P.A.L. Environmental Safety Corp. v. North American Dismantling Corp. et al

Filing 60

ORDER granting #29 Motion to Amend to Assert a Cross Complaint; granting in part and denying in part #41 Motion for Reconsideration. Signed by District Judge Arthur J. Tarnow. (MLan) Modified on 2/18/2021 (MLan).

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
P.A.L. ENVIRONMENTAL SAFETY
CORP.

Case No. 19-11630
SENIOR U. S. DISTRICT JUDGE
ARTHUR J. TARNOW

Plaintiff,
v.

U.S. MAGISTRATE JUDGE
DAVID R. GRAND

NORTH AMERICAN DISMANTLING
CORP. ET AL.
Defendants.
/
ORDER GRANTING NADC’S MOTION TO AMEND TO ASSERT A CROSS
COMPLAINT AGAINST CEC [29] AND GRANTING IN PART AND DENYING IN PART
CEC’S MOTION FOR RECONSIDERATION [41]
Plaintiff P.A.L. Environmental Safety Corp. (“PAL”) is a corporation that
conducts asbestos abatement work for demolition projects. Defendant Consumers
Energy Company (“CEC”) owns the JC Weadock Power Plant in Essexville,
Michigan, (“Power Plant”) which was abated, dismantled, and demolished pursuant
to a contract with the project’s prime contractor: Defendant North American
Dismantling Corporation (“NADC”). NADC subcontracted with PAL to perform the
asbestos abatement phase of the project. Defendant North American Specialty

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Insurance Company (“NASIC”) is the surety on a labor and material payment bond
issued to PAL on behalf of NADC. PAL is suing all three defendants to recover
$23,841,833.37 in unpaid labor and materials for its asbestos abatement work at the
Power Plant.
Before the Court are two motions: NADC’s Motion to Amend to Assert A
Cross Complaint Against CEC [29] and CEC’s Motion for Reconsideration [41],
respectively filed on December 17, 2019 and June 11, 2020. First, NADC’s Motion
to Amend [29] seeks to assert common law indemnity (Count I) and implied
contractual indemnity (Count II) against CEC. (ECF No. 29-1). Although, CEC
originally opposed the motion in its Response [30] on December 30, 2019, it since
changed course and filed an Answer [53] to the Cross Complaint [47] on December
8, 2020. Regardless, because the Court finds that the alleged cross claims arise from
the same transaction and occurrence as the original complaint, the Motion [29] is
GRANTED. Second, CEC’s Motion for Reconsideration [41] asks the Court to cure
defects in the Order Granting in part and Denying in part CEC’s Motion to Dismiss
[39]. For the reasons stated below, the Motion [41] is GRANTED in part and
DENIED in part.

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FACTUAL BACKGROUND
On August 4, 2017, Defendant CEC, as owner, and NADC, as prime
contractor, entered into a written contract in which NADC agreed to abate,
dismantle, and demolish the JC Weadock Power Plant (“Prime Contract”). (Am.
Compl. at ¶ 21). On or about August 29, 2017, PAL, as subcontractor, and NADC,
as prime contractor, entered into a written subcontract in which PAL agreed to
perform abatement of all asbestos containing material (“ACM”) at the Power Plant
(“Subcontract”). (Am. Compl. at ¶ 23). PAL alleges that the scope of the subcontract
is dictated by its August 15, 2017 proposal. (Id.).
The Subcontract price for PAL’s abatement work was $7,996,331. (Am.
Compl. at ¶ 24). However, as a result of performing extra and changed work, PAL
alleges that it is entitled to an adjusted contract price of $23,883,739.37. (Am.
Compl. at ¶ 25). Specifically, PAL alleges that it performed three categories of
additional work: (1) fly ash and coal dust removal, (2) refractory brick abatement,
and (3) an extra amount of ACM removal.
In its proposed Cross Complaint, NADC seeks to assert common law
indemnity (Count I) and implied contractual indemnity (Count II) against CEC.
(ECF No. 29-1). NADC claims that its potential liability to PAL is derivative of
CEC’s actions in “(a) commissioning the Golder Report, (b) allowing and ratifying
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Amec Foster Wheeler/Wood to direct PAL’s abatement work and (c) directing PAL
to complete extra work without providing for appropriated changes to the Prime
Contract and Subcontract and without allocating additional funds to compensate
NADC and PAL.” (Id. at 889) In addition, NADC claims CEC breached their Prime
Contract (Count III) by terminating the contract and failing to pay $2,584,186 in
retainage afterwards for NADC’s work on the project. (Id. at 893-94).
ANALYSIS
I.

NADC’s Motion to Amend [29]
Although stylized as a motion to amend its counter complaint, the Court

properly construes NADC’s motion [29] as a motion to assert a cross claim under
Federal Rule of Civil Procedure 13(g). Rule 13 states the following:
(g) Crossclaim Against a Coparty. A pleading may state as a crossclaim
any claim by one party against a coparty if the claim arises out of the
transaction or occurrence that is the subject matter of the original action
or of a counterclaim, or if the claim relates to any property that is the
subject matter of the original action. The crossclaim may include a claim
that the coparty is or may be liable to the crossclaimant for all or part of a
claim asserted in the action against the crossclaimant.
FED. R. CIV. P. 13 (g). The Sixth Circuit has stated that Rule 13 should be liberally
construed and is “intended to avoid circuity of action and to dispose of the entire
subject matter arising from one set of facts in one action, thus administering
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complete and evenhanded justice expeditiously and economically.” LASA Per
L'Industria Del Marmo Societa Per Azioni of Lasa, Italy v. Alexander, 414 F.2d 143,
146 (6th Cir. 1969) (quoting Blair v. Cleveland Twist Drill Co., 197 F.2d 842, 845
(7th Cir. 1952). Furthermore, if a cross-claim “arises[s] out of the subject matter of
the original action and involves the same persons and issues [then] the claim is
ancillary to the original action[,]” meaning that “if the court has jurisdiction to
entertain the original action, no independent basis of jurisdiction for the cross-claim
. . . need be alleged.” Id. (quoting Glens Falls Indemnity Co. v. United States, 229
F.2d 370, 373-74 (9th Cir. 1955)).
Here, NADC seeks the relief contemplated by the last sentence of Rule 13(g)
through common law and contractual indemnification. See FED. R. CIV. P. 13 (g)
(“The crossclaim may include a claim that the coparty is or may be liable to the
crossclaimant for all or part of a claim asserted in the action against the
crossclaimant.”). Specifically, the claims assert that CEC should “indemnify and
hold NADC harmless” if NADC is “found liable to PAL for extra work PAL
performed on the project.” (ECF No. 29-1, PageID.889, 891). Additionally, NADC
seeks a to recover the retainage for its work on the Power Plant. Because these claims
arise from the same set of facts as the original complaint —work on the Power Plant

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— and their adjudication in this action would promote judicial economy, the Court
grants NADC’s Motion [29].
II.

CEC’s Motion for Reconsideration [41]
On May 28, 2020, this Court issued an order denying in part and granting in

part CEC’s Motion to Dismiss [7], which dismissed PAL’s third-party beneficiary
claims against CEC and upheld PAL’s promissory estoppel, unjust enrichment, and
negligent misrepresentation claims against CEC. CEC has filed a Motion for
Reconsideration [41] pursuant to E.D. Mich. 7.1 (h). In order to grant such a motion,
the movant must “not only demonstrate a palpable defect by which the court and the
parties and other persons entitled to be heard on the motion have been misled but
also show that correcting the defect will result in a different disposition of the case.”
E.D. Mich. 7.1 (h)(3). Further, it “may generally be granted for three reasons: (1) an
intervening change in the law; (2) evidence not previously available has become
available; or (3) the necessity to correct a clear error of law or prevent manifest
injustice.” DirecTV, Inc. v. Karpinsky, 274 F. Supp. 2d 918, 920-21 (E.D. Mich.
2003). Here, the Court finds a clear error of law that necessitates a partial
reconsideration of its previous Order [40].
Relying on Morris Pumps v. Centerline Piping, Inc., this Court held that PAL
could proceed with its promissory estoppel and unjust enrichment claims against

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CEC. 273 Mich. App. 187 (2006). Based on the principle that “an implied contract
may not be found if there is an express contract between the same parties on the
same subject[,]” the court in Morris Pumps found that a supplier of materials could
sue a general contractor for unjust enrichment, because although both parties
separately contracted with the subcontractor, neither of them contracted with one
another. Id. at 190-91, 194-95 (emphasis in original). Following this logic, the Court
did the same here, implying a contract between PAL and CEC where none existed.
CEC has now brought to the Court’s attention a more recent precedent,
Landstar Express Am., Inc. v. Nexteer Auto. Corp, that it argues limits Morris
Pumps’ holding. 319 Mich. App. 192 (2017). Although the Court does not find that
Landstar Express Am., Inc explicitly limits Morris Pumps, it does highlight the key
animating factor in deciding whether to imply a contract: whether there is a contract
covering the same subject matter, the existence of which is “sufficient to preclude
the imposition of any implied contract” contrary to the express contracts. Id. at 202.
In Landstar Express Am., Inc, although no express contracts existed between
plaintiff and defendants, plaintiff could not pursue an unjust enrichment claim,
because defendants “were parties to express contracts related to the subject matter.”
Id. at 202-03. Other courts agree with this approach. See Belle Isle Grill Corp. v.
City of Detroit, 256 Mich. App. 463, 478 (2003) (“a contract will be implied only if

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there is no express contract covering the same subject matter”); see also
Bartosiewicz v. A2Q, LLC, No. 345942, 2020 WL 1286227, at *11 (Mich. Ct. App.
Mar. 17, 2020) (finding that plaintiff could not pursue an unjust enrichment claim,
because she had express contracts regarding the terms in question); see also
Skywatcher, LLC v. Oliver, No. 1:19-CV-409, 2020 WL 4904170, at *6–7 (W.D.
Mich. Aug. 20, 2020).
Additionally, promissory estoppel can only be enforced when an express
contract on the same subject matter does not exist. See Novak v. Nationwide Mut.
Ins. Co., 235 Mich. App. 675, 687 (1999) (declining to enforce a promise that
“expressly contradicted” to parties’ signed contract); see also APJ Assocs., Inc. v. N.
Am. Philips Corp., 317 F.3d 610, 617 (6th Cir. 2003) (“Promissory estoppel may not
be used to override the express agreement of the parties contained in written
agreements . . . For the court to apply promissory estoppel under Michigan law, it
must find that an implied agreement exists between the parties, in the absence of an
express contract. (citing Barber v. SMH, Inc., 202 Mich.App. 366, 509 N.W.2d 791
(1993))); see also Aero Taxi-Rockford v. Gen. Motors Corp., No. 259565, 2006 WL
1479915, at *10 (Mich. Ct. App. May 30, 2006) (upholding plaintiff’s promissory
estoppel claim against defendant as an alternative to a breach of contract claim

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between plaintiff and defendant’s agent, but only if a jury “fails to find the existence
of an express contract” on the same subject matter).
Upon further review, Landstar Express Am., Inc and its progeny are clear —
an express contract on the same subject matter precludes the Court from implying
one. Here, PAL’s express contract with NADC addresses the same subject matter it
attempts to litigate against CEC through equitable means: its abatement of the Power
Plant. Therefore, under the weight of this case law, PAL cannot seek equitable
claims of promissory estoppel and unjust enrichment against CEC.
CEC similarly challenges upholding PAL’s negligent misrepresentation claim
against it. The Court held that the parole evidence rule did not apply, because no
contract with an integration clause exists between PAL and CEC. CEC, however,
now argues that the integration clause in PAL’s Subcontract applies to CEC, because
it is not limited to representations between the contracting parties.
“A written integration clause is conclusive evidence that the parties intended
the document to be the final and complete expression of their agreement” such that
extrinsic evidence could not be used to vary its terms. ADR N. Am., L.L.C. v. Agway,
Inc., 303 F.3d 653, 658 (6th Cir. 2002). “Where parties have deliberately put their
agreement into writing . . . it is conclusively presumed that their whole engagement,

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and the extent and manner of the undertaking, were reduced to writing; and no
evidence is permitted tending to vary or contradict its terms, or to substitute a new
or different contract for it.” Komraus Plumbing & Heating, Inc. v. Cadillac Sands
Motel, Inc., 387 Mich. 285, 291 (1972).
Here, the Subcontract’s integration clause states: “[t]his Agreement
represents the entire and integrated agreement between the Parties and supersedes
all prior negotiations, representations or agreements, either written or oral.” (ECF
No. 7-10, PageID.208) (emphasis added). The clause explicitly states that that the
Subcontract is the integrated agreement of the contracting parties. This indicates that
the excluded prior representations are limited to the representations of the
contracting parties. Because the Court’s analysis does not amount to a palpable
defect, CEC’s Motion to Reconsider [41] as to PAL’s negligence misrepresentation
is denied.
CONCLUSION
For the reasons stated above, the Court GRANTS NADC’s Motion to Amend
to Assert a Cross Complaint [29] and GRANTS in part and DENIES in part
CEC’s Motion for Reconsideration [41]. This ruling has the effect of dismissing
Counts III and V of PAL’s Amended Complaint [44] (Unjust Enrichment and
Promissory Estoppel).

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Accordingly,
IT IS ORDERED that NADC’s Motion to Amend to Assert A Cross
Complaint Against Consumer’s Energy Company [29] is GRANTED.
IT IS FURTHER ORDERED that CEC’s Motion for Reconsideration [41]
is GRANTED in part and DENIED in part.
SO ORDERED.

Dated: February 18, 2021

s/Arthur J. Tarnow
Arthur J. Tarnow
Senior United States District Judge

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