and

that

“the

parties

agree

that

no

promise,

inducement or agreement not expressed herein has been made to any
of the Parties” (Rec. Doc. 1-2). Based on the facts of this case,
Plaintiff’s

reliance

on

representations

not

included

in

the

Settlement Agreement does not constitute grounds for fraud under
federal law.
Finally, summary judgment is appropriate because “where the
allege misrepresentation relates to facts which could have been
discovered upon investigation or inspection, and where the party
alleging fraud has been granted the opportunity to conduct such an
investigation or inspection before entering the contract, that
party cannot subsequently complain that his consent was vitiated
by fraud.” Smoothie King Franchises, Inc. v. Southside Smoothie &
Nutrition Ctr., Inc., 2012 U.S. Dist. LEXIS 67620, at*30(E.D. La.
May 14, 2012) aff’d, 516 Fed.Apex. 362 (5th Cir. 2013). Even fraud
in

the

inducement

claims

based

on

allegedly

intentional

misrepresentations have been deemed non-viable where a party could
9

have investigated the terms of the agreement. Am. Transp. v.
Surveyors, Case No. 15-3971, 2016 U.S. Dist. LEXIS 109617, at*89(E.D. La. Aug. 17, 2016). Plaintiff was a sophisticated party
with legal counsel, Plaintiff should have been able to properly
raise and investigate any concerns it purportedly had concerning
the release of its delay claim. The copy of the modifications,
even if they were unsigned, should have prompted an investigation
as to whether delay damages had been waived.
Furthermore,

Plaintiff

argues

that

its

status

as

a

subcontractor meant that it could not communicate directly with
the Corps and had no choice but to rely on the representations of
the Defendants. Plaintiff argues that it could not call the Corps
in order to verify whether their ability to submit delay claims
had been foreclosed. However, if there was doubt regarding the
terms of the Settlement Agreement, the Plaintiffs should have
continued litigating the case. Plaintiff’s lack of investigation
into the terms of their Settlement Agreement cannot be the basis
for a fraud claim. In light of very convincing evidence of fraud
by movant, we were unable to find an exception that would allow
excusing opponent's above noted deficiencies.
New Orleans, Louisiana, this 10th day of January, 2017.

___________________________________
SENIOR UNITED STATES DISTRICT JUDGE
10