Tin Cup County Water v. Garden City Plumb.

• Decision Date: 16 December 2008
• Docket Number: No. DA 07-0743.,DA 07-0743.
• Citation: 347 Mont. 468,2008 MT 434,200 P.3d 60
• Parties: TIN CUP COUNTY WATER AND/OR SEWER DISTRICT, Plaintiff and Appellant, v. GARDEN CITY PLUMBING & HEATING, INC., a Montana corporation and Druyvestein Johnson & Anderson, Inc. a Montana corporation, Druyvestein Johnson & Anderson, PC, a Montana Professional Corporation and Doe Defendants, Defendants and Appellees.
• Court: Montana Supreme Court

200 P.3d 60

2008 MT 434

347 Mont. 468

TIN CUP COUNTY WATER AND/OR SEWER DISTRICT, Plaintiff and Appellant, v. GARDEN CITY PLUMBING & HEATING, INC., a Montana corporation and Druyvestein Johnson & Anderson, Inc. a Montana corporation, Druyvestein Johnson & Anderson, PC, a Montana Professional Corporation and Doe Defendants, Defendants and Appellees.

No. DA 07-0743.

Supreme Court of Montana.

Submitted on Briefs August 19, 2008.

Decided December 16, 2008.

Rehearing Denied January 13, 2009.

For Appellant: Daniel H. Israel, Attorney at Law, Boulder, Colorado, Ross D. Miller, Attorney at Law, Missoula, Montana.

For Appellee (Garden City): Daniel J. Whyte, Keller, Reynolds, Drake, Johnson & Gillespie, Helena, Montana.

For Appellee (Druyvestein Johnson & Anderson): Neil G. Westesen and Brad Brown, Crowley, Haughey, Hanson, Toole & Dietrich, Bozeman, Montana.

Justice BRIAN MORRIS delivered the Opinion of the Court.

¶ 1 Tin Cup Water and/or Sewer District (Tin Cup) appeals from an opinion and order of the Twenty-First Judicial District, Ravalli County, that granted summary judgment in favor of Garden City Plumbing and Heating, Inc. (Garden City) and Druyvestein Johnson & Anderson, Inc. (DJA). The opinion and order arose from Tin Cup's dispute with Garden City and DJA regarding repair work on the Tin Cup dam in the Selway-Bitterroot Wilderness in 1997. We affirm.

¶ 2 We review the following issues on appeal:

¶ 3 Did the District Court properly grant DJA's summary judgment motion based upon its determination that the three-year statute of limitations for torts barred Tin Cup's action against DJA?

¶ 4 Did the District Court properly grant Garden City's motion for summary judgment when it determined that Tin Cup had failed to meet its burden of showing that genuine issues of material fact existed as to causation?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 5 The Tin Cup dam is a rock and earthen dam originally constructed in 1906 to provide irrigation water for farmers in the Bitterroot Valley. The dam is located in the Selway-Bitterroot Wilderness west of Darby, Montana. Tin Cup operates and maintains the dam under the terms of a special use permit issued by the United States Forest Service (Forest Service). Tin Cup supplies water to approximately 100 irrigators.

¶ 6 Various United States government reports documented deterioration of the dam. The reports began as early as the 1950s and documented leakage, seepage, and internal erosion. Several reports indicated a serious need for repairs to the dam structure. The dam's old outlet system, a masonry conduit built into the bottom of the dam, had crumbled in places. The deterioration of the outlet system permitted water to flow into the interior of the dam. This water carried dirt and other material through the outlet works. The outflowing water also carried portions of the dam embankment. This deterioration left voids in the dam structure. The Forest Service and the State of Montana (State) classified the dam as a "high hazard."

¶ 7 Tin Cup hired DJA, an engineering and surveying firm in Missoula, to provide engineering services for replacement of the dam's outlet conduit pipe. DJA executed a letter agreement with Tin Cup for engineering design services for replacement of the outlet conduit pipe on March 25, 1997. DJA outlined a two phase project.

¶ 8 Phase I of the project called for crews to slip-line the old outlet conduit with a high density polyethylene (HDPE) pipe. The parties planned to grout and seal the annulus, or gap between the HDPE pipe and the existing masonry outlet conduit. The letter agreement anticipated the completion of phase I of the project by September 5, 1997. In phase II, planned for 1998, the parties contemplated further improvements and repairs to the dam.

¶ 9 The Forest Service issued an Environmental Assessment (EA) of the Tin Cup dam project in May of 1997. The EA confirmed the dam's high hazard classification and confirmed the need for the new pipeline and grouting. The Forest Service issued a Notice of Decision approving the project on July 16, 1997. The Forest Service issued a 90-day special use permit on September 30, 1997, that allowed Tin Cup to access the dam and replace the pipeline. The permit placed sole responsibility for the dam's safety on Tin Cup. The permit further required that Tin Cup be liable for up to $1 million for any damage to property or life.

¶ 10 Two factors delayed implementation of the phase I project. First, Tin Cup rejected all of the bids for the work. Tin Cup had to conduct a second bid process. Second, environmental groups filed a lawsuit in federal court on October 2, 1997, to prohibit the use of helicopters and mechanized equipment in the wilderness area. See Wilderness Watch v. Kelly, No. CV 97-164-M-DWM (D.Mont. Oct. 2, 1997). The federal district court issued a temporary restraining order, on October 3, 1997, that prohibited the implementation of the Forest Service's Notice of Decision for the construction project. The federal court ruled on October 10, 1997, however, that the repair project could proceed due to the threat of immediate dam failure.

¶ 11 DJA executed another letter agreement for engineering services during the construction phase of the project on October 16, 1997. Tin Cup separately contracted with Garden City on October 22, 1997, for the construction, installation, and completion of the phase I outlet pipe improvement project. DJA prepared the contract between Tin Cup and Garden City, but DJA was not a party to the agreement. Tin Cup entered into a separate letter contract and fee agreement with DJA on October 23, 1997, for geotechnical investigation and construction administration services.

¶ 12 The crews began phase I of the project in late October of 1997, several weeks later than anticipated and under difficult weather conditions and higher than expected water levels. Garden City pulled the HDPE pipe through the conduit and grouted the annulus. Garden City encountered unexpectedly large voids within the masonry conduit caused by deterioration of the dam. As a result, Garden City ran out of grout at the site and did not grout the final eight to ten feet of the conduit from the upstream side of the dam. DJA performed a grout inspection and determined that Garden City had accomplished the Phase I objectives. The parties demobilized from the site. DJA reported the successful completion of Phase I to Tin Cup in a December 1, 1997, letter.

¶ 13 Tin Cup officials visited the dam on May 4, 1998. The officials observed seepage on the downstream side of the dam adjacent to the newly inserted outlet pipe. Tin Cup reported the seep to the Forest Service, the Bureau of Reclamation, and State dam safety officials. Forest Service and Bureau of Reclamation personnel investigated and confirmed the seep on May 14, 1998.

¶ 14 Two divers retained by the Forest Service and Tin Cup investigated the origins of the seepage on June 6, 1998. The divers released dye at various points below the surface of the water in an attempt to determine the origin of the seep. The divers videotaped the dye test. The divers' investigation revealed that Garden City had not grouted the conduit completely. Thus, Tin Cup learned of the unfinished grouting no later than June 1998.

¶ 15 The Forest Service and the State declared an emergency at the dam based on the seepage and the documented history of problems with the dam. The Forest Service retained Garden City to perform extensive remedial work. Garden City partially breached the dam, widened the spillway, and replaced and excavated a portion of the outlet system. The partial breach reduced the reservoir's storage capacity.

¶ 16 The Forest Service paid Garden City $500,000 for the remedial work, and then billed Tin Cup $1,000,000 for the cost of removing the threat of dam failure. The United States sued Tin Cup for reimbursement of the $1,000,000 costs. See United States v. Abrahamsen, et al., Cause No. CV 03-14-M-LBE (D.Mont. Jan. 31, 2003). Tin Cup and the Forest Service eventually reached a settlement.

¶ 17 Tin Cup sued DJA and Garden City on September 9, 2005. Tin Cup's initial complaint alleged breach of contract, bad faith arising out of a special relationship with DJA, professional negligence, and indemnification. Tin Cup later amended its complaint to add defendants and claims of negligence, negligent misrepresentation, estoppel/equitable partnership, and alter ego/pierce corporate veil/successor liability and to delete its claims of professional negligence. DJA denied all claims and asserted several affirmative defenses. Garden City denied all claims, asserted several affirmative defenses, and cross-claimed against DJA on the basis that it followed the directions, conclusions, and opinions of DJA and Tin Cup.

¶ 18 The parties engaged in extensive discovery and filed numerous pre-trial motions. Both Garden City and DJA filed motions for summary judgment based on statute of limitations. Garden City and DJA contended that the complaint alleged various negligence actions grounded in tort, rather than breach of contract actions. DJA further argued for dismissal based on lack of causation and lack of expert testimony. Garden City separately argued for dismissal based on lack of causation. DJA and Garden City additionally filed motions in limine to exclude Tin Cup's proposed expert witnesses.

¶ 19 Tin Cup submitted two supplemental expert disclosures after oral argument on the pending motions. DJA and Garden City filed motions to strike the supplemental disclosures on the grounds of untimeliness and an improper attempt to create issues of material fact after oral argument. The District Court agreed that Tin Cup's supplemental disclosures should be stricken. The District Court noted the following problems with the supplemental disclosures: 1) the disclosures failed to comply with the Case Scheduling Order and Rules of Civil Procedure; 2) the disclosures...