PRECISION PIPELINE LLC v. DOMINION TRANSMISSION, INC.

Filing 56

MEMORANDUM OPINION. See for complete details. Signed by District Judge John A. Gibney, Jr. on 03/23/2017. (nbrow)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA

Richmond Division

PRECISION PIPELINE, LLC,

Plaintiff,
Civil Action No. 3:16-CV-OO180

V.

DOMINION TRANSMISSION, INC.,
Defendant.
OPINION

In 2011, Dominion Transmission, Inc. ("DTI") retained Precision Pipeline, LLC

("Precision") to build a 55-mile stretch of natural gas pipeline through Pennsylvania and West
Virginia. During the course of construction. Precision encountered many unexpected issues,
making the project dramatically more difficult than planned. Precision now says that DTI failed

to pay Precision for its work and drastically changed the scope of the project due to inaccurate
information about the number of underground obstacles along the pipeline's path.
Precision has now sued DTI asserting eight causes of action: (1) Cardinal Change -

Quasi-Contract (Quantum Meruit), (2) Abandonment - Quasi-Contract (Quantum Meruit), (3)
Constructive Fraud - Quasi-Contract (Quantum Meruit), (4) Breach of Contract, (5) Quantum

Meruit - Quasi-Contract, (6) Pennsylvania's Contractor and Subcontractor Payment Act, (7)

Pennsylvania's Underground Utility Line Protection Law, and (8) Unjust Enrichment - Quasi
Contract.

DTI has moved to dismiss Precision's claims. The Court grants the motion to dismiss

Counts two, six, and seven. Count two fails because the law does not recognize an independent
claim for abandonment.

Counts six and seven fail because they arise exclusively under

Pennsylvania law, but Virginia law governs these claims.

The Court denies the motion as to the remaining claims, because Precision adequately

pleads claims of breach of contract, quasi-contract, and constructive fraud.
I. FACTS

DTI sought bids for the pipeline project by providing Precision and other potential
bidders with informational documents about the scope of the work. (Compl.,

62-63.) These

documents included alignment drawings which showed that the proposed pipeline would cross
ninety other underground utility lines (the "Foreign Crossings"). (Compl. K 80.) DTI hired
Trico Surveying and Mapping, Inc. ("Trico") and G-A-I Consultants, Inc. ("G-A-I") to design
the alignment drawings. (CompL,

21-22.)

Precision won the bid, and in early 2011, the parties entered into two substantially similar

contracts (the "Pipeline Contracts").' (Compl.

1-3; Dk. Nos. 49-1 and 49-2.) The Pipeline

Contracts each contain a choice of law and forum selection clause naming Virginia as the forum

and source of law.^
In fulfilling the Pipeline Contracts, Precision encountered 257 Foreign Crossings.

Excavating around the existing underground structures required a substantial amount of
additional work not contemplated in the Pipeline Contracts.

(Compl.

112-24, 133, 140.)

' The defendant attached the two Pipeline Contracts at issue to its memorandum in support of its
motion to dismiss. Because the Pipeline Contracts lie at the heart of this case and because
neither party disputes their authenticity, the Court will consider the contracts at the motion to
dismiss phase. Sec'y ofStatefor Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir.
2007) ("[A court] may consider documents attached to the complaint ... as well as those
attached to the motion to dismiss, so long as they are integral to the complaint and authentic.").

^The choice of law provisions read:
24.2 Governing Law; Jurisdiction. This Contract shall be governed by the laws
of the Commonwealth of Virginia, without giving effect to the choice of laws
principles thereof, and is deemed to have been executed, entered into and
performed within Richmond, Virginia. The Parties hereby irrevocably submit to

jurisdiction in the Commonwealth of Virginia, and venue shall lie in the Circuit
Court of the County of Chesterfield or the United States District Court for the
Eastern District of Virginia, Richmond Division. The Parties hereby waive any
objection to such jurisdiction and venue.
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Precision also ran into other problems including landslides, lack of access, and bad weather that
made the job harder. Due to the extra work. Precision submitted, and DTI approved, a number

of change orders. DTI, however, "either denied or ignored tens of millions of dollars in
[legitimate] change order requests." (Compl. H164.)

Before Precision brought this case, DTI sued Precision in this Court in 2013. The Court
dismissed the case because DTI had failed to comply with a contractual provision requiring the

parties to engage in alternative dispute resolution before filing suit. Before the beginning of a
scheduled ADR process, Precision filed suit in the Western District of Pennsylvania. The
Pennsylvania court enforced the forum selection clause of the Pipeline Contracts and transferred
the case to this Court. This Court stayed the case pending the parties' attempts at ADR. ADR
failed, and now the case proceeds.

II. DISCUSSION^

Relying on Virginia law, DTI moves to dismiss all of Precision's causes of action.
Hoping to get a leg up on its opponent, Precision argues that Pennsylvania law controlsthis case.
The lawsuit raises two types of claims: claims that arise from the contracts, and other
claims that arise under the separate legal theory of quantum meruit, also known as quasicontract. The choice of law analysis differs depending on the claims.

^ A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint; it does not resolve
contested facts in the case or the factual basis of a claim or defense. Republican Party ofN.C. v.
Martin, 980 F.2d 943, 952 (4th Cir. 1992). In considering the motion, a court must accept all

allegations in the complaint as true and must draw all reasonable inferences in favor of the
plaintiff. Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 253 (4th Cir. 2009)
(citing Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999)). The plaintiffs
allegations, however, must consist of sufficient factual matter that, accepted as true, "state[s] a
claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This plausibility standard requires the
plaintiffto show more than "a sheer possibility that a defendant has acted unlawfully." Id.
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A. Virginia Law Governs Claims Arising Under the Pipeline Contracts

The Pipeline Contracts contain broad choice of law provisions.

Specifically, the

agreements say:

This Contract shall be governed by the laws of the Commonwealth of Virginia,
without giving effect to the choice of laws principles thereof....

(Dk. Nos. 49-1 and 49-2 at Section 24.2.) This provision could not be clearer, and requires the

Court to apply Virginia law to the claims arising from the contracts.

Virginia law "looks

favorably upon choice of law clauses in a contract, giving them full effect except in unusual
circumstances." Colgcm v Air, Inc. v. Raytheon Aircraft,Co., 507 F.3d 270, 275 (4th Cir. 2007).
No unusual circumstances exist here despite DTI's arguments that the Pipeline Contracts lack a

reasonable relationship to Virginia and that enforcement of the provision violates Pennsylvania

public policy. Tate v. Main, 181 Va. 402, 410, 25 S.E.2d 321, 324 (1943) C'[T]he true test for
the determination of the proper law of a contract is the intent of the parties and [] this intent

whether express or implied, will always be given effect except under exceptional circumstances
evincing a purpose in making the contract to commit a fraud on the law.").
Virginia law applies even though two Pennsylvania statutes attempt to prevent

excavators from choosing another state's law to apply to their contracts.'* Virginia does not look
at the public policy of other states in making its choice of law decisions.

In Fallings v.

International Business Machines Corp.., the Fourth Circuit, applying Virginia's choice of law
rules, enforced the choice of law provision in a contract even though the provision conflicted

^ Pennsylvania Contractor and Subcontractor Payment Act (Section 24.2 of 73 P.S. § 514)
("Making a contract subject to the laws of another state or requiring that any litigation,
arbitration or other dispute resolution process on the contract occur in another state, shall be
unenforceable."); Pennsylvania's Underground Utility Line Protection Law, Act 287 (73 P.S. §
176, 180) ("Provisions in any contract, public or private, which attempt to limit the rights of
excavators under this section shall not be valid for any reason, and any attempted waiver of this
section shall be void and unenforceable as against public policy and any such attempted waiver
shall be reported to the department."). These are known as statutory "anti-waiver provisions."
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with another state's public policy. 854 F.2d 1316 (4th Cir. 1988). In Fallings, the parties chose
New York law to govern their franchise contract for the delivery of computers in New Jersey.

Id. Even though New Jersey law provided certain protections for franchisees, the court applied
the chosen New York law which did not provide those protections. Id.

The Court, therefore,

will not look to Pennsylvania's public policy in this case,^ and will apply Virginia law to claims
related to the contracts.

/. Specific Claims Governed by Virginia Law

After finding a choice of law provision valid, a court must still detemiine which claims
the relevant law applies to. In this instance, the parties have effectively chosen Virginia law to

govern the "[ajgreement and the rights and obligations of the parties hereunder . . . including all
matters of construction, validity and performance." Hitachi Credit Am. Corp. v. Signet Bank,

166 F.3d 614, 624 (4th Cir. 1999).^ This embraces the plaintiffs breach of contract claims and
non-payment claims.
It also embraces Precision's constructive fraud claim.

Although Virginia defines

constructive fraud as a tort, a sufficiently wide choice of law provision may cover contractrelated tort claims. Silver v. JTH Tax, Inc., No. CIV.A. 2:05CV126, 2005 WL 1668060, at *3

(E.D. Va. June 21, 2005) ("[W]here a choice of law clause in a contract is sufficiently broad to

encompass contract-related tort claims such as fraudulent inducement, courts will honor the

^ One Circuit Court of Virginia, applying Virginia's choice of law rules, found a choice of law
provision unenforceable as against the public policy of Michigan, but the Court finds the
reasoning of the Fourth Circuit more convincing on this issue. Malpractice Research, Inc. v.
Norman, 24 Va. Cir. 118 (1991).

^See also Pyott-Boone Elecs. Inc. v. IRR Trustfor Donald L. FetterolJ Dated Dec. 9, 1997,91%
F. Supp. 2d 532, 545 (W.D. Va. 2013) ("[T]he scope of a choice-of-law provision should, absent
a showing of intent otherwise, be read to encompass all disputes that arise from or are related to
an agreement. If parties wish to exclude causes of action arising in tort or by statute from the
coverage of their agreement, they may do so, but they should reflect that intent in their
contract.")
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provision with respect both to claims arising out of the contract and related fraud claims"). In
this case, the broad choice of law provision covers Precision's constructive fraud claim.
//. Under Virginia Law, Precision States a Claimfor Breach of Contract
To state a claim for breach of contract in Virginia, a plaintiff must show: "(1) a legally
enforceable obligation of a defendant to a plaintiff; (2) the defendant's violation or breach of that

obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation." Sunrise
Continuing Care, LLC v. Wright, 211 Va. 148, 154, 671 S.E.2d 132, 135 (2009).
Precision states a claim for breach of contract. Precision alleges that DTI breached a

number of obligations under the Pipeline Contracts, including the failure to pay for additional
work necessary to complete the project and the failure to provide accurate information about the
scope of the work. Precision says that it submitted valid change orders, and that DTI failed to
pay for those change orders. At this stage, Precision adequately alleges that DTI breached the

Pipeline Contracts and that Precision has suffered a loss as a result.
DTI's attempts to raise a number of affirmative defenses at this stage, relating primarily

to the plaintiffs compliance with contractual change order procedures. Discovery may disclose
facts that allow DTI to win the case based on those defenses, but they are not ripe at the motion

to dismiss stage. Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007) (calling for the
denial of a motion to dismiss except in "rare circumstances where facts sufficient to rule on an
affirmative defense are alleged in a complaint").
Hi. The Application of Virginia Law Requires Dismissal ofthe Pennsylvania Law Claims

Since Pennsylvania law does not apply to these performance issues, the Court will not
consider Precision's claims under the Pennsylvania Contractor and Subcontractor Payment Act

or Pennsylvania's Underground Utility Line Protection Law. The two sophisticated parties in
this case chose Virginia law to govern their contracts.
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Even though Virginia law affords

Precision fewer protections than the Pennsylvania statutes, Precision agreed to those terms. The

parties here indisputably chose Virginia law, and the Court dismisses Counts six and seven.
iv. Under Virginia Law, Precision Has Adequately Alleged Constructive Fraud

To state a constructive fraud claim under Virginia law, the plaintiff must show: "(1) [a]

false representation of a material fact; (2) made ... negligently, in the case of constructive fraud;
(3) reliance on that false representation to plaintiffs detriment; and (4) resulting damage."

Murphy v. Capella Educ. Co., 589 F. App'x 646, 652 (4th Cir. 2014) (citing Caperton v. A.T.
Massey Coal Co., Inc., 285 Va. 537 (2013)). Precision's claims satisfy Virginia's standard for
constructive fraud by alleging that DTI negligently distributed false alignment drawings which
Precision then relied on and suffered from.

When pleading fraud, a plaintiff must also satisfy Federal Rule of Civil Procedure 9(b),

which requires a particularized fraud claim containing "the time, place, and contents of the false
representations, as well as the identity of the person making the misrepresentation and what he
obtained thereby." That said, "a court should hesitate to dismiss a complaint under Rule 9(b) if
the court is satisfied (1) that the defendant has been made aware of the particular circumstances

for which she will have to prepare a defense at trial, and (2) that plaintiff has substantial

prediscovery evidence of those facts." Smith v. Clark/Smoot/Russell, 796 F.3d 424, 432 (4th Cir.
2015).

Here, Precision identifies Trico and G-A-I as the companies hired by DTI to create the

allegedly false alignment drawings. The plaintiff also says that DTI gave Precision these
drawings in October 2010.

Although Precision does not identify the person who made the

allegedly fraudulent claims, it names the companies charged with creating the allegedly false

drawings and gives the month in which DTI distributed those drawings to Precision. These
allegations satisfy Rule 9(b) in this case because they not only allow DTI to determine the
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drawings which Precision claims contain misrepresentations, but also show that Precision

possesses the fundamental documents related to its fraud claims.
The Court denies the motion to dismiss as to Count three.

B, Precision's Quantum Meruit/Quasi-Contract Claims Pass the Motion to Dismiss^
Precision brings four claims under a theory of quantum meruit, also known as quasi-

contract: Count one for cardinal change, count two for abandonment, count five for quantum

meruit, and count eight for unjust enrichment.

With the exception of Count two for

abandonment, these claims survive DTI's motion to dismiss.

L Choice ofLaw Determinationfor the Quasi-Contract Claims
The choice of law provision in the Pipeline Contracts does not cover Precision's quasi-

contract/quantum meruit claims, so the Court uses Virginia's choice of law rules to determine the
applicable law. "Although little direct guidance exists as to which choice of law principles
govern quasi-contractual claims in Virginia ... for the purposes of determining the forum state's
choice of law principles, courts within the Fourth Circuit generally treat quasi-contractual claims
as arising out of contract." Scott & Stringfellow, LLC v. AIG Commercial Equip. Fin., Inc.., No.
3:10CV825-HEH, 2011 WL 1348324, at *4 (E.D. Va. Apr. 8, 2011) (collecting cases).

Applying Virginia's contractual choice of law rules to Precision's quasi-contract claims, the
Court looks to the law of the place where the parties made the quasi-contractual agreements to
assess their validity.

Scott & Stringfellow, LLC v. AIG Commercial Equip. Fin., Inc., No.

^ Federal Rule of Civil Procedure 8 allows a party to set forth claims in the alternative and
Precision may argue both that Precision breached the Pipeline Contracts and that the work
performed fell outside of the scope of those contracts. Forest City Commercial Dev., Inc. v.
Agere Sys. /«c., No. 3:08CV328, 2010 WL 2245499, at *8 (E.D. Va. June 1, 2010).
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3:10CV825-HEH, 2011 WL 2471237, at *4 (E.D. Va. June 20, 2011).' At this stage, the Court
cannot determine where the parties made their quasi-contractual agreements, so it cannot
determine which state's substantive law applies.
//. Precision States Plausible Quasi-Contract Claims

As discussed above, the Court caimot yet determine the applicable state law, but, at least

in Virginia, Precision's claim for quantum meruit in Count five survives the motion to dismiss.
Precision says that it performed substantially more work than originally anticipated in the
Pipeline Contracts, and says that the parties created a system of approving additional work to
deal with the scope of the new work and the need to keep the project moving quickly. Precision

says that this process took the work outside of the scope of the original contracts and says that
quasi-contract principles require that DTI pay Precision a reasonable sum for its work. A party
may not seek quasi-contract claims where an enforceable contract governs its claims, but
Precision adequately alleges that the work it performed fell outside of the Pipeline Contracts.

Mangold v. Woods, 278 Va. 196, 203-04, 677 S.E.2d 288, 292 (2009).' The Court denies the
motion to dismiss as to Count five.

Precision's cardinal change and unjust enrichment claims in Counts one and eight also
survive DTI's motion to dismiss. Only when the Court can determine the location of where the
parties entered into any quasi-contractual agreements can the Court determine the proper

^See also Lexie v. State Farm Mut. Auto. Ins. Co., 251 Va. 390, 394, 469 S.E.2d 61, 63 (1996)
("[T]he nature, validity, and interpretation of automobile insurance policies, like other contracts,
are governed by the law of the place where made.").

^ See also Royer v. Bd. of Cty. Sup'rs of Albemarle Cty., 176 Va. 268, 280 (1940) ("[W]here
there is an express and enforceable contract in existence which governs the rights of the parties,
the law will not imply a contract in contravention thereof").
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applicable law.'® For now, the Court finds that Precision states claims under Virginia or
Pennsylvania law and denies the motion to dismiss Counts one and eight.
Precision's abandonment claim in Count two, however, fails under either Pennsylvania or

Virginia law. Precision did not even attempt to demonstrate that abandonment states a cause of
action, and the Court could not find any precedent to support the claim. The Court will dismiss
Count two.

III. CONCLUSION

For the reasons stated above, the Court grants DTI's motion to dismiss as to Counts two,
six, and seven. The Court denies the motion as to Counts one, three, four, five, and eight.

The Court will enter an appropriate Order.

Let the Clerk send a copy of this Opinion to all counsel of record.

Date: March

2017

Richmond, VA

John A. Gibney, Jr.

United States Distrfgt Judfee

Under government contracting law, a "cardinal" change is a change in the work so extensive
that it essentially eviscerates the contract. Virginia law does not recognize the cardinal change
doctrine, at least in private contracts. Centex Constr. v. Acstar Ins. Co., 448 F. Supp. 2d 697,
715-16 (E.D. Va. 2006). Pennsylvania recognizes the concept, but it is unclear whether it would
apply to a private contract. JHE, Inc. v. Se. Pennsylvania Transp. Auth, No. 1790 NOV.TERM
2001, 2002 WL 1018941, at *4 (Pa. Com. PI. May 17, 2002) (recognizing cardinal change as a
possible means to a quasi-contract claim). At this stage, the Court will not dismiss the cardinal
change or unjust enrichment claims until it can determine the applicable state law. See Forest
City Commercial Dev., Inc. v. Agere Sys. Inc., No. 3:08CV328, 2010 WL 2245499, at *8 (E.D.
Va. June 1, 2010) (denying a motion to dismiss an unjust enrichment claim due to the need for
further factual development).
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