The Dallas/Fort Worth International Airport Board v. Inet Airport Systems, Inc. et al

Filing 85

Memorandum Opinion and Order granting in part denying in part 45 Motion for Partial Summary Judgment filed by The Dallas/Fort Worth International Airport Board; granting 55 Motion for Summary Judgment filed by Michael F. Colaco, Inet Air port Systems, Inc., Hartford Fire Insurance Company: In accordance with the discussion herein, the court ORDERS that: (A) DFW's motion for summary judgment be, and is hereby, granted as to Defendants' requests for relief under theories o f unjust enrichment and money had and received; (B) DFW's motion for summary judgment be, and is hereby, otherwise denied; (C) Defendants' motion for summary judgment be, and is hereby, granted; and, (D) DFW's claims against Hartford be, and are hereby, dismissed with prejudice. The court determines that there is no just reason for delay in, and hereby directs entry of, final judgment as to the dismissal of DFW's claims against Hartford. The court directs the parties to take into account these rulings in preparing their joint pretrial order. (Ordered by Judge John McBryde on 3/30/2015) (mdf)

u.s. DISTRICT COtRT
NORTHER.~DISTRICT Of T£XAS

FILED
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXA
FORT WORTH DIVISION
THE DALLAS/FORT WORTH
INTERNATIONAL AIRPORT BOARD,
Plaintiff,

til 30 2015

CU:RK, u.s. DISTRICT COURT

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8y _ _- - : - - - - - Dtpu,:"

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VS.
INET AIRPORT SYSTEMS, INC.,
ET AL.,
Defendants.

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NO. 4:13-CV-753-A

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MEMORANDUM OPINION AND ORDER
Now pending are motions for partial summary jUdgment and
summary jUdgment filed, respectively, by plaintiff, The
Dallas/Fort Worth International Airport Board ("DFW"), and
defendants, INET Airport Systems, Inc.

("INET"), Michael F.

Colaco ("Colaco"), and Hartford Fire Insurance Company
("Hartford"), as well as objections by each to the summary
judgment evidence of the opposing party. The court, having
considered the motions, responses, and replies, the summary
judgment evidence, and applicable authorities, finds that
plaintiff's motion should be granted in part and denied in part
and that defendants' motion should be granted.

j

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I.

Background
In 2009, DFW and INET entered into a contract for
installation of certain air conditioning equipment at Terminal E

-J

of the Dallas/Fort Worth International Airport. The contract was
bonded by Hartford. The contract provided, in pertinent part,
that INET install rooftop air conditioning units that were
required to operate from a central utility plant that provided
ethylene glycol/water ("EG/W") to the gates at subfreezing
temperatures. INET determined that the plans contained a design
flaw in that the EG/W could generate condensate that might freeze
and burst the coils, cause the units to malfunction, and create
an environmental hazard. DFW disagreed (or now claims to have
disagreed). This case arises out of the inability of DFW and INET
to resolve their dispute.
DFW filed its original petition in the 17 th Judicial
District Court of Tarrant County, Texas, on August 5, 2013.
Defendants filed a notice of removal, bringing the case before
this court. On September 30, 2013, DFW filed its first amended
complaint asserting causes of action for breach of contract
against INET, individual liability of Colaco as officer and
director of INET, which had by then dissolved, and liability of
Hartford under the performance bond it issued related to the
contract. DFW also sought attorney's fees and costs. Defendants
answered, asserting sixteen affirmative defenses. INET and its
successor, INET Airport Systems, LLC, asserted counterclaims
against DFW for breach of contract, unjust enrichment, and money
2

had and received, and sought to recover attorney's fees and
costs. DFW answered and asserted affirmative defenses to the
counterclaims. 1
II.
Summary Judgment Motions
DFW's motion for partial summary jUdgment seeks judgment as
to breach of contract (but not damages), inability of INET to
prevail on its counterclaims, and inability of INET to prevail on
its affirmative defenses.
Defendants' motion seeks judgment as to their second and
fourth affirmative defenses of excuse and prior material breach
and their eighth affirmative defense that DFW's claim for
liquidated damages is illegal and unenforceable. In addition,
Hartford seeks judgment that DFW's claim on the performance bond
is barred by limitations.
III.
Applicable Summary Judgment Principles
Rule 56(a) of the Federal Rules of civil Procedure provides
that the court shall grant summary jUdgment on a claim or defense
if there is no genuine dispute as to any material fact and the

IOf note in DFW's answer are its admissions that it "lacks knowledge or information sufficient to
form a belief as to the truth of what the temperature of the EG/W solution is once the EG/W solution
enters the Rooftop Air Handling Units" and "the design of the system was based on an assumption that
the Rooftop Air Handling Units could receive a sub-freezing EG/W solution." Further, DFW admits that
no change order was issued for the scope of work to be performed by !NET.
3

movant is entitled to jUdgment as a matter of law.

Fed. R. Civ.

P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247
(1986).

The movant bears the initial burden of pointing out to

the court that there is no genuine dispute as to any material
fact.

Celotex Corp. v. Catrett, 477 U.S. 317, 323, 325 (1986).

The movant can discharge this burden by pointing out the absence
of evidence supporting one or more essential elements of the
nonmoving party's claim, "since a complete failure of proof
concerning an essential element of the nonmoving party's case
necessarily renders all other facts immaterial."

Id. at 323.

Once the movant has carried its burden under Rule 56(a), the
nonmoving party must identify evidence in the record that creates
a genuine dispute as to each of the challenged elements of its
case.

Id. at 324; see also Fed. R. Civ. P. 56(c)

("A party

asserting that a fact . . . is genuinely disputed must support
the assertion by

citing to particular parts of materials in

the record . . . . ").

If the evidence identified could not lead

a rational trier of fact to find in favor of the nonmoving party
as to each essential element of the nonmoving party's case, there
is no genuine dispute for trial and summary jUdgment is
appropriate.

Matsushita Elec. Indus. Co. v. zenith Radio Corp.,

475 U.S. 574, 587, 597 (1986).

In Mississippi Prot. & Advocacy

Sys. v. cotten, the Fifth Circuit explained:
4

Where the record, including affidavits,
interrogatories, admissions, and depositions could not,
as a whole, lead a rational trier of fact to find for
the nonmoving party, there is no issue for trial.
929 F.2d 1054, 1058 (5th Cir. 1991).
The standard for granting a motion for summary jUdgment is
the same as the standard for rendering jUdgment as a matter of
law. 2

Celotex Corp., 477 U.S. at 323.

If the record taken as a

whole could not lead a rational trier of fact to find for the
non-moving party, there is no genuine issue for trial.
Matsushita, 475 U.S. at 597; see also Mississippi Prot. &
Advocacy Sys., 929 F.2d at 1058.
IV.

Objections to the Summary Judgment Evidence
Each party has filed objections to the summary judgment
evidence of the opposing party. Rather than strike any of the
summary jUdgment evidence, the court is giving it whatever
weight, if any, it may deserve.

2In Boeing Co. v. Shipman, 411 F.2d 365, 374-75 (5th Cir. 1969) (en bane), the Fifth Circuit
explained the standard to be applied in determining whether the court should enter judgment on motions
for directed verdict or for judgment notwithstanding the verdict.
5

v.
Undisputed Evidence
The following is an overview of evidence 3 pertinent to the
motions for summary judgment that is undisputed in the summary
jUdgment record:
DFW and INET entered into a contract dated August 6, 2009,
for work on air conditioning units associated with jet bridges at
Terminal E at DFW International Airport. Specifically at issue is
the requirement that INET install preconditioned air units and
roof-top air handling units for use with 30% ethylene
glycol/water. Campos Engineering provided the engineering design
for the project on behalf of DFW. On September 25, 2009, DFW
issued its notice to proceed, stating that the substantial
completion date of the contract would be August 5, 2010.
The contract agreement consists of a number of parts and
totals 565 pages. Paragraph 50-3 of the general provisions says
that all of the parts are intended to be complementary, but in
case of discrepancy, "Contract Forms shall govern over Special
Provisions, Special Provisions shall govern over General
Provisions, General Provisions shall govern over Plans . . . " DFW
070. Paragraph 50-3 further provides that the contractor not take

3Because of the length of the summary judgment record, for convenience, the court is referring to
DFW's evidence as "DFW _" and to Defendants' evidence as "!NET
"
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advantage of any apparent error or omission, but rather bring it
to the owner's attention immediately.
Provisions pertinent to the bidding process for the contract
are part of the contract General Provisions. In particular,
paragraph 20-6 says:
EXAMINATION OF PLANS, SPECIFICATIONS, AND SITE. The
bidder is expected to carefully examine the site of the
proposed work, the proposal, plans, specifications, and
contract forms. He shall satisfy himself as to the
character, quality, and quantities of work to be
performed, materials to be furnished, and as to the
requirements of the proposed contract. The submission
of a proposal shall be prima facie evidence that the
bidder has made such examination and is satisfied as to
the conditions to be encountered in performing the work
and as to the requirements of the proposed contract,
plans, and specifications.
DFW 063.
The Special Provisions include a warranty of construction by
the contractor, INET. However,
[u]nless a defect is caused by the negligence of the
Contractor or subcontractor or supplier at any tier,
the Contractor shall not be liable for the repair of
any defects of Owner furnished material or design
furnished by the OWNER or for the repair of any damage
that results from any defect in material or designs
furnished by the OWNER.
Special Provisions, , 6.0(D), DFW 044. The contract further
provided that:
In case of conflict, discrepancies, errors or omissions
among the various Contract documents, the matter shall
be submitted by Contractor to the Construction Manager
for decision, and such decision shall be final. Any
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Work affected by such conflicts, discrepancies, errors
or omissions which is performed prior to the
Construction Manager determination shall be performed
at the Contractor's risk.
Special Provisions, , 31.0.
with regard to scope of work, the contract provided that DFW
had the right to make such alterations as necessary or desirable
to complete the work and that any such changes would be covered
by change orders issued by DFW. General Provisions, , 40-2, DFW
067. The contract further provided for extra work, which would
also be reflected by change orders containing agreed price and
adjustment to contract time if necessary. Id., , 40-4, DFW 067.
Any paYment for extra work not covered by written agreement would
be rejected by DFW. Id.
with regard to control of work, the engineer was to decide
all questions as to contract interpretation and manner of
performance. General Provisions, , 50-1, DFW 070. Work done
contrary to the instructions of the engineer or any extra work
done without authority would be considered unauthorized and would
not be paid for under the contract. Id., , 50-10, DFW 072.
At a construction kick-off meeting on October 14, 2009, INET
expressed concern over whether certain McQuay rooftop units would
function correctly with sUbfreezing temperatures of glycol
passing through the coils.

(McQuay was one of the brands
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authorized to be used pursuant to the contract. It appears that
INET had based its bid on use of McQuay equipment. What is not
clear is whether INET was then required to use McQuay equipment
since that is what its bid was based on. It appears from INET's
letters that INET believed that to be the case. E.g., DFW 571,
572.)INET formally presented this issue in a request for
information (R-002) dated Nov. 17, 2009. DFW 569. DFW responded
that the unit would work, but that the specification needed to be
changed to include a defrost cycle in the control sequence for
the air handling units. INET 795. INET continued to express
concern about the McQuay units and ultimately determined that
none of the brands specified in the contract would function
properly as per the design of the engineer. DFW 578,

Internal

correspondence between DFW and Campos Engineering shows that the
piping connection design had to be changed for the units to work.
INET 790 (we need to fix the specifications); INET 793 (need to
revise some parts of the specification section); INET 800
(reconfirmed that McQuay units will operate as designed, however,
they do not have a recommended sequence to prevent coils from
freezing); INET 810 (INET is going to ask for an extension of
time and money; need to add 3-way control valve, temperature
sensor and circulation pump); INET 816 (piping design different
than what was originally submitted); INET 825 (please have this
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formally submitted to Campos as a change to design); INET 925
(need to prepare the change order for INET before tomorrow's
meeting).

DFW never issued a change order or request for

proposal to INET, despite INET's request. INET 819; 177; DFW's
answer at 7, "

VI.D.32, VI.D.35. Instead, DFW insisted that INET

either comply with the original plans and specifications or
pursue an acceptable alternative.
By letter dated Aug. 11, 2010, DFW gave notice to INET that
it had failed to achieve milestone 1, substantial completion, by
Aug. 5, so DFW would be assessing liquidated damages of $500 per
day until the work was complete. DFW 602. By letter dated Apr.
14, 2011, DFW notified INET that it was in default and DFW would
proceed against the performance bond. DFW 617. INET responded by
letter dated April 21, 2011, explaining why it was not in
default. DFW 585.

(An earlier letter, dated February 28, 2011,

summarized its correspondence and DFW's failure to adequately
respond. DFW 589.) Again, by letter of Aug. 22, 2011, INET denied
that it was in default, summarizing what had happened and, in
addition, offered to complete the work at no additional cost if
DFW would just issue a change order. DFW 589.
By letter dated Nov. 21, 2011, DFW claimed that INET had
failed and refused to provide pricing "on the piping revision
design,"and that the delays to the contract were the "result of
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INET's stubborn refusal to supply air handling units which have
been fUlly backed by the manufacturer." INET 784. The record does
not support the allegations of the letter.
By letter dated April 23, 2012, DFW issued an ultimatum to
Hartford and INET to agree to perform the work outstanding on the
contract or the contract would be terminated. INET 854. Having
been granted an extension of time to respond, by letter dated May
21, INET said it would proceed with construction exactly as DFW
had demanded. INET 856. Ignoring INET's letter, by findings of
fact dated May 25, 2012, the project manager recommended
termination of the contract. INET 860. The form attached to the
recommendation says in the udescription" section: UThis action
will terminate Contract No. 9500377, Restore PCA Terminal E with
INET Airport Systems, Inc. Of Fullerton, California." INET 861.
This same document appears in the agenda for the board meeting of
June 7, 2012. INET 939. Another presentation states that the
purpose of the of board action is to terminate the contract. lNET
872. The minutes of the June 7 board meeting state that the board
unanimously adopted the resolution terminating the contract. INET
943. Later internal correspondence confirms the termination. lNET
908, 913, 921.
The order for work to complete the contract was not issued
until July 2013. INET 921. The contract was never re-bid,
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contrary to DFW's representation that "DFW is prohibited by law
from simply contracting with a new entity without complying with
contracting requirements for governmental entities." PI.'s reply
at 7. Instead, a business decision was made to use Centennial to
do the work. INET 920. And, DFW paid almost $400,000 more than it
had estimated the work would cost. INET 1024; 1026.
On August 5, 2013, DFW filed its original petition in state
court, after trying unsuccessfully to get Hartford to sign a
tolling agreement.
VI.

Analysis
A.

DFW's Motion.
DFW says that it is entitled to jUdgment because there was a

contract between the parties, INET breached the contract by
failing to meet the substantial completion date, and, INET's
breach was not excused or justified. 4
There is no dispute about the contract and the documents
that comprise it. Further, the work required by the contract was
not completed. The question is which party first breached the
contract.
4DFW alternatively argues that INET breached the contract by reason of its dissolution. There is
no need to address this ground, however, as the summary judgment evidence establishes that the
dissolution took place after DFW had terminated the contract. Moreover, the dissolution was part of a
reorganization with a similarly named entity taking !NET's place. The contract provides that it inures to
the benefit of, and is binding on, successors and assigns. Special Provisions, ~ 30.0.

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DFW alleges that the contract placed the risk of defects on
INET. DFW relies on Lonergan v. San Antonio Loan & Tr. Co., 101
Tex. 63, 104 S.W.1061 (1907), which holds that a contract must
specifically state that the owner, rather than the contractor,
bears the risk of inadequate plans. In particular, DFW relies on
general provision 20-6 regarding examination of plans,
specifications, and site. See Interstate Contracting Corp.

v.

City of Dallas, 407 F.3d 708, 717 (5th Cir. 2005).
As INET points out, the contract also contains special
provision 6.0(0), which says that unless the contractor is
negligent, it is not liable for the repair of any defects or
damages that result from any defect in designs furnished by the
owner. In addition, other contract provisions are contrary to an
allocation of risk to the contractor. For example, special
provision 5.0 sets forth a procedure for the contractor to obtain
an adjustment based on differing site conditions, which would not
be allowable if the contract shifted the risk to INET.

Other

provisions allow DFW to make changes to the contract and provide
that DFW will pay for extra or different work. Also, the language
of the contract at issue is different from the language in

Interstate Contracting, which specifically said that the
contractor would make no claims for damages or additional
compensation or extension of time because of encountering
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different conditions or having to do different work than
anticipated or estimated. 407 F.3d at 721.
To the extent there is any ambiguity in the contract, the
special provisions govern over the general and the contract is to
be construed against the drafter. Gonzalez v. Mission American

Ins. Co., 795 S.W.2d 734, 737 (Tex. 1990). Here, the language of
the contract is more like that in Fleetwood than Lonergan. North
Harris County Junior College Dist. V. Fleetwood Constr. Co., 604
S.W.2d 247, 253 (Tex. App.-Houston 1980, writ ref'd n.r.e.) (where
the contractor was to report any errors, inconsistencies or
omissions to the architect and would not be liable for any
damages resulting from those errors, inconsistencies or
onmissions in the contract documents). DFW's refusal to
acknowledge the issues raised by INET and issue appropriate
change orders constitutes a breach of the contract. Id. at 25354. See Beard Family Partnership v. Commercial Indem. Ins. Co.,
116 S.W.3d 839, 847 (Tex. App.-Austin 2003, no pet.) (citing
United States v. Spearin, 248 U.S. 132, 136 (1918)).
The second part of DFW's motion is devoted to an attack on
INET's counterclaims and affirmative defenses. The primary
argument is that INET forfeited its right to proceed by failing
to pay state franchise taxes.

(This was the subject of an earlier

motion in which the court pointed out that DFW was relying on
14

incorrect statutory provisions.) The summary judgment record
shows that INET has been reinstated and did not owe any taxes.
Texas law is clear that once taxes are paid, the disability is
removed and the party may sue and defend all actions, no matter
when they arose. 5 Mello v. A.M.F. Inc., 7 S.W.3d 329, 331 (Tex.
App.--Beaumont 1999, pet. denied); G. Richard Goins Constr. Co.

v. S.B. McLaughlin Assocs., Inc., 930 S.W. 2d 124, 128 (Tex.
App.--Tyler 1996, writ denied).
DFW then argues that, assuming INET is authorized to pursue
its claims, INET's claims fail for the same reasons that DFW
should prevail on its claims. As discussed, supra, DFW cannot
prevail on its claims.
DFW next argues that INET cannot prevail on its alternate
claims for unjust enrichment and money had and received, because
of the contract between the parties. The court agrees. Texas Star
Motors, Inc. V. Regal Fin. Co., Ltd., 401 S.W.3d 190, 202 (Tex.
App.-Houston [14 th Dist.l 2012, no pet.); Edwards v. MidContinent Office Distribs., L.P., 252 S.W.3d 833, 837 (Tex.
App.-Dallas 2008, pet. denied).
Finally, DFW summarily contends, in a one paragraph
afterthought, that INET cannot produce evidence to create a fact
5Apparently recognizing this to be the case, DFW tries a new tack in its reply, arguing that
"INET did not assert a counterclaim against DFW." Reply at 9. The counterclaim is clearly asserted by
both INET entities, the original contracting party and its successor in interest.

15

issue as to any of its affirmative defenses. For the reasons
discussed herein, that contention is moot. In any event, INET
devotes 21 pages of its response to a discussion of evidence
supporting its defenses. And, as the court has determined, INET
is entitled to judgment that DFW prevented it from performing
under the contract.
B.

Defendants' Motion.
Defendants urge three grounds in support of their motion.

The first, that INET's performance under the contract was
prevented by DFW's breach of the contract, has already been
addressed. The third, that DFW's claim for liquidated damages is
illegal and unenforceable, is now moot. And, the second is that
the claims against Hartford are barred by limitations.
A suit on a performance bond may not be brought after the
first anniversary of the date of final completion, abandonment,
or termination of a public contract. Tex. Gov't Code

§

2253.078.

Here, the summary judgment evidence establishes that the contract
was terminated on June 7, 2012. The suit was not filed until
August 5, 2013. Hence, the claim against Hartford is not timely.
Hartford Fire Ins. Co. V. City of Mont Belvieu, 611 F.3d 289, 294
(5th Ci r. 2010) .
Even if the court accepted DFW's absurd argument that it had
not terminated the contract, DFW clearly takes the position that
16

INET did no work on the contract after October 2010 and that INET
would not do any further work. Thus, under DFW's own analysis,
the contract was abandoned years before it filed suit.

c.

Other Issues.
Although Defendants did not seek judgment as to their

counterclaim for breach of contract, DFW does not dispute that it
is withholding monies on work that was completed by INET. It
appears to the court that the parties should be able to agree on
the amounts withheld and not require further proceedings in that
regard.
VII.
Order
In accordance with the discussion herein, the court ORDERS
that:
(A) DFW's motion for summary jUdgment be, and is hereby,
granted as to Defendants' requests for relief under theories of
unjust enrichment and money had and received;
(B) DFW's motion for summary jUdgment be, and is hereby,
otherwise denied;
(C) Defendants' motion for summary judgment be, and is
hereby, granted;
and,

17

(D) DFW's claims against Hartford be, and are hereby,
dismissed with prejudice.
The court determines that there is no just reason for delay
in, and hereby directs entry of, final jUdgment as to the
dismissal of DFW's claims against Hartford.
The court directs the parties to take into account these
rUlings in preparing their joint pretrial order.
SIGNED March 30, 2015.

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