Sub on Utah packaging plant bankruptcy filings, sues GC for $1.4 million in unpaid change orders and fuel costs
After filing for Chapter 11 bankruptcy late last month, Nevada contractor SoNev Construction LLC sued general contractor The Pike Company, LLC on April 21 for alleged breach of contract over work in a Utah manufacturing plant.
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Communication issues, disputes over change orders and rising diesel fuel costs have all contributed to a tense situation between the two contractors, according to the adversarial process. SoNev’s lawsuit alleges breach of contract and breach of an automatic stay, and the company seeks more than $1.4 million in damages for unpaid bills, lost profits and lost time at other jobs .
SoNev was originally hired by Pike in December 2021 to work at American Packaging Corporation’s (APC) new manufacturing facility in Cedar City, Utah. The project is tied to a number of economic development incentives authorized by the Utah State Legislature. Over the next ten years, the plant is expected to provide 135 well-paying jobs and improve the quality of life for Utah residents.
According to court documents, shortly after all parties signed the contract, APC provided a new geotechnical report that called for changes to SoNev’s “scope, schedule and price of work required.” After some back and forth, the two parties reportedly agreed to a change order in March 2022 that increased the contract value by $121,817.50.
SoNev began work, but was quickly delayed by the confusion of schedules. Citing some “gaps” in SoNev’s work, Pike filed a healing notice letter. According to SoNev, Pike seemed to confuse details with the original schedule, and these “gaps” were in fact consistent with the new change order.
SoNev was given 72 hours to respond to these concerns and made several attempts to clarify the schedule confusion.
Underscoring SoNev’s alleged failure to address its concerns, Pike terminated the contract on March 29 and demanded that SoNev remove its equipment from the project site. SoNev continued to express a desire to reconcile and move forward with the project, but Pike declined offers to mediate until SoNev’s equipment was removed.
In correspondence, SoNev assured Pike that it “would have no problem moving the equipment as long as Pike agrees that SoNev Construction will be paid in full for all work performed and billed on this project.”
Court documents allege that in early April, Pike began removing the equipment himself. After hearing about it, SoNev returned to the site and “immobilized the equipment belonging to him”.
With communication clearly cut off and opportunities for mediation narrowing, SoNev appears to have resorted to legal action in order to recover unpaid bills, as well as damages for lost profits and other opportunities.
Just before Pike terminated the contract, SoNev filed for Chapter 11 bankruptcy on March 25. A Chapter 11 bankruptcy usually means the business is trying to reorganize to stay afloat. These bankruptcies can be the most complicated – often the business in question is trying to stay in business, but this can also lead to liquidation.
According to court documents, SoNev filed for bankruptcy in order to “reorganize.” To date, SoNev says it has not been paid by Pike for more than $299,000 in unpaid bills.
Pike’s subsequent termination of SoNev would have violated the automatic stay issued when SoNev filed for bankruptcy. This, in addition to breach of contract claims, gave SoNev grounds for its lawsuit, in which it seeks more than $1.4 million in unpaid wages, lost profits and lost time on equipment and other jobs.
These damages include approximately $12,000 for fuel costs. The original contract had a diesel fuel budget of $3 per gallon and provided that if the price per gallon of diesel fuel increased beyond $3, Pike would cover the remaining cost.
The price of diesel fuel has since risen to an average of more than $4 per gallon nationally. According to court documents, Pike failed to pay SoNev’s fuel bills as stated in the contract.