GPA, Dongbu Ins. v. Korea East-West Power Co.

• Court: Superior Court of Guam
• Decided: October 30, 2019
• Docket: CV0825-18
• Status: Unknown

Opinion

. PILE D 1U19 OCT )o ( 9: 2 SVPER1O OURT OF GUAM 4

6 IN THE SUPERIOR COURT OF GUAM

7 GUAM POWER AUTHORITY, ) Case No. CVO$25-1$ 8 DB INSURANCE CO., LTD., f/k/a Dongbu Insurance Company, and CHUBB INSURANCE SINGAPORE LIMITED, f/k/a ) o ACE Insurance Limited, as subrogees of ) DECISION AND ORDER Guam Power Authority ) 11 ) 12 Plaintiff, V. ‘3 ) ) 14 KOREA EAST-WEST POWER CO., LTD., PM CONTROL SYSTEMS PTE LTD., ) JOHN DOE COMPANIES 1-20, and JOHN ) 16 DOE INSURANCE COMPANIES 1-20, ) ) 17 Defendant. 18 INTRODUCTION 19 This matter came before the Honorable Alberto C. Lamorena, III on August 2, 2019 on 20

21 submission of Korea East-West Power Co., LTD.’s (“KEWP”) Motion to Stay. Plaintiffs, DB

22 Insurance Co., LTD (“DB Insurance”) and Chubb Insurance Singapore Limited (“Chubb”), are

23 represented by Attorneys Thomas M. Tarpley and Denenberg Tuffley, PLLC. Defendant 24 KEWP is represented by Attorney Rodney J. Jacob and Morrison & Foerster (Singapore) LLP. 25 Defendant PM Control Systems PIE (“PM Control”) is represented by Attorney Patrick G. 26

27 Civille. After considering the arguments of the parties and the applicable law, the Court now

28 Decision and Order CV0825-18, Guam Power Authority v. Korea East-West Power Co.

issues its Decision and Order granting in part and denying in part Defendant KEWP’s Motion to

2 Stay.

3 BACKGROUND

In September 2009, Guam Power Authority (GPA) issued an invitation for bid entitled, 5 “Invitation For Multi-Step Bid, No GPA-047-09, Performance Management Contract For the 6 Guam Power Authority Cabras Units #3 and #4 Slow Speed Diesel Power Plant.” GPA and

$ KEWP subsequently entered into an agreement for KEWP to manage, operate, maintain, and

repair the Cabras Slow Speed Diesel Plant in Piti, Guam. In May 2010, GPA and KEWP 10 executed a “Performance Management Contract for the Guam Power Authority Cabras Unit 3 &

“ (“PMC”), outlining the various obligations owed by each party in their respective 1,

13 performances of the contract. Of particular relevance here is Section 27.2, which requires GPA

14 and KEWP to engage in informal dispute resolution prior to filing suit in court. 15 On August 31, 2015, an explosion and fire occurred which significantly damaged the 16 GPA power plant. Following the explosion, GPA submitted claims to its various insurers. One 17 insurer was Dongbu Insurance Company (now known as DB Insurance). Another insurer was

19 ACE Insurance Limited (now known as Chubb). Payment was eventually made on GPA’s 20 insurance claims. Dongbu Insurance, in issuing payment to GPA, entered into a Settlement 21 Agreement with GPA. Part of the Settlement Agreement authorized Dongbu to sue for 22 reimbursement of the monies paid out in GPA’s name. Following the Settlement Agreement, 23 Plaintiffs, now acting in GPA’s name pursuant to the agreement, contacted KEWP through 24

25 counsel. KEWP, acknowledging that counsel does not act on behalf of GPA, refused to meet

26 with Plaintiffs, indicating they will only meet with GPA. 27 \ 28

Page 2 of 12 Decision and Order CV0825-I8, Guam PowerAuthoritv v. Korea East-West Power Co.

After more unsuccessful attempts to communicate with KEWP, Plaintiffs filed suit in 1

2 August 2018. Plaintiffs filed a first Amended Complaint (“FAC”) on February 7, 2019.

3 Plaintiffs filed a Motion for Leave to File Second Amended Complaint and Jury Demand

(“Motion for SAC”) on April 7, 2019. KEWP filed two motions on April 15, 2019: the Motion

to Disqualify and a Motion to Stay. Plaintiffs filed oppositions to KEWP’s motions on May 13, 6 2019. KEWP filed its Reply in Support of Stay Motion (“Reply”) on May 28, 2019. Relevant

g to this Decision and Order are the Motion to Stay, Plaintiff’s opposition to the Motion to Stay

(“Opposition”), and KEWP’s Reply. After hearing the arguments of the parties on August 2, 10 2019, the Court took the matter under advisement. 11 DISCUSSION 12

“A trial court has authority to stay proceedings in the interest of saving time and effort

14 for itself and litigants. . . .“ ATSA of Cal. e. Cont’t Ins. Co., 702 F.2d 172, 176 (9th Cir. 1983).

The decision to grant a stay is not a matter of right. Nken v. Holder, 556 U.S. 418, 433 (2009) 16 (citing Virginian R. Co. v. United Stcttes, 272 U.S. 658, 672 (1926)). Rather, courts may exercise 17 judicial discretion over such matters, and the decision whether to grant a stay is “dependent 18 19 upon the particular circumstances of the case. Id. (quoting Virginian R. Co., 272 U.S. at 672-

20 73)). 21 The issuance of a stay is generally guided by consideration of four factors: 77

(1) whether the stay applicant has made a strong showing that he is likely to 23 succeed on the merits; (2) whether the applicant will be irreparably injured absent 74 a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies. 25 Nken, 556 U.S. at 426-27 (quoting Hilton v. Bratmskitl. 481 U.S. 770, 776 (1987)). “The first 26 two factors of the traditional standard are the most critical.” Id. at 434. 27 28 \

Page 3 ol 12 Decision and Order CV0825-1$, Guam PowerAuthority v. Korea East-West Power Co.

KEWP argues the four factors weigh in favor of a stay. KEWP asserts a stay should be

2 required because (1) Plaintiffs failed to adhere to the pre-filing procedures under the PMC and

3 (2) Plaintiffs failed to exhaust administrative remedies available to them. Motion to Stay at 10-

17. Plaintiffs respond by saying (1) Plaintiffs agree that a pre-filing meeting should occur and 5 (2) a stay should not be granted on administrative remedies grounds because the remedies 6 asserted are not applicable to Plaintiffs. Opposition at 8-12. Both arguments are discussed in

8 turn.

A. This Matter should be stayed to comply with pre-fihing procedures under the PMC. 10 KEWP argues Plaintiffs failed to adhere to Section 27 of the PMC. Section 27 of the 11 PMC provides that if there is any dispute arising out of the PMC. Motion to Stay at 15. Section 12

13 27 further provides that the parties “shall endeavor to meet together in an effort to resolve such

14 dispute between them.” PMC at § 27.2. Plaintiffs, in their Opposition, agree to a reasonable

stay for this meeting to occur. Parties are bound to exhaust dispute resolution procedures unless 16 they are inadequate or unavailable. See Seat & Co., Inc. v. A.S. McGaughan Co., Inc., 907 f.2d 17 450, 454 (4th Cir. 1990). There being no objection from Plaintiffs on this issue, the Court finds 18 19 this matter should be stayed for a reasonable time for the parties to convene pursuant to Section

20 27 of the PMC. 21 KEWP goes further, however, and argues not only should there be a stay to convene for 22 the Section 27 meeting, but GPA should also be required to be the one attending that meeting, 23 not Plaintiffs. Reply at 3. The Court disagrees. It appears KEWP misunderstands the entire 24

25 nature of this litigation. As explained Part A of this Court’s Decision and Order on KEWP’s

26 Motion to Disqualify, Plaintiffs bring this action in as subrogees of GPA. To be clear, GPA is

not a party in its own right to this litigation. The right to sue, and in turn be sued, has been

Page4ofl2 Decision and Order CV0825-18, Guam Power Authority v. Korea East-West Power Co.

assigned to GPA’s insurers. KEWP has not explained how nor does the Court foresee any

2 situation where KEWP risks unfair treatment during the Section 27 meeting simply by the fact

3 that GPA will not be in attendance.

The Court further finds KEWP’s argument regarding the “unlawful delegation doctrine” 5 unpersuasive. KEWP argues an agency may not delegate public duties to private entities where 6 objectivity may be questioned on grounds of conflict of interest. Reply at 3. KEWP has not

8 explained what is meant by “public duties” nor how GPA’s duties under the PMC qualify as

such. In short, the Court finds KEWP has failed to sufficiently explain how GPA’s duties are I0 non-delegable, especially in the absence of a non-delegation clause in the PMC.

In the interest preserving the parties’ resources, the Court finds a stay is the more

13 appropriate remedy, as opposed to dismissal of this case. A stay will offer the parties a

14 reasonable time to convene and settle the case. If the case is not settled, the use of a stay will 15 save the parties time and money in refiling their cases. 16 B. KEWP has not met the standard for a stay to exhaust administrative remedies. 17 1. KEWP has not made a strong showing that it is likely to succeed on the 18 19 merits.

20 KEWP asserts this action was filed without proper authorization. Motion to Stay at 11. 21 KEWP argues: (1) that this case cannot proceed without the Attorney General (“AG”) pursuant 22 to Guam’s Organic Act, 4$ U.S.C.A. §142lg(d)(l); (2) that Plaintiffs are required to follow the 23 steps in the Guam Procurement Law, 5 GCA § 5121, for hiring outside counsel; and (3) that 24

25 Plaintiffs are required to comply with the Procurement Law’s dispute resolution procedures. Id.

26 at 11, 12, & 14. KEWP argues the failure of Plaintiffs to adhere to these procedures indicates

that this action was improperly filed, raising serious questions of law which favors a stay of this

Page 5 of 12 Decision and Order CV0825- 1$, Guam Power Authority v, Korea East-West Power Co.

action. While a stay is granted for the parties to convene for the Section 27 meeting, the Court

2 disagrees that this action cannot proceed absent the AG or outside hire procedures.

3 a. Because GPA is not a party to this litigation, the AG does not need to

be involved. 5 Guam’s Organic Act provides that “The Attorney general of Guam shall be the Chief 6 Legal Officer of the Government of Guam.” 4$ U.S.C.A. § 142 lg(d)(1) (West 2019). Further,

8 GPA’ s enabling statute provides that “The Attorney General shall represent the Authority in

litigation concerning the affairs of the Authority.” 12 GCA § $112 (emphasis added). Fatal to 10 KEWP’s argument here is that GPA is not a party to this case. GPA is a plaintiff only in name, 11 as permitted by subrogation principles. See Motion to Disqualify at Part A. As such, the AG 12

13 does not need to be involved in this litigation since GPA is not a party to this matter. further,

]4 Plaintiffs do not need to serve the AG with process. See 5 GCA § 6209. KEWP’s argument 15 fails here. 16 b. Because GPA is not a party to this litigation, Plaintiffs do not need to 17 comply with the outside hire procedures. 8 19 KEWP’s argument for mandatory hiring procedures fails for the same reason. Guam’s

20 Procurement Law provides that “No contract for the services of legal counsel in the Executive 21 Branch shall be executed without the approval of the Attorney General.” 5 GCA § 5121(b). 22 However, GPA is not a party to this litigation. The Court sees no reason for Plaintiffs, private 23 entities, to comply with hiring procedures inapplicable to them, and the Court does not see how 24

25 Plaintiffs could go about doing so. KEWP’s argument further fails here.

26 c. Because GPA is not a party to this litigation, Plaintiffs do not need to 27 comply with the Procurement Law’s dispute resolution procedures. 28

Page 6 of 12 Decision and Order CV0825-18, Guam Power AuthorTh’ v. Korea East-West Power Co.

As indicated by the plain language of the statute, the Procurement Law only applies to

2 “controversies between the Territory and a contractor and which arise under, or by virtue of, a

3 contract between them.” 5 GCA § 5427(a) (emphasis added). As explained, there is no

controversy between a Territory (GPA) and a contractor (KEWP) here, as this action is brought 5 in subrogation; the instant litigation is between GPA’s insurers, Plaintiffs, and KEWP. The 6 Court does not find that GPA’s insurers qualify as a “Territory” under the statute, nor KEWP

$ asserted that Plaintiffs qualify as a “Territory” under the statute. Because Plaintiffs are not part

of the “Territory” under the statute and because GPA is not a party to this action, the 10 Procurement Law is inapplicable. 11 d. KEWP’s further arguments raised in the Reply are unpersuasive. 12

13 KEWP argues the administrative procedures asserted are best suited to determine the

14 questions of the PMC interpretation. Reply at 5. KEWP, in Parts C(l), (2), and (3), asserts its 15 interpretation of the PMC indicates KEWP will likely succeed on the merits. Once more, fatal 16 to this argument is the fact that since GPA is not a party in its own right in this litigation, such 17 administrative remedies are not applicable to Plaintiffs. The success of KEWP’s interpretation 18

19 of the PMC is not for an agency under the Procurement Law to determine. Rather, it is the trier

20 of fact in this litigation to determine the true interpretation of the PMC, assuming this litigation 21 . . .

continues due to the parties not reaching settlement at the Section 27 meeting. 22 To borrow from Plaintiffs’ Opposition, KEWP attempts to force a square peg into a 23 round hole. Opposition at 10. The fact that GPA is not a party in its own right, being a party 24

25 only in subrogation, causes KEWP’s arguments to fail, KEWP has failed to “serious legal

26 questions,” a “reasonable probability” or “fair prospect” of success on the merits, or “a

scibstantial case on the merits.” Maharaj v. Ashcroft, 295 F.3d 963, 966 (9th Cir. 2002);

Page7ofl2 Decision and Order CV0825- 18, Guam Power Authority i’. Korea East- West Power Co.

Hollingsworth v. Perr)’, 558 U.S. 183, 190 (2010); Hilton v. Bai-unskill, 481 U.S. 770, 778

2 (1987).

3 Therefore, the Court finds KEWP has not made a strong showing that it is likely to

succeed on the merits. 5 2. KEWP will not be irreparably injured absent a stay. 6 In regard to this factor, KEWP carries the burden of showing that irreparable injury is

8 likely, not just possible, in the absence of a stay. United States v. GoVt of Guam, 2017 WL

1347667, at *10 (citing Winter v. Nat. Res. Def Cottncit, Inc., 555 U.S. 7, 375 (2008)). KEWP 10 asserts that because it is barred from making any counterclaims in this matter, KEWP will be

irreparably harmed if a stay is not granted. Motion to Stay at 18. Plaintiffs respond that KEWP 12

13 has the opportunity to assert its claims against Plaintiffs under subrogation laws. Opposition at

14 12-13. The Court finds KEWP has not met its burden for this factor. 15 The Court is not convinced that KEWP has no path to recovery in this matter. As 16 Plaintiffs explain, because Plaintiffs “stand in the shoes” of GPA in subrogation, KEWP has the 17 opportunity to counterclaim against Plaintiffs for any relief owed. Still, KEWP asserts “this 18

19 action will be a one-sided affair, with only Plaintiffs able to assert their claims.” Motion to Stay

20 at 18. Even though Plaintiffs explain, and subrogation law clearly provides for, that KEWP can

counterclaim against Plaintiffs, KEWP asserts it has the right to choose from who it receives 22 recovery: “. . . but it is EWP’s choice who to hold responsible for GPA’s failure to enforce the 23 agreed upon allocation of fire risk to the insurers. GPA will be a counterclaim defendant in this 24

25 action.” Reply at 5 (emphasis in original).

26 First, KEWP cites no law in support of this proposition. Second, KEWP’s belief that

only Plaintiffs can pursue their claim, leaving KEWP with nothing, is unsupported by the facts

Page 8 of 12 Decision and Order CV0825-18, Guam PowerAuthorTh’ v. Korect East-West Power Co.

and law. KEWP clearly has a path for recovery. Further, if KEWP is insistent on recovering

2 from GPA, it would not be as a counterclaim, since GPA is not a party in its own right to this

3 litigation. KEWP certainly has the option to bring a third-party complaint against GPA as a

third-party defendant in its own right. Absent a third-party complaint, KEWP is within its rights 5 to bring any counterclaims it has against Plaintiffs. 6 Therefore, the Court finds KEWP will not be irreparably injured absent a stay. 7

8 3. GPA will be injured if a stay is granted, but it is uncertain as to whether

such injury would be substantial. 10 KEWP argues Plaintiffs will suffer no harm if a stay is granted and that any harm II suffered is due to Plaintiffs’ failure to comply with the administrative procedures required and 12

13 the PMC. Motion to Stay at 18. However, as explained, the administrative procedures

14 mentioned are not applicable to Plaintiffs. The Court foresees attempts to comply with such IS procedures failing as Plaintiffs, as non-governmental entities, have no duty nor right to utilize 16 such procedures. Granting a stay to exhaust such remedies, with a substantial chance of failure, 17 would only cause Plaintiffs to expend costs in attorney’s fees for something they did not need to 18

19 do in the first place.

20 The standard, pursuant to Nken, is not whether Plaintiffs will be irreparably injured but 21 . . .

rather whether Plaintiffs will be substantially injured. 556 U.S. 418, 433 (2009). As the issue .

77 was not addressed in Plaintiffs’ Opposition, it is difficult to determine whether such a fruitless 23 pursuit of inapplicable administrative remedies would cause substantial injury. It may be that 24

25 Plaintiffs expend great resources trying to comply with these inapplicable remedies, but it also

26 may be that a simple letter will dispose of the matter, causing only a small burden upon 27 Plaintiffs. 28

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Therefore, the Court finds GPA will be injured if a stay is granted, but it is uncertain as

2 to whether such injury would be substantial. In the factor analysis, this factor does not weigh in

3 favor of nor against a stay.

4. The public’s interest does not favor a stay of this matter. 5 KEWP argues it is in the public interest to grant a stay for two reasons: (1) the AG, as 6 counsel for the government and GPA by law, should represent the publics’ interests and (2) a

8 stay would promote settlement outside of court by requiring GPA to utilize the administrative

procedures applicable under law. Motion to Stay at 19. Plaintiffs respond that because the 10 administrative procedures complained of are not applicable, a stay of this action will only delay 11 litigation, serving no public purpose. Opposition at 13. KEWP replies, arguing the AG is 12

13 required to be counsel for Plaintiffs and that the administrative procedures apply here. Reply at

14 10. The Court disagrees. 15 As explained, GPA is not a party to this litigation in its own right. KEWP asks the Court 16 to require Plaintiffs to comply with procedures not applicable to them. This would only serve to 17 waste the public resources. Public agencies will be required to spend time and effort in trying to 18 j9 figure out how to apply a public procedure to a private entity. Such agencies will be unable to

20 do so and will only waste resources in its attempt. On a similar note, the AG will be required to 21 spend time trying to figure out the proper procedure for representing Plaintiffs, private entities, 22 in this matter. The AG will be unable to do so and will only waste resources in its attempt. 23 Therefore, the Court finds the public’s interest does not favor a stay of this matter. 24

25 C. The Court has jurisdiction over this matter.

26 KEWP asserts in its reply and during oral argument that the Court does not have 27 .

jurisdiction over this matter and should thus dismiss this case sua sponte. KEWP argues the 28

Page if) of 12 Decision and Order CV0825-18, Guam PowerAuthoritv v. Korea East-West Power Co.

Court does not have jurisdiction for four reasons: (1) Plaintiffs needed to obtain approval from

2 the AG prior to filing suit; (2) Plaintiff’s needed to follow the outside hire procedures; (3)

3 service of process was required to be made upon the AG prior to filing suit; and (4) Plaintiffs

failed to have the Section 27 meeting and exhaust administrative remedies. For the reasons 5 stated throughout this Decision and Order, KEWP’s arguments fail. 6 The Court’s explanations in Part B(1) apply here. Plaintiffs were not required to obtain

$ approval from the AG prior to bringing suit. Plaintiff’s, as private entities, were not required to

follow hiring procedures applicable to the government. Plaintiffs were not required to affect 10 service of process upon the AG. Plaintiffs are not required to exhaust administrative remedies

inapplicable to them. 12

13 The assertion KEWP succeeds on is the fact that the Section 27 meeting did not occur.

14 On this point, however, KEWP has failed to explain how this court lacks the power to issue a IS stay for such a meeting to occur, warranting dismissal of the action. It has already been well 16 established that courts have the power to issue stays. See ATSA of Cal. v. Cont’t Ins. co., 702 17 f,2d 172, 176 (9th Cir. 1983). The Court sees no reason to ignore this precedent in favor of 18

19 dismissing the current action.

20 CONCLUSION 21 . . .

Plaintiffs do not object to a stay for a Section 27 meeting to occur, and the Court finds 77 KEWP has not satisfied its burden in demonstrating the Nken factors weigh in favor of a stay. 23 Further, the Court has jurisdiction over this matter and sees no reason to dismiss the case. For 24

25 the reasons stated above, the KEWP’s Motion to Stay is GRANTED in part and DENIED in

26 part. The Court grants KEWP’s request to stay the action for a reasonable time for the Section 27

Page 11 of 12 Decision and Order . CV0825-1 8, Guam Power Authority v. Korea East-West Power Co.

27 meeting to occur. The Court denies KEWP’s request to stay the action for exhaustion of

2 administrative remedies.

IT IS SO ORDERED this 30th day of October, 2019.

HONORABLE ALBERTO C. LAMORENA III 10 Presiding Judge, Superior Court of Guam 11

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