Androscoggin Valley Reg'l Refuse Disposal Dist. v. R.H. White Constr. Co.

2017 DNH 093

Androscoggin Valley Regional Refuse Disposal District v. R.H. White Construction Co., Inc.

R.H. White Construction Co., Inc. v. Sanborn, Head & Associates, Inc. et al.

Civil No. 15-cv-434-LM

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

May 8, 2017

ORDER

Androscoggin Valley Regional Refuse Disposal District (the "District") brings suit against R.H. White Construction Co., Inc. ("R.H. White") alleging claims arising out of an agreement between the parties that provided for R.H. White to design and build a landfill gas processing facility. R.H. White filed a third-party complaint (doc. no. 4) against nine entities that were also involved in the building and design of the facility, including Sanborn, Head & Associates, Inc. ("SHA"). SHA answered the third-party complaint and asserted three third-party counterclaims against R.H. White. See doc. no. 42. R.H. White moves to dismiss three claims asserted by the District, arguing that they fail to adequately state a claim for relief. See doc. no. 91. R.H. White also moves to dismiss two of the third-party counterclaims asserted by SHA on the same ground. See doc. no. 92.

Standard of Review

Under Rule 12(b)(6), the court must accept the factual allegations in the complaint as true, construe reasonable inferences in the plaintiff's favor, and "determine whether the factual allegations in the plaintiff's complaint set forth a plausible claim upon which relief may be granted." Foley v. Wells Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014) (citation omitted). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Background¹

The District owns and operates the Mount Carberry Landfill in Success, New Hampshire. On September 12, 2011, the Districtand R.H. White entered into an agreement (the "Agreement") in which R.H. White agreed to design and build a landfill gas compression and treatment facility (the "LFG Facility") at the Mount Carberry Landfill. The purpose of the LFG Facility was to treat and transport the landfill gas through a pipeline to the Gorham Paper and Tissue Mill, which would purchase the gas from the District.

In order to induce the District to enter into the Agreement, R.H. White made several representations in its response to the District's Request for Proposal ("RFP") and in the Agreement itself. Those representations included statements about R.H. White's expertise and ability to build and design the LFG Facility in accordance with the District's needs.

In 2012, R.H. White contracted with several companies to provide design and/or engineering services in connection with the construction of the LFG Facility. On July 5, 2012, R.H. White entered into an agreement with SHA (the "subcontract"), pursuant to which SHA was responsible for much of the overall engineering and design of the LFG Facility.

Under the terms of the Agreement and after several agreed-upon extensions, R.H. White was obligated to substantially complete its work on or before October 22, 2012. On November 5,2012, R.H. White commenced startup of the LFG Facility, and the first day of landfill gas sales occurred on November 7, 2012.

The LFG Facility ran intermittently from November 7, 2012 through December 20, 2012. On December 21, 2012, the facility was shut down entirely because it was not working properly. From December 2012 through March 2014, the LFG Facility experienced frequent unexpected shutdowns caused by multiple failing components, including the regeneration cooler, the air heat exchanger on the compressor skid, the glycol cooler, the compressor motor, and the odorant system.

R.H. White asked SHA to perform an analysis of the LFG Facility to identify the cause of the problems. SHA determined that at least part of the problem arose when some of the landfill gas being sent through a part of the system, the dessicant dryer, was recycled back through the system (the "regeneration gas").

In early 2014, based on SHA's recommendation and design, R.H. White installed a "side flare" to divert and "burn off" the regeneration gas before it was sent through the LFG Facility. The purpose of the side flare was to determine if the regeneration gas was causing the clogging and corrosion problems in the various components of the system.

In March 2014, the side flare began operating, and the LFG Facility stayed "on line" consistently thereafter. R.H. White asked the District to deem the side flare a "permanent solution" to the problems the facility had experienced and an acceptable change to the original design. R.H. White also asked the District to pay it the $496,000 retainage fee it had held back pending completion of the project. The District did not deem the side flare an acceptable permanent solution, because it reduced the amount of landfill gas that was supposed to be treated and eventually sold, and did not pay R.H. White the retainage fee.

While the District and R.H. White attempted to resolve the dispute, the District noticed staining of soil, metal roofs, and equipment in the area immediately beneath and surrounding the side flare. The District tested the stained soil, which showed elevated levels of certain heavy metals, including arsenic, chromium, lead, and nickel. The contamination levels are highest at the point of the side flare, which is consistent with the side flare being the cause of the contamination.

The District informed the New Hampshire Department of Environmental Services ("DES") of its soil testing findings. Based on initial discussions with DES, the District expects that it will need to remediate the contaminated topsoil around theside flare and that it will likely need to discontinue the side flare or redesign it to preclude further contamination. The District's engineers have begun trying to redesign the side flare, but even if successful, some landfill gas will still be diverted from the pipeline, leaving the District with less gas to sell than what was contemplated under the Agreement.

Under the original terms of the Agreement, the District was obligated to pay R.H. White $2,108,130, plus an additional $160,000 for ledge removal. After several "change orders," the total price under the Agreement rose to $3,275,508.40.

Discussion

R.H. White moves to dismiss three of the District's claims (doc. no. 91) and two of SHA's third-party counterclaims (doc. no. 92). The court addresses these motions separately below.

I. Motion to Dismiss District's Claims

The District asserts nine claims against R.H. White in its amended complaint: (1) Breach of Contract (Count I); (2) Breach of the Implied Covenant of Good Faith and Fair Dealing (Count II); (3) Breach of the Implied Warranty of Fitness for a Particular Purpose (Count III); (4) Negligence (Count IV); (5) Violation of the New Hampshire Consumer Protection Act ("CPA"), N.H. Rev. Stat. Ann. ("RSA") Ch. 358-A (Count V); (6) Breach of Express Warranty (Count VI); (7) Breach of Implied Warranty ofGood Workmanship (Count VII); (8) Negligent Misrepresentation (Count VIII); and (9) Unjust Enrichment/Quantum Meruit (Count IX). R.H. White moves to dismiss Counts V, VIII, and IX. The District objects.

A. Violation of the CPA (Count V)

R.H. White moves to dismiss the District's CPA claim, asserting that the allegations underlying the claim simply restate a breach of contract claim, and that the allegations fail to meet the well-recognized "rascality test." In response, the District contends that the rascality test does not apply here, because it is alleging that R.H. White committed one of the acts specifically proscribed by RSA 358-A:2, not that R.H. White's conduct was an otherwise unspecified "unfair method of competition or unfair or deceptive act or practice."

The CPA makes it "unlawful for any person to use any unfair method of competition or any unfair or deceptive act or practice in the conduct of any trade or commerce within this state." RSA 358-A:2. Beyond that, the CPA specifically proscribes 16 different deceptive acts or practices, including "[r]epresenting that goods or services have . . . characteristics . . . or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that such person does not have," RSA 358-A:2, V, and "[r]epresentingthat goods or services are of a particular standard, quality, or grade . . . if they are of another," RSA 358-A:2, VII. The District asserts that it is relying on these two provisions for its CPA claim in Count V, and not on another unspecified act or practice that would be subject to the New Hampshire Supreme Court's rascality test. See Beer v. Bennett, 160 N.H. 166, 171 (2010) ("The rascality test is used to determine 'which commercial actions, not specifically delineated, are covered by the [CPA].'" (quoting ACAS Acquisitions v. Hobert, 155 N.H. 381, 402 (2007))).

In order to state a claim under RSA 358-A:2, V or RSA 358-A:2, VII, a plaintiff must allege that a defendant made a representation, "with actual knowledge of its falsity or reckless disregard for its truth, with the intent to induce" the plaintiff to enter into a transaction. Brace v. Rite Aid Corp., No. 10-cv-290-LM, 2011 WL 635299, at *3 (D.N.H. Feb. 4, 2011) (discussing Kelton v. Hollis Ranch, LLC, 155 N.H. 666 (2007) and Beer, 160 N.H. 166). In its objection, the District asserts that it has sufficiently alleged a violation of RSA 358-A:2, V and RSA 358-A:2, VII, because the amended complaint alleges:

that R.H. White promised that the LFG Facility would be of a particular standard or grade (i.e., a fully functioning LFG Facility) and that the LFG Facility it built would have the characteristics, uses and benefits of a fully functioning LFG Facility; however, the plant R.H. White actually built was not of thatstandard and did not have those characteristics, uses, or

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