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Panel Specialists, Inc. v. Tenawa Haven Processing, LLC

United States District Court, D. Kansas

December 28, 2018

PANEL SPECIALISTS, INC., Plaintiff/Counterclaim Defendant,
TENAWA HAVEN PROCESSING, LLC., Defendant/Counterclaim Plaintiff.



         This is contractual dispute over the construction of a natural gas processing plant owned by the defendant/counterclaim plaintiff Tenawa Haven, LLC (“Tenawa”) for which the plaintiff/counterclaim defendant Panel Specialists, Inc. (“PSI”) contracted and performed instrumentation and electrical services. The pending dispositive motions include: PSI's Motion for Partial Summary Judgment on the Issue of Breach of Contract for Delay (ECF# 100); Tenawa's Motion for Summary Judgment on PSI's Unjust Enrichment/Quantum Meruit Claim (ECF# 102); PSI's Motion for Partial Summary Judgment on Contracts (ECF# 103); Tenawa's Motion for Partial Summary Judgment on Mechanic's Lien Claim (ECF# 106); Tenawa's Motion for Summary Judgment on Attorney's Fees and Interest (ECF# 108); Tenawa's Motion for Partial Summary Judgment to Enforce Plaintiff's Published Price List (ECF# 110); and Tenawa's Motion to Strike PSI's Reply (ECF# 128) and for Leave to file a Sur-Reply (ECF# 130).


         Ultimately, a court grants summary judgment “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see Fed. R. Civ. P. 56. But first, the movant “always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact.” Id. at 323. This does not mean the moving party must negate the other side's claims or defenses through affidavits. Id. Upon a properly supported motion for summary judgment, the nonmoving party must go beyond the pleadings, that is, mere allegations or denials, and set forth specific facts showing a genuine issue of material fact for trial, relying upon the types of evidentiary materials contemplated by Rule 56. Id.

         A court decides the motion “through the prism of the substantive evidentiary burden.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254 (1986). So, a factual dispute is “material” only if it “might affect the outcome of the suit under the governing law.” Id. at 248. To be genuine, a factual dispute requires more than a mere scintilla of evidence in support of a party's position. Id. at 252. This means that the purpose of Rule 56 “is not to replace conclusory allegations of the complaint or answer with conclusory allegations of an affidavit.” Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990). At the same time, the summary judgment stage does not authorize the court's weighing of the evidence, crediting some over other, or determining the truth of disputed matters, but it shall decide whether a genuine issue of material fact for trial exists. Tolan v. Cotton, 572 U.S. 650, 656 (2014). The court performs this task with a view of the evidence that favors most the party opposing summary judgment. Id. at 657. Summary judgment may be granted if the nonmoving party's evidence is merely colorable or is not significantly probative. Liberty Lobby, 477 U.S. at 250-51. Essentially, the inquiry is “whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law.” Id. at 251-52.


         These facts serve as the background for the court's rulings on the pending motions. The court incorporates relevant stipulations and general facts that frame the issues central in the motions. It leaves the facts more specific to the motions for later discussion.

         In 2013, Next Generation Processing, LLC (“NGP”) decided to build a cryogenic natural gas processing facility in Haven, Kansas, (“Plant”) to straddle Panhandle Eastern Pipe Line's interstate pipeline and to serve gas producers throughout southwest Kansas, northwest Oklahoma, and the Texas Panhandle. NGP solicited investors and Tenawa was created to own and operate this natural gas facility. Greg Ameringer, owner of NGP, acquired an equity interest in Tenawa with its formation.

         PSI's business is providing instrumentation and electrical (“I&E”) services to the oil and gas industry. PSI's president is Earl Bergeron. He personally performed some of PSI's work for Tenawa in planning and estimating the work and in doing and supervising construction work at the Plant.

         In 2012, Mr. Ameringer approached Mr. Bergeron about I&E work for the proposed plant and provided him with information. Working from that, PSI furnished on March 21, 2012, an initial budget estimate for I&E work totaling $6.4 million. PSI revised its estimate in September of 2013 to $4.76 million. Mr. Ameringer requested PSI to provide Tenawa with a letter laying out PSI's scope of work and estimating its price. Mr. Bergeron sent a letter dated December 7, 2013, that estimated PSI's price at $4.76 million and stated in part:

Please note that the original price of $4, 760, 000 dated Sept. 13, 2013 was a preliminary budget quote based on the information provided by Tenawa and work performed on similar projects. Panel Specialists Inc. will work on the Haven Project based on a cost-plus basis. Freight and any taxes will also apply to parts and/or equipment sales. I have attached a price list.

ECF# 104-1, p. 8. The attached price list was titled, “Published Price List Field Services, ” and was dated, “2-1-13.” Id. at p. 9. The parties' understandings differ over this price list's purpose, effect and operation.

         Mr. Ameringer followed up with an email to Mr. Bergeron attaching a purchase order signed and dated December 13, 2013, by Mr. Ameringer. Also attached to this email were Mr. Bergeron's letter of December 7, 2013, PSI's 2-1-13 published price list, the “Panel Scope” spreadsheet dated September 13, 2012, certain I&E design and specification documents, and the Master Service Agreement (“MSA”) signed by Mr. Ameringer and also dated December 13, 2013. Mr. Ameringer's email asked PSI to review, sign, and return the MSA. This purchase order for $4.76 million, No. HAV-121313-002, identified PSI as the vendor and described its work as “Cost Plus Proposal for Haven Instrumentation and Electrical Engineering per Panel Specialist Cover Letter and Earlier Budgetary Estimate date 12/7/13.” ECF# 104-1, p. 10.

         Mr. Bergeron signed the MSA. The parties dispute the meaning, scope and effect of certain provisions in the MSA. The following are some of the provisions in question:

(a) From time to time during the term hereof, Company [Tenawa], as owner and/or operator of . . ., may request, either orally or in writing, that Contractor [PSI] perform work or render services for the benefit or account of Company. If Contractor agrees to perform such work or services for Company, then, subject to the provisions of Section 20 below which addresses potential conflicts between the terms of “work similar form(s) for a particular job and the terms of this Agreement, this agreement shall control and govern the performance of all such work or services and the relationship of the parties relating thereto. . . .
(c) This Agreement does not grant Contractor an exclusive right or contract to perform all services described in Exhibit I required from time to time by Company, . . . . Neither Company nor Contractor shall be bound by the terms hereof until work or services have been authorized by Company and accepted by Contractor.
Contractor shall:
(a) Perform all work or services hereunder with due diligence and in a good and workmanlike manner in compliance with the provisions hereof, as well as the provisions of Exhibits I, III and IV here to .....
(a) Contractor shall furnish an invoice to Company in a form satisfactory to Company within thirty (30) days of completion of the work done pursuant hereto. Company shall pay for the work performed hereunder within thirty (30) days after the receipt of such invoices. . . . All invoices shall detail the work done, the equipment or supplies and materials furnished by Contractor for the work, and the rates applicable to each item in accordance with the schedule of rates furnished by Contractor (or with succeeding current rate schedules if approved in writing by Company), or at bid prices where applicable. If an increase in rates is not satisfactory to Company, Company shall have the right to cancel this Agreement by giving Contractor notice to that effect. Contractor shall provide Company not less than thirty (30) days written notice prior to the proposed effective date of changes in said rate schedule .....
All notices and inquires with regard to this Agreement shall be in writing and shall be delivered either personally to the designated representative of the party being notified or sent by registered mail, return receipt requested, to the address of each party set forth on the signature pages hereof. All notices shall be effective as of the time received by the addressee.
This agreement may be amended only by an instrument in writing signed by both parties hereto. . . . .
This instrument embodies the entire agreement of the parties as to the subject matter hereof. There are no promises, terms, conditions or obligations other than those contained herein. Should the parties hereto enter into any future formal written agreements (excluding any printed or other pre-prepared form(s) of “work orders”, “service orders”, “job or delivery tickets”, “invoices” or other similar form(s) submitted to Company by Contractor) specially prepared to provide for a particular job to be done or service to be rendered by Contractor, then, in the event of a conflict between the terms of such agreement and the terms of this Agreement, the terms of the special agreement for the particular job or services shall prevail. In the event of a conflict between the provisions hereof and the provisions of any printed or other pre-prepared form(s) of “work orders, ” “service orders, ” “job or delivery tickets, ” “invoices, ” or other similar form(s) submitted to Company by Contractor in connection with any work or services performed hereunder, the provisions of this Agreement shall prevail and be controlling. . . . .

         EXHIBIT I


1. Work To Be Performed:
Panel Specialists Inc. will supply labor and materials to install all instrumentation and electrical control systems to ensure proper plant functioning. . . .
2. Rates For Above Work: (Rates based on attached schedule supplied by Contractor or if a particular work order is bid, the bid price will become the basis for Contractor's compensation.) Panel Specialists will perform the above described work on a Cost-Plus Basis per Panel Specialists rates included in the Purchase Order. The Preliminary Estimate for Panel Specialist work is $4, 760, 000.

ECF# 104-1, pp. 15-18, 22-23, 30. It is uncontroverted that the parties did not later jointly sign a document to amend pursuant to ¶ 17 above. Nor did the parties pursuant to ¶¶ 6 and 14 provide express written notice of a proposed change in any schedule of rates and receive prior express written approval for a change in any schedule of rates.

         On July 3, 2014, Mr. Ameringer for Tenawa emailed Earl Bergeron for PSI asking, “Per our conversation, attached is the Initial Cost Estimate to be updated. Thanks and Have a Great 4th.” ECF# 104-1, p. 12. The attachment to this email is titled, “Panel IC Est-9-19-12.pdf.” Id. Mr. Bergeron responded by email on the morning of July 17, 2014. It reads, “Please review the attached update and call me if you have any questions.” Id. The attachment to this email is titled, “Panel_Scope_Haven立抙ꭞ 33.xis.” Id. at pp. 12-13. The attachment is a single page that describes ten separate jobs, e.g., “Purchase and Install all Electrical Equip required for the Plant” with an estimated total cost of “2, 500, 000.” Id. at p. 14. The attachment does not describe or disclose an estimated amount of work hours and equipment needed for each job. Nor does it describe or disclose the hourly rates or pricing list for the individual work and equipment costs for any of the jobs. PSI's updated estimate, however, increased the total cost of its work to $6.685 million. Id. Mr. Ameringer's email reply sent that same afternoon did not seek any clarification but simply said, “Looks good. See you next week.” Id. at p. 13. No. new purchase order issued from updated estimate. But, PSI's work at the Plant site did not begin until after Tenawa received and approved this updated estimate. This update did not include the cost of PSI's work performed later at the Interconnect Facility.

         PSI provided delivery tickets for labor and services provided, including per diems and lodging all of which were approved by Tenawa. Some of PSI's 2014 delivery tickets charged rates for work that were higher than the 2013 price list. PSI says the higher rates are what it was charging in 2014. Tenawa points to delivery tickets beginning in the fall of 2014 that included Mr. Bergeron's work as a programmer being charged at $125 per hour instead of $100 per hour. In the Spring of 2015, Mr. Earl's Bergeron's programming rate increased to $135 per hour, and Mr. Scott Bergeron's technician rate increased from $90 to $100 per hour. Mr. Bergeron's wife, Denise, who was PSI's Finance Manager, Secretary, and Treasurer, testified that notice of these rate changes came in the delivery tickets which Tenawa received and signed.

         The court will discuss the remaining facts in its analysis of the motions.


         In its factual contentions in the pretrial order, Tenawa includes that PSI agreed in the MSA to perform its work “in a timely manner, ” and “with due diligence and in a good and workmanlike manner.” ECF# 95, p. 8. Tenawa specifically borrows the language from the MSA in laying out the theory of this claim, “that if, in Tenawa's opinion, PSI fails to use reasonable diligence in performing the Work or fails to perform the Work according to the specifications required by the MSA, Tenawa ‘may at its election take over and perform, either through its own employees or another contractor, all or any part of the work then remaining unperformed.” Id. To support this claim, Tenawa alleges, in part, that PSI's work crew at the Plant site were inexperienced and lacked competent leadership, that PSI did not meet construction deadlines, and that schedules continued to be pushed back causing Tenawa to bring on another I&E contractor, Industrial Electric Company (“IEC”) to assist PSI in completing the I&E work. Tenawa concludes its factual allegations with:

By late March 2015, IEC had taken over the vast majority of PSI's Work (including I&E ordering and installation) and PSI was restricted to programming and limited commissioning work only. By the time that the Plant went into operation on May 15, 2015 (over four months past the original deadline), PSI only had two employees on site, although IEC had a full crew on site until late 2015 to finish up punchlist I&E work.

ECF# 95, p. 10. As for the financial consequences from PSI's delay, Tenawa asserts:

When PSI left the Plant in May 2015, Tenawa had paid it $5.99 million (a 25.8% overrun from PSI's budgetary estimate letter), even though Tenawa also had to pay IEC another $2.7 Million to complete PSI's scope of work. As mentioned above, IEC's work was expedited and performed on short notice with very tight deadlines because of delays caused by PSI. The expedited nature of IEC's work resulted in Tenawa having to pay IEC roughly 30% ...

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