North Alabama Fabricating Company, Inc. v. Bedeschi Mid-West Conveyor Company, LLC et al

Filing 106

MEMORANDUM AND ORDER granting in part and denying in part 82 Motion for Partial Summary Judgment; denying 84 Motion for Summary Judgment. Signed by District Judge Daniel D. Crabtree on 05/14/2018. (mig)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
NORTH ALABAMA FABRICATING
COMPANY, INC.,
Plaintiff,
v.
Case No. 16-2740-DDC-TJJ
BEDESCHI MID-WEST CONVEYOR
COMPANY, LLC, et al.,
Defendants.
_____________________________________
MEMORANDUM AND ORDER
Plaintiff North Alabama Fabricating Company, Inc. brings this lawsuit, asserting breach
of contract and fraud claims, against four defendants: (1) Bedeschi Mid-West Conveyor
Company, LLC (“Bedeschi”); (2) Dearborn Mid-West Conveyor Company, Inc.; (3) Larry Harp;
and (4) Braxton Jones. Defendant Bedeschi responded to plaintiff’s Complaint by asserting a
Counterclaim, alleging breach of contract and breach of warranty claims and seeking a
declaratory judgment that it never breached the parties’ contract.
This matter comes before the court on the parties’ cross-motions for summary judgment.
Defendants have filed a Joint Motion for Partial Summary Judgment (Doc. 82). Defendants’
motion asks the court to grant summary judgment against two of plaintiff’s three claims:
(1) Count II’s claim for fraud, promissory fraud, and misrepresentation; and (2) Count III’s claim
for fraudulent suppression.
Plaintiff also has filed a Motion for Partial Summary Judgment (Doc. 84). Plaintiff’s
motion asks the court to grant summary judgment against: (1) Bedeschi’s counterclaims for
breach of contract and breach of warranty; (2) Bedeschi’s declaratory judgment claim; and (3)

Bedeschi’s affirmative defense asserting a setoff. Also, plaintiff asks the court to enter summary
judgment in its favor on plaintiff’s assertion that Bedeschi changed the “scope of work,” thus
entitling plaintiff to additional payment under the parties’ contract.
After considering the parties’ arguments, the court grants defendants’ summary judgment
motion in part and denies in it part. And the court denies plaintiff’s summary judgment motion.
The court explains why below.
I.

Uncontroverted Facts
The following facts are either stipulated facts taken from the Pretrial Order (Doc. 79), or

uncontroverted for purposes of the parties’ summary judgment motions.
On July 9, 2014, Dearborn Mid-West Conveyor Company, Inc. (“Dearborn”) entered into
a contract with Essar Projects USA, LLC (“Essar”). Dearborn agreed to design, manufacture,
and erect one or more “Iron Pellet” conveyor systems at iron and iron ore processing facilities
owned or operated by Essar in Minnesota (“the Essar Project”). The contract provided that
Dearborn could engage necessary or appropriate subcontractors to facilitate its performance
under the contract, including one or more subcontractors responsible for manufacturing,
fabricating, and delivering to Essar the parts, pieces, components, and materials used to construct
the conveyor systems.
Dearborn then subcontracted its performance under the Essar Project contract to
Bedeschi—a newly created company. Bedeschi engages in the design, integration, and
installation of material handling systems including “conveyor systems.” The principal
consumers of conveyor systems are companies who: generate electrical power; mine, extract,
refine, or process minerals, cement, pulp and paper; or transport goods and commodities by sea.

2

Bedeschi does not manufacture conveyor systems. Instead, it engineers the desired equipment
and subcontracts the manufacturing to outside steel fabricators.
Dearborn and Bedeschi entered into an asset purchase agreement. It provided that
Dearborn would subcontract its obligations under its contract with Essar to Bedeschi. It also
provided that Dearborn would remit to Bedeschi all amounts Essar paid Dearborn. Bedeschi
never had a contract with Essar. Instead, as described, it served as Dearborn’s subcontractor on
the Essar Project.
Bedeschi Contracts with NAFCO
After assuming its subcontractor obligations on the Essar Project, Bedeschi entered into
written contracts with plaintiff North Alabama Fabricating Company, Inc. (“NAFCO”) for
NAFCO to manufacture fabricated steel equipment and support structures for use in the Essar
Project’s construction. The Blanket Subcontract Agreement (Doc. 83-4) and Subcontract
Purchase Order and accompanying Terms and Conditions (Doc. 83-5) is the contract between
Bedeschi and NAFCO for the Essar Project. The court refers to these documents collectively as
“the Contract”. The parties entered the agreements in September 2015.
Before it signed the Contract, NAFCO never requested Bedeschi’s financial statements or
any other information about Bedeschi, its business, assets, organization, or affiliations. In
declarations submitted on summary judgment, Larry Harp (Bedeschi’s President and CEO) and
Braxton Jones (a Dearborn project manager) attest that when the parties entered the Contract in
September 2015, neither Mr. Harp, Mr. Jones, nor Bedeschi intended not to fulfill Bedeschi’s
obligations under the Contract. Also, neither Mr. Harp, Mr. Jones, nor Bedeschi knew any facts
that would or could prevent Bedeschi from performing its obligations under the Contract. Mr.
Harp and Mr. Jones further attest that when the parties entered the Contract, Bedeschi intended

3

to pay NAFCO for its performance under the Contract in the amounts and at the times the
Contract required. Also, they knew no facts suggesting that Bedeschi would not or could not pay
NAFCO as the Contract required. Mr. Harp and Mr. Jones attest that, when the parties inserted
the schedule for NAFCO’s performance under the contract, Bedeschi intended to keep, follow,
and adhere to the schedule. Also, they knew no facts suggesting that Bedeschi would not keep
the schedule or that it would need to disregard the schedule. And Mr. Harp and Mr. Jones attest
that, when the parties entered the Contract, Bedeschi intended to engage a shipper who would
provide trucks to NAFCO for loading and transporting fabricated steel to the Essar Project
jobsite. Finally, Mr. Harp and Mr. Jones knew of no facts that would prevent Bedeschi from
establishing a shipping method for the fabricated steel.
The Terms of the Blanket Subcontract Agreement
The parties’ Blanket Subcontract Agreement (“Subcontract”) provided that Bedeschi
would issue one or more purchase orders to NAFCO. The purchase orders were deemed to
include the terms and provisions of the Subcontract, to define the scope of NAFCO’s work
(including its start and completion dates), and to establish the compensation paid to NAFCO.
The Subcontract required NAFCO to furnish all labor, management, supervision, engineering,
materials, tools, equipment, construction utilities, supplies, samples, models, temporary
structures, and facilities as well as hoisting, transportation, unloading, storage, hauling, and all
other items necessary to perform the scope of work.
Article 4 of the Subcontract established the subcontract price. It provided that each
purchase order issued by Bedeschi to NAFCO would specify the full and complete compensation
for performing the work described in the purchase order. Article 4 also provided that Bedeschi is

4

not liable for any amount exceeding those amounts unless a written change order was issued
under Article 17.
The Subcontract permitted Bedeschi to withhold all or part of any payment if Bedeschi
deemed it necessary to enforce NAFCO’s obligations or to protect Essar from loss. A
withholding of payment could include a withholding resulting from NAFCO’s performance of
defective work under any purchase order.
The Subcontract required NAFCO to provide adequate protection, care, and maintenance
for and to bear all risk of damage to, or loss of: all materials and equipment it furnished; all
materials, supplies, and equipment it delivered to Bedeschi or Essar intended for incorporation or
use in the performance of any work; and all work completed or in progress until the earlier of
Bedeschi’s written final acceptance or possession of the work by Bedeschi, Essar, or one of their
other contractors. Also, the Subcontract required NAFCO to bear the expense of all overtime
and additional labor necessary to meet the completion date established by any purchase order if
caused by NAFCO’s failure to perform according to the terms of the Subcontract.
The Subcontract provided that, in the event of a dispute between Bedeschi and NAFCO
that also involved Essar in any way, the provisions of all contract documents, including the
Bedeschi-Essar Project contract, were binding on NAFCO. Also, it required NAFCO to
complete any portion or portions of any work within the time specified by the purchase order.
And it required NAFCO to modify the order of performance as necessary to comply with
Bedeschi or Essar’s directives. NAFCO was entitled to extra compensation or an extension of
time for completion, or both, only if it complied with the Subcontract’s Article 17. Article 17(B)
permitted NAFCO to seek changes to the agreement, including a price increase, but it required,
among other things, that NAFCO submit the requested change in writing and Bedeschi approve

5

the change in writing. But Article 17(A) permitted Bedeschi to make “minor changes” in the
work (ones not involving a material increase in cost) with no adjustments made to the
subcontract price.
Also, the Subcontract required that, upon receiving written notice from Bedeschi,
NAFCO would suspend shipment and delivery of material and stop any part or all of the work or
operations performed under the contract for any periods of time Bedeschi designated in the
notice. In such cases, NAFCO’s reimbursement, if any, was limited to its actual costs and
expenses without any overhead or anticipated profit for incomplete work.
The Subcontract provided Bedeschi the right, at any time, to terminate NAFCO’s
engagement under the Subcontract and any ensuing purchase orders by giving NAFCO written
notice. The written notice became effective 10 days after NAFCO received it. After receiving
written notice of termination, the Subcontract required NAFCO immediately to discontinue the
work that Bedeschi had terminated and to stop placing orders for material, equipment, and
supplies in connection with the work. But it permitted NAFCO to perform work necessary to
preserve and protect work already in progress or in transit and to protect material and equipment
on the work premises or in transit thereto. The Subcontract provided that neither Bedeschi nor
Essar is liable for any damages or loss of anticipated profits because of such termination. If
Essar requested or directed the termination, the Subcontract prohibits NAFCO from recovering
any costs, expenses, or other items resulting from the termination except to the extent that
Bedeschi could recover the same from Essar for work that NAFCO performed.
Also, the Subcontract gave Bedeschi the right to terminate the agreement, or any portion
thereof, and take possession of the finished and unfinished work by whatever method it deems
expedient, upon 30-days’ notice, in the event, among other things, that NAFCO: failed to

6

prosecute any work with promptness or diligence; refused or failed to supply enough properly
skilled workers or proper materials; refused or failed to make prompt payment for materials or
labor on any project; or otherwise violated any of its agreements with Bedeschi.
NAFCO recognized that the work and materials that it produced under the Subcontract
and any ensuing purchase order was of a special and unique nature, and it constituted a critical
part of Bedeschi’s own work for and on behalf of Essar. Also, NAFCO recognized that Bedeschi
would suffer irreparable harm and damages, including irreparable damage to its reputation and
standing should NAFCO fail to make such work and materials available to Bedeschi, when
needed.
The Subcontract provided that, in the event either NAFCO or Bedeschi failed to comply
with any term, condition, requirement, or provision of the agreement or the purchase orders or
otherwise defaulted upon any obligation contained in or imposed by the agreement or the
purchases orders, the defaulting party would be liable for and must pay to the non-defaulting
party all losses, damages, costs, and expenses of every kind and nature including reasonable
attorney’s fees incurred by the non-defaulting party in connection with the default.
Finally, the Subcontract provided, if NAFCO defaulted and the unpaid balance of the
subcontract price is less than the amount by which the Subcontract permits reduction of the
subcontract price, Bedeschi may deduct the difference from any sums payable to NAFCO.
The Terms of the Subcontract Purchase Order
On October 5, 2016, NAFCO executed an acknowledgement copy of the Subcontract
Purchase Order. The Subcontract Purchase Order provided that $4,637,371 was the total price
for NAFCO’s performance. The Subcontract Purchase Order required Bedeschi to pay the sum
in serial payments equal to the agreed price for all materials and goods actually delivered within

7

the 30-day period next-preceding such payment, subject to a retention of 5%. The Subcontract
Purchase Order provided that Bedeschi would not consider charges for extra or additional
equipment, material, or work without prior written authorization from Bedeschi’s Project
Manager. Under the Subcontract Purchase Order, NAFCO expressly warranted that all goods or
services covered by the agreement would be “of first class quality and . . . conform to the
specifications, drawings, samples or descriptions furnished to or by” Bedeschi; that they would
be “merchantable, of good material and free from defects, latent or patent;” and that since
NAFCO knew of Bedeschi’s “intended use” for such products, NAFCO “expressly warrant[ed]
that all goods covered . . . [had] been selected, designed, manufactured, or assembled by”
NAFCO “based on” Bedeschi’s “stated use and” would “be fit and sufficient for the particular
purposes intended by” Bedeschi. Doc. 83-5 at 3.
The parties’ Subcontract Purchase Order and attachments included several requirements
governing NAFCO’s work for the Essar Project. One of the attachments is the Subcontract
Purchase Order ’s “Terms and Conditions.” Bedeschi drafted the “Terms and Conditions” using
a form that it uses for other projects. The Subcontract Purchase Order required that NAFCO’s
work generally would consist of all detailing, fabrication, and painting as outlined in the
“General Instructions to” NAFCO as well as the “Level of Assembly” matrix. The Subcontract
Purchase Order required NAFCO to manufacture, construct, and fabricate “Crusher Concentrate
Area Conveyors,” “Pellet Plant Area Conveyors,” and “Pellet Product Area Conveyors” as well
as an inventory of spare parts. Id. at 9–11. The Subcontract Purchase Order’s prices included:
the unloading and storage of materials; preparation of shipping documents, efficient truck
loading, dunnage, and strapping of material for shipping to the jobsite; and trucking arranged by
NAFCO using Bedeschi’s preferred carriers and third party billing. The Subcontract Purchase

8

Order includes the term “FOB Origin.” This term means that, excluding warranty, NAFCO’s
responsibility for its goods ends when NAFCO loads the goods onto shipping trucks at
NAFCO’s facilities in Alabama. Also, once NAFCO loads the goods onto the shipping trucks,
title to the goods passes from NAFCO to Bedeschi.
Section 5 of the “Terms and Conditions” provides:
[Bedeschi] reserves the right at any time to direct changes, or cause [NAFCO] to
make changes to drawings and specifications of the goods or to otherwise change
the scope of the work covered by this [purchase] order, including work with
respect to such matters as inspection, testing or quality control, and [NAFCO]
agrees to promptly make such changes; any difference in price or time of
performance resulting from such changes shall be equitably adjusted by
[Bedeschi] after receipt of documentation in such form and detail as [Bedeschi]
may direct. Any changes to this order shall be made in accordance with
Paragraph 27.
Id. at 2. Section 27 provides: “This Order may only be modified by a purchase order
amendment/alteration issued by [Bedeschi].” Id. at 5.
Section 22 of the “Terms and Conditions” provides:
Setoff
In addition to any right of set-off provided by law, all amounts due [NAFCO]
shall be considered net of indebtedness of [NAFCO] to [Bedeschi] and its
subsidiaries; and [Bedeschi] may deduct any amounts due from [NAFCO] to
[Bedeschi] and its subsidiaries from any sums due or to become due from
[Bedeschi] or its subsidiaries to [NAFCO].
Id. at 4.
The Subcontract Purchase Order also contains an attached “Table of Contents” listing
additional provisions incorporated into the parties’ Contract. Section 5 incorporates the
“Specifications and Codes” of several outside authorities, including those of the American
Institute of Steel Construction (“AISC”). Id. at 9. The AISC’s Code of Standard Practice for
Steel Buildings and Bridges (“AISC Code”) is a publication setting forth the industry “trade

9

practices . . . involved in the design, purchase, fabrication and erection of structural steel.” Doc.
85-5 at 4.
Section 1.1 of the AISC Code provides: “In the absence of specific instructions to the
contrary in the contract documents, the trade practices that are defined in this code shall govern
the fabrication and erection of structural steel.” Id. at 14. The Commentary Section 1.1 of the
AISC Code states: “This code is not intended to . . . change the duties and responsibilities of the
owner, contractor, architect or general engineer of record from those set forth in the contract
documents; nor assign to the owner, architect or general engineer of record any duty or authority
to undertake responsibility inconsistent with the provisions of the contract documents.” Id.
Section 9.4.1 of the AISC Code provides:
When the scope of work and responsibilities of the fabricator and the erector are
changed from those previously established in the contract documents, an
appropriate modification of the contract price shall be made. In computing the
contract price adjustment, the fabricator and the erector shall consider the quantity
of work that is added or deleted, the modifications in the character of the work
and the timeliness of the change with respect to the status of material ordering,
detailing, fabrication and erection operations.
Id. at 76. Section 9.4.3 of the AISC Code states:
Price-per-pound and price-per-item contracts shall provide for additions or
deletions to the quantity of work that are made prior to the time the work is
released for construction. When changes are made to the character of the work at
any time, or when additions and/or deletions are made to the quantity of the work
after it is released for detailing, fabrication or erection, the contract price shall be
equitably adjusted.
Id.
Performance of the Contract
In November and December 2015, NAFCO delivered eight shipments of fabricated steel
to the Essar Project, as the parties’ Contract required. Bedeschi paid NAFCO in full for those
deliveries less retainage, after it received payment itself.
10

In the fall of 2015, construction on the Essar Project stopped because the project owner
was unable to secure additional funding needed to finish construction and commence production.
Then, in December 2015, Essar failed to provide proof of an extension of a Letter of Credit as a
method of payment for invoices submitted for work on the Essar Project.
On December 22, 2015, Bedeschi sent a letter to NAFCO. It stated that Bedeschi had
given Notice of Default to the Essar Project owner on account of its failure to provide and
maintain letters of credit as a method for payment of invoices submitted for work performed on
the Essar Project. The letter invoked the parties’ Contract, specifically Section 3 of the Terms
and Conditions of the Subcontract Purchase Order. And it instructed NAFCO to suspend all
further shipments to the Essar Project while Bedeschi continued to pursue issuance of compliant
letters of credit or other credit facilities from Essar that would assure payment and permit
NAFCO to resume shipment. Bedeschi’s temporary suspension applied to shipments of material
then in the process of fabrication as well as all future shipments.
On December 23, 2015, NAFCO sent a letter to Bedeschi. It reported that NAFCO
would suspend further operations and shipments and await reinstatement of the suspended work.
NAFCO then sent invoices to Bedeschi for the additional costs NAFCO had incurred because of
the work’s suspension, as provided by Article 24 of the Bedeschi-NAFCO Subcontract.
Bedeschi never paid those invoices.
In an email dated March 28, 2016 and sent to NAFCO, Mr. Jones (a Dearborn Project
Manager) told NAFCO that it should include a line item in its invoice for interest—or the cost of
money—because Bedeschi needed to show the separate charge when it presented a request for a
change order to Essar. Mr. Jones noted that Mr. Harp (Bedeschi’s President and CEO) had
suggested during an earlier conference call that NAFCO include this line item. On March 31,

11

2016, NAFCO responded to Mr. Jones’s email by providing an updated change order request that
included the “cost of money” at $6,750 per month for the four months while Bedeschi had
suspended NAFCO’s work. Doc. 97-17 at 1. Bedeschi never responded to NAFCO’s March 31
email. It also never contested the “cost of money” line item.
On May 2, 2016, Bedeschi and NAFCO representatives met to discuss the possibility of
Bedeschi lifting the temporary suspension. Mr. Harp suggested to NAFCO that the best way for
it to get paid for materials NAFCO had constructed was to ship them to the Essar Project. The
parties agreed that, if Bedeschi agreed to lift the suspension, the payment terms established in the
Contract would continue to control. But John Ralph Parrish (NAFCO’s President) testified that
Bedeschi offered to pay NAFCO interest if NAFCO resumed its shipments. During the meeting,
Bedeschi never asked NAFCO to change the terms of the parties’ Contract. To the contrary, the
parties agreed that Bedeschi would be obligated to satisfy all outstanding invoices. But Bedeschi
also told NAFCO that it would make payment to NAFCO when Bedeschi itself was paid for its
work on the Essar Project.
At the May 2 meeting, NAFCO asked Bedeschi to provide it with a letter of credit to
ensure payment. Bedeschi refused. Also at the May 2 meeting, NAFCO asked Bedeschi to enter
into a written change order reflecting that it would pay NAFCO additional amounts that NAFCO
claimed it was owed for its performance under the Contract. Bedeschi refused to enter or issue
any such change order.
Later in May, Mr. Harp spoke with Jim Smothers (a NAFCO employee) about NAFCO’s
work on the Essar Project. Mr. Harp told Mr. Smothers that Bedeschi would pay NAFCO when
Bedeschi itself received payment for the Essar Project. Also, Mr. Harp told Mr. Smothers that, if
NAFCO resumed shipping fabricated steel to the Essar Project, Bedeschi would pay NAFCO

12

when Bedeschi was paid. Also during May 2016, Mr. Jones told NAFCO that Bedeschi needed
Essar to pay invoices so that it could pay NAFCO for its work on the Essar Project. Mr. Jones
told NAFCO that Bedeschi did not have the ability to pay NAFCO until Essar made its
payments. When Mr. Jones made these representations, he believes he relied on information that
he received from either Mr. Harp or Bedeschi’s Controller, Nancy Burris, about the company’s
finances.
On May 4, 2016, Bedeschi sent a letter to NAFCO lifting the temporary suspension and
directing NAFCO to resume shipments immediately. The letter asked NAFCO to ship the
material as quickly as possible so that Bedeschi could be paid under a letter of credit that
required delivery of the materials on or before June 10, 2016. More specifically, the accelerated
shipment date required NAFCO to paint and ship 300 tons of fabricated steel within four to five
weeks. Bedeschi acknowledges that this order involved a lot of steel and amounted to “a tall
order.” Doc. 85-3 at 133 (Jones Dep. 389:6–12). The letter also explained that Bedeschi would
pay NAFCO once it had received a corresponding payment for the materials from Essar.
After it received the May 4 letter, NAFCO informed Bedeschi that, given the accelerated
shipment date, it believed Bedeschi would be responsible for NAFCO’s increased costs arising
from the earlier suspension and future accelerated schedule. Mr. Harp and Mr. Jones represented
to NAFCO’s President that Bedeschi would compensate NAFCO for those expenses. Mr. Jones,
testifying in his capacity as Bedeschi’s designated corporate representative, testified that before
resuming the shipments in May 2016, “Bedeschi knew it was going to have to pay NAFCO
amounts that weren’t provided for in the parties’ contract.” Doc. 85-3 at 113 (Jones Dep. 323:2–
6). Also, Mr. Jones testified that Bedeschi’s suspension of shipments in December 2015, and its
resumption of shipments on an expedited basis in May 2016, constituted a significant change to

13

NAFCO’s work under the Contract. Still, NAFCO and Bedeschi never changed the payment
terms as established by the Subcontract Purchase Order and Terms and Conditions.
On May 10, 2016, Mr. Jones told NAFCO that Bedeschi would pay NAFCO when Essar
paid Bedeschi. On May 11, 2016, Mr. Jones sent an email to NAFCO that again explained that
Bedeschi would pay NAFCO when it received the corresponding payment from Essar.
Between May and July 2016, NAFCO delivered 34 more loads of fabricated steel totaling
more than $1.3 million in product. Bedeschi assured NAFCO that the letter of credit provided
the necessary surety to allow Bedeschi to compensate NAFCO for its work. In response,
NAFCO repeatedly told Bedeschi that its payment obligations to NAFCO were independent of
any compensation it might receive under the letter of credit. NAFCO repeatedly has declined
any attempts to amend or alter the parties’ Contract. Instead, it has reserved its rights under that
agreement.
Bedeschi Receives Payment from Essar
Essar eventually paid Dearborn more than $16 million for the Essar Project. Dearborn
has paid Bedeschi all amounts it has received from Essar. Bedeschi received the balance of the
payment after NAFCO filed this lawsuit. Bedeschi never informed NAFCO that Essar had paid
Dearborn the $16 million. Mr. Jones testified that the payment had occurred just recently—after
this lawsuit was filed. Mr. Jones acknowledged that Bedeschi had informed NAFCO several
times that Essar had made no payments to Dearborn. But Mr. Jones testified that these
statements were accurate when Bedeschi made them because Essar had not yet paid Dearborn.
Bedeschi now has received payment (from Essar through Dearborn) for 39 of the 42
loads of steel that NAFCO delivered to the Essar Project. Bedeschi has not paid NAFCO’s
invoices because the parties have not agreed on the amount that Bedeschi owes NAFCO.

14

Bedeschi has told NAFCO several times that Bedeschi could not pay its invoices because
NAFCO had not provided sufficient documentation to support them. Mr. Jones described the
invoices as “not yet valid” because they lack proper documentation. Doc. 97-2 at 48–49 (Jones
Dep. 260:20–261:8). And for this reason, Bedeschi has not paid the invoices. Bedeschi
acknowledges, though, that its suspension and resumption of shipments probably caused
NAFCO to incur increases in the cost of work, costs stemming from inefficiencies, and loss of
productivity. But Bedeschi has not received information showing that NAFCO experienced
these increases from the suspension and resumption of shipments.
On October 4, 2017, Bedeschi paid NAFCO $944,378.30. Bedeschi believed it owed
NAFCO this amount for the final 34 shipments of product under the Contract, plus a portion of
the additional charges that NAFCO had claimed. Bedeschi also provided a reconciliation
showing the method Bedeschi had used to calculate the payment amount. This payment was the
first one that Bedeschi made for the 34 shipments that NAFCO had delivered between May and
July 2016.
Bedeschi’s Estimates of Costs for the Essar Project
After Bedeschi suspended NAFCO’s work in December 2015, but before it resumed
NAFCO’s shipments to Essar in May 2016, Mr. Jones prepared a document titled “Essar Vendor
Recap.” Mr. Jones prepared the Essar Vendor Recap document to estimate Bedeschi’s potential
exposure to its vendors, including NAFCO, on the Essar project. As of February 22, 2016 (when
Mr. Jones sent the Essar Vendor Recap in an email), Bedeschi estimated that it owed NAFCO
$1,297,425.40. Mr. Jones reached this estimate using the information that he had at the time.
And he based the estimate on Essar potentially cancelling the project. So the estimate included

15

costs NAFCO had incurred as of February 22, 2016, but not additional costs NAFCO would
incur if Bedeschi resumed shipments.
Mr. Jones also drafted a document titled “NAFCO Estimate Summary.” He prepared this
document to estimate NAFCO’s “hard costs” for the Essar project. Doc. 85-3 at 143 (Jones Dep.
410:20–24). The NAFCO Estimate Summary reflects Bedeschi’s estimation of NAFCO’s cost
of materials based on average cost per pound, buyouts and additional engineering changes,
storage, and unabsorbed detailing. The NAFCO Estimate Summary does not include NAFCO’s
costs for painting the steel.
The NAFCO Estimate Summary document bears a date of August 2, 2016—showing that
it was printed on that date, not created. Mr. Jones guesses that he created the document before
August 2, 2016, but not long before that date. He also believes that he created the document
after June 10, 2016, when NAFCO completed shipments to the project.
The NAFCO Estimate Summary document includes a “Current Estimate” of its liability
to NAFCO of $1,388,815.22 and an “Upper Bound” estimate of $1,712,815.22. Mr. Jones
created this document before Bedeschi paid NAFCO $944,378.30—the amount Bedeschi
believed it owed NAFCO for the final loads, plus extras.
Warranty Issues
Mr. Harp, Mr. Jones, and Skip Moore (the head of Bedeschi’s quality and safety
department) testified that NAFCO produces quality goods. But Mr. Jones testified that Bedeschi
believes that NAFCO defaulted on its Contract obligations in three distinct ways: (1) NAFCO
failed to submit sufficient back up documentation with its invoices; (2) NAFCO loaded its goods
onto Bedeschi’s shipping trucks unsafely, and (3) the paint on NAFCO’s goods are not
sufficiently thick.

16

Mr. Harp and Mr. Jones testified that Bedeschi never provided any notice to NAFCO that
the goods it had delivered to Essar were non-conforming. But Mr. Harp testified that he recently
had learned—maybe a couple of weeks before the deposition—about concerns with the goods’
paint thickness. Also, Mr. Harp testified that Bedeschi would not discover any other potential
concerns about the goods’ conformity until the goods were erected at the jobsite. Mr. Harp
testified that Bedeschi’s concerns about paint thickness arose after it reviewed documents that
NAFCO had provided to it on May 2, 2017.
When Mr. Harp was deposed in this case, no one from Bedeschi had investigated yet the
concerns about paint thickness. But, after Mr. Harp and Mr. Jones’s depositions—on August 23,
2017—Bedeschi delivered to NAFCO an Inspection Report that describes how NAFCO’s goods
are non-conforming. Specifically, the Inspection Report asserts that, on August 10, 2017,
Bedeschi inspected the goods at the Essar Project jobsite. And it asserts that the inspection
revealed that the paint thickness was inadequate and did not conform to the parties’ Contract.
Bedeschi’s concern about paint thickness is one of the reasons that it has withheld payment from
NAFCO. NAFCO never has repainted the fabricated steel or otherwise cured the purported paint
defects.
NAFCO denies that the paint on the fabricated steel that it delivered to the Essar Project
jobsite fails to conform with the Contract’s specifications. Also, NAFCO denies that the paint
on its goods is defective. NAFCO’s President, John Ralph Parrish, questions the Inspection
Report’s validity because NAFCO delivered more than 4,000 pieces to the jobsite but the Report
recorded observations about 19 pieces only. Also, after reviewing photographs attached to the
Report, Mr. Parrish questioned whether other issues such as shipping damage or dirt marks
account for the “rusted conditions” identified by the Report.

17

Before the August 10, 2017 inspection, Bedeschi never had inspected the goods NAFCO
had supplied to the Essar Project jobsite. Also, this inspection was the first time that Bedeschi
had inspected the final 34 loads that NAFCO delivered between May and July 2016. Mr. Jones
testified that Essar never prevented Bedeschi from inspecting the goods at the Essar Project
jobsite. Bedeschi never performed earlier inspections because it did not have time to do so.
After July 8, 2016, Bedeschi could not access the Essar Project jobsite because Essar filed for
bankruptcy on that date. But, after August 3, 2017, Bedeschi secured permission to enter the
jobsite to inspect NAFCO’s fabricated steel.
In November and December 2015, Bedeschi performed two inspections of NAFCO’s
facilities during the fabrication process. Bedeschi observed a limited number of
nonconformities. And it gave notice to NAFCO of the non-conforming work. NAFCO
remedied that work after receiving Bedeschi’s notice.
After NAFCO filed this lawsuit, Bedeschi complained to NAFCO that it had delivered
unassembled goods to the Essar Project.1 Bedeschi never made such complaints before the
lawsuit’s filing. And Bedeschi never had returned any goods back to NAFCO because they were
unassembled.
Bedeschi does not know whose job it is to assemble the goods that NAFCO supplies. But
Mr. Jones testified that NAFCO had an obligation to assemble component parts together.
Bedeschi does not know if Essar has hired someone to assemble the goods or whether someone
ever will assemble the goods. When NAFCO manufactured and delivered the first eight
shipments, Bedeschi had not provided NAFCO with all the components required to assemble the

1
The term “assembling” goods means to put the various individual components together into a
complete conveyor system.

18

goods because the components were not yet manufactured. And to date, Bedeschi has not
provided to NAFCO all of the equipment necessary for NAFCO to assemble the goods.
After Bedeschi directed NAFCO to resume shipments in May 2016, Bedeschi told
NAFCO to assemble the goods “to the extent possible.” Doc. 85-18 at 5. Mr. Jones explained
that Bedeschi’s request to assemble the goods “to the extent possible” meant that NAFCO did
not have all the components required for full assembly but that Bedeschi was directing NAFCO
to assemble the goods to the extent possible with the components that NAFCO did have. Later,
NAFCO advised Bedeschi that it could not assemble the goods in the accelerated time frame and
that it lacked the materials to do so. With this information from NAFCO, Bedeschi accepted and
understood that NAFCO would not assemble the goods shipped after NAFCO resumed
shipments in May 2016. Nevertheless, Bedeschi still believed that NAFCO had an obligation to
assemble the goods. Mr. Jones suggested that NAFCO could make arrangements for NAFCO—
itself—to assemble the goods in the field, or it could adjust its price with Bedeschi to have
Bedeschi assemble the goods, or it could pay the customer or another subcontractor to perform
the assembly. Bedeschi believes that the Contract allows it to deduct assembly charges from
what it owes to NAFCO for goods that it delivered unassembled.
Mr. Jones testified that he had no direct knowledge of how NAFCO’s goods are stored at
the Essar Project jobsite. But he acknowledged that, according to the Purchase Order, the goods
supplied by NAFCO are intended for outdoor exposure to the elements. Bedeschi’s
Counterclaim asserts that NAFCO’s goods “have been reduced to scrap value.” Doc. 41 at 16–
17 (Counterclaim ¶ 17(d)). But Mr. Jones testified—as Bedeschi’s designated corporate
representative—that Bedeschi does not know whether that assertion is true because it has not
visited the jobsite.

19

NAFCO’s Fraud Assertions
Bedeschi has denied responsibility for the increased costs NAFCO incurred from
complying with Bedeschi’s demands for accelerated shipments. NAFCO asserts that Bedeschi,
Mr. Harp, and Mr. Jones misrepresented certain material facts to NAFCO. They include (but are
not limited to) the following:


Bedeschi would pay timely all invoices submitted by NAFCO;



Bedeschi would lift the temporary suspension, pay NAFCO’s past-due invoices,
and pay all invoices associated with future shipments;



Bedeschi would pay NAFCO all increased costs and expenses arising from
Bedeschi’s accelerated shipment schedule;



Bedeschi would not seek to alter the terms of the parties’ Contract, including its
payment terms;



NAFCO’s past-due invoices were properly payable; and



Bedeschi was agreeable to the cost basis and amounts of NAFCO’s past and
future invoices.

Also, NAFCO asserts that Bedeschi, Mr. Harp, and Mr. Jones fraudulently suppressed
certain material facts from NAFCO. They include (but are not limited to) the following:


Bedeschi had no intention of abiding by the terms of parties’ Contract;



Bedeschi had no intention to pay NAFCO under the terms of the Subcontract
Purchase Order and Terms and Conditions;



Bedeschi was not willing or capable of complying with the parties’ contracts;



Bedeschi did not intend to compensate NAFCO for the additional costs
associated with the temporary suspension;

20



Bedeschi did not intend to compensate NAFCO for the additional costs
associated with the accelerated shipment schedule; and



After entering into the parties’ Contract, Bedeschi would seek to alter its terms
after NAFCO had complied with its own obligations.

On September 12 and 13, 2017, NAFCO’s President, John Ralph Parrish, testified by
deposition both individually and as NAFCO’s corporate representative under Federal Rule of
Civil Procedure 30(b)(6). In response to a question asking him to identify every way that
defendants misrepresented something to NAFCO, Mr. Parrish testified that defendants
misrepresented who NAFCO actually was working for—either Bedeschi or Dearborn. But Mr.
Parrish conceded that, when NAFCO later signed the Contract, the Contract was with
Bedeschi—not Dearborn. Mr. Parrish also could not remember specifically if NAFCO ever
asked to review Bedeschi’s financial documents before signing the contracts.
Mr. Parrish testified that Bedeschi also misrepresented to NAFCO that it would pay for
NAFCO’s completed work after it issued a stop work order. When asked why that was a
misrepresentation, Mr. Parrish responded that the Contract required the payment but Bedeschi
never intended to comply with the Contract’s obligations. Mr. Parrish testified that he knew
Bedeschi never intended to honor the Contract because it never made required payments. But
Mr. Parrish conceded that he did not know what Mr. Harp or Mr. Jones intended when the parties
signed the Contract. Mr. Parrish only knows what they intended based on their actions. And Mr.
Parrish testified that Mr. Harp and Mr. Jones never told him—in September 2015, when the
parties entered the Contract—that Bedeschi never intended to pay NAFCO under the
Subcontract.

21

Also, Mr. Parrish testified that Bedeschi misrepresented to NAFCO the proposed
schedule for fabricating and delivering steel. Mr. Parrish asserted that Bedeschi did not fulfill
the schedule and apparently never intended to fulfill it. Mr. Parrish testified that the schedule—
maybe the same, maybe a little different—was incorporated in the Subcontract that the parties
entered in September 2015. Mr. Parrish explained that an email from Mike Ostradick to Mr.
Jones showed that Bedeschi could not fulfill its Contract obligations, but it never notified
NAFCO of that information. Mr. Parrish conceded that the email was dated sometime in July
2015, before the parties entered the Bedeschi-NAFCO Subcontract. The email—dated July 16,
2015—is from Mike Ostradick to Braxton Jones and has as its subject: “ESSAR-Lassing and
IFC drawings.” Doc. 83-7. The email states:
Braxton,
I learned that Lassing has stopped work on incorporating comments on design
drawings as well as releasing IFC drawings. Is this correct? If so, what do we
expect NAFCO to work on?
Mike
Id. When asked how the alleged misrepresentation “about the schedule resulted
in damage to NAFCO,” Mr. Parrish testified:
Well, I believe that single misrepresentation from Mr. Ostradick, who is an
employee of Dearborn/Bedeschi, signifies that they knew they weren’t going to
meet the schedule; and therefore, they had fraudulent intent at that time and never
conveyed that to us. And then throughout the project, they missed their dates.
And by missing those dates, they continually added costs and overhead to us and
we continued to work in good faith that we would supply a product, meet a
schedule, and be paid for that in return.
Doc. 83-6 at 7 (Parrish Dep. 25:19–26:12).
The next misrepresentation that Mr. Parrish identified was that Bedeschi, Mr. Harp, or
Mr. Jones misrepresented that Bedeschi could provide shipping to NAFCO for the project, but

22

Bedeschi never adequately fulfilled that obligation. Mr. Parrish acknowledged that the
Bedeschi-NAFCO Subcontract required Bedeschi to provide shipping for the fabricated steel
from Alabama to the Essar Project in Minnesota. Mr. Parrish believes that Bedeschi, Mr. Harp,
and Mr. Jones knew when they signed the Subcontract that they could not provide trailers for
NAFCO to use to load and ship fabricated steel. Mr. Parrish’s reason for believing this is that
Bedeschi did not have the trailers set up for loading and transport. So, according to Mr. Parrish,
Bedeschi did not manage its job to allow NAFCO to fulfill its Contract obligations. Mr.
Parrish’s reason for believing that Bedeschi never intended to provide shipping is based on
Bedeschi’s inaction, i.e. its failure to set up the shipping method. Mr. Parrish testified that
Bedeschi’s actions prove that Bedeschi never intended to comply with its shipping obligations.
Mr. Parrish testified about a May 2, 2016 meeting between Bedeschi and NAFCO
representatives. Mr. Parrish conceded that Bedeschi told NAFCO in this meeting that Bedeschi
would pay NAFCO when Bedeschi itself was paid by its customer—Essar. But Mr. Parrish also
recognized that the parties’ Contract required Bedeschi to pay NAFCO according to the
Contract’s terms. Mr. Parrish testified that, after learning that Bedeschi would pay NAFCO
when Bedeschi was paid, NAFCO nevertheless shipped more loads (Loads 9 through 42) to the
Essar Project in May and June 2016.
Mr. Parrish testified that NAFCO knew nothing about Bedeschi’s line of credit until
April 2016. Mr. Parrish conceded that no signed writing exists in which Bedeschi assumed
responsibility for NAFCO’s increased costs arising from suspending the contract performance
and then later accelerating the schedule for contract performance. But Mr. Parrish testified that
Mr. Harp agreed to some of the additional costs before the May 2 meeting. Mr. Parrish also

23

testified that NAFCO made an offer in writing to meet Bedeschi’s accelerated schedule, and Mr.
Harp acknowledged the document.
Before the May 2 meeting, Mr. Harp had discussions with Jim Smothers (another
NAFCO employee) about NAFCO shipping product to the Essar Project so that Bedeschi could
get paid. Mr. Parrish heard two of these conversations in Mr. Smothers’s office. Mr. Parrish
testified that Mr. Harp wanted Mr. Smothers to induce Mr. Parrish to ship the product to the
Essar Project jobsite. Mr. Parrish testified that the first conversation occurred in the April
timeframe leading up to the May 2 meeting. Mr. Parrish described the conversation as “sort of
twofold. It was regarding getting payments and then it was regarding [Bedeschi’s] plan to try to
initiate and be able to try to ship everything. I assume they were—they were working with
counsel at that time, yourself or whomever, trying to figure out how to work through this
situation.” Doc. 83-6 at 14 (Parrish Dep. 59:7–17). Mr. Parrish testified that this conversation
was false and misleading because Bedeschi never intended to pay NAFCO. And he testified that
he knew what Mr. Harp intended based on the fact that Bedeschi never made payment.
Mr. Parrish testified that Bedeschi committed overt fraud when Mr. Harp and Mr. Jones
promised to pay NAFCO interest and additional costs as a means to induce NAFCO to ship the
product. After NAFCO shipped the product—and Mr. Parrish assumes that counsel got
involved—Bedeschi changed what it was willing to pay NAFCO. Mr. Parrish conceded that he
was not inside the mind of Mr. Harp or Mr. Jones. But he testified that Mr. Harp and Mr. Jones
committed fraud based on what he observed—that they induced NAFCO to ship with promises
to pay and then changed their positions after NAFCO had shipped the product.
Mr. Parrish conceded that, during the May 2 meeting between NAFCO and Bedeschi,

24

NAFCO asked Bedeschi for a letter of credit but did not receive one. Also during the May 2
meeting, NAFCO asked for a change order reflecting the extra amounts that NAFCO claimed it
was due. But NAFCO never received such a change order.
When asked to identify what alleged misrepresentation Mr. Harp and Mr. Jones failed to
correct when they later learned that those representations were false, Mr. Parrish testified that
they never corrected the schedule issues when they knew they were not going to meet them.
Also, Mr. Parrish testified that Mr. Harp and Mr. Jones never corrected the drawing issues—
meaning that the drawings were not correct. Mr. Parrish asserted that Bedeschi kept revising the
drawings, that Bedeschi kept missing their dates, and that neither Mr. Harp nor Mr. Jones ever
gave NAFCO updated schedules of when they would complete them. Also, Mr. Parrish testified
that Mr. Harp and Mr. Jones represented to NAFCO “that they would pay us, if not anything,
when they got paid, whether we agreed with it.” Doc. 83-6 at 19 (Parrish Dep. 96:13–21). Mr.
Parrish believes that these actions were fraudulent because, if Bedeschi truly was trying to work
with NAFCO, Bedeschi would have told NAFCO what was “going on” but it never did. Id. at 20
(Parrish Dep. 97:21–98:5).
NAFCO’s Damages Claim
As part of its damages claim, NAFCO seeks damages for lost profits of $900,000. Doc.
79 at 19 (Pretrial Order ¶ 5(i)). NAFCO also seeks lost business opportunities damages in the
amount of $2.5 million. Id. (Pretrial Order ¶ 5(ii)). When asked about NAFCO’s lost business
opportunities, NAFCO President John Parrish testified that he could not remember them “off the
cuff” but that NAFCO bids on “a tremendous amount of projects weekly.” Doc. 83-6 at 17
(Parrish Dep. 85:18–86:5). Mr. Parrish testified that NAFCO had missed several business
opportunities, but was able to identify only one by name—the Dominion project. Mr. Parrish

25

could not recall the amount of NAFCO’s lost profits on the Dominion project. Also, Mr. Parrish
could not provide a number for the dollar value of damages for lost business opportunities.
Also, NAFCO seeks damages for the entire contract price—in the amount of
$4,637,371. Doc. 79 at 19 (Pretrial Order ¶ 5(i)). Mr. Parrish conceded that NAFCO has not
performed its obligations under the Contract fully because it has performed only to the extent
Bedeschi and Dearborn allowed NAFCO to perform. Mr. Parrish does not know the percentage
of the Contract that NAFCO has performed. Mr. Parrish conceded that for the portion of the
contract NAFCO has not performed, NAFCO has avoided certain costs. These avoided costs
include labor, variable overhead, materials, and employee fringe benefits.
II.

Summary Judgment Standard
Summary judgment is appropriate if the moving party demonstrates that “no genuine

dispute” exists about “any material fact” and that it is “entitled to a judgment as a matter of law.”
Fed. R. Civ. P. 56(a). When it applies this standard, the court views the evidence and draws
inferences in the light most favorable to the non-moving party. Nahno-Lopez v. Houser, 625
F.3d 1279, 1283 (10th Cir. 2010). “An issue of fact is ‘genuine’ ‘if the evidence is such that a
reasonable jury could return a verdict for the non-moving party’ on the issue.” Id. (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). “An issue of fact is ‘material’ ‘if
under the substantive law it is essential to the proper disposition of the claim’ or defense.” Id.
(quoting Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998)).
The moving party bears “both the initial burden of production on a motion for summary
judgment and the burden of establishing that summary judgment is appropriate as a matter of
law.” Kannady v. City of Kiowa, 590 F.3d 1161, 1169 (10th Cir. 2010) (citing Trainor v. Apollo
Metal Specialties, Inc., 318 F.3d 976, 979 (10th Cir. 2002)). To meet this burden, the moving

26

party “need not negate the non-movant’s claim, but need only point to an absence of evidence to
support the non-movant’s claim.” Id. (citing Sigmon v. CommunityCare HMO, Inc., 234 F.3d
1121, 1125 (10th Cir. 2000)).
If the moving party satisfies its initial burden, the non-moving party “may not rest on its
pleadings, but must bring forward specific facts showing a genuine issue for trial [on] those
dispositive matters for which it carries the burden of proof.” Id. (quoting Jenkins v. Wood, 81
F.3d 988, 990 (10th Cir. 1996)); accord Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986);
Anderson, 477 U.S. at 248–49. “To accomplish this, the facts must be identified by reference to
affidavits, deposition transcripts, or specific exhibits incorporated therein.” Adler, 144 F.3d at
670 (citing Thomas v. Wichita Coca-Cola Bottling Co., 968 F.2d 1022, 1024 (10th Cir. 1992)).
The court applies this same standard to cross motions for summary judgment. Each party
bears the burden of establishing that no genuine issue of material fact exists and that it is entitled,
as a matter of law, to the judgment sought by its motion. Atl. Richfield Co. v. Farm Credit Bank
of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000). Cross motions for summary judgment “are to
be treated separately; the denial of one does not require the grant of another.” Buell Cabinet Co.,
Inc. v. Sudduth, 608 F.2d 431, 433 (10th Cir. 1979). But where the cross motions overlap, the
court may address the legal arguments together. Berges v. Standard Ins. Co., 704 F. Supp. 2d
1149, 1155 (D. Kan. 2010) (citation omitted).
Summary judgment is not a “disfavored procedural shortcut.” Celotex, 477 U.S. at 327.
Instead, it is an important procedure “designed ‘to secure the just, speedy and inexpensive
determination of every action.’” Id. (quoting Fed. R. Civ. P. 1).

27

III.

Analysis
The court begins its analysis by considering defendants’ Joint Motion for Partial

Summary Judgment. Doc. 82. The court then addresses plaintiff NAFCO’s Motion for Partial
Summary Judgment. Doc. 84.
A. Defendants’ Motion for Partial Summary Judgment
Defendants’ motion seeks summary judgment against NAFCO’s fraud and fraudulent
suppression claims. Also, the motion seeks summary judgment against NAFCO’s damages
claims for lost profits, lost business opportunities, and the entire contract price. The court
addresses each of defendants’ arguments in the following subsections.
1. Fraud and Fraudulent Suppression Claims
The parties’ summary judgment papers discussing NAFCO’s fraud and fraudulent
suppression claims read like two ships passing in the night. Defendants assert that no reasonable
jury can conclude from the undisputed summary judgment facts that defendants are liable to
NAFCO on its fraud, fraud in the inducement, promissory fraud, or fraudulent suppression
claims. Defendants base their summary judgment motion entirely on the Rule 30(b)(6)
deposition testimony of NAFCO’s President, John Parrish. Defendants assert that Mr. Parrish
was asked in his deposition to identify each way that defendants misrepresented something to
NAFCO. In response to this question, Mr. Parrish identified five misrepresentations or
fraudulent omissions. And, defendants contend, the summary judgment facts present no triable
issue about any of the five misrepresentations or omissions. So, defendants ask the court to enter
summary judgment against NAFCO’s fraud and fraudulent suppression claims.
The five alleged misrepresentations or fraudulent omissions that defendants identify—
based on Mr. Parrish’s Rule 30(b)(6) testimony—are: (1) defendants never identified who

28

NAFCO was working with under the Contract, i.e., whether it was Bedeschi or Dearborn;
(2) defendants represented that they would pay NAFCO for the work it completed before
Bedeschi directed it to stop work in December 2015; (3) defendants represented, when the
parties signed the Contract in 2015, that Bedeschi would pay NAFCO for its work under the
Contract; (4) defendants misrepresented that it would adhere to the Contract’s schedule and
would provide a shipping method for the goods; and (5) defendants induced NAFCO to resume
shipments of the fabricated steel in May 2016, by representing that Bedeschi would pay NAFCO.
NAFCO’s Opposition never addresses these five alleged misrepresentations. Instead,
NAFCO asserts that it has alleged other misrepresentations in the Pretrial Order that defendants’
summary judgment motion never addresses. Thus, NAFCO contends, defendants are not entitled
to summary judgment against NAFCO’s fraud and fraudulent suppression claims in their
entirety.
Because NAFCO never addresses the five misrepresentations and fraudulent omissions
that are addressed by defendants’ summary judgment motion, the court properly may assume that
NAFCO has abandoned any fraud or fraudulent suppression claims premised on these five
misrepresentations or omissions. See Hinsdale v. City of Liberal, Kan., 19 F. App’x 749, 768–69
(10th Cir. 2001) (affirming district court’s dismissal of plaintiff’s equal protection claim after it
concluded that plaintiff had abandoned the claim because he had not addressed it in his
memorandum opposing summary judgment); see also C.T. v. Liberal Sch. Dist., 562 F. Supp. 2d
1324, 1337 (D. Kan. 2008) (concluding that plaintiff had abandoned his retaliation claim by not
responding to defendant’s motion for summary judgment against the claim). Thus, the court
grants summary judgment, in part, against NAFCO’s fraud and fraudulent suppression claims to
the extent that they are based on any of the five alleged misrepresentations or omissions

29

identified in Mr. Parrish’s Rule 30(b)(6) deposition testimony. But the court agrees with
NAFCO that this ruling does not dispose of its fraud and fraudulent suppression claims in their
entirety because NAFCO has alleged other misrepresentations and omissions to support the
claims.
Indeed, NAFCO asserts in the Pretrial Order that “Defendants misrepresented, among
other things, that they would pay NAFCO for NAFCO’s increased costs arising from
Defendants’ suspension and resumption of shipments to the [Essar] Project” and “that Dearborn
and Bedeschi had not been paid by Essar for NAFCO’s goods.” Doc. 79 at 13 (Pretrial Order ¶
4.a.2.) (emphasis added). Also, NAFCO asserts in the Pretrial Order: “Among other things,
Defendants suppressed that they had been paid by Essar for NAFCO’s work on the [Essar]
Project” and “that Bedeschi had been paid $16,000,000 by Essar.” Id. (Pretrial Order ¶ 4.a.3.)
(emphasis added).
NAFCO’s Opposition lists four types of fraudulent conduct that, it contends, support its
fraud and fraudulent suppression claims:
(a) Defendants’ misrepresentations that Bedeschi would pay NAFCO’s
invoices when Essar paid Bedeschi.
(b) Defendants’ misrepresentations that Bedeschi had not been paid by Essar,
along with Defendants’ failure to correct these misrepresentations.
(c) Defendants’ misrepresentations that Bedeschi would pay NAFCO interest,
or the “cost of money,” along with their subsequent refusal to do so.
(d) Defendants’ suppression that Dearborn and Bedeschi had, in fact, been
paid by Essar, along with Defendants’ failure to correct their prior
misrepresentations.

30

Doc. 97 at 57–58. Because defendants never moved for summary judgment against NAFCO’s
fraud and fraudulent suppression claims premised on these allegations,2 the court agrees with
NAFCO. Those fraud claims survive summary judgment.
Defendants’ Reply asserts two more arguments. First, defendants try to limit NAFCO’s
fraud and fraudulent suppression claims to the five alleged misrepresentations and omissions that
Mr. Parrish testified about in his Rule 30(b)(6) deposition. See Doc. 101 at 79 (listing what
defendants contend is the “only evidence [NAFCO] has of Bedeschi’s intent not to fulfill its
obligations to NAFCO under the contract” as those provided “[b]y NAFCO’s own admissions in
the form of Rule 30(b)(6) testimony of its CEO, Ralph Parrish”); see also id. at 85 (describing
Mr. Parrish’s Rule 30(b)(6) testimony as “the universe of [NAFCO’s] proof regarding fraudulent
suppression ‘misrepresentations’”). But defendants cite no case law to support their argument
that Mr. Parrish’s testimony limits NAFCO’s fraud claims to those based on the
misrepresentations and omissions to which NAFCO’s Rule 30(b)(6) witness testified.
To the contrary, the Tenth Circuit recently has held that “the testimony of a Rule 30(b)(6)
witness is merely an evidentiary admission, rather than a judicial admission.” Vehicle Mkt.
Research, Inc. v. Mitchell Int’l, Inc., 839 F.3d 1251, 1261 (10th Cir. 2016). In that case, the
appellant argued that the trial court erred by refusing to give the jury the following instruction:
“The corporation cannot present a theory of the facts that differs from that articulated by the
designated Rule 30(b)(6) representative.” Id. at 1256. The Tenth Circuit disagreed, concluding
that the trial court correctly deleted this sentence from a jury instruction because “it was an
incorrect statement of the law.” Id. The Circuit recognized that the majority of courts that have
addressed this issue treat Rule 30(b)(6) testimony “‘as merely an evidentiary admission, and do

2
Also, defendants’ Reply does not respond to NAFCO’s arguments that the summary judgment
record presents triable issues about facts supporting its fraud and fraudulent suppression claims premised
on these four allegations.

31

not give the testimony conclusive effect.’” Id. (quoting Templeton v. Catlin Specialty Ins. Co.,
612 F. App’x 940, 959 n.19 (10th Cir. 2015); then citing Keepers, Inc. v. City of Milford, 807
F.3d 24, 35 (2d Cir. 2015) (“[The plaintiff] rightly notes that an organization’s deposition
testimony is ‘binding’ in the sense that whatever its deponent says can be used against the
organization. But Rule 30(b)(6) testimony is not ‘binding’ in the sense that it precludes the
deponent from correcting, explaining, or supplementing its statements.”)). Consistent with this
governing law, the court refuses to treat Mr. Parrish’s Rule 30(b)(6) testimony as a judicial
admission confining NAFCO’s fraud and fraudulent suppression claims to the five alleged
misrepresentations and omissions he identified in his Rule 30(b)(6) deposition.
Second, defendants assert that NAFCO’s fraudulent suppression claims fail as a matter of
law because Kansas law3 imposed no duty on them either to disclose or to speak about the
information that NAFCO contends they fraudulently suppressed. Defendants correctly assert
that Kansas courts have held that a duty to disclose may arise in two situations: (1) when a
disparity of bargaining power or of expertise exists between two contracting parties; or (2) the
parties are in a fiduciary relationship with one another. DuShane v. Union Nat’l Bank, 576 P.2d
674, 679 (Kan. 1978). Defendants argue that neither situation applies to the parties’ relationship
here.

3
The parties agree that Kansas law governs the claims asserted in the case. Doc. 79 at 2 (Pretrial
Order ¶ 1.d.). Also, the court agrees that Kansas law governs NAFCO’s fraud and fraudulent suppression
claims. In a diversity case, like this one, the court applies the substantive law of the forum state,
including its choice of law rules. Emp’rs Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1170 (10th
Cir. 2010) (citation omitted). Kansas courts follow the rule of lex loci delicti for tort claims, applying the
substantive law of the place where a tort occurred. Anderson v. Commerce Constr. Servs., Inc., 531 F.3d
1190, 1193–96 (10th Cir. 2008); Ling v. Jan’s Liquors, 703 P.2d 731, 735 (Kan. 1985). Here, NAFCO
alleges that Bedeschi and Dearborn—both companies with their principal places of business in Kansas—
and their employees (Larry Harp and Braxton Jones) made fraudulent misrepresentations or fraudulent
omissions to NAFCO. Kansas law thus governs the fraud and fraudulent suppression claims asserted in
this action.

32

But, as the court already has observed when denying defendants’ motion to dismiss the
fraudulent suppression claims, Kansas law also imposes a duty on defendants to correct any
material misrepresentations, even if no duty exists at the relationship’s inception. See Great
Plains Christian Radio, Inc. v. Cent. Tower, Inc., 399 F. Supp. 2d 1185, 1196 (D. Kan. 2005)
(explaining that, in Kansas, “a defendant who speaks is under a duty not to mislead by disclosing
only a portion of the truth” (citing Sparks v. Guar. State Bank, 318 P.2d 1062, 1065 (Kan.
1957))). See also Kan. Waste Water, Inc. v. Allied Techsystems, Inc., No. 02-2605-JWL, 2005
WL 1109456, at *18 (D. Kan. 2005) (denying summary judgment against a fraud by silence
claim because defendant “owed plaintiffs a duty of disclosure to the extent that disclosure was
necessary to prevent [defendant’s] affirmative representations from being misleading”). The
Kansas Supreme Court has explained:
Even though one is under no obligation to speak as to a matter, if he undertakes to
do so, either voluntarily or in response to inquiries, he is bound not only to state
truly what he tells, but also not to suppress or conceal and facts within his
knowledge which will materially qualify those stated. If he speaks at all, he must
make a full and fair disclosure. Therefore, if one wi[l]lfully conceals and
suppresses such facts and thereby leads the other party to believe that the matters
to which the statements made relate are different from what they actually are, he
is guilty of a fraudulent concealment.
Sparks, 318 P.2d at 1066.
Here, NAFCO’s Opposition makes clear that its fraudulent suppression claims are
premised on defendants’ failure to correct alleged material misrepresentations, i.e., that
defendants failed to correct their material misrepresentations that Essar had not paid Bedeschi for
work on the Essar Project. Doc. 97 at 57–58 (explaining that “NAFCO’s fraud-based claims
[are] founded upon . . . Defendants’ misrepresentations that Bedeschi had not been paid by Essar,
along with Defendants’ failure to correct these misrepresentations” and “Defendants’

33

suppression that Dearborn and Bedeschi had, in fact, been paid by Essar, along with Defendants’
failure to correct their prior misrepresentations”).
Defendants contend that Judge Lungstrum’s decisions in Great Plains and Kansas Waste
Water are inconsistent with Kansas law. Defendants cite three Kansas cases where the Kansas
Supreme Court refused to apply the rule announced in Sparks. See, e.g., Gonzales v. Assoc. Fin.
Serv. Co. of Kan., Inc., 967 P.2d 312 (Kan. 1998); DuShane, 576 P.2d 674; Timi v. Prescott State
Bank, 553 P.2d 315 (Kan. 1976). In each of these cases, the Kansas Supreme Court explained
that the facts of Sparks differed from the case at hand because “[i]n Sparks there was not only
concealment with regard to a matter about which the bank had a duty to disclose information but
also false statements about existing material fact, known to be false and made for the purpose of
inducing the party to forego action then available to mitigate his damage.” DuShane, 576 P.2d at
681. In contrast, in defendants’ three cited cases, the Kansas Supreme Court found no evidence
establishing that the defendants had made any false representations that they failed to correct.
See, e.g., Gonzales, 967 P.2d at 325 (explaining that Sparks was “neither factually nor legally
similar” to plaintiff’s case because “Sparks involved a bank officer making affirmative
misrepresentations” while plaintiff asserted no misrepresentations but contended that defendant
had a duty to make more disclosures than the ones that it had made); DuShane, 576 P.2d at 678–
80 (holding that plaintiff adduced no evidence of fraud based upon false representations about
existing and material facts); Timi, 553 P.2d at 325–26 (concluding that “there is no similarity in
the facts here” with Sparks because Sparks involved “false representations” while Timi involved
only “equivocal, vague and indefinite” statements that did not constitute actionable fraud).
Here, the summary judgment facts more nearly resemble Sparks, and not the three cases
defendants cite to support their argument that they had no duty to disclose. NAFCO asserts that

34

defendants misrepresented to NAFCO that Essar never had paid Bedeschi and that defendants
never corrected those misrepresentations when they learned they were untrue. NAFCO has
adduced admissible evidence supporting its assertions. The summary judgment record thus
precludes the court from entering summary judgment against NAFCO’s fraudulent suppression
claim.
Last, the court addresses a final argument about NAFCO’s fraud-based claims. NAFCO
asks the court to enter an Order barring defendants from introducing evidence tending to show:
(1) the dates when Bedeschi received Essar’s post-June 2016 payments; (2) that NAFCO has no
evidence of when Essar made such post-June 2016 payments to Bedeschi; (3) that any post-June
2016 payments were attributable to subcontractors other than NAFCO; and (4) that Bedeschi did
not have the financial wherewithal to pay NAFCO after June 2016. NAFCO argues that the
court’s August 1, 2017 Protective Order, granting in part Bedeschi’s Motion for a Protective
Order, precluded NAFCO from discovering this information. Doc. 60. In that Protective Order,
the court held that testimony about “Bedeschi’s financial ability at the time Bedeschi made the
alleged misrepresentations is relevant to [NAFCO’s] fraud claims and allegations.” Id. at 2. So,
the court denied Bedeschi’s request for a protective order in part “to the extent it relates to
Bedeschi’s financial ability or condition at the time Bedeschi allegedly made the alleged
misrepresentations” between September 2015 and July 2016. Id. at 2–3. But the court also
granted Bedeschi’s motion in part, precluding discovery of Bedeschi’s finances after July 2016.
Id.
NAFCO contends that defendants are using the court’s Protective Order as both a sword
and a shield—i.e., that defendants have used the Protective Order as a shield to prevent NAFCO
from discovering information about Bedeschi’s finances after June 2016, but now use the Order

35

as a sword to argue that NAFCO has no evidence to establish when Bedeschi received any postJune 2016 payments. For several reasons, the court finds no need to grant the relief that NAFCO
seeks. First, the Protective Order never prevented NAFCO from discovering information about
the timing of Essar’s payments to Bedeschi. Instead, it only precluded discovery of Bedeschi’s
financial ability to pay NAFCO outside the time Bedeschi made the alleged misrepresentations
that it could not pay NAFCO until it received payment from Essar. Second, NAFCO, in fact,
discovered information about the timing of the Essar payments. Mr. Jones testified that Bedeschi
has received payment from Essar for 39 of the 42 loads that NAFCO delivered to the Essar
Project. He also testified that Bedeschi received the balance of the payment just recently—in the
two to three weeks before his July 31, 2017 deposition—and after NAFCO filed this lawsuit.
Last, defendants’ summary judgment motion does not rely on the type of evidence that NAFCO
seeks to exclude. At least on summary judgment, the court does not find that defendants are
using the August 1, 2017 Protective Order as both sword and shield. The court thus denies
NAFCO’s request that the court bar defendants from introducing certain evidence. But it does so
without prejudice to NAFCO’s ability to reassert this argument at trial under different
circumstances. For example, if defendants try to argue that Bedeschi was financially unable to
pay NAFCO after June 2016 (something that they never argue on summary judgment), that
argument could implicate the August 1, 2017 Protective Order because it effectively prevented
NAFCO from discovering information about Bedeschi’s finances after June 2016. The court
defers ruling on this issue unless and until the issue is presented at trial.
2. Damages Claims
Finally, defendants assert that NAFCO’s damages claims for lost profits, lost business
opportunities, and the entire contract price fail as a matter of law.

36

First, defendants contend that the parties’ Contract bars recovery of lost profits. Kansas
“follows the general rule that loss of profits resulting from a breach of contract may be recovered
as damages when such profits are proved with reasonable certainty, and when they may
reasonably be considered to have been within the contemplation of the parties.” Vickers v.
Wichita State Univ., 518 P.2d 512, 515 (Kan. 1974) (citations omitted). Defendants assert that
the parties here never contemplated recovery of lost profits because their Contract precludes such
recovery. For support, defendants cite Article 24 of the Subcontract. But that provision only
covers suspensions and limits lost profits damages just to “anticipated profit[s] for incomplete
work.” Doc. 83-4 at 10 (“In all cases, reimbursement to [NAFCO] shall be limited to its actual
costs and expenses, without any overhead or anticipated profit for incomplete work.”).
Defendants also cite Article 25(A) to support their argument against NAFCO’s lost profits claim.
But that provision applies merely to termination and precludes liability “for any damages or loss
of anticipated profits because of such termination.” Id. at 11. The court does not view either
provision to prohibit recovery of lost profits entirely. Instead, the Contract precludes lost profits
in limited situations, i.e., lost profits for incomplete work because of a suspension and lost profits
because of termination. Defendants make no argument that NAFCO’s lost profit claims are
confined to the types prohibited by Article 24 and 25(A). And the court cannot reach such a
conclusion on the summary judgment record presented here. The court thus declines to enter
summary judgment against NAFCO’s lost profits damages claim because the Contract only
precludes lost profits damages under certain and limited circumstances.
Second, defendants argue, even if the Contract permits NAFCO to recover lost profits,
the summary judgment record contains no admissible evidence of lost profits or lost business
opportunities damages. NAFCO designated its President John Parrish as a Rule 30(b)(6) witness

37

to testify about certain topics including “NAFCO’s alleged damages and the basis therefore.”
Doc. 83-6 at 18 (Parrish Dep. 89:8–14). Mr. Parrish testified that lost profits is one of the types
of NAFCO’s asserted damages. He also testified that he could not provide a specific number for
the amount of NAFCO’s lost profits. Further, Mr. Parrish testified that NAFCO had lost
business opportunities, but he could name only one of those opportunities—the Dominion
project. He also could not recall the amount of NAFCO’s lost profits on the Dominion project.
Defendants argue that Mr. Parrish’s testimony fails to establish NAFCO’s lost profits and lost
business opportunities damages with any reasonable certainty. And, for this reason, defendants
contend the court should grant summary judgment against NAFCO’s lost profits and lost
business opportunities damages claims.
NAFCO responds, arguing that Mr. Parrish’s deposition testimony adequately responded
to defendants’ noticed deposition topic and to counsel’s questions about damages. Although Mr.
Parrish could not provide a specific amount for its claimed damages during his deposition,
NAFCO has submitted a Declaration by Mr. Parrish that provides a more specific calculation of
NAFCO’s lost profits and lost business opportunities damages by referring to a document titled
“Essar Project Claim for Suspension of Work/Storage of work/Request for Change Order”
(“Project Claim”) that NAFCO submitted to Bedeschi on May 12, 2016. Doc. 97-12 ¶¶ 3–6, 15–
18.
Defendants argue that Mr. Parrish’s Declaration contradicts his deposition testimony.
Thus, they contend, the court must disregard the contradictory Declaration on summary
judgment. See, e.g., Franks v. Nimmo, 796 F.2d 1230, 1237 (10th Cir. 1986) (explaining that
“courts will disregard a contrary affidavit [conflicting with the affiant’s earlier deposition
testimony] when they conclude that it constitutes an attempt to create a sham fact issue”). The

38

court disagrees with defendants’ position. Mr. Parrish’s Declaration never contradicts his earlier
deposition testimony. Mr. Parrish testified that NAFCO had sustained lost profits and lost
business opportunities damages, but he was unable to quantify the amount of those damages.
His Declaration offers the damages amount that he was unable to provide at his deposition after
he had the opportunity to review the Project Claim. Indeed, Mr. Parrish specifically referred to
this document in his deposition testimony as something that could refresh his recollection about
what types of damages NAFCO is seeking. Doc. 83-6 at 21 (Parrish Dep. 136:18–23)
(explaining that he would “have to look at” the claim to know if it included itemized lost profits
damages).
Defendants assert several other reasons that, they contend, Mr. Parrish’s Declaration
provides speculative and uncertain evidence of NAFCO’s lost profit and lost business
opportunities damages. But all of these arguments go to the weight of Mr. Parrish’s testimony,
not its admissibility. The court cannot weigh the evidence on summary judgment. And, for this
reason, the court concludes that the summary judgment record creates a triable issue whether
NAFCO has sustained lost profit and lost business opportunities damages. The court thus denies
defendants’ summary judgment motion against these damages claims.
Last, defendants assert that NAFCO cannot recover damages for the entire Contract price
because NAFCO concedes that it has not performed its Contract obligations fully. Kan. Stat.
Ann. § 84-2-709(a) allows a seller to recover “the price . . . of goods accepted.” Defendants
argue that the summary judgment facts establish that Bedeschi has not “accepted” all of the
goods promised under the Contract because, as Mr. Parrish’s testimony conceded, NAFCO has
not performed all of its obligations under the Contract. Also, Mr. Parrish conceded that for the
portion of the Contract NAFCO has not performed, NAFCO has avoided certain costs including

39

labor, variable overhead, materials, and employee fringe benefits. For all these reasons,
defendants contend that NAFCO is precluded from recovering the entire Contract price.
NAFCO’s Opposition never responds to defendants’ argument that NAFCO cannot
recover damages for the entire Contract price. The court thus assumes that NAFCO has
abandoned its damage claim for the entire Contract price—in the amount of $4,637,371. See
Hinsdale, 19 F. App’x at 768–69; see also Liberal Sch. Dist., 562 F. Supp. 2d at 1337. The court
thus grants summary judgment against NAFCO’s damages claim seeking to recover the entire
Contract price.
3. Conclusion
For the reasons explained, the court grants defendants’ summary judgment motion in part
and denies it in part. The court grants summary judgment against NAFCO’s fraud and
fraudulent misrepresentation claims to the extent they are based on the five alleged
misrepresentations or omissions that Mr. Parrish testified about in his Rule 30(b)(6) deposition.
The court also grants summary judgment against NAFCO’s damages claim for the entire
Contract price. The court denies defendants’ summary judgment motion in all other respects.
B. Plaintiff NAFCO’s Motion for Partial Summary Judgment
The court now turns to NAFCO’s Motion for Partial Summary Judgment. NAFCO’s
motion asks the court to grant summary judgment against: (1) Bedeschi’s counterclaims for
breach of contract and breach of warranty; (2) Bedeschi’s declaratory judgment claim; and (3)
Bedeschi’s affirmative defense asserting setoff. Also, the motion asks the court to enter
summary judgment in its favor on NAFCO’s assertion that Bedeschi changed the Contract’s
“scope of work.” The court addresses each of NAFCO’s arguments in the subsections, below.

40

The court begins with NAFCO’s argument that it is entitled to summary judgment in its favor on
its assertion that Bedeschi changed the “scope of work” under the Contract.
1. NAFCO’s Assertion that Bedeschi Changed the “Scope of Work”
NAFCO asserts that the summary judgment facts establish, as a matter of law, that
Bedeschi changed the scope of work—as the Contract defines that term—when it suspended and
later resumed NAFCO’s shipments to the Essar Project. NAFCO thus asks the court to enter
summary judgment in its favor on this issue.
Section 5 of the Subcontract Purchase Order Terms and Conditions permitted Bedeschi to
change the scope of work, and it required NAFCO to make the changes promptly. Also, it
allowed NAFCO to seek a price adjustment from Bedeschi for the changes, provided that it
satisfied certain conditions. The Subcontract’s Article 17 also permitted NAFCO to change the
work and adjust the Subcontract price accordingly, but it required, among other things, that
NAFCO submit a claim in writing and Bedeschi approve the price change in writing. Also, the
Subcontract incorporated the AISC Code into the parties’ Agreement. NAFCO argues that
Bedeschi’s suspension and resumption of shipments qualifies as a change in work requiring a
modification of the contract price, as the AISC Code’s provisions define that term. See Doc. 855 at 76 (AISC Code Sections 9.4.1. & 9.4.3.).
Here, NAFCO does not seek a ruling that it is entitled to damages from any change in the
scope of work. Instead, it asks the court to hold, as a matter of law, that Bedeschi changed the
scope of work within the meaning of the Contract. For support, NAFCO cites Project Manager
Braxton Jones’s deposition testimony. Mr. Jones testified as Bedeschi’s Rule 30(b)(6) corporate
representative. And he testified that Bedeschi’s suspension of shipments in December 2015, and

41

its resumption of shipments on an expedited basis in May 2016, constituted a significant change
to NAFCO’s work under the Contract.
Bedeschi responds to NAFCO’s argument, asserting that Bedeschi never changed the
“scope of work” under the Contract because the parties never modified the Contract consistent
with its provisions or Kan. Stat. Ann. § 84-2-209(2) & (3).4 Indeed, although Section 5 of the
Subcontract Purchase Order Terms and Conditions permitted Bedeschi to change the scope of
the work, it also required that “[a]ny changes to this order shall be made in accordance with
Paragraph 27.” Doc. 83-5 at 2. And Section 27 provides: “This Order may only be modified by
a purchase order amendment/alteration issued by [Bedeschi].” Id. at 5. Also, the Subcontract’s
Article 17(b) permitted Bedeschi to change the work “[b]y written order.” Id. Kan. Stat. Ann. §
84-2-209(2) provides: “A signed agreement which excludes modification or rescission except by
a signed writing cannot be otherwise modified or rescinded . . . .” And Kan. Stat. Ann. § 84-2209(3) applies the statute of fraud requirements to a contract modification.
Here, the uncontroverted facts establish that the parties never changed or amended their
Contract with a signed writing. But NAFCO asserts that Bedeschi’s December 22, 2015 letter
directing NAFCO to suspend shipments and its May 4, 2016 letter directing NAFCO to resume
shipments constitute “written orders” under Article 17(b) that changed NAFCO’s work. The
court cannot find any definition of “written order” in the Contract. A reasonable jury could

4
As noted above, the parties agree that Kansas law governs the claims asserted in the case. Doc.
79 at 2 (Pretrial Order ¶ 1.d.). Also, Kansas law governs the parties’ contract claims under choice of law
rules. In a diversity case, like this one, the court applies the substantive law of the forum state, including
its choice of law rules. Emp’rs Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1170 (10th Cir. 2010)
(citation omitted). In Kansas, courts generally apply the law chosen by the parties to control their
agreement unless doing so would contravene public policy. Brenner v. Oppenheimer & Co., Inc., 44 P.3d
364, 375 (Kan. 2002). Here, the Subcontract provides that Kansas law governs. Doc. 83-4 at 16. The
Subcontract Purchase Order’s Terms and Conditions also provide that Kansas law governs. Doc. 83-5 at
4. The court thus applies Kansas law because the parties have chosen Kansas law to govern their
contractual relationship and they also agree that Kansas law governs.

42

conclude that Bedeschi’s communications constituted “written orders” that changed the scope of
work. But a reasonable jury also could conclude that the Contract required a “written order”
expressly amending or modifying the Contract. On this summary judgment record—when
construing the facts in Bedeschi’s favor—the court cannot conclude, as a matter of law, that
Bedeschi’s communications to NAFCO constituted “written orders” sufficient to modify
NAFCO’s scope of work under the Contract.
Also, the court cannot find that Mr. Jones’s Rule 30(b)(6) testimony entitles NAFCO to
summary judgment on this issue. Although Mr. Jones testified that Bedeschi changed the
Contract’s scope of work, his testimony cannot alter the Contract’s requirements for modifying
the parties’ agreement. Whether Bedeschi changed NAFCO’s work under the Contract presents
a factual issue whether the parties satisfied the Contract’s requirements for modification. And
the court cannot decide this issue on summary judgment.
Finally, NAFCO’s reliance on the AISC Code is unavailing. Although certain provisions
of the AISC Code require a contract price modification when changes are made to the contract’s
scope of work, the AISC Code and its commentary direct that the Code applies “[i]n the absence
of specific instructions to the contrary in the contract documents” and that the Code “is not
intended to . . . change the duties and responsibilities . . . from those set forth in the contract
documents” or impose duties “inconsistent with the provisions of the contract documents.” Doc.
85-5 at 14. Here, the parties’ Contract includes provisions governing modifications to the scope
of work. And this summary judgment record presents factual issues whether the parties have
satisfied the Contract’s requirements for such modification. The court thus denies NAFCO’s
summary judgment motion seeking judgment in its favor on its assertion that Bedeschi changed
NAFCO’s scope of work under the Contract—as the Contract defines this term.

43

2. Breach of Contract and Breach of Warranty Claims
Next, NAFCO asserts that Bedeschi’s breach of contract and breach of warranty claims
fail, as a matter of law, because Bedeschi has sustained no damages. Also, NAFCO provides a
second argument supporting summary judgment against Bedeschi’s breach of warranty claim:
NAFCO asserts that the breach of warranty claim fails, as a matter of law, because Bedeschi
never provided timely notice to NAFCO of any warranty breach. The court addresses each
argument separately, below.
a. Do the Summary Judgment Facts Establish No Genuine
Issue Whether Bedeschi Has Sustained Damages to
Support its Breach of Contract and Warranty Claims?
NAFCO asserts that the summary judgment facts establish that Bedeschi has sustained no
damage from any purported breach of contract or breach of warranty. In Kansas, one of the
elements required to establish a breach of contract claim is: “damages to the plaintiff caused by
the breach.” Stechschulte v. Jennings, 298 P.3d 1083, 1098 (Kan. 2013). Also, the Kansas
Uniform Commercial Code5 provides that “[t]he measure of damages for breach of warranty is
the difference at the time and place of acceptance between the value of the goods accepted and
the value they would have had if they had been as warranted, unless special circumstances show
proximate damages of a different amount.” Kan. Stat. Ann. § 84-2-714(2).
NAFCO contends that the undisputed summary judgment facts establish that Bedeschi
has sustained no damage. Indeed, the summary judgment record reveals that Essar paid

5
The parties appear to agree that the Kansas Uniform Commercial Code applies to their dispute
because both parties cite the Code in their summary judgment papers. Also, as NAFCO explicitly
explains, the Kansas Uniform Commercial Code applies to this dispute because the parties’ claims and
defenses are based on the sale of goods, i.e., fabricated steel. Doc. 85 at 36 n.4 (first citing Kan. Stat.
Ann. § 84-2-102 (explaining that “this article applies to transactions in goods”); then citing Kan. Stat.
Ann. § 84-2-105(1) (defining “goods” as “all things (including specially manufactured goods) which are
movable at the time of identification to the contract for sale other than the money in which the price is to
be paid, investment securities (article 8) and things in action”).

44

Dearborn more than $16 million for the Essar Project. And then Dearborn paid Bedeschi all
amounts it has received from Essar. To date, Bedeschi has received payment (from Essar
through Dearborn) for 39 of the 42 loads that NAFCO delivered to the Essar Project. Because
Bedeschi has received its full Contract price for 39 of the loads that NAFCO delivered, NAFCO
contends, Bedeschi cannot establish damages as a matter of law.
Bedeschi responds, arguing that the summary judgment facts create a triable issue about
its damages because the August 10, 2017 inspection revealed that NAFCO’s fabricated steel did
not conform to the parties’ Contract. Specifically, Bedeschi contends that the paint thickness is
inadequate. And it asserts that the cost to repaint the fabricated steel is about $435,400. Thus,
Bedeschi contends, it has come forward with evidence creating a genuine issue whether it has
sustained damages from NAFCO’s alleged breach of contract and breach of warranty.
NAFCO argues that Bedeschi’s damage claim is speculative. It also criticizes Skip
Moore’s Declaration providing the damage calculation as having insufficient evidentiary quality,
i.e., that it does not provide clear and convincing evidence of damages. The court disagrees.
NAFCO’s attacks on Mr. Moore’s damage calculation go to the weight and credibility of this
evidence. The court cannot evaluate the veracity of this evidence on summary judgment.
Instead, the trier of fact must decide whether Bedeschi’s proffered damages evidence supports its
breach of contract and breach of warranty claims.
Also, NAFCO contends that Bedeschi has not sustained damages for any painting defects
because it has received full payment from Essar—without any deductions for purported painting
defects. For support, it cites BAE Systems Information & Electronic Systems Integration, Inc. v.
SpaceKey Components, Inc., 941 F. Supp. 2d 197 (D.N.H. 2013). In that case, the New
Hampshire court granted summary judgment against a buyer’s breach of warranty claim because

45

the buyer’s “resale of the allegedly nonconforming [goods] to its customers for the same amount
they would have paid for conforming [goods] establishes that the market value of the
nonconforming [goods] was the same as the market value of conforming [goods], which left [the
buyer] without any damages resulting from [the seller’s] alleged breach of warranty.” Id. at 218.
NAFCO asserts that the same reasoning applies here because Bedeschi has received the full
Contract price from Essar for the goods NAFCO delivered to the Essar jobsite.
The court disagrees that the facts here require the same summary judgment result as BAE
Systems. In that case, it doesn’t appear that the buyer ever argued that it had sustained damages
for the costs it would incur to cure the defects to the nonconforming goods the seller had
delivered to a third party. In contrast, Bedeschi asserts that it has sustained damages in the
amount that it will cost to repaint the fabricated steel. But NAFCO argues that the summary
judgment record never establishes that Bedeschi owes an obligation to Essar to repaint the
fabricated steel or that it even intends to repaint the steel now that Essar is defunct after filing for
bankruptcy. For its claims to survive summary judgment, Bedeschi (as the non-moving party)
need not prove its damages as a matter of law. Instead, the court only needs to decide whether
Bedeschi has shown a triable issue about damages based on the undisputed summary judgment
facts viewed in Bedeschi’s favor. Here, Mr. Moore’s Declaration asserts that Bedeschi has
sustained damages for the cost to repaint the goods. The court finds this sufficient to establish a
triable fact issue that the jury must decide.
In sum, on this summary judgment record, the court concludes that genuine issues of fact
exist whether Bedeschi has sustained damages from NAFCO’s alleged breach of contract and
breach of warranty. For this reason, the court denies NAFCO’s summary judgment motion
against these two claims.

46

b. Do the Summary Judgment Facts Establish No Genuine
Issue Whether Bedeschi Provided Timely Notice of a
Breach of Warranty?
NAFCO next argues that Bedeschi’s breach of warranty claim cannot survive summary
judgment because the undisputed facts establish that Bedeschi never provided NAFCO timely
notice of a warranty breach. Kan. Stat. Ann. § 84-2-607(3)(a) provides: “Where a tender has
been accepted . . . the buyer must within a reasonable time after he discovers or should have
discovered any breach notify the seller of breach or be barred from any remedy.” Kan. Stat.
Ann. § 84-2-607(3)(a) (emphasis added); see also Smith v. Stewart, 667 P.2d 358, 366 (Kan.
1983) (“We agree with the general proposition of law that the giving of notice within a
reasonable time to the seller, pursuant to [Kan. Stat. Ann. §] 84-2-607(3)(a), is a condition
precedent to filing an action for recovery of damages for breach of implied or express
warranties.”). So, in Kansas, “failure to give timely notice, as required in [Kan. Stat. Ann. §] 842-607(3)(a), bars the buyer from any remedy.” Golden v. Den-Mat Corp., 276 P.3d 773, 787
(Kan. Ct. App. 2012). Kansas’s “requirement of notification is designed to defeat commercial
bad faith, not to deprive a good faith consumer of his remedy.” Dowling v. Sw. Porcelain, Inc.,
701 P.2d 954, 960 (Kan. 1985). “By receiving timely notice of an alleged breach the seller is
afforded an opportunity to prepare his defenses and govern his conduct accordingly.” Smith, 667
P.2d at 363–64 (citation omitted).
NAFCO asserts that this notice requirement applies more stringently here in the
commercial context than compared to a consumer setting. See Kan. Stat. Ann. § 84-2-607 cmt. 4
(explaining that the time for a retail consumer to give notice is judged by a different standard
than that for a merchant buyer); see also Golden, 276 P.3d at 788 (“[T]he courts do not apply the

47

notice-of-breach obligation as stringently in cases involving consumers as in those between
commercial entities.”).
NAFCO also asserts that Bedeschi bears the burden “to plead and prove notice within a
reasonable time.” Dold v. Sherow, 552 P.2d 945, 947 (Kan. 1976). And, NAFCO contends,
Bedeschi has done neither one.
The court agrees Bedeschi never has pleaded notice. Indeed, Bedeschi’s Counterclaim
includes no allegations of notice. See generally Doc. 41. And, although the Pretrial Order6
asserts that NAFCO breached its warranty by improperly painting the fabricated steel, Doc. 79 at
12 (Pretrial Order ¶¶ 3.20., 3.21., 3.24., 3.26.), it never asserts that Bedeschi gave NAFCO notice
of a breach. But nonetheless, the court declines to grant summary judgment based on a pleading
deficiency.
Kansas courts have allowed parties to amend their pleadings to allege notice when the
pleadings failed to include facts establishing notice. See Dowling, 701 P.2d at 960–61
(recognizing that a buyer’s oral notice of breach constitutes sufficient notice under Kansas law
and “[i]f the parties wish to amend their pleadings to reflect the giving of notice and perhaps to
dispute the receipt of that notice, the trial court may make appropriate orders as required.”); see
also Massey Ferguson Credit Corp. v. Umbarger, No. 88-4056-S, 1989 WL 35983, at *2 (D.
Kan. Mar. 17, 1989) (granting buyers leave to amend their counterclaim to plead notice because
Rule 15 requires courts to grant leave “‘freely . . . when justice so requires’” (quoting Fed. R.
Civ. P. 15(a))). For the same reasons, the court grants Bedeschi leave to amend its Factual
Contentions in the Pretrial Order to include allegations of notice.

6
The Pretrial Order now controls the action and supersedes the pleadings. See Fed. R. Civ. P.
16(d) (explaining that the Pretrial Order “controls the course of the action unless the court modifies it”);
see also Weyerhaeuser Co. v. Brantley, 510 F.3d 1256, 1267 (10th Cir. 2007) (“The subsequent pretrial
order supercedes the pleadings.”).

48

The court also rejects NAFCO’s argument that the summary judgment facts establish, as
a matter of law, that Bedeschi cannot prove that it gave reasonable notice. NAFCO asserts that
Bedeschi never has given it notice that the fabricated steel it delivered to the Essar Project jobsite
was nonconforming. Bedeschi disagrees. It contends that it provided the requisite notice on
August 23, 2017, when it delivered the Inspection Report showing that the steel’s paint thickness
is inadequate and not within the Contract’s specifications. Bedeschi contends this notice was
timely because it had inspected the goods on August 10, 2017, Mr. Moore prepared the
inspection report on August 16, 2017, and Bedeschi provided the Inspection Report to NAFCO
only seven days later and a month before discovery closed. Although NAFCO had delivered the
goods to the Essar Project jobsite in June and July 2016, Bedeschi asserts that did not have a
reasonable opportunity to inspect the goods earlier because it did not have the time to do so.
Bedeschi asserts that Essar declared bankruptcy in July 2016, and afterward Bedeschi did not
have access to the jobsite until it secured permission on August 3, 2017, to enter the jobsite and
inspect the goods. Yet, Bedeschi also concedes that Essar never denied it the ability to inspect
the goods at the Essar Project jobsite. Nevertheless, Bedeschi asserts that these facts give rise to
a genuine material issue whether it provided the requisite notice. And, it contends, the jury must
decide this issue. The court agrees.
In Kansas, “[w]hether a buyer notifies a seller of a breach of warranty within a reasonable
time is a question of fact to be determined from all the facts and circumstances.” GFSI, Inc. v. JLoong Trading, Ltd., 505 F. Supp. 2d 935, 939 (D. Kan. 2007) (citing Brunner v. Jensen, 524
P.2d 1175, 1185 (Kan. 1974)). See also Signature Mktg., Inc. v. New Frontier Armory, LLC, No.
15-7200-JWL, 2016 WL 5409996, at *11 (D. Kan. Sept. 28, 2016) (“Kansas courts commonly
consider determinations of reasonable time under § 2-607(3)(a) and under the UCC generally to

49

be within the province of the factfinder.” (citing Golden, 276 P.3d at 788)); AgriStor Leasing v.
Meuli, 634 F. Supp. 1208, 1221 (D. Kan. 1986) (holding that the summary judgment record
presented a “legitimate question of fact” whether the buyer put the seller on sufficient notice of
breach of warranty and thus precluded summary judgment); Golden, 276 P.3d at 788 (concluding
that the trial court should have left for the jury the issue “whether [the buyer] provided notice of
breach within a reasonable time under [Kan. Stat. Ann. §] 84-2-307(3)(a)”).
NAFCO argues that these cases differ from the facts here because they are “almost
entirely . . . arising in the consumer context.” Doc. 102 at 26. Although some of the cases that
Bedeschi cites for this point of law involve the consumer setting—where the notice requirements
are less stringent—several of them involve commercial disputes, like the one here. See, e.g.,
Signature Marketing, Inc., 2016 WL 5409996, at *1–2 (denying summary judgment against a
breach of warranty claim because fact issues existed whether the buyer gave the seller reasonable
notice of the breach in a case involving an agreement by the Kansas corporation seller to
manufacture and provide custom firearm component parts to buyers who were firearms dealers,
distributors, and manufacturers); GFSI, Inc., 505 F. Supp. 2d at 937–38 (concluding, after a
bench trial, that the facts established that a buyer gave reasonable notice of a breach to the seller
when the buyer was a Delaware corporation that sued the Hong Kong limited company seller for
supplying defective garments). So, even applying a stricter standard in the commercial context,
the court cannot decide on summary judgment whether Bedeschi provided reasonable notice if
that determination involves disputed issues of fact.
NAFCO also contends that neither Bedeschi’s counterclaim nor its August 23, 2017
service of the Inspection Report constitute sufficient notice under Kansas law. Citing dicta from
the Kansas Supreme Court, NAFCO argues that a buyer cannot provide requisite notice of a

50

breach through a lawsuit because “[c]ertainly the purpose of [Kan. Stat. Ann. §] 84-2-607(3)(a)
. . . would be thwarted if, for example, a buyer purchased an automobile and two years later, out
of the blue, filed an action for breach of warranty stating the vehicle had never operated
properly.” Smith, 667 P.2d at 366. The court refuses to convert this observation into a blanket
prohibition against breach of warranty claims premised on notice provided for the first time with
the filing of a lawsuit. Indeed, other Kansas federal cases have not applied such a rule. See, e.g.,
Nieberding v. Barrette Outdoor Living, Inc., 302 F.R.D. 600, 613 (D. Kan. 2014) (observing that
plaintiff “gave notice about the alleged defect . . . when he filed his initial complaint” (citing
Graham by Graham v. Wyeth Labs., a Div. of Am. Home Prods. Corp., 666 F. Supp. 1483, 1500
(D. Kan. 1987)); AgriStor Leasing, 634 F. Supp. at 1220–21 (holding that a “legitimate question
of fact” existed whether the buyer gave sufficient notice of a breach of warranty by filing the
lawsuit); Wyeth Labs., 666 F. Supp. at 1500 (“[B]y filing this lawsuit the defendant was given
sufficient notice, under [Kan. Stat. Ann. §] 84-2-607, of the alleged breach of warranty.”).
Considering this authority, the court cannot grant summary judgment for this reason.
Also, citing a Tenth Circuit case, NAFCO contends that the court can decide on summary
judgment whether Bedeschi provided sufficient notice. Doc. 102 at 27 (citing Rajala v. Allied
Corp., 919 F.2d 610 (10th Cir. 1990)). But the summary judgment facts of Rajala differ
significantly from the ones here. In Rajala, the buyer “was unable to direct [the court’s]
attention to any evidence in the record demonstrating that it notified [the seller] that it regarded
delivery of the off-grade resin to constitute a breach.” Id. at 636. Because the record contained
no fact “upon which a reasonable jury could properly find that [the buyer] rejected the off-grade
resin tendered by [the seller] because it was in violation of the asserted oral contract or otherwise
notified [the seller] that it regarded delivery of such goods as a breach of the asserted oral

51

contract,” the Circuit affirmed the district court’s directed verdict for the seller against the
buyer’s breach of contract claim.
In contrast, here, Bedeschi has identified summary judgment facts that permit a
reasonable jury to conclude that it provided timely notice to NAFCO of a breach. The court
acknowledges the tardiness of Bedeschi’s notice provided on August 23, 2017. Indeed, it served
NAFCO with the Inspection Report some 20 months after NAFCO first delivered the goods to
the Essar jobsite in November and December 2015. NAFCO suggests that the court can infer
from Bedeschi’s actions that it has manufactured reasons that it need not comply with its
contractual obligations. NAFCO calls Bedeschi’s breach of warranty claim “nothing more than a
drummed up excuse not to pay its bills.” Doc. 102 at 34. The court agrees that a reasonable jury
could make such an inference. But a reasonable jury also could credit Bedeschi’s explanation for
the timing of its notice and find that it was reasonably timely under the facts here. Both sets of
inferences require factual determinations that the jury must decide—not the court on summary
judgment. For this reason, the court denies NAFCO’s summary judgment motion against
Bedeschi’s breach of warranty claim.
3. Declaratory Judgment and Setoff Claim
Last, NAFCO seeks summary judgment against Bedeschi’s declaratory judgment claim
that it is entitled to a setoff and its affirmative defense asserting setoff. NAFCO argues that
Bedeschi cannot seek a setoff for three reasons: (1) Bedeschi has not sustained any damage to
offset from its liability; (2) Bedeschi failed to give timely notice of its intent to seek a setoff; and
(3) Bedeschi never provided timely notice of a breach of warranty. The court already has
addressed the first and third arguments above. The court has concluded that fact issues preclude
it from deciding on summary judgment whether Bedeschi has sustained damages or whether it

52

provided timely notice of a breach of warranty. And, for the same reasons, the court cannot
grant summary judgment against Bedeschi’s setoff claim based on either NAFCO’s first or third
argument.
Addressing the second reason that NAFCO contends it is entitled to summary judgment
against Bedeschi’s setoff claim, NAFCO argues that Kansas law requires Bedeschi to provide
notice of its intent to seek a setoff. And, NAFCO contends, the summary judgment facts
establish that Bedeschi never has provided the requisite notice. Kan. Stat. Ann. § 84-2-717
provides: “The buyer on notifying the seller of his intention to do so may deduct all or any part
of the damages resulting from any breach of the contract from any part of the price still due
under the same contract.” Id. (emphasis added).
Bedeschi responds to NAFCO’s summary judgment argument by asserting that the
parties’ Contract provides a right to setoff separate and apart from the setoff right in Kan. Stat.
Ann. § 84-2-717. Indeed, Section 22 of the Purchase Order Subcontract’s Terms and Conditions
provides:
Setoff
In addition to any right of set-off provided by law, all amounts due [NAFCO]
shall be considered net of indebtedness of [NAFCO] to [Bedeschi] and its
subsidiaries; and [Bedeschi] may deduct any amounts due from [NAFCO] to
[Bedeschi] and its subsidiaries from any sums due or to become due from
[Bedeschi] or its subsidiaries to [NAFCO].
Doc. 83-5 at 4 (emphasis added). And the Kansas Uniform Commercial Code permits the parties
to vary the effect of the Code’s provisions by agreement. See Kan. Stat. Ann. § 84-1-302
(“[T]he effect of the provisions of the uniform commercial code may be varied by agreement.”).
Bedeschi asserts that the parties did just that here by including the setoff provision in the
Contract—one that includes no notice requirement. The court agrees that the parties’ Contract
here provides a “separate and additional setoff procedure” that is enforceable separate and apart
53

from the setoff right provided by Kan. Stat. Ann. § 84-2-717. See Magid Glove & Mfg. Safety
Co., LLC v. Tower Int’l, Inc., No. 11-CV-11791, 2012 WL 5821814, at *7–9 (E.D. Mich. May 1,
2012) (rejecting a buyer’s argument that the contract’s setoff procedure was invalid under the
Michigan Uniform Commercial Code because the parties had the freedom to contract to include
a setoff procedure separate from the Michigan statutes).
Also, even if the Kansas statute’s notice requirement applies, our court has recognized
that notice of an intent to seek a setoff provided for the first time through a lawsuit’s complaint
can constitute sufficient notice under Uniform Commercial Code § 2-717. Mo. Highways &
Transp. Comm’n ex rel. Buildex, Inc. v. W. Ready-Mix, Inc., No. 14-4037-JWL, 2015 WL
4077594, at *3 (D. Kan. July 6, 2015) (citing McDowell Research Corp. v. Tactical Support
Equip., Inc., No. 08-CV-6499, 2009 WL 2901594, *8 (W.D.N.Y. Sept. 4, 2009)). Indeed,
Bedeschi provided such notice here by asserting setoff in its Answer and Counterclaim. Doc. 41
at 8, 19.
For all these reasons, the court denies NAFCO’s summary judgment motion against
Bedeschi’s declaratory judgment claim for setoff and its affirmative defense asserting the same.
IV.

Conclusion
For the reasons explained above, the court grants defendants’ Joint Motion for Partial

Summary Judgment (Doc. 82) in part and denies it in part, as explained more fully in this Order.
Also, the court denies plaintiff’s Motion for Partial Summary Judgment (Doc. 84).
IT IS THEREFORE ORDERED BY THE COURT THAT defendants’ Joint Motion
for Partial Summary Judgment (Doc. 82) is granted in part and denied in part.
IT IS FURTHER ORDERED THAT plaintiff’s Motion for Partial Summary Judgment
(Doc. 84) is denied.

54

IT IS SO ORDERED.
Dated this 14th day of May, 2018, at Topeka, Kansas.
s/ Daniel D. Crabtree
Daniel D. Crabtree
United States District Judge

55