Drew County Arkansas v. Joh Pas Murray Company

Filing 45

MEMORANDUM AND ORDER denying the Hospital's 25 Motion for Summary Judgment; granting Murray Company's 30 Cross-Motion for Partial Summary Judgment; and denying Cromwell's 16 Motion to Quash Subpoena or for Protective Order. Signed by Judge Susan Webber Wright on 4/22/11. (vjt)

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
PINE BLUFF DIVISION
DREW COUNTY, ARKANSAS,
d/b/a DREW MEMORIAL HOSPITAL,
Plaintiff/Counter-Defendant,

vs.

JOH PAS MURRAY COMPANY, a/k/a
MURRAY COMPANY and a/k/a
J.P. MURRAY COMPANY, INC.,
Defendant/Counter-Plaintiff.

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No. 5:10cv0069 SWW

MEMORANDUM AND ORDER
Drew County, Arkansas d/b/a/ Drew Memorial Hospital (the Hospital) brings this
declaratory judgment action against Joh Pas Murray Company a/k/a Murray Company and a/k/a
J.P. Murray Company, Inc. (Murray Company) seeking a declaratory judgment that Murray
Company’s demand for $142,350.90 from the Hospital for design and planning services it
provided related to an expansion and improvement of the Hospital’s facilities in Drew County,
Arkansas, is unenforceable and that the Hospital has no liability to Murray Company for the
amount demanded. Murray Company has counterclaimed against the Hospital under the
alternate theories of breach of contract, quantum meruit, and/or promissory estoppel.
This action was originally filed in the Circuit Court of Drew County, Arkansas but was
removed to this Court by Murray Company. Now before the Court are the following motions:
(1) the Hospital’s motion for summary judgment [doc.#25]; (2) Murray Company’s cross-motion
for partial summary judgment [doc.#30]; and (3) motion of non-party Cromwell Architect

Engineers, Inc. (Cromwell) to quash subpoena or for protective order [doc.#16]. Having
considered these motions, the responses in opposition, and the replies to the responses, the Court
denies the Hospital’s motion for summary judgment, grants Murray Company’s cross-motion for
partial summary judgment, and denies as moot the motion of Cromwell to quash subpoena or for
protective order.
I
Murray Company is a Missouri corporation that offers construction management services
to healthcare providers. Included in the services offered by Murray Company are integrated
design-build services with a “Guaranteed Maximum Price” (GMP), also known as “construction
management at risk.” Under such an arrangement, Murray Company will guarantee that the cost
of the construction project does not exceed an agreed GMP. If it does, Murray Company is
responsible for the excess cost without reimbursement from the owner. According to Murray
Company, the stages of a construction management at risk project as performed by Murray
Company generally are: (1) completion of a facility assessment and master plan with cost
estimates; (2) 40%-50% completion of detailed design drawings to allow development of the
GMP; (3) development of GMP and approval by owner; (4) completion of remaining design
drawings and specifications; and (5) construction of project.
Prior to 2009, the Hospital’s management and Board of Directors began discussions
about expanding and improving the Hospital’s facilities. Murray Company desired to enter into
a construction management at risk contract with the Hospital relating to the Hospital’s desired
expansion and improvements to its facilities. Consistent with their desires, the Hospital and
Murray Company entered into discussions in late 2008 and early 2009 about a Master Plan and

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Facility Assessment of the Hospital as an initial step toward the planned expansion and
improvements.
By letter dated March 30, 2009, John O’Hara, Murray Company’s principal, presented
the Hospital with a proposed contract to complete the Master Plan and Facility Assessment
wherein Murray Company offered to perform a list of services, including construction
management and architectural and engineering services, for a total price of $12,950 plus
expenses not to exceed $2,000. The Hospital did not execute this contract until April 22, 2009,
but Murray Company states it began working on the Master Plan and Facility Assessment prior
to that date at the request of the Hospital.
O’Hara states that during the period of March through June 2009, he was in regular
communication with Michael Layfield, Chief Executive Officer of the Hospital, and members of
the Hospital Board, and that during the course of these communications, he was repeatedly
informed that the Hospital intended to engage Murray Company under a construction
management at risk arrangement to construct the expansion. O’Hara states that for this reason,
Murray Company, on May 22, 2009, submitted an application to the Arkansas Contractors
Licensing Board seeking licensure as a contractor. The Hospital claims this was done so that
Murray Company could legally provide construction management services to the Hospital.
Murray Company, however, claims it sought licensure as a contractor because it believed a
contractors license would be required to manage the construction of the Hospital expansion once
ground was broken on the project and construction activities began. In any case, in connection
with its application, Murray Company submitted an affidavit in which it affirmed that it would
“not bid, contract, or perform any ... work” with a value of $20,000 or more until such time as

3

Murray Company was licensed. Murray Company further swore that it did “not have
outstanding any such work or any bid for such work.”
On July 22, 2009, O’Hara and Ron Collet, Director of Healthcare Planning at Murray
Company, attended the Hospital’s Board of Governors meeting. O’Hara states that at that
meeting, the Hospital directed Murray Company to proceed with development of plans and
specifications necessary to develop the GMP documents for Phase I of the Hospital expansion
(the Allied Health Building), that the Hospital agreed to pay Murray Company $158,156 for this
work, and that Murray Company began the requested work immediately. Collet testified that
Murray Company went out of that board meeting with authorization to do the GMP drawings for
Phase I for the value of $158,156. He stated that it was not his belief that he had authorization to
go forward with completion of the entire project concerning the Allied Health Building but just
“[e]nough documents so that our estimating staff can give the GMP number to the board.”
Collett Depo. at 62.
By letter dated August 7, 2009, Murray Company transmitted to Layfield a Standard
Form Design-Build Agreement between the Hospital and Murray Company for the design and
construction of the Allied Health Building (Phase I). In that letter, Murray Hospital noted as
follows:
Please note that we have only contracted with [the Hospital] for the 50%
completion of the Design Development Documents, in order to determine the
Guaranteed Maximum Contract price for this project. At the time of the
presentation of the GMP, currently scheduled for mid-October 2009, we will
provide a contract amendment which when fully executed, will authorize Murray
Company to complete the balance of the Construction Documents and begin
construction of the new Allied Health Building.

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The Phase I proposal attached to the August 7th letter outlined certain terms for the
preparation of the remaining 50% of the drawings and specifications for construction of Phase I
but left several key terms blank, such as the GMP, the duration of the project, and Murray
Company’s Design Builder’s Fee. The document indicates that the Design Builder’s Fee will be
3.5% of the cost of the work, determined in the GMP; that the owner-approved GMP will be
added to the document through a contract amendment; and that the Design Builder’s Fee will be
converted to a fixed amount in the contract amendment. The Hospital did not execute the Phase
I proposal.
At some point in August 2009, the Hospital determined that, in addition to the Allied
Health Building, it would like to proceed with the New Patient Wing (Phase II). O’Hara states
that Layfield advised him that the Hospital would like Murray Company to prepare plans and
specifications necessary to develop a GMP for the New Patient Wing.
By letter dated August 26, 2009, O’Hara transmitted to Leyfield updated “Cost Opinions
& Authorization to Proceed with Part 2 GMP Documents.” In that letter, O’Hara outlines
Murray Company’s updated cost opinion to build the Allied Health Building and the New
Patient Wing (Phases I and II) for a total cost of $16,597,441 and states that
[a]t the completion of the GMP part of the project, we will present to you and the
Board of Directors the Guaranteed Maximum Cost for Phase I and II of the
project, which will allow Murray Company to complete the balance of working
drawings, the bidding to local subcontractors and suppliers, and complete ... both
Phase I and II of the phased master plan.
In his deposition, O’Hara, in response to questioning by counsel for the Hospital, stated
the following with respect to this letter:
Q. So as of – And if I can try to fairly summarize it, and you can agree or
disagree, you’re proposing here to do the work for the Allied Health Building and
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the new patient Phase II for completion for those amounts reflected there [in the
letter]; correct?
A. Correct.
Q. For a total of $16,597,000.
A. Correct.
Q. All right. And you’re telling them that the cost to do the GMP documents,
and you’re proposing to do those for the Allied Health Building, for [$]158,156?
A. Yes.
Q. And you already had authority to do that according to you; correct?
A. Yes.
Q. And you had already started working on that.
A. Yes.
Q. And then you were proposing that the GMP documents for the new patient
wing was going to cost the hospital $285,363; correct?
A. Correct, for the documents to get to where we could give a GMP.
Q. Okay. And you asked Mr. Layfield to authorize that, sign it, and date it; is that
correct?
A. As a matter of record to the previous authorizations that they had given us.
Q. And this is your attempt to get in writing what you contend was already
authorized to be done.
A. Yes, sir.
Q. And had already started working on.
A. Correct.
. . .

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Q. And then am I correct that the hospital advised you that they needed to come in
under [$]14 million and so you sent another proposal? ...
A. Between the August 26th letter and the September 10th letter, the hospital had
asked us to change the Allied Health Building from a two-story building to a onestory building structured for a future floor. It would be an assumption on my part
that at that time they had found out they could not finance a $16 million job, they
could only finance a $13 million job.
But again, we were – I was under the impression that we had received the
authorization to proceed with the work, I was just formalizing what that
authorization was and sending it to Michael.
Q. And then again, you had already started on that work.
A. Correct. A month – At least –
Q. Well, since July.
A. Since July, a month and a half earlier.
Q. Yeah. When do you believe you had an agreement – I know you continued to
have an agreement to move forward with the Phase I GMP documents in July.
When do you believe you had authorization or agreement to move forward with
GMP documents for Phase II?
A. In the August [26th Board] meeting.
. . .
Q. Okay. So – But its your position that as of August 26, 2009, you had an
agreement in place to do the construction management services associated with
the GMP drawings for Phases I and II?
A. Yes.
Q. And that was for an amount of approximately $443,000?
A. Yes, sir.
Q. And did you begin work on the Phase II documents immediately as well?
A. Yes, sir.
O’Hara Depo. at 50-54.
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As indicated by his deposition testimony, O’Hara states that at the August 26, 2009
Board of Governors meeting, the Hospital Board directed Murray Company to proceed with the
development of plans and specifications necessary to develop the GMP for Phases I and II of the
Hospital expansion and that the Hospital agreed to pay Murray Company $443,519 for this work,
which included the $158,156 the Hospital previously agreed to pay Murray Company to prepare
GMP documents for Phase I. Murray Company began the requested work immediately.
On August 28, 2009, two days after Murray Company began work on the development of
plans and specifications necessary to develop the GMP for Phases I and II of the Hospital
expansion, the Arkansas Contractors Licensing Board granted Murray Company’s May 22, 2009
application to the Contractors Licensing Board seeking licensure as a contractor and issued a
license to Murray Company. Murray Company was not, however, licensed as an architect or
engineer. Rather, architectural and engineering services on the Hospital expansion were
provided by hired design and engineering professionals and firms licensed in the State of
Arkansas.
By letter dated September 10, 2009, Murray Company transmitted to Leyfield a Standard
Form Design-Build Agreement for Phases I and II. In that letter, Murray Hospital noted as
follows:
Please note that this contract with [the Hospital] is for the 40% complete Design
Development Documents phase, in order to determine the Guaranteed Maximum
Contract price for this project. At the time of the presentation of the GMP,
currently scheduled for mid-January 2010, we will provide a contract amendment
which when fully executed, will authorize Murray Company to complete the
balance of the Construction Documents and begin construction of the new Allied
Health Building and Patient Wing Addition.

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Like the Phase I proposal, the Phases I and II proposal attached to Murray Company’s
September 10th letter leaves several key terms blank, such as the GMP, the duration, and Murray
Company’s Design Builder’s Fee. The Hospital did not execute the Phases I and II proposal.
The Hospital’s attorney, Cliff Gibson, reviewed the Design-Build Agreements and
concluded (incorrectly, believes Murray Company) that the design-build method of construction
work does not comply with the requirements of the Arkansas competitive bidding laws and
processes that must be followed by county governments including agencies and departments
thereof such as the Hospital. Gibson set forth his conclusions in a letter to Leyfield dated
September 29, 2009, and recommended that the hospital “employ an architect/engineering firm
to do the design and specifications work under a standard architect/engineering contract (which
includes handling the bid process, monitoring the construction for compliance with plans and
specifications, approving progress payments, etc.) and to put the project out for bid to general
contractors.” In that same letter, Gibson also set forth general criticisms he had of the
“guaranteed minimum price” approach, although he stated that his criticisms are “really
academic” in light of his opinion that the design-builder method of contracting projects such as
those at issue here does not comply with the Arkansas competitive bidding laws and processes.
Nevertheless, Gibson set forth several of his criticisms as follows:
The hospital is being requested to sign contracts obligating and locking the
hospital into paying various charges (including an almost immediately due half
million dollar payment for the initial set of plans) before anyone knows what the
“guaranteed maximum price” for the projects will be, or whether that number is
within amounts budgeted for the projects. Under the contract as submitted it is
possible for the hospital to be obligated to pay a half million dollars for an initial
set of plans and specifications that may be later determined to be useless because
the “guaranteed maximum price” finally set by the design-builder is far and away
above what the hospital is willing to budget for the projects. In saying this, I am
not unmindful that Mr. O’Hara has previously told you that it was his opinion that
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the total of these projects would not exceed $14 million, but hasten to point out
that number is not set forth in the contract documents submitted [footnote: Nor do
I see a specific provision in the documents that contractually obligates the Murray
Company to actually construct the projects for the “guaranteed maximum price”.];
rather, those contract documents prescribe a process under which Mr. O’Hara’s
company would later determine the amount of the “guaranteed maximum price”
for the project. It occurs to me, therefore, that this whole matter of a “guaranteed
maximum price” is in reality an illusory concept in the context of the contract as
presently drawn.
The Hospital apparently agreed with Gibson’s assessment of the contractual relationship
to which it was committing itself as Murray Company states it was informed by Gibson on
October 6, 2009, that the Hospital would no longer proceed with any contractual arrangement
with Murray Company acting as either a design-build contractor or as a construction manager at
risk. The Hospital states that attempts were made to reach an alternate agreement but Murray
Company refused to consider the offered options. The Hospital states that it then remitted a
check for $12,950 pursuant to the March 30, 2009 letter but that Murray Company refused the
check and returned it to the Hospital.
Murray Company states that at the time, the Hospital indicated that it would not proceed
with any contract with Murray Company unless Murray Company assumed the role of general
contractor on the project. Murray Company states that this was not acceptable and that as a
result it terminated work on Phases I and II. Because, according to Murray Company, the
Hospital had repudiated any intent to go forward with an agreement whereby Murray Company
would serve as construction manager at risk for the project, Murray Company returned the check
for $12,950 to the Hospital and, on October 15, 2009, sent the Hospital a final invoice for
“design and construction management services” provided to date in the amount of $143,642.95.
Subsequently, on November 6, 2009, Murray Company sent the Hospital a revised invoice in the

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amount of $142,350.90 with documentation it states supports the hours worked by Murray
Company and its hired design professionals. The Hospital refused to pay Murray Company’s
invoice and, according to O’Hara, has not returned to Murray Company the drawings, designs,
specifications, and other work product generated in connection with the Phase I and II work but
instead gave Murray Company’s work product to Cromwell who utilized the work product in
preparing the final plans for the expansion.
II
The Hospital moves for summary judgment on the following grounds: (1) Murray
Company’s claims at law and in equity are barred under § 17-25-103(d) of the Arkansas
Contractors Licensing Law, Ark. Code Ann. §§ 17-25-101 et seq., based upon Murray
Company’s alleged false affidavit to the Arkansas Contractors Licensing Board; (2) Murray
Company’s claims are also barred under § 17-25-103(d) of the Arkansas Contractors Licensing
Law based upon Murray Company’s additional violations of the Arkansas Contractors Licensing
Law, namely its not being a licensed contractor; and (3) Murray Company’s breach of contract
claim is barred as a matter of law based upon Murray Company’s practice of architecture and
engineering without a license in violation of the Arkansas Architectural Act, Ark. Code Ann. §§
17-15-101 et seq., and the Arkansas Engineering Act, Ark. Code Ann. §§ 17-30-101 et seq.
Murray Company, in turn, moves for partial summary judgment in its favor on the
Hospital’s defenses predicated on the Arkansas Contractors Licensing Law and the Arkansas
Architectural and Engineering Acts, arguing, inter alia, as follows: (1) Murray Company seeks
to recover for design, planning, and other pre-construction services that clearly do not require a
contractors license; (2) Murray Company did not construct, or manage the construction of, any

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building in violation of the Arkansas Contractors Licensing Law and it is undisputed that the
Hospital refused to proceed with Murray Company under a construction management at risk
arrangement; (3) Murray Company’s proposal(s) submitted prior to obtaining a contractor’s
license did not constitute a “bid” in violation of the Arkansas Contractors Licensing Law as it
did not include a GMP or a fixed price for services; and (4) Murray Company did not violate the
Arkansas Architectural or Engineering Acts because architectural and engineering work on the
expansion was provided by hired architects and engineers licensed in the State of Arkansas, and
in any case these Acts do not contain a penalty provision barring express or implied contractual
remedies and, thus, at a minimum Murray Company is entitled to recover under quantum meruit
and/or promissory estoppel.
A
Summary judgment is appropriate when “the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine issue as to any material fact
and that the movant is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). As a
prerequisite to summary judgment, a moving party must demonstrate “an absence of evidence to
support the non-moving party’s case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
Once the moving party has properly supported its motion for summary judgment, the nonmoving
party must “do more than simply show there is some metaphysical doubt as to the material
facts.” Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986). The nonmoving
party may not rest on mere allegations or denials of his pleading, but “must come forward with
‘specific facts showing ... a genuine issue for trial.’” Id. at 587 (quoting Fed.R.Civ.P. 56(e) and
adding emphasis). See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). The

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inferences to be drawn from the underlying facts must be viewed in the light most favorable to
the party opposing the motion. Matsushita, 475 U.S. at 587 (citations omitted). However,
“[w]here the record taken as a whole could not lead a rational trier of fact to find for the
nonmoving party, there is no ‘genuine issue for trial.’” Id. (citation omitted). “Only disputes
over facts that might affect the outcome of the suit under the governing law will properly
preclude the entry of summary judgment.” Anderson, 477 U.S. at 248. “Factual disputes that are
irrelevant or unnecessary will not be counted.” Id.
B
1
The Court first addresses the Hospital’s arguments that Murray Company’s claims at law
and in equity are barred under § 17-25-103(d) of the Arkansas Contractors Licensing Law based
upon Murray Company’s alleged false affidavit to the Arkansas Contractors Licensing Board
and its not being a licensed contractor.
The Arkansas Contractors Licensing Law defines a “contractor” as
any person, firm, partnership, copartnership, association, corporation, or other
organization, or any combination thereof, that, for a fixed price, commission, fee,
or wage, attempts to or submits a bid to construct or demolish, or contracts or
undertakes to construct or demolish, or assumes charge, in a supervisory capacity
or otherwise, or manages the construction, erection, alteration, demolition, or
repair, or has or have constructed, erected, altered, demolished, or repaired, under
his or her, their, or its direction, any building, apartment, condominium, highway,
sewer, utility, grading, or any other improvement or structure on public or private
property for lease, rent, resale, public access, or similar purpose, except singlefamily residences, when the cost of the work to be done, or done, in the State of
Arkansas by the contractor, including, but not limited to, labor and materials, is
twenty thousand dollars ($20,000) or more.
Ark. Code Ann. § 17-25-101(a)(1). A “contractor” who performs work covered under the
Arkansas Contractor’s Licensing Law without a proper license is guilty of a misdemeanor:
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(a) Any contractor shall be deemed guilty of a misdemeanor and shall be liable to
a fine of not less than one hundred dollars ($100) nor more than two hundred
dollars ($200) for each offense, with each day to constitute a separate offense, who:
(1)(A) For a fixed price, commission, fee, or wage attempts to or
submits a bid or bids to construct or demolish or contracts to
construct or demolish, or undertakes to construct or demolish, or
assumes charge in a supervisory capacity or otherwise, or manages
the construction, erection, alteration, demolition, or repair of, or
has constructed, erected, altered, demolished, or repaired, under
his or her or its direction, any building, apartment, condominium,
highway, sewer, utility, grading, or any other improvement or
structure, when the cost of the work to be done, or done, in the
State of Arkansas by the contractor, including, but not limited to,
labor and materials, is twenty thousand dollars ($20,000) or more,
without first having procured a license with the proper
classification to engage in the business of contracting in this state.
Ark. Code Ann. § 17-25-103(a)(1)(A). A contractor violates the Arkansas Contractors Licensing
Law by “giv[ing] false or forged evidence of any kind to the Contractors Licensing Board or any
member thereof in obtaining a certificate of license.” Ark. Code Ann. § 17-25-103(a)(3). The
Arkansas Contractors Licensing Law further provides that “[n]o action may be brought either at
law or in equity to enforce any provision of any contract entered into in violation of this chapter”
and “[n]o action may be brought either at law or in equity for quantum meruit by any contractor
in violation of this chapter.” Ark. Code Ann. § 17-25-103(d). The purpose behind the Arkansas
Contractors Licensing Law is to require contractors who desire to engage in certain types of
construction work to meet certain standards of responsibility such as experience, ability, and
financial condition. Brimer v. Arkansas Contractors Licensing Bd., 312 Ark. 401, 405, 849
S.W.2d 948, 951 (1993).
The Court has considered the matter and does not find that Murray Company, in
connection with its application to the Arkansas Contractors Licensing Board seeking licensure as

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a contractor, submitted a false affidavit when it affirmed that it would “not bid, contract, or
perform any ... work” with a value of $20,000 or more until such time as Murray Company was
licensed and that it did “not have outstanding any such work or any bid for such work.” It is
undisputed that no final construction contract between the Hospital and Murray Company was
ever formalized (the Hospital refusing to proceed with Murray Company under a construction
management at risk arrangement) and that no construction on the Hospital expansion occurred
while Murray Company was engaged with the Hospital. Rather, the only services performed by
Murray Company in connection with the Hospital expansion were facility assessments, master
planning, cost estimating, and other pre-construction planning and design services that did not in
these circumstances require a license under the Arkansas Contractors Licensing Law.
The Hospital, however, argues that O’Hara’s August 26, 2009 letter to the Hospital
updating the cost opinion to build the Allied Health Building and the New Patient Wing (Phases
I and II) for a total cost of $16,597,441 coupled with O’Hara’s deposition testimony in which he
agreed that he was proposing “to do the work for” Phases I and II for the amounts reflected in
the August 26, 2009 letter establishes that O’Hara – two days prior to Murray Company being
licensed – offered in his August 26th letter to construct two hospital buildings for an exact
amount in violation of the Arkansas Contractors Licensing Act. The Hospital further argues that
the pre-construction planning and design services performed by Murray Company constituted
“construction management” services under § 17-25-103(a)(1)(A) for which a license was
required. The Court rejects both of these arguments.
First, O’Hara’s August 26, 2009 letter does not constitute a “bid” for a “fixed price,
commission, fee, or wage” in violation of the Arkansas Contractors Licensing Law. The letter

15

repeatedly refers to the $16,597,441 figure as a “cost opinion” or Murray Company’s estimate as
to the cost of constructing Phase I and II based on the information available at that time. In this
respect, O’Hara states in the August 26th letter that “[a]t the completion of the GMP part of the
project, we will present to you and the Board of Directors the Guaranteed Maximum Cost for
Phase I and II of the project, which will allow Murray Company to complete the balance of
working drawings, the bidding to local subcontractors and suppliers, and complete ... both Phase
I and II of the phased master plan.” The August 26th letter does not represent a bid or offer to
construct Phases I and II for $16,597,441. Indeed, the Hospital’s own attorney, in his September
29, 2009 letter to Leyfield, noted that Murray Company had not offered to construct Phases I and
II for an exact amount, voicing his concern that “[t]he hospital is being requested to sign
contracts obligating and locking the hospital into paying various charges (including an almost
immediately due half million dollar payment for the initial set of plans) before anyone knows
what the “guaranteed maximum price” for the projects will be,” and that “those contract
documents prescribe a process under which Mr. O’Hara’s company would later determine the
amount of the “guaranteed maximum price” for the project.”1
Nor does O’Hara’s deposition testimony in which he agreed that he was proposing “to do
the work for” Phases I and II for the amounts reflected in the August 26, 2009 letter constitute
and offer to construct Phases I and II for an exact amount. During the relevant testimony cited
by the Hospital, O’Hara was discussing the August 26th letter, which does not include an offer or
bid to build Phases I and II for an exact amount, and he was merely responding affirmatively to
1

The Hospital also argues that O’Hara admitted in his deposition that from the beginning he was proposing to the
Hospital to construct the Allied Health Building at an approximate cost of $4,000,000 and that “[e]ven if there is no document
that clearly reflects this bid for a specified amount, Mr. O’Hara admits that such a bid was made.” The Court does not find that
this proposal (if it can be called that) constitutes an attempt to submit or submission of a “bid” for a “fixed price, commission,
fee, or wage” in violation of the Arkansas Contractor’s Licensing Law.

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the Hospital’s counsel characterizing the letter as a “proposal” to “do the work for the Allied
Health Building and the new patient Phase II for completion for those amounts reflected there [in
the letter]” (which counsel erroneously referred to as $16,597,000). O’Hara’s deposition
testimony makes clear that he was referencing cost estimates, not a bid or offer to construct
Phases I and II for an exact amount, and getting the “documents to ... where we could give a
GMP.”
Finally, the Court does not construe the Arkansas Contractors Licensing Law as requiring
that the pre-construction planning and design services performed by Murray Company prior to a
“construction” contract being entered into had to be performed by a licensed contractor.2 It is
undisputed that the Hospital refused to proceed with Murray Company under a construction
management at risk arrangement, and Murray Company did not construct, or manage the
construction of, any building. Ark. Code Ann. § 17-25-103(d) is a penal statute and is to be
strictly construed in favor of the party sought to be penalized, Meadow Lake Farms, Inc. v.
Cooper, 360 Ark. 164, 167, 200 S.W.3d 399, 402 (2004); see also Meyer v. CDI Contractors,
LLC, 102 Ark.App. 290, 295, 284 S.W.3d 530, 534 (2008) (“Ark. Code Ann. § 17-25-103(d),
which is penal in nature, must be strictly construed and, if a provision is not clear and positive,
every doubt as to its construction must be resolved in favor of the one against whom the
enactment is sought to be applied”), and the Court does not find in these circumstances that the

2

Rule 224-25-12(e) of the Rules and Regulations of the Arkansas Contractors Licensing Board defines “construction
management” as follows:
(e) Construction Management: A process of professional management applied to a construction program,
generally from start to finish, for the purpose of controlling time, cost, and quality. Usually the construction
management organization links itself to the owner as an agent and thereby places itself in a fiduciary
relationship with the owner. Construction management offers a broad range of services encompassing the
planning, procurement, construction, and warranty phases of a project. In this relationship, the construction
manager can properly represent the owner both to the design professional and to the contractors.

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pre-construction planning and design services performed by Murray Company prior to a
construction contract being entered into constituted “construction management” services under §
17-25-103(a)(1)(A) for which a license was required.
2
The Court now turns to the Hospital’s argument that Murray Company’s breach of
contract claim is barred as a matter of law based upon Murray Company’s practice of
architecture and engineering without a license in violation of the Arkansas Architectural Act,
Ark. Code Ann. §§ 17-15-101 et seq., and the Arkansas Engineering Act, Ark. Code Ann. §§ 1730-101 et seq.
The practice of architecture means “the provision of, or offering to provide, services in
connection with the design and construction, enlargement, or alteration of a building or group of
buildings, and the space within and surrounding such buildings,” including “[p]roviding
preliminary studies, designs, drawings, specifications, and other technical submissions” and the
“[a]dministration of construction contracts.” Ark. Code Ann. § 17-15-102(4)(A). Similarly, the
practice of engineering means “any service or creative work, the adequate performance of which
requires engineering education, training, and experience in the application of special knowledge
in the mathematical, physical, and engineering sciences to services or creative work such as
consultation, investigation, evaluation, planning, and design of engineering works and
systems...” Ark. Code Ann. § 17-30-101(4)(A). A person who practices architecture or
engineering without a license or who gives false evidence to the Arkansas State Board of
Architects, Landscape Architects, and Interior Designers or to the State Board of Licensure for

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Professional Engineers and Professional Surveyors is guilty of a misdemeanor. Ark. Code Ann.
§ 17-15-103; Ark. Code Ann. § 17-30-102.
It is clear that at least some of the pre-construction planning and design services
performed by Murray Company for the Hospital constituted the practice of architecture and
engineering, and the Hospital may well be correct that Murray Company was not in compliance
with the Arkansas Architectural and Engineering Acts when it performed these services without
a license.3 But even if Murray Company’s practice of architecture and engineering was in
violation of the Arkansas Architectural and Engineering Acts, those Acts, unlike the Arkansas
Contractors Licensing Law, do not contain a penalty provision barring express or implied
contractual remedies. The Arkansas Supreme Court’s decision in American Accident and Life
Ins. Co. v. American Pioneer Life Ins. Co., 247 Ark. 355, 445 S.W.2d 896 (1969), is instructive.
In that case, insurance companies entered into exclusive agency contracts that were not approved
by the Arkansas Insurance Commissioner and, thus, violated the following statute:
No domestic insurer shall make any contract whereby any person is granted or is
to enjoy in fact the management of the insurer to the substantial exclusion of its
board of directors or to have the controlling or preemptive right to produce
substantially all insurance business for the insurer, unless the contract is filed with
and approved by the Commissioner * * *.

3

Concerning the architectural services provided by Murray Company, the Court notes that Murray Company has not
demonstrated, on this record as least, that it satisfied the criteria for the practice of architecture by a corporation in Arkansas
under Ark. Code Ann. § 17-15-303, and it appears that it could not lawfully provide architectural services in Arkansas simply by
employing an architect licensed in Arkansas. See Arkansas State Board of Architects v. Bank Building & Equipment Corp. of
America, 225 Ark. 889, 895, 286 S.W.2d 323, 327 (1956) (corporation was practicing architecture without a license and the
corporation could not “hide behind the mask, that it has one architect licensed in Arkansas”). See also Sarko, Inc. v. Edwards,
252 Ark. 1082, 482 S.W.2d 623 (1972) (contract between C. Ray Edwards, who operated Edwards Plan Service, and Sarko, Inc.
for the provision of, inter alia, architectural services, was void where Edwards rendered those architectural services without
being licensed). Concerning the engineering services provided by Murray Company, the parties do not address the statutory
scheme set forth in the Arkansas Engineering Act and they do not cite case law specifically addressing that Act. In the absence
of adequate briefing concerning the structure and application of the Arkansas Engineering Act, this Court will not address
whether Murray Company satisfied the criteria for lawfully providing engineering services in the State of Arkansas.

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Id. 247 Ark. at 358-59, 445 S.W.2d at 898 (quoting Ark. Stats. § 66-4240). One of the insurance
companies sought to avoid its payment obligations under the contracts, arguing that the contracts
were unenforceable, but the Arkansas Supreme Court held that while the statute would prevent
enforcement of the contracts, the statute did not, in terms, declare the contract to be “null and
void,” and in the absence of such statutory language, recovery under the contract may be had by
way of quantum meruit. Id. The Court noted that “‘[s]uch recovery, ... is not because of the
contract, but is grounded squarely upon the proposition that, valuable services having been
rendered which have been accepted by the parties, it would be inequitable and unjust to permit
one party to substantially gain under the contract to the great and irreparable damage of the
other.’” Id. 247 Ark. at 359, 445 S.W.2d at 898-99 (quoting Gantt v. Ark. Power & Light Co.,
189 Ark. 449, 455, 74 S.W.2d 232, 234 (1934)). Cf. Sarko, 252 Ark. 1082, 482 S.W.2d 623
(plaintiff failed to plead quantum meruit as grounds for relief and, as a result, the quantum
meruit relief allowed in American Accident and Life Ins. Co. was not available; distinguishing
American Accident and Life Ins. Co. on that basis).
Like the statute at issue in American Accident and Life Ins. Co., the Arkansas
Architectural and Engineering Acts do not contain a penalty provision barring express or implied
contractual remedies. There being no such statutory language, and as Murray Company has pled
quantum meruit and/or promissory estoppel as grounds for relief, Murray Company is not
precluded from recovery under quantum meruit and/or promissory estoppel notwithstanding any
violation of the Arkansas Architectural and Engineering Acts.
C

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Given the Court’s disposition of the Hospital’s motion for summary judgment, the Court
grants Murray Company’s motion for partial summary judgment on the Hospital’s defenses
predicated on the Arkansas Contractors Licensing Law and the Arkansas Architectural and
Engineering Acts as follows: (1) Murray Company did not construct, or manage the construction
of, any building in violation of the Arkansas Contractors Licensing Law and Murray Company’s
design, planning, and other pre-construction services did not require a contractors license; (2)
Murray Company’s proposal(s) submitted prior to obtaining a contractor’s license did not
constitute a “bid” in violation of the Arkansas Contractors Licensing Law as it did not include a
GMP or a fixed price for services; and (3) the Arkansas Architectural and Engineering Acts do
not contain a penalty provision barring express or implied contractual remedies and, thus,
Murray Company is not precluded from recovery under quantum meruit and/or promissory
estoppel, Murray Company having pled quantum meruit and/or promissory estoppel as grounds
for relief.
III
The Court now turns to the motion of Cromwell to quash subpoena or for protective
order. Cromwell seeks to quash Murray Company’s subpoena seeking all files, emails,
documents, and plans in all forms in the hands of Cromwell concerning the Hospital expansion
at issue. The Court held a telephone conference on this motion on the morning of December 14,
2010. During that telephone conference, the parties agreed that Murray Company was entitled to
certain information and that once the Court ruled on the pending motions for summary judgment
(which were not then fully briefed), the parties would confer and agree to a time frame covering
information relevant to this action and set up a time when counsel for Murray Company could go

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to Cromwell’s premises and evaluate that information.4 To the extent Cromwell’s motion was
not resolved during the telephone conference, the Court hereby denies Cromwell’s motion to
quash subpoena or for protective order. Should the parties be unable to reach final agreement
concerning the information to which Murray Company is entitled, the parties may seek
appropriate relief from the Court.
IV
For the foregoing reasons, the Court denies the Hospital’s motion for summary judgment
[doc.#25], grants Murray Company’s cross-motion for partial summary judgment [doc.#30], and
denies the motion of Cromwell to quash subpoena or for protective order [doc.#16].
IT IS SO ORDERED this 22nd day of April 2011.

/s/Susan Webber Wright
UNITED STATES DISTRICT JUDGE

4

Some of the information has already been made available in the public domain.

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