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Audubon Engineering Company LL v. International Procurement and, 15-2805 (2016)

Court: Court of Appeals for the Third Circuit Number: 15-2805 Visitors: 24
Filed: Apr. 27, 2016
Latest Update: Mar. 02, 2020
Summary: NOT PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _ No. 15-2805 _ AUDUBON ENGINEERING COMPANY LLC; AUDUBON ENGINEERING SOLUTIONS LLC, v. INTERNATIONAL PROCUREMENT AND CONTRACTING GROUP LLC, Appellant _ ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE (D.C. No. 1-13-cv-01248) District Judge: Hon. Leonard P. Stark _ Submitted Under Third Circuit L.A.R. 34.1(a) March 23, 2016 _ Before: GREENAWAY, JR., VANASKIE, and SHWARTZ, Circuit Judges. (Opinion Fi
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                                                                  NOT PRECEDENTIAL

                        UNITED STATES COURT OF APPEALS
                             FOR THE THIRD CIRCUIT
                                 ______________

                                       No. 15-2805
                                     ______________

                    AUDUBON ENGINEERING COMPANY LLC;
                    AUDUBON ENGINEERING SOLUTIONS LLC,

                                             v.

     INTERNATIONAL PROCUREMENT AND CONTRACTING GROUP LLC,
                                    Appellant
                         ______________

           ON APPEAL FROM THE UNITED STATES DISTRICT COURT
                    FOR THE DISTRICT OF DELAWARE
                           (D.C. No. 1-13-cv-01248)
                     District Judge: Hon. Leonard P. Stark
                                ______________

                      Submitted Under Third Circuit L.A.R. 34.1(a)
                                   March 23, 2016
                                  ______________

      Before: GREENAWAY, JR., VANASKIE, and SHWARTZ, Circuit Judges.

                             (Opinion Filed: April 27, 2016)

                                     ______________

                                        OPINION*
                                     ______________

SHWARTZ, Circuit Judge.



       *
        This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.
      International Procurement and Contracting Group, LLC (“IPCG”) appeals from

the District Court’s order granting summary judgment for Audubon Engineering

Company, LLC and Audubon Engineering Solutions, LLC (collectively, “Audubon”) on

Audubon’s breach of contract claim arising from IPCG’s failure to pay for services

Audubon rendered. We will affirm.

                                            I

      IPCG is a U.S. headquartered company that connects U.S. suppliers of goods and

services with “clients in the Middle East.” App. 273. Audubon is an American

engineering firm. IPCG and Audubon entered into an agreement with each other to

provide engineering design services to North Refineries Company (“NRC”) in connection

with the construction of a liquefied petroleum gas (“LPG”) unit in Iraq (the “LPG

Project”). IPCG filed suit against Audubon in the United States District Court for the

Eastern District of Michigan, alleging that Audubon breached the agreement. See

Compl., Int’l Procurement & Contracting Grp., LLC v. Audubon Eng’g Co., LLC, No.

5:11-cv-14740 (E.D. Mich. Oct. 27, 2011), ECF No. 1.

      IPCG and Audubon entered into a Settlement Agreement and Mutual Release (the

“Agreement”) resolving that case, pursuant to which Audubon agreed to perform certain

engineering and design services for the LPG Project. The Agreement makes clear that

“[t]he payment terms, dates, and services to be performed [by Audubon]” are governed

by a proposal (the “Proposal”) attached to the Agreement. App. 67. The Proposal sets

forth a “Milestone Payment Schedule,” which includes three separate “Contracts,” each

of which is divided into several “Milestones.” App. 90. Each Milestone includes a series

                                            2
of discrete tasks, the completion of which entitles Audubon to partial payment of its total

fee.

       IPCG awarded Audubon the first Contract described in the Proposal—“Contract

#1”—but reserved the right to deny Audubon subsequent Contracts. App. 67. Consistent

with the terms of the Proposal, IPCG paid Audubon for completing “Milestone #1,”

which Audubon accomplished simply by obtaining Contract #1. App. 90. The instant

dispute relates to the second and third Milestones under Contract #1, which required

Audubon to furnish engineering drawings depicting the layout of the LPG unit’s piping,

electrical wiring, and instrumentation, among other components (“Milestone #2”), and to

prepare “bid packages” to enable NRC to solicit bids from third-party vendors for

construction materials and equipment (“Milestone #3”). App. 90, 163, 464.

       Audubon submitted a series of Milestone #2 drawings to IPCG. In response, and

although not required by that Milestone, IPCG requested that Audubon provide “native,”

or changeable, versions of the drawings, and modify the designs to include international

rather than English-style units of measurement. App. 140. Audubon refused to provide

IPCG with native versions, citing intellectual property concerns. For an additional fee,

however, Audubon agreed to modify the designs to include international units of

measurement, as memorialized in a “Change Order” signed by both parties. App. 154.

After issuing the updated drawings, Audubon submitted an invoice to IPCG for

Milestone #2, which IPCG paid in full a few weeks later.

       Audubon then provided the Milestone #3 bid packages to IPCG and submitted an

invoice in the amount of $560,320.00 (the “Invoice”), reflecting its fee for the Change

                                             3
Order and Milestone #3. IPCG indicated that it would not pay the Invoice until Audubon

provided native versions of the Milestone #2 drawings, as it had previously requested.

Audubon agreed to provide the native versions if IPCG signed a liability release form that

Audubon provided. IPCG never signed the release, Audubon did not provide the native

drawings, and IPCG did not pay the Invoice.

      Audubon filed suit against IPCG in the Delaware Superior Court for breach of

contract, seeking payment of the Invoice plus interest and attorneys’ fees. After IPCG

removed the case to the District Court and the parties completed discovery, Audubon

moved for summary judgment. The District Court granted Audubon’s motion,

concluding that IPCG “raised no genuine dispute of material fact as to whether Audubon

performed its obligations under the Agreement” and holding that IPCG breached its

obligation to pay for Audubon’s services. App. 8. IPCG appeals.

                                           II1


      1
          The District Court had jurisdiction under 28 U.S.C. § 1332. We have jurisdiction
under 28 U.S.C. § 1291. We exercise plenary review over a district court’s order
granting summary judgment. Jacobs Constructors, Inc. v. NPS Energy Servs., Inc., 
264 F.3d 365
, 369 (3d Cir. 2001). Summary judgment is appropriate “if the movant shows
that there is 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). A dispute is “genuine” only if there
is a sufficient evidentiary basis on which a reasonable jury could find for the nonmoving
party, and “material” only if it might affect the outcome of the suit under governing law.
Kaucher v. Cnty. of Bucks, 
455 F.3d 418
, 423 (3d Cir. 2006). The moving party is
entitled to judgment as a matter of law when the non-moving party fails to make “a
sufficient showing on an essential element of her case with respect to which she has the
burden of proof.” Celotex Corp. v. Catrett, 
477 U.S. 317
, 323 (1986). In making this
determination, we “view all of the facts in the light most favorable to the non-moving
party,” and afford the non-moving party “‘every reasonable inference that can be drawn
from the record.’” Reedy v. Evanson, 
615 F.3d 197
, 210 (3d Cir. 2010)(quoting Merkle
v. Upper Dublin Sch. Dist., 
211 F.3d 782
, 788 (3d Cir. 2000)).
                                            4
       The District Court correctly concluded that there are no genuine disputes of

material fact with respect to Audubon’s performance of the Change Order and Milestone

#3 and that IPCG breached its obligation to pay for these services. To begin, IPCG does

not dispute that it authorized the Change Order and received updated drawings consistent

with its terms. There is also no dispute that Audubon provided the Milestone #3 bid

packages to IPCG, nor is there any contemporaneous evidence that IPCG or NRC

believed the bid packages to be incomplete.2

       IPCG maintains that there exists a genuine dispute of material fact with respect to

Audubon’s performance of Milestone #3 notwithstanding this failure of proof, citing the

deposition testimony of its former Chairman, Shakir Alkhafaji. Alkhafaji, deposed two

years after the fact, testified that “whatever Audubon gave [IPCG], NRC rejected it as

incomplete.” App. 350. Alkhafaji also testified that “Audubon did not complete [its]

work,” causing “NRC to reject it and ask for . . . more documents.” App. 363. While this

testimony suggests that IPCG and NRC were dissatisfied with Audubon’s work product,

we agree with the District Court that, in context, it is clear Alkhafaji was referring to the

production of the Milestone #2 engineering drawings, for which IPCG paid Audubon in


       2
         Other than an e-mail confirming receipt of the Milestone #3 bid packages, see
App. 163, the record reveals no communications in which IPCG discussed them. To the
extent IPCG asks us to construe its request for native drawings, or a separate, unfulfilled
request for drawings for the LPG unit’s “foundation” and “skids,” App. 158, as evidence
that Audubon failed to perform Milestone #3, we decline to do so. First, the Milestone
Payment Schedule makes no mention of native drawings, and Milestone #3 makes no
mention of drawings of any kind. Second, while the Milestone Payment Schedule makes
reference to drawings of “equipment foundations” and “offskid instrument installation
details,” this work product is due under “Milestone #11” of Contract #3, App. 90, which
Audubon had not been awarded.
                                              5
full, or other work unrelated to the Milestone #3 bid packages. See App. 349-50

(Alkhafaji discussing Audubon’s failure to provide “amine unit” designs and conceding

that he is “not aware of engineering stuff” immediately before stating that NRC rejected

Audubon’s work as incomplete), 363 (Alkhafaji stating that Audubon did not accomplish

the “first milestone,” related to “engineering drawings,” before stating that Audubon did

not complete its work). Because the relevant issue here is Audubon’s performance of the

Change Order and Milestone #3, Alkhafaji’s testimony does not create a genuine dispute

of material fact concerning Audubon’s entitlement to payment for that work.

       IPCG’s expert witness report also fails to present a genuine dispute of material

fact. As the District Court correctly concluded, the report “falls well short of complying

with the requirements of [Fed. R. Civ. P.] 26(a)(2)(B).” App. 7. Among its many

deficiencies, the report fails to set forth the “facts or data considered by” IPCG’s expert

in forming his opinions. Fed. R. Civ. P. 26(a)(2)(B)(ii). This is a material omission as it

deprives Audubon of the means to determine the foundation for the opinion. Thus, even

absent bad faith, this blatant non-compliance with Rule 26 justified the District Court’s

exercise of its discretion to decline to consider the report. See Caver v. City of Trenton,

420 F.3d 243
, 265-66 (3d Cir. 2005).

       Moreover, nothing in the report reveals that the expert reviewed the Milestone #3

requirements or addressed the packages that are the subject of Milestone #3. This

Milestone requires Audubon to “[i]ssu[e] . . . Major Equipment Procurement Packages

for [IPCG’s] [p]urchase.” App. 90. Elsewhere, in a section titled “Procurement,” the

Proposal states that Audubon is “to provide engineering and procurement services for

                                              6
[the] development of procurement packages to [IPCG]” for it to send to vendors. App.

83. Thus, Milestone #3 addresses services associated with securing materials from

vendors. Nothing in the expert’s opinion discusses this subject and IPCG’s assertion in

its brief that “the discussion of ‘package’ in the [expert’s] report is a reference to the bid

packages,” IPCG Br. 19, is neither evidential nor supported by the four corners of the

report. Rather, the expert’s reference to “package” is a reference to an attachment labeled

“Basic Engineering Design Package,” which lists engineering tasks a contractor would

complete. App. 472. IPCG has identified nothing in that attachment as corresponding

with the bid packages referenced in Milestone #3. Thus, given the absence of any

indication the report discusses the Milestone #3 bid packages and its apparent focus on

the native drawings and design materials, it is irrelevant to the instant dispute.

       Finally, we address IPCG’s claims about the import of NRC’s role in this case.

According to IPCG, Audubon “was heavily invested with, and committed to,” NRC, and

thus “[t]his dispute is really between Audubon and . . . NRC.” IPCG Br. 7. This

argument is unavailing. Under Delaware law,3 our role in interpreting a contract “is to

effectuate the parties’ intent,” and thus we give “[c]lear and unambiguous language . . .

its ordinary and usual meaning.” Lorillard Tobacco Co. v. Am. Legacy Found., 
903 A.2d 728
, 739 (Del. 2006) (internal quotation marks and citation omitted). The Agreement

unambiguously defines only two “Parties” thereto, IPCG and Audubon. App. 65. NRC

is not a signatory to the Agreement, and IPCG has adduced no evidence showing that


       3
        There is no dispute that the “substantive issues [here] are controlled by Delaware
law.” Pierce Assocs., Inc. v. Nemours Found., 
865 F.2d 530
, 535 (3d Cir. 1988).
                                               7
NRC is bound by its terms. In any event, the Agreement’s payment terms make clear that

only IPCG is obligated to pay Audubon for its work on the LPG Project. That IPCG did,

in fact, pay Audubon for completing the first two Milestones bolsters this view and

further undermines IPCG’s assertion that it is nothing more than a middleman who was

not responsible for paying Audubon for its work.

                                             III

       For the foregoing reasons, we will affirm the order of the District Court granting

summary judgment for Audubon.4




       4
         We also uphold the District Court’s determination that Audubon is entitled to
attorneys’ fees pursuant to Paragraph 11 of the Agreement, which provides that the
prevailing party in “any action to enforce, interpret, or challenge the terms of [the]
Agreement . . . shall be entitled to recover its attorneys’ fees and court costs, along with
other reimbursable litigation expenses.” App. 70. First, IPCG waived its right to present
arguments as to whether Audubon is entitled to an award under that clause because it
presented no arguments on this subject to the District Court. See Harris v. City of Phila.,
35 F.3d 840
, 845 (3d Cir. 1994) (noting the well-established rule that this Court will not
consider arguments “raised for the first time on appeal”). Second, even if IPCG’s
arguments are not waived, Paragraph 11 “plainly appl[ies]” to the instant dispute, App.
10, as Audubon seeks to enforce payment of obligations imposed on IPCG by the
Agreement and has succeeded in doing so. Thus, Audubon is a prevailing party that is
contractually entitled to attorneys’ fees. See SIGA Techs., Inc. v. PharmAthene, Inc., 
67 A.3d 330
, 352 (Del. 2013) (“In contract litigation, where the contract contains a fee-
shifting provision, we will enforce that provision.”).
                                             8

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