Nada Pacific Corp. v. Power Eng'g & Mfg., Ltd.

73 F. Supp. 3d 1206, 2014 U.S. Dist. LEXIS 158609, 2014 WL 5847604
CourtDistrict Court, N.D. California
DecidedNovember 10, 2014
DocketNo. C 13-04325 LB
StatusPublished
Cited by4 cases

This text of 73 F. Supp. 3d 1206 (Nada Pacific Corp. v. Power Eng'g & Mfg., Ltd.) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nada Pacific Corp. v. Power Eng'g & Mfg., Ltd., 73 F. Supp. 3d 1206, 2014 U.S. Dist. LEXIS 158609, 2014 WL 5847604 (N.D. Cal. 2014).

Opinion

[1209]*1209ORDER GRANTING BESSER’S MOTION FOR SUMMARY JUDGMENT

[Re: ECF No. 71]

LAUREL BEELER, United States Magistrate Judge

INTRODUCTION

In this action, several entities sued each other after a mierotunnel boring machine broke down while it was boring an underground tunnel on a construction project for the San Francisco Public Utilities Commission (“SFPUC”). Plaintiff Nada Pacific Corporation (“Nada”) leased and operated the machine as a subcontractor for the project’s general contractor, and Defendant/counter-defendant Besser Company (“Besser”) manufactured a component in the machine. Besser moves for summary judgment against Nada on three grounds: (1) Nada is judicially estopped from arguing that Besser’s allegedly defective component caused the boring machine to fail because Nada argued before a dispute resolution board established by its general contractor’s contract with the SFPUC that site conditions caused the machine to fail; (2) alternatively, Nada cannot use the collateral source rule to obtain a duplicate recovery of the amounts it recovered from its general contractor for the same damages it seeks in this case; and (3) alternatively, Nada has put forth evidence of only its economic losses and thus the economic loss rule bars its tort claims. Upon consideration of the parties’ papers and their arguments at the November 6, 2014 hearing, the court holds that (1) judicial estop-pel does not apply because the dispute resolution board did not decide the dispute, (2) Nada’s potential recovery is offset by the money it recovered from its general contractor, and the collateral source rule does not apply, and (3) the economic loss rule bars Nada’s tort claims against Bes-ser. The court thus GRANTS Besser’s motion.

STATEMENT

I. THE PARTIES AND THE PROJECT

This case arises out of the September 2010 failure of a microtunnel boring machine (“MTBM”) while it was boring an underground tunnel on a construction project referred to as the San Francisco Public Utilities Commission-Alameda Siphon Project No. 4, in Alameda County, California (the “Project”). Joint Statement of Undisputed Facts (“JSUF”), ECF No. 71-2 at 2.1 The owner of the Project was the SFPUC, and the general contractor on the Project was Steven P. Rados, Inc. (“Ra-dos”). Id. Nada, a licensed general engineering contractor specializing in micro-tunnelling construction' projects, acted as a microtunneling subcontractor to Rados on the Project. Id.

To perform its work as a tunneling subcontractor on the Project, Nada leased an MTBM from third-party defendant, Ak-kerman, Inc. (“Akkerman”). Id. Because the leased MTBM had a 74" diameter and the Project required a 96" diameter, Nada separately leased an “increase kit” from non-party Walter C. Smith Co., Inc. to enlarge the diameter of the face of the MTBM to the required project dimensions. Id. at 2-3. Nada also installed on the leased MTBM a “cutter head” that Nada owned. Id. at 3. The cutter head is the front-most piece of an MTBM, which rotates to bore through the ground. Id.

[1210]*1210The leased MTBM contained a planetary gearbox designed and manufactured by defendant and cross-claimant Power Engineering and Manufacturing, Ltd. (“PEM”). Id. The PEM gearbox contained a cast iron planetary carrier manufactured by Besser, which Besser sold to PEM for $952.00, plus a $25 pallet and box charge, in September 2008. Id.

II. THE MTBM’S IMMOBILAZATION, RESCUE, AND INVESTIGATION

In September of 2010, while Nada was operating the MTBM to bore a tunnel on the Project, the MTBM became immobilized underground. Id. The immobilization occurred roughly 254 feet into tunnel bore, and 12 lengths of 20-foot interconnected steel casing pipe had been installed behind the MTBM when it became immobilized. Id. With Nada unable to advance the MTBM forward or move it backwards because of the pipe sections that had been installed behind the MTBM, a rescue shaft (or “911 shaft”) was constructed above the MTBM to expose it and then raise it out of the ground with a crane. Id. at 3-4.

After the MTBM was removed from the ground, it was sent to Nada’s facility in Caruthers, California for examination and repair. Id. at 4. Upon examination, Nada discovered that the gearbox within the MTBM was cracked. Id. Nada subsequently obtained a replacement gearbox, performed other repairs to the MTBM, returned the MTBM to the site, lowered it into the tunnel bore alignment, restored the earthen cover removed to create the 911 shaft, and re-launched the MTBM on the Project, which Nada was then able to complete. Id.

The failed gearbox was sent to PEM’s facility where a non-destructive inspection was performed on or about November 16, 2010. Id. The Besser-manufactured planetary carrier within the gearbox then was sent to the University of Northern Iowa (“UNI”) in Cedar Falls, Iowa, where it underwent destructive testing on or about February 28, 2011 at PEM’s request. Id. Based on that destructive testing, UNI prepared a report dated March 31, 2011. Id. Structural Integrity Associates, Inc. then prepared a report dated April 12, 2011, which analyzed the UNI report. Id. Both reports were available to Nada prior to the Dispute Review Board proceeding discussed below. Id.

III. NADA’S REQUEST FOR CHANGE ORDER

In connection with the costs Nada incurred to rescue and repair the immobilized MTBM, Nada submitted a Request for Change Order to Rados on September 6, 2011 and Rados passed that Request for Change on to the SFPUC. Id. Nada’s Request for Change sought compensation for additional costs as follows:

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[1211]*1211Id. at 5.

IV. THE DISPUTE REVIEW BOARD PROCEEDINGS

After the SFPUC refused to execute a change order on Nada’s Request for Change, the SFPUC, Rados, and Nada, in accordance with the prime contract between the SFPUC and Rados, submitted the dispute to a Dispute Review Board (“DRB”). Id. The DRB, which was established by the prime contract between the SFPUC and Rados and whose purpose was “to assist the parties by facilitating the timely resolution of disputes relating to” work on the Project, consisted of one member selected by the SFPUC, one member selected by Rados, and a third member selected by the other two members. Id., Ex. G (“DRB Specification”), ECF No. 71-9 ¶¶1.1, 2-3. Each DRB member was required to hold a certification or pre-qualification from the Dispute Resolution Board Foundation or the American Arbitration Association evidencing that the member received training the DRB process and meets the requirements for DRB members. Id. ¶ 3.2.

The DRB review process proceeds as follows. Either party to the prime contract could initiate the DRB’s review of a dispute. Id. 117.2. The DRB then sets deadlines for the parties to provide pre-hearing submittals, which are position papers supported by evidence, and for a hearing. Id. ¶ 7.3, 7.4. The pre-hearing submittal contains a brief statement of the dispute, a summary of the party’s position and the basis and justification for that position (with reference to contractual language and other evidence), and cost details.

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73 F. Supp. 3d 1206, 2014 U.S. Dist. LEXIS 158609, 2014 WL 5847604, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nada-pacific-corp-v-power-engg-mfg-ltd-cand-2014.