Georgia Company Wins $1.5M Judgment Over Unpaid Puerto Rico Hurricane Work
U.S. District Judge William Dimitrouleas found that a plaintiff contractor hired to help with Hurricane Maria recovery efforts in Puerto Rico unjustly enriched itself from a defendant auto repair company.
September 16, 2019 at 03:43 PM
6 minute read
The original version of this story was published on Daily Business Review
A Georgia company has won a $1.5 million final judgment in a contractual storm over its part in hurricane relief efforts for Puerto Rico.
Automotive Experts of Georgia supplied mechanics and equipment to help Puerto Rico recover from Hurricane Maria in 2017, a Category 5 storm that left most of the island without power. But a legal dispute ensued between Automotive Experts and the company that had hired it for the project.
The spat arose when the U.S. Army Corps of Engineers contracted infrastructure company Louis Berger for its operation and maintenance mission, aimed at rebuilding Puerto Rico's government, hospitals and critical infrastructure. Louis Berger in turn recruited plaintiff Kallberg Industries LLC, which drafted technicians, generators and storm-ready work trucks.
Automotive Experts was among the subcontractors. It claimed Kallberg had agreed to pay for personnel and gear in the form of mechanics, utility trailers, storage containers, oil tanks, fuel caddies and oil pumps that were crucial to the mission.
"My client furnished basically everything that Kallberg Industries needed to handle the project," said Automotive Experts' lawyer, Eric Lee of Lee & Amtzis in Boca Raton, Florida.
Automotive Experts CEO Michael Kunkel claimed he was fired after complaining about late payments.
But Kallberg Industries alleged it removed Automotive Experts at the request of the contractor because Kunkel had allegedly tried to derail the mission by creating a labor dispute between workers.
But U.S. District Judge William Dimitrouleas' findings of fact showed that when Kallberg Industries fired Automotive Experts on Jan, 1, 2018, it kept the subcontractor's equipment for weeks, until Feb. 15. And the judge found that when Kallberg Industries did return them, the equipment was covered in oil and waste, in no fit state to be sent back to Florida.
Kunkel claimed the contractor still owed him money, but Kallberg Industries moved for a declaratory judgment, alleging it owed no more than the $179,000 it had already paid. This made Automotive Experts the defendant in the case.
Plaintiffs attorneys Patrick Gonyea and Richard McIntyre of Thanasides, Bringgold, Elliott, Grimaldi, Guito & Matthews in Tampa did not respond to a request for comment by deadline.
|'Everybody was passing the buck'
Defense attorney Lee fired back with a countercomplaint, alleging breach of contract. He argued Kallberg had continued to use—and therefore benefitted from—his client's equipment months after breaking ties.
When Lee deposed Kallberg and Louis Berger principals, he said he found something curious in the daily expense register they had used to list what equipment was billed to the U.S. government.
"I found out that my client's equipment remained on the DER for months after it was back in the U.S.," Lee said. "Of course, they all said, 'That must have been a mistake, that wasn't us.' Everybody was passing the buck."
Lee said he also found during discovery that while Kallberg Industries had refused to pay his client, its principals had taken more than $3 million from Kallberg Industries. He argued the plaintiff couldn't have completed its mission if it hadn't been for his client.
"Kallberg Industries and the principals had no experience doing any of this before, and they basically had three employees when they started," Lee said. "My client found them hundreds of names of people to bring over there for labor, and brought over all the equipment. Then my client went over there, set up the entire mission, and ran the entire mission until they got rid of him."
After a two-day bench trial, Dimitrouleas agreed, finding unjust enrichment, and that the plaintiff had used and profited from Automotive Experts' equipment and referred labor. The judge ordered Kallberg to disgorge $1.25 million in profits made from the equipment and $287,700 from labor.
Damages could rise as Lee has moved to amend what he claims is an error in the judge's calculation. If Dimitrouleas agrees, disgorgement of profits would increase to $1.475 million, making the overall total more than $1.7 million. Lee also seeks prejudgment interest, which could tally up to $152,000.
The plaintiff too has filed new pleadings.
In its proposed amendments to the findings of fact, Kallberg pointed to alleged bad faith and misconduct from Kunkel. It alleged the subcontractor tried to seek payment for workers he hadn't referred to the project and for equipment he hadn't supplied. Kallberg also claimed it wasn't paid by Louis Berger until three months into the project and maintained it still hasn't received full payment after incurring $4 million in debt and loans.
Lee said the dispute hasn't been easy for his client, who had to shut down his mechanic shop in Georgia to go to Puerto Rico with his equipment and team.
"They were receiving no income for four months other than daily pay, so they were basically shut down for four and a half months while they were over there," Lee said. "It's almost two years later and he still hasn't recovered a penny."
In his finding of fact, Dimitrouleas recognized the government's need to incentivize private enterprises and those willing to uproot their lives to respond to a natural disaster, but he appeared unimpressed with the "gargantuan premium" some contractors charge.
"Kallberg was paid $902 per day per mechanic, and less than half of that ever made it to an actual mechanic," Dimitrouleas wrote. "Louis Berger was certainly paid even more than that. These rates paid by the United States government to Louis Berger and passed down to a series of contractors and subcontractors (with each taking a substantial cut for 'overhead') can only be described as nearly exorbitant."
Read Judge Dimitrouleas's findings:
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