RAM ENGINEERING & CONSTRUCTION, INC ., ET AL . v. UNIVERSITY OF LOUISVILLE
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RAM ENGINEERING & CONSTRUCTION, INC ., ET AL.
v.
APPELLANTS
APPEAL FROM COURT OF APPEALS
1999-CA-002698
FRANKLIN CIRCUIT COURT NO. 97-CI-1452
APPELLEE
UNIVERSITY OF LOUISVILLE
OPINION OF THE COURT BY JUSTICE GRAVES
Reversing
In August 1996, Appellee, the University of Louisville, began accepting bids for
the construction of its new Papa John's Cardinal stadium in accordance with the
Kentucky Model Procurement Code, KRS Chapter 45A. The University's construction
plans involved seven different "packages," including Bid Package No. 1 - Site
Development, the subject of this case . After receiving all of the bids, the University
determined that the low bids exceeded the construction budget. Pursuant to KRS
45A .090(2), the University negotiated with the three lowest bidders, which included
Appellant, RAM Engineering and Construction, Inc . (RAM) . On September 23, 1996,
RAM was declared the lowest of the three bidders at $7,593,325 .
MAC Construction and Excavating, Inc., the original low bidder, filed a protest
with the University challenging the award of Bid Package No. 1 to RAM . The University
denied the protest and, on September 26, 1996, issued a Notice to Proceed to RAM .
MAC thereafter filed a declaratory judgment action against the University in the Franklin
Circuit Court and sought to enjoin the University from commencing construction of the
stadium . RAM neither received notice of nor was made a party to the action. That
same day, the circuit court issued a Temporary Restraining Order preventing RAM from
proceeding with construction . However, the TRO was never signed or entered into the
record.
MAC and the University subsequently entered into an agreed order, which was
entered by the circuit court . The agreed order declared any prior award of Bid Package
No . 1 null and void, and required the University to rebid the package once again .
On October 2, 1996, the University issued a third invitation to bid on the stadium
project . RAM was once again the low bidder on Bid Package No. 1 at $6,993,900,
which was $599,425 less than its previous bid . The University accepted RAM's bid and
issued another Notice to Proceed on October 4, 1996. However, RAM filed a protest
with the University, objecting to the reduction in the bid contract. The University denied
the protest on the grounds that that no contract had existed between RAM and the
University following the previous bid, or that if it had existed, the University had the
power to terminate the contract at its convenience.
RAM then filed an action in the Franklin Circuit Court seeking money damages
for breach of the original bid contract . The circuit court ruled that although the
University and RAM had entered into a valid and binding contract, the contract was
rendered void by entry of the agreed order from the MAC litigation. The circuit court
reasoned that entry of the agreed order constituted a substantial change in
circumstances allowing the University to properly invoke the Termination for
Convenience clause of the contract . Accordingly, summary judgment was entered in
favor of the University .
The Court of Appeals upheld the summary judgment in favor of the University .
Further, in rejecting RAM's due process argument that the agreed order voiding RAM's
initial contract could have no effect because RAM had not been joined in the MAC
litigation, the Court of Appeals held, "RAM had no right or ability to affect the outcome of
the litigation" and thus, "was not denied due process, and was not an indispensable
party to the MAC litigation ."
This Court thereafter granted RAM's motion for discretionary review. RAM
contends that it was an indispensable party to the MAC litigation and was entitled to
participate and defend its contract with the University. RAM further argues that the
lower courts erroneously found that the agreed order between the University and MAC
constituted the substantial change in circumstances required for the University to
terminate RAM's contract for convenience .
l . INDISPENSABLE PARTIES
RAM argues that it should have been joined in the MAC litigation as a party
needed for just adjudication pursuant to both CR 19 .01 and the good faith obligations of
the Kentucky Model Procurement Code. RAM posits that the Court of Appeals
effectively rendered CR 19 .01 and KRS 418.075 meaningless by refusing to require the
presence of a successful bidder, in this case RAM, in an action challenging the public
bidding process . See Veith v . City of Louisville , Ky., 355 S .W .2d 295 (1962) .
MAC challenged the procedures used by the University for rebidding Bid
Package No . 1 . After the circuit court issued the Temporary Restraining Order, the
University entered into an Agreed Order with MAC, rendering the bid contract with RAM
null and void. The Court of Appeals found that RAM "was not a necessary party to [the]
action, as RAM had no involvement in the actions complained of as being improper or
unlawful ." However, in West v . Goldstein , Ky., 830 S.W.2d 379 (1992), this Court held,
"The true meaning of `all necessary parties,' as stated in Security Trust Co. v. Swope,
274 Ky . 99, 118 S .W.2d 200 (1938), is that the term refers to those persons whose
interest would be divested by an adverse judgment."
RAM's interest in the validity of the disputed bidding procedures was as great as
any other possible party because the bidding resulted in the University's awarding the
contract to RAM . RAM's interest in defending its contract fits squarely within the
qualifications of a necessary party under CR 19.01(b), because its interest related to the
validity of the bidding process through the awarded contract, and its absence from the
action impaired RAM's ability to protect the contract . Even though RAM may have
intervened after entry of the agreed order, Rosenbalm v. Commercial Bank of
Middlesboro , Ky. App ., 838 S .W.2d 423 (1992), it chose instead to enter into an
agreement with the University whereby RAM would participate in the rebidding while
retaining any rights from the first contract in order to expedite the commencement of
construction in good faith. As we held in City of Louisville v. Louisville Auto . Club , 290
Ky. 241, 250, 160 S.W.2d 663, 668 (1942), wherein the city entered into a purchase
contract for parking meters and citizens challenged the validity of the ordinance
requiring meters, "The contract here involves a bit of money ; it is but fit and proper that
the interested contractor have his day in court." Accordingly, we conclude that RAM
was, in fact, an indispensable party to the MAC litigation .
II . FEDERAL PROCUREMENT LAW
The concept of termination for the government's convenience developed as a
method to avoid procurement contracts after the close of the Civil War. The
government, under certain circumstances, would terminate contracts and settle with the
contractor for partial performance . See generally Torncello v. United States , 681 F .2d
756, 764-766 (Ct. Cl. 1982), explaining United States v. Corliss Steam-Engine Co., 91
U.S . 321 (1875), and Tim A. Thomas, Annotation, Application, to Determination of
Government's Liability Under Public Contract, of Doctrine of "Constructive" Invocation of
Clause Authorizing Termination for Convenience of Government-Modem Cases, 104
A.L.R .Fed. 661 (1991) . Since the enactment of the first Federal Procurements
Regulation in 1964, termination for convenience has "evolved into a principle for
Government contracts of far-ranging varieties, both civilian and military." Krygoski
Const. Co., Inc. v. United States , 94 F .3d 1537, 1541 (Fed . Cir. 1996), cert. denied , 520
U .S . 1210 (1997) ; see also 48 C .F .R. § 49 .502 (1995) . As explained by the 11th Circuit
Court of Appeals, termination for convenience "permits the Government to terminate a
contract, even in the absence of fault or breach by the other party, without incurring the
usual financial consequences of breach ." Stock Equipment Co. v. Tennessee Valley
Authority , 906 F .2d 583, 586 note 3 (11 th Cir. 1990), citing Maxima Corp . v. United
States , 847 F .2d 1549, 1552 (Fed . Cir. 1988) . While the law is clear that a contracting
officer cannot terminate for convenience in bad faith simply to acquire a better bargain
elsewhere, the federal courts have been inconsistent in enunciating a standard for
exercising termination for convenience clauses .
In Colonial Metals Co. v. United States , 494 F.2d 1355 (Ct. Cl. 1974), overruled
in Torncello , supra, the Court of Claims upheld the Navy's termination for convenience
of a contract for copper in order to obtain a better price, even though the Navy was
aware of the better price at the time of the initial contract award . The court held to the
accommodating standard that the government may terminate a contract for its
convenience in good faith, "in the absence
of
some proof
of
malice or conspiracy."
Colonial Metals, supra, at 1361 . The Colonial Metals decision has been called "the
high-water mark of courts' permissiveness in allowing the government to terminate for
convenience ." Linan-Faye Const. Co., Inc. v. Housing Auth . of the City of Camden , 49
F .3d 915, 924 (3d Cir. 1995) .
Subsequently, the Court of Claims, with six members sitting
en banc,
in Torncello
v. United States , supra, overruled Colonial Metals. The plurality in Torncello enunciated
the "substantial change in circumstances" standard, broadly restricting "the availability
of the [termination for convenience] clause to situations where the circumstances of the
bargain or the expectations of the parties have changed sufficiently that the clause
serves only to allocate risk ." 681 F .2d at 771 . The Torncello court and later courts
viewed the termination for convenience clause as allocating some of the risk of changed
circumstances to the contractor . Id . at 763 ; Erwin v. United States , 19 CI . Ct. 47, 53
(1989); Maxima , supra, 847 F .2d at 1552 . The Torncello court defined the "substantial
change of circumstances" standard as a change in the circumstances from the
reasonable expectations of the parties at the time of the agreement . Torncello , supra ,
681 F .2d at 766 .
In 1984, Congress enacted the Competition in Contracting Act (CICA), (codified
as amended in §§ 10, 31 and 41 U.S.C.), which articulated significant factors bearing on
a contracting officer's decision to terminate a contract for the government's
convenience . CICA requires executive agencies, when procuring property or services,
to "obtain full and open competition through use of competitive procedures ." 41 U .S.G.
§ 253(a)(1)(A) . In Krygoski Const. Co . v. United States , supra, at 1543, the United
States Court of Appeals for the Federal Circuit explained :
This competitive fairness requirement, with its bid protest remedies,
restrains a contracting officer's contract administration. If, for
instance, a contracting officer discovers that the bid specifications
inadequately describe the contract work, regulations promulgated
under CICA may compel a new bid . See 10 U .S.C. § 2305 ; 48
C .F .R. § 1 .602-2 . Thus, to accommodate CICA's fairness
requirements, the contracting officer may need to terminate a
contract for the Government's convenience to further full and open
competition . 48 C .F .R. § 1 .602-2(b) ; see 41 U .S.C . § 414 (1994) .
Thus, to further its full competition objective, CICA permits a lenient
convenience termination standard .
In the wake of CICA, the Krygoski court limited the applicability of Torncello to
situations where "the Government enters into a contract with no intention of fulfilling its
promises." Irgoski, 94 F.3d at 1543-44 (citing Salsbury Industries. v United States ,
905 F .2d 1518 (Fed . Cir. 1990), cert. denied , 498 U .S. 1024 (1991)). Instead, the court
enunciated a "cardinal change in circumstances" standard requiring "an alteration in the
work so drastic that it effectively requires the contractor to perform duties materially
different from those originally bargained for." Krygoski , supra . Nonetheless, three years
later in T & M Distributors, Inc. v. United States , 185 F.3d 1279, 1284 (Fed . Cir. 1999), a
subsequent panel of the same federal Court of Appeals held, "[A] cardinal change is not
a prerequisite for a valid termination for convenience." See also Custom Printing Co. v.
United States , 51 Fed. CI. 729 (2002) .
III . KENTUCKY MODEL PROCUREMENT CODE
The Kentucky Model Procurement Code requires that all government
construction contracts exceeding $50,000 include a "termination for convenience"
clause.'
Article 22 of the University's contract with RAM stipulated that the University
"may terminate the contract for its own convenience when it is determined by the
contracting authority that such termination will be in the best interest of the University,"
and provided for compensation of the contractor's expenses "paid or incurred in the
performance of the contract ."
Termination for convenience clauses required by the Model Procurement Code
are subject to the good faith and fair dealing requirements set forth in KRS 45A.015(2) :
Every contract or duty under this code shall impose an obligation of
good faith in its performance or enforcement. "Good faith" shall mean
honesty in fact in the conduct or transaction concerned and the
observance of reasonable commercial standards of fair dealing .
This good faith obligation is recognized and explained in our case law, "In every
contract, there is an implied covenant of good faith and fair dealing . 17A Am . Jur. 2d
Contracts section 380 ; KRS 355.1-203 . Indeed, it may be said that contracts impose on
the parties thereto a duty to do everything necessary to carry them out. Beech Creek
Coal Co . v. Jones, Ky., 262 S .W.2d 174 (1953) ." Ranier v. Mount Sterling National
Bank , Ky., 812 S .W .2d 154, 156 (1991) ; see also Kentucky Utilities Co . v. South East
Coal Co. , Ky., 836 S .W.2d 392, 405 (1992), cert . dismissed , 506 U.S . 1090 (1993) . The
fact that Kentucky's obligation of good faith arises not only from the UCC, but also from
the same source that requires termination for convenience, the Model Procurement
Code, negates any argument that the covenant of good faith cannot supplant explicit
' "[T]here shall also be specified for inclusion in all construction contracts expected to
exceed fifty thousand dollars ($50,000) in price a clause providing that a contract may
be terminated for the convenience of the Commonwealth or for default, and further
providing for liquidated damages when appropriate and as specified in the contract
schedule, with excuses for nonperformance specifically provided for therein ." KRS
45A .200(2) .
8
terms of the contract, because the terms of the contract and the obligation of good faith
originate concurrently .
The Kentucky Model Procurement Code holds the government to the same
standard of good faith and fair dealing as private parties. KRS 45A.015 . Although the
government may terminate contracts for convenience, that cannot supersede the good
faith duty to do "everything necessary" to carry out the contract . Kentucky's recognition
of good faith as "a duty to do everything necessary to carry [the contract] out," Kentucky
Utilities, supra , limits the contracting officer's discretion to terminate a contract for
convenience and indicates that a change of circumstances standard is best for
Kentucky. Interpreting termination for convenience clauses required by the Code in the
light of the duty of good faith and fair dealing obligations of that same Code is
reasonable . And if we must presume that government officials act in good faith to
contract in their best interest at the time of the agreement, Linan-Faye , supra, then a
change in circumstances is necessary for the contract to no longer be in the
government's best interest when terminating for convenience .
KRS 45A .010, Construction - purposes and policies, provides,
This code shall be liberally construed and applied to promote its
underlying purposes and policies.
(2) The underlying purposes and policies of this code shall be:
(a)
(b)
(c)
(d)
(e)
To simplify, clarify, and modernize the law governing
purchasing by the Commonwealth ;
To permit the continued development of purchasing
policies and practices ;
To make as consistent as possible the purchasing laws
among the various states;
To provide for increased public confidence in the
procedures followed in public procurement;
To insure the fair and equitable treatment of all persons
who deal with the procurement system of the
Commonwealth;
(f)
(9')
To provide increased economy in state procurement
activities by fostering effective competition ; and
To provide safeguards for the maintenance of a
procurement system of quality and integrity. [emphasis
added].
The primary function of the Model Procurement Code is to benefit citizens of the
Commonwealth. Ohio River Conversions, Inc. v. City of Owensboro , Ky. App ., 663
S .W .2d 759 (1984) . Subsections (d), (e), and (g) emphasize the importance of good
faith and fair dealing . The substantial change in circumstances standard for
determining good faith in a termination for convenience advances these policies. Public
confidence in government procurement procedures will increase, as section (d)
encourages, because the public will know that the government cannot simply excuse
itself from a contract for any reason, or for no reason at all . The public should have no
cause to doubt the honesty of the officials of this Commonwealth .
Similarly, interpreting termination for convenience as allowing the government to
terminate without a substantial change of circumstances would not advance the fairness
policies of KRS 45A.01 0(e) . While contractors ought to expect the government to
terminate a contract when it is in its best interest to do so, it is also reasonable for them
to expect that the government's interest will only change if the circumstances
surrounding the contract substantially change . Courts often interpret good faith based
on the parties' reasonable expectations of the meaning of the provisions of the contract .
Corenswet, Inc . v. Amana Refriqeration, Inc. , 594 F .2d 129, 138 (5th Cir. 1979), cert.
denied , 444 U .S. 938 (1979) . The purposes and policies of the Code set forth in KRS
45A .010 are best implemented by requiring a substantial change in circumstances, thus
ensuring that Kentucky's procurement system is one of quality and integrity.
Furthermore, if there is no good faith limitation set by a change of circumstances,
then the government's contracted-for promise becomes illusory :
[T]he courts in general require that before mutual promises will be
enforced, each as the consideration of the other, each party must
promise to do something which will yield a benefit or advantage to the
other, or which will result in a detriment or disadvantage to himself in
exchange for the other promise. Whatever may be the character of the
thing promised, as a general rule it cannot serve as consideration
unless it is binding .
Where an illusory promise is made, that is, a promise merely in form,
but in actuality not promising anything, it cannot serve as
consideration . Even if it were recognized by law, it would impose no
obligation, since the promisor always has it within his power to keep
his promise and yet escape performance of anything detrimental to
himself or beneficial to the promissee. In such cases, the promisor
may perform or not, solely on the condition of his whim, his promise
will not serve as consideration .
7 Williston on Contracts, § 7:6, at 77-79, and § 7:7, at 88-89
(4t"
ed . 1992). Although the
termination for convenience clause requires the government to compensate a contractor
for costs, if those costs and the government's determination of its best interest
represent the only consideration for the contract, then the government may be procuring
"something for nothing ." David Roth's Sons, Inc. v. Wright & Taylor, Inc. , Ky., 343
S.W.2d 389, 391 (1961) . The "reasonable commercial standards of fair dealing"
required by KRS 45A.015(2) further require valuable government consideration in
procurements by the Commonwealth .
Furthering the purpose of the Code, the termination for convenience clause of the
contract should be "liberally construed and applied to . . . (e) insure the fair and equitable
treatment of all persons who deal with the procurement system of the Commonwealth,"
KRS 45A.01 0(e) . The interests of fair treatment and public confidence in the
government from the Model Procurement Code outweigh possible expenses on the
11
public coffers, within the reasonable limits of a substantial change from the parties'
expectations .
IV.
CHANGE OF CIRCUMSTANCES IN THE UNIVERSITY'S CONTRACT
The University argues that the MAC litigation, the issuance of the Temporary
Restraining Order, and the Agreed Order each provided the necessary substantial
change in circumstances to justify a termination for convenience of its contract with
RAM . We disagree .
Neither the MAC litigation nor the Temporary Restraining Order was sufficient to
justify a termination for convenience. Although the litigation may have eventually
delayed construction of the stadium beyond the construction deadlines, and may have
resulted in an increased cost, neither event had yet occurred . In fact, construction was
not delayed because RAM rebid and resumed work in good faith .
Further, Article 24(A)(2) of the bid contract provided for the possibility of a courtordered construction delay by stipulating that such a delay for a period of up to 90 days
"shall not constitute cause for termination ." While interpretation of Article 24(A)(2) is not
necessary to reach a decision in this case, its inclusion in the contract illustrates the
parties' anticipation of possible legal delays without suggesting that the University could
terminate in the event of such a delay .
Similarly, the Agreed Order cannot be considered a substantial change justifying
the University's termination of the contract, because the University itself is responsible
for it. If the government can exercise a termination for convenience clause based on a
situation the contracting officials themselves are responsible for, the clause becomes
merely an exculpatory provision. Stephen N . Young, "Limiting the Government's Ability
to Terminate for its Convenience following Torncello", 52 Geo. Wash. L . Rev. 892, 903
12
(1984). Relying on circumstances the University itself created simply is not grounds for
termination under the changed circumstances standard . The lower courts agreed that,
"while the effect of the TRO may have been to merely delay construction, the effect of
the Agreed Order was to terminate the contract." We are of the opinion that to reason
that termination of the contract justified terminating the contract illustrates the absurdity
of allowing the University's own actions to justify the termination for convenience .
The MAC litigation, the Temporary Restraining Order, and the Agreed Order did not
change "the circumstances of the bargain or the expectations of the parties" significantly
enough to justify termination of the University's contract with RAM . Torncello , 681 F.2d
at 771 .
The Court of Appeals' opinion affirming the summary judgment of the Franklin
Circuit Court is therefore reversed and we remand this matter to the Franklin Circuit
Court for further proceedings in accordance with this opinion .
Graves, Keller, Stumbo, and Wintersheimer, J .J ., concur .
Johnstone, J ., dissents in a separate opinion in which Lambert, C .J, and Cooper,
J ., join .
COUNSEL FOR APPELLANTS
Robert C. Ewald
Wyatt, Tarrant and Combs
2600 PNC Plaza
500 W. Jefferson St.
Louisville, KY 40202
Virginia Hamilton Snell
Wyatt, Tarrant and Combs
2600 PNC Plaza
500 W. Jefferson St.
Louisville, KY 40202
Deborah H. Patterson
Wyatt, Tarrant and Combs
2600 PNC Plaza
500 W. Jefferson St.
Louisville, KY 40202
George Bruce Stigger
Alber Crafton PLLC
Republic Bank Place, Suite 200
661 S. Hurstbourne Parkway
Louisville, KY 40202
M . Holliday Hopkins
Finance and Administration Cabinet
Capitol Annex Building, Room 374
Frankfort, KY 40601
COUNSEL FOR APPELLEE
Barbara R . Hartung
Greenebaum Doll & McDonald
3300 National City Tower
101 South Fifth Street
Louisville, KY 40202
Holland N . McTyeire
Greenebaum Doll & McDonald
3300 National City Tower
101 South Fifth Street
Louisville, KY 40202
RENDERED : DECEMBER 18, 2003
TO BE PUBLISHED
,*uyrrzttQ 0.11aurf Of
2001-SC-0264-DG
rnfurkV
RAM ENGINEERING & CONSTRUCTION,
INC., AND FINANCE AND ADMINISTRATION
CABINET
V.
APPELLANTS
ON REVIEW FROM COURT OF APPEALS
1999-CA-2698-MR
FRANKLIN CIRCUIT COURT NO . 1997-CI-1452
UNIVERSITY OF LOUISVILLE
APPELLEE
DISSENTING OPINION BY JUSTICE JOHNSTONE
I respectfully dissent because I disagree with the majority's conclusion that the
outcome of the litigation between MAC Construction & Excavating, Inc . ("MAC") and the
University of Louisville ("U of L") was not a substantial change of circumstances that
allowed U of L to cancel the original contract between RAM Engineering &
Construction, Inc. ("RAM") and U of L . But before explaining the reasons for my
dissent, I take a moment to address the majority's discussion regarding the question of
whether RAM was an indispensable party to this litigation .
CR 19 .01 provides in pertinent part:
A person who is subject to service of process, either personal or
constructive, shall be joined as a party in the action if (a) in his absence
complete relief cannot be accorded among those already parties, or (b) he
claims an interest relating to the subject of the action and is so situated
that the disposition of the action in his absence may (i) as a practical
matter impair or impede his ability to protect that interest or (ii) leave any
of the persons already parties subject to a substantial risk of incurring
double, multiple, or otherwise inconsistent obligations by reason of his
claimed interest.
As noted by the majority, RAM did not move to intervene in this action even
though it could have . Slip op . at 4 . Thus, the issue here is not whether the trial court
erred in denying RAM's motion to intervene, and the considerations of CR 19 .01 (b) do
not apply . Therefore, the indispensable party issue is limited to the question of whether
the trial court should have sua sponte joined RAM because "complete relief cannot be
accorded among those already parties ."
The Court of Appeals correctly concluded that the trial court did not err in failing
to join RAM, because RAM was not a necessary party to MAC's claim that the bidding
procedure used by U of L was unlawful . That is, inclusion of RAM in the proceedings
was not necessary to accord "complete relief"to either MAC or U of L. True, the
Agreed Order did have the effect of voiding U of L's contract with RAM, but it did not do
so via construction or interpretation of that contract . This left MAC with full legal
recourse for its claim of breach of contract, which is what RAM raised in the underlying
law suit . I now turn to the question of whether the Agreed Order was a substantial
change of circumstances that allowed U of L to cancel its original contract with RAM
under the termination for convenience clause .'
I strongly disagree with the majority's conclusion that the MAC litigation and the
entry of the Temporary Restraining Order were not sufficient changes in circumstances
to justify canceling the original RAM contract under the termination for convenience
clause. This clause provided that U of L could cancel the contract when it was in
U of L's best interest to do so.
' I find it curious that the majority chooses to address this issue after holding that
RAM was an indispensable party to the litigation between MAC and U of L. If true, this
holding should have resolved the case .
The majority found these events to be insufficient reasons to cancel the contract
because "[a]Ithough the litigation may have eventually delayed construction of the
stadium beyond the construction deadlines, and may have resulted in an increased
cost, neither event had yet occurred ." Slip op . a t 12 . On the contrary, the possibility of
delay in construction made it strongly in U of L's best interest to cancel the contract in
order to prevent the delay from occurring .
To benefit from the construction of the stadium, U of L had to be able to use it.
The stadium's primary use is for college football games . Consequently, U of L had a
strong interest in seeing that construction of the stadium was done timely because its
use is tied to a time period -- the college football season -- that it cannot change . The
majority reasons that U of L should have waited until delay was not just a possibility, but
an actual fact. But at that point, U of L may have had a lot less reason to cancel the
contract, because the opportunity to use the stadium for the 1998 football season may
well have been lost along with the considerable revenues and profits generated by the
new stadium.2 In other words, the majority is punishing U of L for not litigating this
action . In so doing, the majority fails to recognize that sometimes it is better to retreat
than to fight.
The majority holds U of L "responsible" for its retreat, i.e. , entering into the
Agreed Order, and implies that it acted in bad faith by doing so . This is simply not true .
The temporary restraining order entered against U of L was not an adjudication of
liability or fault by U of L . Rather, the temporary restraining order caused U of L to enter
2 One source puts the profits generated by the stadium during its first year of use
at $1 .6 million . See http://www.sfo .com/-csuppes/NCAA/ConfUSA/index .htm?
Louisville/index .htm visited on November 12, 2003 . The potential loss of such a
considerable and expected sum would certainly seem to be a substantial change of
circumstances brought about by the specter of delay created by the MAC litigation .
-3-
into the Agreed Order with MAC even though it "dispute[d] MAC's claims and its
entitlement to any relief. " U of L did so because it "believe[d] time [was] of the essence
in the construction of the Stadium and it [was] in its best interest to resolve [the
litigation] as quickly as possible ." In other words, U of L weighed its options and
concluded that entering into the Agreed Order was its best course of action . U of L
merely made the best of a bad situation . Thus, what U of L is ultimately "responsible"
for is acting prudently in its own best interest . Therefore, it was entitled to cancel the
contract with RAM under the termination for convenience clause, and therefore I
dissent.
Lambert, CJ, and Cooper, J ., join this dissenting opinion .
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