Foley Company v. Mixing & Mass Transfer Technologies, LLC

Filing 226

ORDER denying 135 M2T2's motion for summary judgment. Signed on 8/1/13 by Chief District Judge Fernando J. Gaitan, Jr. (Enss, Rhonda)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
FOLEY COMPANY,
Plaintiff,
v.
MIXING & MASS TRANSFER
TECHNOLOGIES, LLC
Defendant/Third-Party Plaintiff,
v.
HDR ENGINEERING, INC.,
Third –Party Defendant

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Case No. 4:11-CV-01080-FJG

ORDER
Currently pending before the Court is Defendant Mixing and Mass Transfer
Technologies, LLC’s (“M2T2”) Motion for Summary Judgment (Doc. Nos. 135 & 138).
I.

BACKGROUND
On January 24, 2006, Foley Company and Unified Government of Wyandotte

County, Kansas City, Kansas (“UG”) entered into a contract (“Contract”), pursuant to
which Foley was to serve as the general contractor for a project known as the Kaw
Point Wastewater Treatment Plant Improvements Project I.D. 6176 (“Project”). The
Contract required that Foley complete all work specified by the Contract documents
within three hundred sixty-five (365) calendar days after the date established in the
Notice to Proceed, unless the period for completion was extended. Pursuant to the
Contract, Foley was to pay liquidated damages of Two Thousand and 00/100 Dollars
($2,000.00) per day for each calendar day thereafter. The Notice to Proceed was

issued by UG on February 13, 2006. As such, the date for completion of all work was
established as February 12, 2007. (Doc. Nos. 138, 151, & 185).
Foley’s scope of work under its Contract included Section 13180, Retrofitted
Oxygenation System (“Oxygenation System”), of the Technical Specifications for the
Project. Foley entered into a subcontracting or purchase order agreement (“Purchase
Order”) with Mixing & Mass Transfer Technologies, LLC (“M2T2”) with respect to the
Oxygenation System. In the Purchase Order, M2T2 agreed to pay liquidated damages
to Foley if M2T2 did not meet agreed upon dates in the delivery schedule and Foley had
to pay liquidated damages to UG. Additionally, the Purchase Order made Section
13180 of the Specifications for the Project a part of the Purchase Order. Section 13180
provides for performance warranty liability, to be exercised in the event that M2T2 or its
equipment failed to attain or meet technical performance criteria or field testing
requirements. Specifically, the Performance Warranty Liability provision, paragraph 3.8
states,
A. In the event the oxygenation system fails to meet the shop and field acceptance
performance warranties described previously, the Owner [UG] has the option to
accept the oxygen dissolution subsystem with liquidated damages up to the limits
as specified or to reject it and require modification and/or replacement so as to
meet the performance requirements. After modification or replacement, the
Contractor shall retest the system as specified for the original testing. The
Contractor shall pay for the retest of the system and any subsequent tests
required, including additional Owner and Owner’s representative (Engineering)
costs associated with retesting.

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C. Notwithstanding any provisions of the preceding subparagraphs, in no event shall
the OSS [M2T2] be liable for combination of modifications to the system and
liquidated damages as specified or any other damages under or caused under
the preceding provisions of Paragraph 3.8, in excess of the aggregate total of
$500,000.
D. Damages listed above for failure to meet performance warranties for the
oxygenation dissolution subsystem shall be paid/incurred in addition to any
liquidated damages incurred by the Contractor as defined elsewhere in the
Contract Documents.
(Doc. Nos. 138, 151, & 185).
In the Spring of 2007, UG’s Engineer notified M2T2 of problems surrounding the
Oxygenation System. M2T2 commenced performance testing. UG rejected the
equipment and required modification. M2T2 performed the warranty work in
accordance with Specification 13180 at no additional cost to UG. The UG required that
after any modification/replacement of the Oxygenation System, that the system be
retested. During October or November of 2009, M2T2 conducted a second
performance test. On December 28, 2009, M2T2 transmitted the final performance test
data to Foley. On February 1, 2010, UG accepted the results of the performance
testing. (Doc. Nos. 138, 151, & 185).
On June 4, 2010, by letter, UG advised Foley that the Project was completed on
February 1, 2010. According to the June 4, 2010 letter, there was a delay in completion
of 1, 084 days, and at a daily liquidated damages rate of $2,000.00 per day, the amount

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owed by Foley to UG on account of liquidated damages was Two Million One Hundred
Sixty Eight Thousand and 00/100 Dollars ($2,168,000.00). Pursuant to discussions
between Foley and UG aimed toward amicably resolving the issue of liquidated
damages, UG agreed to reduce the liquidated damages assessment to a period of 283
calendar days and an amount of Five Hundred Sixty Six Thousand and 00/100 Dollars
($566,000.00). Foley and UG executed a deductive change order to the Contract for
Five Hundred Sixty Six Thousand and 00/100 Dollars ($566,000.00). (Doc. Nos. 138,
151, & 185).
Subsequently, on October 21, 2011, Foley filed the present action claiming that
all conditions precedent to Foley’s right to recovery from M2T2 have been met to Foley,
or have been waived, released, or excused by M2T2. Count I asserts breach of
contract for M2T2 allegedly failing to meet the dates set forth in the delivery schedule
and thus, Foley contends it was damaged for $566,000. Count II asserts breach of
contract in that since M2T2 caused Project delay Foley was assessed liquidated
damages by UG. Foley states M2T2 is responsible for these damages. In Defendant
M2T2’s Answer, M2T2 filed a Counterclaim against Foley for breach of contract for
failure to pay the remaining balance on the account. (Doc. Nos. 138, 151, & 185).
On May 16, 2013, M2T2 filed the present Motion for Summary Judgment (Doc.
No. 135 & 138).
II.

STANDARD OF REVIEW
A moving party is entitled to summary judgment on a claim only if there is a

showing that “there is no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). “[T]he substantive law

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will identify which facts are material. Only disputes over facts that might affect the
outcome of the suit under the governing law will properly preclude the entry of summary
judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). If the moving
party meets this requirement, the burden shifts to the non-moving party to “set forth
specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. 242,
248 (1986). In Matsushita Electric Industrial Co. Ltd. v. Zenith Radio Corp., 475 U.S.
574, 586 (1986), the Court emphasized that the party opposing summary judgment
“must do more than simply show that there is some metaphysical doubt as to the
material facts” in order to establish a genuine issue of fact sufficient to warrant trial. In
reviewing a motion for summary judgment, the court must view the evidence in the light
most favorable to the non-moving party, giving that party the benefit of all inferences
that may be reasonably drawn from the evidence. Matsushia, 475 U.S. 574, 588; Tyler
v. Harper, 744 F.2d 653, 655 (8th Cir. 1984), cert. denied, 470 U.S. 1057 (1985).
Under Missouri law, the elements that must be proven in order to recover for
breach of contract are “(1) existence of an enforceable contract between [the parties to
the action], (2) that mutual obligations had arisen under its terms, (3) that [the party or
parties being sued had not performed obligations imposed by the contract and (4) that
[the party seeking recovery] was thereby damaged.” Superior Ins. Co. v. Universal
Underwriters Ins. Co., 62 S.W.3d 110, 118 (Mo. Ct. App. 2001) (quoting Trimble v.
Pracna, 51 S.W.3d 481, 506 (Mo.App. 2001)).
The rules of contract interpretation presume that a written agreement contains
the intention of the parties. Cargo Protectors, Inc. v. Am. Lock Co., 92 F.Supp.2d 926,
932 (D. Minn. 2000). “The court is to examine the “four corners” of the document to

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discern the intention of the parties.” Id. The contract is to be considered as a whole,
and if the language is unambiguous, then the contract shall be interpreted without
resorting to inclusion of extrinsic evidence.

Id.

“Courts should avoid giving an

interpretation to a provision that will nullify the clear and unambiguous language of
another provision.” Id.
III.

DISCUSSION
M2T2 states that it is entitled to summary judgment on Counts I and II of Foley’s

Complaint because it did not fail to perform its obligations under the contract documents
and Foley has suffered no damages or liquidated damages. First, the rules of contract
interpretation mandate consideration of the Field Testing Performance, Performance
Warranty, and Performance Warranty Liability provisions of the contract between Foley
and M2T2. After M2T2 failed the first performance test, by its own contract, UG had to
make a choice between acceptance of the equipment with liquidated damages or
rejection and modification. UG choose rejection. Accordingly, all delay associated with
the performance of the contract by M2T2 occurred during periods when UG demanded
that M2T2 perform under the warranty provisions of Section 13180 Technical
Specifications and thus, M2T2 was not subject to liquidated damages. Holding M2T2
liable for liquidated damages would allow UG to essentially “double-dip” for its
remedies. Second, M2T2 claims it performed its duties pursuant to the terms of the
Purchase Order or Section 13180 by modifying or replacing the equipment to UG at no
charge. Therefore, M2T2 was not in breach of its contract. Third, Foley suffered no
damages or liquidated damages as a result of the alleged breach of contract because
pursuant to the terms of the Purchase Order and paragraph 3.8(a) of Section 13180,

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Foley agreed to pay the costs it now seeks to recover. These costs are not identified as
liquidated damages, but rather engineering costs. The Purchase Order between Foley
and M2T2 only provides for M2T2’s payment of liquidated damages assessed against
Foley. Therefore, M2T2 is not liable to Foley. Finally, M2T2 states that it is entitled to
summary judgment on Count I of its Counterclaim against Foley because M2T2 fulfilled
their obligations under the Purchase Order and Section 13180. These charges stem
from work contracted and do not include the warranty or replacement costs of M2T2.
Therefore, these charges are due and owing. (Doc. Nos. 135, 138, & 185).
Foley states that M2T2’s argument lacks merit.

First, M2T2 breached the

Purchase Order and is liable for liquidated damages for delay consistent with that
portion of the Purchase Order where M2T2 agreed to pay Foley liquidated damages if:
(1) M2T2 failed to meet the delivery schedule and (2) Foley was required to pay
liquidated damages to UG. It is undisputed that both events occurred here. Second,
even if Foley’s assessment of liquidated damages was not supported by the provisions
of the Purchase Order, Paragraph 19 of the Terms and Conditions which states that
M2T2 shall indemnify Foley for any claims made against Foley for delay supports an
award of liquidated damages.

Third, since Foley’s obligations under the Contract

passed to M2T2 and Foley agreed to pay for the re-test of the Oxygenation System and
any subsequent test required, including additional engineering costs associated with
retesting under paragraph 3.8(A), M2T2 is responsible.

Fourth, paragraph 3.8(D)

defeats M2T2’s argument in that it allows UG to assess both performance related
liquidated damages and delay related liquidated damages. Finally, to the extent the
Court concludes that one or more of the provisions of the Purchase Order (including the

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Section 13180 Technical Specifications) supports M2T2’s motion, there are clearly other
clauses that support Foley’s interpretation of the Purchase Order. Resolution of the
ambiguity is for the jury. (Doc. No. 151).
In this case, given the Purchase Order, it is clear that it was the intention of Foley
and M2T2 to be bound by the Contract and/or Section 13180 Technical Specifications.
Jim Carlson Const., Inc. v. Bailey, 769 S.W.2d 480, 481 (Mo. Ct. App. 1989) (“[M]atters
incorporated into a contract by reference are as much a part of the contract as if they
had been set out in the contract in haec verba.”). However, reading paragraph 3.8(C)
and paragraph 3.8(D) of Section 13180 in conjunction with the Purchase Order makes
clear that Section 13180 provides for liquidated damages under the performance
warranty in addition to delay-related damages incurred as defined elsewhere in the
Contract. It is undisputed that M2T2 was delayed in the delivery schedule. As such,
granting M2T2 summary judgment on this point would be improper. Given the above,
granting M2T2 summary judgment on its Counterclaim would also be improper.
IV.

CONCLUSION
For the aforementioned reasons, M2T2’s Motion for Summary Judgment (Doc.

No. 135) is DENIED.
IT IS SO ORDERED.
S/ FERNANDO J. GAITAN, JR.
Fernando J. Gaitan, Jr.
Chief United States District Judge 

Date: August 1, 2013
Kansas City, Missouri

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