Contractors working on jobsite

After filing for Chapter 11 bankruptcy late last month, Nevada contractor SoNev Construction LLC sued General Contractor The Pike Company, LLC on April 21 over an alleged breach of contract regarding work on a Utah manufacturing plant.

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Miscommunication, change order disputes, and the rising cost of diesel fuel all contributed to a tense situation between the two contractors, according to the adversary proceeding. SoNev’s lawsuit alleges breach of contract and a violation of an automatic stay, and the company is seeking over $1.4 million in damages for unpaid invoices, lost profits, and lost time on other jobs.

SoNev was originally hired by Pike in December 2021 for work at American Packaging Corporation’s (APC) new manufacturing plant 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 high-paying jobs and improve 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 the “scope, timing, and pricing of the work required” of SoNev. After some back-and-forth discussions, both parties reportedly agreed to a change order in March 2022 that increased the contract value by $121,817.50.

SoNev began its work, but was quickly held up over scheduling confusion. Citing certain “deficiencies” in SoNev’s work, Pike filed a Notice to Cure letter. According to SoNev, Pike appeared to be confusing details with the original schedule, and these “deficiencies” were actually in line with the new change order.

SoNev was given 72 hours to address these concerns, and made several attempts to clarify the scheduling confusion.

Pointing to SoNev’s alleged failure to address its concerns, Pike terminated the contract on March 29 and demanded SoNev remove its equipment from the project site. SoNev continued to express a desire to reconcile and move forward with the project, but Pike refused offers for mediation until SoNev’s equipment had been removed.

In correspondence, SoNev assured Pike that it would “have no problem moving the equipment as long as Pike acknowledges 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 equipment itself. After hearing of this, SoNev returned to the job site and “immobilized the equipment belonging to it.”

With communication clearly breaking down and opportunities for mediation dwindling, SoNev appears to have resorted to legal action in order to recover unpaid invoices, 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 typically means the company is trying to reorganize to stay afloat. These bankruptcies can be the most complicated — often, the company in question is trying to stay in business, but it can also result in a liquidation.

According to court documents, SoNev’s filed bankruptcy in order to “reorganize.” To date, SoNev claims it has not been paid by Pike for over $299,000 in outstanding invoices.

Pike’s subsequent termination of SoNev reportedly 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 is seeking over $1.4M in unpaid wages, lost profits, and lost time on equipment and other jobs.

Included in these damages is roughly $12,000 for fuel charges. The original contract budgeted for diesel fuel at $3 per gallon and provided that, if the price per gallon of diesel fuel increased past $3, Pike would cover the remaining cost.

The price of diesel fuel has since risen to an average of over $4 per gallon nationally. According to court documents, Pike has not paid SoNev’s fuel invoices as set out in the contract.