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White Oak Power Constructors v. Mitsubishi Hitachi Power Systems Americas, Inc.

United States District Court, E.D. Virginia, Richmond Division

August 8, 2019

WHITE OAK POWER CONSTRUCTORS, Plaintiff,
v.
MITSUBISHI HITACHI POWER SYSTEMS AMERICAS, INC., Defendant. OLD DOMINION ELECTRIC COOPERATIVE, Plaintiff,
v.
WHITE OAK POWER CONSTRUCTORS, et al. Defendants. WHITE OAK POWER CONSTRUCTORS, Plaintiff,
v.
ALSTOM POWER, INC., and OLD DOMINION ELECTRIC COOPERATIVE Defendants.

          OPINION

          John A. Gibney, Jr., Judge

         In 2014, Old Dominion Electric Cooperative ("Old Dominion") hired White Oak Power Constructors ("White Oak") to build a natural gas power plant in Rising Sun, Maryland. White Oak and Old Dominion drafted and signed the Engineer, Procure, and Construct Contract ("EPC Contract") to govern their relationship. Over the course of construction, multiple disputes arose between Old Dominion, White Oak, and the suppliers of the power plant's different components.[1]This lawsuit followed. White Oak and Old Dominion have both moved for partial summary judgment on the interpretation of part of the EPC Contract: Section 9.2.4.3 (the "Risk of Loss Provision").

         The EPC Contract provides that White Oak owes Old Dominion liquidated damages if White Oak fails to complete the power plant on time. The Risk of Loss Provision in the EPC Contract makes Old Dominion responsible for certain losses or damages to property at the plant. After delays in construction, Old Dominion assessed more than $50 million in liquidated damages against White Oak. White Oak now claims that, under the Risk of Loss Provision, Old Dominion should be liable for "delay-related losses, damages, and costs" attributable to property damage. (Dk. No. 152, at 6.) Old Dominion says that the Risk of Loss Provision only requires it to pay for losses to property and does not extend to liquidated damages for any corresponding delays.

         Because the Risk of Loss Provision is unambiguous and does not require Old Dominion to pay delay-related liquidated damages, the Court will grant Old Dominion's motion and deny in part White Oak's motion.[2]

         I. BACKGROUND

         A. Relevant EPC Contract Language

         Section 9 of the EPC Contract, titled "Indemnities; Insurance/' lists the various insurance policies that Old Dominion, White Oak, and White Oak's subcontractors needed during construction of the power plant. (Dk. No. 44-2, at 53.) Section 9.2.4 covers "Property Insurance" and first specifies what type of "All-Risk Builders' Risk Insurance" that Old Dominion must buy, and what happens in the case of a major property loss at the construction site. (Id. at 60-61.) In Section 9.2.43, titled "Risk of Loss," the EPC Contract states:

[Old Dominion] shall be accountable and responsible for any loss or damage to any part of the Facility, the Site or Work, including property of any kind including, but not limited to, uninsured Losses and deductibles.

(Id. at 62) (emphasis added).[3] The parties' motions focus on the interpretation of this short paragraph.

         The EPC Contract gives two separate definitions of "Work." First, it defines "Work" as "the responsibilities of [White Oak] hereunder." (Id. at 19.) Second, it defines "Work" as "that which is produced, constructed or built pursuant to this Agreement, where the context so requires." (Id.) It also defines "Losses" as "any claims, causes of action, demands, suits, proceedings, fines, penalties, liabilities, judgments, awards, losses, damages, interest, costs or expenses (including attorneys' fees, expert fees, consultant fees, other litigation costs, and court costs)." (Id. at 13.)

         The parties agreed in the EPC Contract that White Oak would reach "Substantial Completion" of the facility by May 1, 2017. (Id. at 16.) Section 8 of the EPC Contract created a procedure for both parties to submit and accept "Change Orders," which could alter the deadlines or specifications for the construction. (Id. at 50.) Section 8 notes that White Oak is "entitled" to a Change Order in circumstances where Old Dominion fails "to perform its obligations" or where a "Force Majeure event will materially delay the schedule of the Work." (Id. at 51.) Section 12 details liquidated damages that White Oak would pay for failing to reach Substantial Completion by May 1, 2017.

         B, Delays in Construction

         Several instances of property damage delayed construction of the power plant. For example, a fire in September, 2016, destroyed one of the transformers and parts of the building around it. Freezing water caused damage to concrete foundations and windstorms destroyed rebar cages. Because of necessary repairs and cleanup, these incidents contributed to the delay of the entire construction effort. White Oak did not reach Substantial Completion by May 1, 2017. In fact, the power plant was not substantially complete until April 11, 2018. Old Dominion has assessed tens of millions of dollars in liquidated damages against White Oak because of its delay in finishing the construction.

         II. D ...


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