US for Use of US Steel v. Const. Aggregates
| Decision Date | 15 March 1983 |
| Docket Number | Civ. No. 78-10090. |
| Citation | 559 F. Supp. 414 |
| Parties | UNITED STATES of America, for the Use of UNITED STATES STEEL CORPORATION; and United States Steel Corporation, Individually, Plaintiff, v. CONSTRUCTION AGGREGATES CORPORATION, a Delaware Corporation; and the Travelers Indemnity Company, a Connecticut Corporation, Defendants. |
| Court | U.S. District Court — Western District of Michigan |
COPYRIGHT MATERIAL OMITTED
Thomas J. Fleischmann, Phillip Allen, Rooks, Pitts, Fullagar & Poust, Chicago, Ill., for plaintiff.
Irwin Zatz, James Barber, Arvey, Hodes, Costello & Burman, Chicago, Ill., for defendant Const. Aggregates Corp.
Richard Poling, Jr., Moore, Sills, Poling, Wooster & Sinn, Birmingham, Mich., for Travelers Indem. Co.
Plaintiff, United States Steel Corporation (USSC) brought this action under the Miller Act, 40 U.S.C. § 270a-d () as a subcontractor on a construction contract between the United States and the defendant, Construction Aggregates Corporation (CAC). In this litigation USSC seeks $1,640,127.53 plus interest and costs which it claims is due and owing for materials supplied to CAC, the prime contractor. CAC has counterclaimed for damages in excess of $8 million allegedly resulting from fraudulent misrepresentations and delays in delivery of the contract materials. The defendant Travelers Indemnity Company, as a commercial surety, provided the payment bond pursuant to 40 U.S.C. § 270a.
The Court, sitting without a jury, held 10 days of trial beginning November 3, 1982. During the trial the Court heard the testimony of 14 witnesses and admitted in evidence over 250 documents, comprised of approximately 5,000 pages. At the conclusion of trial, the parties submitted extensive requests for findings of fact and conclusions of law.
Having considered the pleadings, the testimony of the witnesses, and the documents admitted in evidence, along with the parties' proposed findings of fact and conclusions of law, and otherwise being fully advised, the Court hereby sets forth its Findings of Fact and Conclusions of Law pursuant to FR Civ P 52(a).
1.) The use plaintiff (USSC) is a Delaware corporation with its principal place of business in Pennsylvania, and local offices in Michigan.
2.) The defendant CAC is a Delaware corporation with its principal place of business in Illinois.
3.) The Travelers Indemnity Company is a commercial surety, duly licensed to conduct business in Michigan.
4.) USSC owns and operates two limestone quarries in Michigan, one at Rogers City, (also referred to as the calcite quarry) and one at Cedarville. The Rogers City quarry is the largest limestone quarry in the world.
5.) In addition to supplying USSC's internal operations, these quarries produce raw materials that are sold to outside chemical plants, cement manufacturers, and also to marine contractors for later use in construction projects.
6.) In early January, 1976, Mr. Gerald Lakins, the manager of raw materials sales for USSC, became aware of a potential sale of over one million tons of limestone. This limestone was to be used in the construction of an impoundment project known as the Saginaw Bay Diked Disposal Facility, Lake Huron, Michigan. Accordingly, USSC began to prepare a bid estimate for the project.
7.) The U.S. Army Corp of Engineers (Corps) charged with the responsibility of managing the project, issued a formal advance notice to bidders on January 16, 1976. The advance notice stated that the project was to be completed by June 30, 1978.
8.) On February 6, 1976 the Corps issued an invitation for bids for the construction of the Saginaw Bay Diked Disposal Facility.
9.) The Dike facility is a 13,900 foot perimeter dike enclosure (roughly the shape of a kidney), intersected by an east-west cross dike. The width of the dike at its crown is 10 feet, sloping at a 2 to 1 rate to a base width of 60 feet. Its total height is 29 feet, with approximately 14 feet above the water level.
10.) The primary purpose of this 288-acre enclosure is to contain the dredgings from the Saginaw River and Saginaw Bay shipping lanes. The dredgings have been classified as "polluted" and pursuant to the Clean Water Act must be confined.
11.) The dike is constructed entirely of limestone in varying gradations. The core, or center of the dike wall, consists of over one million tons of "prepared" limestone. Prepared limestone is small stone, ranging in size from a pebble to about six inches in diameter. A plastic filter cloth, designed to permit water to pass through while retaining the polluted dredgings, was placed over the core of prepared limestone.
12.) The next step in the construction process is to place two layers of progressively larger rock on the sloping sides of the core. The first layer was "underlayer" and "riprap" stone, ranging from 30 pounds to 300 pounds per stone. The outer layer is composed of "cover" stone, ranging from 250 pounds to 2,100 pounds per stone. The cover stone is divided into weight classifications of 250 to 600 pounds, 600 to 1300 pounds, and 1300 to 2100 pounds. The primary dispute before this Court concerns the 1300 to 2100 pound stone.
13.) Nine bids were received by the Corps, and CAC was the low bidder at $11,581,100.00. The Corps' estimated cost was $16,211,364.00.
14.) Pursuant to the Miller Act, defendant CAC (the principal) and defendant Travelers (the surety), on or about March 19, 1976, executed a Miller Act Bond to the United States of America, wherein CAC and Travelers conditionally bound themselves jointly and severally in the sum of $2,500,000. The condition contained in the bond was that if the principal should promptly make payment to all persons supplying labor and material in the prosecution of the work provided for in the prime contract, and any and all duly authorized modifications of the prime contract that may be made, notice of which modifications to the surety being waived, then the obligation would be void and of no effect.
15.) Upon acceptance of the payment bond, the contract was awarded to CAC.
16.) The Corps issued a list of 45 approved sources for the limestone. Both the Rogers City and Cedarville quarries were given unconditional approval.
17.) In determining whether the USSC quarries could provide sufficient stone for the project, CAC relied primarily on the Corps' representations contained in its "approved sources" document.
18.) CAC is a marine contractor with previous experience in constructing limestone aggregate dikes.
19.) On February 26, 1976, USSC sent a quotation to CAC concerning the sale of both prepared and "broken" limestone. Broken stone, also referred to as underlayer, mattress, cover and riprap stone is rock that is broken from the face of the quarry during blasting, but that has not been prepared through the crushing facilities.
20.) Before the bid was prepared, Mr. Lakins contacted Mr. Donn Widmayer, the general superintendent of both the Rogers City and Cedarville quarries, to inquire about the availability of broken stone. Mr. Widmayer indicated that while the Rogers City quarry could not produce the entire tonnage of broken stone, between Rogers City and Cedarville there would be no problem in supplying the required tonnage.
21.) USSC's February 26, 1976 quotation to CAC contained the following language:
22.) Upon learning that CAC was the low bidder on the Corps project, Mr. Lakins and Mr. Stewart Steffey, his superior, in an effort to solicit the project, arranged a meeting with representatives of CAC. Mr. Steffey and Mr. Lakins represented USSC at the meeting. Present on behalf of CAC were Ezra Sensibar, chairman of the board of CAC, and James Kwon, a vice-president of CAC.
23.) In the course of this March 19, 1976 convocation, many contract items were discussed. The terms relevant to this lawsuit are the price of the stone, the anticipated date of completion of the project, and the source of the broken stone, i.e. Rogers City or Cedarville. At the close of the meeting, the parties had not reached agreement on any of the above terms.
24.) The parties met again on April 1, 1976 at the offices of CAC. During this meeting, the parties agreed that the project was to be finished by the end of the 1977 work season, not by June of 1978 as required by the Corps. Agreement was also reached on the price of the stone. The prepared limestone was to be sold at $2.72 per delivered ton and the price of the broken stone was $1.15 per ton, not delivered.
25.) During the April 1 meeting, no agreement was reached on the source of the broken stone. CAC insisted that the required tonnage be provided exclusively from the Rogers City quarry, while USSC remained firm in its proposal that a portion of the stone may have to be obtained from the Cedarville quarry.
26.) This disagreement continued. Later in the day of April 1, 1976, Mr. Ezra...
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