Inside of Amazon Data Center with problem project label

Following disputes dating back to 2019, Ohio-based Atlas Industrial Contractors, LLC has been granted partial summary judgment in its ongoing lawsuit against Michigan’s In2Gro Technologies, LLC over the newest Amazon Web Services data server facility in New Albany, Ohio.

The United States District Court for the Southern District of Ohio awarded a total of $177,686.50 to Atlas in a case involving alleged breaches of contract and claims of unjust enrichment. In response, In2Gro Technologies appealed the judgment to the United States Sixth Circuit Court of Appeals on April 26, 2021 — an appeal that is still pending.

The two parties’ dispute centers around a newly-constructed, $400 million data server facility — the second that Amazon has built in New Albany. Atlas Industrial and In2Gro Technologies both have separate contracts with Amazon Web Services to render work on this facility.

The Amazon Web Services facility hosts infrastructure necessary for its web cloud computing services. In recent years, construction of such data centers has become a highly profitable endeavor for contractors, particularly since the start of the COVID-19 pandemic increased demand for bandwidth in 2020. 

Recent Amazon Web Services data centers have been built for upwards of $300 million, and even in the last quarter of 2019 the cloud computing industry spent over $32 billion on developing new facilities.

The ambitious data center expansions pursued by companies like Amazon are also pushing smaller developers to keep up the pace and invest in the industry — building facilities that can cost upwards of $60 million to construct.

Contractors are reporting positive effects from this already. A recent earnings release by construction company Martin Marietta Materials pointed out that rises in e-commerce and remote work are fueling the construction of such fulfillment and distribution centers for companies like Amazon, raising profits significantly as the construction industry attempts to turn a corner away from the effects of the pandemic.

High profitability may lead to disputes over lucrative data center construction contracts

Atlas Industrial, which offers commercial and industrial installation services, claims that it began working on the New Albany data server facility when it was originally being built, becoming involved with In2Gro Technologies when it began its contracted work to “provide, install, activate, and maintain security systems” at the facility.

At this point, In2Gro Technologies requested a quote from Atlas Industrial for the installation of conduit and pull wire for the facility’s security systems. Prior to the development of a contract between the two parties, Amazon Web Services solicited In2Gro Technologies to ensure that Atlas Industrial kept employees present at the facility at all times to complete miscellaneous work not covered by individual contracts, a process known as “standby work.”

According to Atlas Industrial, this standby work included “locksmithing, relocating motion sensors, field research of conduits and electronic components, installation of various items, [and] information gathering.”

Atlas Industrial claims it performed standby work in March 2018, submitting a claim of $69,999 to In2Gro Technologies that month. Following this, In2Gro Technologies issued a purchase order for $69,999 to Atlas Industrial, which it paid in April 2018.

On May 23, the two parties executed a master services agreement intended to govern all future projects between Atlas Industrial and In2Gro Technologies.

This agreement provided that In2Gro Technologies would pay Atlas Industrial for the satisfactory performance of purchase orders’ work and supplies “either (1) 10 days following receipt of payment from [Amazon Web Services] or (2) Net 30 terms from date of Atlas’s invoice date.”

However, it also notes In2Gro Technologies had the right to “withhold payment up to 100% of the amount of any disputed item” and to be allowed “reasonable time” to secure payment from Amazon Web Services prior to paying Atlas Industrial.

Issues over standby work led to unpaid invoices, mechanics lien, and likely, profit loss

In August, October, and December 2018 Atlas Industrial issued three invoices for standby work to In2Gro Technologies, totalling $139,609.20. 

These invoices, Atlas Industrial claims, also included non-standby work, but In2Gro Technologies failed to pay any of them.

Following this, Atlas Industrial invoiced In2Gro Technologies for $177,686.50 in purely non-standby work, which the lawsuit alleges was also not paid.

In April 2019, Amazon Web Services solicited bids for a “Perimeter Gate Redesign Project.” In2Gro Technologies bid for the project, standing to gain an estimated $3,953,796 if selected, which it was on June 13, 2019.

Upon being informed of the June 13 development, Atlas Industrial initiated its lawsuit, following it with the filing of a mechanics lien on the Amazon Web Services data facility on June 18, 2019, for $297,295.70 — a sum which Atlas Industrial claims represents the total of its unpaid standby and non-standby work.

Amazon Web Services requested a copy of the lien on June 26, 2019, and as a result informed In2Gro Technologies on June 27, 2019, that the “Perimeter Gate Redesign Project” would be rebid as three projects, rather than one — effectively causing In2Gro Technologies to lose the contract and its hefty profit margin.

Though this appears to have been a quick decision on the part of Amazon Web Services, in an earlier statement about the New Albany data center Amazon spokeswoman Lauren Lynch noted that the company prefers to avoid commenting on its “future road map.”

In the ensuing rebid, In2Gro Technologies won one of the three projects (for which it now expected a much smaller profit of $352,235), and Atlas Industrial won one bid as a subcontractor for technology company Plugout, LLC

Learn more: The Bidding Process for Private Construction Projects

Atlas Industrial released its previous mechanics lien on December 6, 2019. Though its lawsuit claimed it deserved restitution for all outstanding funds, the partial summary judgement awarded them only $177,686.50 for non-standby work.

The Southern District Court’s ruling notes that “[a] district court considering a motion for summary judgment may not weigh [the]evidence or make credibility determinations…Rather, in reviewing a motion for summary judgment, a court must determine whether ‘the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.’”