Safari Circuits v. Chicago School Ref. Bd. Trust.

• Decision Date: 21 February 2007
• Docket Number: No. 05 C 6736.,05 C 6736.
• Parties: SAFARI CIRCUITS, INC., Plaintiff, v. CHICAGO SCHOOL REFORM BOARD OF TRUSTEES, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

474 F.Supp.2d 993

SAFARI CIRCUITS, INC., Plaintiff, v. CHICAGO SCHOOL REFORM BOARD OF TRUSTEES, et al., Defendants.

No. 05 C 6736.

United States District Court, N.D. Illinois, Eastern Division.

February 21, 2007.

Matthew John O'Hara and Kenneth George, Kubes Sachnoff & Weaver, Ltd., Chicago, IL, for Plaintiff.

Debra Ann Harvey, Ellen Holzman Daley, Susan Margaret O'Keefe, Patrick J. Rocks, Jr., and Sherri Thornton, Board of Education of the City of Chicago, Department of Law, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

SHADUR, Senior District Judge.

Safari Circuits, Inc. ("Safari") brings a breach of contract claim against the Chicago Board of Education ("Board")in this diversity action. Safari was a subcontractor to Systems Concepts, Inc. ("Systems") under a contract between Systems and Board ("Systems Contract") that called for Systems to provide and install audiovisual equipment for Board facilities ("Installation Project"). Safari claims that as a subcontractor on the Installation Project it was a third-party beneficiary of the Systems Contract and that Board breached that agreement when it failed to obtain a payment bond from Systems for the benefit of any subcontractors as required by the Illinois Public Construction Bond Act ("Bond Act," 30 ILCS 550/0.01 to 550/3).¹

Safari and Board have now brought cross-motions for summary judgment under Fed.R.Civ.P. ("Rule") 56. As this opinion explains, the Bond Act does not apply because the Systems Contract was not a contract for "public work." Hence no payment bond was required, so that Safari's motion is denied and Board's motion is granted.

Standard of Review

Under familiar Rule 56 principles, a movant for summary judgment bears the burden of establishing the absence of any genuine issue of material fact (Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). For that purpose courts consider the evidentiary record in the light most favorable to nonmovants and draw all reasonable inferences in their favor (Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir. 2002)). But to avoid summary judgment a nonmovant "must produce more than a scintilla of evidence to support his position" that a genuine issue of material fact exists (Pugh v. City of Attica, 259 F.3d 619, 625 (7th Cir.2001)). Ultimately summary judgment is appropriate only if a reasonable jury could not return a verdict for the nonmovant (Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

One more complexity is added here, where cross-motions for summary judgment are involved. In this case those same principles require the adoption of a dual perspective that this Court has sometimes referred to as Janus-like: As to each motion the nonmovant's version of any disputed facts must be credited.²

Finally, as a federal court sitting in diversity, this Court is charged with applying state law — in this instance Illinois law — to resolve all substantive questions (M. T. Bonk Co. v. Milton Bradley Co., 945 F.2d 1404, 1407 (7th Cir.1991)). What follows, then, is (1) a summary of the facts that either are undisputed or are viewed in the light most favorable to Safari (as the party that has ultimately come up short), followed by (2) an application of Illinois substantive law to those facts.

Background

After issuing a May 2000 request for proposals, Board selected Systems to provide the Installation Project (S.St. ¶¶ 6-7). Systems was to design, deliver and install a multimillion dollar digital audiovisual system to allow Board to store digital media content on servers at its Central Office and to allow teachers then to download that content directly to computers in their classrooms at some 182 different schools (id. ¶¶ 8, 58-63). That system would eliminate the teachers' need to check out and transport physical equipment such as DVD players and DVDs from a central library (id.). As this brief summary indicates, that project was no small endeavor.

In October 2003 Safari agreed to provide Systems with various audiovisual network products and services required for the Installation Project (S.St.¶ 8). To meet Board's specific requirements Safari spent months in specially designing and manufacturing some 200 hardware components known as "ASC300s," "multiplexers" or "multiplexer interfaces," as well as some other equipment to be installed at the Central Office and the various schools (id. ¶¶ 22-27). Systems was also required to program and configure all of the necessary computer hardware (id. ¶ 34).

Before undertaking the installation itself, Systems personnel visited each site to assess whether the school's facilities were ready to accept and interface with the equipment (S.St.¶¶ 37-38). For example, before some of the schools would be ready work was required to install additional wall outlets. All of that work, however, was performed by Board personnel and not by Systems or Safari as part of the Installation Project (B.St. ¶ 39).³

Once the time for installation came, Systems and Safari installed "an interconnected series of eight computer servers, four DVDNCR units, various audio and video output devices, various cables, and four ASC3000s" at the Central Office ("Central Office Equipment")(S.St.¶ 29). That Central Office Equipment was then connected to Board's wide-area network ("Network") by a series of 36-foot patch cables that were also attached to a metal rack running along the ceiling to keep them tidy and out of the way (id. ¶ 33). At each of the schools Systems installed a server, a DVDNCR unit, an ASC3000, a monitor, an uninterruptible power supply and associated cables to connect those components (id. ¶ 35.) Most of that equipment was mounted onto large racks by screws or otherwise, and the racks were in turn bolted to the floor to prevent tipping (id. ¶¶ 51-52). In about a dozen of the 182 schools involved, Systems needed to install new racks that it provided and assembled for the Installation Project (id. ¶¶ 55-57).

All of that installation work at the Central Office and some 182 schools took weeks to accomplish (S.St. ¶ 45). Then after installation a Safari employee visited each of the schools to connect the equipment to the Schools' Networks with patch cables and to test for the proper functioning of the equipment, including checking the connections between computers and servers in 8,100 classrooms (id. ¶¶ 46, 49). Safari then conducted training sessions on the use of the new equipment for Board personnel (id. ¶ 47).

Even though Systems received payment for its work on the Installation Project, it became insolvent and has not in turn compensated Safari for its work (S.St. ¶ 16). This Court has already entered judgment against Systems in Safari's favor in the amount of $691,404.91, but the uncertainty of recovery on that judgment in light of Systems' financial condition (id.) understandably leads Safari to look to Board. And because Board did not require Systems to post a payment bond as part of the Systems Contract for the benefit of subcontractors on the Installation Project (id. ¶ 19), Safari is out of luck in that regard as well. Safari thus brings this action seeking compensation directly from Board for breach of contract.

"Public Work"

Safari's claim for relief stands or falls on whether it may come within the protections of Bond Act § 1, which establishes this requirement with immaterial exceptions:

[A]ll officials, boards, commissions or agents of this State, or of any political subdivision thereof in making contracts for public work of any kind costing over $5,000 to be performed for the State, or a political subdivision thereof shall require every contractor for the work to furnish, supply and deliver a bond to the State, or to the political subdivision thereof entering into the contract, as the case may be, with good and sufficient sureties. The amount of the bond shall be fixed by the officials, boards, commissions, commissioners or agents, and the bond, among other conditions, shall be conditioned for the completion of the contract, for the payment of material used in the work and for all labor performed in the work, whether by subcontractor or otherwise.

Both Illinois courts and our Court of Appeals (applying Illinois law) have held that the bond posting requirement, read into each applicable contract, is intended by the General Assembly to benefit a prime contractor's subcontractors directly by providing them an assurance of payment for the work they perform (Ardon Elec. Co. v. Winterset Constr., Inc., 354 Ill.App.3d 28, 38-39, 289 Ill.Dec. 513, 820 N.E.2d 21, 30-31 (4th Dist.2004); A.E.I. Music Network Inc. v. Business Computers, Inc., 290 F.3d 952, 955 (7th Cir.2002)). That being so, a subcontractor is a third-party beneficiary of the underlying contract and may sue the public entity for breach when that entity fails to obtain the required payment bond (id.). And that, of course, is exactly Safari's claim.

As the parties here recognize, the rub lies in the fact that the Bond Act § 1 requirement does not apply to every contract entered into by an Illinois public entity, but only to "contracts for public work" valued at more than $5,000 (see State ex rel. Chemco Indus., Inc. v. Employers Mut. Cas. Co., 303 Ill.App.3d 898, 903, 237 Ill.Dec. 184, 708 N.E.2d 1224, 1227 (4th Dist.1999)). Hence the question is whether or not the Systems Contract was one for "public work." If so Safari's claim will succeed, and Board may have to pay a second time for the work provided by Safari even though it has already paid Systems for that same work. But if no "public work" was involved, Board will not face the risk of double payment, and Safari may be left with a judgment of dubious value against Systems.

That poses a question of statutory interpretation of what constitutes "public work" for purposes of the Bond Act — whether that concept does or does not encompass the Systems Contract....