Kaman Aerospace v. Arizona Bd. of Regents

• Decision Date: 23 August 2007
• Docket Number: No. 2 CA-CV 2006-0177.,2 CA-CV 2006-0177.
• Parties: KAMAN AEROSPACE CORPORATION, a Delaware corporation, Plaintiff/Counterdefendant/Appellee/Cross-Appellant, v. The ARIZONA BOARD OF REGENTS, University of Arizona, a political subdivision of the State of Arizona, Defendant/Counterclaimant/Appellant/Cross-Appellee.
• Court: Arizona Court of Appeals

171 P.3d 599

KAMAN AEROSPACE CORPORATION, a Delaware corporation, Plaintiff/Counterdefendant/Appellee/Cross-Appellant, v. The ARIZONA BOARD OF REGENTS, University of Arizona, a political subdivision of the State of Arizona, Defendant/Counterclaimant/Appellant/Cross-Appellee.

No. 2 CA-CV 2006-0177.

Court of Appeals of Arizona, Division 2, Department A.

August 23, 2007.

Opinion Denying Reconsideration November 8, 2007.

Fennemore Craig, P.C. by George O. Krauja and Erwin D. Kratz, Tucson, Attorneys for Plaintiff/Counterdefendant/Appellee/Cross-Appellant.

Lewis and Roca LLP by Brian J. Pollock, Lawrence A. Kasten, and Dale A. Danneman,

Phoenix, Attorneys for Defendant/Counter-claimant/Appellant/Cross-Appellee.

OPINION

BRAMMER, Judge.

¶ 1 The Arizona Board of Regents (ABOR)¹ appeals from a judgment entered after a jury rendered its verdict in favor of Kaman Aerospace Corporation (Kaman) on ABOR's counterclaim for breach of contract and Kaman's breach of contract claim, awarding Kaman $0. ABOR asserts the trial court erred when it denied ABOR's motions for judgment as a matter of law on Kaman's claim because there was no written agreement obligating it to compensate Kaman for additional work and because Kaman had failed to prove an authorized signatory had executed contract modifications on ABOR's behalf. ABOR contends that Kaman failed to prove the damages element of its claim and failed to establish that ABOR's breach was material. ABOR also argues Kaman's breach of contract claim was untimely and that the trial court erred in denying ABOR's motions for a new trial on that claim and on the jury's verdict in Kaman's favor on ABOR's counterclaim for damages. Kaman cross-appeals, asserting the court erred by not awarding it attorney fees as the prevailing party at trial.

Factual and Procedural Background

¶ 2 We view "the evidence in a light most favorable to upholding the jury verdict[s]." Hutcherson v. City of Phoenix, 192 Ariz. 51, ¶ 13, 961 P.2d 449, 451 (1998). ABOR is the governing body of the University of Arizona; the astronomy department of the University "has a research wing called Steward Observatory." The observatory has a mirror laboratory, "a unique facility in the world," that makes large mirrors with "unique properties" to exacting specifications. In March 2003, ABOR entered into a fixed price contract with Lockheed Martin, effective September 2001, for ABOR to "[d]esign, develop, fabricate, assemble, test, deliver, and support integration of a 6.5 [meter] class Collimator" for approximately $32 million. A collimator was described at trial as "a telescope operating in reverse"; it would be used to test the accuracy of space telescopes while they were still on earth.

¶ 3 The mirror laboratory's manager testified "the scope of the project was larger than the observatory could handle alone during the time that Lockheed ... wanted delivery." Accordingly, ABOR decided to partner with Kaman. ABOR was to provide the mirrors, and Kaman would be responsible for providing support and control components of the collimator.

¶ 4 Kaman and ABOR entered into a written contract on December 20, 2001. It listed a "Firm Fixed Price" of $9,083,269 for the components Kaman was to provide. The contract contained a statement of work (SOW)², which described various tasks Kaman was expected to perform, and identified certain "billing milestones" when Kaman was to be compensated for completing various tasks from March 2002 to May 2006. The SOW listed three documents that provided its basis.

¶ 5 Paragraph four of the contract stated the "proposal reflects a fixed price for the effort proposed. In the event that there is a modification to the work scope, a modified level of effort will be indicated in a revised scope of work to be agreed upon by the parties at the time of modification." Part of paragraph two of the "terms and conditions of sale" attached to the contract stated, "[a]fter acceptance by [Kaman] any change of specification/drawings manufacturing process delivery schedule and/or quantity may be made only with [Kaman's] written consent and at a charge which [Kaman] shall determine reasonably sufficient to cover its additional costs."

¶ 6 Eleven modifications were entered into by the parties. Relevant here are modifications two and four. Modification two, dated May 31, 2002, provided a new SOW, now based on six documents, including the original three and "design guidelines" from the University.

¶ 7 Modification number four, dated August 16, 2002, increased the total value of the contract to $12,800,000. This modification included a new "terms and conditions of sale," with a revised paragraph two, that stated in part, "After acceptance by [Kaman] any change of specification/drawings manufacturing process delivery schedule and/or quantity may be made only with both parties' written agreement and at a charge which [Kaman] and [ABOR] shall determine reasonably sufficient to cover any additional costs."

¶ 8 Mark Yokley, the program manager for Kaman, testified that when the parties agreed to the May 2002 SOW, there were ten design guidelines in existence that formed the basis of 222 requirements. Nearly two years later, when Kaman presented its claim to ABOR, Yokley stated there had been forty-six revisions or additions to the design guidelines leading to a total of seventeen design guidelines and 472 requirements, although only sixty-three of the requirements were "really new." Yokley testified twenty-three of the requirements were more difficult to perform.

¶ 9 On December 18, 2003, Kaman gave ABOR a "very preliminary, rough" estimate of what it claimed were additional costs in its "new scope and new/changed requirements list." This proposal listed twenty-eight "new requirement description[s]" and an explanation for each charge, with a "total estimated price impact" of $3,821,400. In January 2004, ABOR wrote a letter to Kaman, rejecting most of Kaman's claims and stating that "most derive from a failure by Kaman to perform to the statement of work and teaming agreement." Twenty-five of the twenty-eight claims were rejected with supporting rationale, two were accepted "pending a full cost proposal," and one was accepted and a new contract was formed with respect to this item, a "dual-use collimator support structure study."

¶ 10 Kaman then assembled a claim, presenting it to ABOR on April 5, 2004. This claim listed twenty-nine separate items at a cost totalling approximately $6.25 million. Three of the claims were accepted by ABOR "pending cost evaluation" with a fourth, the support structure study, having already been accepted. The rest of the claims were rejected by ABOR. In July 2004, Kaman filed a notice of claim through counsel pursuant to A.R.S. § 12-821.01 as to ABOR, stating its "claim can be settled for $6,250,110."

¶ 11 Kaman stopped work on September 17, 2004, and sued ABOR, alleging that "[a]fter the parties agreed to the SOW, [ABOR] changed, increased and added new work scope and work effort requirements," and failed to compensate Kaman for the increased work. Kaman's complaint included counts of breach of contract, negligent misrepresentation, unjust enrichment, and quantum meruit.³ ABOR filed a counterclaim in which it alleged Kaman had breached the subcontract by failing to fulfill its obligations and by abandoning performance. At the time Kaman sued, ABOR had paid Kaman approximately $9.3 million of the $12.8 million contract.

¶ 12 ABOR also filed a request for a provisional remedy of partial specific performance or for replevin simultaneously with filing its counterclaim. The court granted the request for replevin upon ABOR's posting of a $4 million bond. ABOR also gave Kaman an additional $1.1 million for parts and materials not covered by the replevin order.

¶ 13 ABOR filed a motion for summary judgment in October 2005, arguing the contract between the parties required a written modification and none had been made; any purported oral modification of the contract was impermissible under its terms; and, the ABOR employees that Kaman argued had modified the contract lacked the authority to enter into contracts on behalf of ABOR. Kaman responded that the changes to the design guidelines changed the work it was required to perform, and that the contract between the parties required ABOR to compensate Kaman for this additional work. The court denied ABOR's motion, stating, "a jury could find that since the SOW is based partly on the design guidelines, a significant change to the design guidelines changes Kaman's level of effort, thus triggering either Paragraph 2 of the revised Terms and Conditions or Paragraph 4 of the contract, which calls for modification of Scope of Work." It also found that whether the design guidelines were specifications was a factual issue for the jury.

¶ 14 ABOR filed a second motion for summary judgment in December 2005, arguing that, during the negotiations as to modification two, "Kaman agreed to drop its demand that it could be paid extra for changes to Applicable Documents .... [and therefore] Kaman cannot now claim that a modification to [the design guidelines that are a part of the] Applicable Documents could entitle it to extra payments." The court rejected this argument as well, stating that even with this new information, a jury could conclude that "although the University chose to enact changes by characterizing them as revisions to the Design Guidelines, it did not mean that ... they did not cause significant changes to Kaman's work as specifications."

¶ 15 At the close of Kaman's case, ABOR again moved for judgment, which the trial court denied. After the verdict, ABOR renewed its motion and moved for a new trial, both of which the court denied. This appeal followed.

Discussion

Denial of Judgment as a Matter of Law — Kaman's Breach of Contract Claim

¶ 16 ABOR contends the trial court erred in denying its motions for judgment as a matter of law...