Adr Consultants, LLC v. Mich. Land Bank Fast Track Auth.

• Decision Date: 24 January 2019
• Docket Number: No. 341903,341903
• Citation: 932 N.W.2d 226,327 Mich.App. 66
• Parties: ADR CONSULTANTS, LLC, Plaintiff/Counterdefendant-Appellee, v. MICHIGAN LAND BANK FAST TRACK AUTHORITY, Defendant/Counterplaintiff-Appellant, and Michigan State Housing Development Authority, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

327 Mich.App. 66

932 N.W.2d 226

ADR CONSULTANTS, LLC, Plaintiff/Counterdefendant-Appellee,

v. MICHIGAN LAND BANK FAST TRACK AUTHORITY, Defendant/Counterplaintiff-Appellant,andMichigan State Housing Development Authority, Defendant-Appellant.

No. 341903

Court of Appeals of Michigan.

Submitted January 15, 2019, at Lansing.

Decided January 24, 2019, at 9:00 a.m.

Dana Nessel, Attorney General, Fadwa A. Hammoud, Solicitor General, and Eric M. Jamison, Kyla L. Barranco, and Adam R. de Bear, Assistant Attorneys General, for the Michigan Land Bank Fast Track Authority and the Michigan State Housing Development Authority.

Sugameli Attorneys & Counselors, PLC, Troy (by J. Paul Sugameli ) for ADR Consultants, LLC.

Before: Cameron, P.J., and Beckering and Ronayne Krause, JJ.

Cameron, P.J.

In this contract dispute, defendants, the Michigan Land Bank Fast Track Authority (MLB) and the Michigan State Housing Development Authority (MSHDA), appeal the Court of Claims’ November 29, 2017 opinion and order denying defendants’ motion for summary disposition under MCR 2.116(C)(7). Two years after the initial complaint was filed in the Court of Claims, plaintiff, ADR Consultants, LLC (ADR), filed an amended complaint adding a breach-of-contract claim for $420,000. The Court of Claims concluded that ADR’s amended claim did not violate the one-year notice requirement for claims filed in the Court of Claims as set forth in MCL 600.6431(1). Because the statutory language in MCL 600.6431(1) allows ADR’s amended claim to relate back to the original complaint, we affirm.

I. BACKGROUND

On August 29, 2012, ADR and the MLB entered into a contract wherein ADR would provide inspection demolition services in connection with the city of Detroit’s Hardest Hit Blight Program (the Program). The MLB was tasked with "blight elimination" within the city of Detroit and across Michigan, which included demolition work. Additionally, the MLB was to manage and dispose "of public property in a coordinated manner to foster the development of that property." The MLB contracted with ADR to act as an MLB contractor for this blight elimination. ADR’s role was to "assist the MLB and the Department of Technology, Management and Budget ... in organizational, procurement, and management tasks...." ADR would "provide technical assistance and project management services to the MLB" and help the MLB manage the demolition of various sites. However, other contractors or subcontractors would conduct the actual demolition work.

After giving 90 days’ notice, the MLB could terminate the contract for convenience "if the State determine[d] that a termination [was] in the State’s best interest." Upon termination for convenience, however, the MLB was required to "pay [ADR] all charges due for Deliverable(s) provided before the date of termination and, if applicable, as a separate item of payment, for work-in-progress, based on a percentage of completion determined by the State." Deliverables were included in those services performed by ADR. In other words, if the MLB terminated for convenience, it would be required to make all outstanding payments to ADR for the work it had provided up until termination.

After the contract was signed, the MLB requested that ADR perform additional services outside the contract’s scope, including new demolition project management and "in-process demolition inspections." The parties disputed whether these additional services were to be paid at a rate of $55 per hour, and this term was never written into the contract. However, the Executive Director at the MLB claimed that the parties verbally agreed to this price. ADR began work on these out-of-scope services on September 11, 2012.

In 2013, MSHDA tasked the Detroit Land Bank Authority (DLBA) with oversight of the Program. In November 2013, the DLBA and the MLB signed an intergovernmental agreement (IGA) in which the MLB agreed to provide project management assistance to the DLBA for carrying out the Program. The DLBA agreed to pay the MLB $100 for each property subject to its demolition project management services. To accomplish its duties under the IGA, the MLB hired ADR as project manager to help administer the Program. The DLBA would notify the MLB and request that ADR perform services, i.e., inspection work and blight certifications. The MLB would then notify ADR of the DLBA’s request and engage ADR’s services.

By September 2014, the MLB was allegedly $50,000 behind in its payments to ADR for both "management of blight program pursuant to the Contract, and ... the in-process hourly rate demolition inspections." ADR claimed that it had not been paid for these services since January 2014. Additionally, by December 2014, ADR allegedly had not been paid for the Program inspections it had performed. James Wright of the DLBA allegedly informed ADR that the DLBA was experiencing financial issues and that ADR could not be paid until February 2015. However, on January 30, 2015, the DLBA allegedly informed ADR that the DLBA would not pay ADR. Moreover, the MLB reportedly refused to pay for the Program inspections. ADR halted its Program inspections on February 9, 2015, but continued to manage the Program. On April 15, 2015, ADR received a notice of termination for convenience and a stop-work order from the MLB. This terminated the original contract between ADR and the MLB.

The parties dispute whether ADR was to receive additional compensation for managing the Program. In its original complaint, ADR alleged that it had agreed to manage the Program "at no cost in recognition of both its own desire to benefit the City as well as in recognition of, according to MLB, the funding mechanism that the [Program] would generate for MLB." However, in its amended complaint, ADR alleged that it had agreed to manage the Program "in consideration of Defendants’ agreement that ADR would continue to manage the blight demolition program, including additional demolitions within the [Program] ... to which ADR was to be paid for its in-process inspections." In both complaints, however, ADR alleged that the MLB advised ADR that the Program would pay the MLB $100 for each home, that there were approximately 4,200 such homes, and that this sum would therefore total $420,000. ADR further alleged that this $100 per property totaling $420,000 was intended to pay for subsequent blight removal efforts managed by ADR, but ADR never received the $420,000. In other words, in exchange for its work in the Program, ADR expected to receive future demolition work within the blight elimination program for which it would be paid by the MLB. ADR valued this future work at $420,000, the same amount that the MLB received from the DLBA for the Program.

According to the MLB, however, it informed ADR at the outset that it would not receive any further compensation from the MLB for the work ADR performed in the Program. MLB denied that the $100 per home amount was ever intended to go to ADR, whether directly or indirectly. ADR’s $420,000 claim is at the heart of this appeal.

On July 31, 2015, ADR filed its Notice of Intention to File a Claim with the Court of Claims. The original complaint was filed on August 14, 2015, and the $420,000 claim was neither raised nor addressed. Defendants first moved for summary disposition on January 5, 2016, contending, inter alia , that MCL 600.6431 barred ADR’s claims because notice of those claims had not been provided within one year of accrual. On April 26, 2016, the Court of Claims issued an opinion and order granting defendants’ motion in part and denying it in part. Rejecting defendants’ MCL 600.6431 argument, the Court of Claims stated that

the only example defendants’ [sic] offer in support of their position is an allegation in the complaint that February 2014 was the last time ADR received payment for in-process demolition inspections. However, this statement does not exclude the possibility that ADR performed in-process demolition inspections after July 31, 2014 for which it was not paid. Defendants have not substantiated their assertion that plaintiff is seeking to recover for claims that accrued prior to July 31, 2014.

On July 10, 2017, ADR moved to amend its complaint to add the claim for $420,000 in future inspection services. According to defendants, ADR was disingenuously seeking to add the $420,000 claim because ADR had admitted in its original complaint that it had agreed to provide the services at no cost. Defendants also argued that leave to amend should be denied because amendment was futile—the Court of Claims Act barred the claim anyway because the original notice of intent was filed in July 2015 and ADR never mentioned the $420,000 claim. Because ADR failed to state the $420,000 claim in July 2015, defendants argued that the claim was barred by the statute. However, on July 25, 2017, the Court of Claims granted ADR’s motion to amend the complaint. On August 7, 2017, ADR filed its amended complaint and added the $420,000 claim.

On August 25, 2017, defendants moved for summary disposition under MCR 2.116(C)(7) or for partial summary disposition under MCR 2.116(C)(7), (8), and (10). Defendants again argued that the $420,000 claim was untimely under MCL 600.6431(1) because it was not filed within one year of the claim’s accrual. On September 29, 2017, before the Court of Claims had ruled on defendants’ August 25, 2017 motion for summary disposition, defendants again moved for summary disposition. In addition to their untimeliness arguments, defendants brought forth new deposition information from Kim Homan, the Executive Director of the MLB. According to defendants, Homan’s testimony demonstrated that ADR had known about the $420,000 claim since 2013. Defendants maintained that ADR’s knowledge of the claim bolstered their untimeliness argument under MCL 600.6431(1).

On November 29, 2017, the Court of Claims issued an opinion and order on both of defendants’ summary-disposition motions. Regarding the...