Hall Contracting Corp. v. Entergy Services, Inc.

• Decision Date: 05 November 2002
• Docket Number: No. 01-1777.,01-1777.
• Citation: 309 F.3d 468
• Parties: HALL CONTRACTING CORPORATION Appellant, v. ENTERGY SERVICES, INC. Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

309 F.3d 468

HALL CONTRACTING CORPORATION Appellant, v. ENTERGY SERVICES, INC. Appellee.

No. 01-1777.

United States Court of Appeals, Eighth Circuit.

Submitted: September 13, 2002.

Filed: November 5, 2002.

COPYRIGHT MATERIAL OMITTED

Aubrey L. Coleman, argued, Atlanta, GA (Gary D. Jiles and Guy W. Murphy, on the brief), for appellant.

Charles L. Schlumberger, argued, Little Rock, AR (Stephen R. Lancaster, on the brief), for appellee.

Before BYE, BEAM, and MELLOY, Circuit Judges.

BEAM, Circuit Judge.

In this diversity action, Hall Contracting Corporation ("Hall") appeals from the decision of the district court granting summary judgment in favor of Entergy Services, Inc. ("Entergy"). We affirm in part and reverse in part.

I. BACKGROUND

Entergy owns and operates the Remmel Dam on the Ouachita River near Hot Springs, Arkansas. Constructed in 1923, the dam is an "Amberson-style" gravity dam comprised of abutments on the north and south shores of the river and a spillway that spans the river and connects the two abutments. In 1996, Entergy solicited bids for a construction project designed to alleviate the Federal Energy Regulatory Commission's concerns relating to the structural integrity of the dam. The project involved removing debris from and cleaning "cells" in all three sections of the dam, filling the hollow cells with rock and concrete, and placing "anchors" in the dam's north abutment. Phase One of the project covered the debris removal and cleaning of the twenty-three spillway cells.

In preparation for submitting a bid on the project, Hall representatives toured and inspected the dam on at least two occasions. During those inspections, Entergy informed Hall that each cell would need to be cleaned down to bedrock at approximately 245.5 feet above mean sea level ("MSL"). Entergy also informed Hall that the catwalk above the cells was 275.5 feet MSL. Thus, by measuring the distance from the catwalk to the debris in each cell and then by subtracting that figure from the height of the catwalk, one could estimate the amount of debris above 245.5 feet MSL. According to Hall-representative Raleigh Jones, Entergy representatives estimated that each cell probably contained two to three feet of water, mud, and silt. Jones dropped a tape measure into approximately five of the twenty-three spillway cells during one inspection, but did not inspect or measure the debris in the other eighteen cells. Hall made no further inspection of the spillway cells.

Entergy invited bidders to bid on a time-and-materials basis for Phase One of the project. This would allow a contractor to be compensated for its labor, equipment, and material costs regardless of the actual amount of debris in the spillway cells. Believing it could obtain a competitive advantage, however, and apparently relying on the rough figures and opinions supplied by Entergy regarding the debris in the cells, Hall decided to submit a lump-sum bid for the entire project. Entergy notified Hall that it was the successful bidder on October 3, 1996. On April 16, 1997, Entergy and Hall executed a contract for the Remmel Dam remedial construction project.

Hall mobilized for construction in May 1997 and, shortly thereafter, hired subcontractor Henderson Specialties, Inc. ("HSI") to perform Phase One. Hall and HSI agreed that a hydraulic electric pump would be the most effective method for removing the two to three feet of water, mud, and silt that they believed was in the cells. Entergy's engineer, Keith Dickerson, approved this approach. But HSI's removal operations revealed debris in much greater volume and of much bulkier composition than anticipated. The bedrock was well below 245.5 feet MSL in some places, and some cells apparently contained nearly ten vertical feet of debris that included large rocks, boulders, wooden forming materials, and a small railroad car. Instead of a hydraulic pump, HSI used backhoes and other heavy machinery to haul the debris through eight-by-eight-foot holes that it cut into the downstream wall of each cell.

The agreement provided that a contractor "waives all claims for ... additional compensation beyond that allowed in this Agreement ... unless the claim is expressly authorized ... and is made in accordance with" specific procedures for submission, approval, and payment. At various times during construction, Hall submitted written change-order requests, and Entergy approved and paid for the changes, according to the contract procedures. One such request related to the debris discovered below 245.5 feet MSL. Hall did not, however, submit change-order requests for debris above 245.5 feet MSL or for the additional costs of removing the bulkier debris. HSI completed Phase One, and Hall ultimately completed the project, but at substantially greater cost than they originally contemplated in their respective bids. HSI then brought an arbitration proceeding against Hall to recover the extra costs. Hall and HSI settled their dispute on December 2, 1999. Meanwhile, Entergy withheld payment of Hall's final invoice, invoking a provision in the contract that required Hall to provide "satisfactory evidence of no undischarged liens arising because of the Work." According to Entergy, Hall had not produced such evidence.

Hall brought this action in the district court to recover its final payment (the "retainage") and the additional costs associated with Phase One. Hall argues that any conceivable "lien" within the meaning of the contract's retainage provision has been effectively discharged by Arkansas statutes of limitation. Entergy counters that "undischarged liens" should be read broadly to include the possibility of a judgment lien resulting from this action. With respect to the Phase One costs, Hall asserted breach of contract, mutual mistake, unjust enrichment, and fraudulent misrepresentation. Entergy responded that the contract governs claims for additional compensation and that, by failing to follow the contract's change-order procedures, Hall waived any claims relating to Phase One. The district court granted Entergy's motion for summary judgment on all counts. Hall appeals the district court's order with respect to all but the fraud claim.

II. DISCUSSION

We review de novo the district court's grant of summary judgment, viewing the evidence in the light most favorable to the non-moving party and giving that party the benefit of all reasonable inferences. Fed.R.Civ.P. 56(c); Mathes v. Furniture Brands Int'l, Inc., 266 F.3d 884, 885 (8th Cir.2001). Reasonable inferences are those that may be drawn without resorting to speculation. Sprenger v. Fed. Home Loan Bank, 253 F.3d 1106, 1110 (8th Cir. 2001). Under Arkansas contract law,¹ a court considering a motion for summary judgment ascertains, with the same favoritism to the nonmovant, "the plain and ordinary meaning of the language in the written instrument, and if there is any doubt about the meaning, there is an issue of fact to be litigated." Carver v. Allstate Ins. Co., 77 Ark.App. 296, 76 S.W.3d 901, 904 (2002). And "[w]hen the intent of the parties as to the meaning of a contract is in issue, summary judgment is particularly inappropriate." Id.

A. The Retainage

Section 8.5 of the contract provides: "Payment of Contractor's final invoice under a particular Contract Order is conditioned upon final completion of the Work described in the Contract Order, Owner's acceptance thereof, and receipt by Owner of satisfactory evidence of no undischarged liens arising because of the Work." Entergy does not allege that Hall did not complete the work it contracted to perform, and there is no indication that Entergy did not accept Hall's work on the project. Entergy asserts, however, that Hall failed to provide "satisfactory evidence of no undischarged liens arising because of the Work." It has withheld Hall's final invoice payment of $354,114 on that basis.

Hall argues that section 8.5 can only be read as referring to statutory mechanic's or materialmen's liens designed to secure payment for work and materials provided by construction contractors. Hall contends that the expiration of all statutory limitation periods for filing such liens² constitutes "satisfactory evidence of no undischarged liens" since, once the liens are time-barred, Entergy is no longer exposed to any threat of lien liability.

Entergy argued in its motion for summary judgment that it was entitled to withhold Hall's final payment "[u]ntil Hall can provide Entergy with proof that HSI's claim has been resolved." Appellant's App. Vol. I, at 218. There is some indication in the record that while Hall had, in fact, obtained lien-waiver certificates from other subcontractors, it had not obtained a waiver from HSI. But in response to Hall's contention that all potential liens have been "discharged" by statutes of limitation, Entergy now argues on appeal that the possibility of a judgment lien resulting from this litigation entitles it to continue withholding the retainage. The district court apparently agreed with Entergy's new construction of section 8.5, and added that, in any event, the res judicata effect of a judgment in favor of Entergy on all other counts would then entitle Hall to the retainage, less litigation fees.

We reject Entergy's construction of section 8.5. It is difficult to see why the res judicata effect of a judgment is any better evidence of "no undischarged liens" than a statutory bar. We find that the plain and ordinary meaning of "liens arising out of the Work" includes mechanic's and materialmen's liens, but does not include the future possibility of a judgment lien. Under Entergy's view, a project owner, armed with a similar retainage provision, could always withhold final payment for any reason or for no reason at all for at least the period of a general contract statute of limitations. In addition, the moment a contractor initiated legal proceedings to recover the payment, the possibility of...