PetSmart, Inc. v. Dancor Construction, Inc.

Filing 142

OPINION AND ORDER by Judge Claire V Eagan that plaintiff is awarded compensatory damages against Policicchio and Dancor, and liquidated damages against Dancor. (Re: 117 Opinion and Order,,,,,,,,,,,, Terminating Motion Referral(s),,,,,, Setting/Resetting Deadline(s)/Hearing(s),,,,,, Ruling on Motion to Vacate Order/Judgment,,,,,, Ruling on Motion for Default Judgment,,,,,, Ruling on Motion for Sanctions,,,,,, Ruling on Motion for Summary Judgment,,,,,, Ruling on Motion for Miscellaneous Relief,,,,,,,,,,, 130 BRIEF on Damages , 132 Brief, 131 Brief, ) (RGG, Chambers)

UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF OKLAHOMA

PETSMART, INC.,
Plaintiff,
v.
DANCOR CONSTRUCTION, INC. and
DANIEL J. POLICICCHIO, SR.,
Defendants.

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Case No. 17-CV-0361-CVE-JFJ

OPINION AND ORDER
On October 22, 2018, the Court entered an opinion and order (Dkt. # 117) finding that default
judgment should be entered against defendant Daniel J. Policicchio, Sr. and that plaintiff Petsmart,
Inc’s (Petsmart) motion for summary judgment against defendant Dancor Construction, Inc.
(Dancor) should be granted. The Court determined that the parties should be given an opportunity
to submit additional briefing and evidence on the issue of damages. The parties have submitted
opening and response briefs on the issue of damages, and the issue is fully briefed. Plaintiff asks the
Court to award it compensatory damages in the amount of $800,754 on its fraud and breach of
contract claims against Policicchio. Dkt. # 131. Plaintiff seeks the same amount of damages on its
fraud claim against Dancor, plus an additional sum of liquidated damages due to Dancor’s failure
to finish its work on time. Dkt. # 132. Plaintiff seeks punitive damages from Policicchio and
Dancor for twice the amount of the actual damages. Defendants respond that the damages sought
by plaintiff are excessive, and the maximum amount of damages that should award to plaintiff under
a benefit of the bargain theory is $65,135. Dkt. ## 130, 138.

Petsmart filed this case alleging breach of contract and contractual indemnification claims
against Dancor. Dkt. # 2. Petsmart alleged that it entered a contract with Dancor for the
construction of a new store in Tulsa, Oklahoma and that it agreed to pay Dancor $1,269,397 to build
the store. Id. at 2. Petsmart made periodic payments to Dancor, and Dancor was to use this money
to pay subcontractors as the work progressed. Id. However, Dancor failed to pay many of the
subcontractors, and subcontractors filed liens on the property in amounts in excess of $490,000.
Petsmart sought damages caused by Dancor’s delay in completing the work and for expenses
incurred to have liens released or defend against claims by subcontractors. Id. at 4-6. Petsmart filed
an amended complaint (Dkt. # 39) adding Dancor’s president, Policicchio, as a party, and adding
fraud claims against Dancor and Policicchio.
Defendants largely failed to defend against plaintiff’s claims and numerous discovery
disputes arose; defendants were sanctioned for their failure to participate in discovery. Dkt. # 92.
Plaintiff filed a motion for default judgment against Policicchio and sought compensatory damages
in the amount of $928,814.01. This amount was determined by subtracting the amount that could
be verified that Dancor paid to subcontractors ($257,782.25) from the amount that Plaintiff paid to
Dancor for the purpose of paying subcontractors ($1,186,596.26). Dkt. # 103, at 3. Plaintiff filed
a motion for summary judgment (Dkt. # 107) against Dancor as to liability, and Dancor failed to file
a response to the motion. The Court entered an opinion and order (Dkt. # 117) granting the motion
for default judgment against Policicchio and the motion for summary judgment against Dancor.
However, the Court did not have sufficient evidence or argument on the issue of damages, and the
parties were directed to file additional briefing as to plaintiff’s damages.

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The parties are generally in agreement that plaintiff’s damages should be determined under
a benefit of the bargain theory, but they vastly differ as to how this theory should be applied.
Plaintiff argues that damages for fraud and breach of contract should be calculated by subtracting
the amount that defendants actually paid subcontractors ($389,626) from the amount that defendants
represented that they had paid subcontractors ($969,680). Dkt. # 131, at 1-2; Dkt. # 132, at 1-2.
This results in a difference of $584,054. Plaintiff also seeks to recover damages for attorney fees
that it incurred in having liens released and defending against claims brought by subcontractors due
to defendant’s failure to pay subcontractors who performed work at the new Petsmart store. Petsmart
has provided a declaration by its attorney, Robert Alexander, Jr., that Petsmart paid $220,700 for
attorney fees in state court litigation to have liens released from its property. Policicchio responds
that the benefit of the bargain is a completed store, and the damages are the same whether Court is
considering plaintiff’s breach of contract or fraud claims. Dkt. # 138, at 3. He claims that the
completed store cost plaintiff $1,383,576.15 and plaintiff should have paid $1,318,440.29 to Dancor
for its work, and this results in damages in the amount of $65,135.86.1 Id. Policicchio also argues
that plaintiff has failed to show that the attorney fees sought by plaintiff are reasonable in the terms
of the work performed and the rate charged by counsel. Id. at 6-10.
The Court must determine the damages for plaintiff’s breach of contract and fraud claims
using the benefit of the bargain doctrine. Under the “benefit of the bargain” doctrine, a plaintiff

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Policicchio states that the initial contract price of $1,269,397 should be increased to
$1,318,440.29 due to change orders allegedly submitted by Dancor. Dkt. # 130, at 2-3. The
Court has reviewed the evidence and the statements for payment submitted by defendants
show that the parties adjusted the final payment to $1,318,440.29. Dkt. # 131-6, at 3. The
Court will rely on this figure as the final amount owed to Dancor if it had completed the
contract under the terms agreed to by the parties.
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alleging fraud is entitled to recover the difference between “the actual value received and the value
the defrauded party would have received had the value been as represented.” Bowman v Presley,
212 P.3d 1210, 1218 (Okla. 2009). The same analysis applies when determining contractual
damages under the benefit of the bargain doctrine. Smoot v. B & J Restoration Servs. Inc., 279 P.3d
805, 822 (Okla. Civ. App. 2012). The starting point for this analysis is determine what bargain the
parties made, and then the Court will determine what amount plaintiff actually paid to obtain the
benefit of the bargain. Plaintiff argues that the contract obligated Dancor to pay subcontractors
$969,680, but Dancor paid its subcontractors only $389,626. However, plaintiff and Dancor entered
a contract for the construction of a Petsmart store, and the payment of subcontractors was simply part
of the performance of the contract. The Court finds that the bargain for the purpose of determining
plaintiff’s damages was the construction of the store, and the parties agreed that Dancor would build
a store for $1,269,397. The evidence submitted by plaintiff shows that there were adjustments to the
contract, and the final value of the contract was $1,318.440.29. Dkt. # 132-6, at 3. Plaintiff is
entitled to damages it incurred to complete construction of the store for any amounts above the
adjusted contract price of $1,318,440.29. In a prior opinion and order, the Court found that any
undisputed facts stated in plaintiff’s motion for summary judgment were deemed confessed, and one
of those confessed facts was that plaintiff paid $1,186,596.26 to Dancor as construction progressed.
Dkt. # 107, at 3. Plaintiff also stated as an undisputed fact that it paid an additional $196,979.89 to
discharge liens filed against plaintiff’s property by unpaid subcontractors. Id. at 4. This results in
a total payment of $1,383,576.15 by plaintiff to complete construction of the Petsmart store, and this
results in damages in the amount of $65,135.86.

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Plaintiff seeks an award of damages for attorney fees and costs that it incurred to defend
against litigation filed by subcontractors to recover sums that were not paid by Dancor and
Policicchio pursuant to subcontracts. Dkt. # 131, at 2; Dkt. # 132, at 2. Policicchio argues that
plaintiff has not met its burden to show that the attorney fees were necessary and reasonable under
the circumstances, and he asks the Court to either deny attorney fees entirely or significantly reduce
the amount of attorney fees awarded to plaintiff. Dkt. # 138, at 4-10. Oklahoma courts have
permitted a party to recover attorney fees as damages when “the wrongful acts of the defendant have
involved the plaintiff in litigation with others, or have placed him in such relation with other as to
make it necessary for him to incur attorney fees to protect his interests . . . .” Barnes v. Oklahoma
Farm Bureau Mut. Ins. Co., 11 P.3d 162, 181 (Okla. 2000). The example provided by the Oklahoma
Supreme Court for a situation in which it would be appropriate to award attorney fees as damages
was a prior case, Griffin v. Bredouw, 420 P.2d 546 (1966), in which the purchasers of a home were
required to defend against a lien foreclosure suit when the seller of the home failed to pay a
subcontractor for work performed prior to the sale. Id. Defendants have conceded by default or by
failing to respond to plaintiff’s motion for summary judgment that defendants failed to pay
subcontractors and that plaintiff was involved in litigation to discharge the subcontractor’s liens
against plaintiff’s property. Dkt. # 117, at 2. The Court finds that plaintiff necessarily incurred
attorney to protect itself from liens filed against its property due to defendants’ conduct, and plaintiff
should be awarded attorney fees as an element of damages.
Plaintiff seeks attorney fees in the amount of $220,700 and has provided the billing records
of its attorney in support of its request for damages. Dkt. # 136. Policicchio argues that the amount
of attorney fees incurred by plaintiff is excessive in light of the straightforward nature of the state

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court cases, and he claims that plaintiff’s attorneys spent an excessive amount of time engaging in
strategy discussions, file review, and drafting form pleadings. Dkt. # 138, at 8. In awarding attorney
fees as damages, the Tenth Circuit has explained that the district court does not need to apply the
lodestar method, and the test is whether the amount of attorney fees sought by the plaintiff will fully
compensate it for the harm caused by the defendant. Hetronic Int’l, Inc. v. Rempe, 697 F. App’x
589, 590 (10th Cir. 2017).2 The amount of attorney fees awarded as damages must be reasonable
and the amount will not necessarily be the full amount of attorney fees incurred by the plaintiff, but
“the amount actually paid is not a bad place start.” Id. at 591. The Court has reviewed the billing
records submitted by plaintiff and it is possible that the Court would find the fees somewhat
excessive if the Court were applying the lodestar method. However, the Court is awarding attorney
fees to compensate plaintiff for defendants’ conduct that caused plaintiff to retain an attorney to
resolve numerous liens and lawsuits. The billing records also establish that defendants’ litigation
conduct in those state court matters to resolve the subcontractor’s liens contributed to the amount
of the fees, and defendants should not be rewarded for engaging in conduct to purposefully frustrate
what should have been straightforward lawsuits to foreclose liens. The Court will award the full
amount of attorney fees of $220,700 to plaintiff as damages on its breach of contract and fraud
claims, for total compensatory damages of $285,835.86.
Plaintiff claims that it is entitled to liquidated damages in the amount of $42,500, because
the parties’ contract requires Dancor to pay a penalty of $500 per day following the 20th day after
the substantial completion date. Dkt. # 132, at 14. James Alley, the witness who testified for Dancor

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Unpublished decisions are not precedential, but may be cited for their persuasive value. See
Fed. R. App. 32.1: 10th Cir. R. 32.1.
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at a Fed. R. Civ. P. 30(b)(6) deposition, testified that Dancor did not substantially complete its work
until April 18, 2017. Dkt. # 87-1, at 47-48. Plaintiff states that using April 18, 2017 as the date to
calculate liquidated damages results in 105 days for the accrual of liquidated damages, resulting in
an award of liquidated damages of $42,500.3 However, plaintiff’s calculation of liquidated damages
relies on a date of January 3, 2017 as the date on which liquidated damages began to accrue, because
the certificate of substantial completion was allegedly issued on that date. The deposition testimony
cited by plaintiff in support of this assertion does not actually establish that the substantial
completion certificate was issued on January 3, 2017, and plaintiff has not submitted the certificate
of substantial completion as evidence. Dkt. # 87-1, at 47-48; Dkt. # 132, at 14-15. The 20th date
after the substantial completion date of December 26, 2016 was January 15, 2017, and the Court will
use January 15, 2017 as the starting point to calculate liquidated damages. See Dkt. # 39-1, at 2
(parties’ contract provides for December 26, 2016 as the date of substantial completion). Relying
on a date of January 15, 2017, this results in a total of 93 days between January 15 and April 18,
2017, for an award of liquidated damages of $46,500.
Dancor argues that a contractual provision imposing liquidated damages as a penalty for nonperformance is void under OKLA. STAT. tit. 15, § 213. In this case, the contract specifically states
that:
For each day following the twentieth day (20th) day after the Substantial Completion
Date that Contractor fails to complete all items in the Punch List in their entirety, the
Contractor shall be obligated to pay Client the sum of Five Hundred Dollars
($500.00) per day as reasonable liquidated damages, and not as a penalty
(“Liquidated Damages”), to reimburse Client for the additional administration

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The Court notes that liquidated damages for 105 days would result in award of $52,500 (105
x 500 = 52,500).
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required of its personnel and impaired or lost business opportunities caused by
Contractor’s delay.
Dkt. # 39-1, at 4. The Oklahoma Supreme Court has provided the following factors to distinguish
between a valid liquidated damages provision and an unenforceable penalty provision: 1) the injury
caused by the breach must be difficult or impossible to estimate accurately; 2) the parties must intend
to provide for damages rather than for a penalty; 3) the sum stipulated must be a reasonable
pre-breach estimate of the probable loss. Sun Ridge Investors, Ltd. v. Parker, 956 P.2d 876, 878
(Okla. 1998). In this case, the parties specifically agreed that the $500 per day liquidated damages
was not a penalty for non-performance, but the amount was intended to reimburse plaintiff for lost
business opportunities caused by Dancor’s failure to complete its work. This type of damages is
difficult to prove or estimate and it was reasonable for the parties to agree on a set value of $500 per
day to compensate plaintiff for loss caused by Dancor’s delay. The Court does not find that the
liquidated damages provision in the contract is unenforceable under § 213, and the Court will award
plaintiff liquidated damages in the amount of $46,500.
Finally, plaintiff seeks punitive damages for up to twice the amount of actual damages it
receives, because the undisputed facts concerning defendants’ actions show that they acted
intentionally and with malice toward plaintiff. Dkt. # 132, at 2-3. In the alternative, plaintiff
requests punitive damages in an amount up the award of actual damages, because defendants acted
with reckless disregard for the rights of others. Id. at 3. Under Okla. Stat. tit. 23, § 9.1, the
following factors must be considered in awarding punitive damages:
1.

The seriousness of the hazard to the public arising from the defendant's
misconduct;

2.

The profitability of the misconduct to the defendant;

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3.

The duration of the misconduct and any concealment of it;

4.

The degree of the defendant's awareness of the hazard and of its
excessiveness;

5.

The attitude and conduct of the defendant upon discovery of the misconduct
or hazard;

6.

In the case of a defendant which is a corporation or other entity, the number
and level of employees involved in causing or concealing the misconduct;
and

7.

The financial condition of the defendant.

The Court has reviewed these factors and does not find that punitive damages should be awarded to
plaintiff. The general public was not harmed by defendants’ conduct and defendants did not profit
from their misconduct. Instead, defendants misappropriated payments that should have gone to
subcontractors because they were have financial difficulties, and Dancor states that it has since
entered an assignment for the benefit of creditors after being unable to pay its liabilities. Dkt. # 130,
at 10. There is no doubt that defendants made intentional misrepresentations to plaintiff about their
failure to pay subcontractors, but this merely establishes that defendants committed fraud.
Defendants did not receive a financial windfall from their misconduct and plaintiff has presented no
evidence that defendants would be able to pay an award of punitive damages. The Court declines
to award punitive damages to plaintiff on its fraud claim against defendants, because punitive
damages would not tend to deter future misconduct of defendants or others and there is no need to
protect the general public from similar behavior by defendants.

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IT IS THEREFORE ORDERED that plaintiff is awarded compensatory damages in the
amount of $285,835.86 against Policicchio and Dancor, and liquidated damages in the amount of
$46,500 against Dancor. A separate judgment is entered herewith.
DATED this 31st day of January, 2020.

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