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Contract – Termination – Convenience or Cause – Refund Claim – Costs & Fee

Duke Energy Florida, Inc. v. Westinghouse Electric Co. (Lawyers Weekly No. 004-019-16, 16 pp.) (Max Cogburn Jr., J.) 3:14-cv-00141; W.D.N.C.

Holding: Even though plaintiff, the owner of a nuclear power plant construction project, did not obtain a Combined Operating License by the date set out in the parties’ contract, since the parties amended the contract to suspend such dates, plaintiff’s failure to obtain the COL did not constitute “cause” to terminate the contract. Therefore, plaintiff’s termination was for convenience, and it owes defendant a $30 million termination fee.

The parties’ cross-motions for summary judgment are granted in part and denied in part.

Plaintiff alleges that it is entitled to a refund of two payments made to defendant for work that was not performed.

However, regarding the reactor vessel internals (RVIs) payment of $2,348,661, defendant issued a purchase order in November 2008 – six months before plaintiff placed the contract in partial suspension. While it is true that the RVIs were not constructed in full, the work was to be done in phases over time with construction occurring at a later phase.

Plaintiff also argues that defendant performed “no work” related to turbine generators for which plaintiff made a “down payment” of $51.8 million. Yet, under the parties’ contract, the phase 1 and phase 2 milestones for the turbine generators was issuing the purchase order. Defendant issued a purchase order to Toshiba America Nuclear Energy Corp. in early 2009. That milestone was completed.

As stated in its complaint, plaintiff’s refund claim cannot survive summary judgment. However, plaintiff may move for leave to amend the complaint to allege a breach of good faith and fair dealing. Furthermore, this ruling is without prejudice as to plaintiff arguing that these payments may be an offset to termination costs or fees.

With regard to defendant’s counterclaim for $512 million in termination costs, there are genuine issues of material fact making summary judgment inappropriate.

In support of its counterclaim for breach of good faith and fair dealing, defendant alleges that plaintiff used extra-contractual behavior to freeze it out of future work, including attempting to negotiate a new contract with defendant’s consortium partner. This claim duplicates the underlying breach of contract counterclaim such that the claims will rise and fall together. Accordingly, the breach of good faith and fair dealing claim must be dismissed as duplicative.

Motions granted in part and denied in part.

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