The Hartford v. MDI Construction, L.L.C. et al
Filing
186
ORDER and REASONS - IT IS ORDERED that the Motion for Summary Judgment 150 , filed by Audubon, is hereby GRANTED, and MDI's claims for damages against The Audubon Commission and The Audubon Nature Institute, Inc. are hereby DISMISSED WITH PREJ UDICE. IT IS FURTHER ORDERED that all parties shall submit to the Court, not later than noon Friday, October 19, 2012, a joint statement indicating whether any claim remains for trial in this matter or whether entry of final judgment is appropriate, as stated within document. Signed by Judge Kurt D. Engelhardt on 10/17/2012. (cab)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
HARTFORD CASUALTY INSURANCE
COMPANY
CIVIL ACTION
VERSUS
NO. 10-4369
MDI CONSTRUCTION, L.L.C., ET AL
SECTION “N” (5)
ORDER AND REASONS
Before the Court is a “Motion for Summary Judgment” (Rec. Doc. 150), filed by The
Audubon Commission and The Audubon Nature Institute, Inc. (collectively, “Audubon), seeking
to dismiss the claims brought by MDI Construction, LLC (“MDI”). MDI has filed a
memorandum in opposition (Rec. Doc. 158), which was adopted by Hartford Casualty Insurance
Company (Rec. Doc. 159). After Audubon filed a reply memorandum (Rec. Doc. 169), MDI
filed a Supplemental Opposition (Rec. Doc. 174), in response to which Audubon filed a
Supplemental Memorandum (Rec. Doc. 179), as directed by the Court. MDI then filed another
memorandum in opposition (Rec. Doc. 180), to which Audubon filed a reply (Rec. Doc. 185).
The Court has considered all of these memoranda, the exhibits and attachments thereto, as well
as the applicable law. The Court has not considered the Supplemental Memorandum in Support
of Motion for Summary Judgment (Rec. Doc. 176), filed by Audubon, which presents an
additional basis for dismissing MDI’s claims that was not raised in the original motion papers.
I. BACKGROUND:
This matter arises out of a construction contract between MDI (as contractor) and
Audubon (as owner) for the construction of the Audubon Park Batture Ball Fields Project (the
“Project”). The litigation began as an action for indemnification, brought by Hartford Casualty
Insurance Company (as surety) against MDI (as principal), to recover amounts paid pursuant to
bonds executed in connection with the Project. MDI filed third-party claims, including the
instant one against Audubon. Audubon then filed an interpleader to determine the party entitled
to certain contract funds retained by Audubon. The interpleader has been adjudicated. See
Order and Reasons, January 31, 2012 (Rec. Doc. 101). Now before the Court is MDI’s claim
against Audubon for damages allegedly incurred as a result of various delays in the Project.
II. LAW AND ANALYSIS:
Rule 56 requires that “[t]he court shall grant summary judgment if 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). Audubon argues that MDI’s claim should be dismissed
because there is no genuine dispute as to the fact that MDI failed to provide a written notice of
claim within twenty-one (21) days, as required by the contract between the parties. The Court
agrees.
A.
The Contract Requires that a Notice of Claim be Made Within 21 Days:
It is undisputed that the contract between Audubon and MDI (the “Contract”)
incorporates by reference the “General Conditions for the Contract for Construction” found in
the American Institute of Architects (AIA) Document A201™ – 1997 (“Form A201”). See
Contract § 8.1.2 (Rec. Doc. 150-2 at p. 6 of 14). It is further undisputed that section 4 of Form
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A201 sets forth the procedure by which the parties to the Contract were to bring claims,
including limiting the time for bringing such claims to twenty-one (21) days:
Claims by either party must be initiated within 21 days after occurrence of the event
giving rise to such Claim or within 21 days after the claimant first recognizes the
condition giving rise to the Claim, whichever is later. Claims must be initiated by written
notice to the Architect and the other party.
Form A201 § 4.3.2 (Rec. Doc. 150-3 at p.19 of 41).
A Claim is a demand or assertion by one of the parties seeking, as a matter of right,
adjustment or interpretation of Contract terms, payment of money, extension of time or
other relief with respect to the terms of the Contract. The term “Claim” also includes
other disputes and matters in question between the Owner and Contractor arising out of
or relating to the Contract. Claims must be initiated by written notice. The responsibility
to substantiate Claims shall rest with the party making the Claim.
Id. § 4.3.1.
Claims…shall be referred initially to the Architect for decision. An initial decision
by the Architect shall be required as a condition precedent to mediation, arbitration
or litigation of all Claims between the Contractor and Owner arising prior to the date
final payment is due, unless 30 days have passed after the Claim has been referred
to the Architect with no decision having been rendered by the Architect. The
Architect will not decide disputes between the Contractor and persons or entities
other than the Owner.
Id. § 4.4.1.
Contracts have the effect of law for the parties. La. Civ. Code art. 1983 (West 2008).
“When the words of a contract are clear and explicit and lead to no absurd consequences, no
further interpretation may be made in search of the parties’ intent.” La. Civ. Code art. 2046
(West 2008).
In this case, no party contends that the Contract is ambiguous. Nor is there dispute as to
its meaning. The law of the contract is clear: Any claim relating to the Contract must be
initiated by written notice to the project architect and the other party within twenty-one days
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after occurrence of the event giving rise to the claim (or within twenty-one days after the claimant
first recognizes the condition giving rise to the claim).
B.
MDI’s Failure to Give Timely Notice of Claim Has Been Admitted and
Conclusively Established Pursuant to Rule 36:
Because MDI failed to timely respond to requests for admission propounded by
Audubon, it is now conclusively established that MDI did not submit a written notice of claim,
as required by the Contract, within twenty-one days after the occurrence of any of the events
giving rise to MDI’s claims for damages or within twenty-one days after MDI first recognized
the conditions giving rise to the claims. See Requests for Admission Nos. 1 through 8 (Rec.
Doc. 150-7 at pp.6-8); see also Order & Reasons dated Oct. 11, 2012 (Rec. Doc. 182) (finding
the matters contained in the requests to be deemed admitted as written and conclusively
established); Fed. R. Civ. P. 36(b) (“A matter admitted under this Rule is conclusively
established unless the court, on motion, permits the admission to be withdrawn or amended”).
It has further been admitted and conclusively established that MDI’s March 25, 2010
letter to the Project architect (Rec. Doc. 150-6) is the first written claim for delay on the Project
that MDI made pursuant to section 4.3 of the Contract. See Request for Admission No. 9 (Rec.
Doc. 150-7 at p.8); see also Rec. Doc. 182. Given that all of the alleged events giving rise to
MDI’s damages claim occurred in 2008 or 2009 (see Rec. Doc. 150-9), this notice of claim is far
outside the twenty-one days prescribed by the Contract.
Therefore, it is established as a matter of law that MDI failed to comply with the
Contract’s requirements for bringing the damages claim that it now seeks to litigate against
Audubon.
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C.
Even If MDI’s Failure to Give Timely Notice of Claim Had Not Been
Admitted, MDI Has Failed to Demonstrate a Genuine Dispute as to the Fact
That Its Notice of Claim Was Untimely:
Moreover, even if MDI’s failure to give timely notice had not been admitted and
conclusively established, MDI has failed to point to any evidence that would create a genuine
dispute as the untimeliness of MDI’s notice of claim. MDI points to numerous documents
tending to show that Audubon had actual knowledge of the various delay events underlying
MDI’s damages claim. However, actual knowledge of a delay – even a writing concerning a
delay event – does not amount to written notice of a Claim, as required under the Contract. The
Contract defines a “Claim” as “a demand or assertion by one of the parties seeking, as a matter of
right, adjustment or interpretation of Contract terms, payment of money, extension of time or other
relief with respect to the terms of the Contract.” Form A201 § 4.3.1 (Rec. Doc. 150-3 at p.19 of
41). It “also includes other disputes and matters in question between the Owner and Contractor
arising out of or relating to the Contract.” Id.
None of the materials cited by MDI can be fairly construed to constitute written notice
that MDI was making a Claim against Audubon. In addition to the numerous change orders,
meeting minutes, emails, and other documents relating to the events underlying MDI’s alleged
delay damages (see, e.g., Rec. Docs. 158-3 through 158-14; 180-2), none of which mention a
claim for delay damages, MDI points to language appended to certain change orders, which
states in pertinent part:
MDI Construction hereby submits the Proposed Change Order to accomplish the work
described below. Applicable time extensions and extended overhead costs that can
be determined at this time, if any, are noted. It is to be understood at this time that
MDI construction and our Subcontractors may have no choice but to reserve our
rights to claim, at a later date, for the extended overhead, overtime, acceleration
cost, etc., via an additional request for change and submit it for your approval.
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See Rec. Doc. 174-1 (emphasis added). MDI argues that, with this boilerplate language, “MDI
clearly notified the owner and architect that time extensions and extended cost and overhead
were going to be claimed, but that it was not possible to calculate those costs, so MDI made an
express reservation of its rights to claim such damages.” Rec. Doc. 174 at 2. The Court
disagrees. Even if the language could be construed as a reservation of rights (which is doubtful
given wording of the phrase “may have no choice but to reserve our rights...via an additional
request for change”), it does not give notice of a Claim, and therefore does not satisfy the notice
of claim requirement prescribed in the Contract. Nor does this language contain anything that
could be construed to waive, negate, or otherwise alter the twenty-one-day notice period or any
other aspect of the claim procedure specified in the Contract.
Thus, even if MDI’s failure to provide timely notice of claim had not been admitted and
conclusively established, as it has been, MDI has nevertheless failed to point to any evidence
that would create a genuine dispute as to the fact of MDI’s untimeliness and failure to follow the
claims procedure prescribed in the Contract.
D.
The Record Contains No Evidence Tending to Show That the Parties
Waived the Notice of Claim Requirement or Any Other Aspect of the
Prescribed Claim Procedure:
MDI cites several court opinions1 as support for its argument that a court may disregard
a written notice requirement in the construction contract where the delay is known to the owner
and the remedial work is necessary to complete the project. See Rec. Doc. 158 at pp.4-5. MDI
1
Roff v. Souther Constr. Corp., 163 So. 3d 112 (La. Ct. App. 3d Cir. 1964); Nat
Harrison Assocs., Inc. v. Gulf States Util. Co., 491 F.2d 578 (5th Cir. 1974); Supply, Inc. v.
Charles Carter & Co., Inc., 268 So. 2d 716 (La. Ct. App. 1st Cir. 1972); Pamper Corp. v. Town
of Marksville, 208 So. 2d 715 (La. Ct. App. 3d Cir.), writ denied, 210 So. 2d 509 (La. 1968);
Groner v. Cavender, 133 So. 825 (La. Ct. App. 2d Cir. 1931); Huey Lumber & Millwork, Inc. v.
Jackson, 212 So. 2d 538 (La. Ct. App. 1st Cir. 1968).
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also cites Louisiana Civil Code articles 2763 and 27642 as support for this argument. However,
the argument fails for several reasons.
First, the jurisprudence and Code articles cited by MDI concern payment for extra work,
not delay damages such as those at issue here. Specifically, they address certain circumstances
under which a contractor may recover payment for extra work performed on the basis of oral
change orders even though the contract requires that all extras and alterations be authorized in
writing. In this case, payment for extra work is not at issue. Although the parties executed
multiple change orders during the course of the Project, including orders for extra work,3 there is
no evidence that they deviated from the detailed procedure for change orders prescribed in the
Contract. Nor is MDI seeking payment for extra work, whether based on oral change orders,
written change orders, or otherwise. Rather, its claim is solely for delay damages, specifically
the cost of extended overhead (i.e., the cost of extending its field and home office overhead from
the contract completion date of March 2009 to January 2010). See Rec. Doc. 180 at 2. Thus,
the jurisprudence and Code articles cited by MDI are inapposite and do not support MDI’s claim.
Second, and more importantly, the courts in the cases cited by MDI allowed recovery for
extra work based on specific findings that the parties, through their consistent actions, had
2
Article 2763 states the general rule that an architect or workman cannot claim an
increase in contract price on the basis of extra work unless he can prove that the changes were
made “in compliance with the wishes of the owner.” La. Civ. Code art. 2763 (West 2005).
Article 2764 states an exception to that rule in cases where the change order or extra work is
necessary and unforeseen or where it is so great “that it can not be supposed to have been made
without the knowledge of the owner.” La. Civ. Code art. 2764 (West 2005).
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See, e.g., Rec. Docs. 158-3, 158-4, 158-5, 158-6, 158-7, 158-8, 158-9, 180-2.
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waived the contract’s requirement that all extras and alterations be authorized in writing.4 See
Groner, 133 So. 2d at 827-29; Roff, 163 So. 2d at 115-118; Huey Lumber, 212 So. 2d at 540;
McGowan-Rigsby, 268 So. 2d at 720; Nat Harrison Associates, 491 F.2d at 580. No such
evidence has been presented here. To the contrary, the record shows that the parties followed the
Contract’s prescribed procedure for change orders. See supra, footnote 3. Moreover, with
respect to extended overhead and delay damages, the record contains no evidence suggesting that
Audubon, through its actions or otherwise, consented to pay such damages or in any way waived
any of its rights with respect to such damages, including its right to receive timely written notice
of a claim based on any such damages. Nor has MDI presented any evidence tending to show
that Audubon waived any provision of the Contract. Consequently, the Court can find nothing in
the cases or articles cited that, based on the record in this case, would relieve MDI from
complying with the claims procedure specified in the Contract.
E.
The Contract’s Notice of Claim Procedure Is Not Void or Unenforceable
Under the Public Works Act:
Finally, MDI cites the following provision of the Public Works Act:5
Any provision contained in a public contract which purports to waive,
release, or extinguish the rights of a contractor to recover cost of
damages, or obtain equitable adjustment, for delays in performing such
contract, if such delay is caused in whole, or in part, by acts or omissions
within the control of the contracting public entity or persons acting on behalf
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The exception is Pamper Corp., 208 So. 2d 715, in which the court did not find waiver
and denied the contractor’s claims for extra work on grounds, inter alia, that the contractor had
failed to comply with the notice of claim provision in the contract. Id. at 718.
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The Court recognizes that MDI cited this legislation primarily in response to an
argument asserted by Audubon in its Supplemental Memorandum (Rec. Doc. 176 at pp.8-10)
(which the Court has not considered in its ruling herein), relating to different provisions of the
Contract. The Court addresses the statute in an abundance of caution, in the event that MDI
intended the argument also to extend to the notice of claim provision.
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thereof, is against public policy and is void or unenforceable. When a
contract contains a provision which is void and unenforceable under this
Subsection, that provision shall be severed from the other provisions of the
contract and the fact that the provision is void and unenforceable shall not
affect the other provisions of the contract.
La. Rev. Stat. § 38:2216(H) (West Supp. 2012) (emphasis added). The Contract’s notice of
claim requirement does not purport to “waive, release, or extinguish” the rights of MDI to
recover delay damages. It merely prescribes the procedure by which a party must initiate such a
claim. Indeed, the Contract specifically states elsewhere that recovery for delay damages is not
precluded. See Form A201 § 8.3.3 (Rec. Doc. 150-3 at p.26 of 41). Thus, the Court does not
find that the notice provision is void or unenforceable pursuant to section 38:2216(H).
Accordingly, for the foregoing reasons;
IT IS ORDERED that the Motion for Summary Judgment” (Rec. Doc. 150), filed by
Audubon, is hereby GRANTED, and MDI’s claims for damages against The Audubon
Commission and The Audubon Nature Institute, Inc. are hereby DISMISSED WITH
PREJUDICE.
IT IS FURTHER ORDERED that all parties shall submit to the Court, not later than
noon Friday, October 19, 2012, a joint statement indicating whether any claim remains for trial
in this matter or whether entry of final judgment is appropriate.
New Orleans, Louisiana, this 17th day of October 2012.
______________________________________
KURT D. ENGELHARDT
UNITED STATES DISTRICT JUDGE
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