Cent. Brown Cnty. Water Auth. v. Consoer
| Decision Date | 11 February 2013 |
| Docket Number | Case No. 09-C-0131 |
| Parties | CENTRAL BROWN COUNTY WATER AUTHORITY, Plaintiff, v. CONSOER, TOWNSEND, ENVIRODYNE, Defendant. |
| Court | U.S. District Court — Eastern District of Wisconsin |
DECISION AND ORDER ON SUMMARY JUDGMENT MOTIONS
This diversity action arises out of the design and construction of a 65-mile underground water pipeline and related facilities that serve the local government members of Plaintiff Central Brown County Water Authority (the Authority). The Authority filed this action against its engineer, Defendant Consoer, Townsend, Envirodyne (CTE), asserting professional malpractice and breach of contract claims which are premised upon numerous alleged breaches of CTE's contractual duties regarding the design, engineering, and construction of the pipeline system. In a previous decision, the Authority's claim against CTE for misrepresentation was dismissed. In addition, the Authority's request for punitive damages was stricken without prejudice because the Authority's complaint had not alleged sufficient factual support for punitive damages. Presently before the Court are the parties' cross motions for partial summary judgment and the Authority's motion to amend its complaint to renew its request for punitive damages. For the reasons that follow, CTE's motion for partial summary judgment will be denied in part and granted in part, and the remaining motions will be denied.
BACKGROUND
The Authority is a governmental body with statutorily defined powers whose main purpose is to serve as a wholesale water supplier to its members. See Wis. Stat. § 66.0823. The Authority's members consist of several communities surrounding the City of Green Bay, including the Villages of Allouez, Bellevue, and Howard, the City of De Pere, the Town of Lawrence, and Ledgeview Sanitary District No. 2, each of whom had been notified that its groundwater exceeded United States Environmental Protection Agency standards for radium and that it needed an alternative source of drinking water.
In 2004, the Authority decided to supply water to its member communities by purchasing Lake Michigan water from the City of Manitowoc, which is located approximately forty miles southeast of Green Bay. To that end, the Authority retained Defendant Consoer, Townsend, Envirodyne (CTE) to design the pipeline that would transport the water to the member communities, and to provide engineering and inspection services in accordance with the terms of a written Professional Services Agreement dated December 23, 2003. The agreement was amended on April 15, 2004 to include additional services. The pipeline construction was substantially completed in May 2007, and the system has been fully operational since August 2007. The Authority continues to oversee the operation of the pipeline, but has an agreement with Manitowoc Public Utilities (MPU), who is responsible for the operation, repair, and maintenance of the pipeline.
In summer and fall 2007, disputes ensued regarding increasing the contractual "not to exceed" (NTE) price for CTE's services. The parties had agreed that CTE would charge standard hourly rates for its services, but that such charges "shall in no case exceed" fees of $9,784,000. However, CTE alleges that due to significant delays in the project caused by permitting issues andone of the contractors, it advised the Authority in 2006 that it would require additional time to complete the project. In May 2007, the Authority agreed to increase the not-to-exceed (NTE) price, and claims that it ultimately paid CTE $922,800 over the NTE price. In September 2007, after a dispute over proposed amendments to the agreement to provide for additional compensation, CTE terminated its services under the agreement.
The Authority brought this action against CTE, along with two separate actions against three of the contractors on the project, in December 2008. CTE, a Delaware corporation with its headquarters in Illinois, removed this action to federal court, and the actions against the contractors remained in state court where they were consolidated and stayed pending resolution of the case against CTE. CTE has now moved for partial summary judgment as to several components of the Authority's claim.
In all, the Authority seeks close to $15 million in damages for alleged defects in the pipeline due to CTE's deficient and/or negligent performance of its duties under its contract. CTE's motion is primarily directed to three components of the Authority's damage claim that it identifies as the deflection claim, the concrete support claim, and the leakage claim. In essence, the Authority contends that due to the failure of CTE to perform its duties under its contract with the Authority in accordance with the generally accepted standard of care for a professional engineering firm, the pipeline was not properly constructed. The bulk of the damages the Authority seeks in the action consists of costs to be incurred for investigation and repair of these defects. The Authority alleges CTE's breach and/or negligence will require a seven-month shutdown of the pipeline in order to, among other things, excavate all 47 butterfly valves in order to replace the bolts and gaskets attaching each valve to the adjoining pipe, add concrete saddle supports under each valve, test thepipeline to determine whether there is any deflection, inspect and repair the inside of the pipe, install corrosion protection, add manways for future access, backfill and compact the soils. These repairs are necessary, according to the Authority, because CTE's failure to properly fulfill its obligations under the contract make it more probable that the butterfly valve joints will fail prematurely and that corrosion and leakage will develop over time.
In addition to the defects that are the subject of CTE's motion, the Authority alleges additional deficiencies on which it claims it is entitled to partial summary judgment. The Authority alleges, for example that the air-release and air-vacuum valve vaults installed in the pipeline are susceptible to corrosion, and in some cases have already begun to corrode, due to deviations in their installation and defects in their design. Likewise, the Authority alleges that CTE failed to properly supervise the installation of the NEMA 12 cabinet housing an automatic transfer switch at the Howard Booster Station. The Authority also contends that CTE failed to require a submittal, or "shop drawing" detailing the materials and techniques used to install an element in a project, for the butterfly valve connections as required in the specifications. The Authority seeks additional damages, including recovery of costs incurred in repairing sinkholes, to repair sidewalk pavement damage, and to provide a Cathodic Protection System. Finally, the Authority seeks damages for legal fees incurred in pursuing claims against contractors for the alleged defects in the pipeline resulting from CTE's alleged failure to properly supervise the system's construction.
The parties' summary judgment motions largely dispute whether certain alleged defects in the pipeline may serve as the basis for contract and tort damages based on the likelihood that the defects will lead to leakage and other malfunctions in the pipeline in the future. The basis of liability in contract or tort, if any, is CTE's alleged failure to perform its services in accordance withgenerally accepted professional engineering standards. CTE argues summary judgment should be entered in its favor on several of the Authority's claims for damages because regardless of whether it has failed to meet the standard of care, the Authority has no evidence that it has suffered any damages as a result. CTE contends the Authority is simply speculating as to its damages and improperly seeking to be compensated now for damages that it has not yet sustained and that may or may not occur in the future. In response, the Authority argues that, at least as to its contract claims, summary judgment should be entered in its favor because there is no dispute that the defects in the pipeline constitute a breach, and as a matter of law, it need not prove actual damages-the fact of the breach alone is enough. As to both the contract and tort claims, the Authority contends that it need not wait for the pipeline to start leaking or otherwise malfunction if it knows now that CTE has allowed the pipeline to be installed with defects that will very likely cause systemic problems. Thus, it is seeking damages "to compensate for injuries that have occurred in order to prevent damages that will occur in the future."
SUMMARY JUDGMENT STANDARD
A motion for summary judgment should be granted "if the movant 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). Where factual disputes do exist, the non-movant's version of events is accepted as true at this stage of the proceedings. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The mere existence of some factual dispute does not defeat a summary judgment motion; however, there must be a genuine issue of material fact for the cause of action to survive. Id. at 247-48. "Material" means that the factual dispute must be outcome-determinative under governinglaw. Contreras v. City of Chicago, 119 F.3d 1286, 1291 (7th Cir. 1997). Failure to support any essential element of a claim renders all other facts immaterial. Celotex, 477 U.S. at 323. A "genuine" issue of material fact requires specific and sufficient evidence that, if believed by a jury, would actually support a verdict in the nonmovant's favor. Fed. R. Civ. P. 56(e); Anderson, 477 U.S. at 249. Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (198...
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