Chrysler Realty Co. v. Design Forum Architects

• Decision Date: 28 February 2008
• Docket Number: No. 06-CV-11785.,06-CV-11785.
• Citation: 544 F.Supp.2d 609
• Parties: CHRYSLER REALTY COMPANY, LLC, Plaintiff, v. DESIGN FORUM ARCHITECTS, INC., Defendant.
• Court: U.S. District Court — Eastern District of Michigan

544 F.Supp.2d 609

CHRYSLER REALTY COMPANY, LLC, Plaintiff, v. DESIGN FORUM ARCHITECTS, INC., Defendant.

No. 06-CV-11785.

United States District Court, E.D. Michigan, Southern Division.

February 28, 2008.

As Amended March 25, 2008.

Order Denying Reconsideration April 14, 2008.

Eric H. Lipsitt, Howard & Howard, Detroit, MI, Mary C. Dirkes, Stephanie N. Olsen, Howard & Howard, Bloomfield Hills, MI, for Plaintiff.

Gregory I. Thomas, Michael F. Healy, Thomas, Degrood, Southfield, MI, for Defendant.

OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

PAUL D. BORMAN, District Judge.

Before the Court is Defendant Design Forum Architects, Inc.'s, (a/k/a Design Forum Architecture, Inc.) ("Defendant") October 18, 2007 Motion for Partial Summary Judgment. (Doc. No. 23). Plaintiff Chrysler Realty Company ("Plaintiff") filed a Response on December 3, 2007. The Court held a motion hearing on January 31, 2008. Having considered the entire record, and for the reasons that follow, the Court GRANTS Defendant's motion.

I. BACKGROUND

This diversity case arises from Plaintiff's allegations that Defendant breached its contract with Plaintiff in connection with the construction of an automobile dealership in Las Vegas, Nevada. Plaintiff is a Delaware corporation, with its principal place of business in Michigan. (Compl.¶ 1). Defendant is an Ohio corporation, with its principal place of business in Ohio. (Compl.¶ 2).

Plaintiff sought Defendant's services in connection with the construction of the Integrity Chrysler/Jeep-Dodge dealership in Las Vegas. (Compl.¶ 5). Plaintiff sought to expedite the project in order to complete the dealership before the February 2004 Dealer Announcement Show. (Compl.¶-7). This planned "Alpha" dealership housed the Chrysler, Dodge, and Jeep brands under a single roof. (Def. Br. Ex. A, Larry Jordan Dep. 5, 19, 23-24). The dealership was to be constructed on land owned by Thomas Saitta. (Def. Br. Ex. C, Saitta Dep. 6). Once the project was completed, Saitta and Greg Bashant were either to purchase or to lease the facility from Chrysler. (Larry Jordan Dep. 36; Saitta Dep. 22, 45).

Plaintiff contacted Defendant in order to procure architectural and engineering services in connection with the planned dealership. To complete the dealership on schedule, Plaintiff compressed the construction schedule from 18 to 24 months to 5/6 to 6 months — in order to complete the work by January 15, 2004. (Larry Jordan Dep. 130-31). Plaintiff retained Lusardi Construction Company as general contractor and the Jordan Company as the construction manager. (Compl.¶ 6). Larry Jordan acted as owner representative for the project for Plaintiff. (Larry Jordan Dep. 19). Lewis Jordan performed the duties of construction manager and reported developments to Larry Jordan. (Id. at 28-29; Def. Br. Ex. B, Lewis Jordan Dep. 10).

The central dispute in the case involves whether certain HVAC (heating, ventilation, air conditioning) systems designed by Defendant for portions of the dealership were inadequate.

Plaintiff and Defendant executed a Purchase Order and a Design Forum Contract. The Purchase Order provided Defendant $582,800, including reimbursable expenses, for its work on the project. (Compl. Ex. A, Purchase Order).

On June 3, 2003, Defendant e-mailed to Plaintiff an assessment of the cooling load for the proposed dealership. (Def. Br. Ex. K, 6/03/03 E-Mail; Def. Br. Ex. I, Whisman Dep. 64-65). Defendant calculated a cooling load of 260 to 275 tons, based upon an outside temperature of 108 degrees. Chris Whisman of Defendant proposed the following design approaches to the project, explaining the advantages and disadvantages of each: (1) multiple split systems; (2) multiple heat pumps; and (3) packaged rooftop units. (6/03/03 Email).

Plaintiff responded that it had recently finished a dealership in Houston, Texas of a similar size with cooling loads of only 163.5 tons, and offered those designs to aid Defendant. (Def. Br. Ex. F, Harding Dep. 70-72; Def. Br. Ex. G, Arakelian Dep. 73; Whisman Dep. 32; Def. Br. Ex. CC, 6/4/03 Fax). The Houston facility used split systems, and not evaporative cooling. (Whisman Dep. 32). Plaintiff also advised Defendant that its design criteria ruled out the use of rooftop units, because of the inherent difficulty in maintaining them. (Lewis Jordan Dep. 56-57; Harding Dep. 101-02; Whisman Dep. 56). Plaintiff instead instructed Defendant to place any condenser units in enclosed outside mechanical yards.

On June 23, 2003, the parties executed a contract governing the project (a modified version of a standard agreement). (Compl. Ex. B, Design Forum Contract). The contract contained the following clauses that are central to the instant dispute:

1.2.2.7 The Owner shall provide prompt written notice to the Architect if the Owner becomes aware of any fault or defect in the Project, including any errors, omissions or inconsistencies in the Architect's Instruments of Service.

1.3.4.1 Any claim, dispute or other matter in question arising out of or related to this Agreement shall be subject to mediation as a condition precedent to arbitration or the institution of legal or equitable proceedings by either party. . . .

1.3.4.2 The Owner and Architect shall endeavor to resolve claims, disputes and other matters in question between them by mediation which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Rules of the American Arbitration Association. . . . .

1.3.8.1 This agreement may be terminated by [Defendant] or [Plaintiff] immediately upon written notice to the defaulting party in the event of Default by such party. For the purposes of this Agreement, "Default" means either of the following:

A. In the event a party. . . . materially breaches this Agreement, any other party may give the breaching party written notice of such breach. The non-breaching party may then terminate this Agreement by written notice if the breaching party does not cure such breach within 30 days after the receipt of notice of breach, or if the breach is not capable of being remedied in 30 days, the breaching party fails to commence the cure within 30 days, and diligently pursue the curative action to completion within a reasonable time.

(Id.).

On July 9 and 10, 2003, representatives from Plaintiff, Defendant, and others involved in the dealership project met in Dayton, Ohio. (Larry Jordan Dep. 23). During these meetings, the topic of HVAC and evaporative cooling was briefly raised. (Id. at 38, 60-61, 65). Lewis Jordan testified that at the meeting, he privately disclosed his reservations about evaporative cooling to Larry Jordan. (Lewis Jordan Dep. 23-24). Lewis Jordan further indicated that when asked about the ability of evaporative coolers to perform the required function, Chris Whisman of Defendant became "defensive." (Id. at 26, 47). Whisman admitted to becoming defensive, faced with "accusations" from Plaintiff's principles about Defendant's work on the project. (Whisman Dep. 112-13). During this meeting, Plaintiff's representative stated that it would be "satisfied" if Defendant could design a system that maintained an 80-82 degree temperature on a day when the outside temperature was 100 degrees. (Larry Jordan Dep. 48-49, 56; Def. Br. Ex. N, Meeting Minutes 6). Brady Harding, a project architect for Defendant, noted that the requirement was 85 degrees for a 100 degree day. (Harding Dep. 61-62). Gregory Arakelian of Defendant recorded the desired temperature of 83 degrees. (Arakelian Dep. 83).

After reviewing the proposals, Plaintiff directed Defendant to go ahead with: (1) split heat pump systems with multiple compressors and condensing units located in exterior walled mechanical yards, with supplemental electric heating; and (2) evaporative cooling units mounted on the overheard ceilings with gas furnaces for the service building. The more expensive refrigeration HVAC system was used for the showroom and sales section of the facility. Additionally, Plaintiff instructed Defendant to ignore any input from Saitta, or any other dealership representatives. (Harding Dep. 68-69; Def. Br. Ex. O, 7/25/03 E-Mail).

To provide air conditioning to the dealership service area, Gregory Arakelian of Defendant testified that Larry Jordan instructed Defendant to look at evaporative cooling systems. (Arakelian Dep. 74, 77). Defendant was under the impression that evaporative cooling typically functioned well in dry heat areas. (Id. at 88). Arakelian testified that there were no more conversations regarding the HVAC systems. (Id. at 98-99).

Plaintiff alleges that Defendant's designer of the HVAC system, Whisman, was not licensed in the State of Nevada to sign mechanical engineering documents, had no formal education or seminar experience regarding evaporative cooler systems, and had little experience working on projects in Las Vegas or involving dealerships. Further, the State of Nevada fined Jim Taube, a civil engineer for Defendant who reviewed and signed off on Whisman's designs, for his signature on design documents, since he was not a licensed mechanical engineer. (Def. Br. Ex. H, Taube Dep. 48, 100-01)

Plaintiff contends that Larry Jordan did not dictate what type of system that Defendant should use in the dealership. Larry Jordan testified that he questioned Defendant's employees at the time on the propriety of using an "outdated" evaporative cooling system for the integrity project. At his deposition, Larry Jordan requested that Defendant do more research on HVAC systems used in Las Vegas before committing to the evaporative cooling system. (Larry Jordan Dep. 23-24, 47).

Defendant contacted two manufacturers in Las Vegas about evaporative cooling systems. (Whisman Dep. 43-45). Whisman testified that he contacted the manufacturer Trane, and that Trane informed him that evaporative cooling would work for the project. (Id. at 44-45). However,...