Dobson Brothers Construction v. Ratliff et al

Filing 158

MEMORANDUM AND ORDER - ACIC's motion for partial judgment on the pleadings (filing 42 ) is denied as moot. ACIC's motion for summary judgment (filing 131 ) is denied. This matter is referred to Magistrate Judge Zwart to schedule trial. Ordered by Senior Judge Richard G. Kopf. (GJG)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
DOBSON BROTHERS
CONSTRUCTION COMPANY, a
Nebraska corporation,
Plaintiff,
v.
RATLIFF, INC., an Oklahoma
corporation, and AMERICAN
CONTRACTORS INDEMNITY
COMPANY, a California
corporation,
Defendants.

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4:08CV3103

MEMORANDUM
AND ORDER

What remains of this dispute are claims asserted by Dobson Brothers
Construction Company (“Dobson”) that its subcontractor’s surety, American
Contractors Indemnity Company (“ACIC”), owes Dobson money under a
performance and payment bond ACIC issued to secure the subcontractor’s
performance of a highway construction subcontract. Pending before the court are
ACIC’s motions for partial judgment on the pleadings (filing 42) and for summary
judgment (filing 131).
A. UNDISPUTED MATERIAL FACTS
1.

On or about April 10, 2007, plaintiff Dobson entered into a prime

contract with the Oklahoma Department of Transportation (“ODOT”) for a project
commonly known as ACNHY-009N(082)GB, Cordell, Oklahoma.
Amended Complaint ¶ 5.)

(Filing 24,

2.

On or about June 18, 2007, defendant Ratliff, Inc., (“Ratliff”) entered

into a subcontract with Dobson to install certain sewer and water lines on the project
(the “subcontract”). (Filing 24, Amended Complaint ¶ 6 & Ex. A; Filing 32, ACIC’s
Answer ¶ 6; Filing 153-1 (copy of subcontract excluding documents that were
incorporated therein such as schedule).) The subcontract between Ratliff and Dobson
allowed Dobson to supplement Ratliff’s work upon Ratliff’s default. (Filing 153-1,
Dobson-Ratliff Subcontract ¶ 6.2 (“If Subcontractor fails to so cure [the default],
Contractor may, at its sole option, assist in completing the Subcontract Work or may
take over the Subcontract Work.”).)
3.

On or about June 6, 2007, Ratliff obtained payment and performance

bonds for the project from defendant ACIC, a commercial surety. The penal sum of
the bonds was $885,003.20, the original amount of the subcontract, and the bonds
generally secured Ratliff’s performance under the subcontract. (Filing 24, Amended
Complaint ¶ 10; Filing 32, ACIC’s Answer ¶ 10; Filing 131-4, Performance Bond;
Filing 131-5, Payment Bond.)
4.

The performance bond contained certain conditions precedent that were

required to be observed by the obligee, Dobson, should it decide to declare the
principal, Ratliff, to be in default:
If there is no Obligee default, the Surety’s [ACIC’s] obligation under this
Bond shall arise after the Obligee has notified the Principal at the address
specified, and the Surety by certified mail at 9841 Airport Blvd., 9th
Floor, Los Angeles, CA 90045 that the Obligee is considering declaring
a Principal Default and has requested and attempted to arrange a
conference with the Principal and the Surety to be held not later than 15
days after receipt of such notice to discuss methods of performing the
Construction Contract; and the Obligee has declared a Principal Default
and formally terminated the Principal’s right to complete the contract.
Such Principal Default shall not be declared earlier than 20 days after the
Principal and the Surety have received notice as provided and the
Obligee has agreed to pay the balance of the contract price to the Surety
2

in accordance with the terms of the construction contract or to a
contractor selected to perform the construction contract in accordance
with the terms of the contract with the Obligee.
(Filing 131-4.)
5.

The performance bond contained the following language concerning

changes to the bonded contract that increased or changed the scope of the project,
resulting in a change in contract price:
It is a condition hereof that any change, alteration, modification or
amendment of any nature whatsoever that may be made in the terms of
said agreement, any change in the character or scope of the work to be
performed, or the method of performance, under said agreement or
modification of said agreement or in the time for completion thereof, any
change in the manner, time or amount of payment as provided therein,
any change of any nature whatsoever that may be made in the terms of
the contract between the said Obligee and the Owner or any change that
may be made in the performance of the work under said agreement by
the Principal, assented to by the Obligee, whether made under express
agreement or not, may be made without notice to the Surety and without
affecting the obligations of the Surety as long as changes are not in
excess of fifteen percent (15%) of the original contract terms. Any
changes in excess of this percentage will need consent of Surety.
(Filing 131-4 (emphasis supplied).) Thus, the performance bond required ACIC to
consent to any changes to Ratliff’s subcontract amount in excess of 15% of Ratliff’s
contract. Further, the performance bond twice provided that no person or entity “other
than the named Obligee and the successors, administrators, or assigns of the Obligee”
or its “heirs [or] executors” shall have a “right of action under this bond.” (Filing
131-4.)
6.

ACIC was obligated under the terms of the Dobson-Ratliff payment bond

to “indemnify and save harmless [Dobson, as Obligee] from all loss, liability, costs,
3

damages, penalty, attorneys’ fees and expenses” incurred by Dobson in connection
with Ratliff’s work. The payment bond also required ACIC to promptly and fully pay
“the claims of all persons, firms or corporations, performing labor or furnishing
equipment, materials or supplies incurred in connection with” Ratliff’s work. (Filing
131-5, Payment Bond.)
7.

By letter dated February 27, 2008, Dobson terminated its subcontract

with Ratliff. (Filing 153-1, Letter from Dobson to Ratliff (“Due to lack of any
meaningful response by Ratliff, as requested in our letter dated February 15, 2008 of
final notice and the failure to provide the necessary crews and equipment to man the
job and perform the work properly, we are terminating your contract.”); Filing 24,
Amended Complaint ¶ 21.)
8.

On May 14, 2008, Dobson filed its original complaint in this action

naming ACIC and Ratliff as defendants and alleging a performance bond claim
against ACIC and a breach of contract claim against Ratliff for Ratliff’s failure to
perform its obligations under the subcontract.
9.

More than one month after filing suit against ACIC and Ratliff, Dobson

sent letters dated June 26, 2008, and July 31, 2008, to both ACIC and Ratliff giving
notice that it was making a claim on the bond issued by ACIC in the amount of
$2,214,267.03. The July 31, 2008, letter noted that Ratliff had failed to respond to
Dobson’s June 26, 2008, letter. (Filing 131-11.)
10.

On June 30, 2010, Dobson amended its complaint in this action to

include a new claim against ACIC under the payment bond, as well as a claim for
breach of contract against ACIC and Ratliff for failure to reimburse Dobson for the
payments Dobson allegedly made on Ratliff’s behalf to suppliers of labor and
materials to complete Ratliff’s subcontract work. (Filing 24, Amended Complaint ¶¶
30-35.)

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11.

Ratliff filed a counterclaim against Dobson alleging breach of contract

and/or an action sounding in quantum meruit seeking compensation for work
performed by Ratliff pursuant to the subcontract for which Dobson had failed to pay
Ratliff. (Filing 31.)
12.

Because the Ratliff subcontract with Dobson contained a provision that

any subcontract disputes should be decided by arbitration between the parties, Ratliff
moved to compel Dobson to arbitrate those disputes. After the issuance of two
comprehensive reports and recommendations by the magistrate judge, I found that the
contract disputes between Ratliff and Dobson were subject to binding arbitration, and
I ordered those parties to arbitrate their contract disputes.1 (Filings 66, 82, 98, 103.)
13.

For eleven days between November 2, 2009, and January 3, 2010, Ratliff

and Dobson arbitrated their contract disputes before private arbitrator Jerome Bales,
who on February 22, 2010, issued his decision concerning those contract disputes.
Arbitrator Bales found that Ratliff had breached its subcontract with Dobson, and that
Dobson was entitled to recover $555,813.962 from Ratliff as a result of that breach.
(Filing 131-12, Arbitration Award.) Specifically, the arbitrator found that:
Ratliff materially breached its contract with Dobson by failing to start its
work on time (it began three weeks late and without justification), failing
to progress its work per the agreed CPM schedule, failing to staff and

1

While Dobson also sought to compel ACIC to participate in the arbitration
between Ratliff and Dobson, this court denied Dobson’s motion to compel ACIC to
arbitrate on March 27, 2009. (Filing 103.)
2

This amount was calculated by adding time-related costs ($388,079.64), pretermination costs to supplement Ratliff’s work ($248,856.88), post-termination costs
to complete and correct Ratliff’s work ($707,023.92), and incentive/disincentive
damages ($360,000.00) for a subtotal of $1,703,960.44. Subtracted from that amount
was $1,148,146.48 (adjusted contract value of $1,531,721.47 minus payments made
to Ratliff). (Filing 131-12 at CM/ECF p. 5.)
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equip the work properly, and failing to perform the work in a
workmanlike manner. Therefore, Dobson justifiably terminated Ratliff’s
Subcontract . . . .
14.

The arbitrator also found that Ratliff’s subcontract amount should be

adjusted from $885,003.20 to $1,531,721.47 to include the value of four approved
change orders (7, 9, 11, and 12), an increase of approximately 73% from the original
subcontract amount. The parties agree that Dobson is bound by the arbitrator’s
determination concerning increases to Ratliff’s subcontract.
CM/ECF p. 5 n.1.)

(Filing 131-12 at

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B. STANDARD OF REVIEW
The Eighth Circuit Court of Appeals has recently clarified the appropriate
standard for consideration of motions for summary judgment:
Summary judgment is proper if the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no
genuine issue as to any material fact and that the movant is entitled to
judgment as a matter of law. The movant bears the initial responsibility
of informing the district court of the basis for its motion, and must
identify those portions of the record which it believes demonstrate the
absence of a genuine issue of material fact. If the movant does so, the
nonmovant must respond by submitting evidentiary materials that set out
specific facts showing that there is a genuine issue for trial. On a motion
for summary judgment, facts must be viewed in the light most favorable
to the nonmoving party only if there is a genuine dispute as to those
facts. Credibility determinations, the weighing of the evidence, and the
drawing of legitimate inferences from the facts are jury functions, not

3

ACIC acknowledges that it agreed to be bound by the determination of the
arbitrator with regard to the disputes between Ratliff and Dobson and that the
arbitrator found that Ratliff was terminated for cause. (Filing 131-1 at CM/ECF p. 6
n.1.)
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those of a judge. The nonmovant must do more than simply show that
there is some metaphysical doubt as to the material facts, and must come
forward with specific facts showing that there is a genuine issue for trial.
Where the record taken as a whole could not lead a rational trier of fact
to find for the nonmoving party, there is no genuine issue for trial.
Jackson v. United Parcel Service, Inc., 643 F.3d 1081, 1085 (8 th Cir. 2011) (quoting
Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8 th Cir. 2011) (en banc)).
C. ACIC’S MOTIONS
ACIC asserts two grounds for its motions: (1) Dobson’s claim against ACIC
under the payment bond must fail because Dobson cannot assert a direct claim under
the bond, nor can it assert a claim as a subrogee; and (2) ACIC is entitled to judgment
on Dobson’s performance bond claim because Dobson failed to meet the conditions
precedent in the bond that would trigger ACIC’s liability. Because ACIC makes
identical arguments in its motion for partial judgment on the pleadings (filing 42) and
its motion for summary judgment (filing 131) regarding the propriety of Dobson as
a payment bond claimant, I shall deny as moot ACIC’s motion for partial judgment
on the pleadings and consider the argument in the context of ACIC’s summary
judgment motion.
1. Whether Dobson is Entitled to State Claim for Relief Under Payment Bond
as Claimant or Under Principles of Subrogation
a. Dobson as Direct Claimant Under Payment Bond
“‘A surety cannot be held beyond the precise terms of his contract. . . . The
liability of a surety, therefore, is measured by, and will not be extended beyond, the
strict terms of his contract.’” Nebraska Beef, Ltd. v. Universal Surety Company, 607

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N.W.2d 227, 233 (Neb. Ct. App. 2000) (quoting Farmers Union Co-op Assn. v. MidStates Constr. Co., 322 N.W.2d 373, 377 (Neb. 1982)).4
Relying on Cagle v. Sammons, 254 N.W.2d 398 (Neb. 1977), ACIC argues that
Nebraska courts “have consistently held” that general contractors like Dobson which
supplement a subcontractor’s forces or take over a subcontractor’s work are “barred
from asserting a payment bond claim” because payment bonds are intended to protect
those who provide labor, materials, and equipment—not the obligee of a bond—and
“the general contractor does not enter into a contract to supply labor and materials to
its own subcontractor.” (Filing 131-1, ACIC Br. at CM/ECF p. 13.) ACIC asserts
that Dobson, “as the general contractor on the Project and the Obligee under the bond,
may properly assert a performance bond claim . . . , but [Dobson] is not a proper
payment bond claimant.” (Filing 131-1, ACIC Br. at CM/ECF p. 18 (emphasis
added).)
In Cagle, the plaintiff general contractor brought suit against its subcontractor
and the subcontractor’s surety claiming that (1) the subcontractor had failed to
perform a substantial part of the work required by the subcontract and (2) the obligee,
in paying for the labor and materials used to complete the bonded contract work,
became a payment bond claimant as that term was defined in the payment bond for
“costs and expenses for labor and material which Plaintiff has paid, or become
obligated to pay.” Cagle, 254 N.W.2d at 401. The Nebraska Supreme Court found

4

Dobson notes that “[t]here is some question as to whether Oklahoma or
Nebraska law should apply to the issues raised by ACIC on the bond, as the Prime
Contract is governed by Oklahoma law and the Subcontract is governed by Nebraska
law. However, as Nebraska and Oklahoma apply consistent rules of law as to whether
general contract principles apply to interpreting bond obligations, this Court need not
determine which state’s law applies . . . .” (Filing 152 at CM/ECF p. 14 n.1.) ACIC
does not claim that Oklahoma law applies, but instead makes its arguments based on
Nebraska case law. (Filings 131-1 & 154.) Therefore, I shall also apply Nebraska
law.
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that the general contractor did not state a cause of action against the surety under the
bond because the bond defined eligible “claimants” in a way that excluded the
plaintiff general contractor—that is, the bond defined a “claimant” who “may sue on
this bond” as one having “a direct contract with the Principal for labor, material, or
both, used or reasonably required for use in the performance of the contract.” Id. at
402.
Even though a provision in the Cagle subcontract permitted the general
contractor to take over the subcontract, complete the work, and charge the cost thereof
to the subcontractor, such language did “not make [the general contractor] a claimant
as defined in the bond, for in such a situation [the general contractor] would have no
direct contract with [the subcontractor] to provide labor or materials to [the
subcontractor].” In sum, “the fact that [the general contractor] could take over the
subcontract on [the subcontractor’s] default does not bring [the general contractor]
within the definition of a claimant as set forth in the bond.” Id. at 403.
Unlike the situation in Cagle, there is no language in the ACIC payment bond
that requires a direct contract between Ratliff and a bond claimant. Rather, the
language of the payment bond obligated ACIC to “indemnify and save harmless
[Dobson, as Obligee] from all loss, liability, costs, damages, penalty, attorneys’ fees
and expenses” incurred by Dobson in connection with Ratliff’s work. The payment
bond also required ACIC to promptly and fully pay “the claims of all persons, firms
or corporations, performing labor or furnishing equipment, materials or supplies
incurred in connection with” Ratliff’s work. (Filing 131-5, Payment Bond.)
There is no indication within the terms of the payment bond that a claimant is
required to be a subcontractor or supplier with a direct subcontract or supply contract
with Ratliff to be entitled to state a claim under the terms of the payment bond.
Indeed, other language within the payment bond indicates that it is possible that an
entity without a direct contract may state a claim.

For instance, certain notice

requirements in the payment bond pertain only to “Claimants who are employed by
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or have a direct contract with the Principal,” while other notice requirements relate
to “Claimants who do not have a direct contract with the Principal.” (Filing 131-5,
Payment Bond (emphasis added).)
Because there is nothing within the language of the payment bond (filing 131-5)
that would bar Dobson from asserting a claim against ACIC on the bond, and because
ACIC “is bound in the manner and to the extent provided in the obligation,” Dobson
is a proper payment bond claimant in this case. Cagle, 254 N.W.2d at 402 (internal
quotation omitted). Therefore, ACIC’s motion for summary judgment on this ground
must be denied.
b. Dobson as Subrogee Under Payment Bond
Dobson’s fourth claim for relief alleges that it was “compelled by legal and/or
moral obligation, and/or by a need to protect its own rights or interests, to pay
Ratliff’s subcontractors . . . and/or to hire laborers and subcontractors . . . to replace
Ratliff and supplement Ratliff’s work” upon Ratliff’s default, and that the costs
incurred by Dobson following Ratliff’s nonperformance should have been paid by
ACIC under the payment bond. (Filing 24 ¶¶ 32-35.) This is a subrogation claim.
Nebraska Beef, Ltd., 607 N.W.2d at 235-36 (“Generally, subrogation is the right of
one, who has paid an obligation which another should have paid, to be indemnified
by the other.”).
Absent an agreement, the doctrine of subrogation applies only when a
party pays the debts of a third person, not as a volunteer, but either out
of a legal or moral obligation to do so or to protect his or her own rights
or interests or to save his or her own property. The doctrine of
subrogation is not administered by courts of equity as a legal right, but
the principle is applied to subserve the ends of justice and to do equity
in the particular case under consideration. It does not rest on contract,
and no general rule can be laid down which will afford a test for its
application in all cases. The facts and circumstances of each case
determine whether the doctrine is applicable.
10

Id. at 236 (internal citations omitted).
To recover on a subrogation claim, Dobson must establish that (1) it was
compelled to hire subcontractors to replace Ratliff, either out of a legal or moral
obligation to do so or to protect its own rights or interests; (2) the cost of those
subcontractors should have been paid by ACIC pursuant to the bond issued by ACIC
to Ratliff; (3) ACIC failed to pay those costs; and (4) Dobson paid the debt otherwise
owed by ACIC to those subcontractors. Id. at 236.
In this situation, the amended complaint alleges (and the arbitrator found) that
Dobson incurred costs and damages as a result of Ratliff’s breach of contract and that
Dobson paid the debts otherwise owed by Ratliff.

(Filing 24, First Amended

Complaint ¶¶ 33-35; Filing 131-12, Arbitrator’s Award at CM/ECF pp. 2, 5.) It is
reasonable to infer from the contractor-subcontractor relationship of Dobson and
Ratliff, and from the arbitrator’s findings, that Dobson most likely did not make these
payments as a volunteer. Moreover, given the duties that Dobson owed to the
Oklahoma Department of Transportation to perform on the prime contract, it is
reasonable to infer that these payments were most likely made out of a moral or legal
sense of obligation and to protect Dobson’s own interests. See Cagle, 254 N.W.2d at
404 (“As a general contractor in a position where its subcontractor had withdrawn
from the job, Cagle may well have had to make such payments to protect its own
interests in the project, to enable itself to complete its contract with the owner, or to
prevent liens from being filed on the property. This court has previously held that
persons may be subrogated to the rights of materialmen in situations analogous to the
one allegedly presented in this case.”).
Thus, Dobson is entitled to assert a claim for relief under the payment bond
under the principles of subrogation, and ACIC’s motion for summary judgment on
this ground must be denied as well.

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2. Whether Dobson Failed to Meet Conditions Precedent in Performance Bond
That Trigger ACIC’s Liability
ACIC’s final argument in support of its motion for summary judgment is that
while Dobson could have properly asserted a performance bond claim against ACIC,
such a claim is barred because Dobson did not satisfy the conditions precedent in the
bond that would have triggered ACIC’s liability. Specifically, ACIC argues that
Dobson was bound—but failed—to: (a) notify ACIC via certified mail that Dobson
was considering defaulting Ratliff; (b) attempt to arrange a conference with ACIC and
Ratliff to discuss how the bonded subcontract could be performed; (c) declare Ratliff
in default no earlier than 20 days after ACIC and Ratliff had been properly notified
of Ratliff’s default; and (d) agree to pay the remaining contract funds to ACIC so that
ACIC could arrange for the completion of its principal’s work under the bonded
contract. (Filing 131-1 at CM/ECF p. 4.) Further, ACIC asserts that the performance
bond required that ACIC consent to any change in Ratliff’s subcontract that modified
the contract by more than 15%, but neither Ratliff nor Dobson sought ACIC’s
approval for changes that increased the subcontract amount from $885,003.20
(original bond amount) to $1,531,721.47 (adjusted contract value as determined by
arbitrator), an increase of approximately 73% of the original contract amount.
In a previous case involving similar performance-bond language, I concluded
that providing notice of default and satisfying other bond conditions were “conditions
precedent under Nebraska law, and . . . the surety’s obligation to act under . . . the
bond does not arise unless such conditions are met.” Developers Surety & Indemnity
Co. v. Dismal River Club, LLC, No. 4:07CV3148, 2008 WL 2223872 at *8 (D. Neb.
May 22, 2008) (analyzing paragraph 3 of AIA A312 standard-form performance
bond).
“Where a guarantor attaches a certain condition or conditions to the
agreement, such condition or conditions must be construed in favor of
the guarantor, and the failure of a creditor to strictly comply with any
condition or conditions invalidates the guaranty. A stipulation for notice
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of default is a condition of liability which may always be imposed.
Where a contract of guaranty specifically requires notice of default, the
failure to give such notice discharges the guarantor’s obligations.”
Id. (quoting State ex rel. Wagner v. Amwest Sur. Ins. Co., 738 N.W.2d 805, 811 (Neb.
2007)).
In Dismal River, I found that although there may have been a jury issue as to
whether the bond’s notice-of-default provision was satisfied, the surety was not liable
on the bond because there was “no evidence” that the other conditions were satisfied,
and there was “no evidence” that those conditions were waived. Id.
Here, the parties have filed evidence creating a genuine issue of material fact
regarding whether Dobson satisfied its obligations in the performance bond to provide
timely sufficient notice of Ratliff’s eventual default; to arrange a conference to discuss
how the bonded subcontract could be performed; and to provide proper notice and
obtain approval for expenditures that could have increased the amount of the contract
by more than 15%.5 Further, the parties have presented evidence creating material

5

Filing 131-4 (performance bond); Filing 131-6, Dobson’s Response to ACIC’s
First Requests for Admissions ¶¶ 18-22, 25-27 (Dobson claims its first attempt to
contact ACIC regarding Ratliff’s nonperformance was October 22, 2007; admits that
October 22 letter did not request conference; and admits that Dobson’s December 12,
2007, letter to ACIC did not contain request to ACIC to participate in conference to
discuss Ratliff’s failure to perform, nor did letter offer to pay to ACIC contract funds
to allow ACIC to complete the project pursuant to bonded subcontract terms); Filing
131-7, Olson Dep. CM/ECF p. 10 (at time Dobson removed Ratliff from project,
Dobson “could have” given funds to ACIC to allow it to perform, “but we didn’t”
because “[w]e didn’t think it was appropriate” and Dobson “chose not to”); Filing
153-1, Olson Decl. ¶¶ 6, 7, 11, 19 & Exs. 1-D, 1-E (Dobson sent ACIC two notices
on October 22, 2007, and December 12, 2007, detailing Ratliff’s non-performance on
project; when Dobson contacted ACIC in December 2007, “no monies remained to
be paid under the Contract by virtue of the delay damages incurred by Dobson as well
as the backcharges incurred to that date”); Filing 131-3, Lanak Aff. ¶¶ 8, 9, 14, 15
13

questions of fact regarding whether ACIC excused, waived, or otherwise relieved
Dobson of these obligations; whether performance of these acts would have been
futile; and whether ACIC consented or otherwise acquiesced to the changes in the
subcontract that exceeded 15% of the contract amount.6

Because “[c]redibility

determinations, the weighing of the evidence, and the drawing of legitimate inferences
from the facts are jury functions,” Jackson, 643 F.3d 1081, at 1085, I shall deny
ACIC’s motion for summary judgment regarding its liability on the performance
bond.

(acknowledging that ACIC received December 2007 letter from Dobson concerning
Ratliff’s nonperformance, but stating that ACIC’s files do not contain the alleged
October 2007 letter); Filing 154 at CM/ECF p. 10 n.3 (“[ACIC] has always
maintained that it did not receive [the October 2007] correspondence, and as [Dobson]
did not send the notice certified mail (as required by the bond) there is no record of
receipt in [Dobson’s] records.”).
6

Filing 131-7, Olson Dep. at CM/ECF pp. 11-12 (penal sum of contract
increased due to change orders, and Dobson “didn’t receive any approval of anything”
regarding an increase); Filing 131-9, Lanak Dep. at CM/ECF p. 16 (“Dobson . . .
should have let us know beforehand and got our consent if they thought it was going
to be in excess of 15 percent . . . because it changes the underlying risk that we’re
assuming. . . . had we been asked it at the time we would not have consented”); Filing
131-9, Lanak Dep. at CM/ECF p. 20 (“the eventual arbitration award . . . found that
Ratliff had done a significant amount of extra work dollarwise far in excess of 15
percent of the $885,000 . . . original subcontract amount”); Filing 131-3, Lanak Aff.
¶¶ 20-22 (neither Ratliff nor Dobson sought ACIC’s consent for changes in scope of
work that increased value of subcontract by 73%; first notice ACIC was given of
changes that might increase scope of Ratliff’s work beyond 15% was in December 17,
2007, letter from Dobson stating Dobson “did not know” if contract changes would
exceed 15% and attaching backcharges made thus far); Filing 153-1, Olson Decl. ¶¶
6-10, 18 & Exs. (letters allegedly sent by Dobson to ACIC notifying it of Ratliff’s
performance problems; “prior to Ratliff’s termination, I personally directed Dobson
staff to work with ACIC in providing any needed information in connection with
Ratliff’s default on its obligations under the Contract. Further, I am personally aware
that numerous communications in fact took place between Dobson employees and
ACIC with regard to Ratliff’s performance on this Project.”).
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D. CONCLUSION
For the reasons discussed above, Dobson can assert a direct claim against ACIC
under the payment bond, as well as a claim under the principles of subrogation.
Further, there are genuine issues of material fact regarding whether Dobson failed to
meet the conditions precedent in the performance bond that would trigger ACIC’s
liability. Therefore, ACIC’s motions must be denied and this case may proceed to
trial.
IT IS ORDERED:
1.

ACIC’s motion for partial judgment on the pleadings (filing 42) is denied

as moot;
2.

ACIC’s motion for summary judgment (filing 131) is denied;

3.

This matter is referred to Magistrate Judge Zwart to schedule trial.

DATED this 10 th day of April, 2012.
BY THE COURT:
s/ Richard G. Kopf
Senior United States District Judge

*This opinion may contain hyperlinks to other documents or Web sites. The
U.S. District Court for the District of Nebraska does not endorse, recommend,
approve, or guarantee any third parties or the services or products they provide on
their Web sites. Likewise, the court has no agreements with any of these third parties
or their Web sites. The court accepts no responsibility for the availability or
functionality of any hyperlink. Thus, the fact that a hyperlink ceases to work or
directs the user to some other site does not affect the opinion of the court.
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