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LLC v. Skinner Tank Company; Defendant/Third-Party Plaintiff

United States District Court, D. Nebraska

January 30, 2014

E3 BIOFUELS-MEAD, LLC, Plaintiff(s),
v.
SKINNER TANK COMPANY; Defendant/Third-Party Plaintiff,
v.
DILLING MECHANICAL CONTRACTORS, INC. Third-Party Defendant.

MEMORANDUM AND ORDER

JOSEPH F. BATAILLON, District Judge.

This matter is before the court on a motion for partial summary judgment filed by defendant/third-party plaintiff Skinner Tank Company ("Skinner"), Filing No. 162. This is an action for breach of contract, fraud, and gross negligence in connection with an ethanol plant construction project in Mead, Nebraska.[1] The plaintiffs, E Biofuels-Mead, LLC and E3 Biofuels-Mead, LLC (hereinafter, collectively, "E3"), entered into a contract with defendant Skinner for the purchase, design, fabrication, construction and installation of several tanks to be used in an Integrated Solid Waste and Bio-Fuels Facility (the "Project") that retrieves usable energy from cattle waste. Jurisdiction is premised on 28 U.S.C. ยง 1332, diversity of citizenship.

Skinner moves for a summary judgment of dismissal on the plaintiff's claims of fraud and gross negligence, asserting that those claims are barred under the economic loss doctrine. Further, it argues that E3 has failed to plead fraud with particularity under Fed.R.Civ.P. 9(b). It also contends that the plaintiff's demand for damages including a twenty-five percent markup under Section 27 of the contracts at issue should be invalidated as an unenforceable penalty under Nebraska law.[2]

I. FACTS

In its First Amended Complaint, E3 alleges it entered into a design contract and a contract for the purchase of fourteen tanks for a total payment of over $2 million.[3] Amended Complaint, Filing No. 99 at ECF p.4. The purchase contract specified that "All welding of tanks will be approved and inspected on site by Certified Weld Examiner, provided by Owner." Id. It alleges that the initial designs of certain tanks proved to be mechanically deficient and correction of the design defects required extensive deviations from the original designs, greatly increasing construction expense and delayed the completion of Skinner's work and that of other contractors. Id. at 5. E3 alleges that welding on the tanks was also grossly defective. Id. at 5. It alleges Skinner's failure to timely complete the work caused E3 to incur damages as a result of the delay, including additional construction costs and expenses, replacement costs, repair expenses, operating expenses and overhead, interest expenses on borrowed money, and loss of operating revenue. Id. at 9.

Specifically, it alleges Skinner breached the Design and Purchase Contracts by "failing to properly design and assemble the tanks and supporting structures and to deliver in a timely fashion tanks which meet the specifications and express and implied warranties of the contracts." Id. E3 also claims fraud in that Skinner "represented to [E3] that it would provide a qualified engineer to fulfill its on-site quality control obligation, that it would provide tradesmen who were qualified and competent to complete the work and that its engineer was capable of inspecting the work of its welders and certifying them qualified for the job without outside oversight, " but those representations were false and fraudulent in that unskilled workers were used and no certification was provided. Id. E3 also alleges Skinner was grossly negligent and failed to live up to its duties as engineers and craftsmen. Id. at 11.

Section 27.0 of each of the contracts between E3 and Skinner provides as follows:

If Supplier by its action or inaction indicates that it is unable or unwilling to proceed with the Work in a reasonable time, Purchaser may, upon five calendar days after written notice to Supplier, accomplish the Work in question by the most expeditious means available and backcharge Supplier for the costs incurred, plus twenty-five percent markup and overhead.

Filing No. 1, Complaint, Ex. A, Purchase Order #0018 (Filing No. 1-1 at ECF p. 4); id., Ex. B, Purchase Order (Filing No. 1-2 at ECF p. 4).

Skinner denies the plaintiff's allegations, asserts a counterclaim for breach of contract and asserts defenses of failure to state a claim, lack of subject matter jurisdiction, intervening cause, contributory negligence, unclean hands, in pari delicto, mitigation of damages, unforeseeability, breach of contract and breach of covenant of good faith and fair dealing, estoppel and waiver, release, consent/ratification, economic loss doctrine, and champerty. Filing No. 107.

II. LAW

Summary judgment is appropriate when, viewing the facts and inferences in the light most favorable to the nonmoving party, "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

"The movant bears the initial responsibility of informing the district court of the basis for its motion, and must identify those portions of [the record]... which it believes demonstrate the absence of a genuine issue of material fact.'" Torgerson v. City of Rochester, 643 F.3d 1031, 1042, (8th Cir. 2011) (en banc) (quoting Celotex, 477 U.S. at 323). If the movant does so, "the nonmovant must respond by submitting evidentiary materials that set out specific facts showing that there is a genuine issue for trial.'" Id. (quoting Celotex, 477 U.S. at 324). A "genuine" issue of material fact exists "when there is sufficient evidence favoring the party opposing the motion for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). If "reasonable minds could differ as to the import of the evidence, " summary judgment should not be granted. Id. at 251.

The evidence must be viewed in the light most favorable to the nonmoving party, giving the nonmoving party the benefit of all reasonable inferences. Kenney v. Swift Transp., Inc., 347 F.3d 1041, 1044 (8th Cir. 2003). "In ruling on a motion for summary judgment, a court must not weigh evidence or make credibility determinations." Id. "Where the unresolved issues are primarily legal rather than factual, summary ...


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