Alpha Partners v. Transamerica Inv.

• Decision Date: 10 August 2006
• Docket Number: No. 20040605-CA.,20040605-CA.
• Citation: 2006 UT App 331,153 P.3d 714
• Parties: ALPHA PARTNERS, INC., a Utah corporation, Plaintiff, Appellant, and Cross-appellee, v. TRANSAMERICA INVESTMENT MANAGEMENT, L.L.C., a limited liability company, Defendant, Appellee, and Cross-appellant.
• Court: Utah Court of Appeals

153 P.3d 714

2006 UT App 331

ALPHA PARTNERS, INC., a Utah corporation, Plaintiff, Appellant, and Cross-appellee, v. TRANSAMERICA INVESTMENT MANAGEMENT, L.L.C., a limited liability company, Defendant, Appellee, and Cross-appellant.

No. 20040605-CA.

Court of Appeals of Utah.

August 10, 2006.

Eric G. Easterly, Park City, and Stephen K. Christiansen, Van Cott Bagley Cornwall & McCarthy, Salt Lake City, for Appellant.

Julianne P. Blanch and David Jason Hawkins, Snow Christensen & Martineau, Salt Lake City, for Appellee.

Before GREENWOOD, Associate P.J., DAVIS, and THORNE, JJ.

OPINION

THORNE, Judge:

¶ 1 Alpha Partners, Inc. (Alpha) and Transamerica Investment Management, L.L.C. (TIM) both appeal from the trial court's order entered after a bench trial relating to their competing breach of contract claims. We affirm in part and reverse in part.

BACKGROUND¹

¶ 2 Alpha is a Utah corporation that specializes in developing marketing programs for companies, such as TIM, that provide investment advisory services. On December 8, 2000, Alpha entered into a contract with TIM to create an investment marketing program for TIM's services to third-party institutional and wholesale investors. The contract, entitled "letter of agreement," was drafted by Liz Hecht, the owner and president of Alpha, and accepted and signed by William T. Miller, the senior vice president and chief operating officer of TIM.

¶ 3 The contract gave a detailed description of the services Alpha was to provide and included a proposed timetable and estimated fees and expenses. Alpha anticipated finishing the project the week of April 23, 2001, "[c]ontingent upon comprehensive and timely feedback from [TIM]." The estimated total fee for the project was $239,000, discounted to $225,000 if Tim paid the full price in advance. Alpha was to send periodic invoices to TIM for expenses, and upon project completion, Alpha was to submit a final invoice.

¶ 4 An explanation for the project fee calculation was provided in the contract's "Terms and Conditions." The contract stated that:

The fees quoted here are based on an estimate of time required by Alpha Partners to perform the work described as well as fair market value for these services. Fees may vary 20% above or below the estimates stated in this letter of agreement. Fees would exceed this estimate by more than 20% only if [TIM] requests expanding the scope of the project as defined here (see Additions, Revised Estimates and Contingencies ...).

The contract addressed the manner in which revisions and additions to the project would be handled and provided that "[a]ny significant revisions or additions to the services or components described here will be billed as additional services above this estimate." Further, Alpha was to "submit written estimates for [TIM's] approval if, for any reason, [Alpha] expect[ed] to exceed the total fee quoted here by more than 20%." Although the anticipated project completion date was in April 2001, the contract provided that "[i]f [TIM] postpones project completion for more than nine months from the date of project inception, it will be necessary to submit an estimate revision for [TIM's] approval."

¶ 5 Pursuant to the contract, TIM took advantage of the discounted rate and paid Alpha $225,000 in advance. Alpha immediately began working on the project, completing the first two stages of the project in January 2001. Although Alpha was very efficient on its end, approval of ideas by TIM took much longer than anticipated because each decision required approval from TIM's board of directors. TIM had difficulty deciding on a tag line and logo mark in particular, given the highly subjective nature of those items. As a result, Alpha granted several extensions to the proposed time line as the project began to take shape.

¶ 6 Throughout this time, Miller was Alpha's main contact at TIM. In July 2001, however, Miller was fired by John Riazzi, TIM's chief executive officer. Riazzi then became Alpha's primary contact at TIM. To keep the project on track, Hecht arranged a meeting with Riazzi on July 20, 2001. At that meeting Riazzi articulated his interpretation of the contract, telling Hecht that TIM had paid Alpha up front in full for the project and would not pay anything more. Hecht agreed, so long as there were no more long delays.

¶ 7 After the July meeting, Riazzi gave his approval for the logo mark, which was required to move the project toward completion. Riazzi rescinded his approval, however, when he learned that he needed to get additional approval from TIM's parent company before making a final decision on the logo. This caused further delays, and another meeting was held on August 17. At this meeting, Riazzi expressed his approval of the work Alpha had presented, but was unable to provide a decision on the logo mark. Based on these meetings, Riazzi knew that delays could result in additional fees to TIM.

¶ 8 On August 31, Hecht sent Riazzi a memo that included a summary of fees and expenses as of that date. The memo also included "invoices for the main project per the December 8, 2000 letter of agreement" and a "schedule of project delays by [TIM]." The memo noted that:

The delays to date (from April, the original project completion date, through the present) have caused project billings to go well into the plus-20% range (the letter of agreement indicates that fees may vary plus or minus 20% of project estimates). Total billings to date reflect significant down time and the need for remobilization of our team after lengthy delays, as well as the costs associated with project management over a much longer period than originally anticipated.

The memo informed TIM that if the project went beyond the September 8, 2001 deadline, Alpha would submit an estimate revision for TIM's approval. One of the invoices requested an additional $43,000, 18% above the initial fee estimate. Riazzi received the invoices in early September and attempted to contact Hecht, but did not pay the invoice.

¶ 9 TIM and Alpha continued to work on the project, finally settling on all logo marks and tag lines in September 2001. On October 20, after several requests for payment of the August invoice, Hecht directed her partners to stop work if TIM did not submit payment by October 24. On October 29, Hecht called Riazzi and again requested payment. Riazzi informed Hecht that TIM had paid Alpha the full price in advance and that TIM would not pay the additional $43,000. Hecht responded that she would turn the matter over to her attorney, effectively terminating the contract. TIM then hired another marketing firm to complete the project. TIM paid the new firm $60,797.17 for marketing materials, that were delivered to TIM in the second quarter of 2002.

¶ 10 On December 31, 2001, Alpha filed a complaint against TIM alleging breach of contract, as well as other causes of action that it later dismissed. Specifically, Alpha complained that TIM failed and refused to pay a total of $64,950 owed under the contract and that this constituted a breach of contract. On March 6, 2002, TIM filed an answer and counterclaim against Alpha denying the claims and alleging breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, and fraud. TIM alleged that Alpha breached the contract by charging more than it was entitled to under the agreement and that Alpha breached the covenant of good faith and fair dealing by charging an additional 18% without any justification. TIM also alleged that Alpha was unjustly enriched since TIM paid a total of $263,000 and never received any completed materials. Finally, TIM argued that Hecht intended to deceive TIM by not informing Riazzi of Alpha's intent to charge additional fees at the July meeting, when Riazzi stated that TIM would not pay additional fees.

¶ 11 A bench trial was held in June 2004. On August 10, 2004, the court entered an order dismissing both parties' claims. The court found that TIM did not breach the contract by failing to provide timely information to Alpha and by refusing to pay additional fees since the contract was ambiguous and indefinite. The court stated that the contract terms relating to timing were indefinite since the contract included a "proposed" timetable that Alpha revised on its own several times, and therefore, TIM could not breach the contract by its delay. Furthermore, the court found that if a delay warranting additional fees occurred Alpha was required to submit a revised estimate for TIM's approval and that the contract did not allow Alpha unlimited discretion to increase its fees within a 20% range.

¶ 12 The court also found that Alpha did not breach the contract or the covenant of good faith and fair dealing. The court determined that Alpha's termination of the contract was not a breach of the contract, that no breach of the implied covenant occurred since TIM was not fully cooperating, and that TIM's inaction, coupled with the substantial performance by Alpha, excused further performance by Alpha. As to TIM's claim for unjust enrichment, the court concluded that Alpha had done substantial work on the project that justified the fees paid. The court addressed the fraud claim and held that TIM failed to show by clear and convincing evidence that Hecht or Alpha made a false statement intended to cause detriment to TIM.

¶ 13 Finally, the court noted that TIM filed an offer of judgment under rule 68 of the Utah Rules of Civil Procedure, and that TIM was therefore entitled to reimbursement of post-offer costs. See Utah R. Civ. P. 68(b). The court reviewed the affidavit of costs and ordered Alpha to pay TIM $3094.78 pursuant to rule 68. See id.

ISSUES AND STANDARDS OF REVIEW

¶ 14 Alpha and TIM each contend on appeal that the trial court erred in dismissing their respective breach of contract claims. "`Interpretation of the terms of a contract is a question of law. Thus, we accord the trial court's legal...