PECK ORMSBY CONSTRUCTION COMPANY v. City of Rigby et al

Filing 145

MEMORANDUM AND ORDER Re: Motions for Summary Judgment 123 , 125 , and 128 . POCC's motion for summary judgment against Rigsby is DENIED; Travelers' motion for summary judgment against Rigby is DENIED; and Parkson's motion for summary judgment against Rigby is DENIED. Signed by Judge William B. Shubb. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (ja)

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UNITED STATES DISTRICT COURT
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FOR THE DISTRICT OF IDAHO
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PECK ORMSBY CONSTRUCTION
COMPANY

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Case No. CV 10-545-S-WBS

Plaintiff,

MEMORANDUM AND ORDER RE:
MOTIONS FOR SUMMARY JUDGMENT

v.
CITY OF RIGBY; PARKSON
CORPORATION; and WESTERN
SURETY COMPANY
Defendants.

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Plaintiff Peck Ormsby Construction Company (“POCC”)
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brought this action against defendants City of Rigby (“Rigby”),
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Parkson Corporation (“Parkson”), and Western Surety Company
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arising from a construction project in Rigby for which POCC was
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the contractor and Parkson the subcontractor.

Rigby subsequently

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filed a counter-claim against POCC, a cross-claim against
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Parkson, and a third-party claim against Travelers Casualty and
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Surety Corporation (“Travelers”) as co-guarantors of POCC’s
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Performance Bond.

Currently before the court are motions for

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summary judgment by POCC, Travelers, and Parkson pursuant to

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Federal Rule of Civil Procedure 56.

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I.

Relevant Facts and Procedural History

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Around December 2007, POCC submitted a bid (“Bid”) to

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construct a wastewater treatment plant in Rigby, Idaho.

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Aff. (Docket No. 123-26) Ex. A.)

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manufacturer of the plant’s cloth filtration system.

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won the bidding process and entered into an agreement (“Prime

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Contract”) with Rigby in January 2008 to construct the plant.

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(Id. Ex. B (“Prime Contract”).)

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(Peck

The Bid selected Parkson as the
(Id.)

POCC

Pursuant to the requirement in the Prime Contract,

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POCC, with Travelers, provided a performance bond to Rigby (Id.

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Ex. F.)

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Rigby with a performance bond (“Performance Guarantee”) for its

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equipment.

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Parkson, under its contract with POCC, also provided

(Mastin Aff. (Docket 128-3) Ex. C.)
Keller Associates (“Keller”), engineers for the

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project, reviewed and approved Parkson’s submittals for the

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filtration system in 2008.

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at 62, Ex. B at 40-41, Exs. D-12, D-51, D-52, D-53.)

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installed the Parkson filters.

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(Meuleman Aff. (Docket 123-3) Ex. A
POCC

(Id. Ex. B at 41.)

After installation, in August 2009, the filters failed

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in the initial startup testing.

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Ex. C.)

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filters so that they would function properly and meet

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specifications.

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(Williams Aff. (Docket 127-2)

During 2009, Parkson allegedly attempted to modify the

(Id. Ex. A; Mullen Depo. at 114:19-23.)

When POCC submitted an invoice in December 2009 to
receive payment for the remainder of the project minus a portion
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of the cloth filtration system, Rigby refused to pay the invoiced

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amount.

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time extension to complete the project.

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(Meuleman Aff. ¶¶ 12-15, Exs. H, I.)

POCC requested a

(Williams Aff. Ex. D.)

POCC then requested a second time extension, agreed

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upon in Change Order 22, which provided POCC until September 2010

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to “modify the Equipment as required to meet performance

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specifications.”

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incorporates the Plan of Action and the Acceptance Test Plan

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(“ATP”).

(Peck Aff. Ex. K.)

Change Order 22

The ATP provides for a two-phase testing of the

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equipment, with the second phase to last for seven days.

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The ATP also provides that “[i]f any item malfunctions during the

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test, the item shall be repaired and the test restarted at day

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zero with no credit given for the operating time before the

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aforementioned malfunction.”

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(Id.)

(Id. Ex. D.)

Change Order 22 also incorporated the Plan of Action,

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which provides that “upon successful execution of the ATP, the

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Plan of Action and approval by the City’s Engineer, in effect,

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[POCC] will have met and satisfied all its contractual

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requirements in its entirety and thus complete [POCC’s]

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contractual obligation.”

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(Id.)

Testing of the filters began in June 2010.

The filters

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passed the first stage of testing, but during the second phase a

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valve malfunctioned, allegedly due to the excessive backwash

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created by the filters.

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at 76:23, 78:8, 80:1, 81:2, 95:7-10.)

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ordered and installed several days after the test.

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Aff. Ex. C at 54-55, Ex. D-19.)

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(Williams Aff. Exs. A, C; Mullen Depo.
A replacement valve was

POCC requested a retest of the filters.
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(Meuleman

(Peck Aff. Ex.

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C.)

Rigby, however, sent POCC a letter formally rejecting the

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filters for five specified reasons.

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again requested to re-test the Parkson filters, but its request

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was denied.

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(Peck Aff. Ex. O.)

POCC

(Peck Aff. Exs. C, M-N, R.)

POCC filed suit against City of Rigby, Parkson, and

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Western Surety for breach of contract.

(Docket No. 1.)

Rigby’s

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Answer included a crossclaim against Parkson for indemnification

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and breach of contract, a crossclaim against Western Surety for

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breach of contract, and a counterclaim against POCC for the same.

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(Docket No. 19.)

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was subsequently dismissed, as was its indemnification claim

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against Parkson.

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Compel Arbitration (“Order”) (Docket No. 96).)

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compel arbitration, (Docket No. 60), but the motion was denied.

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(Id. at 6-9.)

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Rigby’s claim against Western Surety Company

(Am Mem. & Order Re: Mots. to Dismiss and to
Parkson moved to

After this court granted the motions to dismiss, POCC

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amended its Complaint and Rigby, in its Answer to the First

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Amended Complaint, brought a breach of contract claim against

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Travelers.

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(Docket No. 115.)
POCC, Travelers, and Parkson now bring motions for

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summary judgment against Rigby.

(Docket Nos. 123, 125, 128.)

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addition, POCC moves to strike certain exhibits and facts from

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Rigby’s opposition.

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II. Motion to Strike

(Docket No. 133.)

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POCC moved to strike Exhibits D, E, and F from the

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Affidavit of Bradley J. Williams under Federal Rule of Civil

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In

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Procedure 56(c)(4) due to lack of personal knowledge.1

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these objections were withdrawn after Rigby submitted the

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affidavit of James Mullen.2

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motion to strike will be denied.

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III. Motions for Summary Judgment

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(Docket 138-6.)

However,

Accordingly, POCC’s

Summary judgment is proper “if the movant shows that

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there is no genuine dispute as to any material fact and the

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movant is entitled to judgment as a matter of law.”

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P. 56(a).3

Fed. R. Civ.

A material fact is one that could affect the outcome

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of the suit, and a genuine issue is one that could permit a

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reasonable jury to enter a verdict in the non-moving party’s

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favor.

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(1986).

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burden of establishing the absence of a genuine issue of material

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fact and can satisfy this burden by presenting evidence that

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
The party moving for summary judgment bears the initial

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POCC also files objections to facts and expert
testimony in Rigby’s opposition brief. Even if the non-moving
party’s evidence is presented in a form that is currently
inadmissible, such evidence may be evaluated on a motion for
summary judgment so long as the moving party’s objections could
be cured at trial. Century 21 Real Estate LLC v. All Prof’l
Realty, Inc., Civ. Nos. 2:10-2751 WBS GGH, 2:10-2846 WBS GGH,
2:11-2497 WBS GGH, 2012 WL 3260452 at *10 (E.D. Cal. Aug. 8,
2012) (citing Burch v. Regents of the Univ. of Cal., 433 F. Supp.
2d 1110, 1119-20 (E.D. Cal. 2006)). Objections to evidence on
the ground that the evidence is irrelevant, speculative,
argumentative, vague and ambiguous, or constitutes an improper
legal conclusion are all duplicative of the summary judgment
standard itself. Id. POCC’s objections are therefore overruled.
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The court will cite to the Williams affidavit for the
purposes of this Order.
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Federal Rule of Civil Procedure 56 was revised and
rearranged effective December 1, 2010. However, as stated in the
Advisory Committee Notes to the 2010 Amendments to Rule 56,
“[t]he standard for granting summary judgment remains unchanged.”
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negates an essential element of the non-moving party’s case.

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Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

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Alternatively, the moving party can demonstrate that the

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non-moving party cannot produce evidence to support an essential

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element upon which it will bear the burden of proof at trial.

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Id.

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Once the moving party meets its initial burden, the

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burden shifts to the non-moving party to “designate ‘specific

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facts showing that there is a genuine issue for trial.’”

Id. at

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324 (quoting then-Fed. R. Civ. P. 56(e)).

To carry this burden,

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the non-moving party must “do more than simply show that there is

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some metaphysical doubt as to the material facts.”

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Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

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“The mere existence of a scintilla of evidence . . . will be

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insufficient; there must be evidence on which the jury could

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reasonably find for the [non-moving party].”

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at 252.

Matsushita

Anderson, 477 U.S.

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In deciding a summary judgment motion, the court must

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view the evidence in the light most favorable to the non-moving

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party and draw all justifiable inferences in its favor.

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255.

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and the drawing of legitimate inferences from the facts are jury

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functions, not those of a judge . . . ruling on a motion for

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summary judgment . . . .”

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Id. at

“Credibility determinations, the weighing of the evidence,

Id.

A. POCC’s Motion for Summary Judgment
First, POCC seeks summary judgment on Rigby’s

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counterclaim against it for breach of contract.

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moves for partial summary adjudication of the fact that Rigby
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Second, POCC

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wrongfully prevented it from completing its performance under the

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contract.

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the fact that Rigby wrongfully withheld retainage on the project.

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Finally, it seeks partial summary adjudication on the fact that

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it is entitled to prejudgment interest.

Third, POCC requests partial summary adjudication on

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Rigby’s Counterclaim for Breach of Contract

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In its counterclaim, Rigby contends that POCC

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materially breached the contract when POCC provided failing

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filters.

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When a contract includes a performance guarantee, “[a]

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contractor is required to follow the plans and specifications and

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when he does so, he cannot be held to guarantee that the work

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performed as required by this contract will . . . accomplish the

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purpose intended.”

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970, 972-73 (Idaho 1958) (quoting Puget Sound Nat. Bank of Tacoma

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v. C.B. Launch Const. Co., 245 P.2d 800, 805 (Idaho 1952)).

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Thus, when a contractor follows all contract specifications and

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performs in a workmanlike manner, “the responsibility rests upon

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the party who fathers the plan.”

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Flintic Stone Co. v. City of New York, 54 N.E. 661, 664 (N.Y.

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1899)).

B.R. Goodwin v. Village of Firth, 319 P.2d

Id. at 972 (quoting MacKnight

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Here, the contract documents require that POCC provide

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a filter that is manufactured by either Aqua-Aerobic or Parkson,

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(Peck Aff. Ex. E ¶ 2.23(A)), and that meets specifications which

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include, among other things, a minimum effective submerged

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filtration area, (id. at ¶ 2.05).

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the contrary, simply providing a Parkson filter does not satisfy

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its obligation under the contract.
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Despite POCC’s arguments to

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Rigby provides expert testimony that the filters’

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minimum effective submerged filtration area measured only 215.8

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square feet, far less than the 520 square feet required under the

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contract.

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it was undisputed that the contractor provided the correct

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materials for the job, here there is a dispute over whether the

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filters conformed to the contract specifications.

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(Williams Aff. Ex. C at 3.)

Unlike Goodwin, in which

Therefore, whether POCC breached the contract by
failing to provide conforming filters is a genuine issue of
material fact.

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2.

Prevention of Performance

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Under Idaho law, “a party who is prevented from

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performing by the party for whom the work is to be done may treat

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the contract as breached and may recover damages sustained.”

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Sullivan v. Bullock, 864 P.2d 184, 189 (Idaho Ct. App. 1993).

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explained by the Idaho courts:

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In any case where the plaintiff’s performance requires
the cooperation of the defendant, as in a contract to
serve or to make something from the defendant’s materials
or on his land, the defendant, by necessary implication,
promises to give this cooperation and if he fails to do
so, he is immediately liable although his only express
promise is to pay money at a future day.
Indeed, there is generally in a contract subject to
either an express or an implied condition an implied
promise not to prevent or hinder performance of the
condition. Such prevention, if the condition could
otherwise have been performed, is, therefore, an
immediate breach of contract, and if of sufficiently
serious character, damages for the loss of the entire
contract may be recovered.

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Id. at 187-88 (citing 11 Williston on Contracts § 1316 (3d ed.

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1968)).

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“To excuse a party’s nonperformance, however, the
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As

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conduct of the party preventing performance must be ‘wrongful’

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and ‘in excess of their legal rights.’”

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conduct of the party preventing performance must be outside what

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was permitted in the contract and ‘unjustified,’ or outside the

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reasonable contemplation of the parties when the contract was

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executed.”

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Id. at 188.

“[T]he

Id.
Change Order 22 provides that, should an item

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malfunction during testing, “the item shall be repaired and the

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test restarted.”

(Peck Aff. Ex. K.)

However, Change Order 22

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does not abrogate the city engineer’s right to “reject work4

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which engineer believes to be defective,5 or that will not

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produce a completed project that conforms to the contract

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documents or will prejudice the integrity of the design concept

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of the completed project as a functioning whole.”

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C ¶ 6.19(c).)

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(Peck Aff. Ex.

There is evidence that the city engineers refused

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further testing because the filters caused excessive backwash,

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which in turn caused the valve to malfunction.

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Ex. C.)

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right to reject work that “will prejudice the integrity . . . of

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the completed project as a functioning whole.”

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¶ 6.19(c).)

(Williams Aff.

Thus, Rigby was arguably exercising its contractual

(Peck Aff. Ex. C

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Under the Prime Contract, “work” is defined broadly to
include, in part, “[t]he entire construction or the various
separately identifiable parts thereof.” (Peck Aff. Ex. C Section
1.01(52).) The filters therefore qualify as “work.”
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“The word ‘defective,’ when modifying the word ‘Work,’
refers to Work that is unsatisfactory, faulty, or deficient in
that it: (a) does not conform to the Contract Documents . . . .”
(Peck Aff. Ex. C Section 1.02(D).)
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Since it is not clear that rejection of filters during

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the testing period was “outside the reasonable contemplation of

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the parties when the contract was executed,” Sullivan, 864 P.2d

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at 188, whether Rigby prevented POCC from completing the contract

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remains a genuine issue of material fact.

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3. Retainage

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POCC alleges that, even if the court does not find that

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Rigby prevented performance as a matter of law, Rigby must pay

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$375,710.36, which is the entirety of the contract price minus

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five percent of the cloth filters’ value, under Idaho Code

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section 54-1926.

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$380,000.

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The contractual value of the cloth filters is

(Peck Aff. Ex. H.)
Idaho Code section 54-1926 requires that

[p]ublic bodies requiring a performance bond or payment
bond in excess of fifty percent (50%) of the total
contract amount shall not be authorized to withhold from
the contractor or subcontractor any amount exceeding five
percent (5%) of the total amount payable as retainage.
Furthermore, the public body shall release to the
contractor any retainage for those portions of the
project accepted by the contracting public body and the
contractors as complete within thirty (30) days after
such acceptance.

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Idaho Code § 54-1926(3).
The reasons for a retainage statute have been explained
by the Idaho courts:
In the private sector, one furnishing labor or materials
can protect himself against nonpayment by either the
owner or contractor by filing a lien on the property in
question. However, the legislature has determined that
in the public sector such remedies are either unavailable
or would be unseemly and, hence, has enacted the Public
Contracts Bond Act. Such statutes provide a substitute
for the lien remedies available in the private sector.
Those statutes provide that when a public body enters
into a contract for the construction . . . of a public
works, it shall require the contractor to post bonds . .
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. . In the event of nonpayment, a cause of action is
authorized against said bonds.

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H-K Contractors, Inc. v. City of Firth, 611 P.2d 1009, 1010
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(Idaho 1979) (citations omitted).
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First, Rigby’s alleged withholding of $375,710.36 is
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just over four percent of the overall contract price of
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$8,784,928.08.
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Second, Rigby did not accept the cloth filters.

The

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Prime Agreement states that “[n]one of the following shall will
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constitute an acceptance of work: . . . [a]ny review and approval
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of a shop drawing or sample submittal or the issuance of a notice
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of acceptability by engineer.”

(Peck Ex. C ¶ 6.19(c).)

Keller’s

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approval of a design thus does not constitute acceptance of the
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equipment.

Furthermore, Rigby sent a formal letter to POCC

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specifically rejecting the cloth filters.

(Peck Aff. Ex. O.)

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Since Rigby never accepted the cloth filters, it was not required
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to release retainage for that portion of the project.
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Because Rigby’s withholding was less than five percent
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of the overall contract price and does not represent retainage
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for accepted work, Rigby is not required to pay POCC $375,710.36
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under Idaho Code section 54-1926(3).
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4.

Prejudgment Interest

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Finally, POCC argues that it is entitled to prejudgment
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interest on any damages award it could receive.

This issue is

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best resolved when the court can determine whether and how much
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POCC will recover in judgment.
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Overall, genuine disputes of material facts remain as
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to whether POCC breached the contract and whether Rigby
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wrongfully prevented POCC from completing its performance under

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the contract.

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retainage to POCC under Idaho Code section 54-1926(3) and the

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court cannot decide at this time whether liquidated damages are

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available.

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and partial summary adjudication will be denied.

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In addition, Rigby is not required to pay

Accordingly, plaintiff’s motion for summary judgment

B. Travelers’ Motion for Summary Judgment
“A surety is generally not liable on his undertaking
unless his principal is liable and in default.”

Ass’n de

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Azucareros de Guatemala v. U.S. Nat. Bank of Or., Portland Or.,

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423 F.2d 638, 641 (9th Cir. 1970).

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performance bond (“Bond”) in the amount of $8,603,000.000 naming

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Rigby as “Owner.”

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entitled to POCC’s defenses.

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material fact exists as to whether POCC is liable for breach of

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contract when it provided nonconforming filters.

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could be held liable, Travelers could be as well.

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Travelers and POCC executed a

(Peck Aff. Ex. F.)

Travelers is therefore

However, a genuine dispute of

Since POCC

In addition, the Bond does not bar Rigby’s claims

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against Travelers.

The Bond provides that, “[i]f there is no

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Owner Default, Surety’s obligation under this Bond shall arise

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after [lists conditions].”

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in relevant part, “[f]ailure of Owner . . . to pay Contractor as

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required by the Contract.”

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POCC, fails to show that Rigby breached its contractual

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obligations when it refused to pay POCC.

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argue that Rigby failed to meet any of the listed conditions.

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Therefore, whether Rigby’s actions were an “Owner Default” under

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the Bond is a genuine issue of material fact.

(Id.)

(Id.)

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“Owner Default” is defined as,

Here, however, Travelers, like

Travelers does not

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Accordingly, Travelers motion for summary judgment will
be denied.
C.

Parkson’s Motion for Summary Judgment

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Parkson seeks partial summary judgment to enforce the

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limitation on liability contained in the Performance Guarantee.

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The court addressed a similar argument in Parkson’s motion to

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compel arbitration.

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clause, Parkson unilaterally placed a maximum liability clause in

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the Performance Guarantee it was contractually obligated to give

(Order at 7-14.)

As with the arbitration

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to Rigby without the right to do so.6

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arbitration clause, Rigby never signed the Performance Guarantee

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nor affirmatively agreed to the maximum liability clause.

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As was the case with the

Parkson argues that POCC accepted the maximum liability

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clause when its engineers approved the Performance Guarantee.

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However, the scope of the engineers’ review was confined to the

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technical specifications of a project.

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Indeed, the engineer’s stamp of approval clearly states “[t]his

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check is only for review of general conformance with the design

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concept.”

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approved the Performance Guarantee, the scope of their agency was

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limited to approval of the technical aspects of the document and

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did not extend to acceptance of the maximum liability clause.

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(Mastin Aff. Ex. C.)

(Peck Ex. C ¶ 6.19(c).)

Thus, when the engineers

Parkson also argues that, by suing on the Performance

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Guarantee, Rigby ratified the engineers’ acceptance even if

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acceptance was originally outside their scope of authority.

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In deciding this motion, as in the prior Order, the
court makes no judgment regarding the merits of Rigby’s
underlying breach of contract claim. See United Computer Sys.,
Inc. v. AT & T Corp., 298 F.3d 756, 766 (9th Cir. 2002).
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Under Idaho law, “a principal cannot repudiate a contract entered

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into by its agents in excess of the agents’ authority, and at the

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same time accept and retain the benefits that accrue from such

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act.”

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(Idaho 1926) (holding that a cross-complaint filed by defendant

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on a disputed contract ratified the contract).

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argues that, once ratified, Rigby may not pick and choose between

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applicable provisions.

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Shake v. Payette Valley Produce Exch., 245 P. 683, 684

Parkson further

By suing on a disputed contract, however, a party does

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not ratify terms that it never accepted.

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View Hosp., L.L.C. v. Sahara, Inc., Civ. No. 07-464 BLW, 2011 WL

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4962183, at *30 (D. Idaho Oct. 17, 2011) (denying a motion for

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summary judgment where there was no meeting of the minds

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regarding a limitation of liability clause).

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were deemed to have ratified the Performance Guarantee by suing

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under it, such ratification would not extend to the maximum

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liability clause.7

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See, e.g., Mountain

Thus, even if Rigby

For the foregoing reasons, because Rigby never agreed

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to or ratified the maximum liability provision in the Performance

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Guarantee, the court will deny Parkson’s motion for partial

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summary judgment.

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IT IS THEREFORE ORDERED that:

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(1) POCC’s motion for summary judgment against Rigsby

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be, and the same hereby is, DENIED;

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The court need not address here whether Rigby may
ultimately recover on the Performance Guarantee without being
bound by all of its terms. Nor need the court decide whether,
because the Performance Guarantee was a preexisting duty between
POCC and Parkson, Rigby may recover on it at all. Those
questions are not before the court on these motions.

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(2) Travelers’ motion for summary judgment against
Rigby be, and the same hereby is, DENIED; and

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(3) Parkson’s motion for summary judgment against Rigby

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be, and the same hereby is, DENIED.

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DATED:

October 22, 2012

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