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ADA-ES, Inc. v. Big Rivers Electric Corp.

United States District Court, W.D. Kentucky, Owensboro Division

January 24, 2019

ADA-ES, INC. PLAINTIFF
v.
BIG RIVERS ELECTRIC CORPORATION DEFENDANT

          MEMORANDUM OPINION AND ORDER

          JOSEPH H. MCKINLEY JR., DISTRICT JUDGE.

         This matter is before the Court on Plaintiff's Motion for Partial Summary Judgment [DN 59], Defendant's Cross-Motion for Partial Summary Judgment [DN 63], Defendant's Rule 56(d) Motion [DN63], and Plaintiff's Motion to Strike the Sur-Reply Portions of Defendant's Reply [DN 66]. Fully briefed, these matters are ripe for decision. For the following reasons, Plaintiff's Motion for Partial Summary Judgment is DENIED, Defendant's Cross-Motion for Partial Summary Judgment is GRANTED, Defendant's Rule 56(d) Motion is GRANTED, and Plaintiff's Motion to Strike is DENIED.

         I. Background

         According to the Complaint, Plaintiff ADA-ES, Inc. (“ADA-ES”) contracted with Big Rivers Electric Corporation (“Big Rivers”) for the engineering, manufacturing, and delivery of equipment and materials for a Dry Sorbent Injection System (“DSI System”). [DN 20 ¶ 7]. Pursuant to a requirement of the Request for Quotes (“RFQ”), ADA-ES posted an irrevocable standby letter of credit in the amount of $807, 651.00 through CoBiz Bank in Denver, Colorado, to serve as security for performance under the contract. [Id. ¶ 11]. In accordance with the contract, ADA-ES engineered, manufactured, and delivered a DSI System, which was incorporated into a power plant owned by Big Rivers. [Id. ¶ 13]. The purpose of the system was to inject a powdered sorbent into the power plant system where exhaust gas is produced to bind with, capture, and sequester the pollutant, Sulfur Trioxide gas (“SO3”), created from the burning of fuel. [Id.]. In other words, the DSI System was to be used to reduce SO3 emissions to a specific level. [Id.].

         According to the contract documents-the RFQ, the contract, and the purchase order [DN 63-1 ¶ 17]-“Performance Guarantee Test Procedures” were to be mutually agreed upon and provided by ADA-ES 75 days after notice to proceed was granted by Big Rivers. [DN 20 ¶¶ 14- 15]. These procedures were to provide guidelines for Big Rivers' testing of the DSI System after delivery and installation. On or about January 8, 2016, ADA-ES provided Big Rivers with the DSI Performance Test Procedure. [DN 20-7]. Those guidelines were incorporated into the final protocol for the test program, named CleanAir Protocol. [DN 20-8, 9, 10].

         In March 2016, after the DSI System was installed and the performance test guidelines were finalized, Big Rivers conducted its first performance test on the DSI System. [DN 20 ¶ 19]. Big Rivers claimed the system failed the test by failing to reduce the amount of SO3 emissions to less than five parts per million (ppm)-the contractually agreed upon reduction-when a specified amount of sorbent was consumed under specified conditions. [Id. ¶ 20]. Thereafter, Big Rivers notified ADA-ES of the failed test. ADA-ES responded that “it disagreed with Big Rivers' conclusions about the test, and informed Big Rivers that the way to cure the alleged problem was to use the High Reactivity Hydrated Lime as called for in the Test Procedures and the CleanAir Protocol.” [Id. ¶ 22]. Big Rivers conducted a second test in June 2016 using a sorbent it claimed satisfied the contract's requirement and informed ADA-ES that the system again failed the performance test. [Id. ¶ 23].

         Based on the failed performance tests, Big Rivers issued a claim for damages in the amount of $605, 458.78, “which constituted its quantification of damages and asserted a right to both actual and liquidated damages for the same alleged performance breach.” [Id. ¶ 24]. Big Rivers thereafter withheld $563, 382.56 of contract payments. Additionally, Big Rivers withdrew the entire $807, 651.00 letter of credit funds, using the same basis it used to justify the withheld contract payments. [Id. ¶ 27].

         On May 11, 2017, ADA-ES filed an Amended Complaint alleging Fraud (Count I), Unjust Enrichment (Count II), Breach of UCC Warranties (Count IV), Breach of Contract (Count V), and seeking Declaratory Judgment as to seven claims (Count III). [DN 20 ¶¶ 35-77]. In July 2018, ADA-ES filed the instant Motion for Partial Summary Judgment requesting that this Court grant declaratory judgment in its favor as to two of the seven claims-the contractually-permissible damages and the contractually-required sorbent to be used in the DSI System. [DN 59 at 1]. Big Rivers responded opposing ADA-ES's Motion as to both claims, filing its own Motion for Partial Summary Judgment as to the contractually-permissible damages, and filing a Rule 56(d) Motion asking the Court to deny or defer ruling on ADA-ES's Motion as it pertains to the contractually-required sorbent until further discovery could be conducted. [DN 63]. ADA-ES filed in a single document its Reply in support of its initial Motion for Partial Summary Judgment, a Response to Big Rivers' Cross-Motion for Partial Summary Judgment, and its Response in opposition to Big Rivers' Rule 56(d) Motion. [DN 64]. In what would have been the final filing, Big Rivers filed its Reply in support of its Cross-Motion for Partial Summary Judgment and its Rule 56(d) Motion. [DN 65]. However, ADA-ES took issue with the substantive arguments made by Big Rivers' in its Reply. Accordingly, ADA-ES filed a Motion to Strike the portions of Big Rivers' Reply that, in its opinion, constituted a sur-reply. [DN 66]. Big Rivers responded that its Reply consisted only of appropriate arguments and, as such, requested that the Court deny the drastic remedy sought by ADA-ES in its Motion to Strike. [DN 67]. The final brief in this long saga was filed November 9, 2018-ADA-ES's Reply in support of its Motion to Strike. [DN 69].

         II. Standard of Review and Law

         Before the Court may grant a motion for summary judgment, it must find that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of specifying the basis for its motion and identifying the portion of the record that demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the moving party satisfies this burden, the non-moving party thereafter must produce specific facts demonstrating a genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

         Although the Court must review the evidence in the light most favorable to the non-moving party, the non-moving party must do more than merely show that there is some “metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Instead, the Federal Rules of Civil Procedure require the non-moving party to present specific facts showing that a genuine factual issue exists by “citing to particular parts of materials in the record” or by “showing that the materials cited do not establish the absence . . . of a genuine dispute[.]” Fed.R.Civ.P. 56(c)(1). “The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party].” Anderson, 477 U.S. at 252.

         III. Discussion

         The Court will address first the Motion to Strike followed by the motions regarding partial summary judgment.

         A. ADA-ES's Motion to Strike Sur-Reply [DN 66]

         Following Big Rivers' Reply pertaining to its Cross-Motion for Partial Summary Judgment and its Rule 56(d) Motion, ADA-ES filed a Motion to Strike the Sur-Reply Portions of that Reply. [DN 66]. ADA-ES contends that Big Rivers improperly asserted substantive arguments regarding whether the contract required high reactivity hydrated lime for performance testing in its Reply. [Id. at 1]. Specifically, ADA-ES argues that Big Rivers disguised substantive arguments as a Rule 56(d) Reply which instead should be used to show the Court why additional discovery is necessary prior to a summary judgment ruling-“a blatant effort to get the last word on ADA-ES's motion that had already been fully briefed.” [Id. at 3-4]. ADA-ES requests that the Court strike the sur-reply portions of Big Rivers' Reply or, in alternative, allow oral argument on ADA-ES's Motion for Partial Summary Judgment. [Id. at 4]. Big Rivers responded that its Reply was clearly related to its Rule 56(d) Motion, specifically discussing the need for additional discovery on the type of lime sorbent to be used in the performance tests of the DSI System. [DN 67 at 3-7]. ADA-ES retorts that Big Rivers' Reply argued why it believed the contract unambiguously warrants a decision in its favor, an impermissible argument for a Rule 56(d) filing. [DN 69 at 1].

         Big Rivers correctly notes that Rule 12(f) of the Federal Rules of Civil Procedure governs motions to strike pleadings. That Rule provides that “[t]he court may strike from a pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). “Motions to strike under Rule 12(f) are addressed within the sound discretion of the Court, although they are generally disfavored.” Hashemian v. Louisville Reg'l Airport Auth., No. 3:09-CV-951, 2013 WL 1788473, at *5 (W.D. Ky. Apr. 26, 2013) (citing Ameriwood Indus. Intern. Corp. v. Arthur Andersen & Co., 961 F.Supp. 1078, 1083 (W.D. Mich. 1997) (internal citations omitted)). ‚ÄúStriking a pleading is a drastic remedy to be resorted to ...


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