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Thursday, December 12, 2019

Federal judge kicks contractors' tussle over CTA HVAC renovation project to state court

By Scott Holland | Mar 11, 2017

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A dispute between two air conditioning manufacturers over a CTA contract won’t continue in federal court after a judge in Chicago relinquished jurisdiction and dismissed the action, allowing it to be filed again in state court. 

Energy Labs Inc., of San Diego, which makes custom air handling and air conditioning units in Mexico, was pursuing a breach of contract claim against Elk Grove Village-based Edwards Engineering. Edwards had contracted with the CTA to rehabilitate the HVAC system at the CTA’s 103rd Street repair facility and, according to ELI, certified it would comply with the Buy America Act’s mandate that federal funds for components used to build transportation systems be manufactured in America. 

After CTA told Edwards ELI’s parts did not comply with the Buy America Act, Edwards canceled its purchase order. On Sept. 24, 2014, ELI sued Edwards, and on June 2, 2015, U.S. District Judge Marvin E. Aspen denied a motion to dismiss the litigation, finding the Buy America Act did not necessarily void the contract between the two companies. Edwards filed a counterclaim on July 29, 2015, making breach of contract claims against ELI and a third-party complaint against CTA, alleging state law claims for breaches of contract, good faith, fair dealing and implied warranty and spoliation. 

CTA 103rd St. garage

On Oct. 30, 2015, the CTA responded to Edwards’ breach of contract claim and moved to dismiss the others. CTA also that day filed a counterclaim against Edwards and a fourth-party complaint against Western Surety Company, which represented Edwards, seeking damages for Edwards’ alleged breach of contract. 

On Dec. 16, 2015, ELI filed a notice of settlement for its claims with Edwards; Aspen granted a subsequent motion to enforce the settlement, which involved ELI voluntarily dismissing all its claims on June 20, 2016. All that remained for Aspen to consider was state common law claims between Edwards, CTA and Western. 

According to Aspen, Edwards, the CTA and Western had participated in “extensive mediation efforts” since late 2015, leading him to hold CTA’s motion to dismiss in abeyance. After private mediation in mid-January, the parties said they couldn’t reach a settlement, so Aspen set a May 2017 deadline for completing discovery and filing a brief on whether his court should end jurisdiction over the state law claims. Edwards and Western said the court should decline to exercise supplemental jurisdiction; CTA said it should retain. 

“All factors favor dismissing the remaining state law claims,” Aspen wrote in a March 2 opinion. “This case was grounded on state law causes of action, and the basis for original jurisdiction - the diversity of the parties - has since fallen away. Accordingly, comity, convenience, and fairness to the parties counsels in favor of having their state law claims decided in a state forum.” 

Aspen further noted there exists a separate, pending state court case in which Edwards, Western and the CTA are all parties. Although that case is in the early stages, the CTA disputes the notion the federal and state disputes could be consolidated - though Aspen notes “CTA has not presented any reason” to support that argument. 

CTA also argued the exchange of “thousands of documents in connection with their mediation efforts” means starting over would start another two years of legal maneuvering. But Aspen said there would be no need to start over in state court, since there’s already a case pending. 

“None of the parties have argued that it is ‘absolutely clear’ how the pending state law claims should be decided, nor have they argued any of the asserted claims are frivolous,” Aspen wrote. “The contract claims raised by the parties are complex and involve interpretation and application of Illinois common law, and they should be pursued in a state forum.” 

Edwards Engineering is represented in the action by attorneys from the firms of Querrey & Harrow, Ltd., and of Tressler LLP, each of Chicago.

Energy Labs is represented by Gordon & Rees LLP, of Chicago. 

The CTA is represented by the firm of Ice Miller LLP, of Chicago.

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Organizations in this Story

Ice MillerQuerrey and Harrow, Ltd.Tressler, Soderstrom, Maloney and Priess, LLPChicago Transit AuthorityGordon & Rees LLPTressler LLP