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S.J. Louis Construction of Texas LTD. v. City of Baton Rouge

United States District Court, M.D. Louisiana

June 26, 2018

S.J. LOUIS CONSTRUCTION OF TEXAS, LTD.
v.
CITY OF BATON ROUGE AND PARISH OF EAST BATON ROUGE

          RULING

          JOHN W. DEGRAVELLES JUDGE.

         Before the Court is a Motion for Partial Summary Judgment filed on behalf of the Defendant and Plaintiff-in-Counterclaim, the City of Baton Rouge/Parish of East Baton Rouge (“City-Parish”).[1] Plaintiff and Defendant-in-Counterclaim, S.J. Louis Construction of Texas, Ltd. (“SJL”) has filed an Opposition to which the City-Parish has filed a Reply.[2] For the following reasons, the City-Parish's Motion shall be denied.

         I. FACTUAL AND PROCEDURAL HISTORY[3]

         This diversity action concerns two sewer construction projects built for the Sanitary Sewer Outfall Program (“SSO”) that was mandated as a result of a November 2001 Consent Decree among the United States Department of Environmental Protection, the State of Louisiana, and the City of Baton Rouge.[4] The purpose of the SSO was to address deficiencies in the capacity and infrastructure of the sanitary systems in and around the City of Baton Rouge, Louisiana.[5] The two sanitary sewer construction projects at issue are the Bayou Duplantier Sewer Area Upgrades, Project No. 09-GS-MS-0042 (“Bayou Duplantier Project”) and the Central Consolidation Pump Station 42 Force Main Phase II, Project No. 09-FM-MS-036B (“Central Consolidation Project”) (collectively “Projects”).[6]

         On August 9, 2012, in response to the City-Parish's solicitation of bids, SJL submitted a bid for the Bayou Duplantier Project.[7] Because the City-Parish deemed SJL to be the lowest responsible and responsive bidder, on November 8, 2011, it awarded SJL a contract to construct the Bayou Duplantier Project for the original bid or contract price of $4, 835, 681.50.[8]Subsequently, on February 2, 2012, in response to another City-Parish solicitation of bids, SJL submitted a bid for the Central Consolidation Project.[9] The City-Parish once again deemed SJL to be the lowest responsible and responsive bidder and, on March 23, 2012, awarded SJL a contract to construct the Bayou Duplantier Project for the original bid or contract price of $12, 322, 052.40.[10]

         On September 11, 2014, SJL filed a Complaint and Demand for Trial by Jury against the City-Parish in which it claims that during the Projects it encountered owner-caused delays, interferences, disruptions, and other events, which were beyond SJL's control and prevented SJL from meeting either of the Project's Baseline Schedule completion dates.[11] For instance, SJL has alleged that the City-Parish knew and disregarded that its plans and specifications for each Project “were inaccurate and/or incomplete and would result in additional and extra work[, ] and that certain utility conflicts and/or changes to the work would be necessary and impede the completion of both [Projects].”[12] SJL further alleges that it “encountered material alterations to the original plans and specifications and major changes to the contracted scope of work that materially and drastically changed the character and scope of work on both of the [Projects], causing an increase in cost and performance time.”[13] Additionally, SJL claims that the City-Parish's authorization of material design revisions to the Projects' plans and specifications during the course of construction “actively and materially interfered with [S]L's] operations and resulted in substantial increases in the cost and time of performance, the quality and character of the work, and the [Projects'] quantities.”[14] SJL has asserted various state law claims against the City-Parish including claims for breach of contract and breach of warranties in an attempt to recover damages against the City-Parish for costs associated with additional and extra work performed, including additional labor, materials, and equipment, resulting from changes to the Projects.[15]

         The City-Parish denies SJL's allegations, and has asserted compulsory counterclaims against SJL.[16] It is the City-Parish's contention that SJL caused “the majority of the delays, disruptions, and interferences encountered over the course of both Projects.”[17] For instance, the City-Parish has alleged that SJL was negligent in its performance of both Projects, including but not limited to its improper management and/or failure to manage the Projects.[18] The City-Parish further contends that, “SJL materially changed its work in contradiction to the City/Parish's design plans, specifications, and/or drawings without notifying the City/Parish and/or the Project Manager.”[19] As a result of “SJL's negligence, breach of contract, and breach of good faith and fair dealing, ” the City-Parish seeks to recover costs associated with hiring third-party contractors to repair and complete the Projects, and liquidated damages attributed to SJL's delay in completing the Projects by the contracted completion dates.[20]

         The City-Parish now moves for partial summary judgment on SJL's breach of warranties claims, as well as the City-Parish's affirmative defense that it made no such warranties.[21] The City-Parish argues that because it made no express or implied warranties to SJL over the course of the Projects or through any contractual documents, it is entitled to summary judgment as a matter of law on SJL's breach of warranties claims. Since there were no express or implied warranties, the City-Parish further contends that SJL breached its contractual duty to investigate and uncover underground utilities within the work sites prior to commencing work on the respective Projects; therefore, the City-Parish concludes that it is not liable for any damages that SJL seeks for delays associated with unidentified underground utilities. The City-Parish also posits that SJL failed to mitigate its Projects' delays and instead unlawfully sought to re-negotiate established Unit Prices, which only led to further delays for which SJL is liable.[22] The City-Parish also moves for summary judgment on its own breach of contract claims arising out of two incidents where SJL's performance allegedly fell below the workmanship level required and expected of a responsible general contractor: the Bayou Duplantier Project pond breach and the installation of air release valves (ARVs) on Central Consolidation Project.[23]

         SJL disagrees with the City-Parish's arguments, and asserts that there are genuine issues of material fact in dispute that prevent summary judgment from being granted.

         II. LEGAL STANDARD: SUMMARY JUDGMENT[24]

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[25] “An issue is material if its resolution could affect the outcome of the action.”[26] “When assessing whether a dispute to any material fact exists, we consider all of the evidence in the record but refrain from making credibility determinations or weighing the evidence.”[27] “A party moving for summary judgment ‘must “demonstrate the absence of a genuine issue of material fact, ” but need not negate the elements of the nonmovant's case.'”[28] If the moving party satisfies its burden, “the non-moving party must show that summary judgment is inappropriate by setting ‘forth specific facts showing the existence of a genuine issue concerning every essential component of its case.'”[29] However, the non-moving party's “burden is not satisfied with some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence.”[30]

         Notably, “[a] genuine issue of material fact exists, ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'”[31] The Court must resolve all reasonable factual inferences in favor of the nonmoving party.[32] However, “[t]he court has no duty to search the record for material fact issues. Rather, the party opposing the summary judgment is required to identify specific evidence in the record and to articulate precisely how this evidence supports his claim.”[33] “Conclusory allegations unsupported by specific facts, however, will not prevent an award of summary judgment; ‘the plaintiff [can]not rest on his allegations . . . to get to a jury without ‘any significant probative evidence tending to support the complaint.'”[34]

         III. ANALYSIS

         A. SJL's Breach of Warranties Claims and City-Parish's Affirmative Defense

         In response to SJL's breach of warranties claims, the City-Parish has raised an affirmative defense that it made no warranties regarding the Projects' construction contracts.[35] The only representation that the City-Parish admits to making is that the plans were “adequate.”[36]

         In support of its affirmative defense, the City-Parish argues, without much discussion, that the general rule of law mentioned in the Louisiana Supreme Court decision, Brasher v. City of Alexandria, supports a finding that SJL's breach of warranties claims must fail.[37] Brasher's general rule of law provides: “if destruction of a work during the course of construction is caused by defective, inadequate, or insufficient plans and specifications furnished by the owner, the contractor is nevertheless liable.”[38] However, the Brasher court explained that an exception to the general rule exists “where the owner expressly or impliedly warrants the sufficiency of the plans furnished by him.”[39]

         The City-Parish argues, albeit cryptically, that Brasher's general rule applies because instead of warranting that there would be no impediments to SJL, or any other contractor for that matter, while working on its Projects, it did the opposite. The City-Parish, via special provisions throughout the Projects' contractual documents, claims that it apprised all potential contractors that there would be certain impediments to working in certain areas of the Projects during certain periods of time.

         For instance, Bayou Duplantier's Special Provision Section 7-5.2, Work in Servitude Over Private Property, provides in pertinent part as follows:

servitudes from Station 106 (Sht. C-1) to 154 (Sht. C-8) and station 309 (Sht. C-20) to 329 (C-22) have not yet been acquired by the Owner, and the servitude agreements are expected within 60 days after Notice to Proceed for construction is issued. Contractor will not be allowed to commence Work in any areas that do not have servitude agreements in place.[40]

         The City-Parish also cites to Bayou Duplantier's Special Provision 9-4, Prosecution of Work, which states that “[t]he Contractor shall not perform any work on Lee Drive through the entire duration of the LSU home football season . . . For the 2011 LSU football season this will extend from 7:00 AM on Friday 9-9-11 until 7:00 AM on Monday 11-28-11.”[41]

         Based on these provisions, as well as others within the Projects' contractual documents, the City-Parish argues that SJL cannot create a genuine dispute of material fact that the City-Parish warranted that SJL would have generally unimpeded ability to gain and/or maintain access to the worksites. Considering that there was no warranty, the City-Parish contends that the Brasher's general principle of law applies, and SJL is liable for its own damages.[42]

         In response, SJL counters that the City-Parish has mischaracterized its claims as they do not arise from the “destruction of a work during . . . construction.”[43] Rather, its breach in warranties claims are attributed solely to the City-Parish and its allegedly inadequate and insufficient plans and specifications. Therefore, SJL contends that this case “falls squarely within the Spearin doctrine” as set forth by the United States Supreme Court in U.S. v. Spearin, which was adopted by the Louisiana Supreme Court in Louisiana Shipbuilding Co. v. Bing Dampskibsaktieselskab.[44]

         In Spearin, the contractor agreed to build a dry dock at the Brooklyn navy yard pursuant to the plans and specifications that had been prepared by the government. Before he could begin working on the dry dock, however, the contractor had to relocate a section of a 6-foot brick sewer that intersected the chosen site for the dry dock. “The plans and specifications provided that the contractor should do the work and prescribed the dimensions, material and location of the section to be substituted.”[45] The contractor fully complied with the requirements and the government accepted the substituted section as satisfactory. Both before and after the diversion of the 6-foot sewer, it was connected to a 7-foot sewer within the Navy Yard, but outside of the space to be used for the dry dock.

         Approximately one year after the relocation of the 6-foot sewer, a combination of a heavy downpour of rain and a high tide forced water up the sewer causing the internal pressure to break the 6-foot sewer in several places, while the excavation of the dry dock area was flooded. Upon further investigation it was discovered that there was a 5 to 5 ½ foot high dam within the 7-foot sewer, which had been constructed to divert the heavy waters to the 6-foot sewer; hence, this dam had caused the 6-foot sewer to break. Importantly, the dam was not shown on the city's sewerage system, nor the government's plans or blueprints that were submitted to the contractor. Therefore, according to the plans, the 7-foot sewer appeared to be unobstructed.

         In upholding the contractor's contentions that the plans and specifications provided by the government were insufficient and defective, thereby preventing the performance of the work, the Court reasoned as follows:

The general rules of law applicable to these facts are well settled. Where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be excused or become entitled to additional compensation, because unforeseen difficulties are encountered. Thus one who undertakes to erect a structure upon a particular site, assumes ordinarily the risk of subsidence of the soil. But if the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications. This responsibility of the owner is not overcome by the usual clauses requiring builders to visit the site, to check the plans, and to inform themselves of the requirements of the work . . . .[46]

The Spearin Court also found that an implied warranty existed such that if the specifications- which prescribed the character, dimensions, and location of the sewer-were complied with, then the sewer would be adequate. The Court further explained that the “implied warranty is not overcome by the general clauses requiring the contractor to examine the site, to check up the plans, and to assume responsibility for the work until completion and acceptance.”[47]

         As for its claims in this case, SJL has alleged that “[t]he City-Parish prepared the plans and specifications for the [Projects] prescribing the character, dimensions and location of the work.”[48]SJL also claims that “the City-Parish entered into the Bayou Contract and Central Contract with knowledge that bidders, including S.J. Louis, would submit their bids based on the conditions represented in each set of Contract Documents, including, but not limited to, access, the conditions at the site, sequence of construction, specified methods of construction, utility locations and utility construction, quantities, and the contract milestones.[49] The City-Parish warranted that its plans and specifications were accurate, and, if followed, would permit the contractor to perform a certain scope of work within each of the specified contract timeframes.”[50] SJL has also alleged that the City-Parish “expressly and implicitly warranted the plans and specifications were adequate to define the scope of work, perform the work, and that, if the contractor performed the work in accordance with those plans, [ ] the work would be acceptable and could be completed within the specified timeframes.”[51]

         Additionally, SJL has offered undisputed record evidence showing that its claims are attributed to delays caused by owner-directed changes and continuing revisions to the City- Parish's inaccurate plans and specifications. Specifically, SJL identifies one such instance arising out of its work on Bluebell Street during the Bayou Duplantier Project where it was supposed to perform an excavation and installation of a sewer pipe.[52] SJL relied on the specifications and plans which provided for “stable and undisturbed earth” at the worksite; however, once excavation began, SJL realized other means would be necessary to complete the work due to the unstable soil conditions.[53] Although SJL sought a contract change order to cover additional costs needed to complete the work, the City-Parish issued a “Stop Work” order instead; therefore, SJL was directed to stop working along Bluebell Street.[54] Until SJL provided a “corrective action plan” to the City-Parish, the Stop Work order would not be lifted.[55] As a result of the City-Parish's decision to issue a Stop Work order, SJL claims that it experienced owner-caused delays and disruptions that adversely affected SJL's work progress and anticipated costs.

         Considering the nature of SJL's breach of warranties claims, which concern the accuracy of the City-Parish's plans and specifications that SJL was bound by, the Court finds that the claims fall within the purview of the Spearin doctrine as opposed to general rule of law from Brasher. Additionally, SJL has brought forward competent evidence demonstrating that a question of fact exists as to whether the Spearin doctrine applies in the instant case thereby precluding summary judgment. Accordingly, the Court shall deny the City-Parish's Motion as to SJL's breach of warranties claims as a matter of law.

         B. Breach of Warranties and Breach of Contract Claims Related to Utility Conflicts The City-Parish argues that SJL should not be able to recover any monetary damages for any alleged delays and associated costs attributable to underground utilities discovered during the course of the work on the Projects. The City-Parish's argument is three-fold.

         First, the City-Parish argues that pursuant to the express language of Section Two of the General Provisions of the Projects' contractual documents, the parties made known “their express understanding that all plan drawings, specifications, and corresponding soil boring logs were not intended to provide the contractor with exact, precise or complete representations of the location, character or size of all things underground, whether they be utilities, soil conditions, or otherwise.”[56]

Section 2-9 of the General Provisions provides as follows:[57]
The bidder is expected to examine carefully the site of the proposed work, the proposal, plans, project specifications and contract forms before submitting a proposal . . . The location, character, and size of underground natural features and existing subsurface structures shown on the plans were obtained for use by the engineer in the preparation of design, and the City-Parish assumes no responsibility for the accuracy of such data.[58]
Section 2-9.2 of the General Provisions also states:
When logs of test holes, ground water levels and any accompanying soil, geological or seismic reports are included in the plans or specifications, such data is furnished for information only. The field conditions so set forth shall not constitute a warranty that such conditions actually exist. Bidder should make their own investigations of the site conditions, both above and below ground.[59]

         Based upon the foregoing contractual language, the City-Parish asserts that it did not warrant the plans or specifications.[60]

         The Court finds that the resolution of this particular claim ultimately hinges upon whether the City-Parish's plans and specifications were sufficient and accurate. Pursuant to the Spearin Court, any “implied warranty” by the City-Parish that its plans and specifications were accurate will “not be overcome by the general clauses [in this case, Sections 2.9 and 2-9.2 of the General Provisions] requiring the contractor to examine the site, to check up the plans, and to assume responsibility for the work until completion and acceptance.”[61] Because the parties take opposing positions on the accuracy and sufficiency of the City-Parish's plans and specifications, summary judgment is not appropriate on SJL's breach of warranties claims based on underground utility conflicts.

         Second, the City-Parish argues that SJL, as the excavator on the Projects, breached its “legal duty” to discover any unknown underground utilities during its pre-bidding inspections.[62]In response, SJL cites to undisputed evidence that shows that the City-Parish did not adhere to this principle with all contractors and calls into question whether SJL did, in fact, have such a duty. Specifically, the City-Parish authorized change orders to other contractors performing work on the SSO Program for “Differing Site Conditions” in order to avoid conflicts with unforeseen underground utilities.[63]

         According to the City-Parish, in order for SJL to recover damages for any such breach due to unknown or undisclosed utilities, SJL must prove “(1) the owner of the ‘unknown or undisclosed' utility, (2) whether said utility was recorded with the regional notification center, and in the event that said utility(ies) was lodged with the regional notification center, (3) whether the City/Parish received said information on such an ‘unknown or undisclosed' underground utility that was left out of the plans and specifications that were provided to SJL for each of the respective projects. Additionally, SJL must establish with the Court how it was precluded from discovering information about the underground utilities that were not made known to it by the City/Parish.”[64]Importantly, the City-Parish cites no legal authority for the foregoing burden of proof that it asserts SJL must satisfy on this breach of contract claim; therefore, the Court finds no merit in the City-Parish's argument.

         As an alternative argument, the City-Parish contends that it “fulfilled its duty of making itself aware of all known underground utilities within the parameters of both Projects by contact the State of Louisiana's regional notification center for same.”[65] The City-Parish further asserts that it, “through its utilities manager, SIGMA, contacted the regional notification center, who in turn notified the known utility owners across the limitations of both the Bayou and CCP2 projects in accordance with La. R.S. 40:1749.11, et seq., the ‘Louisiana Underground Utilities and Facilities Damage Prevention Law.'”[66] The City-Parish, however, offers no evidentiary support for either statement. It is well-settled that such unsupported allegations setting forth “ultimate or conclusory facts and conclusions of law” are insufficient to support a motion for summary judgment.[67] And while recitation of relevant state law is informative, it does not evince that the City-Parish actually complied with its duties under those laws or the contracts General Provisions.[68] Therefore, the Court finds that the City-Parish has failed to carry its initial burden of proof, and that its Motion shall be denied on SJL's breach of contract claims related to utility conflicts and associated damages.

         C. City-Parish's Affirmative Defense: SJL Failed to Mitigate

         The City-Parish argues that SJL submitted Unit Price Forms as part of each of its bids that were incorporated into the contract documents for each of the respective Projects.[69] During the performance of the Projects, SJL submitted proposals for Requests for Contract Change Orders that proposed higher unit prices than those contained in the Unit Price Forms. The City-Parish asserts that it rightfully denied SJL's proposals for Requests for Contract Change Orders because they were unlawful attempts to renegotiate unit prices.

         For instance, the City-Parish claims that pursuant to Louisiana Public Works Act, unit prices within the initial contract “shall not be renegotiated for the purpose of computing negotiated change orders.”[70] La. R.S. 38:2212(m)(5) of the Public Works Act provides as follows:

Any change order pertaining to public work, not required by this Part to be let out for public bid, shall either be negotiated in the best interest of the public entity or let out for public bid as provided by this Part. Where the change order is negotiated, the public entity shall require that such change order be fully documented and itemized as to costs, including material quantities, material costs, taxes, insurance, employee benefits, other related costs, profit, and overhead. Where certain unit prices are contained in the initial contract, no deviations shall be allowed in computing negotiated change order costs.

         Based on the foregoing statutory provision, the City-Parish asserts that SJL should be responsible for the delay costs it seeks to recover due to its own failure to properly mitigate such damages.

         In response, SJL argues that it never sought to renegotiate prices. Rather, the damages that it seeks to recover are for additional and extra work attributed to “owner-directed changes (e.g. design changes), delay and disruption claims, and changed conditions claims.”[71] In its Complaints, SJL has specifically asserted as much.[72] SJL further alleged that although the City-Parish was obligated under each of the respective contracts to issue change orders and additional compensation necessary to compensate SJL for additional and extra work performed and additional quantities, the City-Parish failed to do so.[73]

         SJL also correctly argues that Louisiana law allows for the recovery of such damages if they can be proven. In Sullivan v. La. DOTD, the Louisiana Court of Appeal for the First Circuit stated as follows:[74]

A contractor is obligated to perform in accordance with contract plans and specifications. However, it is well-settled that the requirement of public bidding, LSA-R.S. 38:2211 et seq., is not fulfilled unless the plans and specifications are sufficiently definite and explicit beforehand. If the DOTD fails to provide sufficiently definite and explicit plans and specifications, it will be liable for the additional costs incurred as a result of this failure.[75]

         As applied to the instant matter, if SJL successfully proves that the City-Parish failed to provide definite and accurate plans and specifications, then the City-Parish will be liable for SJL's additional costs as a result of this failure. Louisiana law also provides that, to the extent that SJL can establish that it incurred any damages due to any delays in performing the Projects, and that these ...


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