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Orion Marine Contractors, Inc. v. City of Seward

United States District Court, D. Alaska

August 3, 2016

CITY OF SEWARD, Defendant.



         Before the Court are Orion Marine Contractors, Inc.’s Motion for Summary Judgment at Docket 22, and the City of Seward’s Cross-Motion for Summary Judgment at Docket 31. Both motions have been fully briefed.[1] Oral argument was held on the motions on June 21, 2016.


         In July 2014, the City of Seward (the City) issued a public notice inviting bids on its Breakwater Rock Production project. Rock for the breakwater was to be taken from the City’s quarry, but conditions in the quarry required that the contractor extract rock from previously untested areas.[2]

         In recognition of the fact that the untested areas of the quarry might produce insufficient rock for the project, the City divided the contract into four phases: a “Base Bid” and three “Additive Amounts.” The Base Bid phase required only “opening the quarry and production of 10, 000 pounds of primary armor [rock].”[3] The three “Additive Amounts” covered the production and stockpiling of the rock to be used for the breakwater.[4] The contract also included an addendum, added after the bid forms were sent out, that allowed a contractor to request termination of the contract after completion of the Base Bid phase.[5] Titled “Addendum No. 3, ” this document provided in part that

[a] request for termination of the Contract may [be] initiated by the Contractor after the Base Bid is completed. The quarry development plan will initially establish the blasting plan, etc. and this will be reviewed by the City’s Consultant. If the plan is not achievable during the first phase, the Contractor may request termination of the contract. This will be subject to additional review by the City.[6]

         Orion Marine Contractors, Inc. (Orion) was the low bidder on the project with a total bid of $6, 150, 900, which included $1, 520, 000 for the Base Bid phase.[7] A lump-sum bid item of $873, 000 for “Mobilization and Demobilization” was included in Orion’s Base Bid amount. The City’s bid schedule had included “Mobilization and Demobilization” as a bid item in the Base Bid phase only; the “Mobilization and Demobilization” item did not appear in the bid item schedules for any of the three additive phases.[8] Orion signed the contract with the City agreeing to receive a total of $6, 150, 900 in exchange for its completion of all four phases of the project.[9]

         Part 4 of Section 01505 of the contract addressed the payment for the mobilization and demobilization (mob/demob) bid item. That provision, which is quoted in its entirety at page seven of this order, allowed Orion to recover its mob/demob bid item incrementally, based on the amount of work performed. It provided that when Orion had completed 4% of the original contract amount of $6, 150, 900, it was entitled to a partial payment, and when Orion had completed 8% of the original contract amount, it was entitled to another partial payment.[10] Orion began work on the Base Bid of the contract in the fall of 2014. Orion presented submittals to the City for mob/demob payments at both the 4% mark and just short of the 8% mark.[11] The City paid Orion a total of $492, 072 for the two submittals, which amounted to roughly 56% of the $873, 000 Orion had bid for mob/demob.

         On November 17, 2014, Orion completed the Base Bid phase. However, Orion had by then determined that due to a “lower than expected” rock yield, it could not feasibly complete the three additive phases of the contract at the contract price.[12] Orion first proposed a price modification to the contract, which the City rejected. Orion then requested “termination for convenience” pursuant to Addendum No. 3 and Section 14.4.2 of the contract-the termination for convenience provision-on November 25, 2014.[13] On December 2, 2014, the City accepted Orion’s request for termination.[14]

         During the ensuing closeout process, the City informed Orion that “[t]he recently approved payment for mob/demob of $492, 072.00 from Pay Request 2 will be the full amount for this category since full mobilization was not performed to support the contract Additive production requirements. The final payment request will not include any further amounts in this item.”[15]

         On February 17, 2015, Orion submitted a claim to the City for $380, 928-the difference between Orion’s bid amount for mob/demob ($873, 000) and the amount it had been paid for that item ($492, 072).[16] Orion’s claim explained that its request for the full mob/demob amount was being made under Part 4 of Section 01505, the section of the contract specifically covering payment for the mob/demob bid item.[17] On March 2, 2015, the Project Manager denied Orion’s request for the additional mob/demob payment.[18] Orion appealed to the City Manager. On May 1, 2015, the City Manager affirmed the Project Manager’s decision to reject Orion’s request for additional payment for mob/demob.[19] On August 26, 2015, Orion filed this case against the City for breach of contract, seeking to recover the $380, 928 that it asserts it is due under the contract.[20]


         I. Jurisdiction

         The Court has subject-matter jurisdiction over this action pursuant to 28 U.S.C. § 1332(a) because there is diversity between the parties and the amount in controversy exceeds $75, 000.

         II. Summary Judgment Standard

         Federal Rule of Civil Procedure 56(a) directs a court to “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.” When considering a motion for summary judgment, a court must draw “all justifiable inferences” in the non-moving party’s favor.[21] In this case, the parties do not dispute the underlying facts, and both assert that summary judgment is appropriate.[22] The question is which party is entitled to judgment as a matter of law based on those agreed-upon facts.

         III. The Contract Dispute

         Because the Court is sitting in diversity, it applies the substantive law of the forum state, Alaska.[23] The Alaska Supreme Court interprets contracts so as to give effect to the parties’ reasonable expectations.[24] “Those expectations are discerned from the language of the disputed provisions, other provisions, and relevant extrinsic evidence, with guidance from case law interpreting similar provisions.”[25] A court will depart from the plain meaning of the contract only if the contract is ambiguous. A contract is ambiguous only if, taken as a whole, it is “reasonably subject to differing interpretations.”[26] “The mere fact that the parties disagree about the proper interpretation of the contract does not mean that the contract is ambiguous.”[27]

         Both parties assert that the contract is unambiguous.[28] Orion asserts that the contract language unambiguously requires the City to pay the full mob/demob amount when the contract is terminated after the Base Bid has been completed, and hence it is due the $380, 928 under the contract. The City assets that the same contract language unambiguously requires completion of the entire contract before it is obligated to pay the full amount set out in the bid for mob/demob, and hence it has not breached its contract with Orion and does not owe any additional amounts.[29]

         The relevant portion of the contract, Part 4 of Section 01505, provides as follows:

A. When 4% of the original contract amount from other bid items is earned, 40% of the amount bid for mobilization and demobilization, or 4% of the original contract amount, whichever is less[, ] will be paid.
B. When you earn a total of 8% of the original contract amount from other bid items, an additional 40% of the amount bid for mobilization and demobilization, or an additional 4% of the original contract amount, whichever is less, will be paid.
C. The remaining balance of the amount bid for Mobilization and Demobilization will be paid after all submittals under the Contract are received and approved.[30]

         The term “Contract, ” as used in subpart C of this provision, is defined elsewhere in the contract as “[t]he written agreement between the CITY and the CONTRACTOR setting forth the obligations of the parties and covering the Work to be performed, all as required by the Contract[] Documents.”[31] The contract defines “Work” as “the act of, and the result of, performing services, furnishing labor, furnishing and incorporating materials and equipment into the Project and performing other duties and obligations, all as required by the Contract Documents. Such Work, however incremental, will culminate in the entire completed Project, or the various separately identifiable parts thereof.”[32] And the term “Contract Documents” is defined as “[t]he Contract form, Addenda, the bidding requirements and CONTRACTOR’S bid (including all appropriate bid tender forms), the bonds, the Conditions of the Contract and all other Contract requirements, the Specifications, and the Drawings furnished by the CITY to the CONTRACTOR, together with all Change Orders and documents approved by the Contracting Officer for inclusion, modifications and supplements issued on or after the Effective Date of the Contract.”[33]

         A second contract provision, Section 14.4.2, is also relevant. That provision specifies certain costs that will be paid when the contract is terminated for convenience, in that it provides that the “part of the job start-up and phase-out costs not amortized by the amount of Work accomplished shall be paid by the CITY.”[34] Here, the parties appear to agree that mob/demob is amortized such that it would not be payable under Section 14.4.2 upon termination of the contract for convenience.[35] Certainly a fair reading of the three sections of Part 4 of Section 01505 would supports conclusion.[36] And although Orion has not specifically stated as much, the fact that it did not move for the balance of the mob/demob bid item under Section 14.4.2 supports a conclusion that it did not maintain that mob/demob was recoverable under that provision. Thus, the Court finds that under the contract, the mob/demob bid item is payable only under the specific mob/demob provision set forth at Part 4 of Section 01505.

         At its core, the parties dispute whether the phrase “all submittals under the Contract” in Part 4(C) of Section 01505 means submittals for the entire contract, made up of all four stages, or whether it refers to submittals for only the Base Bid stage when there has been a termination for convenience by the contractor. Orion asserts that once it conveyed all submittals under the Base Bid stage and those submittals were accepted, it was entitled to the full amount of its mob/demob bid item. Orion cites to the fact that the mob/demob bid item was included in only the portion of the bid form addressing the Base Bid phase. Orion asserts that its analysis is reasonable because it could not terminate the contract before completing the Base Bid phase.[37] Once it had completed the Base Bid phase and terminated the contract, Orion asserts that it was no longer contractually obligated to perform any more of the contract, such that the closeout submittals constituted “all submittals” required under ...

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