Sanact, Inc. v. U.S. Pipelining LLC
1:16-cv-00377
D. Haw.Jul 26, 2018Background
- Sanact (Roto Rooter) provided specialized pipe-cleaning and repair services to US Pipelining, a subcontractor on a Maui condominium renovation, from Sept. 2 to Nov. 9, 2015.
- Parties had no signed written subcontract; Sanact invoiced daily at agreed hourly rates ($150/hr for first 8 hours; $172.50/hr overtime) and US Pipelining paid for work through Oct. 5, 2015 but stopped paying thereafter.
- Sanact completed all requested work; US Pipelining admitted work quality was satisfactory and that payments ceased after Oct. 28, 2015.
- Sanact sought payment for 26 outstanding invoices (Oct. 6–Nov. 9, 2015), totaling $123,203.16, and demanded interest and later filed suit after nonpayment.
- US Pipelining asserted a "pay-when-paid" defense (Sanact would be paid only after Johnson Controls paid US Pipelining); court found no such agreement or valid modification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of enforceable contract | Sanact: implied/express contract by offer, performance, invoices, and accepted rates | US Pipelining: no binding contract absent signed SUBCONTRACTOR AGREEMENT | Court: binding contract existed by offer (US Pipelining), acceptance (Sanact performance), and consideration; invoices and partial payments evidenced terms |
| Validity of proffered SUBCONTRACTOR AGREEMENT | Sanact: never agreed or signed; materially modified and returned | US Pipelining: proffered agreement governs | Court: proffered agreement not binding—no mutual assent; Sanact materially altered it and US Pipelining never signed |
| Pay-when-paid defense (modification) | Sanact: never agreed to wait for US Pipelining to be paid by Johnson Controls; no new consideration | US Pipelining: alleged Sanact agreed payment contingent on Johnson Controls paying US Pipelining | Court: no evidence of such term or valid modification; communications were payment requests, not a contract change; no new consideration, so defense fails |
| Remedies: damages, prejudgment interest, attorneys’ fees | Sanact: seeks unpaid principal $123,203.16, prejudgment interest, attorneys’ fees under assumpsit statute | US Pipelining: disputes liability/amount and assertion re: setoff via upstream dispute | Court: awards $123,203.16; prejudgment interest at 10% per Haw. Rev. Stat. §478-2 from Dec. 9, 2015; Sanact is prevailing party entitled to attorneys’ fees up to 25% under Haw. Rev. Stat. §607-14; post-judgment interest per 28 U.S.C. §1961 |
Key Cases Cited
- Welles v. Turner Entm’t Co., 503 F.3d 728 (9th Cir. 2007) (choice-of-law principles for diversity cases)
- Mikelson v. United Servs. Auto. Ass’n, 111 P.3d 601 (Haw. 2005) (Hawaii’s most-significant-relationship test)
- Earl M. Jorgensen Co. v. Mark Constr., Inc., 540 P.2d 978 (Haw. 1975) (mutual assent and contract formation)
- Shoppe v. Gucci Am., Inc., 14 P.3d 1049 (Haw. 2000) (elements of offer, acceptance, and consideration)
- Chateau des Charmes Wines Ltd. v. Sabate USA Inc., 328 F.3d 528 (9th Cir. 2003) (invoice terms do not bind absent affirmative assent)