In Re: WorldCom, Inc.

Filing 16

OPINION AND ORDER, #100221 that for the foregoing reasons, the Court affirms the Bankruptcy Court's March 19, 2008 Order. The Court affirms in part and modifies in part the Bankruptcy Court's October 16, 2009 Order and finds that Waldinger has an unsecured quantum meruit claim in the amount of $188,927.96. The Clerk of the Court is respectfully directed to terminate any pending motions and close this case. (Signed by Judge Richard J. Sullivan on 4/18/11) (pl) Modified on 4/19/2011 (ajc).

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

NQ 09 Civ, 9623 (RJS)

IN HE WORLDCOM, INC., ET AL.
WORLOCOM, INC., ET AL.,

USDSSDNY

Debtors-Appellees,

DOCUMENT

VERSUS

ELECTRONICALLY FILED

DOC #: -~~--:I'+t:co:r-;­
DATE FILED:
Ii

lfJIrf

THE WALDINGER CORP.

Creditor-Appellant

OPINION AND ORDER
April 18. 2011

1.

RICHARD J. SULLIVAN, District Judge:
Waldinger Corporation ("Waldinger" or
"Appellant") brings this bankruptcy appeal
pursuant to 28 U.S.C. § 158(a), challenging
(I) the March 19, 2008 Order of the
Honorable Arthur J. Gonzalez, Bankruptcy
Judge, reclassifying Waldinger's Claim
against Appellees-Debtors WoridCom, Inc.,
and its subsidiaries ("World Com" or
"Appellees") as unsecured, and (2) Judge
Gonzalez's October 16, 2009 Order
calculating Waldinger's award for quantum
meruit. For the reasons set forth below, the
March 19, 2008 Order is affirmed in its
entirety, and the October 16, 2009 Order is
affmned in part and modified in part.

A,

BACKGROUND!

The Underlying Dispute

Waldinger is a construction company
that provided materials and services to
WoridCom in conneetion with a building
owned by WoridCom in Omaha, Nebraska
named the Mid-Continent Data Center (the
"Data Center"). The Data Center housed
multiple computer systems and data storage
I The Court presumes the parties' familiarity with the
factual background, as set forth fully in and taken
from In re War/dCom, Inc., 382 B.R. 6\0, 614-20
(Bankr. S.D.N.Y. 2008) and In re War/dCom, Inc .•
No. 02-13533 (AJG). 2009 WL 2959287 (Bankr.
S.D.N.Y. Aug. 18,2008). The facts are not disputed
unless otherwise noted, The Court follows the
parties' and the Bankruptcy Court's convention in
referring to the uniquely-numbered exhibits
submitted in various proceedings below as "Trial
Ex."

hardware and utilized air handling units
(“AHUs”) to keep the rooms containing the
hardware ventilated. At some point in 2000,
the Data Center’s Colorado-based senior
leadership, to whom the parties refer as the
“governance people,” informed Raymond
Brock, the Data Center’s building manager,
that the Data Center needed additional
AHUs.2 (Trial Ex. 37, 26:24-28:24.)

“housekeeping pads” on which to place the
new AHUs and installed sheet metal, duct
work, and piping. Brock did not tell any
Waldinger employee that they were
authorized to perform this preparation work.
However, Brock admitted that he instructed
either Smearman or Waldinger foreman
George Russell to work on AHU 5, as
directed by the “governance people.”
Russell stated that Brock also authorized
him to move a water line and a “control
airline,” and to allow a hole to be opened in
a concrete block wall so that sheet metal
ductwork could be installed. (Trial Ex. 34,
5:1-8:23.)

Brock contacted a Waldinger manager,
Michael Smearman, regarding the project
because Waldinger had done work for the
Data Center in the past. On September 15,
2000, Waldinger submitted a proposal
addressed to Brock at the Data Center
offering to sell and install three new AHUs
– numbered 6, 7, and 43 – and upgrade
existing AHU number 5 for a total quoted
price of $1,098,000. (See Trial Ex. 1.)
Waldinger
subsequently
provided
a
breakdown of the project, indicating that the
purchase price of the AHUs alone was
$576,322.
(See Trial Ex. 4.)
Brock
forwarded the proposal to the “governance
people” in Colorado, who had the authority
to issue purchase orders. (Trial Ex. 37,
30:6-9).
On November 14, 2000,
WorldCom Purchasing, LLC issued a
written purchase order to Waldinger in the
amount of $576,000 for the purchase of the
three AHUs referenced in the proposal.
(Trial Ex. 2.) The purchase order did not
reference installation of the AHUs.

The three AHUs referenced in the
November 14, 2000 purchase order were
delivered to the Data Center in July 2001.
Waldinger rented a crane and forklifts to
offload and move the AHUs to the concrete
pads. But when Brock informed one of the
“governance people,” Arnold Espinosa, that
Waldinger was finishing the installation,
Espinosa told Brock that WorldCom issued
a purchase order only to purchase the AHUs
from Waldinger, not to install them.
Subsequently, in either July or September
2001, at Espinosa’s direction, Brock
instructed Waldinger to stop the installation
work. (See Trial Ex. 37, 58:6–11; Trial Ex.
36, 65:9–11.)
Waldinger submitted three applications
for payment to WorldCom.
The first
application, issued on June 5, 2001,
requested payment of $483,500, with a line
item designating $223,053 of that amount to
the purchase of the AHUs. WorldCom paid
the full $483,500 on or about July 27, 2001.
Waldinger issued the second application on
July 6, 2001, requesting an additional
$51,879 for sheet metal and concrete work,
but without specifying the project to which
the work was related. WorldCom paid the
second application on or about October 30,

During the fall and winter of 2000-2001,
Brock provided access to Waldinger
employees to work on existing AHUs at the
Data Center, including AHUs 5 and 24.
Around March or April 2001, Waldinger
began preparing the Data Center for the
delivery and installation of the three new
AHUs.
Waldinger constructed elevated
2

The generally unidentified “governance people”
remotely monitored the Data Center and planned its
operations.

2

partial summary judgment. The Bankruptcy
Court granted that motion on February 23,
2007. See In re WorldCom, Inc., No. 02–
13533 (AJG), 362 B.R. 96 (Bankr. S.D.N.Y.
Feb. 23, 2007). Without passing on the
threshold
validity
of
Waldinger’s
construction lien, the Bankruptcy Court held
that the lien had lapsed and, therefore,
Waldinger’s Claim was unsecured.

2001.
Finally, on August 2, 2001,
Waldinger issued the third application for
payment of $411,983, with a $353,279 line
item for the outstanding balance on the
purchase price of the three AHUs. The
remaining items in the application reflected
other work Waldinger claimed it performed
at the Data Center. On October 15, 2001,
WorldCom paid $40,621 toward the third
application for a total of $576,000, equalling
the purchase price for the AHUs set forth in
the November 14, 2000 purchase order.

Waldinger timely moved the Bankruptcy
Court for reconsideration. After holding a
trial on December 13, 2007, the Bankruptcy
Court reversed itself on the lapse issue. See
In re WorldCom, Inc., 382 B.R. 610, 622623 (Bankr. S.D.N.Y. 2008). However, the
Bankruptcy Court concluded that the parties
did not enter into a contract for the
installation work, rendering Waldinger’s
lien invalid under Nebraska law and its
Claim, therefore, unsecured. Id. at 629. It
also held that Waldinger could not recover
prejudgment interest or attorney’s fees. Id.
Nevertheless, the Bankruptcy Court found
that Waldinger was entitled to an unsecured
claim based on a quantum meruit theory for
the reasonable value of its services, and
scheduled a hearing to determine this
amount. Id. at 631. These rulings were
entered in an Order dated March 19, 2008.
See In re WorldCom, Inc., No. 02–13533
(AJG), Doc. No. 19261 (Bankr. S.D.N.Y.
Mar. 19, 2008.)

On October 29, 2001, two weeks after
WorldCom’s last payment, Waldinger filed
a construction lien on the Data Center
property pursuant to the Nebraska
Construction Lien Act, Neb. Rev. Stat §
52–125, et seq. Subsequently, on January
29, 2002, Waldinger brought an action
against WorldCom in Nebraska state court,
asserting claims for breach of contract and
quantum meruit. WorldCom removed the
action to federal court and the parties
reached a settlement agreement to complete
the installation of the AHUs under a new
purchase order. Soon after the settlement,
however, WorldCom filed for bankruptcy,
and neither party fulfilled the terms of the
agreement.
B.

The Bankruptcy Proceedings

On July 21, 2002, WorldCom filed
petitions under Chapter 11 of the
Bankruptcy Code. Thereafter, Waldinger
filed a proof of claim as a secured creditor in
the amount of $371,362 plus interest and
attorney’s fees (the “Claim”). On October
31, 2003, the Bankruptcy Court confirmed
WorldCom’s Joint Plan of Reorganization,
which became effective on April 20, 2004.
WorldCom then filed an objection to the
Claim, seeking to expunge and disallow it
on the grounds that it was disputed and
unsecured, and subsequently moved for

Following a June 17, 2009 hearing, the
Bankruptcy Court found the reasonable
value of Waldinger’s uncompensated
services was $179,548.27. A final order was
entered on October 16, 2009. See In re
WorldCom, Inc., No. 02–13533 (AJG), Doc.
No. 19483 (Bankr. S.D.N.Y. Oct. 16, 2009.)
On November 19, 2009, Waldinger
appealed from both, the March 19, 2008
Order and the October 16, 2009 Order. The

3

A.

appeal was fully briefed as of January 19,
2010.
II.

The Construction Lien

The “basic federal rule” in bankruptcy is
that state law generally governs the
substance and scope of the underlying
claims. Raleigh v. Ill. Dep’t of Revenue, 530
U.S. 15, 20 (2000) (quoting Butner v. United
States, 440 U.S. 48, 57 (1979)). The
Bankruptcy Court applied Nebraska law to
Waldinger’s claims without objection from
the parties, and the Court does so here as
well.

STANDARD OF REVIEW

Pursuant to 28 U.S.C. § 158(a)(1),
district courts are vested with jurisdiction to
hear appeals from final judgments, orders,
and decrees of bankruptcy courts. A district
court evaluates a bankruptcy court’s
findings of fact for clear error and its
conclusions of law de novo. In re Bennett
Funding Group, Inc., 146 F.3d 136, 138 (2d
Cir. 1998). On appeal, “the district court . . .
may affirm, modify, or reverse a bankruptcy
judge’s judgment, order, or decree or
remand with instructions for further
proceedings.” Fed. R. Bankr. P. 8013.

In order to have a valid construction lien
under Nebraska law, the parties must have
entered into a “real estate improvement
contract.” Tilt-Up Concrete, Inc. v. Star
City/Fed., Inc., 582 N.W.2d. 604, 610 (Neb.
1998); see Mid-Am. Maint. v. Bill Morris
Ford, 442 N.W.2d 869, 871 (Neb. 1989). A
real estate improvement contract is “an
agreement to perform services, including
labor, or to furnish materials for the purpose
of producing a change in the physical
condition of land or of a structure.” Tilt-Up
Concrete, 582 N.W.2d at 610 (quoting Neb.
Rev. Stat. § 52-130). The existence of a
contract, whether written or oral, may be
proven by circumstantial evidence. Id. A
contract is created upon an offer and an
acceptance, and requires a meeting of the
minds or a binding mutual understanding
between the parties to the contract. Id.
“Mutual assent to a contract is determined
by the objective manifestations of intent by
the parties, not by their subjective
statements of intent.” Id. (citations omitted).

III. DISCUSSION
Waldinger has designated fourteen
overlapping issues on appeal, which can be
reduced to five distinct questions: (1)
whether the Bankruptcy Court erred in
determining that Waldinger did not have a
valid construction lien; (2) whether the
doctrine of equitable estoppel barred
WorldCom from arguing that Waldinger
was not entitled to be paid in full on its
Claim and from challenging the amount and
obligation of the Claim; (3) whether
Waldinger was entitled to an adverse
inference because WorldCom failed to make
material witnesses available at unspecified
proceedings; (4) whether the Bankruptcy
Court erred in excluding profit, overhead,
and the project manager’s salary from the
quantum meruit award; and (5) whether
Waldinger is entitled to recover prejudgment
interest pursuant to Nebraska law. The
Court addresses each issue in turn.

The existence of a contract is a question
of fact reviewed for clear error.
See
Gerhold Concrete Co. v. St. Paul Fire &
Marine Ins. Co., 695 N.W.2d 665, 670, 672
(Neb. 2005). The Court may not upset the
Bankruptcy Court’s factual findings in this
regard unless it has a “definite and firm
conviction that a mistake has been

4

Colorado-based “governance people” did
not authorize Brock to take any action with
respect to the September 15, 2001 proposal.
(Trial Ex. 37, 30:10-13.) Although Brock
testified in a deposition that he sent the
proposal and payment applications to the
“governance people” and that they called to
ask him about the status of various AHU
projects (Trial Ex. 37, 30:6-9, 43:23-44:23,
45:20-46:6), his recollection was that there
were multiple projects and the details related
to each project “ran together” in his mind
(Id. 46:21-23.) After the AHUs arrived on
site, Brock’s superior, Espinosa, called
Brock to tell him that Waldinger only had
purchase orders to purchase the three AHUs
and not to install them. (Id. 58:5-10.) When
Brock replied that Waldinger was going to
“finish the installation” of the three AHUs,
Espinosa asked what Brock meant. (Id. at
58:23–59:7.) The presence of Waldinger
employees at the Data Center did not clearly
establish that WorldCom’s “governance
people” knew about and failed to voice
objections to the installation work. See In re
WorldCom, Inc., 382 B.R. at 628
(distinguishing Tilt–Up Concrete, 582
N.W.2d at 611).
For instance, John
Wilhelmi, President of Waldinger’s Omaha
branch, stated that his workers had been
present “almost continuously” at the Data
Center working on other projects as well.
(December 13, 2007 Tr. 60:21-61:2.)

committed.” Vasquez v. GMD Shipyard
Corp., 582 F.3d 293, 297 (2d Cir. 2009)
(internal quotations and citations omitted);
see also Fed. R. Bankr. P. 8013 (“Findings
of fact, whether based on oral or
documentary evidence, shall not be set aside
unless clearly erroneous, and due regard
shall be given to the opportunity of the
bankruptcy court to judge the credibility of
the witnesses.”). Appellant bears the burden
of demonstrating clear error. In re Ciena
Capital LLC, 440 B.R. 47, 52 (S.D.N.Y.
2010).
Upon review of the record, the Court
finds no clear error in the Bankruptcy
Court’s determination that the parties did not
enter into a real estate improvement contract
for the installation of the three AHUs and
upgrades on AHU 5. In the absence of
evidence of any written or oral assent by
WorldCom employees with the authority to
bind WorldCom to the entire proposal,
Waldinger continues to press that the
“silence and acquiescence of WorldCom as
to the work performed by Waldinger after
submission of the requested proposal was a
manifestation of the existence of a real
estate improvement contract with respect to
all other work performed.” (Appellant’s Br.
35-36); see In re WorldCom, Inc., 382 B.R.
at 626 (noting that this argument formed
Waldinger’s “main contention” in its trial
briefs). As the Bankruptcy Court correctly
noted, however, WorldCom did not stay
“silent” or otherwise assent to Waldinger’s
proposal. To the contrary, it responded by
issuing a purchase order for only the
purchase of three AHUs at a specified cost
of $192,000 each, without any indication
that it assented to an additional $500,000 in
costs for the AHUs’ installation and
upgrades for AHU 5. (See Trial Ex. 2.)

While Brock provided access to
Waldinger employees to begin the
installation work, the record does not
indicate that Brock had the authority to bind
WorldCom to a contract (see Trial Ex. 34:46, 37, 32:24-25; 40:1-19), or that anyone
from Waldinger believed him to have that
authority. See In re WorldCom, 382 B.R. at
628 (noting that unlike in Tilt-Up Concrete,
no party who could bind the Debtors to a
contract “observed progress being made
without voicing objections.”) Moreover, the

Likewise, the Court finds no clear error
with the Bankruptcy Court’s finding that the

5

Bankruptcy Court stated that “the best
Waldinger can show is that Brock did ask
about moving a water line well in advance
of the arrival of the three AHU’s and that
Brock did ask Waldinger to do work on
existing [AHU 5],” it did not hold that
WorldCom employees with contracting
authority directly authorized Waldinger to
work on AHU 5 or that they authorized all
the preparation work. The record bears out
that the “governance people” told Brock to
“get the work done” on AHU 5, making the
issue of whether a contract was formed for
upgrading AHU 5 a close call. In re
WorldCom, Inc., 382 B.R. at 615; (see Trial
Ex. 37, 47:8-18.) However, so long as the
factual findings of the bankruptcy court are
“plausible in light of the record viewed in its
entirety,” this Court “may not reverse it even
though convinced that had it been sitting as
the trier of fact, it would have weighed the
evidence differently.” Anderson v. City of
Bessemer City, 470 U.S. 564, 574 (1985).
“Where there are two permissible views of
the evidence, the factfinder’s choice
between them cannot be clearly erroneous.”
Id.

Bankruptcy
Court
credited
Brock’s
deposition testimony that he never told any
employee of Waldinger that Waldinger had
been authorized to install the AHUs. In re
WorldCom, Inc., 382 B.R. at 615 (citing
Trial Ex. 37, 49:9–18, 64:5–9). Appellant
has not presented sufficient evidence to
overturn that credibility determination.
As it did before the Bankruptcy Court,
Waldinger again argues that WorldCom’s
payments-in-full on two of the three
applications demonstrated WorldCom’s
earlier acquiescence to the entire proposal.
(Appellant’s Br. 37.)
However, the
Bankruptcy Court did not clearly err in
finding that the applications were
inconclusive in this regard. Although the
applications stated that the “Original
Contract Sum” was $1,098,000, and
contained line items for work unrelated to
the purchase of the AHUs, they also directly
referenced the November 14, 2000 purchase
order in the “contract date” and “purchase
order” fields. (See Trial Ex. 7.) It is
sufficiently plausible that the WorldCom
personnel who paid the applications simply
believed that they were making payments on
the November 14, 2000 purchase order
without intending to pay for the specific
services in the line items. The fact that
WorldCom stopped payment upon reaching
that purchase order’s exact $576,000 amount
further contradicts any ex post inferences
Waldinger seeks to draw from the payment
history.

With those principles in mind, the Court
finds no clear error in Judge Gonzalez’s
factual finding that that no contract was
formed as to AHU 5. As noted above,
Waldinger did not receive a purchase order
for work on AHU 5.
Moreover, the
evidence does not suggest that Waldinger
believed Brock to have the requisite
authority to bind WorldCom to a contract, or
that Brock specifically told Waldinger that
the “governance people” accepted its
proposal to work on AHU 5. The record
further is devoid of the type of interactions
between the “governance people” and
Waldinger that would demonstrate the
parties’ objective manifestations to form a
contract. Cf. Tilt-Up Concrete, 582 N.W.2d
at 611 (objective manifestations of contract

Waldinger argues that the Bankruptcy
Court’s conclusions are “inconsistent with
[its] findings that WorldCom did in fact
specifically authorize and direct Waldinger
to complete all of the work on AHU 5 and
authorized the necessary preparatory work.”
(Appellant’s Br. 29.) This argument is
based on a mischaracterization of the
Bankruptcy Court’s ruling.
While the

6

formation existed where the offeree’s
president directly instructed the offeror
construction company to begin work under
its proposal, announced the company as the
official
contractor
at
a
public
groundbreaking,
and
observed
and
expressed his pleasure with the progress.)
Accordingly, it was not clear error for the
Bankruptcy Court to conclude that Brock’s
requests did not demonstrate WorldCom’s
assent to Waldinger’s proposal.

estoppel lies in a court’s sound discretion
which, for the reasons that follow, was
properly exercised here.”) (citing Societe
Generale v. Fed. Ins. Co., 856 F.2d 461, 467
(2d Cir. 1988)); Sunbeam Prods., Inc. v.
Wing Shing Prods. (BVI), Ltd., 311 B.R.
378, 395 (S.D.N.Y. 2004). In this case, the
Court finds that the Bankruptcy Court acted
well within its discretion in determining that
under Nebraska law, the circumstances did
not warrant equitable relief.

Having
considered
Waldinger’s
remaining arguments and found that they do
not demonstrate clear error, the Court
affirms the Bankruptcy Court’s finding that
WorldCom and Waldinger did not enter into
an installation contract.3
Because “a
construction lien is not valid absent a
contract between the parties,” Tilt-Up
Concrete, 582 N.W.2d at 610, Waldinger’s
October 29, 2001 lien cannot serve as the
basis for a secured claim.

Nebraska courts apply a two-part test for
the application of equitable estoppel, with
distinct requirements for both the moving
and non-moving parties. See Mogensen v.
Mogensen, 729 N.W.2d 44, 51-52 (Neb.
2007). As to the party being estopped,
Nebraska law requires:

B.

(1) conduct which amounts to a false
representation or concealment of
material facts, or at least which is
calculated to convey the impression
that the facts are otherwise than, and
inconsistent with, those which the
party subsequently attempts to assert;
(2) the intention, or at least the
expectation, that such conduct shall
be acted upon by, or influence, the
other party or other persons; and
(3) knowledge,
actual
or
constructive, of the real facts.

Equitable Estoppel

Waldinger
argues
that
because
WorldCom knowingly allowed it to perform
substantial work and incur costs, WorldCom
should have been equitably estopped from
denying the existence of a contract for the
installation of AHUs 6, 7, and 43, and the
upgrade of AHU 5. (See Appellant’s Br.
40.)

Id. at 51.
The Bankruptcy Court’s analysis of
equitable estoppel is reviewed for abuse of
discretion. See In re Chateaugay Corp., 156
B.R. 391, 403 n.16 (S.D.N.Y. 1993) (“The
application of the concept of equitable

As to the party asserting estoppel, the
court must find:
(1) lack of knowledge and of the
means of knowledge of the truth as
to the facts in question; (2) reliance,
in good faith, upon the conduct or
statements of the party to be
estopped; and (3) action or inaction
based thereon of such a character as

3

For example, the Court is unpersuaded that the
parties’ settlement agreement confirms the existence
of an original contract. The settlement agreement
was executed almost a year after Waldinger stopped
work on the AHUs and contains no admission of
liability on WorldCom’s part.

7

giving Waldinger ample means to clarify
any ambiguities as to the scope of
WorldCom’s assent. Without doing so,
Waldinger commenced work on the entire
proposal. Accordingly, the Court finds that
the Bankruptcy Court did not abuse its
discretion by finding that the equitable
estoppel doctrine did not apply here.

to change the position or status of the
party claiming the estoppel, to his or
her injury, detriment, or prejudice.
Id. at 51-52. Moreover, the party asserting
estoppel must prove these elements by clear
and convincing evidence, which is “that
amount of evidence which produces in the
trier of fact a firm belief or conviction about
the existence of a fact to be proved.” Agrex,
Inc. v. City of Superior, 581 N.W.2d 428,
434 (Neb. Ct. App. 1998) (citing In re
Interest of Joshua M. et al., 558 N.W.2d 548
(1997)). “Equitable estoppel will lie only
where the party asserting estoppel does not
have the same knowledge of the facts that
the party being estopped has, and does not
have the ability to ascertain or is not
chargeable with notice of those facts.” Id. at
436 (citing Commerce Sav. Scottsbluff v.
F.H. Schafer Elev., 436 N.W.2d 151 (Neb.
1989)).

C.

Adverse Inference

Waldinger thinly argues that the
Bankruptcy Court should have drawn certain
adverse inferences from the failure of
“Debtors to appear and testify” at either the
December 13, 2007 trial or the June 17,
2009 hearing. (Appellant’s Br. 41.)
A
factfinder is permitted to “draw an adverse
inference against a party failing to call a
witness when the witness’s testimony would
be material and the witness is peculiarly
within the control of that party.” United
States v. Caccia, 122 F.3d 136, 138 (2d Cir.
1997). The Court reviews the Bankruptcy
Court’s decision not to draw an adverse
inference for abuse of discretion. See In re
CBI Holding Co., 529 F.3d 432, 450 n.7 (2d
Cir. 2008).

In support of its equitable estoppel
argument, Waldinger asserts that: (1)
WorldCom “knowingly allowed” Waldinger
to perform substantial preparation work; (2)
WorldCom did not instruct Waldinger to
stop that work until after delivery of the
AHUs; and (3) WorldCom paid the
applications for payment without contest
and did not claim they were only paying for
the purchase of the AHUs. (Appellant’s Br.
40.)

Here, Waldinger makes no effort to
identify any witness that WorldCom did not
produce, much less explain the materiality
of their testimony or why they were
unavailable to Waldinger. Accordingly, the
Court finds that the Bankruptcy Court did
not abuse its discretion in declining to grant
Appellees request for an adverse inference at
the trial or hearing.

Waldinger’s attempt to recast its contract
arguments into the language of equitable
estoppel fails because Waldinger cannot
show that it lacked knowledge or that it was
unable to ascertain otherwise unknown facts.
Waldinger received a limited purchase order
from WorldCom for an amount $500,000
less than Waldinger’s opening proposal.
The purchase order itself had the name,
telephone number, and email address of the
“Procurement Contact,” Jason Stablier,

D.

Quantum Meruit Calculation

The parties do not dispute that in the
absence of a valid contract, Waldinger is
entitled to recover the reasonable value of its
services under a quantum meruit theory.
Instead, the salient issue on appeal is

8

time he spent on the AHU installation, and
(3) Waldinger’s overhead and profit as
drawn from data in an industry manual. The
proposed reasonable value of Waldinger’s
work under this method was $992,417.43.
Alternatively, under the second method,
Wilhelmi referred to the prices listed in the
industry manual for the materials, labor, and
equipment used by Waldinger, as well as the
manual’s valuation of a project manager,
overhead, and profit. Under the second
method, the total value of Waldinger’s
services was $1,005,758.78.

whether the Bankruptcy Court erred in its
calculation of Waldinger’s quantum meruit
award following the June 17, 2009 hearing.
Quantum meruit is a quasi-contract
“theory of recovery based on the equitable
doctrine that one will not be allowed to
profit or enrich oneself unjustly at the
expense of another.” Tracy v. Tracy, 581
N.W.2d 96, 101 (Neb. Ct. App. 1998); see
also Prof’l Recruiters, Inc. v. Oliver, 456
N.W.2d 103, 108 (Neb. 1990). “[W]here
benefits have been received and retained
under such circumstances that it would be
inequitable and unconscionable to permit the
party receiving them to avoid payment
therefor, the law requires the party receiving
and retaining the benefits to pay their
reasonable value.” Prof’l Recruiters, 456
N.W.2d at 108. Under Nebraska law,
“‘[t]here is no specific standard by which
such reasonable value is to be determined.’”
S.A. Sorenson Constr. Co. v. Broyhill, 85
N.W.2d 898, 903 (Neb. 1957) (quoting
Umberger v. Sankey, 50 N.W.2d 346, 349
(Neb. 1950)). When calculating “reasonable
value,” a court can look to “all reasonable
inferences of value that flow from the
evidence adduced.” Tracy, 581 N.W.2d at
102 (citing In re Estate of Krueger, 455
N.W.2d 809, 814 (Neb. 1990)); see Bosle v.
Luebs, 98 N.W.2d 795, 799 (Neb. 1959).
Because the calculation of the quantum
meruit award is a finding of fact, it is
reviewed for clear error. See In re Louis
Frey Co., Nos. 06 Civ. 7587, 06 Civ. 7588
(RMB), 2007 WL 924206, at *7 (S.D.N.Y.
Mar. 26, 2007).

The Bankruptcy Court first determined
that the reasonable value of Waldinger’s
entire work on the project was $755,548.27
based on Waldinger’s actual materials and
labor costs, including the cost of the three
AHUs themselves. See In re WorldCom,
Inc., No. 02–13533 (AJG), 2009 WL
2959287, at **7-8 (Bankr. S.D.N.Y. Aug.
18, 2008). This total excluded the project
manager’s salary and Waldinger’s proposed
profit and overhead from the industry
manual. Id. The Bankruptcy Court then
deducted the $576,000 already paid to
Waldinger to arrive at an unsecured
quantum meruit claim in the amount of
$179,548.27. Id. at *8.
The Court finds that the Bankruptcy
Court erred in its methodology. It is
undisputed that Waldinger had a valid
contract with WorldCom for the purchase of
the three AHUs. See In re WorldCom, Inc.,
382 B.R. at 626-27. That contract and
payments under it should not have been
included within the calculation of
Waldinger’s services in quasi-contract. The
consequence of doing so is that Waldinger’s
legitimate profit on the AHU purchase order
– approximately $10,000 – was improperly
counted against the quantum meruit claim.
Instead, the reasonable value of Waldinger’s
quasi-contract work should be based on its

At the quantum meruit hearing held on
June 17, 2009, Wilhelmi presented two
methods to calculate the reasonable value of
Waldinger’s work.
The first method
aggregated (1) Waldinger’s actual materials
and labor costs, (2) the pro-rated salary of its
project manager, based on the estimated

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have been obtained if the contract had been
legal and valid, and if recovery were had
according to its terms, but confine[]
recovery to such sum as will reasonably
compensate the party whose services or
property have been devoted to the advantage
of the other.” Gee, 31 N.W.2d at 751; see
also Lanphier v. Omaha Pub. Power Dist.,
417 N.W.2d 17, 23 (Neb. 1987) (quoting
Gee, 31 N.W.2d at 751).
Although
Waldinger is correct in noting that the cases
cited involved municipal corporations and
political subdivisions, there is no reason to
believe that this principle is limited to those
facts, considering that, in quantum meruit
recovery, the “principle applied is that of
reimbursement; and the plaintiff can only
recover the actual cost of the services
rendered and material furnished without the
allowance of profits . . . .” Gee, 31 N.W.2d
at 751.

actual costs for installing the AHUs and
upgrading AHU 5. Accordingly, the Court
finds that the reasonable value for these
services, based on Waldinger’s actual costs,
is $188,927.96. The Court arrives at this
number by adding Waldinger’s $60,668.37
in “mechanical costs” and $128,259.59 in
“sheet metal costs.” (See Trial Exs. 44, 45.)
The Bankruptcy Court’s remaining
factual analysis was not clearly erroneous.
Specifically, the Bankruptcy Court did not
err in excluding the project manager’s salary
from the award. The record reflects that
aside from Wilhelmi’s rough estimation that
the project manager spent 25% of his time
on the installation of the AHUs, Waldinger
did not produce sufficient evidence to
substantiate the figure. At trial, Wilhelmi
testified that the basis for his estimate was
simply his “37 years in the construction
business . . . watching project managers, and
how they work, and what they do.” (June
17, 2009 Tr. at 77:8-9.)

Waldinger relies on Tilt-Up Concrete
and Fru-Con Const. Corp. v. Controlled Air,
Inc., 574 F.3d 527, 534 (8th Cir. 2009), for
the proposition that a “contractor is entitled
to a reasonable profit on the work performed
that is secured by a construction lien, even
though the profit is limited to the extent that
it may be considered compensation for
services actually rendered, as distinguished
from the amount of the contractor’s loss
because of an owner’s breach of contract.”
(Appellant’s Br. 46 (quoting Tilt-Up
Concrete, 582 N.W.2d at 615)). But unlike
in Tilt-Up Concrete, there was no valid
construction lien securing the work here
because there was no contract for the
installation or the upgrade. See Part III.A,
supra. Furthermore, even if Nebraska law
allowed the recovery of profits in quantum
meruit cases absent a valid construction lien,
the Court finds that Waldinger did not offer
sufficient evidence that its profits of
$90,219.77 are reasonable, because they
were derived entirely from an industry

Likewise, the exclusion of Waldinger’s
overhead was not clear error. Relying on
data entirely from the industry manual,
Waldinger did not connect its proposed
overhead calculation with Waldinger’s
“actual costs associated with the installation
of the AHUs or work on Unit 5.” In re
WorldCom, Inc., 2009 WL 2959287, at *8.
In fact, Wilhelmi testified that Waldinger
never actually used the industry manual to
bid a job. (See June 17, 2009 Tr. at 78:18.)
Finally,
the
Bankruptcy
Court
determined that Waldinger was not entitled
to any profit on its quantum meruit claim.
The Court reviews this conclusion of law de
novo. Nebraska courts generally do not
allow recovery of profits in quantum meruit
cases. See Gee v. City of Sutton, 31 N.W.2d
747, 751 (Neb. 1948). “Generally, the
courts will not allow profits which might

10

manual. See In re WorldCom, Inc., 2009
WL 2959287, at '6. As noted above, the
profit fonnulas were not used by Waldinger
to bid for projects, and bear little relation to
Waldinger's actual services rendered in this
matter.

application had an outstanding balance of
$353,279 toward the November 14, 2000
purchase order and that its recovery of that
sum under contract was certain beyond
controversy. Id. However, as explained
above, the Court finds that WorldCom did
not acquiesce to paying for the services
listed in Waldinger's specific line item
designations, but rather made payments
toward the November 14, 2000 purchase
order expressly referenced
in the
applications. Accordingly, in light of the
considerable controversy existing as to
Waldinger's amount of recovery on its
quantum meruit claim, the Court finds that
Waldinger is not entitled to prejudgment
interest.

Thus,
taking into
account the
modification of the quantum meruit award
above, the Court finds that Waldinger is
entitled to an award of$188,927.96.
E.

Statutory Interest

Finally, Waldinger argues that it is
entitled to recover prejudgment interest at
the statutory rate of 12% per annum
pursuant to Nebraska state law.
(See
Appellant's Bf. 47.) The Court reviews this
issue de novo.

IV,

CONCLUSION

For the foregoing reasons, the Court
affinns the Bankruptcy Court's March 19,
2008 Order. The Court affinns in part and
modifies in part the Bankruptcy Court's
October 16, 2009 Order and finds that
Waldinger has an unsecured quantum meruit
claim in the amount of $188,927.96. The
Clerk of the Court is respectfully directed to
tenninate any pending motions and close
this case.

Prejudgment interest is allowed at a rate
of 12% per annum under two situations,
only one of which is relevant to this appeal.
The relevant Nebraska statute provides that
interest "shall accrue on the unpaid balance
of liquidated claims from the date the cause
of action arose until the entry of judgment."
Neb. Rev. Stat. § 45-103.2(2). A claim is
liquidated "when no reasonable controversy
exists to either the plaintiff s right to recover
or the amount." Gerhold Concrete Co., 695
N.W.2d at 673. Generally, prejudgment
interest is not allowed for a quantum meruit
claim. See Ritzau v. Wiebe Constr. Co., 214
N.W.2d 244, 248 (Neb. 1974); Lundt v.
Parsons Constr. Co., 150 N.W.2d 108, 112
(Neb. 1967).

SOORD~6vUnited States District Judge
Dated: April 18, 20 I I
New York, New York

Waldinger again relies on the line-item
designations in the first and second payment
applications to demonstrate that the
$576,000 paid by World Com did not go
entirely toward the purchase of the AHUs.
(See Appellant's Br. 47-48.) Based on that
reasoning, Waldinger claims that the third

,,*
Appellant is represented by James Bernard
Cavanagh, Licben, Whitted, Houghton,
Slowiaczek & Cavanagh, P.c., L.L., 100

II

Scoular Building, 2027 Dodge Street, 3rd
Floor, Omaha, NE 68102 and Bennette
Deacy Kramer, Schlam Stone & Dolan LLP,
26 Broadway, New York, NY 10004.
Appellees are represented by Mark S.
Carder, Stinson Morrison Hecker LLP, 12
Corporate Woods, 10975 Benson, Suite 550,
Overland Park, KS 66210.

12