IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MID-ATLANTIC CONSTRUCTORS :

INC., : CIVIL ACTION

: NO. 03-6125

Plaintiff, :

:

v. :

:

STONE & WEBSTER CONSTRUCTION, :

INC., :

:

Defendant. :

M E M O R A N D U M

EDUARDO C. ROBRENO, J. November 3, 2005

Before the Court are plaintiffs’ and defendant’s cross

motions for summary judgment as to certain claims in this breach

of contract action. The Court held a hearing on October 5, 2005,

where the parties argued their motions. For the reasons set

forth below, defendant’s motion for summary judgment is granted

in part and denied in part and plaintiffs’ motion for summary

judgment is denied.

I. BACKGROUND

The plaintiff, Mid-Atlantic Constructors, Inc. (“MidAtlantic”), brings a diversity action under 28 U.S.C. § 1332

against defendant Stone & Webster Construction, Inc. (“Stone &

Webster”) based on a subcontract that was entered into between

the two parties. The subcontract required Mid-Atlantic to set

certain equipment and install certain off rack piping and

Case 2:03-cv-06125-ER Document 98 Filed 11/04/05 Page 1 of 11
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prefabricated pipe racks in connection with the construction of a

combined cycle power plant in Marcus Hook, PA (the “Project”). 

Mid-Atlantic alleges that Stone & Webster caused delays and

accelerated conditions and inefficiencies in connection with MidAtlantic’s performance of its duties, thereby causing MidAtlantic to incur substantial cost increases and delays. MidAtlantic further alleges that Stone & Webster terminated MidAtlantic in bad faith and without justification. The Complaint

brings claims of breach of contract, unjust enrichment, quantum

meruit and violation of the Pennsylvania Contractor and

Subcontractor Payment Act (“PCSPA”), 73 P.S. § 501 et seq.. 

On January 26, 2004, defendant Stone & Webster filed a

Third-Party Complaint against HSI General Contractors, Inc.,

Frank W. Hake, Inc., and the Hake Group, Inc. alleging breach of

contract, common law indemnification and contractual

indemnification. Essentially, the Third-Party Complaint alleges

that the third party defendants’ own actions caused delays in the

Project. 

On March 9, 2004, upon motion by Stone & Webster, Chief

Judge Giles entered an order consolidating two other related

cases with the instant case. The two related cases are Frank W.

Hake, Inc. v. Stone & Webster, 03-6964 and HSI General

Contractors, Inc. v. Stone & Webster, 03-6966, which are now

proceeding under 03-6125. The plaintiffs in 03-6964 and 03-6966,

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Frank W. Hake, Inc. and HSI General Contractors, Inc.,

respectively, and the plaintiff in 03-6125, Mid-Atlantic, are an

amalgamated organization of sister companies known as the Hake

Group, and upon information and belief by Stone & Webster, share

common ownership, common officers and directors, common

management and a common office. The Complaint and responsive

pleadings in all three cases are virtually identical.

II. ANALYSIS

A. Summary Judgment Standard.

A court may grant summary judgment only when “the

pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that

the moving party is entitled to judgment as a matter of law.”

Fed. R. Civ. P. 56(c). A fact is “material” only if its

existence or non-existence would affect the outcome of the suit

under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 249 (1986). An issue of fact is “genuine” only when there

is sufficient evidence from which a reasonable jury could find in

favor of the non-moving party regarding the existence of that

fact. Id. In determining whether there exist genuine issues of

material fact, all inferences must be drawn, and all doubts must

be resolved, in favor of the non-moving party. Coregis Ins. Co.

Case 2:03-cv-06125-ER Document 98 Filed 11/04/05 Page 3 of 11
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v. Baratta & Fenerty, Ltd., 264 F.3d 302, 305-06 (3d Cir. 2001)

(citing Anderson, 477 U.S. at 248).

B. Summary Judgment is Granted as to Counts II and III of 

Plaintiffs’ Complaint.

Stone & Webster argues that plaintiffs’ unjust

enrichment and quantum meruit claims must fail as a matter of law

because of the existence of an express contract. This Court

agrees. In ILM Systems, Inc. v. Suffolk Construction Co., Inc.,

252 F. Supp. 2d 151, 162 (E.D. Pa. 2002), the court held that

plaintiff’s unjust enrichment claims were defeated by the

existence of the Subcontract, which governed the measure of

recovery for damages caused by changes in work. Moreover, the

court held that “under Pennsylvania law, ‘where an express

contract governs the relationship of the parties, a party’s

recovery is limited to the measure provided by the express

contract; and where the contract fixes the value of services

involved, there can be no recovery under a quantum meruit

theory.’” Id. (quoting Constar, Inc. v. Nat’l Distribution Ctr.,

Inc., 101 F. Supp. 2d 319, 324 (E.D. Pa. 2000)). 

Mid-Atlantic responds that the contracts may be

voidable because of misrepresentations by Stone & Webster at the

time of contracting that Stone & Webster was in privity with the

owner, thereby giving Mid-Atlantic rights to a mechanic’s lien on

the property. See Mem. of Law in Opp’n to Mot. for Summ. J. by

Stone & Webster at 39. The court in Shulman v. Continental Bank,

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The claim that the contract may be voidable is not in Mid- 1

Atlantic’s Complaint, but rather was mentioned in plaintiffs’

brief in opposition to the defendant’s summary judgment motion. 

See Mem. of Law in Opp’n to Mot. for Summ. J. by Stone & Webster

at 39-40. Moreover, that brief mentions that the issue is

currently on appeal in Delaware County Court of Common Pleas, but

does not elaborate.

5

513 F. Supp. 979, 985 (E.D. Pa. 1981), allowed the plaintiff’s

unjust enrichment claim despite the existence of an express

agreement because there was a material factual dispute regarding

the nature of the contract and whether there was a meeting of the

minds as to its terms. Here, Mid-Atlantic filed suit for breach

of contract and Stone & Webster has not raised as a defense that

the contract is voidable. Unlike Shulman, there is no material

factual dispute regarding the nature of the contract or whether

there was a meeting of the minds. Therefore, the parties’ fate 1

rises and falls within the four corners of the agreement. Stone

& Webster is entitled to summary judgment as to Counts II (unjust

enrichment) and III (quantum meruit) of Mid-Atlantic’s Complaint.

C. Plaintiffs’ Use of the Total Cost Method Is Not a Basis

for Summary Judgment as to the Entire Complaint.

Stone & Webster seeks judgment as a matter of law as to

Count I (breach of contract) of Mid-Atlantic’s Complaint,

dismissal of which would effectively end the entire litigation. 

Stone & Webster argues that Mid-Atlantic’s entire claim must fail

because (1) the total cost method used to calculate plaintiffs’

damages is invalid in Pennsylvania and (2) it does not account

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for the delays and productivity losses caused by Mid-Atlantic. 

As evidence of Mid-Atlantic’s role in some of the delay and lost

productivity, Stone & Webster cites to deposition testimony of

several Mid-Atlantic employees who admitted that Mid-Atlantic

could have done more to increase productivity. 

Mid-Atlantic responds that it can and will justify its

use of the total cost method at trial. Moreover, plaintiffs note

that the damages sought do not include delays for which MidAtlantic is responsible. There are delays for which Stone &

Webster is directly responsible, plaintiffs argue, and they cite

their expert reports as evidence.

There is a genuine issue of material fact as to whether

the total cost method applies and whether damages from delay are

due, therefore summary judgment is not warranted based on this

argument. In fact, this Court has held that “[o]bjections as to

the reasonableness of this approach [the total cost method] and

the existence of the necessary elements for costing damages in

this manner are questions of fact.” Aetna Cas. & Surety Co. v.

George Hyman Constr. Co., No. 93-4750, 1998 U.S. Dist. LEXIS

22627, at *255-56 (E.D. Pa. May 15, 1998) (adopting special

master’s findings of fact and conclusions of law as to a

construction contract dispute).

1. The Total Cost Method. 

The total cost method is viable in Pennsylvania and can

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At the summary judgment hearing, the Court mentioned the 2

possibility of a Daubert hearing as to the applicability of the

total cost method based on the plaintiffs’ expert report. See

Summ. J. Hr’g Tr. at 10-15. That issue, however, was not

presented anywhere in the defendant’s summary judgment briefs nor

was it explored at any length during the hearing. Moreover, as

Aetna makes clear, whether the total cost method should be used

is an issue of fact. See Aetna, 1998 U.S. Dist. LEXIS 22627, at

*255-56. That material fact is in dispute, which is enough to

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be used as a measure of damages. Although the Court in Aetna

noted that the total cost method has been described as a measure

of last resort, it also noted that “the use of the modified total

cost method has been approved by the Third Circuit.” Aetna, 1998

U.S. Dist. LEXIS 22627, at *254 (citing Servidone Constr. Corp.

v. United States, 931 F.2d 860, 862 (Fed. Cir. 1991)); id. at

*253 (citing E.C. Ernst, Inc. v. Coppers Co., Inc., 626 F.2d 324

(3d Cir. 1980)). Plaintiffs must satisfy the following four

elements to show that the total cost method should be used: (1)

the nature of the losses at issue make it impossible or

impracticable to determine damages to a reasonable degree of

accuracy by any other method; (2) plaintiffs’ bid for the work

was realistic; (3) plaintiffs’ actual costs for the project are

reasonable; and (4) plaintiffs were not responsible for the added

costs of the project. See id. at *256 (citing John F. Harkins v.

Sch. Dist. of Phila., 460 A.2d 260 (Pa. Super. 1983)). Each of

these elements involves factual issues, which warrants denial of

defendant Stone & Webster’s summary judgment motion as to Count I

(breach of contract) of plaintiffs’ Complaint.2

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survive a motion for summary judgment. 

8

2. Mid-Atlantic’s Alleged Failure to Account for its

Own Damages. 

Stone & Webster claims that Mid-Atlantic uses the total

cost method because it cannot isolate the causes of the breach

and that plaintiffs’ entire claim also must fail under Lichter v.

Mellon-Stuart Co., 305 F.2d 216 (3d Cir. 1962). Lichter involved

a subcontractor’s claim for damages following a delay in the

construction schedule through no fault of its own. The

subcontractor identified its damages in one large lump sum,

without allocating which damages were the result of the delay--

and therefore of defendant’s breach--and which were not. The

court was unable to allocate damages properly and rejected the

subcontractor’s entire claim related to the masonry portion of

the subcontract. The court did, however, allow another of the

subcontractor’s claims because there was enough evidence upon

which the court could allocate damages properly. It is also

important to note that Lichter was decided after trial, where the

court had full use of the evidence presented in support of the

total cost method upon which to reject plaintiff’s claim. See

Summ. J. Hr’g Tr. at 9. 

D. There Are Genuine Issues of Material Fact as to the 

Remaining Arguments for Summary Judgment.

In addition to the reasons addressed above, defendant

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Stone & Webster also seeks summary judgment based upon the

following claims. First, they argue that plaintiffs’ claim is

barred by the language of Article 4.7 of the subcontract, which

states that “concurrent delays” will not be compensable to either

party and damages will be abrogated. Second, they argue that

Article 4.9 of the Subcontract and the language of nine change

orders entered during construction expressly releases the company

from a claim for damages from the “cascading effect” of changes. 

Third, Stone & Webster points to release language in Change Order

23 as it specifically relates to the FW Hake claim. Fourth,

Stone & Webster claims that the Pennsylvania Contractor and

Subcontractor Payment Act (“PCSPA”), 73 Penn. Stat. § 501, does

not apply to damages caused by delay or lost productivity, which

are the subject of the Complaint. Fifth, Stone & Webster refers

to the Contractor Controlled Insurance Program (“CCIP”) as a

basis for summary judgment as to defendant’s own breach of

contract counterclaim for credits owed by plaintiffs under the

CCIP. As to each of these bases upon which summary judgment is

sought by Stone & Webster, there are genuine issues of material

fact. Therefore summary judgment will be denied.

Mid-Atlantic also moves for summary judgment based upon

the following arguments. First, Mid-Atlantic argues that Stone &

Webster’s alter-ego claims should be dismissed because the stated

cause of action is not recognized in Pennsylvania and the

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defendant has not met the extraordinary burden of proof required

to pierce the corporate veil. Second, Mid-Atlantic argues that

Stone & Webster’s breach of contract action should fail as

defendant has not incurred any damages because Stone & Webster

will be reimbursed for overruns by the project owner. Third,

Mid-Atlantic argues that the default termination by Stone &

Webster should be converted into termination for cause. As to

each of the bases upon which summary judgment is sought by MidAtlantic, there are genuine issues of material fact. Therefore

summary judgment will be denied.

III. CONCLUSION

Stone & Webster’s motion for summary judgment will be

granted in part as to Counts II (quantum meruit) and III (unjust

enrichment) of Mid-Atlantic’s Complaint. Stone & Webster’s

motion for summary judgment will be denied as to all remaining

issues. Mid-Atlantic’s motion for summary judgment will be

denied.

An appropriate order follows.

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MID-ATLANTIC CONSTRUCTORS :

INC., : CIVIL ACTION

: NO. 03-6125

Plaintiff, :

:

v. :

:

STONE & WEBSTER CONSTRUCTION, :

INC., :

:

Defendant. :

ORDER

AND NOW this 3rd day of November, 2005, it is hereby

ORDERED that Stone & Webster’s Motion for Summary Judgment (doc.

no. 66) is GRANTED IN PART as to counts II (quantum meruit) and

III (unjust enrichment) of Mid-Atlantic’s complaint and DENIED IN

PART as to all remaining issues. 

IT IS FURTHER ORDERED that Mid-Atlantic’s Motion for

Summary Judgment (doc. no. 68) is DENIED.

AND IT IS SO ORDERED.

 

EDUARDO C. ROBRENO, J.

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