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J. S. Haren Co. v. Fairfield Service Company of Indiana, LLC

United States District Court, W.D. Arkansas, Hot Springs Division

September 12, 2019

J.S. HAREN COMPANY PLAINTIFF
v.
FAIRFIELD SERVICE COMPANY OF INDIANA, LLC DEFENDANT

          FINDINGS OF FACT AND CONCLUSIONS OF LAW

          ROBERT T. DAWSON SENIOR U.S. DISTRICT JUDGE

         Plaintiff J.S. Haren Company filed this action for damages against Defendant Fairfield Service Company of Indiana, LLC alleging claims for breach of contract, breach of express and implied warranties, and revocation of acceptance arising from the sale and purchase of equipment to be used in the upgrade of the Stokes Pump Station in Hot Springs, Arkansas. Defendant denies the claims and contends the equipment it furnished materially complied with Plaintiff's specifications and was fit for the intended purpose or, in the alternative, that Plaintiff failed to timely reject the equipment, acted unreasonably, and failed in its duty to mitigate its own damages. The Court held a bench trial beginning the morning of June 17, 2019 in Hot Springs, Arkansas. Plaintiff appeared by and through its authorized representative, J.S. “Sky” Haren, and was represented by its attorney of record, James D. Lawson, P.C. Defendant appeared by and through its authorized representative, Madu Murarka, and was represented by counsel, Travis J. Morrissey of the Morrissey Law Firm.

         At trial, the Court admitted Plaintiff's Exhibits 1 through 41 (Exhibit and Witness List, June 18, 2019, ECF No. 37) and Defendant's Exhibits 1 through 3. Id. The Court heard testimony from Sky Haren, Larry Merriman, Chris Buntin, David Poston, and Madu Murarka. (Witness List, June 18, 2019, ECF No. 36.) Now having reviewed the record, witness testimony, and the evidence presented, the Court issues the following findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. For the reasons explained below, the Court finds that Plaintiff is entitled to judgment in the amount of $180, 000, with each party to bear its own costs.

         I. FINDINGS OF FACT

         1. Plaintiff, J.S. Haren Company, is a Tennessee corporation with its principal place of business in Athens, Tennessee. Sky Haren is Plaintiff's authorized representative.

         2. Defendant, Fairfield Service Company of Indiana, LLC is a limited liability company with its principal place of business located in Michigan City, Indiana. Madu Murarka is company President and Defendant's authorized representative.

         3. The Stokes Pump Station Upgrades project is owned by the City of Hot Springs, Arkansas (the City). The project was designed to improve the City's wastewater treatment capability. Larry Merriman was the City's Project Manager.

         4. Garver, LLC, is an engineering firm located in Fayetteville, Arkansas, hired by the City to act as its representative in connection with the Project. Garver also designed the Project, including all plans, contract documents and specifications. Chris Buntin, licensed professional engineer, acted as the Project Manager for Garver. T.J. Bruck acted as Garver's local Project construction observer.

         5. As part of the bidding process, Contractor was required to complete a Bid Form complying with “the prescribed requirements, and such alternates, unit prices, and other data” as provided in the City's Bidding Documents. (Specs. and Contract Docs., Pl's. Ex. 1, volumes 1 and 2, Dec. 15, 2015.) The Bidding Documents are very precise and detailed and include Bidding Requirements, Contract Documents, Conditions, General Requirements, and Technical Specifications. Id.

         6. Among the items of equipment specified for completion of the Project were a Mechanical Bar Screen and a Washer Compactor (the Equipment). (Id. at vol. 2, section 44 42 27.19.) The Bidding Documents specified that the Equipment must be the end product of one responsible manufacturer and that the Contractor would be responsible for providing the Equipment as specified in the Bidding Documents. Id. The Bidding Documents designated two responsible manufacturers, including Fairfield and another named Duperon. Id.

         7. Contractor sought out bids from suppliers for the Equipment in order to prepare its bid for the Project. On December 18, 2015, Fairfield submitted its proposal to supply the Equipment as specified in the Bidding Documents at a cost of $173, 000. Mark Hickok of BT Environmental acted as sales representative for Fairfield.

         8. The Duperon proposal came in at $180, 000.

         9. At trial, Sky Haren testified that the Contractor chose to purchase the Equipment from Fairfield based on its lower price and past manufacturing experience.

         10. On January 21, 2016 the City notified Contractor that it was the successful bidder for the Project. The City awarded the Project to the Contractor after determining it was the lowest responsible and responsive bidder. The total contract price of the Project was $2, 317, 000.00 (two million, three hundred seventeen thousand dollars). (Id. at vol.1, section 00 51 00.)

         11. The contract between the City and Contractor specified that time was of the essence regarding the timeline for achieving Substantial Completion (320 calendar days) and completion and readiness for final payment (365 calendar days). The contract provided for liquidated and special damages in the event of Contractor's failure to meet the Project timeline. The Project timeline began to run on March 1, 2016. (Id. at 00 52 00.)

         12. The contract is to be governed by the law of the State of Arkansas (the state in which the Project is located.) Id. at 00 72 00, Art. 18.07.

         13. On January 28, 2016, Contractor transmitted to Fairfield a written Material Order in the amount of $173, 000 for purchase of the Equipment, and Fairfield accepted the order. (Material Order No. 4502, Feb. 9, 2016, Pl.'s Ex. 2.) Payment terms were 90 percent within 30 days and the balance due within 120 days after startup. Id.

         14. The terms of the Material Order specified the Equipment would be manufactured in accordance with “Plans and Specifications including General Conditions for the Stokes Pump Station for the City of Hot Springs, AR dated November 25, 2015, and Addendum No. 1, dated December 15, 2015, as prepared by Garver USA, Fayetteville, AR…” Id.

         15. The Material Order stated that Fairfield would be liable for any liquidated damages caused by its failure to meet the time schedule, but that liquidated damages would “only be charged if the contractor is accessed [sic] damages which are directly attributable to Fairfield's performance or lack thereof.” Id.

         16. The Material Order does not include a provision for attorney's fees.

         17. The Material Order bound Fairfield to provide submittal data to Garver for approval prior to March 16, 2015 and to provide the Equipment within 140 calendar days after approval. Id.

         18. Fairfield's submittal data was provided to Garver on March 7, 2015.

         19. In support of its submittal data, Fairfield provided a Special Warranty Letter for the Equipment dated May 25, 2016. (Pl.'s Ex. 4.)

         20. Garver approved Fairfield's submittal data in or around May or June 2016.

         21. On or around October 28, 2016, Fairfield delivered the Equipment to the Project site and invoiced Contractor the sum of $155, 700.00 (90 percent of the agreed price).

         22. Due to unforeseen circumstances involving another vendor, the Project was running behind schedule, and Contractor accepted delivery of the Equipment and stored it outdoors on the Project site for installation at a later date.

         23. Upon receipt of the Equipment, Contractor performed a cursory inspection that revealed a bent door. Contractor notified Fairfield of the damage, and Fairfield replaced the door.

         24. Sky Haren testified that, because the Equipment was intended for outdoor use in a wastewater facility, Contractor thought that storing the Equipment outdoors would not cause it to suffer damage. The cursory inspection made upon receipt of the Equipment was thought to be enough, because there was no reason to question whether Fairfield had manufactured the Equipment in accordance with the Project plans and specifications and the approved submittal data.

         25. Sky Haren is a credible and believable witness, and the Court accepts his testimony as truthful and accurate.

         26. On July 6, 2017 a progress meeting was held between the City (Merriman), Garver (Buntin) and Contractor (Sky Haren), and it was agreed the installation of the Equipment would be scheduled for the end of June 2017. This date was later postponed to a time between July 10 and 14, 2017, and a Substantial Completion inspection was scheduled for August 8, 2017.

         27. On July 11, 2017, T.J. Bruck, Garver's construction observer, visited the Project site and noted visible corrosion on the mechanical bar screen component of the Equipment and sent photos to Chris Buntin, Garver's Project Manager.

         28. Upon reviewing the photos, Buntin became concerned that the materials used to construct the bar screen were not stainless steel as specified and shown in Fairfield's submittal. Buntin emailed Haren inquiring about the material used for the Fairfield screen link system. (Pl.'s Ex. 8, Buntin message, Tue., July 11, 2017 12:51 PM.)

         29. After looking at the photos, Merriman emailed Buntin and Haren and requested confirmation that the materials used to manufacture the Equipment were as specified in the Bidding Documents prior to installation. “No one will want to remove it to validate or change any components…” (Pl.'s Ex. 8, Merriman message, Tue., July 11, 2017 4:15 PM.)

         30. Mark Hickok of BT Environmental, acting on behalf of Fairfield, emailed Haren to confirm that the “bar screen links are made out of 304SS as specified” and that “the screen & compactor are both supplied as submitted & approved[.]” (Pl.'s Ex. 9, Hickok message, Tue., July 11, 2017 5:28 PM.) Haren forwarded Hickok's email to Buntin and Merriman.

         31. Merriman emailed Haren, Buntin, and Hickok, “Based on the field observation of the snap rings, I would have to challenge that they are S/S. However, my eyes do not qualify as a spectrometer so I will rely on those who have material info to respond. As I first said, if we install it and it is incorrect changing any component will surely be more difficult.” (Pl.'s Ex. 9, Merriman message, Wed. July 12, 2017 7:55 AM.)

         32. On July 12, 2017 there was an on-site inspection of the Equipment performed by Hickok performed as Fairfield's local representative. Hickok noted the lock-links, adjustable roller arm pins, scrapper arm mounting bolts, and the lock-link pin snap-rings were specified to be made of 304SS (stainless steel), and Fairfield's approved submittal data specified the parts were to be made of 316SS. It was noted some of the parts appeared to be rusting. (Pl.'s Ex. 5.) Additionally, it was noted that the screen doors were mounted with SS bolts, when the specifications called for Knurled Knobs and the submittal data specified SS Wing Nuts/Thumb Nuts. Id. It was also noted that the Gear Drive Box Motor supplied was a Marathon Motor and not the Baldor Motor submitted and approved. Id.

         33. After completing the inspection, Hickok emailed Merriman, Buntin and Haren to say, “[Fairfield] will address the items called out [and] supply verification of materials of construction as requested. The snap-rings on the lock-link pins are rolled steel, this was an oversite [sic] and these will be replaced with SS snap-rings as required.” (Pl.'s Ex. 9, Hickok message, Wed. July 12, 2017 2:04 PM.)

         34. By letter addressed to Contractor dated July 13, 2017, Fairfield addressed the Equipment irregularities noted by Hickok during the inspection. (Pl.'s Ex. 5.) Fairfield promised to test the lock-link material and submit a test report. Fairfield admitted some fasteners on both the adjustable roller arm and the scrapper arm were not stainless steel and promised to provide new fasteners. Id. With respect to the lock-link pin snap rings, Fairfield admitted the snap rings were not stainless steel as specified by the Bidding documents or as submitted by Fairfield and approved by Garver. Fairfield explained that “stainless steel Snap-Rings get loose after repeated application. Hence, we have changed the material of the Snap-Rings [to] spring steel.” According to Fairfield, while spring steel is weak in corrosion resistance, it has better elastic resilience. Id. Fairfield admitted the screen doors were improperly mounted and promised the specified Knurled Knobs would be provided. Finally, Fairfield addressed the issue with the Gear Box Drive Motor, stating that the alternate brand meeting the specifications and intended performance had been supplied in order to meet the project delivery schedule. Id.

         35. By letter dated July 13, 2017, Buntin notified Contractor that the materials used to manufacture the mechanical bar screen were not stainless steel as specified and noted in the submittal data approved by Garver, and the materials did not meet the Project plans and specifications. Questionable items included the chain pin retaining ring material, chain links material, various bolts material, lynch pins material, and chain drive drum material. In addition, Buntin noted knurled knobs had not been provided, several handles were missing from Equipment panels, the motor provided was a Marathon instead of the Baldor motor as specified, and the gear box manufacturer was unknown because the tag had been removed. “Non-conforming items will not be allowed for this project. Please provide a corrective action plan and verification of questionable items for review.” (Pl.'s Ex. 10, Buntin letter, July 13, 2017.)

         36. On Monday, July 17, 2017, Buntin followed up with a second letter to Contractor advising that additional items had been discovered that did not meet the Project plans and specifications. “We also anticipate there may be other items not yet noted…Please consider this notice to document that the [mechanical] bar screen is defective. All items must be resolved, as approved by the Owner and [Garver], prior to acceptance of this equipment.” (Id., July 17, 2017 letter.) Buntin demanded a corrective action plan, insisting that the plan include an inspection of all Equipment components by a qualified Fairfield representative. Buntin also requested Fairfield's fabrication shop drawings and materials testing reports. Id.

         37. Two days later, Buntin emailed Haren requesting an update on the mechanical bar screen and a schedule for all remaining work. “Resolution is needed as soon as possible to be substantially completed on August 8th….” (Pl.'s Ex. 10, Buntin message, Wed., July 19, 2017 7:54 pm).

         38. The following Monday, Hickok emailed Haren and Buntin advising that, according to Fairfield, the bar screen links were made of 316 SS and appear to have oxidation deposits on them. Hickok asked whether a spectrometer test of the of the bar screen links would be acceptable to the City. Hickok also inquired as to whether the City wanted the links cleaned up or changed out. (Pl.'s Ex. 11, Hickok message, Mon. July 24, 2017 11:41 am.)

         39. In response to Hickok's email, Buntin emailed Haren, “We will advise upon receiving a corrective action plan, and the corrective action plan is pending the previously requested items (Fairfield Inspection, Testing Reports, and Fabrication Shop Drawings) to confirm all items to be corrected. Please provide a schedule for correction of defective work and all other items remaining for substantial completion.” (Id., Buntin message, Mon., July 24, 2:04 pm.)

         40. At trial, Madu Murarka testified that the stainless steel used to make the screen was certified by the manufacturer in India. Any rust observed on the screen formed on environmental contaminants deposited on the screen during the manufacturing process. The observed rust could have been sanded off at start-up of the Equipment.

         41. Haren messaged Buntin acknowledging some confusion and advised that Fairfield thought a corrective action plan had been submitted in previous correspondence. “The question is in regards to the stainless steel chains. Providing these prove to be 316 stainless steel (316 SS), will Fairfield be able to continue with their use even though they are discolored…” Id. Haren explained the discoloration was most likely caused by the oxidation of residue deposits picked up during fabrication. “Being the unit will operate in wastewater and future coloration is most likely, it seems the coloration would not be an issue…” Id., Haren message, Mon., July 24, 2017 3:05 PM.

         42. Fairfield Project Manager Steve Schweinfurth emailed Haren to advise that the Equipment had been inspected by BT Environmental, Fairfield's local representative, “to confirm the questionable components and material.” Fairfield's plan was to replace the steel components/defective material with stainless steel “as submitted [and] approved per Fairfield's response letter.” (Pl.'s Ex. 11, Schweinfurth message, Mon., July 24, 2017 3:53 pm.) Schweinfurth questioned why Fairfield was required to resubmit the “shop/assembly drawings [that] were a part of the approved submittal…” Finally, Schweinfurth informed Haren that Fairfield “has complied in providing 316 SS material for the bar rack links and considers this a closed topic.” Id.

         43. Haren passed Schweinfurth's email on to Hickok and Buntin, explaining that the email provides “further clarification from Fairfield as regarding the screen. Fairfield will proceed with the replacement…so that 304 stainless steel is used.” Id., Haren message, Mon., July 24, 2017 3:17 PM.

         44. Hickok sent an email to Haren and Buntin confirming BT Environmental would be onsite the next morning “to remove and replace all of the non-stainless steel (snap-rings, bolts [and] nuts) so that [Contractor] can proceed with moving and setting it into place.” (Id., Hickok message, Mon., July 24, 2017 4:49 PM.)

         45. Buntin fired back an email to Haren and Hickok, “I am confused. Confirmation of defective items is outstanding, and the corrective action has not been approved.” Buntin pointed out deficiencies in Fairfield's proposed plan: the requested material testing reports had not been provided, and the inspection of all Equipment components was supposed to be performed by a qualified Fairfield representative, and the inspection by its sales representative, BT Environmental, was not acceptable. Furthermore, based upon an inspection of the Equipment by Garver and the City, there were other “non-conforming items remain[ing] to be identified, including but not limited to the welds…. Skip welds are not acceptable. The submittal did not include the fabrication design, welding details, welder certification, weld inspection reports. Please provide supplemental welding information. Will qualified representatives from Fairfield inspect all equipment as requested?” Id., Buntin message, Mon., July 24, 2017 7:03 PM.

         46. The next morning, Hickok emailed Schweinfurth to point out that “the original specification…does require that all welds below grade be seal-type welds, it also requires that a copy of welder certification and weld inspection reports be submitted prior to delivery to job site.” Hickok stated that “repairing onsite is no longer an option, the screen should be picked up to be returned to your fabricator.” (Pl.'s Ex. 11, Hickok message, Tue., July 25, 2017 10:26 AM). Hickok admonished Schweinfurth and Fairfield ...


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