Georgia Deemed Proper Venue for Contract Suit
(CN) - A federal judge passed the ball to a sister court in a $900 million dispute over additional costs for the construction of nuclear electric generators at a Georgia plant.
In 2008, Stone & Webster Inc. and Westinghouse Electric Company agreed to design, build and test two nuclear-powered generating units at an electric generating plant in Waynesboro, Ga.
Claiming unforeseen regulatory changes had forced them to make substantial design changes, which had increased costs and delayed the project, the contractors later submitted various change orders, asking for adjustments to the contract price and schedule.
They claimed new U.S. Nuclear Regulatory Commission final rules that had come out after the agreement was executed required significant changes to the project's design and warranted change orders for more than $900 million in increased work costs and extensions in the project's schedule.
The owners of the project, which include Georgia Power Company, Oglethorpe Power Corp., the Municipal Electric Authority of Georgia and the City of Dalton, Ga., refused to adjust the costs and schedule, and asked the contractors to refund more than $100 million paid for allegedly unjustified change orders.
After their mediation efforts failed, the parties filed mirror-image complaints in two federal courts, each seeking to beat the other to the courthouse and win the first-to-file race.
In a federal complaint filed on Nov. 1, 2012 in the District of Columbia, the contractors claimed the owners of the project had breached the engineering and construction agreement by refusing to make price and schedule adjustments.
The same day, the owners filed a similar complaint in the Southern District of Georgia, seeking a declaration that they were not responsible for design changes and delays. They also claimed the contractors owed them money for disputed costs they had already paid under the agreement.
According to Georgia Power's complaint, the contractors were simply seeking a judicial modification of the agreement so that they could avoid responsibility for delays on the project and submit unjustified invoices.
Both complaints were filed on Nov. 1, 2012, at 8 p.m., the date and time that marked the official end of the mediation efforts, according to court filings.
Stone & Webster and Westinghouse then asked the District of Columbia court to stop the duplicative action in Georgia, and Georgia Power and its co-defendants countered with a motion to dismiss.
Though both parties argued that their complaint had been filed first, U.S. District Judge Colleen Kollar-Kotelly ruled that the Georgia court was the proper venue for the dispute.
Regardless of who sued first, trying the case in the Southern District of Georgia would increase judicial efficiency because the parties' agreement is governed by Georgia law, according to the 16-page opinion.
Easier access to relevant evidence and witnesses located in Georgia also weighs in favor of the Georgia action, the opinion states.
What's more, a local court should hear the dispute because of its impact on Georgia residents, local jobs, and energy demand and cost in the state of Georgia, the judge held.
"Clearly, the project is a local project with significant local effects - a consideration counseling strongly in favor of resolution of the instant dispute by the Southern District of Georgia," Kollar-Kotelly wrote. "To be sure, the court does not disagree with plaintiffs that the viability of nuclear power is a national, not simply a local, concern. However, the mere fact that the development of nuclear electrical generating units generally bears national import does not detract from the undoubtedly significant impact of this particular project on Georgia and its citizens."
Calling the two lawsuits "flip-sides of a single coin," the judge rejected the contractors' argument that the owners were merely seeking a preemptive declaratory judgment.
Both parties raised mixed claims for coercive and declaratory relief in "mirror-image" lawsuits, and sought to prove that the other party should bear costs resulting from the regulatory changes, according to the opinion.
Barring the owners from asserting breach of contract claims would lead to an absurd scenario where the contractors could submit change orders for an unlimited amount and demand that the owners pay 50 percent of those invoices, without a way to recover unjustified payments, the opinion adds. Kollar-Kotelly dismissed the lawsuit without prejudice, allowing the contractors to assert their claims in the Georgia action.