Opinion ID: 6342886
Heading Depth: 2
Heading Rank: 1

Heading: Facts and Pertinent Contractual Provisions

Text: In May 2012, Westlake Chemical Corporation, on behalf of its subsidiary Westlake Vinyls Company, L.P., 1 hired James Construction Group, LLC, as a general contractor to perform civil and mechanical construction work on Westlake Vinyls’ chlor-alkali plant in Geismar, Louisiana. Primoris Services Corporation, James’s parent company, guaranteed the contract. The contract itself did not obligate Westlake Chemical to assign James any work. Rather, under Section 1.2, if Westlake wanted James to “perform certain services and/or provide equipment, materials, supplies or other products,” and James “agree[d] to perform and/or provide such Work,” then Westlake would issue a work order for James to execute. 2 The contract confirmed that “[u]nless and until a Work Order has been executed by the Parties,” Westlake was not obligated “to retain [James] for any Work” and James was not obligated “to accept any request for any Work.” Further, Westlake was entitled to “retain other contractors to perform comparable work” as it saw fit. 3 Unless necessary for clarity or context, we refer to Westlake Chemical 1 and Westlake Vinyls collectively as Westlake. 2James had five days after issuance to either return the executed work order or advise Westlake as to any issues James had with the order and negotiate in good faith with Westlake to resolve those issues. 3Relatedly, James “acknowledge[d]” under Section 15.7 that Westlake “may have the need or desire to enter into other contracts related to the Work or the Project” and “agree[d] to cooperate and coordinate with all other contractors of [Westlake] or its Affiliates.” 4 James was contractually “responsible for the safety and health of its employees and Subcontractors” and “for the adequacy, stability and safety of all operations, construction temporary facilities, construction equipment and the construction site and methods necessary for the performance of the Work.” At the same time, the contract gave Westlake certain rights to “intervene” if it had safety concerns. Specifically, Section 17.2 authorized Westlake “to intervene in any appropriate way” if in its reasonable opinion James was, among other things, “performing its duties under th[e] Contract in an unsafe way or manner” that Westlake “believe[d] may cause injury or damage to persons or property.” In such cases, Westlake had the “right to require [James] to immediately take remedial action,” and James would be “solely accountable for all costs associated with such intervention and remedial action” regardless of who incurred the costs. Section 21 of the contract governed termination. Under Section 21.2, either party could cancel the contract with sixty days’ written notice. Section 21.5 further authorized Westlake, “at any time,” to terminate the contract “for [Westlake’s] convenience and without cause.” James was required to take certain actions upon receipt of written notice of Westlake’s termination for convenience and was “entitled to receive payment for Work executed, and reasonable actual costs incurred by reason of such termination.” Finally, Section 21.3 authorized Westlake to terminate James for “[d]efault” if Westlake determined “in its reasonable opinion” that 5 James, among other things, had “serious safety violations.” 4 To terminate under Section 21.3, Westlake was required to give James three notices: (1) notice that Westlake had determined there were serious safety violations, triggering a seventy-two-hour window for James to “begin to remedy” the violations; (2) notice that Westlake was “not reasonably satisfied with the pace and the quality of the remediation effort”; and (3) notice that Westlake had elected to terminate the contract or a portion of the work. Per Section 9.1, all notices given pursuant to the contract were required to be in writing. Upon termination of the contract under Section 21.3, Westlake had the “right to take possession of the Work or the portion thereof terminated” and to complete that work, with James being responsible for “[a]ny extra costs in excess of the Contract Price incurred by [Westlake].” Following the contract’s execution, James performed both civil and mechanical work on the project on a cost-reimbursable basis in accordance with work orders issued by Westlake. The record shows that James had several safety incidents between May 2012 and April 2013— when Westlake transferred all remaining mechanical work to another contractor—including multiple “OSHA-recordable” injuries and “near misses.” Though the parties dispute the precise nature, severity, and cause of many of the safety incidents, it is undisputed that James was 4 Other grounds authorizing termination for default were: James was “willfully or in bad faith violating” the contract; James was failing to perform the work “with promptness and diligence”; James filed for bankruptcy; and James “fail[ed] to perform any material obligation under” the contract. 6 cited for a serious safety violation that occurred on December 28, 2012, when James employee Gregory Price suffered a fatal injury on the job. 5 Immediately following the incident, the parties began discussing James’s safety record. In an internal Westlake email to project manager Abram Kuo and others, Westlake Vice President Andrew Kenner began inquiring about James’s Total Recordable Incident Rate and proposed a safety review with James to “show us how” James would prevent further such incidents, saying that “[t]his was completely preventable.” Kuo forwarded that email to other Westlake employees and copied James’s project site manager Rusty DeBarge, adding “see Andrew’s comment” and stating that “[w]e have to develop preventive safety mind set [sic] with some extraordinary measure[s] on job safety.” Kuo further noted in the email that he would be at the project office on January 2, 2013, for a safety meeting that James’s management had “been asked to attend.” Kenner testified that the meeting’s focus was on improving safety performance “to make sure we didn’t have another serious incident.” After the meeting, Westlake internally discussed the possibility of moving a portion of the mechanical work to another contractor “so that James could have a better chance to manage their scope and keep their project safe.” The next day, January 3, Kuo contacted Turner Industries Group, LLC, about potentially taking over some of that work. 5 Price was on a ladder leaning against a large truck when another James employee flagged the truck forward without checking to make sure no one was on the ladder. Price fell and sustained a fatal head injury. OSHA later cited James for the incident as a serious violation. 7 For James’s part, on January 9, a week after the meeting, DeBarge sent an email to several Westlake employees summarizing James’s pre-accident safety procedures and listing several additional post-accident procedures that James had implemented or was planning to implement. On January 18, he sent Kuo another email stating that he was aware of talk that Westlake was considering “changes in the execution of the project going forward.” DeBarge asked Kuo to consider the email an “appeal” of that consideration and emphasized James’s safety improvements and ability to successfully manage and coordinate future work. He advocated for James receiving as much potential work as possible, but he admitted that the addition of certain offsite work would “be a challenge to our group” because it would require an “attention level” that had “the potential to affect our efforts within the plant boundaries,” such that he did “not see a negative effect on the project if those scopes of work were given to another contractor.” Kuo responded to DeBarge’s email the same day, agreeing that “we have done many good things and set up very good programs” on the project, including with respect to safety, and stating that “a lot of credit[] has to go to [James] and its demonstrated willingness to work on [the] project.” He confirmed the “decision to introduce possible [sic] another contractor” for the purpose of “ensuring Westlake/[James] will be successful” on the project and stated that Westlake “[n]ever intended to wipe out what [James] has been doing well for the project thus far especially the areas mentioned by” DeBarge’s email. He further stated that he saw it “necessary” to “separat[e] out independent jobs such as EDC [ethylene dichloride] and pipelines” to address DeBarge’s admitted 8 concern that they “ha[d] the potential to affect [James’s] efforts within the plant boundaries.” About two weeks later, on January 30, Westlake Vinyls and Turner executed a formal contract very similar to the one between Westlake Chemical and James, and Westlake began allocating offsite EDC and pipeline work to Turner. There is no dispute that the contract between Westlake and James authorized Westlake to contract with Turner to perform that work regardless of Westlake’s satisfaction with James’s performance. Kuo testified that James’s safety performance improved in January but deteriorated again in February. Westlake’s site manager, Scott Campbell, testified that starting in January, James had brief periods without incident followed by regression into old patterns. Internal Westlake emails—which were not sent to James—stressed James’s unacceptable Total Recordable Incident Rate and Westlake’s dissatisfaction with James’s safety improvements, while internal James emails reflect concerns about Westlake’s “unrealistic expectations and misperceptions regarding their own impact on our performance.” In any event, James removed DeBarge as site manager in late February at Westlake’s request and replaced him with Mark Lammon. On March 6, Kenner informed Kuo in an internal Westlake email that “I think we need to let James Construction know that we are considering removing them from the job and putting them on notice.” However, nothing in the record reflects that Westlake communicated as much to James at that time. In a March 22 internal Westlake email, Kenner communicated that James’s Total Recordable Incident Rate for the entire project was “2.2+”—higher than the industry standard—but 9 he also noted a recent safety audit reflecting that “James has stepped up their safety monitoring and performance.” Kuo responded, again internally, that since December 2012, Westlake had “seen a trend in poor performance of [James’s] safety record as well as its productivity in general coupled with indications of quality issue[s] on piping (excellent in civil and structural and equipment setting).” Kuo further stated that Westlake had assigned more mechanical work to Turner “to spread the job out so that [James] can be more focus[ed] on addressing all the issues mentioned,” that lightening James’s load had allowed it to focus on those issues, that James’s new site manager “has made differences as even our corporate people have noticed,” and that Turner should be set up “as a strong back up if [James] continues the poor performance after the scope splitting so that project [sic] will not be in danger of delay.” According to Westlake, additional incidents after that internal March 22 discussion as well as scheduling delays led Campbell to recommend on April 2 that Westlake remove “the remaining mechanical work” from James and assign it to Turner. Kuo agreed. On April 11, James and Westlake representatives had an in-person meeting. According to Campbell’s description of the meeting, he informed James: [W]e have tried to get y’all to improve your safety, we’ve done everything we can do, y’all brought another project manager in here, you are falling back into the same pattern. We want you to – I think I said, you have five days to get your remaining piping and mechanical people off the job. 10 James VP Conrad Bourg testified by deposition that the meeting was “very brief,” and that Westlake told James at the meeting that “they were reassigning our work to Turner.” It is undisputed that Westlake sent no written notice of termination before or after the April 11 meeting. The record also contains no other written communication from Westlake to James memorializing the actions taken at that meeting. Nevertheless, James ceased mechanical work and confirmed via email on May 8 that at Westlake’s direction, James “has discontinued mechanical work on the Chlor-Alkali project and . . . completed the demobilization of the mechanical forces.” Westlake allocated the remaining mechanical work to Turner and ultimately paid James in full for the mechanical work it had already completed. James also retained and completed the civil work on the project and was paid for that work. Turner completed all remaining mechanical work on October 31, 2013.