United States District Court, D. Alaska
ORDER RE CROSS-MOTIONS FOR SUMMARY JUDGMENT
SHARON
L. GLEASON UNITED STATES DISTRICT JUDGE
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.
FACTS
& PROCEEDINGS
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]
DISCUSSION
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 ...