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Mears Group, Inc. v. Kiawah Island Utility, Inc.

United States District Court, D. South Carolina, Charleston Division

May 30, 2019

MEARS GROUP, INC., Plaintiff,



         This matter is before the court on defendant Kiawah Island Utility, Inc.'s (“KIU”) motion to reconsider, ECF No. 50, and KIU's motion for certificate of appealability, ECF No. 51. For the reasons set forth below, the court denies the motion to reconsider and denies the motion for certificate of appealability.

         I. BACKGROUND

         This case arises out of the construction of a pipeline running from Kiawah Island to Johns Island (“the Project”). KIU, the owner of the Project, entered into a contract (“the Contract”) with plaintiff Mears Group, Inc. (“Mears”) to construct the pipeline. The Project consisted of using horizontal directional drilling to bore an underground hole and then pulling pipe through the hole. During this process, the pipe got stuck in the borehole, and Mears's work was lost. As a result, Mears had to drill a second borehole and install a new section of pipeline.

         Mears presented a claim for the lost work to KIU to be submitted to KIU's builder's risk insurance carrier. Mears contends that the Contract required KIU to obtain builder's risk insurance and name Mears as a loss payee. KIU disputes whether the Contract required KIU to provide builder's risk insurance for the Project, but regardless, KIU submitted Mears's claim under a property insurance policy held by KIU's parent, SouthWest Water Company. That policy is supplied by Westport Insurance Corporation (“Westport”). KIU also demanded that Mears submit a claim to its own builder's risk insurance carrier, which KIU claims that Mears still has not done. Westport denied the claim. Mears alleges that as a result of KIU's failure to procure builder's risk insurance, Mears was not provided the builder's risk insurance coverage it bargained for and has now suffered over $7 million of damages, the amount of money it cost Mears to re-drill the second borehole and obtain additional pipe.

         The dispute in this case centers around the Contract itself. The parties used a standard Engineers Joint Contract Documents Committee (“EJCDC”) form to draft the Contract. The Contract consists of, among other documents, (1) General Conditions, (2) Supplementary Conditions, and (3) Special Conditions. The court's March 8, 2019 order (“the Order”) provides greater detail on the contractual clauses at issue here, but for the purposes of this order, the court will briefly review the relevant clauses. The first is Article 5.06 in the General Conditions, which requires KIU to “purchase and maintain property insurance upon the Work at the Site in the amount of the full replacement cost thereof.” ECF No. 18-1 at 73. Article 5.06 further requires that “[t]his insurance shall . . . be written on a Builder's Risk ‘all-risk' policy form that shall at least include insurance for physical loss or damage to the Work . . . .” Id. Article 5.07 of the General Conditions then states that “Owner and Contractor intend that all policies purchased in accordance with Paragraph 5.06 will protect Owner, Contractor . . . and will provide primary coverage for all losses and damages caused by the perils or causes of loss covered thereby.” Id. at 74.

         The only Special Condition discussed by the parties, SC-7, requires Mears to obtain certain insurance. The portions relevant here state:

SC-7 CONTRACTOR'S AND SUBCONTRACTOR'S INSURANCE: The Contractor shall not commence work under this contract until obtaining all the insurance required under this paragraph and such insurance has been accepted by the Owner, nor shall the Contractor allow any Subcontractor to commence work on a subcontract until the insurance required of the Subcontractor has been so obtained and accepted.
a. Builder's Risk Insurance (Fire and Extended Coverage): The Contractor shall have adequate fire and standard extended coverage, with a company or companies acceptable to the Owner, in force on the project. The provisions with respect to Builder's Risk Insurance shall in no way relieve the Contractor of its obligation of completing the work covered by the Contract.

Id. at 118. Finally, as a general matter, the Contract indicates that it “is to be governed by the law of the state in which the Project is located, ” which is South Carolina. Id. at 116.

         Mears filed the instant suit on September 8, 2017 alleging KIU breached the Contract by failing to obtain builder's risk insurance and seeking a declaratory judgment that KIU failed to comply with its insurance obligations. Mears subsequently filed its motion for partial summary judgment on its claims for declaratory judgment and breach of contract on August 3, 2018. ECF No. 18. KIU responded to the motion on August 31, 2018, ECF No. 21, to which Mears replied on September 14, 2018, ECF No. 26. KIU separately filed a cross-motion for summary judgment on September 10, 2018. ECF No. 25. Mears responded to KIU's cross-motion on September 24, 2018, ECF No. 33, and KIU replied on October 4, 2018, ECF No. 36. The court held a hearing on the summary judgment motions on January 16, 2019.

         The court denied KIU's cross-motion for summary judgment and granted in part and denied in part Mears's motion for summary judgment. The Order denied Mears's motion as to the breach of contract claim but granted the motion as to the declaratory judgment claim, holding that the Contract unambiguously required KIU to obtain primary builder's risk insurance. As a result, KIU filed a motion for reconsideration of the Order, ECF No. 50, and a motion for certificate of appealability of the Order, ECF No. 51, on March 18, 2019. Mears responded to both on April 1, 2019. ECF Nos. 52-53. KIU did not file a reply in support of either motion. Therefore, the motions are ripe for review.

         II. STANDARDS

         A. Motion to Reconsider

         Rule 54(b) states, in relevant part:

[A]ny order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities.

         A motion brought under Rule 54(b) is judged by similar standards as a motion brought under Rule 59(e), which may only be granted for the following reasons: “(1) to accommodate an intervening change in controlling law; (2) to account for new evidence not available at trial; or (3) to correct a clear error of law or prevent manifest injustice.” Grayson Consulting, Inc. v. Cathcart, 2014 WL 587756, at *1 (D.S.C. Feb. 14, 2014) (quoting Pac. Ins. Co. v. Am. Nat'l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998)); Slep-Tone Entm't Corp. v. Garner, 2011 WL 6370364, at *1 (W.D. N.C. Dec. 20, 2011). The Fourth Circuit has “noted on more than one occasion, ‘a prior decision does not qualify for the third exception by being just maybe or probably wrong; it must strike [the court] as wrong with the force of a five-week-old, unrefrigerated dead fish. It must be dead wrong.'” U.S. Tobacco Coop. Inc. v. Big S. Wholesale of Virginia, LLC, 899 F.3d 236, 258 (4th Cir. 2018) (quoting TFWS, Inc. v. Franchot, 572 F.3d 186, 194 (4th Cir. 2009)).

         B. Certification of Interlocutory Appeal

         “[28 U.S.C. § ]1292(b) provides a mechanism by which litigants can bring an immediate appeal of a non-final order upon the consent of both the district court and the court of appeals.” Lynn v. Monarch Recovery Mgmt., Inc., 953 F.Supp.2d 612, 623 (D. Md. 2013) (quoting In re Cement Antitrust Litig., 673 F.2d 1020, 1026 (9th Cir. 1982)). Pursuant to 28 U.S.C. § 1292(b), an interlocutory appeal may be sought for an order that is not otherwise appealable when the district court is “of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.” As such, a district court may certify an order for interlocutory appeal when: “1) such order involves a controlling question of law, 2) as to which there is substantial ground for difference of opinion, and 3) an immediate appeal from that order may materially advance the ultimate termination of the litigation.” Mun. Ass'n of S.C. v. Serv. Ins. Co., Inc., 2011 WL 13253448, at *3 (D.S.C. Sept. 21, 2011) (internal quotations omitted). All three requirements must be met. Id.

         In addition, Rule 54(b) of the Federal Rules of Civil Procedure permits a district court to “direct entry of a final judgment as to one or more, but fewer that all, claims” when an action involves multiple claims as long as “the court expressly determines that there is no just reason for delay.” “The burden is on the party endeavoring to obtain Rule 54(b) certification to demonstrate that the ...

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