Sacramento Mun. Util. Dist. v. FCC Corp., C064248

• Decision Date: 09 July 2012
• Docket Number: Super. Ct. No. 05AS00862,C064248
• Parties: SACRAMENTO MUNICIPAL UTILITY DISTRICT, Plaintiff and Appellant, v. FCC CORPORATION formerly named FRU-CON CONSTRUCTION CORPORATION, Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

SACRAMENTO MUNICIPAL UTILITY DISTRICT, Plaintiff and Appellant, v. FCC CORPORATION formerly named FRU-CON

CONSTRUCTION CORPORATION, Defendant and Appellant.

C064248

Super. Ct. No. 05AS00862

COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento)

Filed July 9, 2012

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

FCC Corporation, formerly named Fru-Con Construction Corporation (Fru-Con),¹ appeals from a judgment that awards approximately $54 million to the Sacramento Municipal Utility District (SMUD) for damages arising from the construction of the Cosumnes Power Plant. SMUD sought to build the power plant on afast-track schedule after experiencing a critical shortage of electricity in 2000. SMUD retained Utility Engineering Corporation (Utility Engineering) to provide the engineering design and Fru-Con to build the power plant.

Construction difficulties plagued the project, and Fru-Con missed a sufficient number of intermediate construction milestones to trigger the maximum liquidated damages rate of $25,000 per day. SMUD terminated Fru-Con's right to proceed with any further work after Fru-Con expressly refused to remove deficient concrete in the foundation for the power plant's cooling tower. By terminating Fru-Con's right to proceed, the practical effect of SMUD's action was to terminate the construction contract with Fru-Con.

Litigation ensued in state and federal court. In Sacramento County Superior Court, SMUD filed an action for declaratory relief, breach of contract, and statutory penalties under the False Claims Act (Gov. Code, § 12650 et seq.) against Fru-Con. Fru-Con filed a cross-complaint asserting causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of the implied warranty of correctness of plans and specifications, and breach of the statutory duty to make prompt payment.

The Sacramento County Superior Court granted SMUD's motion for summary adjudication, determining that Fru-Con had been properly terminated under the construction contract. A jurytrial culminated in an award to SMUD of more than $35 million in damages for the excess cost of the work above the contract price, nearly $6.6 million in liquidated damages for delay, and $10,000 in statutory penalties under the False Claims Act. The trial court awarded SMUD slightly more than $13 million in prejudgment interest and determined that Fru-Con was entitled to approximately $1.1 million in credits to avoid double counting of damages. The court denied SMUD's motion for contractual attorney fees on grounds that the construction contract did not include a fee-shifting clause.

On appeal, Fru-Con presents multiple arguments as to every component of the judgment against it.

The summary adjudication granted by the trial court is attacked by Fru-Con on grounds that (1) the entire construction contract could not be terminated for failure to perform a separable part, i.e., construction of section C of the cooling tower foundation, (2) triable issues of material fact existed regarding whether the section C concrete deficiency affected the power plant's final completion date, whether SMUD waived its right to terminate Fru-Con for the refusal to replace deficient concrete, and whether Fru-Con refused only to comply with the December 10, 2004, letter from SMUD, (3) the trial court erred in granting declaratory relief for purely retrospective conduct, and (4) summary adjudication improperly resolved only part of SMUD's declaratory relief claim in violation ofsubdivision (f)(1) of Code of Civil Procedure section 437c (Section 437c).

Fru-Con alleges errors occurring at trial by arguing that (5) the trial court violated section 437c, subdivision (n)(3), by instructing the jury that summary adjudication had already established that Fru-Con breached the construction contract, (6) the court erroneously excluded evidence that SMUD failed to mitigate its damages by disallowing Fru-Con from completing the project, (7) the excess damages award held Fru-Con responsible for project design completeness and accuracy in violation of Public Contract Code section 1104 (Section 1104), (8) the trial court erred in denying Fru-Con's proposed instructions regarding the limited extent of its responsibilities as contractor for the construction project, and (9) insufficient evidence supported the excess cost damages award.

Fru-Con urges us to reverse the liquidated damages award (10) based on its contentions regarding summary adjudication and the applicability of section 1104, and (11) because the award constituted an illegal penalty.

Fru-Con contends the statutory penalty imposed under the False Claims Act must be reversed (12) due to insufficient evidence, and (13) because the trial court's denial of the motion to bifurcate trial on the False Claims Act cause of action prejudiced Fru-Con's right to a fair trial.

Finally, Fru-Con contends SMUD was not entitled to prejudgment interest (14) because damages were not ascertainable prior to trial.

SMUD also appeals, contending that the trial court erred in denying its motion for contractual attorney fees. Specifically, SMUD argues that the construction contract incorporated another related contract's attorney fee provision, and that Fru-Con was bound by its judicial admission that the construction contract allows recovery of attorney fees.

We affirm the judgment against Fru-Con. As we explain below, the trial court did not err in concluding that SMUD properly terminated Fru-Con for its refusal to remove and replace the deficient concrete in the cooling tower's foundation. Nonetheless, we conclude that the trial court erred in granting summary adjudication on the declaratory relief claim because the amount of damages could not be resolved as a matter of law. On this record, however, the error was harmless because Fru-Con's undisputed and unequivocal refusal to remove and replace the deficient concrete left no triable issue of fact regarding whether Fru-Con breached the construction contract.

Contrary to Fru-Con's claim, the evidence adduced during the three-month trial amply supports the jury's awards for excess cost damages, liquidated damages, and statutory penalties under the False Claims Act. We find no error in the challenged rulings by the trial court on evidentiary objections, refusal togive Fru-Con's proposed jury instructions, or denial of the motion to bifurcate trial on the False Claims Act cause of action. We conclude that prejudgment interest was warranted because damages were readily calculable prior to trial.

As to SMUD's cross-appeal, we affirm the order denying SMUD's motion for contractual attorney fees. As SMUD's own pleadings established, the construction contract does not provide for attorney fees. And, the express language of the surety bond contract's fee-shifting provision renders it inapplicable to actions on the construction contract.

FACTUAL BACKGROUND

Impetus for the Cosumnes Power Plant

The evidence at trial shows that, in 2001, SMUD decided to build a new power plant after it had "just come out of the energy crisis time when . . . there was a whole lot of upheaval . . . in the electricity markets." SMUD's long-term power purchase agreements that had been signed when the nuclear power plant at Rancho Seco closed in 1999 were beginning to expire. SMUD determined that it needed to have the new power plant become operational by the summer of 2005. The timing of the power plant's completion was "[v]ery" important to SMUD.

SMUD's supervisor of engineering for power generation, Christopher Moffitt, testified: "It was of the utmost importance for SMUD to get this power plant built. When we are able to make power from our own resources, we are not subject tothe market volatility. In peak summer, the price that we would pay to make our own power is a fraction of what the peaking price is out on the market." Thus, the Cosumnes Power Plant was to be built on a fast-track schedule. SMUD's power plant construction expert, Robert Zanetti, testified that "a fast track [project] is generally a project that tries to get off on a quick start and generally you start construction when the engineering is not a hundred percent complete."

To comply with California clean air regulations, SMUD settled on an efficient combined-cycle natural gas power plant. A combined-cycle power plant generates electricity in each of two stages. The first, is "essentially just a jet engine coupled with a generator." In the second stage, the exhaust heat is captured and used to boil water for a steam turbine generator.

For the Cosumnes Power Plant, SMUD selected a site near its decommissioned Rancho Seco nuclear power plant and hired Utility Engineering to provide the engineering design work. While Utility Engineering worked on the engineering design for the power plant, SMUD began to secure the required governmental permits.

In November 2002, SMUD issued a request for proposal for the "civil and underground" portion of the power plant. In issuing a request for proposal, SMUD opted not to use an invitation for bid process.

With an invitation for bid, a public agency typically prepares a bid package containing all of the contract terms and conditions, with price as the only variable. Prospective contractors have no opportunity to negotiate over the scope of work or contract terms. By contrast, a request for proposal invites contractors to submit a proposal for which price is only one of the variables. Thus, "the proposer is allowed to take exception to terms and conditions, contract terms and conditions, to suggest alternatives to those contract terms and conditions and negotiate."

SMUD's initial...