Superior Steel, Inc. v. Ascent at Roebling's Bridge, LLC

• Decision Date: 14 December 2017
• Docket Number: 2015-SC-000204-DG AND 2015-SC-000636-DG,2015-SC-000635-DG
• Citation: 540 S.W.3d 770
• Parties: SUPERIOR STEEL, INC., and Ben Hur Construction Company, Inc., Appellants/Cross-Appellees v. The ASCENT AT ROEBLING'S BRIDGE, LLC; Corporex Development and Construction Management LLC; Dugan & Meyers Construction Company and Westchester Fire Insurance Company, Appellees/Cross-Appellants and Dugan & Meyers Construction Company, Cross-Appellant v. The Ascent at Roebling's Bridge, LLC; Corporex Development and Construction Management LLC; Superior Steel, Inc.; Ben Hur Construction Company, Inc. and Westchester Fire Insurance Company, Cross-Appellees
• Court: United States State Supreme Court — District of Kentucky

540 S.W.3d 770

SUPERIOR STEEL, INC., and Ben Hur Construction Company, Inc., Appellants/Cross-Appellees
v.
The ASCENT AT ROEBLING'S BRIDGE, LLC; Corporex Development and Construction Management LLC; Dugan & Meyers Construction Company and Westchester Fire Insurance Company, Appellees/Cross-Appellants
and
Dugan & Meyers Construction Company, Cross-Appellant
v.
The Ascent at Roebling's Bridge, LLC; Corporex Development and Construction Management LLC; Superior Steel, Inc.; Ben Hur Construction Company, Inc. and Westchester Fire Insurance Company, Cross-Appellees

2015-SC-000204-DG AND 2015-SC-000636-DG
2015-SC-000635-DG

Supreme Court of Kentucky.

DECEMBER 14, 2017
Rehearing Denied March 22, 2018
AS CORRECTED: MARCH 22, 2018

COUNSEL FOR APPELLANTS/CROSS-APPELLEES: SUPERIOR STEEL, INC., AND BEN HUR CONSTRUCTION COMPANY, INC., Griffin Terry Sumner, Louisville, John Kendrick Wells, IV, Donald Scott Gurney, Frost Brown Todd, LLC.

COUNSEL FOR APPELLEES/CROSS-APPELLANTS AND CROSS-APPELLEES: THE ASCENT AT ROEBLING'S BRIDGE, LLC, Mark T. Hayden, John Nalbandian, Taft Stettinius & Hollister LLP.

CORPOREX DEVELOPMENT AND CONSTRUCTION MANAGEMENT LLC., AND WESTCHESTER FIRE INSURANCE COMPANY, Mark T. Hayden, John Nalbandian, Taft Stettinius & Hollister LLP.

COUNSEL FOR CROSS-APPELLANT: DUGAN & MEYERS CONSTRUCTION COMPANY, Thomas J. Kirkwood, Kimberly Ellen Ramundo, Heather Hawkins, Thompson Hine LLP.

COUNSEL FOR AMICUS CURIAE, THE AMERICAN INSTITUTE OF STEEL CONSTRUCTION: Kenneth Allen Bohnert, Edward Francis Busch, Scott Alan Johnson, Louisville, Conliffe, Sandman & Sullivan.

COUNSEL FOR AMICUS CURIAE, THE AMERICAN SUBCONTRACTORS ASSOCIATION: Thomas Russell Yocum, Richard Weber, Benjamin Yocum & Heather LLC.

OPINION OF THE COURT BY JUSTICE HUGHES

540 S.W.3d 773

The Ascent at Roebling's Bridge (the "Project") is a 21-floor, luxury condominium building in downtown Covington, owned by Appellee/Cross-Appellant The Ascent at Roebling's Bridge, LLC ("Ascent") and developed by Appellee/Cross-Appellant Corporex Development and Construction Management LLC ("Corporex"). Corporex, the design builder, contracted with Appellee/Cross-Appellant Dugan & Meyers Construction Company ("D&M"), the construction manager and general contractor. D&M worked directly with subcontractors, including Appellant/Cross-Appellee Superior Steel, Inc. ("Superior"), the steel fabricator, and Appellant/Cross-Appellee Ben Hur Construction Company, Inc. ("Ben Hur"), the steel erector and installer. When new drawings led to extra work outside the scope of the original bid documents, Superior and Ben Hur proceeded with the work, but they were never paid for either that work or the retainage amount owed under Superior's contract with D&M. The two steel companies banded together as "the Steel Team" and brought suit against D&M, Ascent and Corporex.

After a fifteen-day jury trial, the Kenton Circuit Court entered judgment in favor of Superior and Ben Hur against D&M and Ascent for the cost of the extra work and the unpaid retainage as well as attorneys' fees incurred by Superior. D&M prevailed on its indemnification cross-claim against Corporex and Ascent and on the negligence cross-claim asserted against it by Corporex and Ascent. On appeal, the Court of Appeals reversed the judgment in its entirety, unwinding the majority of the trial court's rulings and returning the case to that court for a new trial. Having reviewed the trial proceedings, the record and applicable law, we affirm the judgment of the Court of Appeals in part, reverse in part, and remand for further proceedings consistent with this Opinion.

FACTUAL AND PROCEDURAL BACKGROUND

In November 2005, Ascent hired Corporex to be the "design builder" for the Project.¹ Later, in March 2006, Corporex hired D&M, as the construction manager/general contractor for the Project. Corporex agreed to pay D&M a $2.2 million lump sum, a $975,000 contractor's fee (plus any participation in savings and a potential bonus), and a sum for the cost of the work as identified in the "Initial Estimate."

In July 2006, D&M solicited bids for the fabrication and erection of structural steel for the Project. The bid package that

540 S.W.3d 774

D&M supplied to potential subcontractors included architectural and structural drawings for the Project. Notably, those drawings did not include a forces table (a chart which identifies the forces acting upon each piece of steel to be used on the Project) or designs for the steel connections.

On August 4, 2006, D&M received three bids, including one from Superior, to be the subcontractor for the structural steel work. Subsequently, D&M contacted Superior and inquired whether the company would be willing to modify its bid proposal. As a cost saving measure, D&M wanted Superior to fabricate the steel for the project and have Ben Hur complete the erection and installation work. Prior to Superior submitting its modified bid, the Project's architect issued a revised set of drawings. Despite that fact, D&M instructed Superior to not acknowledge the revised drawings in making its bid; D&M wanted to be able to evaluate each of the bids it had received on an equal basis. Superior's modified bid was accepted by D&M in September 2006² and the parties' contract had a fixed price of $1,814,000. In turn, Superior contracted with Ben Hur to erect the steel and metal decking for $444,000. As structured, payment for all of the steel work flowed from Corporex to D&M and then from D&M to Superior. Superior would then pay Ben Hur what it was owed for erection and installation of the steel fabricated by Superior.

After Superior and Ben Hur were retained to work on the Project, further alterations were made to the structural design drawings issued by Ascent/Corporex. Corporex alerted D&M to the changes, and D&M in turn informed Superior and Ben Hur. Superior and Ben Hur expressed concern about the design changes as they would require additional work to be performed, work beyond the original scope of the contract.³ In response, D&M separately directed both Superior and Ben Hur to perform the extra work, while keeping track of the time and costs.

Prior to starting the additional work, Ben Hur's Vice President, Mark Douglas, sought the personal assurance of D&M's President, Jay Meyers, along with Corporex Vice-President Mike O'Donnell, that Ben Hur would be paid for the additional work. In a meeting with Meyers, Douglas was directed to proceed with the extra work, while tracking the time and costs. Meyers reassured Douglas that Ben Hur would not be cheated. On the day following the meeting, Dan Dugan of D&M drafted a letter to Superior acknowledging that additional work was necessitated due to changes to the design from the original bid documents and authorizing Superior to proceed with the additional work. That draft letter was forwarded to O'Donnell at Corporex, who directed Dugan not to send the letter.

Later, Ben Hur and Superior submitted work orders to D&M detailing the additional work done on the Project. In turn, D&M submitted those work orders to Corporex. While Ascent/Corporex did pay for some of the extra work performed, they failed to pay for additional work performed on the forces table/design load increase, the roof edge condition, and the roof tip. When Superior submitted its written change order for this extra work, Bill Butler,

540 S.W.3d 775

a principal at Ascent and Corporex, ordered O'Donnell, the Corporex vice-president, to address the claim at a later time. Eventually, Ascent/Corporex refused to provide any additional compensation to Ben Hur and Superior. As the basis for their refusal, Ascent/Corporex asserted that the amounts requested by Superior and Ben Hur were excessive and that those claims were due to D&M's mismanagement of the Project. Ultimately, in addition to not being paid for additional work performed on the forces table/design load increase, the roof edge condition, and the roof tip, Superior also was not paid the $195,143.40 owed in retainage earned on the base contract work.⁴

After several months passed without payment, Superior and Ben Hur filed mechanics' liens on the Project to secure payment of the amounts owed. Subsequently, Ascent purchased lien discharge bonds from Westchester Fire Insurance Company ("Westchester") to remove the liens and enable Ascent to begin selling condominium units. In April 2008, Superior and Ben Hur filed this suit naming Ascent, Corporex, D&M, and Westchester as defendants. Superior and Ben Hur asserted claims against Ascent, Corporex, and D&M for breach of contract, unjust enrichment, breach of express and implied warranties, negligence, negligent misrepresentation, negligent supervision, and promissory estoppel. D&M then filed a crossclaim against Ascent/Corporex for breach of contract and indemnification for all monies owed to Superior and Ben Hur.⁵ Ascent/Corporex also filed a crossclaim against D&M alleging breach of contract, negligent performance of contract, constructive fraud and indemnification.

At trial, D&M disputed whether a written contract with Superior had been agreed upon, and if so, which version of the contract would be enforced. Further, while D&M and Ascent admitted at trial that Superior and Ben Hur had performed extra work, they...