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Parkcrest Builders, LLC v. Housing Authority of New Orleans

United States District Court, E.D. Louisiana

August 8, 2017


         SECTION: "J"(4)



         Before the Court are four separate motions for partial summary judgment. The Housing Authority of New Orleans (“HANO”) has filed a Motion for Partial Summary Judgment on the Issue of Substantial Completion (Rec. Doc. 230)[1] and a Motion for Partial Summary Judgment to Dismiss Delay Claims Alleged by Liberty and Parkcrest (Rec. Doc. 237).[2] Liberty Mutual Insurance Company (“Liberty”) and Parkcrest Builders, LLC (“Parkcrest”) each filed a separate Motion for Partial Summary Judgment on the Issue of HANO's Damages Arising out of Work Completed by Colmex Construction, LLC. (Rec. Docs. 236 and 247), which the Court construes as one motion.[3]

         Having considered the motions and legal memoranda, the record, and the applicable law, the Court finds that all four motions should be DENIED.


         This case arises out of disputes that occurred during the construction of affordable housing units in New Orleans. On March 4, 2013, HANO entered into a contract (“Prime Contract”) with Parkcrest whereby Parkcrest would serve as the contractor for the construction of the Florida Avenue: New Affordable Housing Units (the “Project”). The Project's scope of work included the construction of twenty-six separate buildings, which would contain fifty-one living units and one management office, [4] as well as the construction of streets, sidewalks, curbs, and other infrastructure elements within the Project area. Because the Project fell within the ambit of the Louisiana Public Works Act, Parkcrest was obligated to obtain a statutory performance and payment bond, and it sought the bond from Liberty. Liberty issued a payment and performance bond naming Parkcrest as principal and HANO as obligee in connection with the Project. The initial contract price was $11, 288, 000.00 and the initial completion date was to be July 27, 2014.

         Progress on the Project was hampered by numerous delays. Parkcrest claims that the delays were caused by issues out of its control. HANO, on the other hand, asserts that the delays were caused by Parkcrest's “failure or inability to execute the work” and that Parkcrest intentionally disregarded contract specifications by performing deficient, poor quality, and non-code compliant work. Whatever the cause, the parties agreed to enter a change order that extended the completion date to September 14, 2014.

         The relationship between HANO and Parkcrest deteriorated during the course of the Project and on April 10, 2015, HANO terminated Parkcrest prior to completion. HANO then called upon Liberty to perform its obligations as surety for Parkcrest. On June 9, 2015, HANO and Liberty entered into a Takeover Agreement to complete the project.[5] Once the Takeover Agreement was executed, Liberty retained Parkcrest as its completion contractor and the parties resumed work. However, the Project continued to be plagued by delays and disagreements about their cause. Liberty claims that HANO began violating the terms of the Takeover Agreement immediately after signing it by failing to pay money it already owed, improperly reducing amounts approved for payment, failing to respond timely to change order proposals submitted by Parkcrest, and failing to timely issue punch lists. HANO denies these allegations and says that all delays are attributable to Liberty. Nevertheless, Liberty informed HANO on May 17, 2016 that it considered the Project to be substantially complete. On June 9, 2016, Mark Clayton, the primary project manager for Perez, APC, sent a letter to HANO stating that he was unable to grant substantial completion. The letter sent by Clayton included attachments of hundreds of pages of punch lists that identified work he determined to be unfinished or deficient. On June 14, 2016, Liberty sent HANO a letter in which Liberty reaffirmed its position that the Project was substantially complete and informed HANO that it would only maintain its insurance and security on the worksite through July 1, 2016. As a result, HANO obtained insurance for the Project effective July 1, 2016 and informed Liberty that it would arrange for a third party contractor to complete the Project. On October 4, 2016, HANO entered into a contract (“Completion Contract”) with Colmex Construction, LLC (“Colmex”) to perform all necessary work to complete the Project. On March 25, 2017, HANO granted a certificate of substantial completion to Colmex for the Completion Contract.

         Parkcrest instituted this suit against HANO on May 8, 2015, alleging that HANO breached the contract by terminating Parkcrest “for convenience.” HANO filed a counterclaim against Parkcrest alleging that delays in the project were attributable solely to Parkcrest. On September 1, 2016, Liberty intervened in this lawsuit to allege breach of the Takeover Agreement, bad faith breach of contract, and wrongful termination claims against HANO. In response, HANO filed a counterclaim against Liberty alleging that Liberty breached the terms of the Takeover Agreement in bad faith and that it induced HANO to sign the Takeover Agreement through fraudulent misrepresentation.

         The parties have filed multiple motions for partial summary judgment, all of which are now before the Court. Each motion is fully briefed and will be discussed separately.


         Summary judgment is appropriate when “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed.R.Civ.P. 56); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). When assessing whether a dispute as to any material fact exists, a court considers “all of the evidence in the record but refrains from making credibility determinations or weighing the evidence.” Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008). All reasonable inferences are drawn in favor of the nonmoving party, but a party cannot defeat summary judgment with conclusory allegations or unsubstantiated assertions. Little, 37 F.3d at 1075. A court ultimately must be satisfied that “a reasonable jury could not return a verdict for the nonmoving party.” Delta, 530 F.3d at 399.

         If the dispositive issue is one on which the moving party will bear the burden of proof at trial, the moving party “must come forward with evidence which would ‘entitle it to a directed verdict if the evidence went uncontroverted at trial.'” Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991). The nonmoving party can then defeat the motion by either countering with sufficient evidence of its own, or “showing that the moving party's evidence is so sheer that it may not persuade the reasonable fact-finder to return a verdict in favor of the moving party.” Id. at 1265.

         If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record is insufficient with respect to an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. See Id. at 324. The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue for trial. See, e.g., id. at 325; Little, 37 F.3d at 1075.


         I. HANO's Motion for Partial Summary Judgment to Dismiss Delay Claims Alleged by Liberty and Parkcrest

         HANO moves the Court to dismiss all delay claims alleged by Liberty and Parkcrest because it argues that Parkcrest failed to comply with procedures set forth in the contract for identifying the cause of delay as unforeseeable. More specifically, HANO argues that Parkcrest failed to comply with the requirement that it provide HANO with written notice of the cause of any delay. Such written notice is a pre-condition for having a delay considered excusable. Thus, HANO argues that no delays in the Project should be considered excusable and that it is due stipulated damages as a matter of law.

         Liberty and Parkcrest oppose the motion, arguing that strict application of the written notification requirement is not appropriate for a multitude of reasons. First, Liberty and Parkcrest argue that HANO had actual knowledge of the cause of the delays and so written notification was unnecessary. Liberty and Parkcrest also emphasize that they are not seeking additional compensation for the delays; rather, they intend to prove the delays were excusable in order to avoid liability to HANO for the delays. Liberty and Parkcrest argue that HANO has suffered no prejudice because it had actual notice. Finally, Liberty and Parkcrest claim that HANO waived the written notification requirement by failing to provide written notice to Parkcrest when HANO's contracting officer was replaced by another person.

         A. Relevant Factual Background

         The Prime Contract entered into by HANO and Parkcrest incorporated Form HUD-5370 titled “General Conditions for Construction Contracts - Public Housing Programs” (the “General Conditions”). (Rec. Docs. 1-17 and 1-18.) The General Conditions set forth the responsibilities and obligations of the contractor (Parkcrest) and the public housing authority (HANO). The General Conditions also supply a variety of definitions and procedures for addressing termination of the contractor and who bears the burden in case of delay.

         The General Conditions gave HANO full authority to terminate Parkcrest from the Project. However, the General Conditions prescribed different outcomes depending on whether HANO terminated Parkcrest for “cause” or for “convenience.” A “for cause” termination is one that happens because the contractor refuses or fails to complete the work “with the diligence that will insure its completion within the time specified in this contract.” (Rec. Doc. 1-18 at 1.) If HANO were to terminate Parkcrest for cause, then the General Conditions contained a liquidated damages provision requiring Parkcrest to pay HANO $1, 189 for each day of delay. But the General Conditions stipulated a different result if HANO were to terminate the contract because it “determined that such termination is in the best interest of [HANO].” A termination on this ground is considered a termination for “convenience.” Id. at 2. If HANO were to terminate Parkcrest for convenience, then HANO would be liable to Parkcrest for reasonable and proper costs resulting from the termination.

         Section 32 of the General Conditions stated that Parkcrest would not be charged with liquidated damages if the delays were “excusable.” A delay would be excusable if it met two requirements. First, the delay must have arisen “from unforeseeable causes beyond the control and without the fault or negligence of [Parkcrest].”[6] Id. at 2. The second requirement is that “[t]he Contractor, within days (10 days unless otherwise indicated) from the beginning of such delay (unless extended by the Contracting Officer) notifies [HUD's] Contracting Officer in writing of the causes of delay.” Id. If Parkcrest were to satisfy these requirements, then the General Conditions required HANO to analyze Parkcrest's notification according to the following provision:

The Contracting Officer shall ascertain the facts and the extent of the delay. If, in the judgment of the Contracting Officer, the findings of fact warrant such action, time for completing the work shall be extended by written modification to the contract. The findings of the Contracting Officer shall be reduced to a written decision which shall be subject to the provisions of the Disputes clause of this contract.


         As described above, it is undisputed that the Project was supposed to be completed by September 14, 2014[7] and that the work was not complete by that date. It is also undisputed that Parkcrest only sent one written notification of delay on September 12, 2014, a mere two days before the Project was supposed to be complete. (Rec. Doc. 1-8 at 1.) The letter stated that the Project was delayed due to multiple factors outside Parkcrest's or negligence of both the Contractor and the subcontractors control, namely: “Entergy redesign of the electrical infrastructure, delays in the electric power pole relocation, electrical infrastructure not being complete, redesign and approval of the sewer and water connections, and coordination issues.” Id. Because this letter was delivered to HANO more than ten days from the beginning of all said delays, HANO argues that Parkcrest failed to comply with the contract.

         B. Analysis

         Although Parkcrest did not strictly comply with the written notification requirement, summary judgment is not warranted. In its briefing, Parkcrest identifies five separate issues that caused delays, one of which is the supply of permanent power infrastructure to the Project worksite.[8] Parkcrest alleges, and HANO does not dispute, that HANO was responsible for contracting with Entergy to design and construct the underground electrical infrastructure for the Project. Parkcrest also contends that the progress of this electrical infrastructure was discussed on a regular basis during the weekly construction progress meetings, and minutes from the meetings support this argument.[9] Parkcrest argues that it relied on HANO to take certain steps necessary to install the underground electrical infrastructure and that Parkcrest had no control over the progress of the installation.

         On June 12, 2014, HANO's project manager, Hollie DeHarde, sent what appears to be an internal HANO email titled “Florida -Entergy Underground Utility Work.” (Rec. Doc. 253-2 at 15.) In the email, Ms. DeHarde stated that HANO was “having issues with Entergy relative to starting underground utility work” at the Project site. Ms. DeHarde then asked if there was anyone “at Entergy with whom HANO could discuss how critical starting the underground work at Florida is and the impact continued delays are having on the construction schedule[.]” Id. In another email sent to an employee at Entergy on June 18, 2014, Ms. DeHarde stated, “The situation is becoming critical with regard to the construction schedule.” Id. at 17.

         On July 7, 2014, Ms. DeHarde and Patrick Kennedy sent an internal memorandum titled “Entergy” which purported to provide a “recap of meetings, discussions and communications” between HANO and Entergy regarding the Project. Id. at 13. The memorandum ...

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