Allstate Interiors & Exteriors, Inc. v. Stonestreet Construction, LLC

907 F. Supp. 2d 216, 2012 WL 5381673, 2012 U.S. Dist. LEXIS 155939
CourtDistrict Court, D. Rhode Island
DecidedOctober 31, 2012
DocketNo. C.A. 09-283-ML
StatusPublished

This text of 907 F. Supp. 2d 216 (Allstate Interiors & Exteriors, Inc. v. Stonestreet Construction, LLC) is published on Counsel Stack Legal Research, covering District Court, D. Rhode Island primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Allstate Interiors & Exteriors, Inc. v. Stonestreet Construction, LLC, 907 F. Supp. 2d 216, 2012 WL 5381673, 2012 U.S. Dist. LEXIS 155939 (D.R.I. 2012).

Opinion

DECISION AND ORDER

MARY M. LISI, Chief Judge.

This litigation arose from a hotel construction and renovation project (the “Project”) in Providence, Rhode Island. The case was originally filed in this Court by a subcontractor on the Project, Allstate Interiors & Exteriors, Inc., (“Allstate”), against general contractor Stonestreet Construction, LLC (“Stonestreet”) for “an outstanding balance due and owing” in connection with a subcontract between Allstate and Stonestreet. Allstate Complaint ¶ 8 (Docket # 1). Stonestreet, which asserted counterclaims against Allstate, also brought third-party claims against the [220]*220owner of the Project, Weybosset Hotel, LLC (“Weybosset”). Allstate, however, is only a minor player in this litigation, the core of which lies in the claims which Stonestreet and Weybosset have asserted against each other. Those claims were litigated before the Court in a trial without a jury, after which the parties submitted extensive posttrial memoranda. The Court’s Findings of Fact and Conclusions of Law pursuant to Fed.R.Civ.P. 52(a) are set forth below.

I. Procedural History1

On June 26, 2009, Allstate filed a complaint against Stonestreet, seeking payment of $244,725 for labor and materials it provided to the Project. On September 3, 2009, Stonestreet filed its answer and it asserted a counterclaim, in which it generally alleged that Allstate failed to perform work pursuant to the subcontract agreement between the parties. On September 14, 2009, Stonestreet filed a third-party complaint against Weybosset for breach of contract, breach of good faith and fair dealing, unjust enrichment, tortious interference with contractual relations, and indemnification. According to the third-party complaint, Weybosset failed to make payment to Stonestreet for sums due under the construction contract (the “Contract”) between the parties, “including sums that may be due for Allstate’s work on the Project,” Third-Party Complaint ¶ 10 (Docket # 9). Stonestreet also asserted that -it “is entitled to payment from Weybosset before Stonestreet is required to pay Allstate.” Id. ¶ 12. While Stonestreet’s complaint did not specify the amount it sought from Weybosset, Stonestreet was essentially seeking the difference between the payment to which Stonestreet believed it was entitled under the Contract, and the amount it was actually paid by Weybosset, or approximately $1.5 million.

Specifically, Stonestreet alleged that, instead of paying Stonestreet sums due under the Contract, Weybosset contacted “certain of Stonestreet’s subcontractors on the Project, making representations and negotiating with those subcontractors, paying subcontractors discounted amounts, and interfering with Stonestreet’s subcontractor relations.” Id. ¶29. Regarding the indemnification claim, Stonestreet asserted that “Weybosset’s failure to pay Stonestreet caused Stonestreet to breach its subcontract with Allstate and/or other subcontractors on the Project,” and that Stonestreet was entitled to indemnification by Weybosset for damages sustained from such breaches. Id. ¶ 32.

Although Allstate’s claims were resolved by payment in full shortly after commencement of this litigation, Allstate elected not to dismiss its complaint in light of Stonestreet’s continuing counterclaims.2 On November 12, 2009, Weybosset filed a motion to dismiss the third-party complaint for “lack of an independent basis of jurisdiction.” Mot. Dismiss 1. Following a hearing on January 21', 2010, this Court denied Weybosset’s motion on the ground that Stonestreet’s claims against Weybosset were “inextricably intertwined” with the claims that fell in this Court’s diversity jurisdiction. Allstate Interiors & Exteriors, Inc. v. Stonestreet Constr., LLC, No. C.A. 09-283-ML, 2010 WL 695808 at *4.

[221]*221The parties engaged in extensive discovery, in the course of which Stonestreet amended its third-party complaint by adding First Bristol Corporation (“First Bristol”) and J. Karam Management (“JKM”) as defendants in connection with Stonestreet’s tortious interference claim. (Docket # 47). Stonestreet alleged that First Bristol had a substantive role in the negotiations between Weybosset and Stonestreet’s subcontractors, and that payments to the subcontractors were made by checks written from JKM’s accounts.

Weybosset, on its part, restated its counterclaims against Stonestreet for breach of contract, indemnification (with respect to Stonestreet’s contractual obligation to pay its subcontractors), breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty (alleging that Stonestreet failed, upon receipt of payment from Weybosset, to hold monies in express trust for its subcontractors.) (Docket # 56).

On April 8, 2011, Weybosset filed a motion for partial summary judgment with respect to $1,016,499 in subcontractor costs that Stonestreet sought to recover under the Contract, but which Weybosset had already settled by direct payment of $893,521 to Stonestreet’s subcontractors. (Docket # 92). Following a hearing on October 4, 2011, the Court took the motion under advisement after indicating to the parties that it would grant Weybosset’s motion, at least, in part. Following the parties’ unsuccessful attempt to settle the case, the Court granted Weybosset’s motion with respect to the $893,521 it had paid to the subcontractors. The Court reserved all other issues for trial.

Subsequently, the Court granted a joint motion by Allstate and Stonestreet to submit their claims and counterclaims against each other by written submission for determination after the claims between Stonestreet and Weybosset had been decided. Stonestreet and Weybosset also agreed to have the case heard by this Court without a jury. The Court conducted a ten-day trial, during which the parties presented eleven witnesses and more than 160 exhibits. The parties filed extensive posttrial memoranda on May 25, 2012, and further responses on June 29, 2012.

II. Factual Background

Weybosset owns certain property located in Providence known as the Hampton Inn & Suites (the “Property”). The construction project at issue ..in this case involved the renovation of an existing 11-story historic building and the construction of a matching 10-story addition. Following a bidding process, Stonestreet was awarded the job of constructing and managing the Project. The operative document in this litigation is a November 2007 construction agreement (the “Contract”), Ex. 1, between Stonestreet. and Weybosset, pursuant to which Stonestreet was to serve as the construction manager and provide general contractor services to improve the Property. Because Stonestreet’s bid of $12.2 million exceeded Weybosset’s budget by approximately $1 million, Weybosset sought to reduce costs through “value engineering,” ie. by using less expensive construction methods and materials, for example, the use of brick veneer instead of real brick and employment of nonunionized subcontractors.

The Contract between Weybosset and Stonestreet is the A121 “Standard Form of Agreement between Owner and Construction Manager (where the Construction Manager is also the Constructor)” (the “A121”). Ex. 1 SS038790-SS038804.

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907 F. Supp. 2d 216, 2012 WL 5381673, 2012 U.S. Dist. LEXIS 155939, Counsel Stack Legal Research, https://law.counselstack.com/opinion/allstate-interiors-exteriors-inc-v-stonestreet-construction-llc-rid-2012.