Hagen Construction, Inc. v. The Whiting-Turner Contracting Company
Filing
68
MEMORANDUM. Signed by Chief Judge James K. Bredar on 2/4/2019. (bmhs, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
HAGEN CONSTRUCTION, INC.,
Plaintiff
v.
CIVIL NO. JKB-18-1201
WHITING-TURNER CONTRACTING
CO.,
Defendant
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MEMORANDUM
I. Background
Initially filed in New Jersey state court, this lawsuit was brought by Plaintiff Hagen
Construction, Inc. (“Hagen”), against Defendant Whiting-Turner Contracting Co. (“W-T”) after
Hagen had served as a subcontractor on the construction of Nemours – Alfred I. DuPont Hospital
for Children Outpatient Center (the “Project”) in Deptford, New Jersey. (Compl., ECF No. 1-1.)
The case was removed to the United States District Court for the District of New Jersey which
granted a change of venue to this Court based on a forum selection clause in the subcontract.
(Notice of Removal, ECF No. 1; Order, Apr. 24, 2018, ECF No. 32.)
Hagen’s complaint contains three counts: Count I, breach of contract; Count II, violation
of New Jersey’s Prompt Pay Act; and Count III, unjust enrichment. The case has proceeded
through discovery and the filing of W-T’s motion for partial summary judgment as to Hagen’s
labor inefficiency claim, which is part of Count I. (W-T’s Mot. Partial Summ. J. (“W-T’s
Mot.”), ECF No. 55.) The motion has been briefed (ECF Nos. 62, 64) and is ready for decision.
Hagen has also filed a motion for leave to file a surreply (ECF No. 66), and that, too, has been
briefed (ECF No. 67) and is ripe. No hearing is required. Local Rule 105.6 (D. Md. 2018).
W-T’s motion will be granted, and Hagen’s motion will be denied.
II. Standard for Summary Judgment
“The 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); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing predecessor to
current Rule 56(a)). The burden is on the moving party to demonstrate the absence of any
genuine dispute of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). If
sufficient evidence exists for a reasonable jury to render a verdict in favor of the party opposing
the motion, then a genuine dispute of material fact is presented and summary judgment should be
denied. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). However, the “mere
existence of a scintilla of evidence in support of the [opposing party’s] position” is insufficient to
defeat a motion for summary judgment. Id. at 252. The facts themselves, and the inferences to
be drawn from the underlying facts, must be viewed in the light most favorable to the opposing
party, Scott v. Harris, 550 U.S. 372, 378 (2007); Iko v. Shreve, 535 F.3d 225, 230 (4th Cir.
2008), who may not rest upon the mere allegations or denials of his pleading but instead must, by
affidavit or other evidentiary showing, set out specific facts showing a genuine dispute for trial,
Fed. R. Civ. P. 56(c)(1). Supporting and opposing affidavits are to be made on personal
knowledge, contain such facts as would be admissible in evidence, and show affirmatively the
competence of the affiant to testify to the matters stated in the affidavit. Fed. R. Civ. P. 56(c)(4).
III. Governing Documents
Two documents govern the Court’s analysis of W-T’s motion.
The first is the
Subcontract signed by both parties. (W-T’s Mot. Ex. 2, ECF No. 55-6.) The second is the
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Subcontractor’s Partial Release Waiver of Lien and Affidavit, attached as Exhibit I to the
Subcontract and made a part thereof. (ECF No. 55-6 at p. 49 (for this document, the Court
utilizes the pagination generated by CM/ECF).)
In the Subcontract are several pertinent provisions:
•
ARTICLE 5. PAYMENT—
...
(b) . . . As a condition precedent to the payment of any application, the
Subcontractor shall (1) produce waivers of mechanics lien rights and claim releases in the
form required by Contractor by Subcontractor and all persons supplying labor or
materials to the Subcontractor on the Project through the period covered by the
application, or (2) exhibit such other evidence as the Contractor may require that charges
for all labor and material have been paid.
...
•
ARTICLE 6. ADDITIONAL OR OMITTED WORK—
(a) In the event that the Contractor directs Subcontractor to perform additional
work, Subcontractor agrees that it will promptly perform and diligently complete such
work whether or not Contractor and Subcontractor have agreed on the cost of such work.
Subcontractor shall submit to Contractor a lump sum proposal for such work, which
proposal shall include a detailed cost breakdown for each component of the work,
indicating both quantities and unit prices, and such proposal shall be submitted to
Contractor not later than 7 days after Contractor directs Subcontractor to perform extra or
additional work or such lesser period if required by the Contract between Owner and
Contractor. If a lump sum price or unit price for the additional work cannot be agreed
upon, or Subcontractor fails to submit such proposal within 7 days after Contractor
directs Subcontractor to perform extra or additional work, Subcontractor agrees to do the
work on the basis of its actual cost plus percentage fees for overhead and profit as set
forth in Article 10. The Contractor shall not be liable for payment for any additional
work performed by the Subcontractor unless such work is first expressly authorized by
the Contractor in writing and payment is made by the Owner to the Contractor for such
extra work, payment by Owner to Contractor being a condition precedent for Contractor
to pay Subcontractor for such work. Both authorization in writing by the Contractor and
actual payment by the Owner to the Contractor for such extra work shall be conditions
precedent to Contractor’s obligation to pay Subcontractor for such additional work. Any
additional compensation or time to be given to Subcontractor shall be set forth in a
Subcontract supplement and shall constitute a full and final equitable adjustment of
compensation, time or any other alleged entitlement, known or unknown, arising in
connection with the facts and circumstances described in and which gave rise to such
contract supplement and Subcontractor waives all damages, direct, indirect and
consequential, relating to such facts and circumstances, including, but not limited to,
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impact, reduced productivity, interference by other trades, lack of coordination of the
work by Contractor, inefficiencies, acceleration, delays, extended overhead, diminished
bonding capacity or lost profits.
...
(d) In the event of any dispute, controversy, or claim for additional compensation
or time extensions, except for payment for extra or additional work expressly directed by
Contractor in accordance with Section 6 (a) of this Subcontract, the compensation for
which shall be fully and finally governed by Section 6 (a) of this Subcontract and for
which no further claim can or shall be made, notice in writing shall be given to the
Contractor no later than seven (7) days following the occurrence on which such claim is
based, unless the notice provision in the General Contract between the Owner and
Contractor is less than seven (7) days, in which case, Subcontractor shall give notice to
Contractor within 2 days less than the time required for Contractor to give notice to the
Owner according to the notice provision in the General Contract. Such notice shall
describe the dispute, controversy or claim in detail so as to allow Contractor to review its
merits. Such notice shall also provide detailed information to substantiate such claim
including supporting documentation and calculations, and including any information
requested by Contractor. Any claim not presented within such time period shall be
deemed waived by Subcontractor.
...
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ARTICLE 8. RELEASES OF CLAIMS AND WAIVER OF LIENS—
Subcontractor agrees to provide to Contractor, and to provide and obtain from its
subcontractors and suppliers of all tiers, executed releases of claims and/or waivers of
liens and lien rights in the form required by Contractor and at such times as may be
requested by Contractor.
The Subcontractor’s Partial Release Waiver of Lien and Affidavit provided in pertinent
part:
The undersigned Subcontractor, in consideration of the payments
previously made and payment for the period covered by the current invoice set
forth above, hereby waives and releases all mechanic’s, materialman’s or other
liens and, to the fullest extent permitted by law, all rights to file any such liens in
the future, and all claims and demands against Contractor, Owner, their sureties
and the real property on which the project is located, in any manner arising out of
work, labor, services, equipment or materials, performed or furnished by
Subcontractor, its subcontractors, and suppliers, in connection with the Project
and subcontract, through the period covered by the current invoice and all
previous invoices. The release does not apply to retention, nor to extra work
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which Subcontractor has been authorized to proceed with by the Contractor, but
for which payment has not yet been approved.
Except as noted below, Subcontractor acknowledges and represents that
for the period and work covered by all previous invoices for which Subcontractor
has received payment:
l.
Subcontractor has paid in full all amounts for subcontract, labor,
materials and rented equipment.
2.
Subcontractor has properly applied previous payments to pay all
outstanding invoices related to the Project.
3.
Subcontractor is aware of no claims nor any circumstances that
could give rise to any future claims against Contractor, Owner, Architect or other
Subcontractor on the Project.
4.
All payroll, withholding, sales and other taxes, union benefits,
insurance premiums and any other amount required by law, regulation or
agreement to be paid in connection with labor, materials, and equipment for the
Project have been paid in full.
List exceptions, if any:
...
I hereby certify, under penalties of perjury, that the facts, information and
representations set forth above are true and accurate to the best of my knowledge,
information and belief.
BY:
(Name of Subcontractor)
BY:
(Signature, Printed Name and Title), Duly Authorized Agent of Subcontractor
IV. Evidence
The Subcontract under which Hagen agreed to provide the labor and materials required to
complete the drywall and rough carpentry for the Project was executed on or about July 29,
2015.
(Subcontract 9.)
(Although Hagen and W-T also executed another agreement in
January 2016 for Hagen to complete millwork and casework installation on the Project, only the
drywall subcontract is at issue in this case.)
The amount to be paid to Hagen under the
Subcontract was $2,400,000; in addition, pursuant to Article 10 of the Subcontract, W-T agreed
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to pay Hagen its actual costs and certain percentage fees for overhead and profit for extra work
authorized in writing under Article 6. (Subcontract 8.)
According to Rebecca Reeves, W-T’s project manager for the Project, Hagen began work
under the Subcontract in September 2015 and achieved substantial completion of its work by
June 30, 2016.1 (Reeves Decl. ¶ 13, W-T’s Mot. Ex. 1, ECF No. 55-5.) For each progress
payment application on the Subcontract, Hagen submitted a signed Partial Release Waiver of
Lien and Affidavit (“Partial Release”). (Id. ¶¶ 14-16.) Hagen submitted a total number of 16
payment applications and Partial Releases.2 (Id.) On none of the Partial Releases did Hagen list
any exceptions. (Id. ¶ 18.) In the first payment application numbered “14,” which covers the
time period after May 31, 2016, and up to August 31, 2016, Hagen certified it was 100%
complete with its original work under the Subcontract. (Id. ¶ 20; Payment App’n 14, W-T’s
Mot. Ex. 4, ECF No. 55-8 at pp. 95-101 (using CM/ECF pagination).) Four additional payment
applications were submitted after that one, with dates of October 31, 2016 (the second
application numbered “14”), November 30, 2016 (application numbered “15), November 30,
2016 (application numbered “16”), and February 28, 2017 (application numbered “17”). (Id.
Ex. 4, ECF No. 55-8 at pp. 102-29.)
Reeves states the latter four payment applications
“requested payment for additional work subject to bilaterally executed contract supplements and
the release of retention.” (Reeves Decl. ¶ 22.) Reeves states W-T paid Hagen in full for
applications numbered 1-17. (Id. ¶ 19.)
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The first two payment applications preceded September 2015, indicating some work must have occurred
before September 2015. It is noted, however, that the amounts of the first three applications were, generally, a good
bit smaller than the payment applications from October 31, 2015, onward.
2
Reeves indicates the numbering of the payment applications is not sequential in some instances, “and
there are duplicate numbers due to the parties’ contemporaneous revisions of and combination of certain draft
payment applications.” (Reeves Decl. ¶ 17.) Thus, no payment application is numbered “12” or “13,” and two
payment applications are numbered “14.” (Id. ¶ 16.)
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Reeves states, “Throughout the summer of 2017, W-T and Hagen were negotiating closeout of the several open Hagen change order requests which totaled $123,499 and did not include
any labor inefficiency claims and several W-T backcharges against Hagen (the ‘Open Items’).”
(Id. ¶ 24.) The Court interprets this statement as indicating W-T and Hagen were negotiating
during the Summer of 2017 the settlement of several open Hagen change order requests and
several W-T backcharges against Hagen; further, the Court interprets Reeves’s statement to
mean the open Hagen change order requests did not include any labor inefficiency claims.
On May 12, 2017, Reeves emailed George Jackson, who was Hagen’s project manager
on the Project, and attached a copy of W-T’s “logs showing all open items at this time.” (W-T’s
Mot. Ex. 7, ECF No. 55-11.) She also said,
With regards to the “Rejected” log, the majority of these items are items that were
submitted to Nemours through the change order process and returned “not
approved”. We will need to review each item in detail to resolve how they will be
addressed. Additionally, the Pending log is a list of open/pending backcharges. I
will compile the back-up for the miscellaneous issues and send that to you in a
separate email. . . .
...
At this point, I'd like to get through everything that we can to issue a contract
supplement early next week, even if there are still a few items, including the HSJ
charges that are not yet finalized.
Please review and let me know your availability to discuss next week. . . .
(Id.)
Jackson responded the next day,
Rebecca there is a lot of rejected and partial payments that we need time to go
through and identify what is happening and where. I would like some time to
review and then perhaps a meeting to try and resolve? There is a lot to go through
over the phone. Let me know what you think. Thank you.
(Id.)
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On May 17, 2017, Reeves responded,
I will likely put a supplement together of the approved items to get those cleaned
up. Please let me know some dates that you may be available to review—I want
to get something on our calendars before we both get booked up.
(Id.)
On June 1, 2017, Jackson emailed Reeves and said,
Rebecca please review the attached response from Hagen Construction. At this
point Rebecca we are looking to get a final change order and simply move on
with some recognition of our efforts. We can meet to discuss if you would like
but we believe the attached is fair for what we have been through on this project.
Anything falling short of this mark will need to be resolved at a different level.
Please contact us to discuss further. Thank you.
(Id.) Attached to Jackson’s email message was a log entitled “Change Order Resolution” in
which he provided comments to Reeves’s proposed resolution of change order requests and
backcharges, noting those with which Hagen either agreed, agreed after modification, or
disagreed. (Id.) In his deposition, Jackson was asked about this log; specifically, W-T’s counsel
posed the question, “Now, in these logs is there any inefficiency claim identified being asserted
by Hagen Construction?” (Jackson Dep. 129:3-4, W-T’s Mot. Ex. 5, ECF No. 55-9.) Jackson
responded, “No, there is nothing on here for the COR on that.” (Id. 12:5-6.)
Jackson was asked in his deposition, “Were there any delays or impacts to Hagen, it
bases its inefficiency claim on, after June 30, 2016?” (Id. 74:5-6.) He answered, “Not that I can
remember or that I am aware of.” (Id. 74:7.) He was also asked, “So as of June, say the end of
June 2016, Hagen would have been aware of those events that would have given rise to impact to
their performance relating to these items that you identify. Is that correct?” (Id. 80:6-9.) He
answered, “Yes.” (Id. 80:10.) In response to the question, “Did Hagen submit a Change Order
Request relating to those items?,” Jackson said, “Not at that time. No.” (Id. 80:11-13.) A few
moments later, W-T’s counsel asked him, “My question is specific though, whether Hagen
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submitted a change order request for those items?,” and Jackson responded, “No, we did not.”
(Id. 80:22-24.)
Patti Ford, Hagen’s accounts receivables manager, signed payment applications 10
through 17 and their accompanying Partial Releases. (W-T’s Mot. Ex. 4.) In her deposition, she
acknowledged no exceptions had been noted on the Partial Releases she had signed. (Ford Dep.
19:13—30:9, W-T’s Mot. Ex. 6, ECF No. 55-10.) When asked if she had been aware of an
inefficiency claim that Hagen was asserting on the Project, she responded in the negative. (Id.
26:21-23.)
She testified that neither Jackson nor Hagen’s president, Alfred Hagen, had
communications with her about claims Hagen was asserting against W-T on the Project. (Id.
27:8-23.)
On August 14, 2017, Reeves sent an email message to Jackson proposing resolution of
outstanding amounts:
Hi GeorgeAs discussed, we have resolved the outstanding items with Nemours which now
allows us to work toward a final resolution of your Subcontract change orders and
amount.
Based on our discussion this morning, below is Whiting-Turner’s proposed close
out value:
$63,615.26 - Open Approved Change Order Requests
$50,065.00 - Previously Rejected Change Order Requests
-$902.50 - PCO #331/COR #135 Hagen agrees to split value of rejected change
per response 6/1/17
-$1,011.00 - PCO #33/ COR #137 Hagen agrees to split value of rejected change
per response 6/1/17
-$828.00 - PCO #424/COR #194 Hagen agrees that this change may be rejected
per response 6/1/17
-$439.00 - PCO #412/Tru-Fit Backcharge - Hagen agrees to this backcharge per
response 6/1/17
-$1,283.50 - PCO #476/Union Roofing Backcharge - Hagen agrees to portion of
backcharge per response 6/1
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-$3,161.00 - PCO #255/COR #86 - Issue not properly submitted/documented,
tickets submitted well after work in field completed without proper notification
-$2,345.00 - PCO #255/COR #87 - Issue not properly submitted/documented,
tickets submitted well after work in field completed without proper notification
-$29,846.86 - PCO #320 - Firestopping Backcharge, Value reduced based on
request to utilize Hagen contract rates despite actual Invoices/costs being
submitted. Additionally, no W-T supervision/coordination time has been charged
associated with this work which was documented to be deficient by Hagen
Construction.
-$26,844.00 - PCO #447 - HSJ Additional Costs associated with excessive
door/hardware punchlist and numerous backchecks performed due to deficient
work. Costs are associated with additional HSJ visits on 9/14-9/15, 10/24 and
11/16. Following each visit an updated punchlist or field visit report was issued
by HSJ. These charges do NOT include any of the additional HSJ visits, calls, or
work associated with the door clip issue.
Net Final Subcontract Supplement = $47,019.40
Please review these values and confirm that this is acceptable so that we can issue
a final Subcontract Supplement.
Thank you.
Rebecca
(W-T’s Mot. Ex. 8, ECF No. 55-12.) According to Reeves, the complaint filed in the instant
case was the first notification to W-T of the labor inefficiency claim. (Reeves Decl. ¶ 27.) The
lawsuit was filed August 2, 2017, and served on W-T August 10, 2017. (Compl., ECF No. 1-1.)
Alfred Hagen testified in his deposition that the company “certainly shared [with W-T]
throughout the project the fact that the project inefficiencies were impacting our ability to
execute, have a Draconian impact on the job.” (A. Hagen Dep. 75:2-5, W-T’s Mot. Ex. 9, ECF
No. 55-13.) In response to the question, “Did you provide [W-T] with the substantiation, the
detailed analysis of your inefficiency claim before filing the lawsuit?,” he responded, “I don’t
believe so.” (Id. 75:11-14.)
Jackson’s Declaration is also before the Court. (Jackson Decl., Hagen’s Opp’n Ex. 2,
ECF No. 62-2.) In it, he states,
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WT attempted to mitigate the initial Project delays, design changes, and other
disruptions by resequencing and accelerating Hagen’s work.
(Id. ¶ 25.)
By resequencing Hagen’s work and deviating from the contractually agreed-upon
schedule, WT forced Hagen to work in an impacted and inefficient environment.
(Id. ¶ 26.)
Hagen notified WT—both orally and in writing—of the impacts and inefficiencies
to its work throughout the course of the Project.
(Id. ¶ 28.)
Hagen’s notice took the form of conversations on the Project floor and in
meetings, as well as in writing via emails, letters, and other paperwork, including
meeting minutes.
(Id. ¶ 29.)
Hagen also notified WT of numerous issues with the Project’s design documents,
inefficient field conditions and obstructions to Hagen’s work, and issues with the
work of WT’s other subcontractors, all of which were impacting the efficiency of
Hagen’s base scope of work.
(Id. ¶ 37.)
I discussed impacts to Hagen’s work with WT’s project manager, Ms. Rebecca
Reeves, on nearly a weekly basis throughout the Project—both in person at
Project meetings and telephonically.
(Id. ¶ 42.)
Ms. Reeves acknowledged issues and impacts to Hagen’s work but, nevertheless,
instructed Hagen to prosecute its work as directed by WT.
(Id. ¶ 43.)
Despite Hagen’s continual notice of the impacts to, and inefficiencies in the
prosecution of, its work, WT never sought additional information or
documentation relating to the impacts and inefficiencies.
(Id. ¶ 44.)
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WT never demanded that Hagen provide a detailed breakdown or calculation of
its cost overruns.
(Id. ¶ 45.)
WT never requested that Hagen submit a formal change order request.
(Id. ¶ 46.)
WT never asserted that Hagen failed to give proper notice under the Subcontracts.
(Id. ¶ 47.)
WT never claimed that Hagen waived its rights to seek compensation for its labor
inefficiencies.
(Id. ¶ 48.)
Instead, during a telephone conversation regarding the negotiation of Hagen’s
change order requests and labor inefficiency claim, WT—and in particular, Ms.
Reeves—represented to me that WT knew Hagen was suffering losses due to the
design issues and inefficiencies on the Project, as was WT, and that WT would
work with Hagen and “treat Hagen fairly.”
(Id. ¶ 49.)
Throughout the course of the Project, Hagen requested additional compensation
for a series of added work items for which Hagen has not yet been paid.
(Id. ¶ 50.)
WT departed from and waived the notice and change order procedures otherwise
required by the Subcontracts by not demanding strict compliance with such
contractual provisions and approving a substantial amount of Hagen’s additional
work items which remain unpaid and in dispute.
(Id. ¶ 51.)
Alfred Hagen also provided a declaration to the Court. (A. Hagen Decl., Pl.’s Opp’n
Ex. 15, ECF No. 62-15.) His declaration repeats some of the statements in Jackson’s declaration
about the company’s notifications given orally and in writing to W-T regarding impacts and
inefficiencies to Hagen’s work. (Id. ¶¶ 12-15.) He also states he met with Reeves on at least
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three occasions and, each time, informed her of impacts causing inefficiencies in Hagen’s work.
(Id. ¶ 17.) Further, during one of those meetings, he “advised Ms. Reeves that Hagen estimated
it would sustain approximately $750,000 in losses on the Project as a result of the numerous
design issues, Project mismanagement, and related chaos on the Project.” (Id. ¶ 18.) Reeves, he
states, “represented to [him] that WT knew Hagen was suffering losses due to the design issues
and inefficiencies on the Project, as was WT, and that WT would work with Hagen on its
additional costs incurred as [a] result of the extra work and inefficiencies.” (Id. ¶ 24.) He made
other statements in his declaration:
. . . Hagen reasoned that the lien releases it signed throughout the course of the
Project did not apply to waive any of its extra work and inefficiency claims
because it could not be claimed in a lien under New Jersey’s lien law anyway.
(Id. ¶ 25.)
After substantial completion in June of 2016 through the first half of 2017, Hagen
attempted to negotiate closeout of its Subcontracts and open additional work
items with WT in good faith and based upon WT's promise to work with Hagen.
(Id. ¶ 28.)
Additionally, Alfred Hagen stated that the initial negotiations took place between Jackson
and Reeves, but when those “broke down,” he spoke with James Martini, a senior vice president
of W-T, and discussed “Hagen’s retainage, its unpaid change order requests, and its loss of
production due to the inefficient manner in which WT managed the Project.” (Id. ¶¶ 29-31.)
Martini’s final offer was that “WT would pay Hagen in full for its unpaid change orders in order
to close out the Project and Hagen’s claims for extra compensation, but [Alfred Hagen] rejected
Mr. Martini’s proposal and this suit ensued.” (Id. ¶ 32.)
Hagen has provided, as supporting evidence of its position, copies of two email messages
and a letter sent by Hagen to W-T. The first email message is dated November 5, 2015, and was
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sent by Rick Jankowski to Reeves, Jackson, Joe Lenker, and Chris Issa. It has a letter attached.
(Pl.’s Opp’n, Ex. 11, ECF No. 62-11.) In the letter, Jankowski complains to Reeves about
another subcontractor, Thomas Mechanical, which had damaged some of the walls erected by
Hagen. Jankowski tells Reeves, “I without complaint, spent 32 man hours fixing his destruction.
. . .” (Id.) Jankowski asked that Thomas Mechanical be required to cooperate so that Hagen’s
work does not have to be repeated or repaired. (Id.) He also said, “If W/T wishes framing to
cease, please inform George [Jackson] immediately in writing. If not, please get Thomas on
board with what we, as a team, are trying to accomplish.” (Id.)
The second email is dated April 28, 2016, and was sent by Jankowski to Reeves and
Jackson. (Id. Ex. 12, ECF No. 62-12.) The subject line is “Second floor,” and Jankowski states,
“I can’t install millwork/ finish ceilings with this in my way…..why was Nemours allowed to
load this building?” (Id.) Attached are two pictures showing large boxes under unfinished
ceilings. (Id.)
The letter is dated February 6, 2016, and was sent by Jackson to Reeves. (Id. Ex. 13,
ECF No. 62-13.) In his letter, Jackson complains to Reeves that certain things have not been
done to allow Hagen to fully install drywall, as opposed to “piece meal . . . drywall installation
[which] . . . has a gross negative impact to our productivity.” (Id.) Jackson also referred to the
north elevation siding installation and says,
4) . . . We experienced a gross negative impact to our productivity by
having to return to sections of exterior wall several times in order to
complete the siding installation. The south elevation still has a section of
siding left out awaiting direction on how the concrete bench interacts with
the siding and flashing details. To our knowledge we do not currently have
this information.
We currently have 26 men on this project, 20 carpenters, 4 tapers, and 2 laborers
as of Thursday 2/4/16. We can only proceed as fast as the trades in front of us.
Hagen Construction is committed to doing everything we can to help meet the
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completion date for the project. However we cannot pay for the privilege of
doing so by working in a nonproductive manner. Jumping around the project and
going back to areas that should be completed with a single mobilization are
costing us resources we do not have in the project. Again we are attempting to
keep things on track by installing drywall one side and hopping up and down on
the south and west siding installation. Moving forward we need to be able [to]
complete tasks in a productive manner.
Please contact our main office if you need to further discuss this matter. Thank
you.
(Id.)
Also before the Court are Daily Logs submitted by Hagen to W-T during the time when
work was in progress under the Subcontract. (Id. Ex. 9, ECF No. 62-9.) These have shorthand
notations that indicate, inter alia, problems encountered in the Project. For example, the Daily
Log for September 25, 2015, has the following notation under “Issues, Hold-ups & Delays”:
Waitng [sic] on level 2 parapet elevations...... 8 days, rfi came back without
elevations
North elevation from 1 to 3 line, had to add stand off studs, clips didn't reach
CFMF due to building being out of skew 1 l/4"
Need west elevation louver size
HM frames
West elevation clip change
Need incorrect cue deck changed for top track....
(Id. at p. 3 (utilizing CM/ECF pagination).)
Another example is the Daily Log for October 28, 2015, showing the following notation
under “Issues, Hold-ups & Delays”:
East elevation tube steel conflicts with arch drawings for height
Eyebrow wall at 7.6 line steel conflicts with arch drawings
Pool area windows....no storefront supports similar to RFI #127
HM frames
North tube steel plate.......19 days
5 line bent plate.....8 days
Change in parapet height again on high roof over Areas A and B
Control line issue on Level 2
(Id. at p. 15.)
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The Daily Logs also show “Tasks Performed Today.” For September 25, 2015, the
following notation was made:
Misc safety work level 2
North elevation CFMF
(Id. at p. 3.) And for October 28, 2015, the Daily Log showed the following:
Interior framing level 1, areas A and B
CFMF Level 1, North elevation Area C
Layout, top track, framing Level 1 Electrical/Mechanical rooms
(Id. at p. 15.)
Another Daily Log for February 8, 2016, showed “Issues, Hold-ups & Delays” as the
following:
No plumbing inspection L2......cannot drywall
No electrical inspection LlC......can only l side, cannot close up
No electrical inspection stair towers......stopped, cannot drywall
No painter onsite......no reason given
Fitters still welding pipe L2A.....cannot drywall
Plumbers, electricians holding up multiple phases
Grid starting 2/11/2016 with or without paint
(Id. at p. 18.) And the “Tasks Performed Today” for the same day are listed as follows:
Frame soffits L1C
In wall blocking L1C
Z bar block walls main entry and stone wall
Patch in Z bar, alum, ins L2 west
Finish siding L2 west
Start flashings noth [sic] elevation L1
Spray sound sealant LlA
Shoot ceiling wires Ll
Drywall stair B Ll...stopped by Joe
Frame columns L2
Top off L2
Shaftwall Elev A, L2
In wall blocking L2A
Tapers....sand LlB, Coat LlA
Clean up
(Id.)
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V. Analysis
W-T has asserted three reasons why it is entitled to judgment in its favor on Hagen’s
labor inefficiency claim.
First, W-T says Hagen failed to provide timely notice and
substantiation for the labor inefficiency claim as required by the Subcontract. Second, W-T
contends Hagen’s labor inefficiency claim is barred by Hagen’s execution of releases in which it
released all claims against W-T and represented it was not aware of any claims or occurrences
giving rise to future claims through a time period well beyond the dates of the events purportedly
giving rise to the labor inefficiency claim. Third, the labor inefficiency claim is a delay claim
and is barred by the Subcontract’s “no damages for delay” clause. (W-T’s Mot. Supp. Mem. 13.)
Although the Court finds no merit to the third argument, it concludes W-T is correct as to its first
and second arguments.
Because Maryland law governs the interpretation of the Subcontract, the Court relies
upon Maryland’s familiar principles of contract construction.
Maryland adheres to the principle of the objective interpretation of contracts. If
the language of a contract is unambiguous, we give effect to its plain meaning and
do not contemplate what the parties may have subjectively intended by certain
terms at the time of formation.
Cochran v. Norkunas, 919 A.2d 700, 709 (Md. 2007). Furthermore,
A recognized rule of construction in ascertaining the true meaning of a contract is
that the contract must be construed in its entirety and, if reasonably possible,
effect must be given to each clause so that a court will not find an interpretation
which casts out or disregards a meaningful part of the language of the writing
unless no other course can be sensibly and reasonably followed.
Sagner v. Glenangus Farms, 198 A.2d 277, 283 (Md. 1964), quoted in Cochran, 919 A.2d at
710. Finally,
Where the contract comprises two or more documents, the documents are to be
construed together, harmoniously, so that, to the extent possible, all of the
provisions can be given effect.
17
Rourke v. Amchem Products, Inc., 863 A.2d 926, 941 (Md. 2004).
A. Notice and Substantiation for the Labor Inefficiency Claim
The Court starts with the unarguable proposition that Hagen’s labor inefficiency claim is
a claim or demand upon W-T. More specifically, it is a claim or demand for reimbursement of
costs beyond those Hagen anticipated under the Subcontract based on W-T’s alleged
mismanagement of the Project, thereby causing Hagen to repeat work it had already done or to
start, stop, and return to work in various areas multiple times because Hagen was not afforded
unimpeded access to those areas according to the Project schedule and because it was not
provided in a timely fashion with materials and information required to perform its work on the
Project. Hagen’s allegations plausibly establish the basis for a labor inefficiency claim, but it
must be decided whether the claim may be properly asserted in this lawsuit.
For any work beyond the established scope of the Subcontract, two ways were provided
in the Subcontract for Hagen to seek reimbursement. The first method is set forth in subsection a
of Article 6. There, the Subcontract addresses the potential for compensation for extra or
additional work required by W-T. In the event W-T directed Hagen to perform additional work,
Hagen agreed it would “promptly perform and diligently complete such work whether or not
[W-T] and [Hagen] have agreed on the cost of such work.” (Subcontract 3.) Either Hagen could
submit a lump sum proposal for the work, including “a detailed cost breakdown for each
component of the work, indicating both quantities and unit prices” no later than seven days after
W-T directed Hagen to perform the extra or additional work, or, if a price could not be agreed
upon, then Hagen would undertake the work “on the basis of its actual cost plus percentage fees
for overhead and profit as set forth in Article 10.” (Subcontract 3-4.) Regardless of which
pricing mechanism prevailed in a particular instance, the Subcontract was unequivocal that W-T
18
would not be liable to Hagen for payment for additional work “unless such work is first
expressly authorized by [W-T] in writing and payment is made by the Owner to [W-T] for such
extra work . . . . Both authorization in writing by [W-T] and actual payment by the Owner to
[W-T] for such extra work shall be conditions precedent to [W-T’s] obligation to pay [Hagen]
for such additional work.” (Subcontract 4.) The “writing” contemplated under subsection a of
Article 6 is described as “a Subcontract supplement,” although it is possible other “writings”
would satisfy Article 6(a). Such a supplement
shall constitute a full and final equitable adjustment of compensation, time or any
other alleged entitlement, known or unknown, arising in connection with the facts
and circumstances described in and which gave rise to such contract supplement
and Subcontractor waives all damages, direct, indirect and consequential relating
to such facts and circumstances, including, but not limited to, impact, reduced
productivity, interference by other trades, lack of coordination of the work by
Contractor, inefficiencies, acceleration, delays, extended overhead, diminished
bonding capacity or lost profits.
(Id.)
No evidence before the Court shows that the additional work claimed by Hagen as caused
by labor inefficiencies is the subject of a Subcontract supplement or any other “writing”
constituting W-T’s express authorization in writing of such additional work. Thus, Hagen’s
labor inefficiency claim does not properly lie under subsection a of Article 6.
The second method provided by the Subcontract for reimbursement of additional or extra
work is set forth in subsection d of Article 6. Subsection d also requires a writing:
In the event of any dispute, controversy, or claim for additional compensation or
time extensions, except for payment for extra or additional work expressly
directed by Contractor in accordance with Section 6 (a) of this Subcontract, the
compensation for which shall be fully and finally governed by Section 6 (a) of
this Subcontract and for which no further claim can or shall be made, notice in
writing shall be given to the Contractor no later than seven (7) days following the
occurrence on which such claim is based . . . . Such notice shall describe the
dispute, controversy or claim in detail so as to allow Contractor to review its
merits. Such notice shall also provide detailed information to substantiate such
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claim including supporting documentation and calculations, and including any
information requested by Contractor. Any claim not presented within such time
period shall be deemed waived by Subcontractor.
(Subcontract 4.)
Although it is clear that Hagen frequently, and apparently justifiably, complained to W-T
about problems preventing Hagen from executing its work in an efficient manner, the Court can
find no writing in the record that constitutes an actual claim by Hagen for compensation by W-T,
that “provide[s] detailed information to substantiate such claim including supporting
documentation and calculations,” and that was submitted within seven days of any occurrence
upon which a claim could be based. The closest that Hagen comes to meeting that contractual
standard is the letter attached to the November 5, 2015, email message by Jankowski to Reeves
that referred to 32 man hours spent by Jankowski in the prior week repairing damage to Hagen’s
framing caused by another subcontractor.
But even that seems more in the nature of an
expression of frustration and a request for W-T to rein in a renegade subcontractor rather than a
request for reimbursement; the letter simply does not make a claim against W-T for the 32 man
hours.
General complaints by Hagen that W-T mismanaged the project do not constitute
“claims.” No evidence of a claim within the scope of subsection d of Article 6 can be found in
the record.
Hagen counters by arguing that W-T waived the requirement of compliance with
Article 6, either subsection a or d, “by not demanding strict compliance with such contractual
provisions and approving a substantial amount of Hagen’s additional work items which remain
unpaid and in dispute.”
(Pl.’s Opp’n 11-12, citing Jackson Decl. ¶ 51.)
But Jackson’s
conclusional statement in his declaration to that effect does not suffice for factual evidence that
W-T, in fact, waived the Subcontract’s requirement of compliance with its terms. Hagen has
20
provided no evidence of any occasion when W-T reimbursed Hagen for work outside of a duly
submitted payment application or change order request.
Hagen’s opposition response also suggests that Reeves’s statement that W-T would “treat
Hagen fairly” amounted to a waiver of compliance with the Subcontract’s notice and
substantiation provisions. (Pl.’s Opp’n 17.) The Court presumes Reeves made such a statement,
but finds nothing in it that constitutes a waiver. Reeves’s statement is, after all, consistent with
compliance with the Subcontract’s terms. Thus, if Hagen provides proper and timely notice of a
claim, then W-T will treat Hagen fairly. Nothing Reeves allegedly said obviates the need for
Hagen to give proper and timely notice first, however. Hagen analyzes this argument according
to principles of equitable estoppel, citing the case P Overlook, LLLP v. Bd. of Cty. Comm’rs of
Washington Cty., 960 A.2d 1241, 1254 (Md. Ct. Spec. App. 2008). (See Pl.’s Opp’n 18.) But
that case does not support Hagen’s argument. As Hagen points out, an essential element of
equitable estoppel is whether the plaintiff relied upon the defendant’s voluntary conduct to
plaintiff’s detriment by changing his position for the worse.
Id. Hagen has produced no
evidence that Reeves’s promise to “treat Hagen fairly” caused Hagen to change its course of
conduct, much less to change its course of conduct to its detriment. Jackson’s Declaration
indicates this promise occurred in the Spring and Summer of 2017 when Hagen had already
finished its work under the Subcontract and the parties were negotiating the close-out. (Jackson
Decl. ¶ 49.) But the Court, in viewing the evidence most favorably to Hagen, will assume for
the sake of argument that the statement was made at an undefined time while Hagen was still
performing its work under the Subcontract. Hagen asserts it continued to work on the project
“while incurring enormous expenses to complete the Project in a timely fashion” and that fact
establishes detriment to Hagen. Its assertion is unconvincing since Hagen has provided no
21
evidence it intended to do something other than continue to work on the Project. Consequently,
Hagen’s evidence does not satisfy an essential element of equitable estoppel.
The Court notes Hagen has also relied upon the undersigned’s prior opinion in Carter
Concrete Structures, Inc. v. Whiting-Turner Contracting Company, Civ. No. JKB-15-1330
(Mem. Mar. 4, 2016, ECF No. 30), for its observation regarding W-T’s failure in that case to
raise the issue of timely notice in the parties’ presuit negotiations, and how that fact supported
Carter Concrete’s contention that its compliance with its contractual obligation to provide notice
was not properly raised by W-T in the suit itself. (Pl.’s Opp’n 16-17.) The short answer to
Hagen’s argument—that W-T’s presuit failure to raise the issue of timely notice of Hagen’s labor
inefficiency claim bars it from asserting the issue now—is that Carter Concrete’s facts and
circumstances are markedly different from the instant case. The evidence in Carter Concrete
supported the plausible conclusion, in the Court’s view, that the plaintiff there had given W-T
proper and timely notice of Carter Concrete’s claim for additional compensation; the Court’s
only reservation on that point was regarding the amount of the claim in this Court as opposed to
the amount of the claim communicated by Carter Concrete to W-T. Thus, the fact that W-T had
not raised the issue of notice in presuit negotiations “len[t] credence to Mr. Carter’s assertion in
his affidavit that ‘Whiting-Turner departed from and waived the notice and change order
procedures otherwise required by the Subcontract.’” (Civ. No. JKB-15-1330, Mem. Mar. 4,
2016, slip op. at 10-11.) Here, the Court cannot find evidence of proper and timely notice to
W-T of Hagen’s labor inefficiency claim prior to the filing of this suit. As a result, that W-T did
not raise the issue of notice in presuit negotiations with Hagen is unremarkable and immaterial.
The Court concludes Hagen’s failure to comply with the Subcontract’s notice provisions on
Hagen’s labor inefficiency claim results in waiver of any right to assert it in this lawsuit.
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B. Signed Partial Releases
A second basis for concluding Hagen’s labor inefficiency claim is barred is Hagen’s
execution of the Partial Releases submitted with the payment applications. In its opposition,
Hagen strains to interpret the Partial Release contrary to its plain wording and to that of the main
body of the Subcontract. (Pl.’s Opp’n 19-24.) First, Hagen notes the Partial Release does not
apply “to extra work which Subcontractor has been authorized to proceed with by the Contractor,
but for which payment has not yet been approved,” and it further notes that the language in
question does not itself require written authorization from W-T.
(Id. 19-20.)
However,
remembering the rule requiring multiple documents that form a contract to be interpreted
harmoniously together, the Court construes the quoted language from the Partial Release as
consistent with Article 6 of the Subcontract, which addresses extra or additional work. Thus, this
exception to the Partial Release’s effect only applies to extra work as expressly authorized in
writing by W-T pursuant to Article 6. As previously noted, Hagen has failed to show that the
“extra work” that is the subject of its labor inefficiency claim was expressly authorized in writing
by W-T. This argument fails.
A second argument put forth by Hagen is that the Partial Release only applies to liens,
not to claims. (Pl.’s Opp’n 22-24.) Hagen’s position on this point is disingenuous because it
flies in the face of the plain wording of the Partial Release. It is true that the word “claim” is not
in the title of the document, but Hagen cites no authority for the proposition that every critical
word in a release must be contained in the release’s title, and the Court knows of none. The text
of the Partial Release unambiguously includes “all claims and demands against Contractor” in
the release.
Further, the Partial Release requires a Subcontractor’s certification that the
Subcontractor is aware of neither claims against the Contractor nor occurrences that could give
23
rise to future claims against the Contractor. And space is provided for the Subcontractor to list
any exceptions to the release of claims or waiver of liens or certification as to knowledge of
claims or future claims. But, as earlier noted, Hagen never listed any exceptions in any of its
Partial Releases. It is, therefore, bound by its release of its labor inefficiency claim through
execution of the Partial Releases without listing any exceptions.
C. No Damage for Delay Clause
W-T provides a third potential basis for barring Hagen’s labor inefficiency claim, but the
Court finds W-T’s argument unmeritorious. Article 4 of the Subcontract provides,
To the fullest extent permitted by applicable law, Contractor shall have the right
at any time to delay or suspend the work or any part thereof without incurring
liability therefore. An extension of time shall be the sole and exclusive remedy of
Subcontractor for any delays or suspensions suffered by Subcontractor, but only
to the extent that a time extension is obtained from the Owner, and Subcontractor
shall have no right to seek or recover from Contractor any damages or losses,
whether direct or indirect, arising from or related to any delay or acceleration to
overcome delay, and/or any impact or effect of such delays on the Work.
(Subcontract 3.)
Hagen’s claimed damages due to labor inefficiencies are not based upon delay. They are
based upon the additional work that Hagen says was necessitated by W-T’s allegedly poor
management of the Project. Mere delay is not what is at issue. W-T’s argument on this point is
without merit.
VI. Conclusion
The Court concludes Hagen’s labor inefficiency claim is barred by its failure to give
proper and timely notice and by its execution of unqualified Partial Releases. A separate order
will issue dismissing that portion of Count I. The Court also concludes that W-T’s reply on its
motion for partial summary judgment did not raise new issues and that Hagen’s proposed
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surreply is repetitive of, and only an elaboration of, its earlier opposition to W-T’s motion.
Accordingly, the motion for surreply will be denied.
DATED this 4th day of February, 2019.
BY THE COURT:
____________/s/______________________
James K. Bredar
Chief Judge
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