Judds Brothers Construction Co. v. Mersino Dewatering, Inc.

Filing 114

MEMORANDUM AND ORDER - IT IS ORDERED: The Motion for Reconsideration, ECF No. 92 , filed by Defendant Mersino Dewatering, Inc., is denied. Ordered by Chief Judge Laurie Smith Camp. (TCL)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA

JUDDS BROTHERS CONSTRUCTION
CO., a Nebraska Corporation;
8:16CV1
Plaintiff,
MEMORANDUM
AND ORDER

vs.
MERSINO DEWATERING, INC., a
Michigan Corporation;
Defendant.

This matter is before the Court on the Motion for Reconsideration, ECF No. 92,
filed by Defendant Mersino Dewatering, Inc. (Mersino). For the reasons stated below,
the motion will be denied.
BACKGROUND
In 2015, the City of Council Bluffs, Iowa, hired Plaintiff Judds Brothers
Construction, Co. (Judds), as general contractor on the Mosquito Creek South Sewer
Relocation Project. Judds sought and received bids from two subcontractors to dewater
the project—Mersino and Griffin Dewatering Corp. (Griffin). Mersino proposed drilling
33 wells to a depth of 40 feet, while Griffin proposed drilling 14 wells to a depth of 90
feet.

Judds selected Mersino to dewater the Mosquito Creek Project.

Mersino’s

proposal for the project (First Proposal), as signed by Judds, stated “the dewatering
system shall sufficiently lower the ground water level below the sub-grade elevations
except where silts, clays, rock or other impervious material may be encountered” and
that “[i]f additional dewatering systems should be required or requested of Mersino in

excess of that which is quoted above, additional systems will be provided at additional
costs.” ECF No. 70-3, Page ID 1896–98.
On April 28 and 29, 2015, Mersino installed three wells, which terminated in
“gray-ish looking clay” and did not achieve the anticipated groundwater drawdown. On
May 8, 2015, Mersino submitted a second proposal (Second Proposal),1 this time
proposing the installation of a well-point system to aid in dewatering. Judds directed
Mersino to install a test run of 500 feet of well points. When the well-point system was
ineffective, Judds undertook several actions on its own to attempt to dewater the site,
such as installing sump pumps in a trench, electric pumps in the Mersino wells, and an
additional shallow well.
In mid-July of 2015, Judds informed Mersino that it was engaging Griffin to install
three wells at a depth of 90 feet to dewater the site. Mersino asked for the opportunity
to install deep wells, but Judds refused. The deep wells installed by Griffin eventually
achieved the desired drawdown and Judds completed the sewer relocation project.
Due to delays in project completion, the City of Council Bluffs imposed liquidated
damages on Judds per the terms of their contract.
Judds brought suit against Mersino in the District Court of Douglas County,
Nebraska, on November 24, 2015. ECF No. 1. Mersino removed the case to this Court
on January 4, 2016. In its complaint, Judds asserted claims for breach of contract,
negligence, breaches of implied and express warranties of fitness for a particular

1

As with the First Proposal, the Second Proposal stated, “the dewatering system shall
sufficiently lower the ground water level below the sub-grade elevations except where silts, clays, rock or
other impervious material may be encountered” and that “[i]f additional dewatering systems should be
required or requested of Mersino in excess of that which is quoted above, additional systems will be
provided at additional costs.”

2

purpose, and unjust enrichment. Id., Page ID 5–14. In its answer, ECF No. 7, Mersino
asserted counter-claims against Judds for breach of contract and quantum meruit. Id.,
Page ID 38–39.
On February 24, 2017, Mersino moved for summary judgment, ECF No. 60, in its
favor on all claims and counter-claims. On May 26, 2017, the Court entered an order,
ECF No. 87, granting the motion in part, and entering summary judgment in favor of
Mersino on all Judds’s claims except breach of contract. Regarding that claim, the
Court held that the undisputed evidence showed there had been no breach of the
express terms of the First and Second Proposals; but, because Judds introduced
evidence that Mersino may have suggested the well-point system despite its
unlikelihood of success and in order to prolong billing Judds, the Court allowed the
claim to proceed solely on the grounds that Judds may have breached its common-law
duty to perform the contract with reasonable care, expedience, and good faith. ECF No.
87, Page ID 3033–36. For this same reason, the Court did not grant summary judgment
on the clause in the agreement prohibiting damages for delay in Mersino’s performance,
as such a clause had been held unenforceable in cases where the delay resulted from
concealment, misrepresentation, fraud, bad faith, or malicious intent. Id., Page ID 3036.
Mersino has moved for reconsideration as to the breach of contract claim and the
no-damages-for-delay clause.
STANDARD OF REVIEW
“A ‘motion for reconsideration’ is not described in the Federal Rules of Civil
Procedure, but such a motion is typically construed either as a Rule 59(e) motion to
alter or amend the judgment or as a Rule 60(b) motion for relief from judgment.” Auto
3

Servs. Co. v. KPMG, LLP, 537 F.3d 853, 855 (8th Cir. 2008) (citing Sanders v. Clemco
Indus., 862 F.2d 161, 168 (8th Cir. 1988)). The Eighth Circuit Court of Appeals has
stated that “motions for reconsideration are ‘nothing more than Rule 60(b) motions
when directed at non-final orders.’” Elder-Keep v. Aksamit, 460 F.3d 979, 985 (8th Cir.
2006) (quoting Anderson v. Raymond Corp., 340 F.3d 520, 525 (8th Cir. 2003)).
Certain district court opinions have taken issue with Elder-Keep’s holding, citing a
district court’s “inherent authority to reconsider interlocutory orders.” Garrett v. Albright,
No. 4:06-CV-4137-NKL, 2008 WL 268993, at *2 (W.D. Mo. Jan. 30, 2008) (citing 15B
Wright and Miller, Federal Practice and Procedure § 3914.28); see also Lustgraaf v.
Sunset Fin. Servs., Inc., No. 8:08CV335, 2012 WL 5996968, at *2 n.3 (D. Neb. Nov. 28,
2012) (citing Garrett; Disc. Tobacco Warehouse, Inc. v. Briggs Tobacco & Specialty
Co., Inc., No. 3:09–CV–05078–DGK, 2010 WL 3522476, at *2 (W.D.Mo. Sept.2, 2010))
(recognizing courts’ disagreement with Elder-Keep).

Indeed, Federal Rule of Civil

Procedure 54(b) states that any order that adjudicates fewer than all the claims in a
pending action “does not end the action . . . and may be revised at any time before the
entry of a judgment adjudicating all the claims and all the parties’ rights and liabilities.”
Fed. R. Civ. P. 54(b); see Birge v. Smeall, No. 8:13CV136, 2013 WL 6631653, at *2 (D.
Neb. Dec. 17, 2013) (quoting K.C.1986 Ltd. P’ship v. Reade Mfg., 472 F.3d 1009, 1017
(8th Cir. 2007)) (“District courts have ‘the inherent power to reconsider and modify an
interlocutory order any time prior to the entry of judgment.’”).
Even district courts that have criticized Elder-Keep as too restrictive of a district
court’s discretion have noted that a court’s interest in judicial economy and respect for
the finality of court decisions “would be undermined if [a court] were to routinely
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reconsider its interlocutory orders.” Disc. Tobacco, 2010 WL 3522476, at *2. These
courts have required the moving party to show “(1) that it did not have a fair opportunity
to argue the matter previously, and (2) that granting the motion is necessary to correct a
significant error.” HM Compounding Servs., LLC v. Express Scripts, Inc., No. 4:14-CV1858 JAR, 2017 WL 2118012, at *1 (E.D. Mo. May 16, 2017) (citing Disc. Tobacco.).
DISCUSSION
I.

Common-law Duty to Perform Contract With Care, Skill, Reasonable

Expedience, and Faithfulness
In its summary judgment order, the Court held that Judds could proceed on its
breach of contract claim only on the theory that Mersino violated the common-law duty
to perform the contract with care, skill, reasonable expediency, and faithfulness to the
thing agreed to be done.2

The Court noted that Judds offered evidence, via the

testimony of Les Wallace, that Mersino suggested a well-point system, despite knowing
it was very unlikely to work, in order to save face and pad its bill. ECF No. 87, Page ID
3033–36
Mersino now argues that its motion for reconsideration should be granted
because this evidence was misleading and did not reflect the testimony of Wallace as a

2

In its opposition brief, Judds argued that the summary judgment order left intact Judds’s claim
that Mersino breached certain express terms of the First and Second Proposals, namely the term stating
“[i]f additional dewatering systems should be required or requested of Mersino in excess of that which is
quoted above, additional systems will be provided at additional costs.” ECF No. 97, Page ID 3180–81.
Although the summary judgment order did not expressly address this issue, the order impliedly found no
breach of this term, because the order allowed the breach of contract claim to proceed solely on the
question of the implied duty of care, skill, reasonable expediency, and faithfulness. The issue is not
whether Mersino failed to supply an alternative dewatering system—the uncontroverted evidence on
summary judgment showed that it suggested the well-point system—but whether it suggested a system in
breach of its implied duty, knowing the system would not work, and continued to advocate for its
operation despite its ineffectiveness so as to collect more money from Judds.

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whole. Specifically, Mersino points to Wallace’s testimony that Mersino thought a wellpoint system was the best option and that Mersino, early in the project, generally
discussed the possibility of deep wells with Judds.3 Supp. Brief., ECF No. 93, Page ID
3052–55.

This evidence simply demonstrates that genuine issues of material fact,

including Wallace’s credibility and the weight to be given to his testimony, remain.
Mersino also argues that because the Court found no breach of the express
terms of the First and Second Proposals, the claim for breach of the implied duty of care
must also fail. Under Nebraska law, when a claim for the breach of an express contract
term fails, any concomitant claim for bad faith or breach of the implied duty of care
generally will fail. See, e.g., Lawyers Title Ins. Corp. v. Hoffman, 513 N.W.2d 521, 525
(Neb. 1994) (citing Getzschman v. Miller Chemical Co., 443 N.W.2d 260 (Neb. 1989)
(holding that breach of the implied duty of care requires existence of a legal duty
“determined from the terms of the agreement”); see also Welfl v. Northland Ins. Co., 192
F.3d 1169, 1172 (8th Cir. 1999) (applying Nebraska law) (“[A]cting according to express
terms of a contract is not a breach of good faith and fair dealing.” (quoting Terry A.
Lambert Plumbing, Inc. v. Western Sec. Bank, 934 F.2d 976, 983 (8th Cir. 1991)).
This is not to say, however, that a breach of the implied duty of care must fail as
a matter of law when an accompanying claim for breach of an express contract term
fails. In LeRette v. Am. Med. Sec., Inc., 705 N.W.2d 41 (Neb. 2005), a woman sued her
health insurer, alleging it denied her precertification for a procedure in bad faith and that
it breached their contract by failing to timely pay her medical bills. Id. at 547–49. The
3

Mersino did not address this evidence in its reply brief on summary judgment, but rather,
argued that the implied duty did not apply in the construction context, ECF No. 72, Page ID 2828–29, an
argument the Court rejected in its order, ECF No. 87, Page ID 3033–36.

6

Nebraska Supreme Court considered the viability of the bad faith claim4 in the apparent
absence of a claim that the precertification denial constituted a breach of an express
contract term.5 Thus, this Court cannot conclude that the Nebraska Supreme Court
would reject a claim for breach of an implied duty of care, in the absence of an express
breach of a contract’s terms.
Here, factual questions remain regarding what Mersino knew about the viability
of potential alternative dewatering methods and its motivation for suggesting the use
and continued operation of the well-point system. There may be sufficient evidence
from which a reasonable jury could conclude that Mersino breached its implied duty of
care, skill, reasonable expediency, and faithfulness to the thing agreed to be done.6
Finally, Mersino argues that the Court should dismiss the breach of contract
claim, because Judds did not sufficiently plead the claim in its complaint.7 Mersino did
not raise this argument in its motion for summary judgment, though it was clear at the
time that Judds was seeking relief under the theory of the implied duty of care, and the
Court will not revise its earlier order on this basis.
4

In LeRette, the claim was a tort action for breach of the duty of good faith and fair dealing. In
its previous summary judgment order, this Court noted that in Lesiak v. Cent. Valley Ag Co-op., Inc., 808
N.W.2d 67 (Neb. 2012), the Nebraska Supreme Court held that in cases of purely economic loss, such as
here, a claim for breach of the implied duty of care may only be brought as a contract action. ECF No.
87, Page ID 3034–36 (citing Lesiak, 808 N.W.2d at 82–83).
5

The court held that the breach of contract claim for untimely payment of medical bills was
“separate and distinct” from the bad faith claim, even though the claims shared some facts in common.
LeRette, 705 N.W.2d at 48.
6

For this same reason, Mersino’s argument that it could not have breached its implied duty
because it informed Judds that it lacked less than full information regarding the dewatering site—i.e., that
it did not have, but could obtain at additional cost, a professional geotechnical report—does not relieve
Mersino from potential liability.
7

Judds moved to amend its complaint, ECF No. 99, on July 7, 2017. Magistrate Judge Michael
Nelson, noting that the pretrial order—rather than the complaint—now controlled, denied the motion.
ECF No. 107.

7

II. The No-Damages-for-Delay Clause
The First and Second Proposals stated that “Mersino shall not be held liable for
any costs due to strikes, delays, changed project conditions and/or any other
unforeseen conditions.” ECF Nos. 62-8, Page ID 861; 62-23, Page ID 888.

In its

summary judgment order, the Court noted that when such clauses are in effect, “a party
can recover for delay only if the clause is unenforceable due to concealment,
misrepresentation, fraud, bad faith, or malicious intent.” ECF No. 87, Page ID 3036
(citing Kiewit Const. Co. v. Capital Elec. Const. Co., No. 8:04 CV 148, 2005 WL
2563042, at *8 (D. Neb. Oct. 12, 2005); Siefford v. Hous. Auth. of City of Humboldt, 223
N.W.2d 816, 823 (Neb. 1974)). Mersino argues that there was no evidence in the
record of bad faith on its part, and the Court should have found the clause enforceable
as a matter of law.
This Court infers that the Nebraska Supreme Court would use an analysis similar
to that applied in Siefford, when, as here, an issue remains as to whether the party
invoking the no-damages-for-delay clause breached an implied duty of care, skill,
reasonable expediency, and faithfulness to the thing agreed to be done. Accordingly,
IT IS ORDERED: The Motion for Reconsideration, ECF No. 92, filed by
Defendant Mersino Dewatering, Inc., is denied.

Dated this 18th day of September, 2017.

BY THE COURT:
s/Laurie Smith Camp
Chief United States District Judge
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