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Wahlcometroflex, Inc. v. Westar Energy, Inc.

United States District Court, Tenth Circuit

October 25, 2013

WAHLCOMETROFLEX, INC., Plaintiff,
v.
WESTAR ENERGY, INC., Defendant.

MEMORANDUM AND ORDER

ERIC F. MELGREN UNITED STATES DISTRICT JUDGE

This matter is before the Court on Westar Energy, Inc.’s (“Westar”) Motion for Summary Judgment (Doc. 53). Westar argues it is entitled to the maximum amount of liquidated damages allowed under the contract between Westar and Wahlcometroflex, Inc. (“Wahlco”) because Wahlco failed to deliver equipment by the deadlines agreed upon in the contract. Wahlco argues that Westar must prove that Wahlco’s late delivery of equipment resulted in actual harm and that the harm is solely attributable to Wahlco. The Court has previously determined that Westar does not need to prove actual delay or damages as a condition precedent to recovering liquidated damages, and the Court concludes that Wahlco’s responsibility for the late delivery of equipment is sufficient for Westar to recover the maximum amount of liquidated damages. Because the Court finds that Westar has demonstrated that it is entitled to the maximum amount of liquidated damages allowed under the Contract, the Court grants Westar’s motion.

I. Factual and Procedural Background[1]

Wahlco and Westar entered into a contract (“Contract”) in which Wahlco agreed to manufacture and deliver equipment for Westar’s Jeffrey Energy Center FGD Upgrade Project (the “Project”) in St. Mary’s, Kansas. The equipment primarily consisted of dampers for Unit 1, Unit 2, and Unit 3 of the Project. The total Contract price, including all change orders, was $6, 229, 185.50.

The Contract required Wahlco to deliver Unit 1 equipment by August 29, 2007; Unit 2 equipment by July 29, 2008; and Unit 3 equipment by March 16, 2008. The Contract also contained a liquidated damages provision which states:

In the event Contractor has not delivered each piece of Equipment and Material with no apparent shipping damage by the latest allowable delivery date indicated in ARTICLE 1 of this Attachment 1; Contractor shall pay Owner one and one half percent (1.5%) of the total Contract Price per week for every week beyond the latest allowable delivery date.
The total liquidated damages for the delay in the Delivery of Equipment shall not exceed ten percent of the total Contract Price.

The provision further states that liquidated damages “shall be calculated at the end of each calendar month, and an invoice for that month's total calculated liquidated damages will be issued to Contractor.” The provision permits Westar to deduct liquidated damages owed from Westar’s invoice payment to Wahlco “[i]f Contractor [Wahlco] does not fully compensate Owner [Westar] for invoiced liquidated damages within 30 days of invoice receipt.” Wahlco completed the delivery of Unit 1 equipment on November 15, 2007. On June 18, 2008, Westar informed Wahlco that the Unit 1 delivery was late and that Westar was entitled to the maximum liquidated damages recoverable under the Contract. On July 30, 2008, Westar released payment for three of the Contract milestones and again advised Wahlco that Westar was not waiving its right to assess liquidated damages after all three Units were delivered and operating satisfactorily.

Wahlco delivered the Unit 3 equipment on August 1, 2008, and the Unit 2 equipment on October 3, 2008. On February 13, 2009, Westar provided an itemization of the liquidated damages recoverable under the Contract. On July 22, 2009, Westar informed Wahlco that because Wahlco owed liquidated damages for late delivery of equipment, Westar was withholding the $367, 511.28 balance Westar owed Wahlco under the Contract.

Wahlco filed a complaint against Westar, alleging that Westar wrongfully withheld the $367, 511.28 balance due. Count I of the complaint alleged breach of contract and Count II alleged Westar violated the Kansas Fairness in Private Construction Act by unreasonably withholding payment due under the Contract. Westar filed a counterclaim against Wahlco. In Count I of the counterclaim, Westar sought a declaratory judgment that Westar did not have to prove actual harm as a condition precedent to enforcing the liquidated damages provision. In Count II of the counterclaim, Westar alleged breach of contract and argued that Westar was entitled to the maximum amount of liquidated damages allowed under the Contract.

The Court separated the litigation into two phases. Before engaging in full-blown discovery, the parties wanted the Court to resolve whether Westar must prove actual harm as a condition precedent to recovering liquidated damages under the Contract. The parties filed cross-motions for summary judgment regarding Count I of Westar’s counterclaim. After determining that the Contract did not require Westar to demonstrate actual harm or delay to the Project before enforcing the liquidated damages provision, the Court granted Westar’s Motion for Partial Summary Judgment and denied Wahlco’s Motion for Summary Judgment.[2]

Wahlco subsequently filed a Motion for Reconsideration or in the alternative for Certification under 28 U.S.C. Section 1292(b). The Court denied Wahlco’s Motion for Reconsideration, noting “[t]he Court believes that it apprehended Wahlco’s position when it stated that the issue presented was ‘whether Westar ha[d] to prove actual harm, in the form of project delay or damages, as a condition precedent to recovering liquidated damages for Wahlco’s late delivery of equipment.’”[3] The Court also denied Wahlco’s request for certification.[4]

Westar has filed a Motion for Summary Judgment in which it requests that the Court grant summary judgment for Westar on Wahlco’s breach of contract and Kansas Fairness in Private Construction Act claims. Westar also requests that the Court grant summary judgment for Westar on Westar’s remaining breach of contract ...


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