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Black & Veatch Corporation v. Modesto Irrigation District

October 11, 2011

BLACK & VEATCH CORPORATION,
PLAINTIFF,
v.
MODESTO IRRIGATION DISTRICT,
DEFENDANT. MODESTO IRRIGATION DISTRICT, COUNTERCLAIMANT,
v.
BLACK & VEATCH CORPORATION, COUNTERDEFENDANT. AND RELATED ACTIONS.



The opinion of the court was delivered by: Sheila K. Oberto United States Magistrate Judge

ORDER GRANTING CITY OF MODESTO'S MOTION FOR INTERVENTION AS A DEFENDANT

(Docket No. 25)

I. INTRODUCTION

On August 19, 2011, the City of Modesto ("City") filed a motion for intervention as a defendant in the action between Plaintiff Black & Veatch Corporation ("B&V") and Defendant Modesto Irrigation District ("MID").*fn1 (Doc. 25.) City asserts that it is a real party in interest in the case and that MID may not adequately represent City's interest. On September 7, 2011, B&V filed an opposition (Doc. 34) and on September 14, 2011, City filed a reply (Doc. 39). On September 21, 2011, a hearing was held before the Court.

The Court has reviewed the pleadings and supporting documents and considered the arguments raised at the hearing. For the reasons set forth below, the Court GRANTS City's motion for intervention as a defendant in this action.

II. PROCEDURAL BACKGROUND

On April 29, 2011, B&V filed a complaint against MID, alleging claims for (1) breach of written contract, (2) breach of the implied covenant of good faith and fair dealing, and (3) declaratory relief. (Doc. 1.) On May 23, 2011, MID filed a motion to dismiss, which was denied by the Court on July 5, 2011. (Docs. 7, 13.)

On July 25, 2011, MID filed an answer and a counterclaim against B&V. (Docs. 16, 17.) MID's counterclaim pleads causes of action for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) professional negligence, (4) breach of fiduciary duty, (5) negligent representation, (6) express contractual indemnity, (7) unjust enrichment, and (8) declaratory relief. (Doc. 17.)

On August 8, 2011, MID filed a complaint-in-impleader as a third-party plaintiff against third-party defendants Western Summit Constructors, Inc. ("Western Summit"), Big B Construction, Inc. ("Big B"); Federal Insurance Company ("FIC"); Fidelity and Deposit Company of Maryland ("Fidelity"); and Travelers Casualty and Surety Company of America ("Travelers") pursuant to Federal Rule of Civil Procedure 14(a). (Doc. 22.) MID alleges claims for (1) express contractual indemnity against Western Summit and Big B, (2) total equitable indemnity against Western Summit and Big B, (3) comparative equitable indemnity against Western Summit and Big B, (4) breach of contract against Western Summit, (5) breach of express warranty against Western Summit, (6) negligence and property damage against Western Summit, (7) negligence and property damage against Big B, (8) breach of implied warranty of merchantability against Big B, (9) breach of implied warranty of fitness against Big B, (10) breach of implied warranty of workmanship against Big B, (11) negligent misrepresentation against Western Summit, (12) recovery under performance bond against FIC, Fidelty, and Travelers, and (13) declaratory relief. (Doc. 22.)

On August 19, 2011, City filed this instant motion to intervene as a defendant, asserting that it is a real party in interest in the action and that MID may not adequately represent its interests. (Doc. 25.) B&V opposed the motion, and City filed a reply. (Docs. 34, 39.) On September 21, 2011, the Court held a hearing on the instant motion.

The Court notes that on September 9, 2011, and September 16, 2011, Western Summit and Big B, respectively, filed motions to dismiss MID's complaint-in-impleader. (Docs. 38, 40.) Both motions are scheduled for hearing on October 24, 2011, before District Judge O'Neill.

III. FACTUAL BACKGROUND*fn2

In 1992, City and MID entered into a contract to complete Phase 1 of the Modesto Regional Water Treatment Plant (the "Project"), and further contemplated the Phase 2 Expansion at that time. (Doc. 30, Ulm Decl., ¶ 2.) Pursuant to the 1992 Agreement, City and MID formed a Technical Committee and a Policy Committee to oversee all phases of the Project. (Doc. 30, Ulm Decl., ¶ 4.) In November 2001, MID began a comprehensive consultant selection process for the Phase 2 expansion consisting of a new 36 million-gallon-per-day water treatment expansion and improvements to the existing water treatment plan. (Doc. 30, Ulm Decl., ¶ 3; Doc. 26, 2:11-14.) As a result of this selection process, B&V was selected to provide consulting engineering work. (Doc. 30, Ulm Decl., ¶ 3.)

B&V and MID entered into a written contract for the design and construction of the Phase 2 Expansion and Optimization of the Project, which included the expansion and improvements to the existing water treatment plan. (Doc. 1, ¶¶ 5-6; Doc. 26, 2:11-14.) The contract was segregated into three phases: the Agreement for Preliminary Design Services, dated August 4, 2003; the Agreement for Preliminary Engineering Services, dated November 25, 2003; and the Agreement for Construction Phase Services, dated April 20, 2007 (collectively, the "MID-B&V contract"). (Doc. 1, ¶ 13.) The Construction Phase Services Agreement ("Construction Phase Agreement") outlined three main categories of work: (1) the engineering and construction management services during the construction phase, (2) limited start-up, commissioning, and training services, and (3) configuration services. (Doc. 1, ¶ 14). The base scope services were to have been completed no later than December 2009. (Doc. 1, ¶ 15.)

In October 2005, City and MID entered into an Amended and Restated Treatment and Delivery Agreement ("T&D Agreement") in which MID would provide and increase the long-term source of City's treated water supply. (Doc. 26, 3:18-26; Doc. 30, Ulm Decl., ¶ 8; Doc. 34, 2:14-18.) Pursuant to the terms of the T&D Agreement, MID agreed to expand its existing water treatment plant for City's exclusive use, and City would be responsible for the costs of the Project. (Doc. 26, 2:24-3:3; Doc. 30, Ulm Decl., ¶ 9.)

The construction phase of the Project commenced in June 2007 after MID's construction contract was awarded to Western Summit, the Project contractor. (Doc. 1, ¶ 8.) The Project's contract completion was originally scheduled for September 2009. (Doc. 1, ¶ 8.)

B&V's complaint alleges that in December 2009, MID and B&V discussed amending the Construction Phase Agreement to include further construction phase work that extended beyond the original 2009 completion date and to provide compensation for those services. (Doc. 1, ¶ 15.) B&V submitted to MID Proposed Amendment No. 8 in January 2010 and, upon request for a revised proposal, submitted Proposed Amendment No. 8A on February 26, 2010. (Doc. 1, ¶¶ 19-21.) B&V contends that it provided additional services throughout 2010 at MID's direction through its authorized agents and that MID assured B&V that its requests for a contract amendment and additional compensation would be timely and fairly addressed. (Doc. 1, ¶ 17.)

B&V claims that it notified MID that B&V had significantly increased its field staffing pursuant to the increased work requested by MID and that B&V would remain at the Project site while Western Summit completed the Project. (Doc. 1, ¶ 21.) Western Summit allegedly forecast a completion date extending to December 2010 and possibly into 2011, more than one year beyond B&V's contracted construction phase duration. (Doc. 1, ¶ 21.)

In May 2010, MID issued to Western Summit a Notice of Intent to Terminate Western Summit's performance under the contract. (Doc. 1, ¶ 27.) At the same time, MID allegedly assured B&V that MID would work in good faith to resolve the issues of compensation but requested that the resolution take place after MID's formal decision regarding its intention to terminate Western Summit. (Doc. 1, ¶ 27.) In May and June 2010, allegedly pursuant to MID's oral and written directives, B&V worked with Western Summit and MID to develop a plan for Western Summit to cure and further mitigate construction delays. (Doc. 1, ¶ 28.) Western Summit's cure plan was implemented throughout the summer of 2010. (Doc. 1, ¶ 29.)

On August 18, 2010, B&V submitted an invoice to MID for services allegedly performed at MID's direction between March and August 2010 for which B&V had not been paid. (Doc. 1, ¶ 30.) On September 17, 2010, MID informed B&V that it was recommending to its Board that other firms be retained to complete the Project and that B&V cease further construction phase services and remove itself from the Project site. (Doc. 1, ¶ 31.) MID allegedly failed to grant an equitable adjustment to B&V's compensation for the additional work performed and refused to pay any of B&V's outstanding invoices. (Doc. 1, ¶ 32.)

MID's counterclaim alleges B&V's construction phase services commenced in June 2007 after MID's construction contract was awarded to Western Summit. (Doc. 17, ¶ 18.) During the construction phase, MID alleges that the construction was behind schedule, there were numerous engineering defects and errors attributable to B&V, and widespread quality control errors by Western Summit that were not adequately addressed by B&V in its capacity as construction manager. (Doc. 17, ¶ 19.) MID pleads that B&V's failure to fulfill its duties as the construction manager resulted in damages and a widespread overpayment by MID. (Doc. 17, ¶ 23.) As a result, in September 2010, MID suspended its contract with B&V and was required to retain other professionals to rectify the substantial problems caused by B&V. (Doc. 17, ¶ 24.)

MID's complaint-in-impleader alleges that Western Summit and Big B entered into a written subcontract agreement. (Doc. 22, ¶ 20.) During construction, MID discovered numerous defects and deficiencies with Western Summit and Big B's work, which substantially delayed the project and prevented its completion. (Doc. 22, ¶¶ 23-24.) The Project currently remains incomplete. (Doc. 1, ¶ 8.)

IV. DISCUSSION

A. B&V's Objections to City's Reply

On September 16, 2011, B&V filed objections to City's reply, specifically objecting to the declaration of City's counsel Patricia Lakner ("Lakner Decl.") and to City's reply argument. (Doc. 43.) B&V objects to the Lackner Decl. on grounds of hearsay, privilege, confidential mediation privilege, identification, relevance, and prejudice and confusion. (Doc. 43, p. 2.) B&V objects to City's reply argument as assuming facts not in evidence, lacking foundation, and speculation.

For a motion for intervention, the Ninth Circuit requires a district court to "take all well-pleaded, nonconclusory allegations in the motion to intervene, the proposed complaint or answer in intervention, and declarations supporting the motion as true absent sham, frivolity or other objections." Sw. Ctr. for Biological Diversity v. Berg, 268 F.3d 810, 820 (9th Cir.2001); see also Gen. Elec. Co. v. Wilkins, No. 1:10-cv-00674 OWW-JLT, 2011 WL 533549 at *1 (E.D.Cal. Feb. 11, 2011). City's allegations do not appear to be frivolous or sham pleadings, and the Court accepts City's arguments and declarations as true for purposes of this motion.*fn3

Further, while courts are generally constrained to consider only admissible evidence in the context of summary judgment motions, see, e.g., Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665 (9th Cir. 1980),this is not universally applicable with regard to nondispositive motions filed early in the proceedings. See, e.g., Flynt Distrib. Co. v. Harvey, 734 F.2d 1389, 1394 (9th Cir. 1984) ("The urgency of obtaining a preliminary injunction necessitates a prompt determination and makes it difficult to obtain affidavits from persons who would be competent to testify at trial. The court may give even inadmissible evidence some weight . . ."); Mujica v. Occidental Petroleum Corp., 381 F. Supp. 2d 1134, 1144 (C.D. Cal. 2005) ("Since a determination regarding dismissal on the basis of forum non convienens should be made early in the litigation and there will have been little discovery, the court should not be restricted in considering only admissible evidence.") See also Rosen Entm't Sys., LP v. Eiger Vision, 343 F. Supp. 2d 908, 912 (C.D. Cal. 2004) (citing Harvey and determining that inadmissible evidence offered by defendant opposing motion for preliminary injunction may be considered by the court); Martinez v. Schwarzenegger, No. C 09-02306 CW, 2009 WL 1844989, at *3 n.4 (N.D. Cal. June 26, 2009) (determining that the court may consider inadmissible evidence on a motion for preliminary injunction). As a motion for intervention is a motion decided early in the proceedings similar to a preliminary injunction and a motion for forum non convienens, the Court finds that it may consider the submitted evidence.

Accordingly, the Court OVERRULES B&V's objections to City's reply.

B. B&V's Request for Judicial Notice

B&V's opposition contains a Request for Judicial Notice ("RJN") of the existence and content of the T&D Agreement between MID and City, and the MID-B&V contracts, including the Agreement for Preliminary Design Services, the Agreement for Preliminary Engineering Services, and the Agreement for Construction Phase Services, for Phase 2 Expansion ...


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