Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_03-cv-00949/USCOURTS-caed-2_03-cv-00949-25/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

EL DORADO IRRIGATION DISTRICT,

a political subdivision of the

State of California,

NO. CIV. S-03-949 LKK/GGH

Plaintiff,

v. O R D E R

TRAYLOR BROS., INC., an 

Indiana corporation,

Defendant.

 /

AND RELATED COUNTER-CLAIMS.

 /

Pending before the court is defendant’s motion for summary

judgment seeking judgment on all of EID’s remaining affirmative

contract claims against both TBI and Travelers Insurance Co. under

the theory that EID failed to fulfill conditions precedent to suit

which were specified in the contract. TBI also seeks judgment on

the fraud claims since they argue they are based on the contract.

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26 1 The facts are undisputed unless otherwise specified. 

2

I.

FACTS1

On November 1, 1999, EID and TBI entered into a written

contract for the construction of the Mill Bull Tunnel Project.

Notice of Lodgment (NOL) Ex. 1 (Agreement), Ex. 2 (General

Conditions), Ex. 3 (Special Provisions) and Ex. 4 (DRB Agreement);

Declaration of George Miteer (Miteer Dec.) at ¶ 2. Under the

definitions of the Contract, EID is the "owner" or "district" and

TBI is the "contractor." NOL Ex. 2, at 1; Ex. 2, Definitions, at

1-2. 

Under the contract EID was to designate an engineer to, among

other things, act as EID's representative during the construction

of the project. NOL Ex. 2, at 21-22, Section 9.01A. The Engineer

was also responsible for the initial interpretation of the contract

documents if, during the work, a claim or dispute arose relating

to: (1) the acceptability of the work; or (2) the interpretation

of the requirements of the contract documents pertaining to the

execution and progress of the work. NOL Ex. 2, at 22-23, Section

9.06A

In the event of a dispute or claim, the claimant was required

to deliver notice to the Engineer and other party within fifteen

days of the occurrence of the event giving rise to the claim. NOL

Ex. 2, at 22-23, Section 9.06A. The Engineer was required to

render a written decision on the claim or dispute within a

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reasonable time or with reasonable promptness. NOL Ex. 2, at

22-23, Sections 9.03A, 9.06A.

Under the contract terms, the rendering of the Engineer's

Decision was a “condition precedent to any exercise by Owner or

Contractor of the rights or remedies as either may otherwise have

under the contract or at law.” NOL Ex. 2, at 23, Section 9.06B;

Ex. 6. at 3. The contract required the Engineer, when acting in

the capacity of interpreter and judge, to show no partiality to the

owner or contractor. NOL Ex. 2, at 23, section 9.06A. 

A. DISPUTES REVIEW BOARD

The contract also mandated the establishment of a Disputes

Review Board (DRB). NOL Ex. 3, at 28, section 8.15; NOL Ex. 4.

The provision for a DRB was implemented in a separate agreement

between TBI, EID and the members of the DRB. (DRB Agreement.) NOL

Ex. 4. The stated purpose and intent for the DRB in both the

Contract and the DRB Agreement, was the parties' desire to have an

established entity to provide assistance to the contracting parties

in resolving claims and disputes in a fair and impartial manner.

NOL Ex. 3, at 28-29, Section 8.15(1)(a)(d); NOL Ex. 4, DRB

Agreement, at 1, section I. The DRB was to be composed of three

members: one appointed by the contractor, one appointed by the

owner, and the third selected by the contractor's and owner's

appointees and agreed to by the parties to serve as chairperson of

the DRB. NOL Ex. 4, at 1, DRB Agreement Recital; Ex. 3, at 29,

Section 8.15(2)(a)(1) and (2).

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4

Under the DRB Agreement, the DRB was to remain a functioning

entity until "the day of acceptance of the Work." NOL Ex. 4, at

6, Section V. Both the Contract and DRB Agreement allowed for the

termination of a contracting party's appointed representative on

the DRB. NOL Ex. 3, at 31, Section 8.15.2.d(1); Ex. 4, at 8,

Section VIII. Neither the Contract nor the DRB Agreement allowed

for either owner or contractor to terminate the entire DRB without

the other party's consent. EID Ex. 3, at 31-32, section 8.15.2.d;

Ex. 4, at 8, section VIII. 

Under the Contract, “[t]he DRB shall be used when the parties

are unable to resolve a dispute or claim." NOL Ex. 3, at 28,

Section 8.15.1.b. For purposes of DRB jurisdiction, a "dispute"

included "all differences of opinion or disagreements concerning

the scope of work, the amount to be paid, the time for performance,

and all similar matters relating to the Project." NOL Ex. 3, at

28, section 815.1.c. Under the DRB Agreement, upon receipt by the

DRB of a written referral of a claim or dispute, from either party

to the DRB Agreement, the DRB was required to convene to review and

consider the matter. NOL Ex. 4, at 3, section D. 

B. FILING OF LAWSUIT

 On or before April 7, 2003, the parties disagreed as to

whether TBI had performed in accordance with the terms of the

agreement. On that date, EID filed a Complaint in the Superior

Court of El Dorado County, Case No. PC20030188 ("EID Complaint").

NOL Ex. 7 [See Request for Judicial Notice]. The EID Complaint

addressed its assertion that TBI had not performed as required by

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the contract and alleged causes of action for Breach of Contract,

Violation of California Civil False Claims Act, Fraud, and sought,

inter alia, injunctive relief. NOL Ex. 7. Prior to filing, EID

did not request the Engineer to issue a formal written decision on

any of the claims or disputes in the EID Complaint. 

C. TERMINATION OF DRB AND NO REFERRAL OF CLAIMS OR DISPUTES 

TO DRB

 On July 25, 2003, EID terminated its appointee to the DRB, Mr.

Korbin, and claimed the DRB decisions were invalid because it was

improperly constituted and biased. NOL Exs. 11 & 12. EID has

never submitted the claims and disputes in its Complaint to the

DRB. Miteer Dec. at ¶ 9.

II.

STANDARDS

Summary judgment is appropriate when it is demonstrated that

there exists no genuine issue as to any material fact, and that the

moving party is entitled to judgment as a matter of law. Fed. R.

Civ. P. 56(c); See also Adickes v. S.H. Kress & Co., 398 U.S. 144,

157 (1970); Secor Limited v. Cetus Corp., 51 F.3d 848, 853 (9th

Cir. 1995).

Under summary judgment practice, the moving party

[A]lways bears the initial responsibility of

informing the district court of the basis for

its motion, and identifying those portions of

"the pleadings, depositions, answers to

interrogatories, and admissions on file,

together with the affidavits, if any," which

it believes demonstrate the absence of a

genuine issue of material fact.

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Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "[W]here the

nonmoving party will bear the burden of proof at trial on a

dispositive issue, a summary judgment motion may properly be made

in reliance solely on the 'pleadings, depositions, answers to

interrogatories, and admissions on file.'" Id. Indeed, summary

judgment should be entered, after adequate time for discovery and

upon motion, against a party who fails to make a showing sufficient

to establish the existence of an element essential to that party's

case, and on which that party will bear the burden of proof at

trial. See id. at 322. "[A] complete failure of proof concerning

an essential element of the nonmoving party's case necessarily

renders all other facts immaterial." Id. In such a circumstance,

summary judgment should be granted, "so long as whatever is before

the district court demonstrates that the standard for entry of

summary judgment, as set forth in Rule 56(c), is satisfied." Id.

at 323.

If the moving party meets its initial responsibility, the

burden then shifts to the opposing party to establish that a

genuine issue as to any material fact actually does exist.

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

586 (1986); See also First Nat'l Bank of Ariz. v. Cities Serv. Co.,

391 U.S. 253, 288-89 (1968); Secor Limited, 51 F.3d at 853. 

In attempting to establish the existence of this factual

dispute, the opposing party may not rely upon the denials of its

pleadings, but is required to tender evidence of specific facts in

the form of affidavits, and/or admissible discovery material, in

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support of its contention that the dispute exists. Fed. R. Civ.

P. 56(e); Matsushita, 475 U.S. at 586 n.11; See also First Nat'l

Bank, 391 U.S. at 289; Rand v. Rowland, 154 F.3d 952, 954 (9th Cir.

1998). The opposing party must demonstrate that the fact in

contention is material, i.e., a fact that might affect the outcome

of the suit under the governing law, Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 248 (1986); Owens v. Local No. 169, Assoc. of

Western Pulp and Paper Workers, 971 F.2d 347, 355 (9th Cir. 1992)

(quoting T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n,

809 F.2d 626, 630 (9th Cir. 1987), and that the dispute is genuine,

i.e., the evidence is such that a reasonable jury could return a

verdict for the nonmoving party, Anderson, 477 U.S. 248-49; see

also Cline v. Industrial Maintenance Engineering & Contracting Co.,

200 F.3d 1223, 1228 (9th Cir. 1999).

In the endeavor to establish the existence of a factual

dispute, the opposing party need not establish a material issue of

fact conclusively in its favor. It is sufficient that "the claimed

factual dispute be shown to require a jury or judge to resolve the

parties' differing versions of the truth at trial." First Nat'l

Bank, 391 U.S. at 290; See also T.W. Elec. Serv., 809 F.2d at 631.

Thus, the "purpose of summary judgment is to 'pierce the pleadings

and to assess the proof in order to see whether there is a genuine

need for trial.'" Matsushita, 475 U.S. at 587 (quoting Fed. R.

Civ. P. 56(e) advisory committee's note on 1963 amendments); see

also International Union of Bricklayers & Allied Craftsman Local

Union No. 20 v. Martin Jaska, Inc., 752 F.2d 1401, 1405 (9th Cir.

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1985).

In resolving the summary judgment motion, the court examines

the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any. Rule

56(c); See also In re Citric Acid Litigation, 191 F.3d 1090, 1093

(9th Cir. 1999). The evidence of the opposing party is to be

believed, see Anderson, 477 U.S. at 255, and all reasonable

inferences that may be drawn from the facts placed before the court

must be drawn in favor of the opposing party, see Matsushita, 475

U.S. at 587 (citing United States v. Diebold, Inc., 369 U.S. 654,

655 (1962) (per curiam)); See also Headwaters Forest Defense v.

County of Humboldt, 211 F.3d 1121, 1132 (9th Cir. 2000).

Nevertheless, inferences are not drawn out of the air, and it is

the opposing party's obligation to produce a factual predicate from

which the inference may be drawn. See Richards v. Nielsen Freight

Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d

898, 902 (9th Cir. 1987).

Finally, to demonstrate a genuine issue, the opposing party

"must do more than simply show that there is some metaphysical

doubt as to the material facts. . . . Where the record taken as a

whole could not lead a rational trier of fact to find for the

nonmoving party, there is no 'genuine issue for trial.'"

Matsushita, 475 U.S. at 587 (citation omitted).

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2 Why judgment rather than a stay is the appropriate remedy

is not specified.

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III.

ANALYSIS

TBI claims that EID failed to fulfill a condition precedent

which required it to seek an engineer’s decision prior to

litigating certain disputes. They also claim that EID failed to

bring the claims to the Dispute Review Board (DRB). On this basis,

they seek judgment in their favor.2 EID has provided a long list

of defenses focusing on the applicability of the condition

precedent and on TBI’s failure to perform the contract. Below the

court resolves the matter.

TBI relies on §9.06 of the contract which provides:

9.06 Decisions on Disagreements

A. Engineer will be the initial interpreter of the

requirements of the contract documents and judge of the

acceptability of the Work thereunder. Claims, disputes

and other matters relating to the acceptability of the

Work or the interpretation of the requirements of the

contract documents pertaining to the execution and

progress of the Work shall be referred initially to

Engineer in writing with a request for a formal decision

in accordance with this paragraph, which Engineer will

render in writing within a reasonable time. Written

notice of each such claim, dispute and other matter

shall be delivered by the claimant to Engineer and the

other party to the Agreement within fifteen days of

occurrence of the event giving rise thereto, and written

supporting data will be submitted to Engineer and the

other party within forty-five (45) days of such

occurrence unless Engineer allows an additional period

of time to ascertain more accurate data. In his

capacity as interpreter and judge, Engineer will not

show partiality to Owner or Contractor and will not be

liable in connection with any interpretation or decision

rendered in good faith in such capacity. 

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B. The rendering of a decision by the Engineer

pursuant to paragraph 9.06.A with respect to any such

claim, dispute or other matter (except which have been

waived by the making or acceptance of final payment as

provided in paragraph 14.11.A [sic]) will be a condition

precedent to any exercise by Owner or Contractor of such

rights or remedies as either may otherwise have under

the contract documents or at law in respect of any such

claim, dispute or other matter. (Ex. 3, pat 22-23.) 

TBI asserts that the language of the above provision requires

that submission of disputes to the Engineer was mandatory prior to

seeking a remedy under the contract or at law. EID asserts a

number of different defenses, claiming that the section was not

meant to apply broadly, that the section violates state law, and

that other sections of the contract are in conflict. EID does not

contend that it submitted the claim underlying this suit to the

Engineer. It does contend, that they “substantially complied” with

§9.06. 

Rather than wading knee deep into the myriad of arguments

presented by EID regarding possible conflicts in the contract or

other reasons why the condition precedent and or DRB provision is

invalid, the court is compelled to deny summary judgment on a

simpler ground, namely waiver.

This case was removed to this court just short of three years

ago, on May 7, 2003. TBI filed its initial answer to the removal

complaint on May 12, 2003. As TBI notes, it raised the

contractually-obligated administrative remedies as an affirmative

defense when it submitted its answer. Nonetheless, for reasons

that TBI has not explained, it waited until now to rely on the

asserted condition precedent. 

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As this court has noted a number of times, this case has been

extremely heavily, possibly excessively, litigated by both parties.

Both California and federal law permits a court to conclude that

a party has waived their right to pursue arbitration when they have

failed to fairly pursue that option and behaved in a manner which

suggested that they did not intend to. The court can conceive of

no reason why the instant claim, essentially identical to an

arbitration claim, should not be subject to the same analysis. 

In Sobremonte v. Superior Court, the California Court of

Appeal referred to the following factors relative to waiver: 

In determining waiver, a court can consider '(1) whether

the party's actions are inconsistent with the right to

arbitrate; (2) whether "the litigation machinery has

been substantially invoked" and the parties "were well

into preparation of a lawsuit" before the party notified

the opposing party of an intent to arbitrate; (3)

whether a party either requested arbitration enforcement

close to the trial date or delayed for a long period

before seeking a stay; (4) whether a defendant seeking

arbitration filed a counterclaim without asking for a

stay of the proceedings; (5) "whether important

intervening steps [e.g., taking advantage of judicial

discovery procedures not available in arbitration] had

taken place"; and (6) whether the delay "affected,

misled, or prejudiced" the opposing party.' 

61 Cal.App.4th 980, 992 (1998); see also Law Offices of Dixon R.

Howell v. Valley, 129 Cal.App.4th 1076, 1097 (2005); Simms v. NPCK

Enterprises, Inc., 109 Cal.App.4th 233, 239 (2003); Groom v. Health

Net, 82 Cal.App.4th 1189, 1194 (2000). The California Supreme

Court expressly endorsed these factors, explaining that they are

“relevant and properly considered in assessing waiver claims” and

also noting that the state’s decisions hold that “the ‘bad faith’

or ‘wilful misconduct’ of a party may constitute a waiver and thus

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3 The courts have held that a finding of waiver is generally

an issue of fact upon which the trial court may make a

determination if examining undisputed issues. Law Offices of Dixon

R. Howell v. Valley, 129 Cal.App.4th 1076, 1098 (2005) (stating

that waiver is a question of fact but where the facts are

undisputed and “only one inference may reasonably be drawn” the

appellate court may treat it as a question of law); Simms v. NPCK

Enterprises, Inc., 109 Cal.App.4th 233, 239 (2003) (“A trial court

shall refuse to compel arbitration if it determines that the right

to compel arbitration has been waived.”). The court’s

consideration here relies exclusively upon the plain evidence in

the court’s docket. 

4 There is some dispute amongst the circuits as to whether

a showing of prejudice is essential. See Uwaydah v. Van Wert

County Hosp., 246 F.Supp.2d 808, 811-12 (N.D. Ohio 2002) (Outlining

the various circuits which require a finding of prejudice,

including the Ninth Circuit, and those which consider it only as

a factor). 

5 The waiver rule exists in various forms in a very large 

number of jurisdictions, for a sample see Joel E. Smith,

Defendant's Participation in Action as Waiver of Right to

Arbitration of Dispute Involved Therein, 98 A.L.R. 3d 767. 

12

justify a refusal to compel arbitration.” Saint Agnes Medical

Center v. PacifiCare of California, 31 Cal.4th 1187, 1196 (2003).3

Likewise, the federal courts have held that a waiver may be

found under the Federal Arbitration Act, if there is “(1) knowledge

of an existing right to compel arbitration; (2) acts inconsistent

with that existing right; and (3) prejudice to the party opposing

arbitration resulting from such inconsistent acts.”4 Britton v.

Co-op Banking Group, 916 F.2d 1405, 1412 (9th Cir. 1990); Chappel

v. Laboratory Corp. of America, 232 F.3d 719, 724 (9th Cir. 2000).5

Both the federal and state cases put a heavy burden on the party

seeking the waiver and both emphasize the same basic elements for

consideration. Britton, 916 F.2d at 1412; Sobremonte, 61

Cal.App.4th at 991 (citing Keating v. Superior Court, 31 Cal.3d

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584, 604 (1982)). 

Although these cases create a test to be used where

arbitration was a prerequisite to litigation, as I indicated above

there is no apparent reason to distinguish the matter at bar from

arbitration cases. Indeed, defendant’s motion urges the court to

view the arbitration cases they offer as relevant, since ultimately

arbitration is simply another form of contractually agreed-upon

dispute resolution. Put directly, applying the elements of the

arbitration waiver cases approved by the California courts to the

instant matter makes it perfectly clear that defendant has waived

a right to rely on the contract clause in issue. 

The first element asks whether the party’s actions were

inconsistent with the right to arbitrate, the second examines

whether the litigation machinery has been substantially invoked and

how far into the lawsuit the parties have advanced and the third

asks whether the party requested arbitration close to the trial or

otherwise delayed for a significant period.

The court in Sobremonte was analyzing a case brought by two

bank customers against their bank. 61 Cal.App.4th at 984-990. The

bank had inserted an arbitration clause into the contract but did

not invoke it (outside of their answer) until after a year into the

litigation. Id. The court in Sobremonte detailed the steps of the

litigation up to the point that the arbitration clause was invoked,

stating:

In the ten months between service of the complaint and

the motion to compel, the Bank filed two demurrers, one

cross-complaint, and one motion to transfer the case to

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the municipal court. The Bank also participated in five

trial court hearings, including two status conferences,

and extensive discovery. The Bank actively litigated the

case and never objected to the court's setting a trial

date or to the discovery propounded by Sobremonte and

Esperidion on grounds of arbitration. The Bank objected,

however, to a number of the propounded interrogatory and

document requests. Not one of those objections was based

on arbitration. Additionally, the discovery protective

orders and oppositions to motions to compel filed by the

Bank failed to contain any argument based on

arbitration.

Sobremonte, 61 Cal.App.4th at 994; see also Law Offices of Dixon

R. Howell, 129 Cal.App.4th at 1099 (finding waiver where the party

did not move to stay or dismiss the action until 15 months after

the action was filed and 13 months after the affirmative defense

was first asserted); Uwaydah v. Van Wert County Hosp., 246

F.Supp.2d at 812 (finding that eighteen months of litigation,

involving extensive and protracted discovery, was more than

sufficient for a finding of waiver).

The conduct in the California cases noted above pales in

comparison to those that have been litigation practice in this

case. TBI has filed over twenty-five motions before this court,

including three motions for summary judgment, a motion for

reconsideration, a motion for a temporary restraining order and a

preliminary injunction, and innumerable motions to compel

discovery. TBI has moved for summary judgment on the substance of

issues related to the condition precedent they are now claiming

(see the motions for summary adjudication on fraud, false claims,

and delay damages). The present motion for summary judgment was

filed at the very last opportunity before the close of motion

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6 Raising an affirmative defense, without more, is not

sufficient to defeat a finding of waiver. Sobremonte, 61

Cal.App.4th at 993; Law Offices of Dixon R. Howell, 129 Cal.App.4th

at 1099.

7 They also moved to dismiss the fraud cause of action, which

they now claim should also be dismissed because of the condition

precedent clause. 

15

practice and less than seven months before trial was set; to say

that the parties are “well into preparation of a lawsuit” would be

a gross understatement. Sobremonte, 61 Cal.App.4th at 992; Law

Offices of Dixon R. Howell, 129 Cal.App.4th at 1100 (finding that

waiver was suggested where the party waited until the eve of trial

to move to dismiss the suit). Thus, both the first, second and

third factors heavily favor a finding of waiver here. 

The fourth factor asks whether the defendant filed a

counterclaim without asking for a stay. Participation in

litigation alone is not enough to demonstrate a waiver. Analysis

also requires consideration of the extent of the litigation, the

demonstrated intent of the parties, and the number of issues, if

any, which may have been decided during the course of the 

litigation. Nonetheless, the extent of participation is a good

indicator of intent. Groom v. Health Net, 82 Cal.App.4th 1189,

1194. Defendants filed counterclaims (and an affirmative defense)

in this matter6. Indeed, defendants moved for summary judgment on

some of the damages being sought under the contract (namely the

delay damages) four months before moving to dismiss the entire

contract claim.7 It is established that “a party may waive his

right to arbitration by allowing the action to go to judgment

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8 Given the fact that plaintiff’s contract case relies upon

a faulty alignment, this may not be as significant of a factor in

the matter at bar.

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without objection.” Doers v. Golden Gate Bridge, 23 Cal.3d 180, 188

(1979)). Here, defendants themselves sought judgment on the merits

prior to raising this issue in a motion. Indeed, at oral argument

the court asked TBI why they waited all this time to bring this

claim which is predominately a question of law and apparently 

relies on nothing that was not available at the start of the case.

TBI was utterly unable to explain the delay. The fourth factor

again weighs in favor of waiver. 

The fifth and six factors, which ask about the utilization of

the judicial discovery procedures and about prejudice equally point

to waiver.

The prejudice adverted to in the cases is normally that of a

party obtaining evidence or strategy though the litigation process

which could then be used harmfully in arbitration, that is using

the litigation process to obtain opposing parties’ strategy before

using the contractually-provided alternative dispute process.

Clearly, given the extent of litigation all of the plaintiff’s case

has been discovered.8

Besides the risk of revealing their case, there are other

types of prejudice that are obvious here. Defendants collectively

filed about fifteen separate motions to compel discovery, much of

which, it seems, would have been unnecessary if they had moved to

dismiss the contract action at the outset. Furthermore, it is

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9 Moreover, the court must be frank. This district has the

highest weighted caseload per active judge in the United States.

Defendant’s conduct is simply intolerable in light of the court’s

docket. While imposition on the court has not generally received

the kind of weight it deserves, in this case it certainly should,

at minimum, be considered. It is no answer to say that now

defendant will relieve the court from further litigation. The

damage has been suffered, and the court has been forced to spend

enormous resources in learning what this case is about. 

Defendant’s suggestion that all that effort should be set aside is

a remarkable display of “chutzpah.”

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clear that the delay may have affected and misled the opposing

party. This delay in moving certainly cost hundreds of thousands

of dollars in what may have been entirely unnecessary litigation

resources, both on the part of the plaintiff and the court. The

courts have stated that they will “not find prejudice where the

party opposing arbitration shows only that it incurred court costs

and legal expenses.” Saint Agnes Medical Center v. PacifiCare of

California, 31 Cal.4th 1187, 1203 (2003). Here, though, where it

is unclear whether EID could even go back and ask for an Engineer’s

Decision, these expenses seem most relevant.9 

All told, it is plain that defendants’ decision to not bring

this motion until now was a gross abuse of the resources of the

court and the opposing party, not to mention the defendants

themselves. The behavior of defendants up to this point surely

demonstrates that they did not intend to enforce the condition

precedent clause.

Both the state and federal cases apply a rigorous analysis in

determining whether the party seeking arbitration has waived,

because the law generally strongly favors arbitration. See Saint

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Agnes Medical Center, 31 Cal.4th at 1203 (quoting Moncharsh v.

Heily & Blase, 3 Cal.4th 1, 9 (1992)); Fisher v. A.G. Becker

Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986) (“Waiver of a

contractual right to arbitration is not favored.”); ATSA of

California, Inc. v. Continental Ins. Co., 702 F.2d 172, 175 (9th

Cir. 1983) (“Arbitration clauses are to be liberally construed, and

any doubts about the scope of an arbitration clause are to be

resolved in favor of arbitration.”). This is not the case for

conditions precedent, as they are strongly disfavored by the law

and are to be strictly interpreted against the party seeking to

enforce such a provision. Helzel v. Superior Court, 123 Cal.App.3d

652, 663 (1981); Pacific Allied v. Century Steel Products, Inc.,

162 Cal.App.2d 70, 79-81 (1958).

A. ADDITIONAL DISPUTED ISSUES

The court is also convinced that even if TBI had not waived

its rights, the court could not resolve the question on summary

judgment. EID has raised a slew of defenses regarding the

condition precedent, some of which appear to raise material

disputed facts. Specifically, EID claims that TBI repudiated their

contractual obligations, and/or committed a first material breach

after hole-through when they refused to repair the tunnel and

remove the TBM from the site. EID claims that TBI’s breach was so

significant that it released EID from its obligation to comply with

the other conditions of the contract. “Whether a breach is so

material as to constitute cause for the injured party to terminate

a contract is ordinarily a question for the trier of fact.” 

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10 Indeed, TBI has failed to even recognize this court’s

previous findings in its briefs. 

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Whitney Inv. Co. v. Westview Development Co., 273 Cal.App.2d 594,

601 (1969). 

There are also significant questions about exactly which

disputes were required to go before the Engineer. TBI’s motion

does not highlight exactly which disputed issues it believes were

to be heard by the Engineer. EID claims that the Engineer

determined that the tunnel was misaligned, and that TBI did not

dispute that, and thus there was no need to bring the dispute to

the Engineer for a further decision. If this is true, then it

would have been the responsibility of TBI to bring the claim to the

Engineer if they disputed the misalignment finding. Since the

misalignment appears to be the central fact for the contract claim,

it appears that at least part of that claim could survive.

B. DISPUTE REVIEW BOARD

With regards to the Dispute Review Board, this court

previously denied TBI’s request for a preliminary injunction to

prevent EID from issuing a further termination notice. Therein,

the court made substantial findings regarding the applicability of

the DRB. The central issue in that motion was whether the contract

had already been terminated, such that the DRB created by the

contract would no longer function. The court denied the injunction

on the ground that EID had demonstrated a high likelihood of

success on the merits, and it does not appear that TBI has

presented anything which undermines that conclusion.10 The court

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determined that the record indicated that TBI expressly refused to

perform its obligations under the contract to the satisfaction of

the District, despite the District having repeatedly warned TBI

that failure to perform would result in termination. Id. at 20.

A party’s repudiation of a contract, whether express or implied,

results in termination of the contract. Taylor v. Johnston, 15

Cal.3d 130, 137 (1975). The court found that the facts

“conclusively” established that the District terminated the

contract when TBI refused to perform after being given a number of

opportunities. Id. at 20. Thus, following termination, the DRB

would cease to function except that it could complete “unfinished

dispute hearings and reports” of which there were none. Id.

“[T]his result is consistent with the purpose and scope of DRB

proceedings, which is to adjudicate issues arising during the

course of performance of the contract rather than issues remaining

after the termination of a contract due to repudiation or failure

to perform.” Id. 

IV.

CONCLUSION & ORDER

The court finds that summary judgment must be denied because

defendants have waived their right to enforce the condition

precedent. Moreover, there are a number of disputed issues of

material fact which remain and would prevent the court from

deciding the applicability of the provision at this time. Finally,

the court has already determined that the DRB was likely no longer

applicable after termination, and defendants have submitted no

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information to alter that conclusion at this time. 

Defendant’s motion for summary judgment is DENIED. 

IT IS SO ORDERED. 

DATED: April 3, 2006.

/s/Lawrence K. Karlton 

LAWRENCE K. KARLTON

SENIOR JUDGE

UNITED STATES DISTRICT COURT

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