Team Contractors, L.L.C. v. Waypoint NOLA, L.L.C. et al, No. 2:2016cv01131 - Document 275 (E.D. La. 2017)
Court Description: ORDER AND REASONS denying 124 Motion for Partial Summary Judgment on Team Contractors, LLC's claim for lost profits. Signed by Judge Susie Morgan on 10/2/2017. (clc)
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Team Contractors, L.L.C. v. Waypoint NOLA, L.L.C. et al Doc. 275 U N ITED S TATES D ISTRICT COU RT EASTERN D ISTRICT OF LOU ISIAN A TEAM CON TRACTORS, L.L.C., Plain tiff CIVIL ACTION VERSU S N O. 16 -113 1 W AYPOIN T N OLA, L.L.C., ET AL., D e fe n d an ts SECTION : “E”( 2 ) ORD ER AN D REAS ON S Before the Court is Defendants’ J oint Motion for Partial Sum m ary J udgm ent. 1 HC Architecture, Inc. (“HCA”), Salas O’Brien South, successor in interest to KLG, L.L.C. (“KLG”), Danny Y. Lundstrum , and Bobby G. Beach seek sum m ary judgm ent on the issue of Plaintiff Team Contractors, L.L.C.’s (“Team ”) claim for extended hom e office overhead dam ages under Eichleay . 2 The m otion is opposed. 3 The Court heard oral argum ent regarding the m otion on August 18, 20 17. 4 The Court has considered the briefs, record, and applicable law, and now issues its ruling. For the reasons that follow, the Motion for Partial Sum m ary J udgm ent is D EN IED . BACKGROU N D This case involves the developm ent and construction of the Hyatt House hotel in downtown New Orleans, Louisiana (“the Project”). It is undisputed that Team entered into a contract with Waypoint NOLA, L.L.C. (“Waypoint”), the owner of the Project, for the construction and/ or renovation of seven floors of the property located at 1250 Poydras Street, New Orleans, Louisiana. 5 Waypoint also entered into an agreem ent by which HCA 1 R. Doc. 124. R. Doc. 124 at 2. See Eichleay Corp., ASBCA No. 5183, 60 -2 B.C.A. (CCH) ¶ 268 8 (J uly 29, 1960 ). 3 R. Doc. 168. 4 R. Doc. 187. 5 R. Doc. 1 at 2. 2 1 Dockets.Justia.com would serve as the Project’s architect, an d additionally provide “all norm al Architectural, Civil, Structural, and [m echanical, electrical, and plum bing] engineering services.”6 HCA, in turn, subcontracted the m echanical, electrical, and plum bing (“MEP”) design work to KLG. 7 HCA delivered a com plete set of specifications, including KLG’s MEP plans, to Team on Septem ber 26, 20 14. 8 It was later discovered that several com ponents of KLG’s MEP system design did not com ply with New Orleans code requirem ents. For exam ple, the original plum bing designs did not com ply with ventilation requirem ents in the New Orleans plum bing code, 9 and the m echanical designs om itted m ore than 150 sm oke dam pers, in violation of other applicable m unicipal codes. 10 Because construction had begun on the MEP system s before the parties recognized the code deficiencies, Waypoint issued several construction change directives, under which Team had to rem ove the faulty system s an d rebuild the MEP system s from revised plans before continuing its work as scheduled. 11 Team filed suit in this Court in February 20 17, alleging breach of contract by Waypoint and n egligence on the part of Waypoint, HCA, and KLG. 12 Team alleges it incurred dam ages during construction in the form of additional subcontractor work, hourly labor, increased supervision, and other recurring expen ses, when it was directed to rem ove the deficient MEP system s and re-install revised system s. 13 Team argues that 6 R. Doc. 53-3. R. Doc. 157-18 (KLG Proposal). 8 R. Doc. 155-2 at ¶ 9 (Affidavit of Tom Hogan ). 9 R. Doc. 123-2 at 5. 10 R. Doc. 123-2 at 6. 11 R. Doc. 1 at 4. 12 R. Doc. 1. 13 R. Doc. 1 at 2-3. 7 2 the additional work from these corrections resulted in an extension of its obligations on the Project an d a delay of the Project’s com pletion date. 14 Team ’s expert, Rittiner & Associates (“R&A”), issued a report on J une 5, 20 17, which in cluded opinions with respect to Team ’s dam ages claim s. 15 R&A opined that Team suffered extended hom e office overhead dam ages related to the delay. 16 In calculating the extended hom e office overhead dam ages, R&A used the Eichleay 17 form ula, 18 which “com putes the daily am ount of overhead that the contractor would have charged to the contract had there been no delay, and gives the contractor this am ount of overhead for each day of delay that has occurred during perform ance.”19 On August 2, 20 17, HCA, KLG, Beach, and Lundstrom filed a Motion for Partial Sum m ary J udgm ent on Team ’s claim for extended hom e office overhead, arguing that Plaintiff has failed to establish entitlem ent to extended overhead under Eichleay . 20 LEGAL STAN D ARD Sum m ary judgm ent is appropriate only “if the m ovant shows that there is no genuine dispute as to any m aterial fact and the m ovant is entitled to judgm ent as a m atter of law.”21 “An issue is m aterial if its resolution could affect the outcom e of the action.”22 When assessing whether a m aterial factual dispute exists, the Court considers “all of the eviden ce in the record but refrains from m aking credibility determ inations or weighing 14 R. Doc. 1 at 4. R. Doc. 119-2. 16 Defendants separately m oved for sum m ary judgm ent on the issue of Plaintiff’s claim for lost profits. R. Doc. 119. The Court den ied this m otion . R. Doc. 255. 17 See Eichleay Corp., ASBCA No. 5183, 60 -2 B.C.A. (CCH) ¶ 268 8 (J uly 29, 1960 ). 18 R. Doc. 124-2. 19 Bert K. Robinson , Construction Law : Elem ents of Contractors’ Dam ages, 38 LA. B. J . 247, 248 (1990 ). 20 R. Doc. 119 at 1. 21 F ED . R. CIV. P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322– 23 (1986). 22 DIRECTV Inc. v. Robson, 420 F.3d 532, 536 (5th Cir. 20 0 5). 15 3 the eviden ce.”23 All reasonable inferen ces are drawn in favor of the nonm oving party. 24 There is no genuine issue of m aterial fact if, even viewing the evidence in the light m ost favorable to the nonm oving party, no reasonable trier of fact could find for the nonm oving party, thus entitling the m oving party to judgm ent as a m atter of law. 25 If the dispositive issue is on e on which the m oving party will bear the burden of persuasion at trial, the m oving party “m ust com e forward with evidence which would ‘entitle it to a directed verdict if the evidence went uncontroverted at trial.’”26 If the m oving party fails to carry this burden, the m otion m ust be denied. If the m oving party successfully carries this burden, the burden of production then shifts to the nonm oving party to direct the Court’s attention to som ething in the pleadings or other evidence in the record setting forth specific facts sufficient to establish that a genuine issue of m aterial fact does indeed exist. 27 If the dispositive issue is one on which the nonm oving party will bear the burden of persuasion at trial, the m oving party m ay satisfy its burden of production by either (1) subm itting affirm ative eviden ce that negates an essential elem ent of the nonm ovant’s claim , or (2) dem onstrating there is no evidence in the record to establish an essential elem ent of the nonmovant’s claim . 28 When proceeding under the first option, if the 23 Delta & Pine Land Co. v. N ationw ide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 20 0 8 ); see also Reeves v . Sanderson Plum bing Prods., Inc., 530 U.S. 133, 150 – 51 (20 0 0 ). 24 Little v. Liquid Air Corp., 37 F.3d 10 69, 10 75 (5th Cir. 1994). 25 Sm ith v. Am edisy s, Inc., 298 F.3d 434, 440 (5th Cir. 20 0 2). 26 Int’l Shortstop, Inc. v. Rally ’s, Inc., 939 F.2d 1257, 1263– 64 (5th Cir. 1991) (quoting Golden Rule Ins. Co. v. Lease, 755 F. Supp. 948, 951 (D. Colo. 1991)). 27 Celotex, 477 U.S. at 322– 24. 28 Id. at 331– 32 (Brennan , J ., dissentin g); see also St. Am ant v. Benoit, 80 6 F.2d 1294, 1297 (5th Cir. 1987) (citing J ustice Brennan’s statem ent of the sum m ary judgm ent standard in Celotex Corp. v. Catrett, 477 U.S. 317, 322– 24 (1986), and requirin g the m ovants to subm it affirm ative evidence to negate an essential elem ent of the nonm ovant’s claim or, alternatively, dem onstrate the nonm ovant’s evidence is insufficient to establish an essential elem ent); Fano v. O’N eill, 80 6 F.2d 1262, 1266 (citing J ustice Bren nan’s dissent in Celotex, and requiring the m ovant to m ake an affirm ative presentation to n egate the non m ovant’s claim s on sum m ary judgm ent); 10 A CHARLES ALAN W RIGHT, ARTHUR R. M ILLER & M ARY KAY KANE , F EDERAL P RACTICE AND P ROCEDURE §2727.1 (20 16) (“Although the Court issued a five-to-four decision , the m ajority 4 nonm oving party cannot m uster sufficient eviden ce to dispute the m ovant’s contention that there are no disputed facts, a trial would be useless, and the m oving party is entitled to sum m ary judgm ent as a m atter of law. 29 When, however, the m ovant is proceeding under the second option and is seeking sum m ary judgm ent on the ground that the nonm ovant has no evidence to establish an essential elem ent of the claim , the nonm oving party m ay defeat a m otion for sum m ary judgm ent by “calling the Court’s attention to supporting eviden ce already in the record that was overlooked or ignored by the m oving party.”30 Under either scenario, the burden then shifts back to the m ovant to dem onstrate the inadequacy of the evidence relied upon by the nonm ovant. 31 If the m ovant m eets this burden, “the burden of production shifts [back again] to the nonm oving party, who m ust either (1) rehabilitate the evidence attacked in the m oving party’s papers, (2) produce additional eviden ce showing the existence of a genuin e issue for trial as provided in Rule 56(e), or (3) subm it an affidavit explaining why further discovery is necessary as provided in Rule 56(f).”32 “Sum m ary judgm ent should be granted if the nonm oving party fails to respond in one or m ore of these ways, or if, after the nonm oving party responds, the court determ ines that the m oving party has m et its ultim ate burden of persuading the court that there is no genuine issue of m aterial fact for trial.”33 “[U]nsubstantiated assertions are not com petent sum m ary judgm ent evidence. The party opposing sum m ary judgm ent is required to identify specific evidence in the and dissent both agreed as to how the sum m ary-judgm ent burden of proof operates; they disagreed as to how the standard was applied to the facts of the case.” (internal citations om itted)). 29 First N ational Bank of Arizona v. Cities Service Co., 391 U.S. 253, 28 8 – 89 (198 0 ); Anderson v. Liberty Lobby , Inc., 477 U.S. 242, 249– 50 (1986). 30 Celotex, 477 U.S. at 332– 33. 31 Id. 32 Celotex, 477 U.S. at 332– 33, 333 n.3. 33 Id.; see also First N ational Bank of Arizona, 391 U.S. at 289. 5 record and to articulate the precise m anner in which that evidence supports the claim . ‘Rule 56 does not im pose upon the district court a duty to sift through the record in search of evidence to support a party’s opposition to sum m ary judgm ent.’”34 AN ALYSIS Defendants seek sum m ary judgm ent that Plaintiff is not entitled to recover any dam ages for extended hom e office overhead. 35 In Louisiana, the general rule as to the m easure of dam ages is the am ount of loss the plaintiff has sustained or the gain of which he has been deprived. 36 This m easure m ay include both direct and indirect dam ages. 37 Louisiana courts have long held that hom e office overhead expenses, which include “costs of running a business, such as accounting and payroll services, general insurance, salaries of upper-level m anagem ent, heat, electricity, taxes, and depreciation,” are recoverable as indirect dam ages when the breaching party delays perform ance by the non-breaching party. 38 Louisiana courts apply a three-prong test to determ ine if a claim ant is entitled to recover extended hom e office overhead dam ages: First, the contractor m ust dem onstrate that there was a governm ent-caused delay 39 not excused by a con current contractor-caused delay. Second, the contractor m ust show that it incurred additional overhead expenses, either 34 Ragas v. Tenn . Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998) (citin g Celotex, 477 U.S. at 324; Forsy th v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994) an d quoting Skotak v. Tenneco Resins, Inc., 953 F.2d 90 9, 915– 16 & n .7 (5th Cir. 1992)). 35 R. Doc. 124 at 2. 36 LA. CIV. CODE art. 1995 (1985). 37 McCarty Corp. v. Indus. Scaffolding, Inc., 14681 (La. App. 1 Cir. 6/ 25/ 1981); 413 So. 2d 1322, 1324 (“Overhead or indirect expenses are in fact an expense. They are as true a cost of doing busin ess as are the direct costs. For these reasons, it is custom ary to m ake an award of overhead in both actions of breach of contract and tort actions to cover indirect expenses . . .”). 38 Gilchrist Const. Co., LLC v. State, Dep’t of Transp. & Dev., 20 13-210 1 (La. App. 1 Cir. 3/ 9/ 15); 166 So. 3d 10 45, 10 64 (quotin g JMR Const. Corp. v. United States, 117 Fed. Cl. 436, 442 (Fed. Cl. 20 14)). See also Magnolia Construction Co., L.L.C. v. Parish of St. Charles, 0 6-543 (La. App. 5 Cir. 11/ 28/ 0 6); 947 So. 2d 747. 39 The Eichleay jurisprudence evolved in the field of governm ent contracts, and so generally in volves claim s by contractors against the federal govern m ent. The parties have not argued that Eichleay is inapplicable in the context of private contracts, so the Court does not address the issue. 6 because the contract’s perform ance period was extended or because the contract would have finished prior to the unextended perform ance period’s close. Third, the contractor m ust establish that it was required to rem ain “on standby” for the duration of the delay. 40 To show that it was “on standby,” a contractor m ust show (1) the delay was not only substantial, but was of an indefinite duration, (2) the contractor was required to return to work at full speed and im m ediately during the delay, and (3) m ost, if not all, of the contract work was suspended. 41 Louisiana courts have been reluctant to broaden the application of Eichleay beyond these “strict prerequisites.”42 In Gilchrist Const. Co., LLC v. State, Dep’t of Transp. & Dev., the Louisiana Court of Appeal reviewed a contractor’s claim for hom e office overhead dam ages related to an exten ded construction schedule. 43 In that case, the governm ent’s alleged n egligence resulted in a delayed schedule, and the plaintiffs sought dam ages for the period in which, but for the delay, it would have earned incom e from other contracts. The court recognized that although the case expressed “the underlying principle of the Eichleay form ula, that the delay caused by the public entity precludes the contractor from undertaking other work to otherwise absorb the continuous accrual of hom e office overhead,” it nonetheless declin ed to apply Eichleay because the plaintiff failed to show a work stoppage. 44 Sim ilarly, in Alonso et al. v. W estcoast Corp., 45 the U.S. District Court for the Middle District of Louisiana declined to widen the application of Eichleay . In that case, the court reversed a jury’s award of hom e office overhead dam ages because the plaintiff 40 Gilchrist Const. Co., LLC, 166 So. 3d at 10 65. Id. 42 Id. at 10 65. 43 Id. at 10 49. 44 Id. at 10 65. 45 20 17 WL 4176973 (M.D. La. Sept. 21, 20 17). 41 7 had not presented sufficient eviden ce that the contract was required to return to work “at full speed and im m ediately.”46 In the present case, Defendants argue that Plaintiff cannot recover extended hom e office overhead dam ages under Eichleay because “there was no suspension or stoppage of the work.”47 Defendants set forth three facts in support of their m otion. First, they point to Brett Fortner’s deposition testim ony suggesting there was n o shutdown or work stoppage resulting from the construction change directives. 48 Second, Fortner testified that Team ’s executive and supervisory em ployees were working hard on the project after the plum bing and m echanical issues were discovered. 49 Third, Fortner testified that the Team ’s subcontractors were also busy working to resolve the MEP issues after they were discovered. 50 Team disputes each of these facts as m ischaracterizations of Mr. Fortner’s testim ony. 51 In response, Team provides sum m ary judgm ent eviden ce that there was a functional stoppage of “all or m ost of the work perform ed” pursuant to the contract. 52 Deposition testim ony by both Mr. Fortner and Steve Laski indicates that at least som e of Team ’s work was stopped as a result of the construction change directives. 53 For exam ple, Mr. Fortner testified that “work was not advancing” beyond tasks “on a m inor, m inor level.”54 46 Id. at *5. R. Doc. 148 . 48 R. Doc. 124-5 at 9-12 (Deposition of Brett Fortner). 49 Id. 50 Id. 51 R. Doc. 168. 52 R. Doc. 168-5. See R. Doc. 168-3 at 2 (Deposition of B. Fortner). 53 R. Doc. 168 at 4-6. 54 R. Doc. 168-3. 47 8 Louisiana courts have not decided whether a “functional” work stoppage would satisfy Eichleay , and if so, what degree of work stoppage is required. “In the absence of a final decision by the state’s highest court on the issue at hand, it is the duty of the federal court to determ ine, in its best judgm ent, how the highest court of the state would resolve the issue if presented with the sam e case.”55 That is, this Court m ust m ake an “Erie guess.”56 In its lim ited application of Eichleay , Louisiana courts have seem ingly adopted the doctrine from federal courts without alteration. As the court noted in Gilchrist, “while the Eichleay form ula is basically a jurisprudential doctrine em anating from the federal courts that has seeped, to a slight degree, into our state court system for adoption, we observe that even use of the form ula by our courts has been consistent with [federal courts’] prerequisites.”57 Accordingly, federal analyses of this issue are particularly persuasive, and should weigh heavily in this Court’s Erie guess. Federal courts have held a claim ant need not show a total stoppage of work to recover extended overhead dam ages. 58 On this theory, a contractor’s perform ance of m inor tasks during the suspension does not prevent it from recovering under Eichleay . 59 The Court agrees. The com pletion of m inor tasks during an otherwise stopped construction project should not preclude recovery of hom e office overhead dam ages. “It 55 Am Int’l Specialty Lin es In s. Co. v . Canal Indem . Co., 352 F.3d 254, 260 (5th Cir. 20 0 3). Keen v. Miller Environ m ental Group, Inc., 70 2 F.3d 239 (5th Cir. 20 12). 57 Gilchrist Const. Co., LLC v. State, Dep't of Transp. & Dev., 20 13-210 1 10 65 (La. App. 1 Cir. 3/ 9/ 15); 166 So. 3d 10 45, 10 65. 58 See, e.g., Altm ay er v . John son, 79 F.3d 1129 (Fed. Cir. 1996); JMR Const. Corp. v. United States, 117 Fed. Cl. 436, 442 (Fed. Cl. 20 14)). 59 Id. 56 9 is sufficient, for purposes of establishing standby, if a contractor can dem onstrate that work has ‘stopped or significantly slowed.’”60 The question of whether a plaintiff incurred delay-related dam ages is “in part, a factual determ ination,” so any genuine issues of m aterial fact regarding a claim for dam ages precludes sum m ary judgm ent. 61 Whether or not the work slowdown resulting from the MEP design errors was sufficient to entitle Team to recover extended hom e office overhead dam ages is a factual question disputed by the parties. Because this question represents a genuine dispute of m aterial fact, sum m ary judgm ent is not appropriate. 62 CON CLU SION Accordingly; IT IS ORD ERED that Defendants’ J oint Motion for Partial Sum m ary J udgm ent on Team Contractors, LLC’s claim for lost profits is hereby D EN IED . N e w Orle a n s , Lo u is ian a, th is 2 n d d ay o f Octo be r, 2 0 17. _____________________________ SU SIE MORGAN U N ITED S TATES D ISTRICT J U D GE 60 JMR Const. Corp., 117 Fed. Cl. at 443 (quoting P.J. Dick Inc. v. Principi, 324 F.3d 1364, 1372 (Fed. Cir. 20 0 3). 61 Gilchrist Const. Co., LLC v. State, Dep’t of Transp. & Dev., 20 13-210 1 (La. App. 1 Cir. 3/ 9/ 15); 166 So. 3d 10 45, 10 64. 62 The Court notes that the Plaintiff m ust still prove an entitlem ent to dam ages at trial by dem onstratin g it did not cause the delay, that it incurred additional overhead expenses, and that it was required to rem ain on standby. Eichleay does n ot relieve a contractor of its burden of provin g that it is entitled to recover hom e office overhead dam ages; Eichleay m erely provides a form ula for calculating those dam ages when the plaintiff has proven them . 10
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