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Sanitary Board of City of Charleston v. Colonial Surety Co.

United States District Court, S.D. West Virginia, Charleston

May 29, 2019

COLONIAL SURETY COMPANY, a Pennsylvania corporation; and PARTNERRE INSURANCE COMPANY OF NEW YORK, a New York corporation, Defendants. and COLONIAL SURETY COMPANY, a Pennsylvania Corporation, Third-Party Plaintiff,
TRI-STATE PIPELINE, INC., an Ohio corporation; and ERIC D. TAYLOR, Third-Party Defendants and Fourth-Party Plaintiffs,
BURGESS & NIPLE, INC., an Ohio corporation, Fourth-Party Defendant.


          John T. Copenhaver, Jr., Senior United States District Judge

         Pending is a motion to dismiss, filed October 22, 2018 by Burgess & Niple, Inc., (“Burgess & Niple” or “Engineer” or “B&N”), seeking to dismiss the complaint filed against it by third-party defendant and fourth-party plaintiff Tri-State Pipeline, Inc. (“Tri-State” or Contractor”).

         I. Facts and Procedural Background

         This case arises from a project to improve the sewer systems of Charleston, West Virginia. Specifically, according to the fourth-party complaint, “[o]n or about July 26, 2016, The Sanitary Board of the City of Charleston, West Virginia (the [“Sanitary Board” or “CSB”]) accepted bids for Contracts 15-1 ‘Porters Branch & Spring Branch Sanitary Sewer Improvement' and 15-2 ‘Callie Road & Anderson Heights Road Sanitary Sewer Improvements'. These contracts involved gravity sewer line replacement, manhole installation, house service connections, restoration of pavement and other related work.” Compl. ¶ 6. As part of the bidding process, the Sanitary Board “provided prospective bidders with the project design prepared by [Burgess & Niple], including plans, specifications, bid documents, and other contract documents, ” each prepared by Burgess & Niple, the project engineer, for the Sanitary Board. Id., ¶ 8. According to Tri-State, “[t]hese bidding documents were intended to provide a ‘road map' for prospective bidders to allow reasonable anticipation of conditions in the work area and to allow them to prepare accurate bids for the work.” Id.

         Tri-State submitted a bid, “[i]n specific reliance upon the Plans, Specifications and other bidding information prepared by [Burgess & Niple.]” Id., ¶ 9. The Sanitary Board accepted Tri-State's bid and on September 22, 2016, the parties entered into an agreement for the completion of both projects for a contract price of $9, 876, 186.44. Id., ¶ 10. The contract had a start date of on or about October 10, 2016, and provided that substantial completion should be achieved in 330 calendar days, with final completion 30 days thereafter. Id., ¶ 12. Burgess & Niple served as the Project Engineer and “the [Sanitary Board's] onsite representative during the construction project.” Id., ¶ 11.

         Tri-State immediately suffered delays in its performance, allegedly “as a result of [Burgess & Niple]'s changing and dictating Tri-State's planned manner and method of performance, failing to adequately and timely review and approve submittals, failing to recommend payment for materials and work provided, failing to recommend and approve requests for extensions of time, failing to investigate and initiate change orders for changed work for extra work resulting from unforeseen or changed site conditions as to when it had notice, ” each of which Tri-State contends constitutes a breach of Burgess & Niple's duties owed to Tri-State. Id., ¶ 13. Tri-State alleges that “[i]n its capacity as the design and project engineer for the Project and as the Owner's representative on the Project, B&N owed a duty of care to Tri-State to render its services, including, but not limited to, design, preparation of drawings, specifications, and contract documents, together with administration of the Project, recommending and improving payment and change order requests, with the ordinary skill, care and diligence commensurate with that rendered by members of its profession in the same or similar circumstances.” Id., ¶ 14.

         Specifically, Tri-State alleges in paragraph 15 that Burgess & Niple breached its duties owed to it by:

a. failing to prepare adequate and accurate drawings, plans and specifications, and contract documents for use in the construction of the Project;
b. failing to timely and adequately investigate, consider, approve and process change orders for extra and additional work, performed by Tri-State at the direction of B&N or the CSB, the Project Owner, as well as requests for extensions of time;
c. failing to adequately and properly administer the Contract as the project owner's representative;
d. directing, altering, and dictating Tri-State's manner and method of performance and requiring unnecessary and additional work without recommending additional compensation;
e. failing to timely and adequately address and approve submittals, address requests for clarification and/or corrections to the project plans and specifications, and to timely and adequately respond to requests for change orders, and claims; and
f. failing to act as an impartial arbiter with respect to claims and disputes between the CSB and Tri-State and refusing to investigate and recommend payment for claims submitted by Tri-State or as to which it had adequate notice[; and]
g. recommending and/or approving the CSB's wrongful termination of Tri-State's contract.

Id., ¶ 10. Tri-State alleges that these actions or inactions constitute negligence by Burgess & Niple as “a failure to render its services with the ordinary skill, care and diligence commensurate with the members of the engineering profession under similar circumstances.” Id., ¶ 16. Tri-State further alleges that “[a]s a direct, proximate and foreseeable result of B&N's breach of its duties owed to Tri-State, Tri-State has suffered substantial financial losses including, but not limited to, the cost of additional work performed, extra costs resulting from delays and lost productivity, loss of business opportunities, loss of profit, aggravation and annoyance.” Id., ¶ 17.

         This lawsuit commenced on June 29, 2018, when the Sanitary Board filed a complaint against Colonial Surety Company, the surety on the project, and PartnerRe Insurance Company of New York, the re-insurer surety on the project, invoking the court's diversity jurisdiction. See Original Complaint, ECF # 1. Thereafter, on August 28, 2018, defendants Colonial Surety Company and PartnerRe Insurance Company of New York filed an answer to the complaint, accompanied by a third-party complaint by Colonial Surety Company against third-party defendants Tri-State and Eric D. Taylor, Tri-State's president. See Answer and Third-Party Complaint, ECF # 16. Then, on September 20, 2018, the third-party defendants filed an answer to the third-party complaint, ...

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