Construction Law Insights

Faneuil Inc. v. 3M Co., 2018 Va. Cir. LEXIS 74 (Cir. Ct. City of Richmond May 14, 2018)

In 2011, the Virginia Department of Transporation (“VDOT”) hired Elizabeth River Crossing Opco, LLC (“Elizabeth River”) to develop, design, construct, manage, operate, and maintain a tolling project in the Hampton Roads region of Virginia (the “Project”). Elizabeth River contracted 3M Company (“3M”) to design, implement, and operate the electronic tolling system (the “Tolling System”) for the Project. On October 9, 2013, 3M engaged Faneuil Inc. (“Faneuil”) to, among other tasks, run the customer service center and identify, invoice, and accept payment from the non-E-Z Pass drivers under a subcontract that contained a flat monthly rate (the “Tolling Subcontract”). Section 14.05(a) of the Tolling Subcontract required the parties to execute a “Scope Change” in the event of any “material addition to, deletion from, suspension of or other modification to” or a “material change to the requirements of the” Tolling Subcontract. Section 25.18 of the Tolling Subcontract further required the parties to memorialize in writing any alteration, amendment, or revocation to the matters covered in the Tolling Subcontract.

On July 2, 2014, Faneuil began charging 3M for “special services” (staff hours that it claimed exceeded its obligations under the Tolling Subcontract). Since July 2, 2014, 3M made several good faith payments to Faneuil for these special services, totaling $1,066,172.58. On September 22, 2016, Faneuil filed a lawsuit, seeking $3,802,430.96 as reimbursement for these special services. Because the parties never executed a Scope Change relating to the special services, the court dismissed Faneuil’s complaint with prejudice.

The court also dismissed 3M’s counterclaim with prejudice because: (1) 3M materially breached the Tolling Subcontract first by not providing the required state of the art Tolling System, which caused Faneuil to incur the special services; (2) the Tolling Subcontract provided for the review of Faneuil’s invoices every month and withhold the money that it believed it was entitled to, but 3M did not apply for or request from Faneuil any adjustment to the base monthly fee until May 2016, nearly two and half years into the Subcontract; and (3) 3M’s claims are related to two settlement agreements between 3M and Elizabeth River, and, according to Section 15.03(d) of the Tolling Subcontract, Faneuil was “not liable for any settlement or compromise by [3M] of a third-party claim except with [Faneuil]’s prior written consent.

PLDR Law Mark Burgin 1 PLDR Law Scott Kowalski 1 Wolf Tom v2 Stout Kenneth 2016

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