0 n /~. "l
p ·,~ ! 1 'f 1·• L! 'i11
3 IN THE SUPERIOR COURT OF GUAM 4
5 HUBTEC INTERNATIONAL CO., a ) Case No. CV 1358-12 6 Guam Corporation )
)
7 Plaintiff, )
)
8 vs. ) DECISION AND ORDER ON ) DEFENDANTS' SECOND MOTION 9 ) FOR SUMMARY JUDGMENT )
GOVERNMENT OF GUAM and JOANNE )
10 BROWN, in her capacity as Director of the )
II DEPARTMENT OF PUBLIC WORKS, an )
instrumentality of the government of Guam, )
12 )
)
13 )
Defendants. )
14 )
______________________________)
15
16 INTRODUCTION 17 This matter carne before the Honorable Alberto C. Larnorena III on September 29, 2014
18 upon the Second Motion for Summary Judgment of Defendants Government of Guam and Joanne Brown in her former capacity as Director of Department of Public Works ("DPW").
19 Attorney John R. B. Bell represents Plaintiff Hubtec International Co. and Assistant Attorney 20 General Kenneth Orcutt represents Defendants. For the reasons set forth below, the Court 21 GRANTS the Motion.
22 BACKGROUND
23 The parties entered a contract on January 7, 2010 for a construction project in the 24 amount of $1,835,040.00. According to the contract, Plaintiff would remove and replace 25 existing culverts, reconstruct pavement, make various safety improvements, and construct a 26 rock slide retaining wall in southwestern Guam. The project was named "Route 2 Culverts and 27 Side Repair," and numbered GU-NH-002(104).
28
ORIGINAL
CV 1358-12, Hubtec v. Government of Guam and Joanne Brown
Federal Highway Administration ("FHWA") funded the project through grants pursuant to the Federal-Aid Highway Program and the American Recovery and Reinvestment Act of 2 2009. Such funding was contingent on a number of conditions, including the Buy America 3 requirement of23 U.S.C. § 313, which requires that, absent an FHWA waiver, all steel and iron 4 that is to be permanently incorporated in funded projects must be manufactured in the United 5 States. The parties' contract thus had a provision requiring Plaintiff to use American steel. 6 Plaintiff submitted proposals for Korean steel, which were rejected. Plaintiff then submitted 7 proposals to use U.S. steel, which were approved. 8 The FHWA visited the project site on January 21, 2011 and found both Korean and
9 American steel on the premises. Plaintiffs President and Project Manager, Mr. Young Kim,
10 stated that the Korean steel was only used for slit fences, while American steel was used in the walling. Plaintiff was ultimately unable to prove that it used U.S. steel on the project. In a letter II on February 3, Plaintiff acknowledged to Defendants that Korean steel had been used. A wall in 12 which Korean steel had been used was thereafter removed and reconstructed with American 13 steel.
14 The ensuing investigation into Plaintiffs business revealed that Plaintiff had submitted 15 false invoices to Defendants to be paid greater amounts than to which it was entitled. This 16 practice led to criminal charges and a subsequent guilty plea in a federal case, United States v. 17 Young C. Kim and Hubtec Int'l Corp., Guam District Court Case No. 12-00029. Defendants 18 terminated their contract with Plaintiff on February 11, 2011. They contracted with another
19 company, IMCO General Construction ("IMCO"), to complete Project GU-NH-002(104) for
20 $3,815,491.72.
Plaintiff sought payment for work it performed by filing an administrative appeal with 21 the Office of Public Accountability ("OP A"). The OP A found that, in light of Plaintiffs breach, 22 Defendants' termination of the contract was justified. Plaintiff then sued Defendants in the 23 instant case on December 10, 2012 for breach of contract and quantum meruit. In response, 24 Defendants raised counterclaims for breach of contract, violations of Guam's Deceptive Trade 25 Practices - Consumer Protection Act, and fraud.
26 On May 9, 2014, upon Defendants' first Motion for Summary Judgment, this Court 27 dismissed Plaintiffs claims. The Court also awarded Defendants the $120,000.00 lost in federal 28
Page 2 of8
CV 1358-12, Hubtec v. Government of Guam and Joanne Brown
funding caused by Plaintiff's breach of contract. Plaintiff subsequently submitted a Motion for Reconsideration and Clarification on May 19, which the Court denied on October 17.
2 Defendant Government of Guam also filed a Complaint in CV 0738-13 against 3 Plaintiff's President, Mr. Kim, alleging violations of Guam's Deceptive Trade Practices -
4 Consumer Protection Act and fraud for the same conduct. The Government of Guam moved for 5 summary judgment in that case, which was denied on May 14, 2014. The matter was moreover 6 dismissed because the court found that the Government of Guam lacked standing to sue under 7 the Consumer Protection Act, and that the economic loss rule extended to fraud. Both issues are 8 currently on appeal. 9 Defendants filed their Second Motion for Summary Judgment in the instant case on
10 August 7, 2014. Plaintiff filed its Motion in Opposition to Defendant's Second Motion to Summary Judgment on September 4. Defendants replied on September 18. The Court heard oral II arguments on September 29 and took the matter under advisement.
12 DISCUSSION
13 Defendants seek summary judgment on their three counterclaims: (1) breach of contract;
14 (2) violations of Guam's Deceptive Trade Practices - Consumer Protection Act; and (3) fraud.
15 (Def. 's Second Mot. for Summ. J. 2.) Because the dispositions of the second and third claims 16 may be contingent upon the Guam Supreme Court's ruling in CV 0738-13, the Court will 17 abstain from addressing them pending the Supreme Court's decision. This Court stated such at 18 the summary judgment hearing on September 29, 2014 without objection by either party. Thus, 19 for the time being the Court will only consider Defendants' breach of contract counterclaim.
20 I. Summary Judgment Standard Summary judgment is appropriate where "the pleadings, depositions, answer to 21 interrogatories, and admissions on file, together with affidavits, if any, show that there is no 22 genuine issue of material fact and that the moving party is entitled to a judgment as a matter of 23 law." Guam R. Civ. P. Rule 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317 (1986). Rule 24 56(c) further mandates summary judgment against a party who "fails to make a showing 25 sufficient to establish the existence of an element essential to that party's case, and on which 26 that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. 27 In weighing summary judgment, a court must "draw inferences and view the evidence in 28 a light most favorable to the non-moving party." Bank of Guam v. Flores, 2004 Guam 25 ~ 7. If
Page 3 of8
CV 1358-12, Hubtec v. Government of Guam and Joanne Brown
the movant demonstrates a lack of genuine issue of material fact, the non-moving party must then present "sufficient evidence which establishes a factual dispute requiring resolution by a 2 fact-finder." Guam Pac. Enter., Inc. v. Guam Poresia Corp., 2007 Guam 22 ~ 8 (internal 3 quotation marks and citations omitted); see also Celotex, 447 U.S. at 325. The evidence must be 4 "significant" and "probative," Iizuka Corp. v. Kawasho Int'l (Guam), Inc., 1997 Guam 10 ~ 8, 5 and the factual dispute must be "relevant to an element of a claim or defense and whose 6 existence might affect the outcome of the suit," Guam Pac. Enter., Inc., 2007 Guam 22 ~ 8 7 (quoting T.W. Elec. Serv. Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 8 1987)). The ultimate inquiry for a court is thus "whether the 'specific fact' set forth by the
9 nonmoving party, coupled with undisputed background or contextual facts, are such that a
10 rational or reasonable jury might return a verdict in its favor based on that evidence." Flores, 2004 Guam 25 ~ 7.
II II. Summary Judgment Is Appropriate in This Case 12 A. The Issue of Plaintifrs Breach of Contract 13 The Court has already determined that there is no genuine issue about a material fact 14 with respect to whether Plaintiff breached its contract with Defendants; the Court has moreover 15 declined to reconsider that decision.
16 In reaching its decision on Defendants' first Motion for Summary Judgment, the Court 17 noted that the OPA's "factual findings are conclusive on matters relating to the breach of 18 contract," and that the OPA "determined that Plaintiff breached the contract by using Korean
19 steel when the terms required use of American steel." (Decision & Order, May 9, 2014, 10:15-
20 19.)
Even if the OPA's findings were not binding, summary judgment would still be 21 appropriate. The Court found that Defendants submitted multiple declarations in support of their 22 counterclaim, and that Plaintiff even admitted, on several occasions, to using non-conforming 23 steel on the project in violation of the contract. (Decision & Order, May 9, 2014, 10:1-12.)
24 Plaintiff, on the other hand, failed to provide any factual support on the issue. (ld.)
25 Even after drawing inferences and viewing the evidence in a light most favorable to the 26 Plaintiff, there is no genuine issue of material fact with respect to Plaintiffs breach of contract. 27 II 28 II
Page 4 of8
CV 1358-12, Hubtec v. Government of Guam and Joanne Brown
B. The Issue of Defendants' Damages In their Second Amended Answer to Plaintiffs Complaint, Defendants allege that "[d]ue 2 to Plaintiffs breach and default of the contract, [Defendants] suffered damages when [they 3 were] obliged to retain a new contractor to correct Plaintiffs work and finish the Route 2 4 project." (Def.'s Second Am. Answer to Pl.'s Compl. ~ 24.) Defendants further note that 5 "damages include an amount equal to the cost of hiring another contractor to complete the 6 performance contemplated by the contract." (Id.) Defendants also allege damages for 7 "additional construction management costs," and having "overpaid plaintiffs for undistributed 8 materials." (I d. ~~ 25-6.) 9 Plaintiff counters that the issue of damages is a factual dispute for trial. (Pl.'s Mot. in
IO Opp'n to Def.'s Second Mot. for Summ. J. 5:7-11.) It contends that the $3,815,491.72 contract with IMCO "was not actually 'the project' [Plaintiff! was hired to do, but, instead, a new project II with different requirements, different terms, and a new contract for which [Plaintiff! cannot I2 under any contract damages theory be expected to pay for." (I d.) Plaintiff further argues that I3 Defendants were "fully compensated via the performance bond payment ... for any economic I4 loss caused by the breaches of [Plaintiff!." (I d. 5: 11-13.)
I5 It is well-settled that a non-breaching party may recover from the breaching party the I6 cost to finish the contracted construction project. See U.S. for Use of Palmer Const., Inc. v. Cal I7 State Elec., Inc., 940 F.2d 1260, 1265 (9th Cir. 1991); see also Hughes Commc'ns Galaxy, Inc. I8 v. United States, 271 F.3d 1060, 1066 (Fed. Cir. 2001) (quoting E. Allan
I9 Farnsworth, Farnsworth on Contracts, § 12.11 (2d ed. 1998)) ("[W]here a building contractor
20 breaches a first contract and the owner obtains substitute performance under a second contract, the owner can recover any additional amount required by the second contract beyond what the 2I owner would have had to pay under the first."). As phrased by the Ninth Circuit, "regardless of 22 the value of the work performed by the breaching party, if the amount the non-breaching party 23 must pay to a third party to finish the job, when added to the amount it has already paid to the 24 breaching party, exceeds the contract price, the non-breaching party may recover the excess 25 amount from the breaching party as damages." U.S. for Use of Palmer Const., Inc., 940 F.2d at 26 1265. 27 Some jurisdictions require that the difference in cost between the original and substitute 28 contracts be reasonable. In Palmer, for instance the Ninth Circuit looked to California law,
Page 5 of8
CV 1358-12, Hubtec v. Government of Guam and Joanne Brown
which provides that "[i]n building contracts '[t]he measure of damages ... is the reasonable cost ... to finish the work in accordance with the contract."' U.S. for Use of Palmer Const., 2 Inc., 940 F.2d at 1261-62 (citing Walker v. Signal Cos., Inc., 149 Cal.Rptr. 119, 124 (Ct. App.
3 1978)).
4 Here, even if there were a reasonableness requirement, Plaintiff is unable to advance any 5 specific facts suggesting that the amount of Defendants' substitute contract with IMCO was 6 unreasonable. Rather than refer to the record with any particularity, Plaintiff baldly asserts that 7 Defendants' contract with IMCO concerned a "new project with different requirements, 8 different terms, and a new contract." (Pl.'s Mot. in Opp'n to Def. 's Second Mot. for Summ. J.
9 5:7-11.)
10 Defendants, on the other hand, provide declarations and exhibits that suggest just the opposite. The Declaration of Defendant Joanne M.S. Brown, former director of Department of II Public Works, includes the contract between Defendants and IMCO. (Brown Decl., at 2.) The 12 contract is again for project number GU-NH-002(1 04), "Route 2 Culverts and Slide Repair."
13 (Id. at 4-5.) The contract required IMCO to "furnish all the necessary labor, materials, 14 equipment, tools and services necessary to perform and complete in a workmanlike manner all 15 of the work required to take over and complete the construction of the Project." (I d. at 6.) 1 The 16 contract also states that IMCO was the "lowest responsive, responsible bidder able to take over 17 and complete the Project." (Id.) 18 The IMCO contract further outlines the "Description of Work." (Brown Decl., at 16-18.) 19 It details the work to be performed on the Sella Bay Culvert, the Cetti Bay Culvert, the Cetti
20 Rock Slide Wall, and the Umatac Baseball Culvert. Having reviewed both contracts, the specifications for IMCO are substantially similar to those laid out in the contract with Plaintiff.
21 Compare Brown Decl., at 16-18 (IMCO contract), with Gerardo Decl. Ex. A, at 483-84 22 (materials before OPA, including Defendants' contract and work details with Plaintiff).
23 The IMCO contract differs where it notes either that "[t]he previous contractor 24 [Plaintiff] performed limited work within this area," or "[t]he previous contractor performed the 25 following work within this area," listing work completed. (Brown Dec I., at 16-18.) It further 26
27 1 The Court is also mindful that Brown's Declaration includes a change order for the project, but this did not alter 28 the price. (Brown Dec!. at 2, 323.)
Page 6 of8
CV 1358-12, Hubtec v. Government of Guam and Joanne Brown
notes that with respect to the Umatac Baseball Culvert, "[t]he previous contractor installed a new outlet structure [that] has not been accepted by the government and must be removed." (Id.
2 at 17.)
3 Furthermore, the Declaration of Thomas Paulino, Deputy Financial Manager for Guam 4 Department of Administration and authorized Custodian of Records, includes copies of invoice 5 payments from IMCO totaling the contract price, $3,815,491.00. (Paulino Decl., at 1-2.) The 6 invoices, moreover, are for the same project name and number as in the prior contract with 7 Plaintiff, GU-NH-002(104), "Route 2 Culverts and Slide Repair." (Id.) 8 On the basis of the above declarations and exhibits, the Court is satisfied that there can
9 be no genuine dispute about the terms and price of the contract with IMCO, which Defendants
10 executed in order to complete the project that Plaintiff did not. The contract with IMCO was thus not for, as Plaintiff alleges, "a new project." Further supporting Defendants' position, II IMCO was the lowest responsive, responsible bidder able to complete the project.
12 As for calculating appropriate damages, Defendants propose a figure in their instant 13 motion:
14 IMCO finished the project for $3,815,491.00. Of this amount, 15 [Plaintiffs] bonding company paid $1,695,593.72. The remaining $2,119,897.28 for the IMCO contract was funded by DPW's 16 Federal Highway Funds. Of this amount, $1,540,948.20 was obtained from the unexpected funds from the [contract with 17 Plaintiff]. Subtracting $1,540,948.20 from $2,119,897.28 is 18 $578,949.08. 19 (Def. 's Second Mot. for Summ. J. 17-19.) Defendants further note that this amount should be 20 reduced by the amount of retainage on the original contract ($46,010.20), and the amount
21 Defendants owed Plaintiff based on Plaintiffs submission of an invoice ($56,513.00). (Id.)
These amounts, however, should be offset by Defendants' overpayment for purchased yet 22 undistributed materials on two invoices ($45,968.00). (Id.)
23 The above total, $522,393.88, is added to the $120,000.00 amount this Court has already 24 awarded Defendants as a result of their first Motion for Summary Judgment to equal 25 $642,393.88.
26 Having reviewed the record, the Court finds that the above calculations are supported by 27 the summary judgment materials Defendants provide; Plaintiff, on the other hand, does not set 28 forth any significant, probative evidence that establishes a factual dispute requiring resolution
Page 7 of8
CV 1358-12, Hubtec v. Government of Guam and Joanne Brown
by a fact-finder. Even after drawing inferences and viewing the evidence in a light most favorable to the Plaintiff, there is no genuine issue of material fact with respect to Defendants'
2 damages.
3 CONCLUSION
4 In light of the foregoing, the Court GRANTS Defendants' Motion for Summary 5 Judgment as it relates to Defendants' counterclaim for breach of contract. Plaintiff is hereby 6 ordered to pay Defendants the requested amount of $642,393.88. The Court's prior order on 7 May 9, 2014 for Plaintiff to pay Defendants $120,000.00 is consolidated into this order. 8 Defendants' remaining two counterclaims, and the issue of attorneys' fees and punitive
9 damages, are stayed pending the Guam Supreme Court's ruling in the related case, CV 0738-13.
10 IT IS SO ORDERED this day of December II
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Page 8 of8