PG&E Corporation v. AECOM Technical Services, Inc..

Background

The dispute arises from the Burney K2 Replacement Project, which involved replacing a natural-gas compressor unit and making upgrades at a compressor station. PG&E and AECOM entered into an engineering, procurement, and construction agreement. AECOM then subcontracted construction obligations to JH Kelly, LLC. The parties disputed responsibility for alleged delays, cost overruns, contractual violations, and tortious conduct.

AECOM’s First Amended Counterclaim asserted sixteen causes of action against PG&E and JH Kelly. PG&E moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a pleading does not state a legally sufficient claim. The motion concerned AECOM’s non-contract claims against PG&E: negligent misrepresentation, fraudulent concealment, quantum meruit, implied contractual indemnity, and contribution or apportionment.

Negligent Misrepresentation and Fraudulent Concealment

AECOM based these claims on alleged representations in PG&E’s request for proposal. AECOM alleged that PG&E represented that it would make only minimal changes to the pre-bid design, that the design was accurate, that the construction methods were described in the request for proposal, and that the project and design scope would be fixed at the pre-bid stage, subject to schedule extensions or price increases for later changes.

Because these claims sounded in fraud under California law, the court applied Federal Rule of Civil Procedure 9(b). That rule requires fraud to be pleaded with particularity, including the time, place, specific content, and participants in the alleged misrepresentation. The court found that AECOM had not identified the specific provisions of the request for proposal containing the alleged misrepresentations or provided sufficient context for them. The court therefore dismissed both claims with leave to amend. It did not decide PG&E’s separate argument concerning California’s economic-loss rule.

Quantum Meruit

Quantum meruit is a theory for recovering the reasonable value of services when a contract does not govern the recovery. AECOM alleged that PG&E’s excessive project changes amounted to abandonment of the construction agreement and entitled AECOM to recover under quantum meruit.

The court explained that abandonment requires both parties to intend to disregard the contract. AECOM alleged facts that might show PG&E’s implied intent to abandon the agreement, including demands for numerous changes and failure to follow the agreement’s change-order process. But AECOM did not allege that it also intended to abandon the agreement. The court noted that AECOM’s other claims sought to enforce the same agreement. It dismissed the quantum meruit claim with leave to amend.

Implied Contractual Indemnity

AECOM sought implied contractual indemnity if it were found derivatively liable to JH Kelly. The court held that California law requires a joint legal obligation to the injured party for an implied contractual indemnity claim. AECOM did not plausibly allege that PG&E and AECOM shared such an obligation to JH Kelly. The court dismissed this claim with leave to amend.

Contribution or Apportionment

AECOM’s contribution or apportionment claim appeared to depend on its implied contractual indemnity theory, and AECOM offered no other basis for the claim’s viability. The court therefore dismissed the contribution or apportionment claim against PG&E with leave to amend.

Other Dispositions and Order

The opinion states that the parties stipulated to dismissal of AECOM’s claim for determination of the priority and extent of its mechanics’ lien against PG&E, based on the court’s prior ruling on JH Kelly’s mechanics’ lien foreclosure claim. The court dismissed that first cause of action without leave to amend.

The order granted PG&E’s motion to dismiss in part. The body of the opinion identifies the dismissed claims with leave to amend as the fifth, sixth, seventh, eighth, and sixteenth causes of action. The conclusion instead refers to the fifth, sixth, seventh, ninth, and sixteenth causes of action. The order allowed AECOM 21 days from the order’s date to file an amended counterclaim and prohibited it from adding new causes of action or defendants. The request for judicial notice was denied as moot because the court did not rely on the submitted documents.