Cameo Homes v. Kraus-Anderson Const. Co., 04-1200.

• Decision Date: 18 January 2005
• Docket Number: No. 04-1200.,04-1200.
• Parties: CAMEO HOMES, Plaintiff — Appellant, v. KRAUS-ANDERSON CONSTRUCTION COMPANY; City of East Grand Forks, a political subdivision, Defendants — Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

394 F.3d 1084

CAMEO HOMES, Plaintiff — Appellant, v. KRAUS-ANDERSON CONSTRUCTION COMPANY; City of East Grand Forks, a political subdivision, Defendants — Appellees.

No. 04-1200.

United States Court of Appeals, Eighth Circuit.

Submitted: November 17, 2004.

Filed: January 18, 2005.

Jon J. Jensen, argued, Grand Forks, ND, for appellant.

Joseph E. Flynn, Lake Elmo, MN (Patrick S. Collins and Pierre N. Regnier, on the brief), for appellee City of East Grand Forks.

Joseph G. Springer, argued, Minneapolis, MN, for appellee Kraus-Anderson.

Before MURPHY, HANSEN, and MELLOY, Circuit Judges.

MURPHY, Circuit Judge.

Cameo Homes contracted with the City of East Grand Forks to do concrete work in the reconstruction efforts following a severe flood. Disagreements arose and Cameo eventually sued the city for breach of contract, statutory violations, and various torts, seeking compensatory and statutory damages. The district court¹ granted summary judgment to the City and Kraus-Anderson, and Cameo appeals. We affirm.

After extensive flooding in spring 1997 in East Grand Forks, Minnesota, the City entered into a large number of contracts for the repair or reconstruction of damaged and destroyed municipal facilities. Kraus-Anderson, a Minnesota corporation, was hired by the City as construction manager for four of the projects: City Hall, the Holiday Mall, the Infill Building, and the City fire station. As construction manager, Kraus-Anderson was responsible for overseeing the work of the contractors who were hired by the City. Cameo Homes, a North Dakota corporation, was hired by the City as concrete contractor for the four construction projects Kraus-Anderson was managing. No contracts were formed between Kraus-Anderson and Cameo.

Each of Cameo's contracts with the City incorporated a standard set of "General Conditions for the Contract of Construction" drafted by the American Institute of Architects. The conditions provide that each contract is the "entire and integrated agreement between the parties," GC § 1.1.1, and that the contract could be modified only through written agreements such as "change orders." Id. Change orders had to be prepared by Kraus-Anderson, and they were to specify how the work was to be modified, for what deadline, and for what additional compensation, if any. Id. § 7.2.1. To be effective, a change order required the signatures of Kraus-Anderson, the City, the project architect, and Cameo. Id. § 7.2.1. The conditions contain no provision for oral modification of contract terms.

The general conditions in Cameo's contracts with the City also establish a process for making "claims" regarding contract terms or matters "arising out of or relating to" the terms. GC § 4.7.1. The general conditions distinguish claims from change orders. Change orders modify the terms of a contract, while claims seek relief owed "as a matter of right" under the existing terms of a contract. Id. §§ 1.1.1, 4.7.1. Under the claims process, Cameo was required to present written notice of any claim to the project architect within 21 days of an event or of the discovery of an event giving rise to the demand. Id. § 4.7.3. Failure to present a claim to the architect would preclude later litigation about it, for the architect's decision was a condition precedent to the right to litigate a dispute. Id. § 4.7.2.

Cameo's contracts for the Holiday Mall, Infill Building, and fire station projects also incorporated a final payment provision. Under this provision Cameo's "acceptance ... of final payment" would release the City from "all claims and all liability ... other than claims and stated amounts as may be specifically excepted by [Cameo]." Upon completing each of the three projects, Cameo signed an Affidavit of Payment of Debts and Claims, stating that:

payment ha[d] been made in full and all obligations have otherwise been satisfied for all materials and equipment furnished, for all work, labor, and services performed, and for all known indebtedness and claims against the Contractor for damages arising in any manner in connection with the performance of the Contract ... for which the Owner or Owner's property might in any way be held responsible or encumbered.

Cameo also signed a Contractor's Affidavit of Release of Liens after each of the three projects. This affidavit stated that Cameo and all its subcontractors, suppliers and laborers "who have or may have liens or encumbrances or the right to assert liens or encumbrances against any property of [the City] arising out of the performance of the Contract" had released or waived those liens "to the best of [Cameo's] knowledge, information and belief." Finally, Cameo's insurer signed Consent of Surety to Final Payment forms. In these forms the insurer approved the City's final payments to Cameo for its work on the Holiday Mall, Infill Building, and fire station. No surviving claims or liabilities were stated on any of these documents.

Numerous disagreements arose during Cameo's performance of the contracts. The beginning of the company's City Hall work was delayed for two months because other contractors had failed to meet the schedule for excavating the site. According to Cameo, Kraus-Anderson nonetheless insisted that its work be completed on schedule, resulting in its incurring significant overtime expenses. Cameo requested change orders to cover the additional costs, but the modifications were never approved. Errors in the architectural plans provided by the City further complicated Cameo's performance on the City Hall contract. According to Cameo, mistakes in the City's blueprints required it to remove and repour substantial amounts of concrete. This resulted in added delays and costs, and as a result Kraus-Anderson said it would have to verify the proper placement of concrete before Cameo did any future pours. The problem of misplacement apparently continued, and Cameo was required to remove and repour more concrete. No change orders were approved for the additional expenses, and Cameo was not compensated for them.

Similar difficulties arose during Cameo's work on the Holiday Mall project. Kraus-Anderson demanded that expensive fire treated lumber be used, but Cameo did not believe it was required under the terms of the contract. After Kraus-Anderson threatened to levy on Cameo's bond or terminate its contract, Cameo went ahead and installed the wood without first obtaining a change order. It later submitted change orders to cover the added $50,180 expense, but they were denied.

Unexpected costs were also incurred in Cameo's work on the Infill Building. Kraus-Anderson required Cameo to change hardware it had already installed, and Cameo claims that $257.29 of its expense in responding was neither approved in a change order nor paid. Third party delay also slowed Cameo's progress on this project, resulting in an alleged acceleration expense of $41,863 that was never approved in a change order or compensated.

Without first giving written notice of its claims to the project architect, Cameo filed an action in Minnesota district court against the City and Kraus-Anderson. It alleged breach of contract by the City in its failure to compensate Cameo for its additional expenses; breach of contract by the City in its failure to pay ten percent bid increases that Cameo inserted on its bid envelopes but did not incorporate into the contracts; negligence by the City and Kraus-Anderson in the design and verification of concrete placements; defamation fraud; RICO violations; intentional and negligent interference with prospective business advantage; intentional interference with contractual relations; extortion; civil conspiracy; and violations of the Davis-Bacon Act. Cameo sought $367,508.13 in damages for breach of contract, $572,256.82 in damages for defamation, additional but unspecified damages for other injuries, and attorney fees.

The defendants removed the case to federal court and moved for summary judgement. The district court granted their motions and dismissed all of the claims in Cameo's complaint. Cameo's allegations of breach were rejected because of its failure to give proper notice of its claims and its acceptance of final payment for three of the projects, both being barriers to litigation. Cameo's claim for negligence in the preparation of architectural plans was dismissed since all duties relating to the blueprints were contractual in nature. Finally, Cameo's allegation of negligence in the verification of concrete placements was denied on the ground that it was itself responsible under the contract for ensuring the proper placement of the concrete. The remaining claims were dismissed, but Cameo has not appealed those dismissals. Cameo's subsequent motions for reconsideration and for alteration or amendment of judgment were denied, and Cameo appeals.

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