MLE Entreprises Inc v. Vanguard Contractors LLC et al

Filing 73

MEMORANDUM AND OPINION by Senior Judge Thomas B. Russell on 5/9/2013; re 60 MOTION for Summary Judgment filed by Travelers Casualty & Surety Company of America, Vanguard Contractors LLC ; an appropriate order shall issuecc:counsel (KJA)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION
CASE NO. 5:11-CV-00027
UNITED STATES OF AMERICA
ex rel. MLE ENTERPRISES, INC., and
MLE ENTERPRISES, INC.

PLAINTIFFS

v.
VANGUARD CONRACTORS, LLC, and
TRAVELERS CASUALTY AND SURETY
COMPANY OF AMERICA

DEFENDANTS

MEMORANDUM OPINION
This matter comes before the Court on a motion for summary judgment by Defendant
Vanguard Contractors, LLC. (Def.’s Mot., Docket Number (“DN”) 60.) The Plaintiff responded.
(Pl.’s Resp., DN 69.) The Defendant replied. (Def.’s Reply, DN 70.) Fully briefed, this matter
is now ripe for adjudication.

Having considered the matter and being fully advised, the

Defendant’s motion is GRANTED.
I.
Defendant Vanguard Contactors, LLC (“Vanguard”), served as the prime contractor on a
construction project at Fort Sill, Oklahoma known as the Building 700 project. Vanguard hired
Plaintiff MLE Enterprises, Inc. (“MLE”), as a subcontractor on the project. MLE claims that
Vanguard owes it $187,794.34 for uncompensated work that was performed outside of and in
addition to the subcontract.1 (Compl., DN 1, ¶ 9.) MLE also seeks $156,996.07 in retainage
allegedly withheld by Vanguard on the subcontract. (Id.) MLE brought this action to recover a

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Vanguard contests any claim that MLE performed work outside of and in addition to the subcontract. Resolving
any ambiguities and drawing reasonable inferences against Vanguard, the Court assumes, but does not expressly
find, that MLE performed extra-contractual work. Even in light of this favorable assumption, MLE cannot
overcome Vanguard’s motion for summary judgment because the evidence conclusively demonstrates that MLE has
suffered no loss.

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combined total of $344,790.41 on grounds that “Vanguard . . . breached the express and implied
terms of its subcontract with MLE[.] (Id. at ¶¶ 9, 11.)
Discovery in this action revealed three important evidentiary considerations.

First,

MLE’s claim for additional, uncompensated work is for $96,115.35, not $187.794.34. Second,
the retainage claim is for $140,513.31, not $156,996.07. Third, MLE now admits that it did not
credit Vanguard for $251,791.00 in “off contract” payments.
1.
Discovery first revealed that MLE’s claim for work performed outside of and in addition
to the subcontract is less than the amount alleged in the complaint. The original claim was based
on a proposed subcontract change order between MLE and Vanguard.2 (See Proposed Change
Order, DN 60-3.) In that proposal, MLE sought additional compensation for work performed by
three of MLE’s subcontractors in the following amounts: 1) Construction Building Specialties $37,891.53; 2) MDC Drywall, Inc. - $127,370.00; and 3) ASPRO - $22,532.85. (Id.) In all, the
work performed by these subcontractors totaled $187,794.37, the amount MLE now seeks to
recover from Vanguard for the work performed outside of the subcontract.
In her deposition, MLE’s owner, Mary Luttrell, admitted that the claim for the extra work
was less than $187,794.37. Specifically, Luttrell agreed to drop any portion of the claim for
work performed by Construction Building Specialties.

(Luttrell Dep., DN 59, p. 5:1-14.)

Additionally, she agreed that MLE was only seeking $73,582.50 from Vanguard for work
performed by MDC Drywall, not $127,370.00 as listed in the proposed change order. (Id. at pp.
60:23-62:20.) Finally, the evidence regarding payments to ASPRO is ambiguous. On one hand,
Luttrell conceded that MLE withheld $22,532.85 from ASPRO because the company failed to
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The change order was only signed by MLE’s owner, Mary Luttrell, and explicitly stated that it was not valid until
signed by both parties. It is undisputed that Vanguard never signed the change order.

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complete certain work on the project. (See id. at pp. 61:8-62:20; Letter of Nov. 10, 2009, DN 604.) Vanguard claims that MLE cannot recover for any non-payment to ASPRO. On the other
hand, evidence exists that MLE paid at least some portion of the amount intended for ASPRO to
other subcontractors to complete ASPRO’s work. Because Luttrell did not explicitly concede
that MLE is not seeking to recover the amount necessary to complete ASPRO’s work, the Court
includes that full amount in the damage calculation, even though it may overestimate damages.
Doing so resolves this ambiguity in favor of MLE, as is required of the Court when faced with a
motion for summary judgment, but has no effect on the ultimate outcome of this action.
Accordingly, evidence produced during discovery reveals that MLE’s claim for work performed
outside of and in addition to the subcontract is, at most, $96,115.35, not $187.794.37 as alleged
in the complaint.
2.
Second, discovery also revealed that MLE’s claim for retainage is less than alleged.
MLE’s subcontract with Vanguard was for $1,350,342.85.3 Luttrell admitted in her deposition
that Vanguard paid MLE a total of $1,209,829.54 on the subcontract. (See Luttrell Dep., DN 59,
pp. 27:16-31:2.) This leaves only $140,513.31 unpaid on the subcontract, not $156,996.07 as
alleged in the complaint. Adjusting MLE’s damages in light of evidence revealed in discovery,
MLE seeks $140,513.31 in unpaid retainage on the subcontract and $96,115.35 for work
performed outside of an in addition to the subcontract, for total damages of $236,628.66.
3.
Third, the evidence produced in discovery revealed that Vanguard made “off contract”
payments to MLE in the amount of $251,791.00 and that MLE never credited Vanguard for those
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This amount represents the total of MLE’s original subcontract with Vanguard and two additive change orders that
are not subject to dispute.

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payments. In answer to the complaint, Vanguard asserted that MLE did not credit Vanguard for
these “off contract” payments and that MLE wrongly charged Vanguard for work MLE did not
perform and for materials it did not deliver. (Am. Answer, DN 42, pp. 2, 3.) Accordingly,
Vanguard seeks offset of these amounts, or, in the alternative, counterclaims to recover the
non-credited payments.
The nature and origin of the “off contract” payments from Vanguard to MLE is unclear
from the record. Vanguard allegedly routed these payments from other projects to MLE’s
subcontract on the Fort Sill project in an attempt to prevent MLE from losing money on the
project because of a bad bid. The exact origin of the payments is inconsequential, however,
because Luttrell admitted in her deposition that MLE did not but should have applied the “off
contract” payments to the MLE’s work on the project.
Q: [Vanguard]:

You don’t have any disputes that the remaining $251,791
was retained by MLE, correct?

A: [Luttrell]:

Correct.

Q:

And you also agree that that money was intended to be
applied toward costs associated with Fort Sill, correct?

A:

Yes. That is correct.

....
Q:

And I think you mentioned earlier, you don’t have any
dispute that the 251,000 off the Fort Campbell and Puerto
Rico money, that that should be credited now towards the
Fort Sill costs. We can agree on that, right?

A:

Right.

(Luttrell Dep., DN 59, pp. 27:9-15, 31:10-15.) Luttrell’s testimony clearly demonstrates that
Vanguard paid MLE $251,791.00 in “off contract” payments. Furthermore, Luttrell admits that
MLE did not but should have applied those payments to costs and expenses it billed to Vanguard
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for the project.
Based on the foregoing evidence, Vanguard now moves for summary judgment on
grounds that MLE has suffered no loss.

As corrected for the evidence produced during

discovery, MLE seeks $236,628.66 in retainage and uncompensated extra work. Mary Luttrell,
MLE’s owner, now admits that the company received but did not credit Vanguard for
$251,791.00 in “off contract” payments that should have been applied to the unpaid balance of
MLE’s work at Fort Sill.
II.
Summary judgment is appropriate where “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). In determining whether summary judgment is appropriate, a court must resolve
all ambiguities and draw all reasonable inferences against the moving party. See Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
“[N]ot every issue of fact or conflicting inference presents a genuine issue of material
fact.” Street v. J. C. Bradford & Co., 886 F.2d 1472, 1477 (6th Cir. 1989). The test is whether
the party bearing the burden of proof has presented a jury question as to each element in the case.
Hartsel v. Keys, 87 F.3d 795, 799 (6th Cir. 1996). The plaintiff must present more than a mere
scintilla of evidence in support of his position; the plaintiff must present evidence on which the
trier of fact could reasonably find for the plaintiff. See id. (citing Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 252 (1986)). The plaintiff may accomplish this by “citing to particular parts
of materials in the record” or by “showing that the materials cited do not establish the absence
. . . of a genuine dispute . . . .” Fed. R. Civ. P. 56(c)(1). Mere speculation will not suffice to
defeat a motion for summary judgment; “the mere existence of a colorable factual dispute will

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not defeat a properly supported motion for summary judgment. A genuine dispute between the
parties on an issue of material fact must exist to render summary judgment inappropriate.”
Monette v. Elec. Data Sys. Corp., 90 F.3d 1173, 1177 (6th Cir. 1996).
While the substantive law of Kentucky is applicable to this case pursuant to Erie
Railroad v. Tompkins, 304 U.S. 64 (1938), a federal court sitting in diversity applies the
standards of Federal Rule of Civil Procedure 56, not “Kentucky’s summary judgment standard as
expressed in Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476 (Ky. 1991).” Gafford v.
Gen. Elec. Co., 997 F.2d 150, 165 (6th Cir. 1993) (abrogated on other grounds in Hertz Corp. v.
Friend, 130 S. Ct. 1181 (2010)).
III.
Based on the facts recounted above, the Court finds that Vanguard is entitled to summary
judgment because the evidence conclusively shows that MLE has not sustained a loss in this
action. Because there is no genuine dispute on the issue of MLE’s damages, Vanguard’s motion
must be granted.
As alleged in the complaint, MLE originally sought damages for unpaid retainage and
uncompensated work in the combined amount of $344,790.41.

Resolving all evidentiary

ambiguities in MLE’s favor, discovery revealed that MLE’s damages for unpaid retainage and
uncompensated work were, at most, $236,628.66. Against these damages, MLE now admits that
it received $251,791.00 in “off contract” payments from Vanguard and that those payments were
not but should have been credited to Vanguard for the Fort Sill project. Doing so demonstrates
that Vanguard overpaid MLE by, at minimum, $15,162.34. Accordingly, the evidence before the
Court conclusively establishes that MLE has not suffered any loss in this action. Therefore,
summary judgment is appropriate.

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The Court must also consider one argument that might preclude the grant of summary
judgment. MLE originally asserted that Vanguard received consideration in exchange for the
“off contract” payments in the form of additional work and materials list in an “Exhibit A” to
MLE’s answer to Vanguard’s counterclaim. (See Exhibit A to Answer to Counterclaim, DN 451.) None of the work or materials listed in Exhibit A includes the extra, uncompensated work
performed by MLE’s subcontractors, MDC Drywall and ASPRO, as discussed above. It must be
noted, however, that MLE has been unable to produce a change order or other written contract
between Vanguard and MLE for the work and materials listed in Exhibit A. Therefore, MLE
essentially claimed that it entered into an oral modification of the subcontract with Vanguard
whereby Vanguard paid MLE the “off contract” payments in exchange for the work and
materials listed in Exhibit A. If true, then MLE’s claim for the extra, uncompensated work
performed by its subcontractors might remain viable.
MLE’s arguments in support of oral modification are without merit for two reasons.
First, MLE has abandoned this argument. MLE attached Exhibit A to its answer to Vanguard’s
counterclaim.

In response to the motion for summary judgment, however, the work and

materials listed in Exhibit A are not mentioned or relied upon by MLE as a basis for denying the
motion. In fact, MLE makes no attempt in its response brief to link Exhibit A and Vanguard’s
“off contract” payments. Second, and perhaps the reason for MLE’s abandonment, MLE has
failed to produce any documents or witnesses to support its oral modification argument by clear
and convincing evidence. In Kentucky law, “a written contract can be modified or abandoned by
a subsequent oral agreement.” Dalton v. Mullins, 293 S.W.2d 470, 475 (Ky. 1956). But, proof of
oral modification must be “clear and convincing.” Id. “This does not mean that it must be
established beyond a reasonable doubt, but that the evidence must not be vague, ambiguous, or

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contradictory, and must come from a credible source.”

Wehr Constructors, Inc. v. Steel

Fabricators, Inc., 769 S.W.2d 51, 54 (Ky. Ct. App. 1988). In the present case, MLE has not
produced evidence tending to show that Vanguard made “off contract” payments in exchange for
the work and materials listed in MLE’s Exhibit A. Accordingly, MLE cannot meet the clear and
convincing standard necessary to prove oral modification.
At the end of the analysis, two clear points justify summary judgment in favor of
Vanguard. First, MLE has suffered no loss. Mary Luttrell, MLE’s president, testified that
Vanguard’s “off contract” payments were not but should have been applied to the work that MLE
performed on the Fort Sill project. Those payments, totaling $251,791.00, exceed the damages
that MLE allegedly suffered, revealed in discover to total $236,628.66. The “off contract”
payments and MLE’s damages offset so that MLE has suffered no loss in this action. Second,
MLE has failed to produce clear and convincing evidence that the parties entered into an oral
modification of the subcontract. Absent clear and convincing proof to the contrary, there is no
genuine dispute that the parties orally modified.
Upon review of the record as a whole and in light of the parties’ arguments, the Court
finds that there are no genuine disputes and that Vanguard is entitled to summary judgment.
CONCLUSION
Defendant Vanguard Contractors, LLC moved for summary judgment on all claims
asserted by Plaintiff MLE Enterprises, Inc. For all of the forgoing reasons, Vanguard’s motion is
GRANTED.
Vanguard’s counterclaim to recover the “off contract” payments was asserted
alternatively in the event that those payments were not used to offset MLE’s alleged damages.
Because the “off contract payments” offset MLE’s damages, Vanguard’s counterclaim is

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DISMISSED AS MOOT.
An appropriate order and judgment shall issue separately from this memorandum
opinion.

May 9, 2013

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