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D&D Underground Utilities, Inc. v. Walter Martin Excavating, Inc.

United States District Court, Eastern District of Kentucky, Southern Division, London

May 7, 2015



Gregory F. Van Tatenhove, United States District Judge

On August 18, 2010, the City of Somerset Gas Department (“Somerset”) contracted with Defendant Walter Martin Excavating (“WME”) to install a gas line beneath the Rockcastle River. [R. 1 at ¶ 8.] Defendant International Fidelity Insurance Company (“IFIC”) issued a payment bond on the project for the benefit of WME. [Id. at ¶ 9.] WME contracted with Plaintiff D&D Underground Utilities, Inc., (“D&D”) to bore beneath the river and install a 12 inch casing to accommodate the gas line. [Id. at ¶ 10.] The circumstances surrounding the performance of this subcontract give rise to the present litigation. Both parties agree that the work was not completed in a timely fashion but disagree as to who is to blame, who is to bear the cost for those delays, and whether delays in payment have been in good faith. The matter is now before the Court on WME’s motion for partial summary judgment and D&D’s related motion to strike portions of Scott Adam’s affidavit. For the reasons that follow, the Partial Motion for Summary Judgment will be GRANTED in part and DENIED in part and D&D’s Motion to Strike will be DENIED.


The contract between Somerset and WME provided that the project was to be completed by November 27, 2010 and that WME would be assessed damages of $400 per day if the project was not completed on time. [R. 37-2 at ¶ 5-6 (Adams Aff.); R. 37-3 (Contract).] After receiving bids, and attempting to do the work themselves, WME entered into a non-written contract with D&D to bore beneath the river and install a 12 inch casing to accommodate the gas line. [R. 1 at ¶ 10; R. 37-2 at ¶ 8 (Adams Aff.); R. 42-1 at ¶¶ 9-10 (Burr Aff.)]

According to Don Burr, the President and Owner of D&D, he discussed the liquidated damages clauses with Shawn Martin, former Vice-President of WME, in advance of agreeing to the project and made it clear that D&D would likely not even get to the project site before the project deadline had passed. [R. 42-1 at ¶ 9 (Burr Aff.)] According to Burr, “Shawn Martin understood that D&D Underground would not be responsible for any liquidated damages.”[1] [Id. at ¶ 9-10 (Burr Aff.)] The parties agree that the work was to be done for $168, 000.[2]

D&D arrived at the site in the third week of November and began work on the project soon thereafter. [R. 1 at ¶ 10; R. 37-2 at ¶ 9 (Adams Aff.); R. 42-1 at ¶ 10 (Burr Aff.)] In March 2011, D&D hit a snag when a “reemer head” broke off and became lodged in the bore. [R. 1 at ¶ 12; R. 37-2 at ¶ 10 (Adams Aff.); R. 37-4 at ¶ 9 (Williams Aff.); R. 42-1 at ¶ 14 (Burr Aff.)] The parties disagree about what then ensued. WME contends that D&D tried to retrieve its equipment, but failed and left WME to figure out how to proceed. [R. 37-1 at 3; R. 37-2 at ¶ 10 (Adams Aff.)] According to WME, D&D would not return unless WME retrieved its equipment from beneath the river, but did agree that they (D&D) would be responsible for additional costs incurred in retrieving the equipment. [R. 37-1 at 3; R. 37-2 at ¶ 12 (Adams Aff.); R. 42-1 at ¶ 17 (Burr Aff.)]

D&D admits that WME assisted in trying to recover the equipment but notes that it was very involved in the process too, even breaking a second reemer head in the process of retrieving the first. [R. 42 at 6.] After breaking two reemer heads, D&D concluded that they would have to dig the reemer heads out to recover them, which D&D was prepared to do, but the project was shut down when Somerset’s engineer, Vaughn Williams, advised the parties that an environmental assessment was necessary. [R. 1 at ¶ 13; R. 37-1 at 3-4; R. 37-4 at ¶ 11 (Williams Aff.); R. 42 at 6; R. 42-1 at ¶ 17 (Burr Aff.)] The environmental assessment was necessary for two reasons: the removal of existing pipeline by WME and the retrieval of D&D’s equipment. [R. 42 at 7; R. 37-4 at ¶ 11 (Williams Aff.)]

The environmental assessment cost WME $17, 693.34 and was not completed until late 2011. [R. 37-1 at 4; R. 37-4 at ¶ 14 (Williams Aff.); R. 42 at 7.] D&D returned to the project on December 29, 2011 and completed work in January, 2012. [R. 37-1 at 4; R. 37-4 at ¶¶ 11-12 (Williams Aff.); R. 42-1 at ¶ 18 (Burr Aff.)]

In February 2012, WME was partially paid by the City of Somerset and that payment included compensation for D&D’s work on the project. [R. 42 at 9; R. 42-2.] Burr spoke with Shawn Martin, the former Vice-President of WME who worked on the Rockcastle River Project, about payment for D&D’s work. [R. 42 at 7; R. 42-1 at ¶ 19 (Burr Aff.)] Burr agreed to two offsets ($5, 143.12 for costs incurred in renting a DriPrime pump and $17, 693.34 for the environmental assessment) based on Shawn Martin’s promise that D&D would be immediately paid. [R. 42 at 8; R. 42-1 at ¶ 19 (Burr Aff.)] The parties exchanged invoices for offsets and payments, and, at the request of WME, D&D provided its banking information to WME but WME did not pay D&D. [R. 42 at 9; R. 42-1 at ¶ 19-21 (Burr Aff.); R. 42-3; R. 42-4.]

On March 30, D&D sent WME a demand letter, demanding payment of $150, 788.44. [R. 42 at 9; R. 42-1 at ¶ 22 (Burr Aff.); R. 42-5.] D&D then retained counsel and submitted a claim on the payment bond that WME posted through IFIC. [R. 42 at 9.] While waiting to hear back from IFIC, on July 6, WME sent D&D a letter requesting an additional $130, 244.30 in offsets, and offering to pay $45, 000 for the work that D&D performed. [R. 37-1 at 4; R. 37-5; R. 42 at 10.] D&D contends this letter and the offsets contained in it were sent in bad faith. [Id.] They argue that many of the costs in the letter were not attributable to the delay or else were expenses that WME was required to bear under its contract with Somerset. [R. 42 at 10.] After rejecting the $45, 000 offer, D&D elected to file this suit on December 11, 2012.

On December 20, 2013, Somerset issued a joint check to WME and D&D for $37, 755.70 and also a $12, 875.96 check made solely to WME. [R. 37-1 at 5; R. 37-7.] On December 26, 2013, more than a year after this lawsuit was filed, and almost two years after D&D had submitted its invoice, WME tendered a check for $43, 380.70 to D&D in compensation for the “undisputed amount owed to D&D for its work on the Project and an additional $5, 625 for amounts claimed with respect to the Weddle Project.” [R. 37-1 at 5; R. 42 at 10-11.]

Despite the somewhat complicated, and very much disputed, factual predicates laid out by both parties, the issues raised in the partial motion for summary judgment are narrow and well defined. First, WME argues that D&D’s damages under counts one (Breach of Contract) and three (Unjust Enrichment) are limited to $107, 407.74. [R. 37-1 at 6-7.] Second, WME argues that count two, which alleges a violation of the Kentucky Fairness in Construction Act (“FICA”), must be dismissed as a matter of law because there is a good faith dispute regarding D&D’s claim. [R. 37-1 at 7.]

Both parties have submitted affidavits to support their motions. WME has produced affidavits from Scott Adams, Senior Manager of WME, and Vaughn Williams, President of Kenvirons, Inc., the engineering firm responsible for preparing the biological assessment and plan for removing D&D’s boring equipment and the existing gas pipeline.[3] [R. 37-2; R. ...

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