Rd. & Highway Builders, LLC v. N. Nev. Rebar, Inc.

• Decision Date: 09 August 2012
• Docket Number: Nos. 55542,56499.,s. 55542
• Citation: 128 Nev. Adv. Op. 36,284 P.3d 377
• Parties: ROAD AND HIGHWAY BUILDERS, LLC, A Nevada Limited Liability Company, Appellant, v. NORTHERN NEVADA REBAR, INC., A Nevada Corporation, Respondent. Road and Highway Builders, LLC, A Nevada Limited Liability Company, Appellant, v. Northern Nevada Rebar, Inc., A Nevada Corporation, Respondent.
• Court: Nevada Supreme Court

284 P.3d 377

128 Nev. Adv. Op. 36

ROAD AND HIGHWAY BUILDERS, LLC, A Nevada Limited Liability Company, Appellant,

v.NORTHERN NEVADA REBAR, INC., A Nevada Corporation, Respondent.

Road and Highway Builders, LLC, A Nevada Limited Liability Company, Appellant,

v.Northern Nevada Rebar, Inc., A Nevada Corporation, Respondent.

Nos. 55542, 56499.

Supreme Court of Nevada.

Aug. 9, 2012.

Pisanelli Bice PLLC and Todd L. Bice and Jarrod L. Rickard, Las Vegas; Carl M. Hebert, Reno, for Appellant.

Holland & Hart LLP and Alex Flangas and Tamara Reid, Reno; Holland & Hart LLP and J. Lee Gray, Greenwood Village, CO, for Respondent.

BEFORE CHERRY, C.J., GIBBONS and PICKERING, JJ.

OPINION

By the Court, CHERRY, C.J.:

These consolidated appeals address whether a claim for fraud in the inducement is available when the basis for the claim contradicts the very language of the contract at issue in the parties' dispute. We conclude that when a fraudulent inducement claim contradicts the express terms of the parties' integrated contract, it fails as a matter of law. Additionally, we address the propriety of the damages awarded by the jury under a separate claim for breach of contract. We affirm the compensatory damages award but reverse the punitive damages award, as we reverse the finding of fraud on which the punitive damages were based.

FACTS

Appellant Road and Highway Builders, LLC (Builders), a general contractor, was awarded a contract with the Nevada Department of Transportation (NDOT) to build a 2.3–mile portion of the Carson City Freeway project (the Project), from U.S. Highway 50 to Fairview Drive. The Project required a substantial amount of reinforcing steel, or rebar, including an amount to be used in the installation of more than 3,000 lineal feet of reinforced concrete boxes (RCBs) under the roadway surface in order to drain water.

For the rebar subcontractor work, Builders chose respondent Northern Nevada Rebar, Inc. (NNR), based on NNR's pre-award bid to Builders. According to NNR, its bid, including the unit price for the rebar, was based upon providing all of the rebar needed pursuant to NDOT's plans and engineering estimates, which called for approximately 2.7 million pounds of black and epoxy-coated rebar and for manufacturing the RCBs by pouring the concrete in place at the job site. Even before incorporating NNR's bid into its bid to NDOT, however, Builders was considering using precast RCBs instead of poured-in-place RCBs and had begun the requisite change approval process through NDOT. Builders decided that, if approval was granted, it would use a different subcontractor, Rinker Materials, to supply the substituted precast RCBs. However, Builders never communicated these plans to NNR, and Builders used NNR's subcontract bid in making its bid on the Project to NDOT.

After being awarded the contract but while waiting for NDOT's approval to use the precast RCBs, Builders began drafting a subcontractwith NNR for all of the rebar work on the Project. Builders then, before obtaining approval from NDOT, submitted a purchase order to Rinker for the precast RCBs for the Project. A few weeks later, Builders delivered the written subcontract agreement to NNR. At this point, Builders had not disclosed to NNR that it was attempting to use precast RCBs from another supplier. Thus, Builders contemplated making deductions to the quantities of rebar that NNR would furnish and install under the draft subcontract. The day after Builders delivered the subcontract to NNR, NDOT gave approval for the substitution of approximately 80 percent of the poured-in-place RCBs. Builders did not update the subcontract or otherwise disclose this information to NNR.

Builders and NNR subsequently negotiated and agreed to a finalized subcontract (the Subcontract) for the Project's rebar work. The Subcontract provided that NNR would furnish all labor and materials necessary to fully perform and complete the work, which consisted of the full 2.7 million pounds of rebar, including the RCBs. The Subcontract also specified, however, that “[w]ithout invalidating this Subcontract[,] ... [Builders] may, at any time or from time to time, order additions, deletions or revisions in the Work to be performed by [NNR].” And similarly, the Subcontract also stated, “[i]n addition to changes made or additional Work ordered by [NDOT] under the Contract, [Builders] reserves the right to make any change, including additions of omissions, in the Work to be performed by [NNR] under this Subcontract.” The Subcontract set the non-modifiable unit price of the rebar while at the same time recognizing that the final quantities of rebar would match NDOT's quantities unless otherwise agreed to in writing. Builders was granted the absolute right to terminate at any time and for any reason, and the parties expressly agreed that, in the event of such a termination, NNR's sole remedy would be payment for the work that it had performed up to the termination date. So as to preclude any oral understandings contrary to the Subcontract's written terms, the parties agreed that the written agreement was their only agreement.

After the Subcontract was executed, NNR began delivering and installing rebar on the Project. However, many of the precast RCBs had already been installed by Rinker. When NNR first learned of Builders' use of precast RCBs, it sought an equitable adjustment of the unit price for the rebar pursuant to the Subcontract. Builders rejected the request, stating that it had a right to make the changes. In response, NNR sought payment for the work provided to date and demanded to be released from the Subcontract; nonetheless, NNR continued to work on the Project. Subsequently, Builders sent a letter to NNR stating that it had ceased all payments to NNR until the matter was resolved. NNR continued to work and responded to the cease-payment letter by requesting payment and withdrawing the demand to be released from the Subcontract.

Several weeks later, NNR's employees did not show up on the job site because, according to NNR, it was completely out of work while it was waiting for Builders to move dirt. The same day that NNR's employees did not show up, Builders sent a letter to NNR stating that NNR was in default for not showing up and informing NNR that it would be replaced immediately. After receiving the termination letter, NNR's employees indicated that they would not be returning. By that time, NNR had supplied 28 percent of the total black rebar and 6 percent of the total epoxy-coated rebar for the Project.

Builders filed suit against NNR the next day, alleging a claim for breach of contract. NNR answered and asserted several counterclaims against Builders, including fraud in the inducement, breach of contract, breach of the implied covenant of good faith and fair dealing, and consumer fraud. Builders replaced NNR with a new subcontractor, causing a 16–day delay and requiring Builders to pay $152,198 more than NNR's total bid price for the rebar on the Project, in addition to other delay damages.

After a failed attempt by Builders to remove NNR's fraudulent inducement counterclaim via summary judgment, the parties proceeded to trial. Following NNR's case-in-chief, Builders moved for judgment as a matter of law under NRCP 50(a), on the sole basis that NNR had failed to make a prima facie case for fraudulent inducement, but the district court denied the motion.

Following the four-day trial, the jury unanimously found against Builders on its claim and found in favor of NNR on its counterclaims. The jury awarded NNR $700,000 in compensatory damages. Because the jury found that there had been fraudulent conduct, the jury returned for further deliberation on punitive damages. The jury assessed $300,000 in punitive damages against Builders.

After judgment was entered on the jury verdict, Builders renewed its motion for judgment as a matter of law and sought a new trial; the district court denied Builders' motion. Builders appealed, arguing among other things that the district court erred in allowing NNR's fraud claims to proceed to trial when the basis for the fraud claims contradicts the very language of the Subcontract and that the defects in the fraud claims leave the damages awards unsupported.

DISCUSSION

We first address whether the counterclaim for fraud in the inducement could proceed in this case when the basis for the claim contradicts the terms of the contract at issue in the parties' dispute. We then move on to address the propriety of the damages awards.

Standard of review

Builders argues that it was entitled to summary judgment or judgment as a matter of law on NNR's counterclaim for fraud in the inducement. We review such rulings de novo. Winchell v. Schiff, 124 Nev. 938, 947, 193 P.3d 946, 952 (2008) (reviewing a district court's order granting or denying judgment as a matter of law de novo); Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029 (2005) (reviewing granting or denying of summary judgment de novo).

Fraudulent inducement

Builders contends that the district court erred as a matter of law in allowing NNR's fraudulent inducement counterclaim to proceed, as the law precludes assertions of fraud when the alleged misrepresentation is contradicted by the parties' bargained-for terms.¹See, e.g., Tallman v. First Nat. Bank, 66 Nev. 248, 259, 208 P.2d 302, 307 (1949) (stating that “fraud is not established by showing parol agreements at variance with a written instrument and there is no inference of a fraudulent intent not to perform from the mere fact that a promise made is subsequently not performed”); Brinderson–Newberg v. Pacific Erectors, 971 F.2d 272, 278 (9th Cir.1992) (explaining that completely integrated contracts negate any oral agreements that provide for contrary interpretations of the contract terms). In particular, Builders argues that NNR cannot rest upon a purported promise concerning the amount of rebar NNR would provide...