516 F.Supp.3d 407
D.N.J.2021Background
- PSEG solicited bids for a power-plant project using a Bill of Quantity (BOQ) that allegedly understated scope and materials; Durr relied on the BOQ, bid, and began work.
- PSEG had more accurate drawings at bidding but is alleged to have withheld them to obtain lower bids; design changes and new drawings arrived during performance increasing Durr’s costs.
- Parties executed a November 2016 contract that limited scope to documents as of September 2016 but preserved PSEG’s right to change scope; PSEG continued to issue changes and withheld promised support/supplies.
- Durr alleges PSEG withheld progress payments, pressured Durr and its surety, and took actions to avoid payment, causing severe financial harm and tens of millions in alleged damages.
- Durr sued asserting breach of contract, Prompt Payment Act, cardinal change, quantum meruit/unjust enrichment, breach of implied covenant of good faith, misrepresentation, tortious interference with contract, and tortious interference with prospective advantage; PSEG moved to dismiss Counts 3–8.
Issues
| Issue | Durr’s Argument | PSEG’s Argument | Held |
|---|---|---|---|
| Cardinal-change doctrine (Count 3) | PSEG’s mid-project alterations were so drastic they amounted to a cardinal change warranting relief outside the contract | Doctrine is federal gov’t–contract law and should not be recognized under NJ law | Dismissed — court declines to adopt cardinal-change doctrine under NJ law |
| Quantum meruit / unjust enrichment (Count 4) | In the alternative, Durr may recover for additional work if contract does not provide recovery | Claim is duplicative of breach-of-contract and should be dismissed | Survives — permitted as alternative pleading; not dismissed at this stage |
| Implied covenant of good faith and fair dealing (Count 5) | PSEG acted in bad faith (withheld drawings/payments, pressured Durr) to frustrate Durr’s performance and benefits | Claim duplicates contract remedies or fails to plead bad faith motive | Survives — allegations plausibly show bad-faith intent and are not merely contract breaches |
| Misrepresentation / fraud (Count 6) | PSEG misrepresented/withheld material facts (BOQ and project conditions) to induce Durr to bid and contract | Economic loss doctrine bars tort claims tied to contract; pleadings fail to satisfy Rule 9(b) | Survives — fraudulent-inducement theory pleaded; Rule 9(b) applies but elements and particulars (who/what/when/where/how) are adequately alleged |
| Tortious interference with contract — surety (Count 7) | PSEG maliciously informed Durr’s surety of purported default, causing surety to deny bonding and a $16M project | Communications were ordinary business and barred by contract exculpatory clause or economic loss doctrine | Survives — pleadings plausibly allege intentional, unjustified interference; exculpatory clause does not bar willful misconduct; economic-loss doctrine not dispositive here |
| Tortious interference with prospective economic advantage (Count 8) | PSEG’s withholding of payments harmed Durr’s bonding/credit and cost it future business | Claim lacks specific allegations of targeted interference and is merely consequential damages from breach | Dismissed — fails to allege targeted, intentional interference with specific prospective contracts |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must permit reasonable inference of liability)
- Rumsfeld v. Freedom NY, Inc., 329 F.3d 1320 (Fed. Cir. 2003) (describing cardinal-change doctrine in gov’t contracts)
- City of Philadelphia v. Beretta U.S.A. Corp., 277 F.3d 415 (3d Cir. 2002) (federal courts should not expand state law beyond state precedent)
- Crystallex Int’l Corp. v. Petroleos de Venezuela, S.A., 879 F.3d 79 (3d Cir. 2018) (federal courts look primarily to state supreme court to predict state law)
- Wade v. Kessler Inst., 798 A.2d 1251 (N.J. 2002) (scope of implied covenant of good faith and fair dealing)
- Allstate N.J. Ins. Co. v. Lajara, 117 A.3d 1221 (N.J. 2015) (elements of fraud under New Jersey law)
- In re Suprema Specialties, Inc. Secs. Litig., 438 F.3d 256 (3d Cir. 2006) (when Rule 9(b) applies to claims that "sound in fraud")