UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Unity School District, Plaintiff
v. Case No. 15-cv-155-SM Opinion No. 2019 DNH 195 Vaughn Associates, Inc., and Scott Vaughn, Defendants
v.
School Administrative Unit #6, Excel Mechanical, Inc., Superior Walls of Hudson Valley, Inc., and Town of Unity, Third-Party Defendants
O R D E R
In 2010, the Unity School District hired Vaughn Associates
and Scott Vaughn (collectively, “Vaughn”) to design and oversee
construction of a new elementary school in Unity, New Hampshire.
The project did not proceed as the School District had
envisioned. Construction was beset with delays and forced work
stoppages (by, for example, the state fire marshal) and costs
ballooned from the $4.7 million that Vaughn had promised to more
than $9 million. Eventually, Vaughn’s contracts with the School
District were terminated and the School District sued Vaughn for
damages. Those claims were settled and, in April of 2017, the School District’s suit against Vaughn was dismissed, by
agreement of the parties. See Stipulation of Dismissal
(document no. 100).
What remain are Vaughn’s third-party claims against two
subcontractors on the project: Excel Mechanical, Inc., and
Superior Walls of the Hudson Valley, Inc. Pending before the
court is Excel Mechanical’s motion for summary judgment, in
which Excel asserts that it is entitled to judgment as a matter
of law as to each of the three state law claims Vaughn advances
against it. Vaughn objects.
For the reasons discussed, Excel’s motion for summary
judgment is granted.
Standard of Review
When ruling on a motion for summary judgment, the court is
“obliged to review the record in the light most favorable to the
nonmoving party, and to draw all reasonable inferences in the
nonmoving party’s favor.” Block Island Fishing, Inc. v. Rogers,
844 F.3d 358, 360 (1st Cir. 2016) (citation omitted). Summary
judgment is appropriate when the record reveals “no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). In this
2 context, a factual dispute “is ‘genuine’ if the evidence of
record permits a rational factfinder to resolve it in favor of
either party, and ‘material’ if its existence or nonexistence
has the potential to change the outcome of the suit.” Rando v.
Leonard, 826 F.3d 553, 556 (1st Cir. 2016) (citation omitted).
Consequently, “[a]s to issues on which the party opposing
summary judgment would bear the burden of proof at trial, that
party may not simply rely on the absence of evidence but,
rather, must point to definite and competent evidence showing
the existence of a genuine issue of material fact.” Perez v.
Lorraine Enters., 769 F.3d 23, 29–30 (1st Cir. 2014). In other
words, “a laundry list of possibilities and hypotheticals” and
“[s]peculation about mere possibilities, without more, is not
enough to stave off summary judgment.” Tobin v. Fed. Express
Corp., 775 F.3d 448, 451–52 (1st Cir. 2014). See generally
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
Background
The factual background of this case has been set forth in
prior orders of the court. See, e.g., Order on Third-Party
Defendants’ Motion to Dismiss (document no. 42); Order on
Defendants’ Motion for Summary Judgment (document no. 55). It
need not be recounted again in detail. It is sufficient to note
the following. In 2010, the Unity School District entered into
3 two contracts with Vaughn to design and oversee construction of
a new elementary school. Construction began in late 2011.
Then, in August of 2012, the Unity School District hired Excel
Mechanical to perform rough and finish plumbing services. On
the same date, the School District entered into a separate
contract with William Knight, d/b/a LSE (“LSE”), to perform HVAC
and mechanical work on the project. LSE, in turn, entered into
a subcontract with Excel to provide “design drawings with
engineer’s stamp for both plumbing and mechanical.”
The upshot of all of this is the following: Vaughn had two
contracts with the Unity School District. It did not, however,
have any contractual relationship with Excel; Excel’s contracts
were with the School District itself, and with LSE. Moreover,
Excel’s contractual obligation to provide mechanical drawings
stamped by a licensed engineer - the critical element of
Vaughn’s claims - ran to LSE, not Vaughn. See AIA Standard
Agreement between Contractor and Subcontractor (document no.
139-7) at Article 8, and “Notes and Clarifications” to Contract
(document no. 139-8) at 3.
In its third-party complaint, Vaughn alleges that it
sustained compensable damages when it relied, both reasonably
and to its detriment, upon allegedly false and material
4 misstatements made by Excel concerning the presence of an in-
house mechanical engineer. Specifically, Vaughn alleges:
Excel represented to VAI [Vaughn] that it had a mechanical engineer who could complete the mechanical components of design and construction drawings.
Excel did not, in fact, have a mechanical engineer who fulfilled this role.
Excel’s purported engineering documents were produced in house by an unregistered engineering school graduate and then stamped by a licensed engineer who was not principally responsible for production of the engineering documents.
Excel knew or should have known that its representations were false when made.
Excel had a duty to VAI as agent for USD to be truthful in describing the scope of its abilities.
Excel made the representations in an effort to convince VAI to recommend that USD use Excel as the mechanical contractor on the project.
The representations were material.
VAI relied on the representations of Excel in recommending their use on the project and in not partnering with a separate mechanical engineer.
Excel’s failure to provide accurate stamped engineering drawings and/or to have a mechanical engineer on staff caused significant delays and costs on the project including but not limited to shutdowns from the various government agencies.
The representations of Excel constitute material, intentional misrepresentations.
Third Party Complaint (document no. 8) at paras. 178-87
(emphasis supplied). See also id. at paras. 76-78.
5 According to Vaughn, Excel’s allegedly false and material
misstatements about having an in-house mechanical engineer
prompted Vaughn to recommend to the School District (and/or LSE)
that it contract with Excel, contributed to delays in completing
the project, and caused “reputational damages” to Vaughn, which
ultimately contributed to the School District’s decision to
terminate Vaughn as the project’s architect and construction
manager. See, e.g., Deposition of Scott Vaughn (document no.
139-3) at 197 (alleging that “Excel’s delay and this issue with
the engineer caused delays on the project and costs
increased.”); id. at 197-98 (“What specifically relates here and
why they [Excel] are a piece of the puzzle is that their
nonperformance and failure to perform directly impacted the
credibility of Vaughn Associates, and the credibility of Vaughn
Associates was important in terms of the confidence on the
project and the belief that I could get this done. . . . [T]heir
failure injured my reputation. Because it injured my
reputation, I . . . it was a piece of the puzzle for why I had
to withdraw as construction manager.”) (emphasis supplied).
Excel denies that it ever represented to anyone that it
employed or maintained an “in-house” mechanical engineer (and
asserts that its lack of an in-house engineer is not material).
It says all parties were aware that its mechanical drawings
6 would be (and, indeed, were) stamped by a licensed mechanical
engineer with whom Excel worked, but did not directly employ.
As evidence of Vaughn’s knowledge of that fact, Excel points to
a written change order, submitted by Excel (and accepted and
paid by Vaughn), for fees Excel incurred when the outside
engineer reviewed and stamped project drawings. See Exhibit C
to Affidavit of William Souza, “Change Order 8” (document no.
139-9) ($6,120 related to “Mechanical Engineering Costs”).
Moreover, and critical to this proceeding, Excel’s
subcontract with LSE did not require Excel to use an “in-house”
engineer. Rather it provided that Excel would supply “design
drawing[s] with engineer’s stamp for both plumbing and
mechanical.” AIA Standard Agreement between Contractor and
Subcontractor (document no. 139-7) at Article 8, and “Notes and
Clarifications” to Contract (document no. 139-8) at 3. There is
no dispute that Excel complied with those requirements of its
contract with LSE.
But, even assuming the truth of Vaughn’s claim about
alleged misrepresentations, Excel says Vaughn sustained no
compensable injuries from its use of an outside engineer.
First, Vaughn has pointed to no evidence linking Excel’s conduct
or alleged misrepresentations to an actual delay in the project.
7 That the project suffered numerous delays is undisputed and
undeniable. That Excel’s lack of an in-house engineer
proximately caused any of those delays is little more than
unsupported speculation by Scott Vaughn. Moreover, if any party
might legitimately complain about damages resulting from delays
allegedly caused by Excel’s failure to employ an in-house
engineer, it would be the School District (the project owner)
or, perhaps, LSE (the HVAC contractor with which Excel had
subcontracted and promised to provide stamped drawings). Yet,
LSE never sued Excel or complained about its lack of an in-house
engineer. Nor did the School District. In fact, when the
School District hired a new project manager to replace Vaughn,
it retained Excel and, in fact, expanded the scope of work to be
provided by Excel. Plainly, then, the School District was
neither dissatisfied with Excel’s work nor, it would seem, did
it blame Excel for any of the numerous and substantial delays
the project sustained while Vaughn was project manager.
Indeed, Scott Vaughn testified that, “The plumbing drawings
[prepared by Excel] were generally okay and workable. And in
terms of craftsmanship, Excel’s actual execution of the plumbing
work and the mechanical work was generally fine. It passed
inspection. People were happy with it. And they made good
contributions to buildability and coordination, those kinds of
8 things.” Deposition of Scott Vaughn (document no. 139-3) at
193-94. Although it is far from clear, it would seem that
Vaughn complains only about the HVAC work Excel performed under
its subcontract with LSE (again - work that did not require use
of an in-house engineer), not the work Excel performed under its
contract with the School District. Of course, Scott Vaughn’s
description of Excel’s “mechanical work” as “fine” undermines
that claim somewhat. Further undermining Vaughn’s assertion
that Excel was responsible for (or contributed to) costly
project delays is a letter dated December 22, 2013, in which
Vaughn wrote:
It is the belief of Vaughn Associates, Inc. (“VA”) in its capacity as Construction Manager for the work of the new Unity Elementary School (“UES”) that the best path forward for all parties to the HVAC work . . . is [that] LSE should assign its sub-contract with Excel Mechanical, Inc. (“Excel”) to the Owner [and] Excel should accept that assignment without contest and become the prime contractor for the HVAC work.
Letter from Vaughn Associates (document no. 139-10) at 1
(emphasis supplied). It is entirely unclear why Vaughn would
recommend that Excel “become the prime contractor for the HVAC
work” if, as Vaughn now contends, Excel failed to properly
perform under its contracts and/or contributed to damaging and
material delays in completing the project.
9 Discussion
In its third-party complaint, Vaughn advances three state
law claims against Excel: (1) intentional misrepresentation/
fraud (Count 7); contribution, pursuant to N.H. Rev. Stat. Ann.
(“RSA”) 507:7-f; and (3) common law indemnity. None has merit.
I. Intentional Misrepresentation.
Under New Hampshire law, to prevail on a claim for
intentional misrepresentation or fraud, a plaintiff must
establish: (1) that the defendant made a factual
misrepresentation; (2) with knowledge of its falsity or with a
conscious indifference to its truth; (3) with the intention that
the plaintiff rely on that misrepresentation; (4) that the
plaintiff did justifiably rely, to his or her detriment, upon
that misrepresentation; and (5) that the plaintiff suffered
compensable damages as a consequence. See, e.g., Ridlon v. N.H.
Bureau of Secs. Regulation, __ N.H. __, 214 A.3d 1196, 1203
(N.H. July 24, 2019); Patch v. Arsenault, 139 N.H. 313, 319
(1995). See also Nichols v. Gen. Motors Corp., No. 99-C-566,
1999 WL 33292839, at *4 (N.H. Super. Dec. 13, 1999). Here,
Vaughn’s fraud claim falls substantially short on several of
those elements.
10 First, Vaughn has identified no credible and admissible
evidence to support its claim that Excel actually represented to
Vaughn that it employed an in-house licensed engineer. As the
source of that alleged misrepresentation, Vaughn points to
Excel’s work proposal (document no. 139-8), which was
incorporated into Excel’s contract with LSE. See Vaughn’s
Opposition Memorandum (document no. 143-1) at 8-9. See also
Affidavit of Scott Vaughn (document no. 143-2) at para. 10 (“The
Excel Proposal includes a representation that Excel employs a
registered engineer who can prepare and stamp drawings for the
Project.”). That statement is demonstrably false. As noted
above, Excel’s proposal does not make any representations about
employing an in-house engineer. It states that Excel will
provide mechanical drawings that bear a licensed engineer’s
stamp. See Excel’s Work Proposal (document no. 139-8) at 3
(“Design drawing with engineer’s stamp for both plumbing and
mechanical are included in this proposal.”). 1
1 Excel’s owner, William Souza, testified that “we were requested [by Scott Vaughn] to add the engineer’s stamp into our proposal. So the engineer’s stamp for both the plumbing and mechanical came under Excel’s scope of work.” Deposition of William Souza (document no. 143-3) at 29. See also Id. at 20. He also testified that Scott Vaughn instructed him to add the cost associated with obtaining those engineering stamps to its anticipated budget. Id. at 30. Souza also testified that, “Excel Mechanical does not have a registered engineer to stamp a set of drawings, and you will notice [on the proposal (document no. 139-8), at 3] that I put that on there as bold.” Id. Souza then explained that, when needed, Excel utilized an outside
11 Moreover, Vaughn points to no evidence that might support
even an inference that Excel intended Vaughn to rely upon such
an alleged misstatement (or even why Vaughn believes Excel would
have misrepresented such a seemingly minor matter) - after all,
a professional stamp is required, but whether the stamping
engineer is an employee or a consultant would seem entirely
beside the point. Either circumstances might cause some delay
depending on a variety of factors, and either circumstance could
just as easily prove more, not less, timely. Nor is there
evidence that Vaughn relied to its detriment upon such an
alleged misstatement or that Vaughn suffered any compensable
damages as a result of such alleged reliance upon the alleged
misstatement.
Vaughn’s intentional misrepresentation claim is, at best,
vague and ill-defined - seemingly, deliberately so. And, the
“evidence” upon which Vaughn relies in support of that claim is
little more than “conclusory allegations, improbable inferences,
and unsupported speculation” set forth in Scott Vaughn’s
deposition and affidavit. Am. Steel Erectors, Inc. v. Local
Union No. 7, Int’l Ass’n of Bridge, Structural, Ornamental &
Reinforcing Iron Workers, 536 F.3d 68, 75 (1st Cir. 2008). It
engineering firm to stamp drawings, in exchange for a professional fee. Id. at 30.
12 is insufficient to stave off Excel’s motion for summary judgment
and no reasonable trier-of-fact could plausibly credit it as
true. See generally Scott v. Harris, 550 U.S. 372, 380 (U.S.
2007) (“When opposing parties tell two different stories, one of
which is blatantly contradicted by the record, so that no
reasonable jury could believe it, a court should not adopt that
version of the facts for purposes of ruling on a motion for
summary judgment.”).
II. Statutory Contribution and Common Law Indemnity.
As the court noted in a prior order (document no. 42), the
New Hampshire Supreme Court has explained the distinction
between contribution and indemnification as follows:
[I]ndemnity is distinguished from contribution because whereas indemnity shifts the entire burden of loss from one tortfeasor who has been compelled to pay it, to another whose act of negligence is the primary cause of the injured party’s harm, contribution is partial payment made by each or any of jointly or severally liable tortfeasors who share a common liability to an injured party.
Gray v. Leisure Life Indus., 165 N.H. 324, 330 (2013) (citations
and internal punctuation omitted) (emphasis supplied).
13 A. Statutory Contribution - RSA 507:7-f.
In Count 8 of its third-party complaint, Vaughn alleges
that, “to the extent that VAI [Vaughn] is liable to USD [the
Unity School District] under a theory of negligence or any other
tort-based theory of recovery, . . . Excel is liable to VAI for
its negligence in causing or contributing to the damages of USD
in accordance with RSA 507:7-f.” Id. at para. 190. That
statute provides that, subject to certain conditions, “a right
of contribution exists between or among 2 or more persons who
are jointly and severally liable upon the same indivisible
claim, or otherwise liable for the same injury, death or harm.”
(emphasis supplied). But, “contribution is not available to a
person who enters into a settlement with a claimant unless the
settlement extinguishes the liability of the person from whom
contribution is sought, and then only to the extent that the
amount paid in settlement was reasonable.” RSA 507:7-f, II.
Vaughn’s claim for statutory contribution is without merit.
First, Vaughn has failed to demonstrate that, as part of the
settlement agreement between Vaughn and the Unity School
District, the School District released Excel from any claim on
which Vaughn paid a settlement amount. The settlement agreement
between Vaughn and the Unity School District plainly contains a
mutual release of claims. See Mediated Settlement Agreement and
14 Mutual General Release (document no. 139-4) at 3-4. The
agreement also contains a hand-written addendum that purports to
release Superior Walls of Hudson Valley from any claims that the
School District might have against it. See Id. at 6.
Critically, however, there is no similar release of the School
District’s claims against Excel. To be sure, Vaughn’s
settlement with the School District would have reduced the
amount of any judgment the School District might have
subsequently obtained against Excel related to claims as to
which Vaughn and Excel shared liability. But, that settlement
did not extinguish Excel’s liability to the School District on
those (or any other) claims. See RSA 507:7-f, II. See also
Leisure Life Indus., 165 N.H. at 331 (“Although, as the
plaintiffs point out, their settlement with Orvis would have
reduced the amount of any judgment against the defendants by the
amount of consideration paid, it did not extinguish the
defendants’ potential liability to the plaintiffs. Since
Orvis’s settlement did not extinguish the defendants’ liability,
there was no basis for Orvis to obtain indemnity from the
defendants. The defendants were therefore entitled to judgment,
as a matter of law, on the indemnity claim.”) (citing RSA 507:7–
h). Vaughn’s failure to obtain from the School District a
release of all its claims against Excel is fatal to Vaughn’s
statutory contribution claim against Excel.
15 Additionally, even if it were possible to construe the
language of the settlement agreement as some sort of implied
release of the School District’s claims against Excel, Vaughn
has failed to demonstrate that Excel owed and breached any
cognizable common law duties to the School District that
proximately caused the injuries for which the School District
sought (and obtained) compensation from Vaughn. In other words,
Vaughn has failed to show that Excel is a joint tortfeasor that
should be held to account for its proportionate share of
Vaughn’s liability to the School District. See Leisure Life
Indus., 165 N.H. at 330 (“contribution is partial payment made
by each or any of jointly or severally liable tortfeasors who
share a common liability to an injured party.”) (emphasis
supplied). See also Restatement (Third) Torts: Apportionment
Liab. § 23 (Am. Law. Inst. 2000) (noting that the party seeking
contribution must demonstrate that the party from whom it seeks
contribution proximately caused the plaintiff’s injuries).
At this point, it is probably worth revisiting the School
District’s original complaint against Vaughn. In it, the School
District advanced two tort claims against Vaughn: professional
malpractice (negligence) and negligent misrepresentation
(fraudulent inducement to enter the contracts with Vaughn). So,
to prevail on its statutory contribution claim, Vaughn must
16 point to both legal and factual support for its assertion that
Excel shares liability as a joint tortfeasor - that is, for
having either fraudulently induced the School District to enter
its contracts with Vaughn (contracts that were executed well
before Excel was ever involved in the project) or for having
committed architectural malpractice.
Given the evidence of record, it is difficult to conceive
of how Excel could have possibly been a joint tortfeasor with
respect to either of those torts. But, more importantly, Vaughn
has failed to point to admissible evidence supportive of such a
theory. Consequently, it’s claim for statutory contribution
necessarily fails.
B. Common Law Indemnity.
In Count 9 of its third-party complaint, Vaughn alleges
that:
Excel knew or should have known that VAI [Vaughn] would rely on Excel’s work (as represented to VAI) in completing its design of the new Unity School and during construction.
Excel performed its work negligently and with total disregard for project timelines.
Excel’s failures on the project caused damages to USD and/or VAI.
17 VAI should be entitled to recover its damages from Excel under a theory of common law indemnity.
Third-Party Complaint at paras. 192-95. As noted above,
“indemnity shifts the entire burden of loss from one tortfeasor
who has been compelled to pay it, to another whose act of
negligence is the primary cause of the injured party’s harm.”
Leisure Life Indus., 165 N.H. at 330 (emphasis supplied). As
the court previously observed, in dismissing Vaughn’s indemnity
claims against SAU #6, see Order on Third-Party Defendants’
Motion to Dismiss (document no. 42), New Hampshire common law
recognizes three distinct types of indemnity: derivative or
imputed by law, express, and implied. See Leisure Life Indus.,
165 N.H. at 327.
Vaughn has not clearly stated whether it is pursuing a
theory of implied indemnity or derivative/imputed indemnity. To
the extent it is the former, Vaughn faces a substantial problem:
“under New Hampshire law, a right to indemnification is rarely
implied.” Johnson v. Capital Offset Co., No. 11-cv-459-JD, 2013
WL 5406619, at *8, 2013 DNH 127 (D.N.H. Sept. 25, 2013)
(citation omitted). According to the New Hampshire Supreme
Court, “This disinclination [to infer an indemnification
obligation] reflects a simple notion founded in pragmatism and
fairness, that those who are negligent should bear
18 responsibility for their negligence.” Dunn v. CLD Paving, Inc.,
140 N.H. 120, 123 (1995) (citation and internal punctuation
omitted). For the same reasons discussed in this court’s prior
order, Vaughn has failed to demonstrate that the facts of this
case fall within any of the limited exceptions to the general
rule barring implied indemnifications agreements. See Order on
Third-Party Defendants’ Motion to Dismiss (document no. 42) at
10-12. See generally Leisure Life Indus., 165 N.H. at 328;
Jaswell Drill Corp. v. General Motors Corp., 129 N.H. 341, 346
(1987).
To the extent Vaughn is pursuing Excel on derivative/
imputed theory of indemnity, that claim also fails. That theory
of recovery is based upon “the concept that one party is
unjustly enriched at the expense of another when the other
discharges liability that should be the first party’s
responsibility to pay.” Leisure Life Indus., 165 N.H. at 329
(citation omitted) (emphasis supplied). As discussed above,
Vaughn has failed to show that Excel is the true party at fault
and should, therefore, be responsible for reimbursing Vaughn for
the sums it paid to settle the School District’s claims that
Vaughn engaged in professional malpractice and/or that Vaughn
fraudulently induced the School District to enter contracts with
it.
19 Finally, as is the case with statutory contribution, “an
indemnitee must extinguish the liability of the indemnitor[,]
either by a settlement with the plaintiff that by its terms or
by application of law discharges the indemnitor from liability
or by satisfaction of judgment that by operation of law
discharges the indemnitor.” Leisure Life Indus., 165 N.H. at
329 (citation and internal punctuation omitted). The theory
behind that requirement is based in equity: “the indemnitee has
provided a benefit to the indemnitor by fully discharging the
indemnitor’s liability, making restitution appropriate.” Id.
Such is not the case here. As noted above, the settlement
agreement between Vaughn and the School District did not, by its
terms or by operation of law, extinguish all potential liability
of Excel to the School District. Moreover, largely for the
reasons already given, because Vaughn has conferred no benefit
upon Excel (i.e., it has not paid any obligation Excel owed to
the School District), it cannot seek to recover from Excel on a
theory of indemnification.
Conclusion
Vaughn’s claim for intentional misrepresentation (fraud)
is, for the reasons given, without merit. With regard to its
contribution and indemnity claims, Vaughn has failed to show
that, when it settled with the School District, it somehow
20 resolved claims for which Excel might be jointly liable.
Rather, Vaughn extinguished only its own liability to the School
District for architectural malpractice and fraudulent
inducement. Having conferred no benefit upon Excel (and having
failed to obtain a release of the School District’s potential
claims against Excel), Vaughn cannot recover against Excel on
either theory.
For the foregoing reasons, as well as those set out in
Excel Mechanical’s comprehensive legal memorandum (document no.
139-1), the court concludes that there are no genuinely disputed
issues of material fact and, as a matter of law, Excel is
entitled to judgment. Excel’s Motion for Summary Judgment
(document no. 139) is granted. Excel’s Motion to Exclude VAI’s
Experts (document no. 140) is denied as moot.
SO ORDERED.
____________________________ Steven J. McAuliffe United States District Judge
November 19, 2019
cc: George T. Dilworth, Esq. Demetrio F. Aspiras, III, Esq. Melissa A. Hewey, Esq. Kenneth B. Walton, Esq. Lindsey D. Smith, Esq. Kristin Hartman, Esq. Michael P. Sams, Esq.
21 Daniel H. Conroy, Esq. Matthew V. Burrows, Esq. Samantha D. Elliott, Esq. Andrew B. Livernois, Esq.