# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 8- 23 45

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Adv an ce Co nv ey in g Tec hn ol og ie s, LLC

ll ll ll ll ll ll ll ll ll ll l Cr os s C la ima nt - App el le e

v.

Lem art ec Co rp or at io n

ll ll ll ll ll ll ll ll ll ll l Cr os s Def en da nt - App el la nt

__ __ __ __ __ __
App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e So ut he rn Dis tri ct of I owa - Des M oi ne s

__ __ __ __ __ __

Su bm it te d: May 15, 2 01 9
Fi le d: Ju ly 25, 2 01 9

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Befo re BENTON, W OLLMAN, and GRASZ, Cir cu it Ju dg es

.

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W OLLMAN, Circ ui t J ud ge

.

Fo ll owi ng a fo ur -d ay be nc h tri al

, th e di st ric t co ur t en te red jud gm en t in fav or 1

of Adv an ce Co nv ey in g Tech no lo gi es , LLC (ACT), on ACT’s br each of co nt ract

cl ai m ag ai ns t Lem art ec Co rp or at io n (Lem art ec). On ap pe al

, Lem art ec arg ue s th at th e

The Hon or ab le Ch arl es R. W ol le

, Uni te d St at es D ist ri ct Judg e fo r th e So ut he rn 1

Dis tri ct of I owa

.di st ric t co ur t erre d in co nc lu di ng th at Lem art ec’s bi d pa ck ag e was in co rp or at ed in to

th e pa rti es ’ co nt ract (th e pu rch as e or de r). Alt ho ug h we co nc lu de th at th e bi d pa ck ag e

was no t so in co rp or at ed in so m an y wor ds

, we no ne th el es s affi rm th e jud gm en t,

be cau se whe n th e co nt ract is co ns id ered in li gh t of the us ag e-o f-t rad e ev id en ce tha t

th e di st ric t co ur t fo un d cred ib le

, th ere is no erro r in th e de te rm in at io n th at Lem art ec
br each ed th e p ur ch as e o rd er.

Lem art ec se rv ed as th e ge ne ral co nt ract or fo r th e co ns tru ct io n of a ch lo r-al ka li

pr od uc ti on pl an t in Edd y vi ll e, Io wa. Ch lo r

- a lk al i is an in du st ria l pr oc es s th at us es

sa lt an d wate r fo r th e pr od u ct io n of ch lo rin e, cau st ic so da

, hydro ch lo ric aci d, an d

so di um hypo ch lo rit e

. Th e Ed dyvi ll e pl an t req ui red a co nv ey or syste m th at wou ld

t r a ns po rt sa lt fro m rai l cars an d se m i-t ru ck s in to a st or ag e faci li ty a n d t o t h e

pr od uc ti on flo or

. BRPH Co m pa ni es (BRP H) se rv ed as th e arch it ect fo r th e pr ojec t.

Lem art ec pu bl is he d a bi d pa ck ag e to so li ci t bi ds fo r th e co nv ey or syste m

. The

bi d pa ck ag e se t fo rth cert ai n res po ns ib il it ie s fo r th e co nv ey or -s y st em su bc on tra ct or

. It req ui red the subm is si on of “ en gi ne eri ng de si gn dr awin gs an d sh op de ta il dr awin gs ”

to th e own er or th e own er’s rep res en ta ti ve an d di sa ll owe d t h e su bc on tra ct or fro m

st art in g fab ric at io n un ti l it “ rece iv ed d r a w i n g s m ark ed ‘A PPROVED’ or

‘A PPROVED AS NOTED.’ ” The bi d pa ck ag e al so req ui red th at th e su bc on tra ct or

fo ll ow cert ai n de si gn an d co ns tru ct io n co de s, in cl ud in g th e Am eri can In st it ut e of

St eel Co ns tru ct io n Co de of St an da rd Prac ti ce fo r St eel Bu il di ng s an d Bri dg es (AISC

co de ). Lem art ec ac cep te d t he rev is ed bi d p ro po sa l th at ACT su bm it te d p ur su an t t o

th e b id pa ck ag e.

Lem art ec an d ACT en te red in to th e pu rch as e or de r on Dec em be r 18

, 20 13

. Att ach ed to th e pu rch as e or de r an d “ fo rm in g a pa rt of th is Su b c o n t r a c t” were a

“ Sco pe of W or k Cl ari fic at io n” do cu m en t an d ACT’s bi d pr op os al

. The sc op e of wor k

do cu m en t req ui red A C T t o c om pl y wit h “ ap pl ic ab le co de req ui rem en ts ” an d “ th e

reas on ab le in te nt of th e Arch it ect /En gi ne er.” W it h res pe ct to th e de li ve ry sc he du le

,

-2

-ACT’s bi d pr op os al pr ov id ed fo ur to si x week s f o r g en eral arra ng em en t “ ap pr ov al

dr awin gs ,” two to th ree week s fo r cert ifi ed dr awin gs , an d si xt een to twen ty week s fo r
fab ric at io n.

ACT su bm it te d it s ge ne ral arra ng em en t dr awin gs to Lem art ec fo r ap pr ov al on

Ja nu a r y 2 7

, 20 14

. Lem art ec st am pe d th e dr awin gs on Ja nu ary 28

, 20 14

, as

“ Rev ie wed by G.C

. ” an d “ Fi na l Rev ie w pe nd in g AE of Rec or d,” bu t ne it he r Lem art ec

no r th e arch it ect /e ng in eer of reco rd ap pr ov ed th e dr awin gs

. The pr ojec t was de la y ed

ba se d on th e ch an ge s in bo un da ry co nd it io ns th at Lem art ec co mm u ni cat ed to ACT

th ro ug ho ut th e su m

m er o f 20 14

. 2

Lem art ec di rect ed ACT in Sep te m be r 20 14 to im m ed ia tely de li ve r co m po ne nt s

fo r in st al la ti on

. ACT pr ot es te d th at it ha d no t y et rece iv ed fin al ap pr ov al of it s
de si gn s. ACT warn ed th at ex pe di te d fab ric at io n an d de li ve ry was no t reas on ab le an d

wou ld ul ti m at el y res ul t i n d e l a ys an d th e ne ed fo r rewo rk

. Lem art ec no ne th el es s

“ req ui red ACT to fab ric at e an d sh ip pr od uc t be fo re th e de si gn was co m pl et e.” D. Ct

. Ord er of May 21

, 2 0 1 8

, a t 3. Afte r a de la y ed an d pr ob le m at ic in st al la ti on , th e

co m pa n y t h a t Lem art ec ha d hi red to in st al l th e co nv ey or syste m fil ed su it ag ai ns t

Lem art ec an d ACT, se ek in g pa y m en t fo r th e ad di ti on al wor k it was req ui red to

co m pl et e. Lem art ec an d ACT fil ed c r o s s -cl ai m s, whi ch were am en de d or res ta te d

aft er Lem art ec an d t he in st al le r se tt le d.

W it h res pe ct to it s br each of co nt ract c l a im

, ACT arg ue d th at th e pu rch as e

o rd er req ui red ACT to co m pl y wit h “ ap pl ic ab le co de req ui rem en ts ,” wh i c h A C T

arg ue d in cl ud ed th e A I S C co de

. Dr. Geo rg e W an dl in g, a pr of es si on al en gi ne er

li cen se d in Io wa, te st ifi ed th at th e AISC c o d e w a s t h e in du st ry st an da rd an d th at it

Bo un da ry co nd it io ns are th e in te rfac es of th e ACT syste m to ot he r pa rts of th e 2 pl an t, i nc lu di ng th e rai l u nl oa d s ta ti on , th e sa lt bu il di ng , th e co nc ret e pi ers , and th e fo un da ti on

.

-3

-r e q u i r ed Lem art ec to ap pr ov e ACT’s de si gn s. W an dl in g ex pl ai ne d th at al th ou gh

Lem art ec h ad rev ie wed ACT’ s d rawi ng s i n J an ua ry 20 14 , n ei th er Lem art ec no r th e
arch it ect ha d ap pr ov ed th e dr awin gs

. Lem art ec res po nd ed th at th e AISC co de di d no t

ap pl y be cau se th e pu rch as e or de r di d no t in co rp or at e th e bi d pa ck ag e (wh ic h req ui red

th e su bc on tra ct or to co m

pl y wit h th e AISC co de ). Lem art ec’s se ni or pr ojec t m an ag er

co nc ed ed th at th e pu rch as e or de r req ui red Lem art e c t o ap pr ov e th e ge ne ral

arra ng em en t dr awin gs , bu t as se rte d th at Lem art ec ha d do ne so in Ja nu ary 20 14

. The

pr ojec t m an ag er te st if

i e d t h a t th e pu rch as e or de r de le ga te d th e ro le of

arch it ect /e ng in eer to ACT an d th us th e pa rti es ’ co nt ract di d no t co nt em pl at e ap pr ov al

fro m BRPH.

ACT pr es en te d ev id en ce th at fab ric at io n an d de li ve ry of th e co nv ey or syste m

were de la y ed be cau se th e own er di d no t sp eci fy un ti l Ju ne 20 14 th e ex act lo cat io n of

th e rai l an d th e rai l un lo ad st at io n or th e co nt ou r of th e sl op e be twee n th e rai l st at io n

an d th e sa lt b u i l di ng

. ACT al so es ta bl is he d th at Lem art ec ha d im pl em en te d a fas ttra ck de li ve ry m et ho do lo gy, arg ui ng th at Lem art ec th us bo re th e ris k of co st ov erru ns

un de r th e AISC co de

. Lem art ec rei te rat ed th at th e AISC co de di d no t ap pl y be cau se

it was no t in co rp o r a t ed in to th e pa rti es ’ co nt ract

. Acco rd in g to Lem art ec, it ne ve r

im pl em en te d a fas t-t rack de li ve ry m et ho do lo gy, bu t m erel y pr es su red ACT to ti m el y
de li ve r th e co m

po ne nt s.

The di st ric t co ur t co nc lu de d th at “ ACT pr ov ed th at it ha d co m pl et ed th e wor k

cal le d fo r by th e pu rch as e or de r of Decem be r 18

, 2 0 1 3 ; t h a t i t di d no t br each an y

p r o v i s io n of th e co nt ract ; an d th at it ha d no t be en pa id th e am ou nt of $3 17 ,4 6 7

. 0 7

Lem art ec owe d it un de r th e pu rch as e or de r, as rev is ed

. ” D

. Ct

. Ord er of May 21

, 20 18

, at 4. The co ur t fo un d th at “ [t]he de la y s an d ne ed fo r on si te m od ifi cat io ns were

th e di rect res ul t of Lem art ec’s in ad eq ua te su pe rv is io n a n d m an ag em en t of th e

pr ojec t.” Id

. at 3- 4. The co ur t ul ti m at el y co nc lu de d th at ACT ha d act ed reas on ab ly

whe n it wit hh el d f

a b r i c a t i on pe nd in g Lem art ec ap pr ov al an d th at Lem art ec ha d

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-im

pl em en te d a fas t-t rack pr oje c t d el iv ery m et ho do lo gy whe n it in si st ed “ th at ACT

sh ip fab ric at e[d ] pa rts be fo re t he de si gn s wer e fi ni sh ed .” Id . at 5

.

The cen tra l di sp ut e on ap pe al is whe th er th e di st ric t co ur t de te rm in ed th at th e
bi d pa ck ag e was in c o r

p o r a te d by refe ren ce in to th e pu rch as e or de r or whe th er it

de te rm in ed th at th e AISC co de co ns ti tu te d a us ag e of tra de th at ex pl ai ne d or

su pp le m en te d th e pu rch as e or de r. The di st ric t co ur t’s op in io n in di cat es th at it rel ie d

up on Lem art ec’s bi d pa ck ag e in de ci di ng th a t Le mar t ec’s ap pr ov al was req ui red

be fo re fab ric at io n co ul d be gi n. In it s fin di ng s of fact

, th e co ur t em pl oye d t h e bi d

p ack ag e’s la ng ua ge in ex pl ai ni ng th at “ Lem art ec ne it he r m ark ed th e dr awin g s

‘A PPROVED’ or ‘A PPROVED AS NOTED.’ ” Id

. at 3. In it s co nc lu si on s of la w, th e

co ur t s ta te d:

ACT was reas on a b le in ex pe ct in g Lem art ec to fo ll ow th e pr oc ed ur e it
ha d sp eci fic al ly la id ou t in so li ci ti ng pr ojec t bi ds an d on whi ch ACT ha d
rel ie d in pr ep ari ng it s bi d. Lem art ec is bo un d by th e wor ds it us ed whe n it m ad e su bc on tra ct or fab ric at io n de pe nd en t on Lem art ec ap pr ov al an d
whe n it ex pr es sl y st at ed th at th e te rm s of th e bi d pa ck ag e were in cl ud ed
in an y su bs eq ue nt su bc on tra ct

.

Id

. at 5. W it h th e fin di ng th at W an dl in g’s te st im on y was “ f u l l y cred ib le an d

pe rs ua si ve ,” id

. at 5- 6, th e op in io n al so in di cat es th at th e co ur t cred it ed W an dl in g’s

te st im on y th at th e AISC co de is a us ag e of tra de th at ex pl ai ne d th e te rm “ ap pl ic ab le

co de req ui rem en ts ” or ot he rwis e su pp le m en te d th e pu rch as e or de r. The pa rti es ag ree

t h a t Io wa la w ap pl ie s to th is di ve rs it y act io n. W he th er a co nt ract in co rp or a t e s

ex tri ns ic m at eri al is a le ga l qu es t i o n , Lo n g fel lo w v. Sayler, 73 7 N.W .2d 14 8, 15 4
(Io wa 20 0 7 )

, t ha t we rev ie w de no vo , Ac ci on a W in dp owe r N. Am ., LLC v. Ci ty o f

W es t Bran ch

, 84 7 F.3 d 96 3, 96 6 (8 th Ci r. 20 17 ). The ex is te nc e an d sc op e of a us ag e

of tra de m

us t be pr ov ed as fact s. Io wa Co de § 55 4.1 30 3( 3)

. W e rev ie w fact ua l

fin di ng s fo r cl ear e rro r. Acci on a Wind po wer, 8 47 F.3d at 9 66

.

-5

-Lem art ec arg ue s th at th e di st ric t co ur t erre d in ho ld in g th at th e bi d pa ck ag e was

in co rp or at ed in to th e co nt ract be twee n Le mar te c an d ACT. “ Und er th e do ct rin e of

in co rp or at io n, an ex tri ns ic do cu m en t be co m es pa rt of th e co nt ract by refe ren ce to th at

do cu m en t in th e co nt ract .” Lon gf el lo w, 73 7 N.W .2d at 15 4 (ci ti ng Hof m ey er v. Io wa
Dis t. Ct., 64 0 N.W .2d 22 5, 22 8 (Iowa 20 01 )). The co nt ract m us t “ m ak e a clear an d

sp eci f i c refe ren ce to an ex tri ns ic do cu m en t to in co rp or at e th e do cu m en t in to th e

co nt ract .” Id . ( ci ti ng In re Est at e of Kok joh n, 5 31 N.W .2d 99 , 1 00 -0 1 (Io wa 19 95 )
(p er cu ria m )). The pu rch as e or de r he re co nt ai ns no cl ear an d sp eci fic refe ren ce to th e
b i d pa ck ag e. ACT arg ue s th at th e pu rch as e-o rd er te rm s “ co nt ract do cu m e n t s ” a n d

“ sc op e of wor k cl ari fic at io n” refe r to th e ge ne ral req ui rem en ts se ct io n of th e bi d

pa ck ag e, bu t th os e te rm s are no t su ffi ci en tl y sp eci fic to es ta bl is h th at th e pa rti es

in te nd ed to in cl ud e th e bi d pa ck a g e a s a pa rt of th ei r co nt ract

. Mo reo ve r, it is

u n d is pu te d th at th e bi d pa ck ag e was no t in cl ud ed in th e do cu m en ts th at th e pa rti es

at ta ch ed to th e pu rch as e or de r an d th at “ fo rm [ed ] pa rt of th is Su bc on tra ct .” W e th us

co nc lu de th at th e p ur ch as e o rd er d id no t i nc or po rat e b y refe ren ce t he bi d p ack ag e.

ACT arg ue s th at we sh ou ld no ne th el es s affi rm be cau se it pr ov ed th at th e AISC

co de co ns ti tu te d a us ag e of tra de th at ex pl ai ne d or su pp le m en te d th e pu rch as e or de r.
Und er Io wa la w, te rm s of a co nt ract “ m ay no t b e co nt rad ic te d by ev id en ce of an y

pr io r ag reem en t” bu t th ey m ay be “ ex pl ai ne d or su pp le m en t e d ” b y us ag e of tra de

. Io wa Co de § 55 4.2 20 2( 1)

. “ Usa ge of tra de ” is de fin ed as “ an y pr act ic e or m et ho d of

de al in g ha vi ng su ch reg ul ari ty of ob se rv an ce in a

. . . tra de as to jus ti fy an ex pe ct at io n

th at it wil l be ob se rv ed wit h res pe ct to th e tr a n s a c t io n in qu es ti on .” Id

. § 55 4.1 30 3( 3)

. Acco rd in gl y , a ny “ us ag e of tra de ” whi ch th e pa rti es “ are or s h o u l d

be aware ” m ay su pp le m en t th ei r a g r e e ment

. Id

. § 55 4.1 30 3( 4) ; C-Th ru Co nt ai ne r

Co rp . v. Mi dl an d M fg . Co., 5 33 N.W .2d 54 2, 5 45 (Io wa 19 95 ).

W e co nc lu de th at th e di st ric t co ur t’s de ci si on to cred it W an dl in g’s te st im on y ,

co up le d wit h it s ap pl ic at io n o f t h e A I SC co de

, co ns ti tu te d a fin di ng th at th e AISC

co de ex pl ai ne d or su pp le m en te d th e pu rch as e or de r as a us ag e of tra de

. W an dl in g

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-ex pl ai ne d th at th e AISC co de ap pl ie d to th e co n s t r u c t i o n of th e co nv ey or syste m

be cau s e i t w a s “a tra de pr act ic e an d

. . . a st an da rd an d cu st om in th e in du st ry .”

Acco rd in g to Wan dl in g, th at co de req ui red Lem art ec or th e own er “ to gi ve th ei r

ap pr ov al th at th e d e s i gn dr awin gs [were ] acce pt ab le an d [m et ] th e sp eci fic at io ns .”

W an dl in g te st ifi ed th at Lem art ec’s st am p of rev ie w d i d no t co ns ti tu te ap pr ov al of

ACT’s dra win gs :

It is no t a fin al rev ie w, an d it i s n o t an in di cat io n th at th e de si gn ha s be en a c c e p t e d by th e own er an d, in fact

. . . th e la st se nt en ce in th e
st am p sa y s, Fi na l rev ie w pe nd in g by A/E of r e c o rd

. Tha t’s th e arch it ect /e ng in eer o f rec or d, an d i n t hi s ca se th at wou ld be BRPH.

W an dl in g fu rth er te st ifi ed th at whe n Lem art ec in Sep te m be r 20 14 or de red ACT to

co m m en ce fab ric at io n an d to de li ve r pa rts to th e si te im m ed ia te ly, it im pl em en te d a

fas t-t rack pr ojec t de li ve ry m et ho d, un de r whi ch fo rm al ap pr ov al pr oc ed ur es were se t

as id e to ex pe d it e th e de si gn , fab ric at io n, an d erec ti on of th e syste m

. W an dl in g

te st ifi ed th at th e ris k of fie ld rewo rk th en fal ls to th e own er un de r th e AISC co d e.
The di st ric t co ur t ci te d th e AISC co de in su pp or t of it s co nc lu si o n t h a t Le m art ec

as su m ed th e co st ov erru ns aft er it “ im pl em en te d a fa s t

- tra ck pr ojec t de li ve ry

m et ho do lo gy.” D. Ct

. Ord er of May 21

, 20 18

, at 5. The de te rm in at io n th at th e AISC

co de ex pl ai ne d or su pp le m en te d th e pu rch as e or de r as a us ag e of tra de is no t cl earl y

erro ne ou s, an d we co nc lu de th at th e co ur t di d no t err in ap pl y in g it to th e fact s of th is

cas e. Cf. Lesc h v. Uni te d St at es , 61 2 F.3 d 97 5, 98 1 (8 th Ci r. 20 10 ) (ex pl ai ni ng th at

a di st ric t co ur t’s de ci si on fo ll owi ng a be nc h tri al m us t “ se t fo rth it s reas on in g wit h

en ou gh cl ari ty th at th e ap pe ll at e co ur t m ay un de r s t an d th e ba si s of th e de ci si on ”
(q uo ti ng Leo na rd v. Dor se y & W hi t n e y LL P

, 5 5 3 F.3 d 60 9, 61 3 (8 th Ci r. 20 09 ))).

The jud gm en t i s af

fir m ed

.

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