United States, for the United Statese & Benefit of Ash Equip. Co. v. Morris, Inc.

• Decision Date: 08 August 2017
• Docket Number: 4:14-CV-04131-VLD
• Parties: UNITED STATES OF AMERICA, FOR THE USE AND BENEFIT OF ASH EQUIPMENT CO., INC. D/B/A AMERICAN HYDRO; AND ASH EQUIPMENT CO., INC., A MARYLAND CORPORATION; Plaintiffs, v. MORRIS, INC., A SOUTH DAKOTA CORPORATION; UNITED FIRE AND CASUALTY COMPANY, AN IOWA CORPORATION; AND RED WILK CONSTRUCTION, INC., A SOUTH DAKOTA CORPORATION; Defendants.
• Court: U.S. District Court — District of South Dakota

UNITED STATES OF AMERICA, FOR THE USE AND BENEFIT OF ASH EQUIPMENTCO., INC. D/B/A AMERICAN HYDRO; AND ASH EQUIPMENT CO., INC., AMARYLAND CORPORATION; Plaintiffs, v. MORRIS, INC., A SOUTH DAKOTA CORPORATION; UNITED FIRE ANDCASUALTY COMPANY, AN IOWA CORPORATION; AND RED WILKCONSTRUCTION, INC., A SOUTH DAKOTA CORPORATION; Defendants.

4:14-CV-04131-VLD

UNITED STATES DISTRICT COURT DISTRICT OF SOUTH DAKOTA SOUTHERN DIVISION

August 8, 2017

ORDER DENYING IN PART AND GRANTING IN PART THE PARTIES' VARIOUS MOTIONS FOR PARTIAL SUMMARY JUDGMENT

DOCKET NOS. 140, 153 & 170

TABLE OF CONTENTS

INTRODUCTION ............................................................................................. 1

FACTS ............................................................................................................ 1

A. Contractual Relations Between the Parties .............................................. 1

B. Hydrodemolition ..................................................................................... 2

C. Hydro's Pre-Contract Proposals .............................................................. 4

D. Disputes While Work Was Progressing .................................................... 6

1. Start Time ........................................................................................... 6

2. Red Wilk's Alleged Breaches ................................................................ 7

3. Manholes ............................................................................................. 9

4. Measurement of Concrete Removal .................................................... 10

5. The End ............................................................................................ 12

E. Claims Asserted by the Parties ............................................................. 13

F. Arguments in Favor of Partial Summary Judgment ............................... 13

1. Hydro's Motion for Partial Summary Judgment .................................. 13

2. Red Wilk's Motion for Partial Summary Judgment ............................. 14

3. Morris' Motion for Partial Summary Judgment ................................... 14

DISCUSSION ................................................................................................ 15

A. Summary Judgment Standard .............................................................. 15

B. South Dakota Contract Law .................................................................. 16

C. Hydro's Motion for Partial Summary Judgment ..................................... 18

1. Liability on Miller Act Claim ............................................................... 18

2. Whether Red Wilk's Liquidated Damages Are Enforceable .................. 25

a. Validity of Liquidated Damages as a Matter of Law ....................... 25

b. Waiver of Liquidated Damages ...................................................... 42

3. Red Wilk's Counterclaim .................................................................... 44

a. Notice and Opportunity to Cure .................................................... 44

b. Red Wilk Caused its Own Damages .............................................. 49

c. Whether Red Wilk's Damages are Speculative ............................... 49

d. Manholes ..................................................................................... 50

D. Red Wilk's Motion for Partial Summary Judgment ................................ 58

1. Request for Extension of Time ........................................................... 59

a. Section 9.6 ................................................................................... 59

i. Damages are Not Limited .......................................................... 59

ii. Hydro Requested an Extension of Time .................................... 62

b. Acceleration Damages .................................................................. 65

c. Section 16.2 ................................................................................. 68

2. Delay Damages in Favor of Hydro ...................................................... 71

E. Morris' Motion for Partial Summary Judgment ..................................... 78

1. Survey Requirement .......................................................................... 79

2. Quantum Meruit ............................................................................... 84

3. Lost Productivity Damages ................................................................. 90

CONCLUSION ............................................................................................... 92

INTRODUCTION

This is a Miller Act action (40 U.S.C. § 3133(b)(3)(B)), brought by the United States of America for the use and benefit of Ash Equipment Company, Inc., doing business as American Hydro ("Hydro"). Defendants are the general contractor on the project, Morris, Inc. ("Morris"); the company that issued the payment bond, United Fire and Casualty Company ("UF&CC"); and subcontractor Red Wilk Construction, Inc. (Red Wilk). Pending before the court are motions from each party for partial summary judgment in their respective favors. See Docket Nos. 140, 153 & 170. This matter is before this court on the consent of all parties pursuant to 28 U.S.C. § 636(c).

FACTS

A. Contractual Relations Between the Parties

Defendant Morris contracted with the United States Army Corps of Engineers ("the Corps") to do work on the Fort Randall Dam spillway at Pickstown, South Dakota, in September, 2013. Work on the spillway was necessitated (in part) due to a flood which occurred in the summer of 2011. The project included removal and replacement of damaged concrete. Morris obtained a Miller Act payment bond on the project from defendant UF&CC in the amount of $7,472,670.25. The payment bond obligated Morris and UF&CC jointly and severally to guarantee payment to any subcontractor of Morris' who furnished labor and materials on the project as well as to persons who had a direct contractual relationship with Morris on the project.

The project plans and specifications of the Corps required concrete removal using, in part, hydrodemolition methods. Morris subcontracted the hydrodemolition work to Red Wilk in October, 2013. Red Wilk in turn subcontracted with Hydro on April 9, 2014. See Docket Nos. 158-1 and 158-2.¹ Red Wilk promised to pay Hydro for Hydro's work on the project within 10 working days after Morris paid Red Wilk on monthly progress payments. Specific provisions of these three contracts are discussed in depth below in the DISCUSSION section of this opinion.

B. Hydrodemolition

Hydrodemolition is the process of removing concrete with high-pressure water jets mounted on a robot. A hydrodemolition system includes three main components: (1) the robot; (2) high-pressure pumps which operate on diesel or electricity and deliver to the robot up to 100 gallons of water per minute at pressures up to 40,000 pounds per square inch; and (3) a trailer holding the pumps, spare parts, tools, fuel, water, hoses and filters. The depth of a cut is determined by the force of the water coming out of the robot's jets and how long the jets linger over an area of concrete. The deeper the cut, the more water force and time required. In addition to supplying copious amounts of water on the front-end of the process for the robot's jets, hydrodemolition also requires prompt removal of waste water.

The removal of waste water is important for three reasons. First, only upon removal of wastewater can the operator of the robot assess how deeply and cleanly the concrete is being demolished and, therefore, whether the pressure or time being used should be adjusted. Second, if wastewater is allowed to pool over the cutting site, the jetted water from the robot hits the pool first rather than directly hitting the concrete. This diminishes the power of the jets to cut the concrete because the pool of wastewater deflects, to some extent, the power of the water emanating from the jets. Finally, if wastewater is not quickly and efficiently removed, the particles in the wastewater can resettle in the cut area and resolidify, essentially filling in or partially filling in a cut that has been made.

The robot used for hydrodemolition in this case weighed approximately 7,000 pounds. Needless to say, it is not an easy piece of equipment to move around. Maximum efficiency for using the robot dictates that all of the concrete removal in a particular area be done at the same time rather than skipping around doing spot removals in numerous different areas. Further, if the robot is cutting concrete on a slope, it has to be secured with tethers. The tethering must be relocated whenever the robot is moved to another area on the slope. These details of hydrodemolition are important to know in order to understand the parties' disputes.

C. Hydro's Pre-Contract Proposals

Prior to Red Wilk and Hydro entering into their finalized contract, Hydro submitted four proposals to Red Wilk. Hydro's first proposal dated July 29, 2013,² included unit prices for hydrodemolishing 47,375 square feet of concrete to a 6-inch depth, 40,500 square feet of concrete to a 10-inch depth, and 6,400 square feet at 16 manhole locations to an 18-inch depth. See Docket No. 159-1. Different rates applied depending on the depth of the concrete removal and whether the removal was taking place upstream of tier 46 or downstream of tier 46. Id. The upstream-downstream designation had to do with whether the hydrodemolition occurred on a horizontal surface or a slope—the downstream area was the sloped area.

The second proposal submitted by Hydro was dated August 22, 2013. See Docket No. 161-1. This proposal reiterated the offer to remove 40,440 square feet of concrete at the six-inch depth upstream, 6,935 square feet at the six-inch depth downstream, 29,575 square feet at a 10-inch depth upstream, and 10,925 square feet at a 10-inch depth downstream. Id. This second proposal did not include an offer to do any manhole work denominated...