International Production Speci v. Schwing America Incorporated ( 2009 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 07-3632
INTERNATIONAL P RODUCTION S PECIALISTS, INC.,
Plaintiff-Appellant,
v.
S CHWING A MERICA, INC.,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 05 C 621—Rudolph T. Randa, Chief Judge.
A RGUED S EPTEMBER 5, 2008—D ECIDED S EPTEMBER 2, 2009
Before F LAUM, R OVNER and W ILLIAMS, Circuit Judges.
R OVNER, Circuit Judge. International Production Special-
ists, Inc. (IPS) entered into a contract with Schwing Amer-
ica, Inc. (Schwing) to make and install five silos to store
and treat sludge at a wastewater treatment plant owned
by the general contractor, North Shore Sanitary District
(NSSD). Initially IPS’s piece of the process was to take
about eight months. After several years of delays—some
attributable to NSSD, some to IPS, and some to events
2 No. 07-3632
beyond anyone’s control—nearly three-and-a-half years
after the parties signed the initial purchase order, the
project still had not been completed. On February 11,
2005, Schwing notified IPS that it was cancelling the
contract for cause. IPS responded by suing for breach
of contract and Schwing countersued. The district court
ruled in favor of Schwing, awarding damages in the
amount of $467,140.02. We affirm, but remand in part
to correct a small error in the calculation of damages.
I.
This case comes to this court after a trial in the district
court. The facts of this case, as determined by the trial
court, are long and tedious, but necessary for a full under-
standing of the intricacies of the relationship between
the parties.
Schwing and IPS were both subcontractors on a
larger project to build a wastewater treatment facility. In
2001, NSSD hired Voest-Alpine Industries, Inc. (VA Tech)
to work on the construction of its new wastewater treat-
ment plant in Waukegan, Illinois, agreeing to pay it
$6.6 million. VA Tech, in turn, entered into a $1.25 million
subcontract with Schwing to supply and install two
wet sludge silos, a dry granules silo (conical silos), two
receiving bins, and other associated equipment for the
NSSD facility. Pursuant to the terms of the contract
with VA Tech, Schwing obtained a performance bond.
Schwing’s operations manager, Nancy Predatsch,
decided to find a local contractor to fabricate the silos. A
No. 07-3632 3
web search turned up IPS, a Wisconsin manufacturer of
construction equipment, including standard and custom
built bulk material handling equipment. On August 20,
2001, IPS and Schwing executed a purchase order in
which, for payment of $666,372, IPS agreed to manu-
facture and install at the NSSD Waukegan facility the
five silos, incorporating the specifications and technical
supplies from the VA Tech-Schwing contract.
By attachment, the parties set forth a delivery, installa-
tion, and payment schedule. (D. Exh. 1004 at p.4)1 . Accord-
ing to the delivery schedule, IPS was to deliver all of the
silos (the two receiving bins, the two wet storage, and
the one dry storage) by December 28, 2001. The installa-
tion schedule was labeled “approximate” and noted the
following dates:
Two (2) Sliding Frame Silos (Receiving Bin), Approxi-
mately February 1, 2002 2
Two (2) Sliding Frame Silos (Wet Storage), Approxi-
mately February 15, 2002
1
Exh. References are to district court trial exhibits; D. Exh. to
the defendant, Schwing’s exhibits and Pl. Exh. to the plaintiff,
IPS’s exhibits. Tr. references are to pages in the trial transcript.
2
The purchase order actually lists these dates as 2001, but it
seems clear that this is a scrivener’s error and should be 2002.
Of course the equipment could not be installed until after it
was delivered. Furthermore, when the parties signed the
purchase order on September 5, 2001, the February and
April 2001 dates would have been nine and four months past,
respectively.
4 No. 07-3632
One (1) Conical Silo (Dry Storage), Approximately April
15, 2002
Id. A note below the schedule states, “[a]ctual schedule
will be dictated by progress on the plant construction
contract. Installation activity will need to be co-
ordinated with the site contractor.” Id. The delivery
schedule contains no such approximate language.
IPS’s Executive Vice President, Jordan Kopac, Jr. man-
aged IPS’s work directly on site as IPS worked
through the late summer and fall 2001. Schwing made
progress payments to IPS totaling $595,692.
In November 2001, NSSD decided to suspend work
on the project. Consequently, on November 30, 2001,
Schwing sent IPS a facsimile directing IPS to cease on-site
work, but to continue fabricating the two receiving bin
silos at the shop, as scheduled. Schwing also informed
IPS that it could continue to deliver materials to the
site and unload them, but they should not be fabricated
on site. Schwing estimated that the work stoppage
would continue for ninety days and asked IPS to
inform Schwing of any cost changes associated with the
schedule change.
On April 11, 2002, VA Tech inspected IPS’s work on
the silo parts. Representatives from VA Tech, NSSD, IPS,
and Schwing attended the inspection. The next day, a
Schwing representative sent out an e-mail identifying
fifteen problems with the silos including improper
painting and welding. (Pl. Exh. 17). A VA Tech represen-
tative also prepared a memorandum noting manu-
facturing defects , including poor painting and improper
No. 07-3632 5
welding. (Pl. Exh. 18). At the time of the memorandum,
90% of the receiving bin silo manufacturing had been
completed, as had 50% of the wet sludge silos and 40% of
the dried granules silos. Of course, no installation had
begun or was yet required. After the inspection, the
project lay dormant for approximately two years—until
about February 19, 2004, when VA Tech notified Schwing
that NSSD had restarted the project at a new site in Zion,
Illinois and that VA Tech expected Schwing to honor
its contract. VA Tech did not increase its payment to
Schwing.
Schwing, in turn, informed IPS that the project was
restarting and that Schwing expected IPS to honor its
contract. Schwing’s project manager asked IPS to inform
him of any additional expenses that IPS might incur as
a result of the change of location.
IPS responded that a “deep silo fabrication lay-down
area”—in layman’s terms a work area—would be neces-
sary at the Zion site and would be used to fabricate
and store the wet sludge silos on site. It provided two
field service quotations for a total of $210,500.
In spring 2004, representatives from Schwing, IPS, VA
Tech, and NSSD met to view the project site, coordinate
the silo construction site, discuss scheduling, and review
potential lay down sites where IPS could work on the
silos. Schwing asked IPS’s vice president, Kopac, to
identify IPS’s lay-down area preference and to present
Schwing with a proposal for reimbursement of the addi-
tional costs for relocating the project and transporting
materials.
6 No. 07-3632
After the meeting, IPS’s Kopac called Schwing’s project
manager, David Miller once, but did not identify his lay-
down area preference. Miller left a number of unreturned
messages for Kopac and eventually called IPS’s president,
Jordan Kopac, Sr., who informed Schwing that IPS
would not be participating in the project because the
new site was problematic. IPS maintains that had a
suitable work area been provided, IPS would have been
able to complete the project in three to four months. The
new area, however, was a full-blown construction site
and IPS believed that the lay down area and roadways
were insufficient to complete the project.
Schwing solicited bids from other companies to
complete IPS’s work, but those bids were high compared
to Schwing’s contract with VA Tech, factoring in the
payments Schwing already had made to IPS. Consequently,
Schwing wrote to IPS on June 10, 2004, asking IPS to
honor the contract and resume work, or, in the alterna-
tive, return all payments it received.
IPS responded that the agreement it had made was for
the Waukegan site and not the Zion site, stating further,
IPS stands ready, willing and able to perform per
its contract with Schwing. We are not willing, however,
to modify the terms of our contract and commit to
the performance at a new site that poses potential
pitfalls and complexities that did not exist with
respect to the Waukegan site. From a complexity of
performance standpoint, the Zion site, being a full-
blown construction project, is substantially more
complex.
(Pl. Exh. 4).
No. 07-3632 7
Notwithstanding IPS’s position, Schwing and IPS
continued to negotiate. On July 12, 2004, IPS sent a
quote to Schwing indicating that for approximately
$264,084, it could complete the project at the Zion site.
The quote contained three general notes (only note one
and two are relevant to this appeal).
GENERAL NOTE #1
Additional costs from the original 2001 job quota-
tion in Waukegan based on an August 2004 start
date with the majority of the main & coned silo
work expected to be completed by September 30th,
2004.
GENERAL NOTE 3:
IPS has requested and to-date has not received a
Zion Project time lines [sic] from Schwing, NSSD or
the General Contractor. Therefore IPS will not be
responsible for any monetary penalties on this
project caused by unrealistic milestones, delays
caused by others or acts of God.
(D. Exh. 1012, 1017).
On July 29, 2004, the project manager from Schwing
e-mailed IPS’s Kopac a proposed change order which
included nine additional work items with a proposed
additional payment. IPS increased the change order
price to $143,630 and noted the outstanding purchase order
balance of $99,946, for a total price of $243,576. Kopac
quickly sent a return e-mail back to Schwing proposed
revisions including that general notes 1-3 of the July 12
quotation be incorporated. IPS also requested a final
paragraph that stated:
8 No. 07-3632
No other changes to this order apply at this time.
Access to silo installation area infrastructure for
eventual silo placement into the General Contractor[’]s
facilities or the use of the General Contractor[’]s
material handling equipment or requirements for
the hiring of General Contractors labor personnel
has not yet been established by Schwing America
Project Manager and must be established. Additional
charges may apply if accessibility is delayed or
limited, and charges from the General Contractor or
unforeseen issues arise.
The modifications requested by IPS were incorporated
into the final change order which was executed on
August 12, 2004. (D. Exh. 1017)
That same day, the new Schwing project manager sent
Kopac a copy of a “classic layout schedule” common on
large construction sites, scheduling activity at the site.
The time line contained the following dates:
activity early start date early finish date
install truck August 11, 2004 August 12, 2004
receiving bins
install wet December 2, 2004 December 3, 2004
sludge silos
install dry December 6, 2004 December 10, 2004
granules silos
(D. Exh. 1013)
No. 07-3632 9
Schwing made a 30% progress payment of $69,172 on
August 9, 2004, and then again on August 24, 2009. IPS
installed the two receiving bin silos on September 8,
2004. On September 24, 2004, IPS’s Kopac sent Schwing
an e-mail stating that NSSD had informed IPS that it
wanted the remainder of the silos the first week of Octo-
ber. Kopac told Schwing that this was the first he
had heard of this time frame, and that IPS had been
planning on delivering the first week of December, refer-
encing the specific lines in the layout schedule which
showed a December date for the wet silo installation. On
October 29, 2004, IPS sent Schwing an invoice for a 20%
progress payment. Schwing called IPS and noted that
the underlying work had not been completed. IPS
agreed, and thus Schwing withheld the payment.
From this point forward, things began to deteriorate
rapidly. Schwing’s operations manager began to hear
reports that IPS was delaying the NSSD project and that,
with only two workers on site, it was not providing
adequate staff for the work. VA Tech began calling
Schwing, threatening to call Schwing’s performance
bond because the work was not progressing.
By November 9, 2004, the Zion site was ready for the
installation of the two wet sludge silos. IPS indicated
that the two wet sludge silos would be installed by Decem-
ber 20, 2004. On December 14, however, Schwing’s field
project manager received a report of welding defects in
IPS’s work. On December 22, 2004, Schwing asked IPS to
provide a date for installation of the silos. IPS responded
that the silos would be on transport trucks by January 21,
2005, and ready for transportation by January 24.
10 No. 07-3632
Concerned about the delays, Schwing engaged its
former project manager, David Miller, as an outside
consultant to go to the Zion work site for two weeks and
put matters back on track. Miller testified that the job
site was in disarray and chaotic, that the two wet sludge
silos were only fifty percent complete, that the dry
storage silo had not been assembled, and pieces of it
were still at the Waukegan site. He testified further that
IPS had sufficient work space. Miller spent some time
assisting with welding and fabrication.
While Miller was on site, IPS’s Kopac raised concerns
that the road was insufficient to transport the wet sludge
silos from the lay down area to the building site. Kopac,
Miller, and a representative from the general contractor,
J.J. Henderson, walked the site, discussed the road condi-
tions, and laid out flags indicating where Kopac wanted
the general contractor to place additional gravel. At
some point not identified in the record, J.J. Henderson
put down the fresh gravel.
On January 25, Schwing paid IPS’s outstanding
October 29, 2004 invoice. On February 3, IPS sent a
revised quotation with a cover note that stated “[t]his
covers the eventualities that the delays in preparing the
site continue for an unforeseen time” [sic] and proposed
additional charges of $43,548.30. Schwing believed that
the additional charges were improper because IPS
included installation costs which were part of the
original purchase order and were not removed in the
change order. IPS believed that the change order did not
address silo installation at the Zion site and therefore
No. 07-3632 11
the purchase order only obligated IPS to install at the
Waukegan site.
On the same day that IPS sent the revised quote,
Schwing inspected the paint and noticed obvious un-
painted stripes of white primer on the undersides of the
wet sludge silos where they had been laying on the
trailers when they were painted. The inspection also
revealed other paint problems. By February 9 e-mail,
Schwing advised IPS that it would be liable for any
delay until the paint “is within specifications,” and advised
IPS of other repairs that had to be made.
In a February 11, 2005 letter, Schwing terminated IPS’s
contract citing delays and the increased costs flowing
therefrom. (D. Exh. 1034). The letter noted that the sched-
ule required installation of the wet sludge silos by Novem-
ber 30, 2004, and the dry granules silo by December
2004. Id. The letter also stated that IPS’s failure to
complete the project within the agreed time frame
caused delays and thus additional costs to the project
for which Schwing would hold IPS liable. Id.
Schwing hired J.J. Henderson, Northeast Water Technol-
ogies (NWT), and Manta Industrial and Prime Coat
Corporation to finish the remaining work. Schwing paid
J.J. Henderson $231,515.65 for labor, equipment, and
rigging of the wet and dry sludge silos. It paid NWT
$87,388.78 to complete fabrication of the dry granules silo
and to transport four remaining sections of the roof and
other miscellaneous pieces from Waukegan to Zion.
Schwing paid Manta $202,730 to sandblast and re-paint
the interior of the silos with coal tar epoxy, and paid
12 No. 07-3632
$24,826 to Prime Coat to paint the exterior of the three
silos. (See D. Exh. 1039).
IPS filed suit alleging that Schwing lacked cause for
cancelling the contract and that Schwing was liable for
IPS’s damages. Schwing counterclaimed arguing that it
justifiably cancelled the contract after IPS breached and
that IPS was liable for damages incurred by Schwing
due to IPS’s delays and deficient performance.
The action was initially filed by IPS in the Circuit Court
for Racine County, Wisconsin but removed to the district
court by Schwing as the parties are diverse and the
amount in controversy exceeds $75,000. 28 U.S.C. § 1332.
IPS is incorporated in Wisconsin with its principal place
of business in Wisconsin and Schwing is incorporated
in Minnesota with its principal place of business in Min-
nesota. See Pastor v. State Farm Mut. Auto. Ins. Co., 487
F.3d 1042, 1047-1048 (7th Cir. 2007).
After a two-day trial, the district court concluded (1) that
Schwing was justified in cancelling the contract after IPS
materially breached, (2) Schwing did not breach the
contract, and (3) that Schwing sustained damages in the
amount of $467,140.02. We affirm in most part and
remand for a recalculation of damages.
II.
The parties dispute the standard by which we review
various aspects of this case. “The fixing of the boundary
between questions of law and questions of fact, is a matter
of federal procedural law and therefore governed by
No. 07-3632 13
federal rather than state law in diversity as in other
federal suits.” Dilworth v. Dudley, 75 F.3d 307, 309 (7th
Cir. 1996); Tax Track Sys. Corp. v. New Investor World, Inc.
478 F.3d 783, 789 (7th Cir. 2007) (in a diversity suit when
the judge acts as a fact finder the federal standard of
review applies). Although the interpretation of an estab-
lished written contract is generally a question of law for
the court (Holmes v. Potter, 552 F.3d 536, 538 (7th Cir.
2008), the question of whether or not a particular breach
of a contract is material is a question of fact. ABM
Marking, Inc. v. Zanasi Fratelli, S.R.L., 353 F.3d 541, 544 (7th
Cir. 2003). Thus, we interpret the contract de novo but
review the district court’s determination of whether IPS
materially breached the contract for clear error. See
United States v. Lake, 500 F.3d 629, 632 (7th Cir. 2007)
(questions of law reviewed de novo; findings of fact
for clear error).
A. Breach of Contract
The district court concluded, and the parties do not
contest, that Wisconsin law applies to the agreement in
this case. Under Wisconsin law, a material breach of
contract releases the non-breaching party from perfor-
mance of the contract. Mgmt. Computer Servs., Inc. v.
Hawkins, Ash, Baptie & Co., 557 N.W.2d 67, 77 (Wis. 1996).
A breach is material if it destroys the essential object of
the agreement or deprives the non-breaching party of a
benefit that the party reasonably expected. Ranes v. Am.
Family Mut. Ins. Co., 580 N.W.2d 197, 200 (Wis. 1998);
Mgmt. Computer Servs., Inc., 557 N.W.2d at 77-78. In this
14 No. 07-3632
case, Schwing terminated the contract due to IPS’s failure
to complete work satisfactorily within particular time
frames. Consequently, the district court’s task was to
determine whether fabrication and installation by a
particular date was a benefit that Schwing reasonably
expected and whether the delays and the claimed defects
in performance destroyed the essential object of the
contract.
The first step in such a determination is identifying
the contract and what it required. The district court
determined that the September 5, 2001 purchase order,
and the August 12, 2004 change order together formed
the contract between the parties. (R. 32 at p.23). The
question before this court is interpreting what, if
anything, those orders say about performance standards
and deadlines.
When a contract is silent on the time for performance, a
reasonable time is implied. Delap v. Inst. of Am., Inc., 143
N.W.2d 476, 478 (Wis. 1966); Wis. Stat. § 402.309(1). IPS
argues that the contract here was such a “reasonable
time” contract. We think the better interpretation is that
the contract did indeed set forth specific dates for per-
formance. As we ultimately conclude, however, whether
the contract was one demanding performance within “a
reasonable time,” or by a date certain, IPS failed to
meet the requirement.
The original 2001 purchase order clearly identified a
time frame for performance, requiring delivery by Decem-
ber 28, 2001, and installation by the approximate dates
of February 1, 2002, for the two receiving bins, February 15
No. 07-3632 15
for the two wet storage silos, and April 15 for the dry
storage bins. (D. Exh. 1004, Attachment A at p.4). Of
course, these dates were later modified by the parties;
first, by a November 30, 2001 fax, in which Schwing
directed IPS to continue shop fabrication, but to cease on-
site fabrication until further notice (D. Exh. 1005), and
later by the August 12, 2004 change order (to which we
will turn our attention momentarily). These initial dates
indicate that Schwing and IPS had a meeting of the
minds that the project would be completed within a
particular time frame—an approximately eight-month
period, with installation occurring just one month from
the delivery date for receiving bins, forty-nine days from
delivery for the wet sludge silos, and three-and-a-half
months from delivery for the dry granules silo. In sum,
the initial contract contemplated a short time frame and
a quick turn around time from delivery to installation.
Nothing in the language of the change order alters
those expectations or modifies the contract from one
requiring specific dates to one requiring only a rea-
sonable time for performance. In fact, the change order
specifically states that other than the changes
specifically iterated in the change order, “no other changes
to this order apply.” (D. Exh. 1017 at p.2). We know, of
course, that it was the intent of the parties to alter the
delivery and installation dates from the original purchase
order. Clearly, Schwing altered the contract deadlines
when it sent the fax directing IPS to cease all on-site
fabrication as of November 30, 2001, and later when it
agreed to a change order. To what date, then, did the
parties alter the original deadlines?
16 No. 07-3632
General Note One to the change order states that “the
majority of the main & coned silo work [is] expected to
be completed by September 30th, 2004.” (D. Exh. 1017,
1012)3 . The main silo work refers to the wet sludge silos
and the coned silo refers to the dry granules silos (see
D. Exh. 1004), thus leaving only a smaller project—the
truck receiving bins—to complete after September 30,
2004 4 . In fact, the receiving bins were installed on Septem-
ber 8, 2004, well before the September 30 deadline. This
express language sets forth some clear expectations
regarding timing. September 30 came and went without
completion of the majority of the main and coned silo
work.
Not even Schwing, however, seems to be arguing that
IPS breached by missing the September 30, 2004 deadline
from the change order. Schwing argues instead that the
new deadlines came from the layout schedule—an eight-
page, 399-line spreadsheet used to coordinate all of the
projects on the site. General Note Three to the change
order states, “IPS has requested and to-date has not
received a Zion Project time lines [sic] from Schwing, NSSD
or the General Contractor. Therefore IPS will not be
3
The change order (D. Exh. 1017) incorporated by reference
three general notes from IPS estimate #1520 (D. Exh. 1012),
drafted by IPS.
4
The initial purchase order contemplated delivery of all of the
parts on December 28, 2001, and installation of the truck
receiving bins just a mere 31 days later, so we may assume
that this was the fastest of the projects.
No. 07-3632 17
responsible for any monetary penalties on this project
caused by unrealistic milestones, delays caused by
others or acts of God.” (D. Exh. 1017 at p.2; Exh. 1012 at
p.4). This language contemplates that the timelines will
be guided by the layout schedule. In fact, IPS’s
language indicates that without such a timeline, “all
bets are off.” Clearly this is not a contract that antici-
pated that the parties would perform in a “reasonable
time.” The project at hand was complex and involved
coordination of many different subcontractors. The
layout schedule contained approximately 400 lines of
activities that were to be completed over the course of
eighteen months—each activity carefully scheduled to
coordinate with the project as a whole. Even IPS relied
upon the layout schedule for its deadlines. IPS’s senior
vice president stated in an e-mail to Schwing, “They are
actually looking for the remainder of the silos in the first
week of October. This is also the first I have heard this and
was planning/scheduling to be ready the first week in
December [as described in the attached layout schedule]
Line #s 1810 and 1990.” (D. Exh. 1022). In sum, this
appears to be a contract containing specific deadlines and
one that was referring to the layout schedule to provide
them.
In arguing that the layout schedule did not establish
deadlines, IPS raises some noteworthy points. First, IPS
argues that the parties could not have intended to in-
corporate some of the layout schedule deadlines in their
contract. For example, the layout schedule states an early
finish date of August 12, 2004 for installation of the truck
receiving bins. The parties, however, did not execute the
18 No. 07-3632
change order until August 12, 2004. IPS argues that it
certainly did not intend to execute a contract that it was
in breach of before it had any opportunity to perform.
IPS, however, puts too fine a point on these exact dates.
After the lengthy delay while the project sat on hold, and
after some mildly contentious correspondence, on July 10,
2004, the parties began negotiating to resume the
project under revised terms. On July 12, 2004, IPS sent
Schwing a Field Service Quotation which eventually led
to the final change order which the parties signed on
August 12, 2004. On July 12, when Schwing drafted the
field service quotation that would become the final
change order, the August 12 deadline certainly was
feasible. It is quite possible that the parties contemplated
beginning work or perhaps did begin work before the
ultimate change order agreement was finalized and
signed. In fact, the receiving bins were installed on Septem-
ber 8, only twenty-seven days after the parties signed
the change order. Moreover, the fact that some of the
dates were either unrealistic or inaccurate does not eviscer-
ate the import of the general framework of the layout
schedule to the project. Of course, as IPS points out,
one expects some amount of delay and revision in the
scheduling of construction projects. And although
“[w]hen performance is due . . . anything short of full
performance is a breach” (Steele v. Pacesetter Motor Cars,
Inc., 672 N.W.2d 141, 144 (Wis. Ct. App. 2003) (internal
citations omitted)), a relatively minor breach does not
excuse the other party from its contractual performance.
Mgmt Comp., 557 N.W.2d at 77-78.
No. 07-3632 19
Even if we were to determine that the parties did not
intend to incorporate the layout schedule into the
contract, we would arrive at the same conclusion re-
garding the question of a material breach. If the contract
contained no time for performance, the law will imply
a reasonable time. Delap, 143 N.W.2d at 478. What consti-
tutes a reasonable time for performance given the facts
of the case is again a question of fact to which we defer to
the district court. Klockner, Inc. v. Fed. Wire Mill Corp., 663
F.2d 1370, 1380 (7th Cir. 1981). And how would a court
determine what a reasonable time for performance is in
a complex construction project such as this? The logical
place to begin is by looking at the highly detailed docu-
ment that sets forth all of the various time frames for the
project—the layout schedule. It is true, as IPS points
out, that the layout schedule speaks not of deadlines, but
of “early start” and “early finish” dates. Once again,
however, the layout schedule is the beginning, and not
the end of the consideration. In determining materiality
of breach and the parties’ reasonable expectations, a court
would look not only at the construction schedule, but
would also consider the circumstances as a whole,
bearing in mind normal delays of construction, whether
Schwing or other contractors or subcontractors bore
responsibility for the delays, and the benefit Schwing
could reasonably expect. In short, whether we conclude,
as the district court did, that the layout schedule was
part of the contract, or whether we find that IPS had
a “reasonable time” to perform, the determination of
whether IPS materially breached the contract must be
made by looking initially to the time frames set forth in
the purchase orders and layout schedule.
20 No. 07-3632
The district court found that IPS had materially
breached the terms of the contract and the record
certainly supports such a determination. The original
purchase order required delivery less than five months
from the date the order was signed and then antici-
pated approximate installation dates one month from
the delivery date for the receiving bins, forty-nine days
from delivery for the wet storage silos, and three-and-a-
half months from delivery for the dry storage bin (conical
silos). The notice to cease work at the site specifically
instructed IPS to continue shop fabrication. Thus, by the
time the change order negotiations occurred in July and
August 2004, a significant amount of work had or
should have already occurred in the shop. It was not
unreasonable, therefore, for the contract to contemplate
“an August 2004 start date with the majority of the main
& coned silo work expected to be completed by Septem-
ber 30th, 2004,” as stated in General Note One. (D. Exh.
1012 at p.4). Nor was it unreasonable for the agree-
ment (via the layout schedule) to contemplate installa-
tion of the wet and dry storage silos by the even later
dates in early December. (D. Exh. 1013, line 1810 and 1990).
Of course, IPS argued that the new site presented far
greater logistical challenges than the previous site. Even
so, as of February 11, 2005, long after any of the contem-
plated due dates, the project had not been completed.
The district court did not err by determining that IPS
materially breached the contract by failing to meet
Schwing’s reasonable expectations.
Nor did the district court err in finding that IPS’s
reliance upon an allegedly insufficient lay-down area as
an excuse for its delayed performance was not con-
No. 07-3632 21
sistent with the evidence. The district court determined
that persuasive, overwhelming, and credible evidence
established that the Zion site provided sufficient space
and roads for IPS to complete its work, and that IPS
did not devote a sufficient number of workers to the
project.
Finally, we need not address IPS’s argument that expert
testimony as to “reasonable time” was required, as that
argument was waived when IPS failed to raise it in the
district court. See Skywalker Communications of Ind., Inc. v.
Skywalker Communications, Inc., 333 F.3d 829, 831 (7th
Cir. 2003).
B. Damages
Having determined both that IPS materially breached
the agreement, and that the breach damaged Schwing,
the district court turned to its calculation of damages.
We review the calculation of an award of damages for
clear error (Trs. of Chicago Painters and Decorators Pension,
Health and Welfare, and Deferred Sav. Plan Trust Funds v.
Royal Intern. Drywall and Decorating, Inc., 493 F.3d 782, 789
(7th Cir. 2007)), but review the propriety of awarding
damages de novo. See Morley-Murphy Co. v. Zenith Elec.
Corp., 142 F.3d 373, 378 (7th Cir. 1998).
The district court determined that Schwing was
entitled to damages to compensate it for losses it
incurred by IPS’s breach. In a breach of contract action,
the fundamental idea is to put the injured party in as
satisfactory a position as the party would have been in
had the contract been performed. Thorp Sales Corp. v. Gyuro
22 No. 07-3632
Grading Co., 331 N.W.2d 342, 346 (Wis. 1983). Once the
district court concluded that IPS breached, it properly
determined that Schwing was entitled to damages to
rectify the loss.
IPS objects to the district court’s characterization of the
damages as “incidental damages.” See (R. 32 at p.31). The
district court noted that they could also be characterized
as “cover.” Id. We need not quibble over the terms. Pro-
vided Schwing properly mitigated its damages as
required, it is entitled to be placed in the position it
would have been had IPS properly performed. (Peterson
v. Cornerstone Prop. Dev., LLC, 720 N.W.2d 716, 731
(Wis. App. 2006)). Under that general concept, the
injured party is entitled to damages that flow directly
and necessarily from the breach of contract, and that
were reasonably foreseeable to or contemplated by the
parties at the time the contract was made. Id. at 730. A
party is not entitled, however, to be placed in a better
position than it would have been if the contract had
been performed. Id. Our task then, is to determine
whether the district court clearly erred in calculating
which payments were necessary to put Schwing in the
position it would have been in had IPS performed, allow-
ing for reasonably foreseeable additional damages, but
ensuring that Schwing did not come out ahead.
1. Silo installation
IPS argues first that it had no obligation to install silos
at the Zion site, claiming that, because IPS did not have
No. 07-3632 23
available sufficient information to quote installation
costs at the time it signed the change order, the change
order did not address silo installation at all. The
district court did not address the matter directly, but
by allowing damages for silo installation, inherently
found that the contract obligated IPS to install the silos
at the Zion site. The interpretation of an established
written contract is generally a question of law for the
court, and thus we review this question de novo. Holmes
v. Potter, 552 F.3d 536, 538 (7th Cir. 2008).
IPS argues that the final paragraph of the change
order indicates that “issues relating to silo area infra-
structure access, material handling equipment and labor
requirements had not been established at the time the
order was signed.” IPS Brief at 21. That final paragraph
of the change order states:
No other changes to this order apply at this time.
Access to silo installation area infrastructure for
eventual silo placement into the General Contractors
facilities or the use of General Contractors material
handling equipment or requirements for the hiring
of General Contractor labor personnel has not yet
been established by Schwing America Project Manager
and must be established. Additional charges may
apply if accessibility is delayed or limited, and charges
from the General Contractor or unforeseen issues arise.
(D. Exh. 1017 at p.2). Under the plain language of this
paragraph, the parties anticipated that IPS would install
the silo at the Zion site and that additional charges
might apply, but only if IPS’s access to the site was
24 No. 07-3632
delayed or limited or other unforeseen issues arose. The
only unresolved installation issues, therefore, were ques-
tions regarding access to the site, use of the general con-
tractor’s materials and labor, and possible unforeseen
issues. The final note assumes that the contract covers
installation at the Zion site.
IPS’s vice president Kopac testified that installation
was not included in the change order. Schwing’s opera-
tions manager, Predatsch, testified to the contrary. Al-
though the district court did not make an explicit
factual finding, by granting Schwing damages for silo
installation, it determined that the change order
included installation of the silos at the Zion site. Such a
determination makes sense to the narrative of this case.
Recall that after Schwing asked IPS to honor the original
agreement, IPS responded that the agreement it had
made was for the Waukegan site and not the Zion site.
Negotiations continued and after several exchanges, the
parties signed the change order and IPS resumed its
work at the Zion site. Not only does the plain language
of the change order demonstrate an agreement to install
at the Zion site, but the parties’ actions demonstrate an
agreement that IPS would continue performing and
install the silos at the Zion site.
2. Painting and coating
Each party in this case presented evidence regarding
the sufficiency of the coating and painting of the silos, both
inside and out. After hearing the evidence, the district
court determined that Schwing had met its burden of
No. 07-3632 25
proving damages attributable to IPS’s breach of perfor-
mance. Our review of the record reveals no clear error.
See, e.g., D. Exhs. 1027, 1032, 1033, 1042; Tr. pps. 138-39,
155, 233-35, 237, 247-48, 255-56, 259-62, 275). IPS argues
that Schwing failed to prove that the drips and runs,
which are obvious from photographic and documentary
evidence in the record, were not permitted by the
contract specifications, and did not require complete re-
coating as a remedy. The district court, in awarding
damages for re-coating, disagreed and the record
supports such a conclusion. See id. IPS also argues that IPS
remedied the paint thickness problem by re-coating the
silos prior to termination. The district court was well
within its bounds to determine that this eve-of-termination
remedy either came too late or was insufficient to
resolve the problem. Nevertheless, even if the coat thick-
ness had been resolved, the drips and runs had not,
and the district court did not clearly err by determining
that Schwing was entitled to re-paint.
3. The warranty
IPS further claims that Schwing waived any claim for
defective workmanship by failing to present a warranty
claim to IPS as IPS claims was required by the contract.
Paragraph K of the contract stated,
K. Warranty: One year parts and labor. One year
commences upon acceptance by owner. I.P.S. shall
be responsible for replacement or repair resulting from
defective workmanship or non-conformance to
Schwing-furnished designs, approved shop drawings
26 No. 07-3632
or standard fabrication procedures. Warranty is to
be performed by I.P.S. others authorized by I.P.S.
(D. Exh. 1004).
In short, IPS argues that Schwing had a contractual duty
to give IPS the first stab at repairing any defects or dam-
age. The parties engage in much back and forth
over whether either of the parties waived this issue by
failing to raise it below. IPS raised it below, at least nomi-
nally, by claiming in its post-trial brief that “Schwing is
not entitled to any damages because . . . it did not comply
with the requirements of paragraph K of Attachment A
to the original purchase order which required that any
warranty claim work be performed by IPS.” (R. at 24
at p.8). See Oscar Gruss and Son v. First State Bank of Eldo-
rado, 582 F.2d 424, 433 (7th Cir. 1978) (noting without
discussing that a party had raised a claim below by
asserting it in a post-trial brief); See also Quest Med., Inc. v.
Apprill, 90 F.3d 1080, 1087 (5th Cir. 1996) (“an issue first
presented to the district court in a post-trial brief is prop-
erly raised below when the district court exercises
its discretion to consider the issue”). IPS did not discuss
the issue further, but nevertheless, the statement is
clear, albeit perfunctory, in its claim. Not surprisingly,
Schwing failed to reply to this needle of a claim hidden
in a haystack of issues in this case. It is also not
surprising because each party filed its post-trial brief on
the same day, limiting the opportunity of both parties to
respond. Of course, a party may always move a court for
the opportunity to reply (see, e.g., Wright v. United States,
139 F.3d 551, 553 (7th Cir. 1998) (allowing party to file
an additional brief where opposing party articulated
No. 07-3632 27
new theory)), but because the argument was so trun-
cated, Schwing may not have identified it as a new
or separate argument.
In any event, there is no question that, at trial, the parties
had the opportunity to present evidence as to whether
IPS had a fair chance to correct defects or damage, and
the district court considered this matter in the course of
arriving at its holding. The district court noted that
Schwing gave notice of its dissatisfaction with IPS’s
work by its repeated requests for an installation date
for the wet sludge silos and its complaints about the
painting and welding of the silos. (R. at 32 at p.27). See
also (D. Exhs. 1027, 1029, 1032, 1033, 1043) (Tr. pps. 72, 123-
124, 132-145, 207-209, 233-235, 251, 253-55, 274). The
district court did not err by determining that this was
sufficient notice to IPS of Schwing’s dissatisfaction.
IPS argues, in the alternative, that Schwing com-
plained only of drips and runs and the thickness of the
exterior shell coatings on the wet sludge silos and that,
even if it did give sufficient notice for these items, such
notice did not relieve Schwing of the duty to tender
warranty claims for other work before contracting with
others. The district court concluded, however, that
Schwing gave IPS sufficient notice of its dissatisfaction,
not only with the quality of the work, but also with IPS’s
tardiness in completing the project. It was this failure to
perform on both fronts—timeliness and quality—that
allowed Schwing to repudiate the contract and mitigate
its damages by retaining other companies to either com-
plete the unfinished work or redo the non-conforming
work as appropriate. (See R. at 32 at p.27).
28 No. 07-3632
4. Amount of damages
As to the amount of damages, a matter we review for
clear error (Gaffney v. Riverboat Servs. of Ind., Inc., 451 F.3d
424, 461 (7th Cir. 2006)), we agree with the district court’s
assessment that Schwing met its burden of proving to
a reasonable degree of certainty that the following dam-
ages were attributable to IPS’s breach:
(1) $68,500.00 to Northeast Water Technologies (NWT)
for completion of fabrication work (March 5, 2005);
(2) $75,250.00 to J.J. Henderson for labor, equipment,
and rigging of the wet sludge silos into place. (Febru-
ary 14, 2005);
(3) $45,054.00 to J.J. Henderson for labor, equipment,
and rigging of the dry granules silo into place (May 10,
2005);
(4) $18,888.78 to NWT for documented additional
work items including meetings, inspections, repairing
manufacturing defects, and supplies (September 1,
2005);
(5) $13,891.32 to J.J. Henderson (December 19, 2005)5 ;
(6) $42,826.02 to Prime Coat for painting the exteriors
of two wet sludge silos and the dry granules silo
(December 28, 2005); and
5
These numbers differ from Schwing’s charges incurred
(see infra at section I and D. Exh. at 1039), as not all of the
payments to J.J. Henderson were attributable to IPS’s breach
(see Tr. at 156-58).
No. 07-3632 29
(7) $202,730.00 to Manta for repainting the interior
of the two wet sludge silos and the dry granules
silo with coal tar epoxy (December 20, 2005).
(R. at 32 at p.33) (see also D. Exh. 1044).
We do, however, find one small error. At the time of
the breach, Schwing had not yet paid IPS $46,116 dollars
that would have been owed had IPS completed the con-
tract. By failing to deduct this money from the
damage award, Schwing was placed in a better position
than it would have been in had IPS performed. Schwing
received damages to cover its costs for completing the
work, but also was absolved of its requirement to pay the
remaining $46,116 of the contract. In essence, Schwing
was rewarded twice for the breach. Schwing is incorrect
that IPS waived this argument. In its post-trial brief to
the district court, IPS argued that the damage “sum must
be reduced by $46,114, the final 20% installment under
the change order that Schwing did not pay.” (R. at 24 at
p.9). IPS raised the issue and identified the amount at
pages 12 and 30 of its brief before this court. Apparently,
Schwing agrees that the unpaid balance of the change
order amounted to $46,116, and argues only that IPS
waived the argument (a contention we just debunked) or
that, in some nebulous way, the trial court’s findings
were plausible in light of the record and should be af-
firmed. 6 We remand for the limited purposes of
6
In calculating the amount of the unpaid balance of the change
order, Schwing twice correctly calculates the number as $46,116.
(continued...)
30 No. 07-3632
deducting this $46,116 unpaid balance from the total
damage award calculated by the district court.
Finally, the district court concluded that Schwing
owed IPS $2,000 for moving two power pacs from
Waukegan to Zion. The district court concluded that the
work was not part of the parties’ contract, but based on
Schwing’s stipulation at trial that $2,000 in compensation
for these services was acceptable, the district court con-
cluded that Schwing should reimburse IPS for these
costs. IPS seems to have viewed this concession as an
opportunity to get the rest of the camel under the tent.
Toward that end, it argues not just that Schwing and IPS
had a separate agreement to transport two power pacs
from Waukegan to Zion, but that the parties had an
entire oral contract regarding installation of the silos (a
matter, we have already concluded was included in the
written contract). The existence of an oral agreement is
a question of fact that warrants deference to the district
court. Podolsky v. Alma Energy Corp., 143 F.3d 364, 369 (7th
Cir. 1998). In this case, the district court determined
(largely because of Schwing’s agent’s concession at trial)
that the parties had a separate agreement for “mobilization
of two power pacs from Waukegan to Zion,” but not, as
IPS states, that they had an agreement for all of the
6
(...continued)
See Schwing brief at 35, n.12. In a parenthetical explaining the
calculations, however, Schwing mis-typed that number as
$44,166. According to both Schwing and IPS’s calculations, the
correct number is $46,116.
No. 07-3632 31
costs IPS would incur in assisting Schwing’s installation
of silos at the Zion site.
For the foregoing reasons, the district court is A FFIRMED
in part, and R EVERSED in part with instructions to
correct damages in a manner consistent with this opin-
ion. IPS shall bear the cost of this appeal.
9-2-09