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FindACase | United States v. Morris, Inc.
United States v. Morris, Inc.
MORRIS, INC., A SOUTH DAKOTA CORPORATION; UNITED FIRE AND CASUALTY COMPANY, AN IOWA CORPORATION; AND RED WILK CONSTRUCTION, INC., A SOUTH DAKOTA CORPORATION; Defendants.
VERONICA L. DUFFY United States Magistrate Judge.
This is a Miller Act action (40 U.S.C. § 3133(b)(3)(B)), brought by the United States of America for the use and benefit of Ash Equipment Company, Inc., doing business as American Hydro (“Hydro”). Defendants are the general contractor on the project, Morris, Inc. (“Morris”); the company that issued the payment bond, United Fire and Casualty Company (“UF&CC”); and subcontractor Red Wilk Construction, Inc. (Red Wilk). Pending before the court are motions from each party for partial summary judgment in their respective favors. See Docket Nos. 140, 153 & 170. This matter is before this court on the consent of all parties pursuant to 28 U.S.C. § 636(c).
Defendant Morris contracted with the United States Army Corps of Engineers (“the Corps”) to do work on the Fort Randall Dam spillway at Pickstown, South Dakota, in September, 2013. Work on the spillway was necessitated (in part) due to a flood which occurred in the summer of 2011. The project included removal and replacement of damaged concrete. Morris obtained a Miller Act payment bond on the project from defendant UF&CC in the amount of $7, 472, 670.25. The payment bond obligated Morris and UF&CC jointly and severally to guarantee payment to any subcontractor of Morris' who furnished labor and materials on the project as well as to persons who had a direct contractual relationship with Morris on the project.
The project plans and specifications of the Corps required concrete removal using, in part, hydrodemolition methods. Morris subcontracted the hydrodemolition work to Red Wilk in October, 2013. Red Wilk in turn subcontracted with Hydro on April 9, 2014. See Docket Nos. 158-1 and 158-2.Red Wilk promised to pay Hydro for Hydro's work on the project within 10 working days after Morris paid Red Wilk on monthly progress payments. Specific provisions of these three contracts are discussed in depth below in the DISCUSSION section of this opinion.
Hydrodemolition is the process of removing concrete with high-pressure water jets mounted on a robot. A hydrodemolition system includes three main components: (1) the robot; (2) high-pressure pumps which operate on diesel or electricity and deliver to the robot up to 100 gallons of water per minute at pressures up to 40, 000 pounds per square inch; and (3) a trailer holding the pumps, spare parts, tools, fuel, water, hoses and filters. The depth of a cut is determined by the force of the water coming out of the robot's jets and how long the jets linger over an area of concrete. The deeper the cut, the more water force and time required. In addition to supplying copious amounts of water on the front-end of the process for the robot's jets, hydrodemolition also requires prompt removal of waste water.
The removal of waste water is important for three reasons. First, only upon removal of wastewater can the operator of the robot assess how deeply and cleanly the concrete is being demolished and, therefore, whether the pressure or time being used should be adjusted. Second, if wastewater is allowed to pool over the cutting site, the jetted water from the robot hits the pool first rather than directly hitting the concrete. This diminishes the power of the jets to cut the concrete because the pool of wastewater deflects, to some extent, the power of the water emanating from the jets. Finally, if wastewater is not quickly and efficiently removed, the particles in the wastewater can resettle in the cut area and resolidify, essentially filling in or partially filling in a cut that has been made.
The robot used for hydrodemolition in this case weighed approximately 7, 000 pounds. Needless to say, it is not an easy piece of equipment to move around. Maximum efficiency for using the robot dictates that all of the concrete removal in a particular area be done at the same time rather than skipping around doing spot removals in numerous different areas. Further, if the robot is cutting concrete on a slope, it has to be secured with tethers. The tethering must be relocated whenever the robot is moved to another area on the slope. These details of hydrodemolition are important to know in order to understand the parties' disputes.
Prior to Red Wilk and Hydro entering into their finalized contract, Hydro submitted four proposals to Red Wilk. Hydro's first proposal dated July 29, 2013, included unit prices for hydrodemolishing 47, 375 square feet of concrete to a 6-inch depth, 40, 500 square feet of concrete to a 10-inch depth, and 6, 400 square feet at 16 manhole locations to an 18-inch depth. See Docket No. 159-1. Different rates applied depending on the depth of the concrete removal and whether the removal was taking place upstream of tier 46 or downstream of tier 46. Id. The upstream-downstream designation had to do with whether the hydrodemolition occurred on a horizontal surface or a slope-the downstream area was the sloped area.
The second proposal submitted by Hydro was dated August 22, 2013. See Docket No. 161-1. This proposal reiterated the offer to remove 40, 440 square feet of concrete at the six-inch depth upstream, 6, 935 square feet at the six-inch depth downstream, 29, 575 square feet at ¶ 10-inch depth upstream, and 10, 925 square feet at ¶ 10-inch depth downstream. Id. This second proposal did not include an offer to do any manhole work denominated by name; nor did the proposal include any 18-inch demolition which was associated with manhole work. Id.
The third proposal submitted by Hydro was dated August 30, 2013, and includes the same exact amount of square footage for removal of concrete at the six-inch and ten-inch depths (47, 375 square feet and 40, 500 square feet respectively). See Docket No. 159-2. The third proposal changed the description for removal of concrete at the 18-inch depth. Id. This offer reinserted an offer to do manhole work. It described hydrodemolishing "any work upstream" to a depth of 18 inches at a rate of $55.88 per square foot and $67.58 per square foot for "any work downstream" at the 18-inch depth. Id. Hydro's third proposal for removal to a depth of 18 inches did not include a total square footage associated with the 18-inch depth. Id. Hydro submitted a fourth proposal dated April 2, 2014, which was identical to its third proposal in terms of its description of square feet of concrete to be removed, depth of removal, and rates for removal. Compare Docket No. 159-2 with Docket No. 159-3.
All four of Hydro's written proposals indicate a spring, 2014, start date and also indicate that Hydro required a minimum of three weeks' notice prior to beginning work. See Docket Nos. 159-1, 161-1, 159-2, all at page 1, and 160-8, at page 2. The contract between Red Wilk and Hydro was signed April 9, 2014. Three weeks from April 9 was April 30, 2014.
Hydro's first proposal set 207 working days as the time Hydro needed to complete the work. See Docket No. 159-1 at p. 2. Hydro's second proposal reduced the total time needed to complete the work to 169 days. See Docket No. 161-1 at p. 2. The third proposal further reduced the proposed work time to 165 days. See Docket No. 159-2. Hydro's fourth and final proposal was for 83 days, which was adopted in the parties' final contract dated April 9, 2014. Compare Docket No. 160-8 at p. 2; with Docket No. 158-1 at § 9.3; Docket No. 158-2 at § 9.3.
The subcontract had a project completion date of August 1, 2014. See Docket No. 158-1 at p. 15, § 9.3; Docket No. 158-2 at p. 15, § 9.3. The subcontract was to be performed over 83 working days, with Sundays and public holidays excluded (a six-day work week). See Docket No. 158-1 at p. 6, § 4.1.16; Docket No. 158-2 at p. 6, § 4.1.16. A working day was to be 10 hours long and begin at 7:00 a.m. Id. The contract stated that the date of commencement of the contract was to be calculated from the date of completion. Id. at p. 14, § 9.1. Unless otherwise provided, the start date was to be the date the agreement was executed. Id. Counting backwards from August 1, 2014, the contract would have needed to be begun by April 24, 2014, in order to run for 83 days (excluding all Sundays, Memorial Day and Independence Day) and to be completed on August 1, 2014. The contract specified that "time is of the essence." Id. at p. 15, § 9.4.
Disputes between Hydro and Red Wilk materialized almost immediately. Despite representations in its proposals that it could start work with three weeks' notice, Hydro asserts it orally told Red Wilk before the contract was entered into that it could not begin working on the project until late May or even potentially early June. If supplied with the necessary water, removal of waste water, and continuous cutting as specified in the contract, Hydro alleges it could have met the target completion date of August 1 with far less than 83 working days. Red Wilk issued a demand on April 28 that Hydro begin work immediately, insisting that the contract required Hydro to have begun work on April 21. Hydro mobilized and arrived on the job site on May 7. After setting up its equipment, Hydro was ready to begin work at noon on Friday, May 9.
When Hydro arrived, however, it was not able to begin working. The Corps required Red Wilk to test the berm which would contain the wastewater from hydrodemolition before beginning work. Red Wilk had not performed the necessary testing of the berm before Hydro arrived. Hydro actually began work on Tuesday, May 13. The contract between Hydro and Red Wilk provided in §§ 8 and 10.3 for payment of $3, 000 per day to Hydro for "idle and standby charges, " that is, time Hydro was forced to wait around doing nothing because of Red Wilk. Hydro billed Red Wilk and Red Wilk paid $3, 000 per day for the days Hydro spent idle waiting for the start of hydrodemolition.
Red Wilk agrees Hydro orally told it when it could start, but alleges Hydro told Red Wilk it could start three weeks after the contract was signed, consistent with Hydro's written proposals. Red Wilk asserts that the parties discussed and agreed upon a specific start date of April 21, 2014, while the parties were at a pre-project meeting on March 25, 2014.
Once Hydro was able to begin work, Hydro alleged that Red Wilk failed in its contract requirements in several respects. Hydro asserts the contract required Red Wilk to order Hydro's work so as to provide two phases maximum of continuous cutting. This provision meant, according to Hydro, that Red Wilk was obligated to order Hydro's work so as to provide one phase of cutting at the D wall and half of the gates and one phase of cutting at the E wall and half of the gates. See Docket No. 203-6 at pp. 8-9; Docket No. 167-2. This provision, according to Hydro, was intended to allow Hydro to perform hydrodemolition without having to relocate its robot, pumps, and trailer more than two times. Id. Instead, Hydro alleges Red Wilk required Hydro to perform hydrodemolition in small patches all around the work site, requiring Hydro to relocate its equipment nine to ten times. Id. at p. 10.
Red Wilk was to supply Hydro with 300 gallons of water per minute for hydrodemolition and Hydro alleges Red Wilk did not consistently do so. Red Wilk was also supposed to continuously clean the cuts made by Hydro so Hydro could see whether it was cutting sufficiently, which Hydro also alleges Red Wilk failed to do consistently.
Hydro also alleges Red Wilk was to make saw cuts around the areas to be hydrodemolished as required by the Corps' plans and specifications. Hydro alleges Red Wilk failed to make these saw cuts, with the result that Hydro could not see the outlines of the area to be cut once it was inundated with water and concrete waste.
Finally, Hydro alleges Red Wilk failed to provide sufficient containment for the waste water from the hydrodemolition, with the result that waste water flooded over areas to be cut, reducing the effectiveness of Hydro's equipment which was then forced to cut into a "pond" instead of directly cutting into concrete.
Hydro alleges its fell behind schedule due to Red Wilk's breaches. Hydro requested an extension of the August 1 deadline set by the contract due to this situation. Red Wilk refused the request, insisting on completion of the work by August 1. Therefore, Hydro attempted to accelerate its work by bringing in additional employees and equipment. Hydro alleges Red Wilk refused to allow Hydro to utilize these additional workers and equipment because Red Wilk could not answer the demand for additional support services, particularly it was not able to accommodate the increase in wastewater to be handled if Hydro increased its hydrodemolition pace. See Docket No. 203-6 at p. 10.
Red Wilk claims that Hydro was responsible for hydrodemolishing around the perimeter of manholes and refused to carry out this work. Hydro claims that hydrodemolition around manholes was not covered by its contract with Red Wilk. The original Corps plans and specifications called for 18-inch hydrodemolition around manholes, as well as less than 8-inch and more than 8-inch hydrodemolition in other places.
The final contract between Red Wilk and Hydro calls for hydrodemolition only at 6-inch and 10-inch depths. See Docket Nos. 158-2 at pp. 13-14; 158-3 at pp. 13-14. The square footage for removal at the six- and 10-inch depths matches exactly all four of Hydro's pre-contract proposals for hydrodemolition of concrete at the six-inch and ten-inch depths: 47, 375 square feet for six-inch depth removal and 40, 500 square feet for ten-inch depth removal. Id. The final contract contains no mention of removal of concrete at the manholes specifically nor does it contain any provision for removal of concrete to a depth of 18 inches. Id. Hydro claims the final contract it entered into with Red Wilk did not include the manholes.
Red Wilk claims the Corps amended its plans and specifications with an addendum on August 30, 2013, changing the hydrodemolition depth for manholes to 10 inches, instead of 18 inches. Hydro claims it never received the Corps' August 30, 2013, addendum. Red Wilk claims it provided the amendment to Hydro via email. However, Red Wilk has never produced a copy of any email documenting this delivery.
Q2: Note 1 on sheet S-501 states to remove concrete by hydrodemolition methods as necessary to install manholes. The slab needs to be removed completely. Would it not make better sense to sawcut full depth and remove concrete? Hydrodemolition of 18" thick concrete is very costly.
A2: Full depth saw cutting will be allowed within the extents of the manhole. The area around the manhole will need to be hydromilled to facilitate the repaired condition lap splice or mechanical splice of the rebar.
See Docket No. 160-2. It is clear from this Q & A that the Corps dispensed with the requirement of 18-inch hydrodemolition around manholes. In its place, the manholes were to be sawcut, something that was outside of Hydro's contract, which dealt only with concrete removal through hydrodemolition. However, the Corps continued to require some hydromilling around manholes, though at an unspecified depth and unspecified square footage.
The general contract between Morris and the Corps contains several provisions for concrete removal. See Docket No. 156-4 at pp. 6-8, Parts 1, 2. Concrete removal under the general contract is to be measured by the square foot, with measurement made by a survey of the removal limits. Id. at pp. 7-8, Parts 1, 2, ¶¶ 1.2, 2.2. Payment is then to be made by multiplying the unit price by the number of square feet of concrete removed and accepted. Id. The terms of the prime contract are incorporated by reference into the contract between Hydro and Red Wilk. The prime contract calls for hydrodemolition of a total of 81, 775 square feet of concrete. See Docket No. 160-2 at pp. 4, 7-8. The contract between Hydro and Red Wilk called for the removal of 87, 875 square feet of concrete (47, 375 square feet at a depth of six inches; 40, 500 square feet at a depth of ten inches).See Docket Nos. 158-2 at pp. 13-14, and 158-3 at pp. 13-14.
Morris asserts that the only true survey made of the concrete removal was made by itself on September 15, 2014, and showed that Hydro had removed 57, 776 square feet of concrete. It seeks to limit Hydro's claim for unpaid concrete removal to this figure. Hydro counters that Morris billed the Corps and was paid for removal via hydrodemolition of 62, 000 square feet of concrete. However, Morris asserts that approximately 6, 000 square feet of this 62, 000 figure was work done by Hydro's successor on the job site, 2X Hydro-Demolition, LLC, thus leaving Hydro's portion at 57, 776.
Hydro submitted progress billings to Red Wilk as its work progressed and Red Wilk in turn billed Morris accordingly. Between May, 2014, and December, 2014, Morris paid Red Wilk $1, 248, 914.10 for Hydro's work on the project. However, Red Wilk in turn only paid Hydro $475, 074 for its work.
On July 29, 2014, Hydro left the project site. See Docket No. 197-12 at pp. 102-03. There was additional hydrodemolition work due under the contract. However, Red Wilk had never supplied Hydro with a schedule for work. Each day Hydro would have to consult with Red Wilk to get its instructions for work for that day. On Friday, July 25, 2014, Walter "Red" Wilk, owner of Red Wilk, was on the job site but refused to speak to Hydro. No one else from Red Wilk gave Hydro instructions as to what work to perform. Hydro sent its workers home for the day. No one from Red Wilk was on the job site the next day, Saturday, July 26, 2014, either and no one contacted Hydro with instructions via phone. Hydro sent its crew home that day as well. On Monday, July 28, 2014, Walter Wilk was on the job site. When Hydro asked for direction as to work, Walter told Hydro the only work available for Hydro were the manholes. See Docket No. 167-1 at p. 66. Since this was a disputed issue and Red Wilk refused to give Hydro any other work, Hydro withdrew from the job site. Id. at 65-66.
Hydro returned twelve days later on August 11, 2014, to finish the remaining work. See Docket No. 203-23 at pp. 64-66. Hydro brought this lawsuit on August 22, 2014, but stayed on the job site until August 25 finishing work. The parties dispute whether, at the time Hydro made its final departure on August 25, there was any defective work needing to be remedied which Hydro knew of and refused to remedy. The parties also dispute whether Hydro completed all of its work due under the contract because Red Wilk asserts Hydro promised to hydrodemolish the manholes and did not do so. Red Wilk also asserts there were additional areas above tier 46 that still needed to be hydrodemolished which Hydro did not complete before leaving the job site.
Hydro gave notice to Morris that it had not been paid. In its complaint, Hydro asserts a common law breach of contract claim against Red Wilk, an equitable claim in quantum meruit against Morris, and a Miller Act claim against the UF&CC bond.
Morris and UF&CC asserted a cross-claim against Red Wilk, seeking indemnification and setoff for any damages Hydro might obtain from Morris and/or UF&CC on account of Red Wilk's actions.
Red Wilk counterclaimed against Hydro. Red Wilk asserted a breach of contract claim, asserting Hydro did not perform all work called for by its contract, it performed incomplete and nonconforming work, and it left the project work site without finishing its work. Red Wilk also asserted a claim for liquidated damages against Hydro pursuant to their contract. Finally, Red Wilk asserts the equitable defenses of unclean hands and unjust enrichment.
Hydro moves for partial summary judgment [Docket No. 170] on the following grounds: (1) Hydro has established liability on its Miller Act claim and only damages should be tried; (2) Red Wilk's claim for liquidated damages should be dismissed because the liquidated damages provision in the contract between Red Wilk and Hydro is not enforceable; and (3) Hydro is entitled to judgment as a matter of law on Red Wilk's counterclaims: (a) because Red Wilk did not give Hydro notice and an opportunity to cure any alleged defects; (b) because Red Wilk caused its own damages; (c) because Red Wilk's damages calculation is too speculative; and (d) because manholes were not part of the contract between Hydro and Red Wilk.
Red Wilk moves for partial summary judgment on the following grounds: (1) because Hydro did not request an extension of time to complete its work Hydro is not entitled to money damages or acceleration costs; and (2) Hydro's exclusive remedy for delay caused by Red Wilk is the $3, 000 per day delay damages specified in the contract between Red Wilk and Hydro.
Morris seeks partial summary judgment on three issues: (1) it seeks to limit Hydro's damages to the amount of concrete removal demonstrated by the September 15, 2014, survey it conducted; (2) it seeks dismissal of Hydro's quantum meruit claim against Morris; and (3) it seeks to limit Hydro's damages for "lost productivity" to those liquidated damages specified in the Red Wilk-Hydro contract for idleness or delay.
Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is appropriate where the moving party ''shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'' Fed.R.Civ.P. 56(a).
The court must view the facts, and inferences from those facts, in the light most favorable to the nonmoving party. See Matsushita Elec. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); Helton v. Southland Racing Corp., 600 F.3d 954, 957 (8th Cir. 2010) (per curiam). Summary judgment will not lie if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Allison v. Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir. 1994).
The burden is placed on the moving party to establish both the absence of any genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Once the movant has met its burden, the nonmoving party may not simply rest on the allegations in the pleadings, but must set forth specific facts, by affidavit or other evidence, showing that a genuine issue of material fact exists. Anderson, 477 U.S. at 256; Fed.R.Civ.P. 56(e) (each party must properly support its own assertions of fact and properly address the opposing party's assertions of fact, as required by Rule 56(c)).
The underlying substantive law identifies which facts are ''material'' for purposes of a motion for summary judgment. Anderson, 477 U.S. at 248. ''Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.'' Id. (citing 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure ' 2725, at 93-95 (3d ed. 1983)). ''[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.'' Id. at 247-48.
Essentially, the availability of summary judgment turns on whether a proper jury question is presented: ''The inquiry performed is the threshold inquiry of determining whether there is the need for a trial-whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.'' Id. at 250.
The parties agree that South Dakota law applies in this case. See Secura Ins. v. Horizon Plumbing, Inc., 670 F.3d 857, 861 (8th Cir. 2012) (State law governs the interpretation of a contract when federal jurisdiction is based on diversity of citizenship). "A contract is an agreement to do or not to do a certain thing." See SDCL § 53-1-1. The party asserting a breach of contract claim must prove (1) an enforceable promise, (2) a breach of that promise, and (3) resulting damages. Gul v. Ctr. for Family Medicine, 2009 S.D. 12, 762 N.W.2d 629, 633. Under South Dakota law, contract interpretation is a question of law. Cornelius v. Nat'l Cas. Co., 2012 S.D. 29, ¶ 6, 813 N.W.2d 167, 169; Lillibridge v. Meade School Dist. #46-1, 2008 S.D. 17, & 9, 746 N.W.2d 428, 431.
When interpreting a contract, ''effect will be given to the plain meaning of its words.'' In re Dissolution of Midnight Star, 2006 S.D. 98, & 12, 724 N.W.2d 334, 337. Courts must ''give effect to the language of the entire contract and particular words and phrases are not interpreted in isolation.'' Id. (internal citation omitted). When provisions of a contract conflict and full weight cannot be given to each provision, the more specific provision controls the more general provision as it is presumed the more specific clause reflects the parties' intention. Spiska Eng'g, Inc. v. SPM Thermo-Shield, Inc., 2007 S.D. 31, & 21, 730 N.W.2d 638, 645; Bunkers v. Jacobson, 2002 S.D. 135, 653 N.W.2d 732, 738. Courts look ''to the language that the parties used in the contract to determine their intention.'' Pauley v. Simonson, 2006 S.D. 73, & 8, 720 N.W.2d 665, 667-68. In interpreting the contract, the court is to ascertain and give effect to the parties' intentions. Bunkers, 653 N.W.2d at 738.
If the language of the contract is clear and unambiguous, ''it is the duty of [the] Court to declare and enforce it.'' Pauley, 2006 S.D. 73, & 8, 720 N.W.2d at 668. However, if the contract is ambiguous, then ''parol and extrinsic evidence may be utilized >to show what [the parties] meant by what they said . . .' '' Id. (quoting Jensen v. Pure Plant Food Internatl., Ltd., 274 N.W.2d 261, 264 (S.D. 1979)). ''A contract "is ambiguous when it is fairly susceptible to two constructions.'' Fall River Co. v. South Dakota Public Assur. Alliance, 2001 S.D. 40, & 6, 623 N.W.2d 735, 737. Where the identity of a crucial party named in a contract, such as "engineer, " is not defined, parol evidence can and should be admitted to show who the "engineer" was and what its duties were vis-a-vis the contracting parties. Subsurfco, Inc. v. B-Y Water Dist., 337 N.W.2d 448, 457 (S.D. 1983).

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