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Hisert v. Blue Waters Dredging LLC

United States District Court, D. Massachusetts

November 16, 2018

RICHARD HISERT, Manager, on behalf of H2H ASSOCIATES, LLC, Plaintiff,
v.
BLUE WATERS DREDGING LLC, DAVID URBANI, HERBERT HASCHEN, and DOROTHY B. WILLIAMS, Defendants.

          MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

          F. Dennis Saylor IV United States District Judge

         This is an action arising out of a contract dispute concerning a marine dredging project. Jurisdiction is based on diversity of citizenship.

         In July 2015, the Army Corps of Engineers awarded H2H Associates, LLC a contract for a dredging project in Cohasset Harbor in Massachusetts. H2H subcontracted with Blue Waters Dredging LLC (“BWD”) to perform work on that project.[1] The complaint alleges that BWD failed to perform under the contract as promised and that its members repeatedly made false statements and threats to induce H2H to make payments not due under the contract. It alleges three counts under Massachusetts law for breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud.

         Defendant Herbert Haschen, defendant David Urbani, and plaintiff Richard Hisert have separately moved for summary judgment. For the following reasons, Urbani's motion will be granted; Haschen's motion will be denied; and Hisert's motion will be denied.

         I. Factual Background

         H2H Associates, LLC, is a limited liability company organized under New York law. (Hisert Aff. ¶ 3; Pl. SUF ¶ 1). Richard Hisert, a resident of New York, is the managing member of H2H. (Hisert Aff. ¶ 2).

         Blue Waters Dredging LLC was a limited liability company organized under Maryland law. (Hisert Aff. ¶ 5; Pl. SUF ¶ 2; Def. Urbani SUF ¶ 7). At the times relevant here, BWD had three members: Herbert Haschen and Dorothy Williams, who each owned a 40% share of the company, and David Urbani, who owned the remaining 20%. (Pl. SUF ¶ 2; Def. Haschen; SUF ¶ 1; Def. Urbani SUF ¶ 13). All are residents of Maryland.

         Urbani was also the sole member of Morris Street Financial LLC, a limited liability company formed in approximately February 2015 to “lend money and lease equipment.” (Pl. SUF ¶ 3, Ex. 1 at 24, 26-31; Hisert Aff. ¶¶ 8-9; Def. Urbani SUF ¶ 17). Although MSF had loan agreements with other customers, it leased equipment only to BWD. (Pl. SUF ¶ 3, Ex. 1 at 24, 26-31; Urbani SUF ¶ 16, 18).

         A. The Prime Contract with the ACOE

         On July 13, 2015, the Army Corps of Engineers awarded H2H a contract to dredge Cohasset Harbor in Massachusetts. (Hisert Aff. ¶ 4, Ex. 1; Pl. SUF ¶ 4). The contract required H2H to maintain sufficient capacity and equipment to complete the project by January 31, 2016, and to propose a schedule of equipment needed to meet that deadline. (Pl. SUF Ex. 4 at 13; Pl. SUF Ex. 12 at 5). The contract also required H2H to secure a 100% performance and payment bond. (Pl. SUF ¶ 8).

         B. The Subcontract with BWD

         On August 27, 2015, H2H subcontracted with BWD to provide all “labors, materials, equipment and services” necessary to dredge the harbor for a price of $1, 194, 611. (Hisert Aff. ¶ 6, Ex. 2 at 2; Pl. SUF ¶ 5).

         That same day, BWD sent H2H a list of specifications of the equipment it intended to use on the project. (Pl. SUF ¶ 23). H2H forwarded BWD's specifications to the Corps of Engineers, as was required under the prime contract, and the Corps approved the specifications. (Pl. SUF ¶¶ 24-25).

         C. The Lease of the Booster Pump

         The specifications submitted by BWD and approved by the Corps of Engineers included an Ellicott Series 670 Booster Pump that was necessary to perform the dredging work. (Pl. SUF ¶ 23). When BWD representatives arrived at Cohasset Harbor on October 3, 2015, however, the company did not yet have the booster pump, and thus was unable to start dredging. (Pl. SUF ¶ 30; Def. Urbani ¶¶ 30-31).

         As of October 22, BWD still did not have a booster pump, and the project had not begun. That day, H2H project manager Jennifer Popp e-mailed Haschen requesting that BWD respond by close of business with a plan for procuring the booster to “ensure no further delays” to the project. (Hisert Aff. ¶ 15; Hisert Aff., Ex. 4 at 3).

         Haschen responded to H2H later that evening. (Hisert Aff. Ex. 4 at 2). In his response, Haschen wrote that he had “contracted with a dredging company out of Long Island better than a month ago to build [BWD] a booster that . . . would have saved me [] $100, 000, ” but that the delivery of the booster had been delayed. (Id.). He estimated that he expected the Long Island booster pump to arrive by the “end of next week.” (Id.). He did not, however, tell H2H that he had actually paid Joseph Edgar, a member of the Long Island dredging company, $100, 000 on September 6, 2015. (Pl. SUF ¶ 28). He also did not tell H2H that he had never requested a refund from Edgar, or that BWD had in fact retained Edgar as a paid consultant. (Pl. SUF ¶¶ 31, 32; Pl. SUF, Ex. 23).

         With delivery of the Long Island booster pump more than a week away, Haschen informed H2H that the “best/fastest option to get a booster on site” would be to lease one from Ellicott Dredge in Baltimore. (Hisert Aff, Ex. 4 at 3). Haschen told H2H that because BWD was in a “tight spot with cash flow, ” he needed a $70, 000 “advanc[e]” to pay the lease for the booster pump. (Id.). Seeking to “exhaust every effort . . . to begin pumping operations . . . next week, ” H2H wired $70, 000 directly to Ellicott Dredge the next day, October 23. (Hisert Aff. ¶ 17; Hisert Aff. Ex. 3 at 2; Hisert Aff., Ex. 5 at 2). The leased booster pump arrived at the work site on October 27, four days later, and BWD commenced dredging on November 3. (Pl. SUF, Ex. 1 at 30; VAC ¶ 39). On November 12, H2H paid BWD $252, 154-the amount called for in BWD's original invoice ($322, 654) less the $70, 000 H2H had sent to Ellicott Dredge on October 23. (Hisert Aff. Ex. 5).

         D. Additional Delays in Performance

         The dredging project soon experienced significant additional delays. (Pl. SUF, Ex. 2 at 62; Def. Urbani SUF ¶ 23). Nonetheless, BWD contacted H2H on both November 29 and 30 and threatened to stop work unless H2H paid BWD amounts it had not yet earned under the subcontract. (Pl. SUF ¶ 38). H2H complied with BWD's demands and sent it $62, 476.79 on December 14. (Hisert Aff. ¶ 21; Hisert Aff., Ex. 5).

         On December 22, Urbani contacted Hisert for the first time. He introduced himself by e-mail as both the “silent partner” of BWD and the “principle [sic] member of the finance company funding BWD.” (Hisert Aff., Ex. 6). He told Hisert that BWD “basically came to [H2H's] rescue, ” and blamed Hisert for his “unilateral decision” to lease the booster pump from Ellicott Dredge. (Id.). He also informed Hisert that BWD had incurred significant operating, capital, and payroll costs on the project. (Id.). He concluded by stating “I think it would be appropriate for H2H to advance BWD funds until the payments for yards dredged start[] flowing.” (Id.).

         On December 29, Haschen e-mailed Hisert that BWD was “out of available operating cash.” (Pl. SUF ¶ 39; Hisert Aff., Ex. 8). Haschen asked Hisert for an additional “payment” and warned that he didn't “want to stop” the project. (Id.). Later that day, H2H sent $262, 643.28 to BWD. (Hisert Aff. ¶¶ 22-23; Exs. 5 & 8).

         On January 18, 2016, Williams sent H2H an e-mail stating that BWD was unable to “pay[] off outstanding invoices.” (Def. Urbani SUF, Ex. 8). On a conference call the next day, H2H agreed to make four “weekly payments” to BWD to assist with, among other things, outstanding vendor invoices. (Id.). H2H required BWD to give “advance[] notice to H2H if there [was] a concern over monies.” (Id.).

         H2H made three such “weekly payments” of $75, 000 to BWD on January 20, January 25, and February 3. (Hisert Aff. ¶ 27). On February 4, Urbani sent Hisert an e-mail threatening that BWD would cease dredging operations unless H2H either shared all proceeds from the prime contract with BWD or, in the alternative, assumed all of BWD's assets and liabilities, including a $325, 000 debt owed to Urbani's company, Morris Street Financial. (Pl. SUF ¶ 50; Pl. SUF, Ex. 1 at 192-205, 206-07; Pl. SUF, Ex. 26; Hisert Aff. ¶ 29).

         On February 6, Urbani sent another e-mail to Hisert stating that BWD would continue operations only if, among other things, H2H agreed to make an immediate lump-sum payment of $80, 000. (Pl. SUF ¶ 51; Pl. SUF, Ex. 27; Hisert Aff. ¶ 33). H2H did not make the $80, 000 lump-sum payment; however, on February 10 it paid BWD the final of the four $75, 000 weekly payments. (Pl. SUF ¶ 52; Pl. SUF, Ex. 5).

         After a few more days of attempting to re-negotiate the contract, BWD quit the job on February 20, 2016. It maintained that it did so because it had run out of money. (Pl. SUF ¶ 22; Pl. SUF, Ex. 1 at 172; Def. Urbani SUF ¶ 48).

         E. The Lien Waivers

         Over the course of their contractual relationship, H2H made eight payments to BWD totaling $947, 774.07. (Pl. SUF ¶ 19; Pl. SUF, Ex. 5).[2] On seven occasions after receiving payments from H2H, BWD completed and submitted “Partial Lien Waiver[s]” that “certif[ied] that all obligations for labor, services, equipment, materials, all taxes, licenses, fees and or insurance; and all other bills, which arose in any manner in connection with the performance of the Subcontract between Subcontractor Blue Waters Dredge [sic] LLC and the Contractor H2H Associates, LLC on Job Number #700.01-Maintenance Dredging of Cohasset Harbor and Beach Nourishment ha[d] been paid in full, and that there [were] no unsatisfied claims for such items . . . of said Subcontract.” (Pl. SUF, Ex. 31).[3] Six of the seven partial lien waivers were signed by Williams; the other, which was completed on December 30, 2015, was signed by Haschen. (Id. at 5).

         H2H contends that at the time Haschen signed the lien waiver, BWD had open vendor invoices of more than $653, 000. (Pl. SUF ¶ 56). Urbani disputes that contention, and Haschen contends that he has “no knowledge” as to its truth. (Def. Urbani Resp. to Pl.'s SUF; Def. Haschen Resp. to Pl.'s SUF).

         II. Procedu ...


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