Phillips & Jordan, Inc. v. Am Dirtworks & Constr. LLC

• Court: U.S. District Court — District of North Dakota
• Writing for the Court: Peter D. Welte, Chief Judge United States District Court
• Decision Date: 10 April 2020
• Docket Number: Case No. 1:17-cv-00006
• Citation: Phillips & Jordan, Inc. v. Am Dirtworks & Constr. LLC, Case No. 1:17-cv-00006 (D. N.D. Apr 10, 2020)
• Parties: Phillips and Jordan, Inc., Plaintiff, v. AM Dirtworks and Construction LLC, Defendant.

Phillips and Jordan, Inc., Plaintiff, v. AM Dirtworks and Construction LLC, Defendant.

Case No. 1:17-cv-00006

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NORTH DAKOTA

April 10, 2020

ORDER ON MOTIONS FOR PARTIAL SUMMARY JUDGMENT

This case arises from disputes surrounding aggregate crushing performed in two separate gravel pits - one north of Williston, North Dakota ("Frank Pit"), and the other near Fairview, Montana ("Fairview Pit"). Plaintiff Phillips and Jordan, Inc. ("Phillips") contends that Defendant AM Dirtworks and Construction LLC ("Dirtworks") produced aggregate from the Frank Pit that failed to conform to the technical specifications required to complete a road construction project on Highway 85 in western North Dakota ("Project"). Dirtworks counters that Phillips wrongly refused to pay for rejected material produced from the Frank Pit and other outstanding invoices. Complicating the matter, the parties proffer dueling written contracts, as well as corollary oral agreements, that purport to control their obligations. Unrelated to those disagreements but around the same time, Dirtworks subleased aggregate crushing in the Fairview Pit to Phillips. Dirtworks claims Phillips subsequently excavated outside the authorized work area, resulting in the State of Montana shuttering the Fairview Pit contingent on costly reclamation efforts. From these events, Phillips and Dirtworks each assert various causes of action predicated on express contract, quasi- contract, and negligence theories. Now before the Court are Phillips and Dirtworks' respective motions for partial summary judgment that seek to dismiss most of the claims.¹ Doc. Nos. 55, 60.

I. BACKGROUND

Phillips is a North Carolina corporation headquartered in Tennessee that specializes in heavy civil construction. Doc. No. 57, ¶ 3. Dirtworks is a Utah limited liability company that provides aggregate crushing services to contractors. Doc. No. 64, ¶ 2. A synopsis of this case's factual background and procedural history follows.

A. Frank Pit

In May 2015, the North Dakota Department of Transportation ("NDDOT") engaged Knife River Corporation ("Knife River") to serve as general contractor for the Project. Doc. No. 57, ¶ 4. Knife River then subcontracted aggregate work to Phillips on July 21, 2015. Id. ¶ 5. Phillips agreed to supply two types of aggregate relevant to this lawsuit: "Plant Mix FAA 45," essentially a blend of several aggregates used for asphalt paving, and "DOT Class 5," a particular base gravel. Doc. No. 62-3, p. 77. The NDDOT publishes comprehensive specifications that contractors must adhere to before aggregate can be utilized in road projects. See Doc. No. 64-6. The component parts of FAA 45 vary depending on the qualities of each gravel pit and other factors, and the NDDOT must approve an individualized mix design from a pit before incorporation into a project. Doc. No. 62-3 at 17:23-18:11. Class 5 is a single aggregate with certain gradation requirements. See id. at 16:14-22. That means the gravel is run through multiple sieve sizes, and if too much ortoo little material passes through any given sieve, then the aggregate fails the Class 5 requirements. See Doc. No. 64-6, p. 41.

Dirtworks' involvement with the Project began shortly after Knife River subcontracted aggregate work to Phillips. After exploring opportunities to expand into North Dakota, Dirtworks began a lease to excavate the Frank Pit in early 2015. Doc. No. 51, ¶ 21. Matt Mitchell, Dirtworks' owner, had represented to Phillips that he possessed 25 years of experience in the construction industry and knowledge of the NDDOT aggregate specifications. See Doc. Nos. 64, ¶¶ 2, 8; 72, ¶ 4. Intending to use Dirtworks' services and the Frank Pit to supply aggregate for the Project, Phillips entered into a "continuing short form contract" with Dirtworks on July 28, 2015 ("July Agreement"). Doc. No. 57-1.

Mitchell and Phillips Vice President John West signed the July Agreement, which contains several noteworthy provisions. Id. at 4. The stated intent was "to provide a mechanism of affording a simple and effective means of awarding multiple project tasks to [Dirtworks] without the need for individual contracts." Id. at 1. The July Agreement's terms were to take effect upon a delegation of work from Phillips to Dirtworks. Id. While the agreement contemplated future work orders that would define the scope of work, scheduled completion time, and compensation for specific assigned tasks, Phillips never prepared any work orders for the Project. See Doc. No. 72, ¶ 8. The absence of a work order, however, did not prevent the July Agreement from activating when a delegation of work occurred. Doc. No. 57-1, p. 1. As for performance, Dirtworks consented "to furnish all necessary labor, equipment, materials, supplies and other items required and . . . to complete the work . . . to the satisfaction of and in compliance with the directions of [Phillips] or [Phillips'] Engineers." Id. The July Agreement required Dirtworks to submit monthly invoices, with Phillips obliged to remit payment within 30 days of receipt. Id. Phillips initiallycontracted with another company to produce aggregate for the Project, paying royalties to Dirtworks for the Frank Pit's use. Doc. No. 51, ¶ 27. In the meantime, Dirtworks commenced crushing work for Phillips on other projects and submitted its first invoice on July 30, 2015. Doc. No. 88, ¶ 2.

At the beginning of September 2015, Phillips shifted course and requested that Dirtworks take over aggregate crushing in the Frank Pit. Doc. No. 51, ¶ 28. Dirtworks avers that the parties then entered into a second "standard terms and conditions" contract on September 1, 2015 ("September Agreement") that superseded the July Agreement. Doc. No. 64, ¶ 5. Like before, Mitchell signed on Dirtworks' behalf. Doc. No. 64-2, p. 6. Unlike before, Jerady Sticka—an aggregate manager and the son of a Dirtworks employee—signed for Phillips. Id. Sticka does not remember signing the September Agreement or the surrounding circumstances. Doc. No. 80, ¶ 3. He recognized his signature on the document, though, and knew the contract related to aggregate crushing in the Frank Pit. Id. Sticka asserts that he regularly entered into contracts with subcontractors and that the September Agreement was the type of contract he normally signed on Phillips' behalf. Id. ¶ 4. Several of Sticka's superiors involved with the Project challenge that, contending Sticka did not have authority to sign contracts for Phillips and that no one authorized him to sign the September Agreement. Doc. Nos. 72, ¶ 11; 93, ¶ 8; 94 ¶¶ 5-7. Those employees additionally state that they were unaware of the September Agreement's existence and that Phillips would not have entered into such a contract in light of the preexisting July Agreement. See id.

The September Agreement's apparent purpose was to accept a "Job Quotation . . . provided by [Dirtworks]," but no accompanying written quotation exists. Doc. No. 64-2, p. 1. Mitchell acknowledges that he did not submit a quote for the entire Project at that time because the NDDOT had yet to approve a mix design for the FAA 45. Doc. No. 64, ¶ 7. Instead, Mitchell alleges heprovided a contemporaneous oral quote on a "time and materials" basis that called for Phillips to pay Dirtworks $3 per ton for Class 5 aggregate and $7 per ton for FAA 45. Doc. No. 90, ¶ 3. Dirtworks later submitted a written quote to Phillips on January 12, 2016 that reflected the same prices and included the minimum aggregate quantities needed to complete the Project. Doc. No. 64-3. But no one from Phillips signed or otherwise accepted the quote. Doc. No. 64, ¶ 15. The parties therefore failed to reach a written agreement on aggregate prices and quantities. Id. ¶ 16. With that said, the parties concur that the prices included in the January 12, 2016 quote accurately represent what Phillips actually paid Dirtworks, as numerous fulfilled invoices make clear. See Doc. No. 72, ¶ 10.

The September Agreement's terms differ from the July Agreement in important respects. For example, the September Agreement contained a more limited commitment to provide conforming aggregate only "at the time [Dirtworks] furnishes the Materials to [Phillips]." Doc. No. 64-2, p. 1. A limitation of liability clause excluded recovery for certain types of damages, including consequential damages. Id. at 2. Also of significance, the September Agreement stated that Phillips would assume responsibility for quality control and that Dirtworks would not "be responsible or liable for any pay . . . reductions, whether assessed by the project owner or otherwise, as a result of quality control results." Id. at 3. A no oral modification clause added a requirement that any alterations to the September Agreement be memorialized in a signed writing. Id. at 4. And a merger clause conferred the apperance of a final agreement between the parties, superseding any prior or contemporaneous written or oral agreements by its terms. Id. at 5.

Not long after inking the September Agreement, Dirtworks commenced crushing work in the Frank Pit. At first, Dirtworks produced approximately 65 tons of usable aggregate for every 100 tons of excavated material, and the work progressed relatively issue-free. Doc. No. 64, ¶ 12.But by early 2016, the Frank Pit had, in Mitchell's words, "gone bad" because there was too much sand in the pit, as opposed to the hard rock needed to produce quality aggregate. Id. At that point, 100 tons of excavated material yielded a mere 5-10 tons of acceptable aggregate, necessitating additional work to produce the required quantities the Project demanded. Id.

In response to the troubles in the Frank Pit, Dirtworks claims that three Phillips employees—Kyger Hill, Tom Stull, and Clint Stephens—entered into an oral agreement with Mitchell in February 2016 ("February Agreement") during a meeting at Phillips' office in Williston, North Dakota. Id. ¶ 16. As...