United States District Court, D. Alaska
Orion
Marine Contractors, Inc., Plaintiff, represented by Conner G.
Peretti, Davis Wright Tremaine LLP, pro hac vice & Traeger
Machetanz, Davis Wright Tremaine LLP.
City
of Seward, Defendant, represented by William A. Earnhart,
Birch Horton Bittner & Cherot & Adam W. Cook, Birch Horton
Bittner & Cherot.
City
of Seward, Counter Claimant, represented by Adam W. Cook,
Birch Horton Bittner & Cherot & William A. Earnhart, Birch
Horton Bittner & Cherot.
Orion
Marine Contractors, Inc., Counter Defendant, represented by
Conner G. Peretti, Davis Wright Tremaine LLP, pro hac vice &
Traeger Machetanz, Davis Wright Tremaine LLP.
ORDER RE CROSS-MOTIONS FOR SUMMARY JUDGMENT
SHARON
L. GLEASON, 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 ...