Edward E. Gillen Co. v. City of Lake Forest

Decision Date17 August 1993
Docket NumberNo. 92-2206,92-2206
Citation3 F.3d 192
PartiesEDWARD E. GILLEN COMPANY, a Wisconsin corporation, Plaintiff-Appellant, v. CITY OF LAKE FOREST, Defendant-Appellee.
CourtU.S. Court of Appeals — Seventh Circuit

John A. Busch (argued), Lee J. Geronime, Grant C. Killoran, Michael, Best & Friedrich, Milwaukee, WI, William E. Snyder, Michael, Best & Friedrich, Chicago, IL, for plaintiff-appellant.

David M. Stahl (argued), Bruce Zessar, Sidley & Austin, Chicago, IL, for defendant-appellee.

Before KANNE and ROVNER, Circuit Judges, and REYNOLDS, Senior District Judge. *


Edward E. Gillen Company ("Gillen") brought this diversity suit against the City of Lake Forest, Illinois ("Lake Forest") after Lake Forest refused to pay for unanticipated expenses Gillen had incurred in constructing off-shore breakwaters for a municipal marina. Claiming damages in excess of $850,000, Gillen sought recovery under theories of express and implied warranty, mistake, equitable reformation, negligent misrepresentation, quantum meruit, contract, and quasi-contract. The district court dismissed several of these claims, including the claim for equitable reformation of Gillen's contract with Lake Forest. The court later granted Lake Forest's motion for partial summary judgment as to damages, holding that most of the monetary relief Gillen sought was precluded by the contract's "no damages for delay" clause. Gillen challenges both of these rulings on appeal. We affirm.


In 1986, Gillen was awarded a contract to construct off-shore breakwaters in Lake Michigan for the Lake Forest marina. A portion of the project involved the construction of "Breakwater II," which was designed to serve as both a breakwater and a walkway for strolling and fishing. The dual purpose of this breakwater required that it be built of large stones that fit closely together. Accordingly, the manual setting forth Lake Forest's specifications for the project (and that served as the basis for Gillen's bid) dictated the use of cubic "AIII" stone with a uniform dimension of approximately 4.5 feet. The project manual also required that this stone be procured solely from Valders Stone and Marble, Inc. ("Valders").

After Lake Forest awarded the construction contract to Gillen, it contracted with Valders to supply the AIII stone. An addendum to Lake Forest's agreement with Valders required that the stone conform to the requirements of the project manual. Valders supplied the first shipment of AIII stone in September 1986. Although the stone was inspected and approved by a Lake Forest agent, it did not meet the project manual's specifications, particularly in terms of its dimensions and shape. Gillen complained to Lake Forest's site engineer, but the engineer instructed Gillen to select the better pieces of stone and try to "jigsaw" them together. Gillen incurred additional costs in doing so.

A second shipment of stone was delivered in October 1986, and it had the same problems as the first. Lake Forest again directed Gillen to jigsaw the stone into place. However, when Gillen was approximately halfway through installing this shipment, Lake Forest's engineer agreed that the stone was inadequate and halted construction. Shortly thereafter, Lake Forest issued Change Order No. 5, which altered the specifications for the breakwater, shortening the portion to be constructed of AIII stone and dictating a different type of construction for the remainder. The change order also extended the completion date for Breakwater II from January 1, 1987 to May 22, 1987. Gillen proceeded in accordance with the new specifications until mid-December 1986, when construction was halted for the winter.

In January 1987, Gillen submitted a claim to Lake Forest for the additional costs it had incurred as a result of the non-conforming AIII stone. Lake Forest denied the claim.

On March 27, 1987, Lake Forest issued Change Order No. 6, which required Gillen to reconstruct a 75-foot portion of the breakwater, replacing the AIII stone with pre-cast concrete units. Gillen refused to sign the order because it did not provide for any additional compensation. But when Lake Forest threatened to replace Gillen and sue for damages, Gillen proceeded as ordered. Gillen completed work on Breakwater II in May 1987. Gillen filed this action in January 1991. 1

The district court dismissed Gillen's equitable reformation claim because Gillen had not alleged that its written contract with Lake Forest departed from the parties' mutual understanding of their agreement. In the court's view, Gillen's allegation that it had entered into the contract expecting that Valders would supply appropriate stone supported a claim for breach of warranty or contract (which Gillen had asserted separately), but not one for equitable reformation. Edward E. Gillen Co. v. City of Lake Forest, No. 91 C 0183, 1991 WL 171945, at * 5-6, 1991 U.S.Dist. LEXIS 12274, at * 14-15 (N.D.Ill. Sept. 3, 1991).

The court subsequently granted Lake Forest's motion for partial summary judgment as to damages, concluding that most of the damages Gillen sought were barred by Supplemental Condition SC-12.5 of the contract, which provided:

The CONTRACTOR agrees that in the event of delay for any reason caused by any party or person, it will be fully compensated for the delay by an extension of time to complete the Contract and will not seek additional compensation.

Edward E. Gillen Co. v. City of Lake Forest, No. 91 C 0183, 1992 WL 29995, 1992 U.S.Dist. LEXIS 1438 (N.D.Ill. Feb. 12, 1992). Gillen filed a motion to reconsider, arguing that a substantial portion of its damages resulted from additional costs that were unrelated to delay. The district court denied the motion, observing that Gillen had never before quarreled with the proposition that the majority of its damages were delay-related. The court further concluded that despite Gillen's belated attempt to re-characterize its damages, most of the costs for which it sought compensation had in fact been caused by delay. Edward E. Gillen Co. v. City of Lake Forest, No. 91 C 0183, Minute Order (N.D.Ill. Apr. 22, 1992).

The district court's ruling barred Gillen from recovering all but $82,000 of the damages it sought. 2 The parties subsequently settled that portion of the suit.


On appeal, Gillen contends that the district court erred in finding that the majority of its alleged damages were delay damages barred by its contract with Lake Forest. Gillen also contends that its complaint stated a viable claim for equitable reformation of the contract that should not have been dismissed.

A. The Nature of Gillen's Damages Claims

Illinois courts have consistently honored contractual provisions that preclude the recovery of damages resulting from delay. Bates & Rogers Constr. Corp. v. Greeley & Hansen, 109 Ill.2d 225, 93 Ill.Dec. 369, 372, 486 N.E.2d 902, 905 (1985). 3 Gillen does not dispute that SC-12.5 of its contract with Lake Forest bars delay damages, nor does it challenge the validity of the clause under Illinois law. It takes issue solely with the district court's finding that the bulk of its damages were, in fact, delay damages. We review this decision de novo, viewing the record in the light most favorable to Gillen and determining whether it reveals any material dispute of fact that precludes summary judgment. Colburn v. Trustees of Indiana Univ., 973 F.2d 581, 585 (7th Cir.1992).

In granting partial summary judgment as to the damages Gillen claimed, the district court observed that "[n]o party disputes that these damages are 'delay damages.' " 1992 WL 29995, at * 3, 1992 U.S.Dist. LEXIS 1438, at * 7. Gillen contests that finding. It concedes that the word "delay" appears in its complaint, in the deposition testimony of its witnesses, and in its damages study. Gillen Br. at 9. Gillen nonetheless maintains that the district court ignored indications in the record that its damages were not entirely caused by delay. Gillen emphasizes that many of the costs for which it seeks compensation resulted from additional work occasioned by the faulty stone rather than from delay in completion of the breakwater. Gillen points to this response to Lake Forest's statement of facts:

While the calculations set forth ... in Gillen's Damages Study ... describe Gillen's damages as "delay" damages, Gillen's Complaint seeks damages from Lake Forest for a wide range of damages caused by Lake Forest's failure to supply conforming stone to the project and the work done under Change Order No. 6 R. 51 at 10-11 p 20 (emphasis supplied) (citation omitted). Gillen also notes the deposition testimony of its president, Gary A. Jackson:

This isn't a delay [case]. This is a breach. I mean they furnished defective stone. This is a breach of contract.

R. 60 at 62. In Gillen's view, these statements were enough to put the district court on notice that Gillen disagreed with the "delay" label Lake Forest had affixed to its damages.

We understand Gillen to make two separate but related arguments: (1) that it did not concede that its damages were delay damages, as the district court indicated; and (2) that the evidence before the court established a factual dispute as to the nature of Gillen's damages, thus precluding summary judgment on the issue. We find neither argument to be correct. Although we might be inclined to agree that not all of Gillen's additional costs were actually caused by delay, see Paul Hardeman, Inc. v. United States, 406 F.2d 1357, 1361, 186 Ct.Cl. 743 (1969), our review of the record convinces us that Gillen neglected to make this contention in a timely manner below and did not, in any event, identify evidence sufficient to establish a dispute of fact as to this issue.

Lake Forest's view of Gillen's damages was clear from the start. In the city's motion for summary judgment, this view figured prominently as a reason why...

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