Fraser Engineering Company, Inc. v. IPS-Integrated Project Services, LLC

          Ronald D. Ciotti. Esq.

          Seth Michael Pasakarnis, Esq.

          Rene David Quinlan, Esq.

          Shawn R. Farrell, Esq.

          Peter G. Callaghan, Esq.

          Christopher T. Hilson, Esq.

          ORDER

          Andrea K. Johnstone, United States Magistrate Judge.

         Fraser Engineering Company, Inc., alleges that IPS-Integrated Project Services, LLC, and Lonza Biologics, Inc., wrongfully withheld payments for subcontract work Fraser performed on a construction project. IPS served as general contractor on the project, which involved the design and construction of a building in Portsmouth, New Hampshire. Lonza owned the building. Fraser entered into a subcontract with IPS to provide mechanical and plumbing services as part of the project.

         The sole issue before the court is whether Fraser may perfect a mechanics lien on the property.^[1] Fraser moved for, and was granted, an ex parte attachment in state court. The defendants objected to that attachment before removing the case to this court. They then filed an assented-to motion for a hearing on their objections pursuant to N.H. Rev. Stat. Ann. (RSA) § 511-A:3. The district judge granted that motion and directed Fraser to refile its complaint and its motion for ex parte attachment and the defendants to refile their objections to that motion. Mar. 22, 2017 Order (doc. no. 8) at 2-3 (DiClerico, J.). The district judge designated the undersigned magistrate judge, pursuant to 28 U.S.C. § 636(b)(1)(A), to consider and resolve the defendants' objections.^[2]

         The court held a hearing on the objections in May 2017. At that time, the court granted the parties leave to file post-hearing memoranda and statements of fact. Following the hearing, Fraser moved to compel the defendants to produce the prime contract governing the project. The defendants objected, and the district judge referred the motion to the undersigned.

         The court initially deferred ruling on the motion to compel based on the parties' representation that they would mediate this matter in November 2017. When that mediation did not occur, however, the court conducted an in camera review of the prime contract and granted the motion to compel in part. Following that ruling, the parties submitted a statement of undisputed facts, statements of disputed facts, post-hearing memoranda, and replies. The mechanics lien issue is therefore ripe for resolution.

         Having reviewed the parties' pre- and post-hearing filings and their arguments at the hearing, the court overrules the defendants' objections to Fraser's attachment. As discussed below, the defendants have not demonstrated that Fraser failed to timely perfect the lien, that Fraser waived the lien, or that the lien amount should be reduced. Fraser is accordingly entitled to a mechanics lien on the property in the amount of $4, 917, 122.02.

         I. Standard of Review

         Absent an applicable federal statute, “the law of the state where the [district] court is located” governs attachment proceedings. Fed.R.Civ.P. 64(a), (b). Under New Hampshire law, any person who performs labor or furnishes materials in the amount of $15 or more when erecting or repairing a building pursuant to a contract with the owner of that building has a lien on the materials furnished and on the building. See RSA 447:2, I. RSA 447:5 extends that right to subcontractors performing work or furnishing materials pursuant to a subcontract, so long as certain notice requirements are met. The lien continues for 120 days after the work is performed or the materials are furnished, unless payment is made. See RSA 447:9. The lien may be secured beyond the 120-day period by attaching the subject property during the lien period. RSA 447:10.

         RSA 511-A, which governs pre-judgment attachment procedures, applies to proceedings to secure mechanics liens under RSA 447. See Chagnon Lumber Co. v. Stone Mill Const. Corp., 124 N.H. 820, 823 (1984). Under RSA 511-A:8, a court may attach property ex parte if a plaintiff establishes probable cause of its basic right to recovery and the amount of the lien. RSA 511-A:8, III; Chagnon, 124 N.H. at 823. When a court grants an ex parte attachment, the party against which the attachment is made may object and is entitled to a prompt hearing. RSA 511-A:8.

         Though a burden-shifting framework typically applies during attachment hearings, see RSA 511-A:3, several courts, including at least two in this district, have declined to follow this framework when analyzing mechanics liens, see Osgood v. Kent, No. 11-cv-477-SM, 2011 WL 6740411, at *3 (D.N.H. Dec. 21, 2011); H.E. Contracting v. Franklin Pierce Coll., 360 F.Supp.2d 289, 291 (D.N.H. 2005); W. Side Dev. Grp. v. D'Amour, No. 04-C-018 (N.H. Super. Mar. 24, 2004); Consolidated Elec. Distrib., Inc. v. SES Concord, Co., No. 89-C-571/579 (N.H. Super. Nov. 21, 1989). Those courts instead analyze whether a plaintiff has met its burden under RSA 511-A:8, which a defendant may rebut by challenging the plaintiff's basic right to recovery, the lien amount, or the notice provisions. See Osgood, 2011 WL 6740411, at *3; H.E. Contracting, 360 F.Supp.2d at 291. Both parties agreed at the hearing that the RSA 511-A:3 framework does not apply in the present context. See Hearing Trans. (doc. no. 29) at 71-74. Accordingly, the court will analyze this matter under the standard articulated by those courts that have found RSA 511-A:3 inapplicable.

         II. Background^[3]

         Lonza leases a building on property in Portsmouth, New Hampshire. Doc. no. 43 ¶ 1. On September 8, 2014, Lonza and IPS entered into an agreement for the design, procurement, and construction of a manufacturing facility on that property. Id. ¶ 2. That agreement was subsequently amended on July 19, 2016. Id.^[4] Pursuant to these documents, Lonza was required to pay IPS for “the cost of trade labor including the indirect costs, overhead and profit for all [s]ubcontractors and equipment necessary for construction.” See Prime Contract § 17.16

         On October 9, 2015, IPS notified Fraser that it intended to award Fraser a subcontract to perform mechanical piping and plumbing work on the project. Doc. no. 43 ¶ 5. Fraser and IPS executed a formal subcontract on February 11, 2016, whereby Fraser agreed to furnish all labor, services, materials, tools, equipment, supplies, and any other items necessary or incidental to perform the plumbing and mechanical scope of work on the project. Id. ¶¶ 3, 6. The original subcontract sum was $5, 312, 100. Id. ¶ 7.

         The subcontract contained specific procedures for performing extra work. See, e.g., doc. no. 12-1 at 5, 71. Though Fraser did not always follow those procedures, IPS approved change orders totaling $1, 535, 350.87. See doc. nos. 12-2, 12-3. IPS rejected four change orders totaling $317, 461.17. See doc. no. 12 ¶ 12; doc. no. 12-5.

         In December 2015, Fraser and IPS began having discussions about Fraser potentially accelerating its work on the project. Doc. no. 20-4. On December 11, 2015, Fraser indicated to IPS and Lonza that doing so would result in labor inefficiencies. Doc. no. 20-5. On December 21, 2015, IPS directed Fraser to accelerate its work by using extra overtime under the subcontract. Doc. no. 20-7. The accelerated work continued for months, during which time the parties communicated on numerous occasions about purported labor inefficiencies resulting from the acceleration. See doc. nos. 20-8 through 20-14. The inefficiencies directly resulted in Fraser's employees working 59, 845 additional man-hours on the project. Doc. no. 12-6 at 7, 29.

         The subcontract required Fraser to tag valves and mark pipes. Doc. no. 43 ¶ 12; doc. no. 12-1 at 32. Fraser started this work on August 9, 2016. Doc. no. 20-16 at 11. The work continued through at least October 3, 2016. See Id. at 11-13; doc. no. 20-17 at 4-7; doc. no. 20-18 at 1. All told, Fraser employees spent 1, 199 hours tagging valves and marking pipes in August, September, and October 2016. See doc. no. 20-16 at 11-13; doc. no. 20-17 at 4-7; doc. no. 20-18 at 1.

         The subcontract contained several additional clauses relevant to the present dispute. Under section 10.6, IPS has the sole and exclusive option to arbitrate any disputes arising under the subcontract, which it has invoked in this case. Doc. no. 12-1 at 13. Section 4.18 contains what the defendants characterize as a waiver of indirect damages. Doc. no. 12-1 at 8. Section 2.17 required Fraser to notify IPS of any unforeseen conditions resulting in changes to the work, and indicated that failure to do so would result in Fraser waiving any claim for an adjustment of time of completion, milestone dates, or agreement value. Id. at 4-6. Section 2.6 required IPS to submit conditional lien waivers with each request or invoice for a progress payment. Id. at 3, 79. During the course of its time on the project, Fraser submitted eight individual lien waivers pursuant to section 2.6. Fraser did not exclude any claims from the first seven of these waivers, the last of which was executed on May 31, 2016. See doc. no. 14-5. The eighth waiver, executed October 26, 2016, included exclusions. See doc. no. 45 ¶ 29.

         On August 31, 2016, Fraser submitted a closeout claim to IPS in the amount of $4, 006, 505.72. Doc. no. 43 ¶ 10; doc. no. 12-6. Fraser specifically sought $3, 324, 083.30 for unpaid man-hours caused by the labor inefficiency (doc. no. 12-6 at 7, 29) and $682, 422.42 resulting from changes in the scope of Fraser's work during the course of the project (doc. no. 12-6 at 2, 4, 7). See also doc. no. 43 ¶ 10. Fraser further indicated in its closeout claim that it was entitled to $1, 554, 867.29 in retainage and unpaid contract balance amounts. Doc. no. 12-6 at 2. On September 16, 2016, IPS rejected the closeout claim. Doc. no. 43 ¶ 11.

         On January 24, 2017, Fraser provided IPS and Lonza with a notice of intent to lien. See doc. no. 12-7. Two days later, Fraser filed a verified motion for ex parte attachment to perfect a mechanics lien in Rockingham County Superior Court. See doc. no. 1-1 at 12-18. Fraser specifically sought a lien totaling $4, 917, 122.02, including $3, 324, 083.30 in unpaid man-hours resulting from the labor inefficiency, $682, 422.42 caused changes to the scope of Fraser's work, $593, 155.13 in outstanding subcontract balance, and $317, 461.17 in outstanding change order requests. Id. at 12. The state court granted Fraser's motion on an ex parte basis to the extent it sought to attach ...