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Transcontinental Gas Pipe Line Co., LLC v. Kibby Welding, LLC

United States District Court, N.D. Oklahoma

August 8, 2019

TRANSCONTINENTAL GAS PIPE LINE COMPANY, LLC, Plaintiff,
v.
KIBBY WELDING, LLC, Defendant.

          OPINION AND ORDER

          CLAIRE V. EAGAN UNITHD STATES DISTRICT JUDGE

         Now before the Court are the following motions: Plaintiff Transcontinental Gas Pipe Line Company, LLC's Partial Motion to Dismiss Defendant's First Amended Counterclaim for Failure to State a Claim and Brief in Support (Dkt. # 26); Plaintiff Transcontinental Gas Pipe Line Company, LLC's Motion to Strike Defendant's Jury Demand and Brief in Support (Dkt. # 27); and Defendant's Motion for Leave to Amend Counterclaim (Dkt. # 31).

         I.

         On August 28, 2018, Transcontinental Gas Pipe Line Company, LLC (Transco) filed this case alleging that Kibby Welding, LLC (Kibby) breached a construction contract. Dkt. # 2. Transco has filed an amended complaint (Dkt. # 22) and this is now the operative pleading. The amended complaint alleges claims of breach of contract (counts one and two) and indemnification (count three), and Transco also seeks declaratory and injunctive relief (count four) and an accounting of amounts paid to subcontractors by Kibby (count five).

         Transco states that it is an interstate pipeline company, and Transco entered a contract with Kibby for work on a section of pipeline located in Virginia. Dkt. # 22, at 2. Transco agreed to pay Kibby $4, 058, 500 to make modifications and replace components on a section of pipeline. Id. The contract required Kibby to submit a performance and payment bond upon a written request by Transco. Id. Transco claims that it submitted written requests for a performance and payment bond from Kibby on January 2, 8, and 17, 2018, but Kibby failed to furnish a bond as required by the contract. Id. at 3. The contract requires Kibby to “keep the property and Work free and clear of all liens, claims, security interests and encumbrances arising from the performance of the Work and this Contract.” Dkt. # 22-1, at 27. Numerous liens have been filed against Transco by subcontractors of Kibby totaling $2, 894, 600.97, and Transco believes that Kibby has failed to pay other subcontractors who have not yet filed liens. Dkt. # 22, at 4. In addition, Kibby has also filed liens against Transco's property in the amount of $4, 421, 849.28, and Transco claims that these liens were filed in breach of the parties' contract. Id. Transco has demanded that Kibby release its lien and Kibby has refused. Id.

         The contract provides a final completion date of June 17, 2018 and requires Kibby to meet certain “Key Milestone Performance Dates.” Id. Transco alleges that Kibby failed to meet any of the performance deadlines and that the work remains uncompleted as of the filing of the amended complaint. On August 7, 2018, Transco sent a letter notifying Kibby of Transco's intent to terminate the contract for cause. Id. at 5. Transco acknowledges that Kibby has submitted requests for payments for extra work, but Transco claims that the extra work “was not consistent with the Contract requirements, was not supported by appropriate documentation and was due to Kibby's self-inflicted wounds, including its own delays, inefficiencies and inability to perform the Work.” Id. at 5-6. Transco states that the parties were unable to informally resolve their dispute, and Transco filed this case seeking damages in excess of $75, 000 and injunctive and declaratory relief.

         Kibby filed an answer to the original complaint and also asserted counterclaims against Transco. Transco filed an amended complaint and Kibby filed an amended answer and counterclaims. Kibby's original and amended answers both contain a jury demand. Kibby states that it is a welding company and has periodically worked for Transco for about eight years. Dkt. # 25, at 2. Kibby states that the contract required it to “provide welding services needed in conjunction with several trap modifications, valve replacements, [Department of Transportation] retesting, tap abandonments, and pipeline replacements” in Charlottesville, Virginia. Id. In more general terms, Kibby claims that it performed welding at tie-ins along the pipeline and connected various pieces of the pipeline. Id. Kibby made a bid of $4, 058, 500 based on its understanding of the work to be performed, and Kibby claims that its bid was based on a belief that there were no bends in the pipeline and that there would be no matching of different types of pipe. Id.

         Kibby claims that it began its work and encountered a bend in the pipeline at the first tie-in it was asked to weld, and Kibby claims that Transco delayed in directing Kibby how to proceed. Id. at 3. Kibby blames Transco for any delays in completing the work required by the parties' contract, and Kibby claims that the scope of work was more time-consuming and expensive than contemplated in its bid for the contract. Id. Kibby disputes Transco's assertion that Kibby failed to complete the contract work, and Kibby claims that it achieved “mechanical completion” in July 2018. Id. at 4. Kibby further claims that Transco tacitly or impliedly approved extra work requests and allowed Kibby to go forward with work outside the scope of the contract. Id. Kibby alleges that Transco has denied its extra work requests and change orders, even though Transco impliedly approved such request or change orders. Id. Kibby asserts counterclaims of breach of contract, fraud, unjust enrichment, and interference with business relationships.

         II.

         Transco argues that Kibby's counterclaims for fraud and unjust enrichment should be dismissed, because the parties' relationship is governed by an enforceable contract and these alternative claims seek the same relief that Kibby could recover for breach of contract. Dkt. # 26. Kibby responds that it is permitted to plead alternative claims of breach of contract and unjust enrichment, and Kibby asserts that it has alleged a plausible claim of constructive fraud based on the non-disclosure of material facts. Dkt. # 33.

         A.

         Kibby argues that it is permitted to plead alternative claims of fraud and breach of contract, even though it acknowledges that it may not receive double recovery on both claims. Dkt. # 33, at 8. Kibby cites Specialty Beverages, LLC v. Pabst Brewing Co., 537 F.3d 1165 (10th Cir. 2008), for the proposition that Oklahoma law permits a party to proceed with claims for breach of contract and fraud at the pleading stage. However, a party may not allege breach of contract and fraud claims based on identical facts, and the claims must be sufficiently distinct in order for a party to simultaneously maintain claims for breach of contract and fraud. Horton v. Bank of America, 189 F.Supp.3d 1286, 1290-91 (N.D. Okla. 2016); Atkinson, Haskins, Nellis, Brittingham, Gladd & Fiasco, P.C. v. Oceanus Ins. Group, 2014 WL 3891267, *5 (N.D. Okla. Aug. 7, 2014); McGregor v. National Steak Processors, Inc., 2012 WL 314059, *3 (N.D. Okla. Feb. 1, 2012). A party who elects to sue for breach of contract cannot bring a fraud claim unless the “tortious act is sufficiently independent of the breach of contract.” McKnight v. Marathon Oil Co., 2017 WL 1628981, *2 (W.D. Okla. May 1, 2017). In addition, “the fraud must have resulted in damages greater than those caused by the breach of contract alone.” West v. Ditech Financial LLC, 2016 WL 3200296, *4 (W.D. Okla. June 8, 2016).

         Kibby alleges that it made a bid of $4, 058, 500 for the contract work based on its “belief that there were no bends in the pipe or matching different types of pipe together . . . .” Dkt. # 25, at 2. When Kibby began working, the first tie-in that Kibby was asked to weld had a bend in the pipe, and Kibby claims that the bend in the pipe was not disclosed during contract negotiations. Id. at 3. Kibby blames Transco for any delays in completing the work, because Transco failed to timely respond to Kibby's request for additional direction concerning how to proceed with welding at the bend in the pipe. Id. Transco allegedly delayed in approving Kibby's requests to obtain additional parts as Kibby encountered more bends in the pipe or attempted to weld pipes made of different materials. Id. In support of its breach of contract counterclaim, Kibby alleges that it submitted extra work requests and change orders pursuant to the contract, and Kibby claims that Transco provided assistance in putting the requests in the proper format. Id. at 4. Transco allegedly took no action to stop Kibby from performing additional work and incurring extra costs, and Kibby claims that Transco breached the contract by refusing to pay Kibby's extra cost requests and change orders. Id. Kibby seeks damages for breach of contract for these additional costs it incurred to complete the contract work. Id. at 4-5. As to Kibby's fraud counterclaim, Kibby claims that Transco was aware or should have been aware of bends in the pipeline and the existence of non-matching pipes, and Kibby claims that Transco had a duty to disclose this information as part of the bidding process. Id. at 5. Kibby believes that Transco purposefully withheld this information to obtain lower bids for the work, even though it knew that the subcontractor would incur additional expenses in completing the work. Id. Kibby alleges that Transco intended to deny extra work requests or change orders and force Kibby to complete the contract work even at bidding stage of contract negotiations, and Kibby claims that it was harmed by having to hire more workers and purchase additional parts to complete the work. Id. at 6.

         After reviewing the allegations of Kibby's amended counterclaims, the Court finds no significant distinction between the facts supporting Kibby's breach of contract and fraud counterclaims. The key fact supporting both the breach of contract and fraud counterclaims is that Transco failed to disclose the existence of bends in the pipeline and non-matching pipes during contract negotiations. Kibby claims that this resulted in the submission of a bid that was too low for the necessary work, and Kibby was forced to incur unexpected expenses to complete the contract work. The harm for the breach of contract and fraud claims is that Transco denied Kibby's extra work requests and change orders, and the amended counterclaims make no distinction between the damages sought for breach of contract and fraud. Kibby has elected to proceed with a breach of contract counterclaim against Transco, and it may not proceed with a duplicative fraud claim for the same damages. Kibby cites Specialty Beverage, LLC for the proposition that it may simultaneously proceed with breach of contract and fraud counterclaims, and that Oklahoma rules of procedure allow for the pleading of alternative or inconsistent remedies. Dkt. # 33, at 5. However, the Tenth Circuit specifically cautioned that a party may not obtain a double recovery and there must be separate bases for recovery to support claims of breach of contract and fraud. Specialty Beverage, LLC, 537 F.3d at 1180 n.12. The factual basis for Kibby's breach of contract and fraud claims is ...


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