Ted's Wiring Service, Ltd. v. Department of Transportation ( 2021 )

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
27-SEP-2021
08:57 AM
Dkt. 36 MO
SCWC-XX-XXXXXXX
IN THE SUPREME COURT OF THE STATE OF HAWAII
TED=S WIRING SERVICE, LTD.,
Respondent/Plaintiff-Counterclaim Defendant-Appellee,
vs.
DEPARTMENT OF TRANSPORTATION, STATE OF HAWAII;
Petitioner/Defendant-Counterclaimant-Appellant.
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CIV. NO. 1CC131001910)
MEMORANDUM OPINION
(By: Recktenwald, C.J., Nakayama, McKenna, Wilson, and Eddins, JJ.)
Petitioner/Defendant-Counterclaimant-Appellant
Department of Transportation, State of Hawaiʻi (DOT) seeks review
of the Intermediate Court of Appeals’ (ICA) February 4, 2020
Judgment on Appeal entered pursuant to its December 26, 2019
Memorandum Opinion. The ICA vacated the May 20, 2016 Judgment
of the Circuit Court of the First Circuit (circuit court).
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This case arises from a contract dispute between DOT
and Respondent/Plaintiff-Counterclaim Defendant-Appellee Ted’s
Wiring Service, Ltd. (TWS). DOT and TWS entered into a contract
for goods and services, wherein TWS agreed to build a ground
transportation tracking system for DOT at the Daniel K. Inouye
International Airport (“the airport”). After TWS believed it
had fulfilled its obligations under the contract, DOT notified
TWS that it was not satisfied with TWS’s performance and
proposed withholding the remaining balance due to TWS under the
contract.
TWS filed an action against DOT in the circuit court
to recover the remaining balance under the contract and DOT
filed a counterclaim for damages. Both parties filed motions
for summary judgment. The circuit court ruled in favor of TWS,
finding that there were no genuine issues of material fact and
concluding as a matter of law that TWS had completed the
contract and that DOT accepted the system built by TWS. The
circuit court entered a single judgment in favor of TWS and
against DOT on all claims asserted in the action.
DOT appealed to the ICA and argued that the circuit
court erred by (1) concluding that TWS was entitled to summary
judgment; and (2) disregarding the contract’s non-waiver
provision, which states that final acceptance by DOT does not
preclude it from recovering from TWS. The ICA held that the
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circuit court erred by granting TWS’s motion for summary
judgment because genuine issues of material fact exist as to
whether TWS breached the contract, whether TWS satisfied its
contractual obligations, and whether DOT accepted TWS’s
performance. Because the ICA concluded that there was a genuine
issue of material fact as to whether DOT accepted TWS’s
performance, the ICA declined to address the effect of the
contract’s non-waiver provision. However, the ICA’s decision
included a footnote stating that DOT’s appeal did not challenge
the circuit court’s entry of judgment against it on its
counterclaim. The ICA vacated the circuit court’s judgment and
remanded for further proceedings.
In its application for writ of certiorari, DOT argues
that the ICA erred by stating that DOT did not challenge the
circuit court’s entry of judgment against DOT on its
counterclaim. DOT maintains that it is still entitled to pursue
its counterclaim for damages on remand. DOT argues that the
sole issue in this case is whether TWS satisfied or breached the
contract and that TWS’s claim for the contract balance and DOT’s
counterclaim for damages are intertwined. DOT maintains that by
appealing the circuit court’s judgment in favor of TWS, it
appealed both the judgment in favor of TWS on its claim and
against DOT on its counterclaim.
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We conclude that by appealing the circuit court’s
judgment, DOT appealed both the circuit court’s grant of summary
judgment in favor of TWS on its complaint and against DOT on its
counterclaim. Thus, the ICA erred by stating that DOT did not
challenge the circuit court’s entry of judgment on its
counterclaim. Because the ICA concluded that genuine issues of
material fact exist as to whether the parties modified the
contract and whether TWS performed under the contract, DOT is
entitled to pursue its counterclaim for damages on remand.
Accordingly, we vacate in part the ICA’s
February 4, 2020 Judgment on Appeal as to DOT’s counterclaim and
affirm the ICA’s Judgment on Appeal in all other respects. We
remand to the circuit court for further proceedings consistent
with this opinion.
I. BACKGROUND
In June 2000, TWS and DOT entered into a contract for
goods and services (“the Contract”), wherein TWS agreed to build
an Automatic Vehicle Identification system (“AVI System”) that
uses radio frequency technology to help manage commercial ground
transportation providers at the airport (“the Project”). DOT
intended to use the AVI System, which consists of antennas at
the airport’s entrances and exits, computer hardware, and
software to track and meter ground transportation providers so
that DOT could send them accurate monthly bills.
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The Contract specifically incorporated the request for
proposals (“the RFP”) issued by DOT, which set forth the
threshold requirements for the Project. As relevant here, the
RFP required the AVI System to “provide an automated record
keeping and collection system capable of generating invoices and
reports to the user for confirmation of charges/withdrawals.”
The Contract required TWS to complete performance by installing
the AVI System within eight months of the date that DOT issued
the notice to proceed and then operating and maintaining the
system for an additional two years after installation.
DOT issued the notice to proceed on December 15, 2000,
and the original completion date for the Project was
August 13, 2003. However, work on the Project was delayed by
the September 11, 2001 terrorist attacks, unanticipated
difficulties in designing the AVI System, and difficulties in
obtaining DOT’s approval of the Concept of Operations (COP) for
the Project.1 DOT finally approved the COP on May 19, 2003.
By letter dated May 27, 2003, TWS proposed changing
the hardware in the AVI System to a single server because
1 While the RFP laid out the threshold requirements for the AVI System,
the COP described in detail how the AVI System would operate and the methods
it would use. The COP was a document developed by TWS and the Project could
not begin until DOT approved it.
In May 2002, DOT rejected TWS’s initial proposed COP because it did not
meet all of the specifications set forth in the RFP. DOT requested that TWS
resubmit a proposed COP for approval that included all of the RFP
specifications and reminded TWS that “any changes and/or adjustments to the
RFP requires that an [sic] Amendment or Change Order to the Contract.”
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technology had improved in the years since the Project was first
proposed and a dual server was no longer necessary. DOT
responded to TWS in writing to acknowledge receipt of the single
server proposal, stating that it “ha[d] no additional input at
this time[,]” as “the proposed changes ought to meet the
specifications of your contract,” and DOT would “defer to your
knowledge and expertise.” (Emphasis added.)
By letter dated October 15, 2003, TWS clarified to DOT
the function of the AVI System software and specified the twelve
reports the software would generate. On November 4, 2003, DOT
notified TWS that it approved of TWS’s description of the twelve
submitted reports.
Because of delays, the parties agreed to extend the
deadline for installation and testing of the AVI System to
April 30, 2009. By letter dated June 23, 2009, DOT declared TWS
to be in default of its obligations under the Contract for
failure to complete installation and testing by April 30, 2009.
DOT suspended work on the Project the following day.
On October 13, 2009, Travelers Casualty and Surety
Company of America (Travelers), the Contract surety company,
entered into a Takeover Agreement with DOT to complete the
Project. Travelers selected TWS to serve as the completion
contractor.
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By February 2010, all of the hardware and software for
the AVI System was installed. DOT indicated in a letter to
Travelers that the AVI System software was “evaluated and found
to be functional” and that the two-year operations and
maintenance period, during which TWS would provide support to
DOT, would commence on February 15, 2010.
On February 15, 2012,2 DOT notified Travelers that it
was not satisfied with the functionality of the software because
of errors that occurred when DOT ran the billing report. DOT
stated that it would not deem the Project to be complete until
the software issue was resolved.
By letter dated March 27, 2012, DOT wrote to Travelers
to “acknowledge[] the completion of the two-year operations and
maintenance period as of February 29, 2012.” However, DOT
stated that it was still not satisfied with the functionality of
the AVI System software, claiming that it did not satisfy the
RFP because it did not provide accurate reports. Because DOT
did not believe that TWS could satisfactorily resolve the
software issues, DOT stated that it was “willing to accept the
installed system ‘as is’ and consider the Takeover Agreement
completed[.]” DOT stated that it would withhold the outstanding
balance due under the Takeover Agreement and use those funds to
2 Because the two-year operations and maintenance period required by the
Contract commenced on February 15, 2010, the operations and maintenance
period was scheduled to conclude on February 14, 2012.
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“correct the issues with the current software on its own accord
with another software consultant.”
A. Circuit Court Proceedings3
On July 9, 2013, TWS filed an action against DOT in
the circuit court seeking to recover the remaining balance under
the Contract. On July 31, 2013, DOT filed a counterclaim
against TWS for damages for lost revenue and expenses incurred
by DOT because the Project was not completed on time and the AVI
System software failed to function as expected.4
On June 2, 2015, TWS filed a motion for summary
judgment on all claims asserted in its complaint and on all
counterclaims asserted by DOT.
On September 11, 2015, DOT filed a motion for partial
summary judgment on all claims asserted in TWS’s complaint and
on all of DOT’s counterclaims for damages, except lost revenue
and additional security costs.
The circuit court heard TWS’s motion for summary
judgment on September 9, 2015, and heard DOT’s motion for
partial summary judgment on October 7, 2015.
3 The Honorable Jeannette H. Castagnetti presided.
4 In its discovery responses, DOT divided its damages into four
categories: (1) additional expense to hire an outside contractor to supervise
completion of the Project; (2) additional security costs incurred because DOT
was unable to reduce security as planned, once the AVI System was
implemented; (3) the entire Contract amount; and (4) lost revenue because the
AVI System was not completed and operating by the original project completion
date.
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During the October 7, 2015 hearing, the circuit court
ruled that TWS was entitled to summary judgment on its claim for
the outstanding balance due under the Contract because there
were no genuine issues of material fact. The circuit court
concluded that TWS “completed the contract as extended and
modified by DOT and [TWS]” and “[TWS] performed under the
contract to the DOT’s satisfaction, as agreed and modified by
the parties.” The circuit court further concluded that DOT
accepted the AVI System.
As to DOT’s counterclaims, the circuit court orally
ruled that TWS was entitled to summary judgment based on the
circuit court’s conclusion that TWS did not breach the Contract.5
Finally, the circuit court concluded that because “[TWS] is
entitled to judgment as a matter of law on its claim for
retainage and amounts owing as well as the counterclaim asserted
by the [DOT], and the [DOT] would not, therefore, be entitled to
partial summary judgment as the [DOT] has moved for.” (Emphasis
added.)
5 The circuit court also stated its conclusion that even if TWS had
breached, DOT did not have a valid claim for damages because (a) DOT did not
assert a claim for breach of contract based on any untimely performance;
(b) if DOT had asserted such a claim, it would not be valid because DOT
agreed to multiple extensions of the time of performance; (c) DOT did not
incur additional expenses to supervise completion of the Project based on
TWS’s conduct, but because DOT was understaffed; (d) DOT’s claim for lost
revenue lacked any legal basis because TWS was not obliged to provide DOT
with revenue from the AVI System; and (e) DOT’s claim for recovery of the
entire Contract price failed as a matter of law.
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On November 12, 2015, the circuit court entered orders
granting TWS’s motion for summary judgment and denying DOT’s
motion for partial summary judgment. The circuit court awarded
TWS the outstanding balance due under the Contract.
On May 20, 2016, the circuit court entered final
judgment in favor of TWS and against DOT.
B. ICA Proceedings
DOT appealed the circuit court’s judgment to the ICA.
As relevant here, DOT argued on appeal that the circuit court
erred by (1) concluding, as a matter of law, that (a) the COP
changed the Contract specifications; and (b) that DOT accepted
the AVI System; and (2) disregarding the Contract’s non-waiver
provision, which states that final acceptance by DOT does not
preclude it from recovering from TWS. DOT requested that the
ICA reverse the circuit court’s judgment in favor of TWS, enter
judgment in favor of DOT “as requested in [DOT]’s motion for
partial summary judgment,” and remand for a trial on DOT’s
damages.
The ICA entered a memorandum opinion (MO) in which it
concluded that the circuit court erred by granting summary
judgment in favor of TWS because there were genuine issues of
material fact regarding whether the COP modified the Contract
specifications and whether DOT finally accepted the AVI System
under the terms of the Contract. Because there was a genuine
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issue of material fact about whether DOT accepted the AVI
System, the ICA declined to address the effect of the Contract’s
non-waiver provision. The ICA did not address the question of
whether TWS was entitled to summary judgment as to DOT’s
counterclaim, stating in footnote 6 of its MO: “TWS also argued
that it was entitled to judgment as to DOT’s counterclaim for
damages under the contract. DOT has not challenged the Circuit
Court’s entry of judgment against it on its counterclaim on
appeal.” (Emphasis added.)
Accordingly, the ICA vacated the circuit court’s
May 20, 2016 Judgment in favor of TWS and against DOT and
remanded for further proceedings “not inconsistent” with its MO.
The ICA entered its Judgment on Appeal on February 4, 2020.
II. DISCUSSION
In its application for writ of certiorari, DOT argues
that the ICA erred by stating in footnote 6 of its MO that “DOT
has not challenged the Circuit Court’s entry of judgment against
it on its counterclaim on appeal.” DOT contends that by
appealing the circuit court’s judgment in favor of TWS and
against DOT, it appealed all claims asserted in the action —
which encompassed both the award of the remaining balance of the
Contract in favor of TWS and DOT’s counterclaim for damages.
According to DOT, the sole issue in this case is whether TWS
performed under the Contract and the parties’ competing claims
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regarding whether the Contract was modified and whether DOT
accepted the AVI System are inextricably intertwined. DOT
contends that footnote 6 contradicts the ICA’s conclusion that
TWS was not entitled to summary judgment because there were
genuine issues of material fact as to which party defaulted on
the Contract. Accordingly, DOT maintains that it is still
entitled to pursue its counterclaim for damages against TWS on
remand.
Conclusions of law are reviewed de novo under the
right/wrong standard of review. Maria v. Freitas, 73 Haw. 266,
270, 832 P.2d 259, 262 (1992). In this case, the ICA concluded
as a matter of law that the circuit court erred by granting
summary judgment in favor of TWS and against DOT because genuine
issues of material fact exist. The ICA also concluded that DOT
failed to challenge on appeal the circuit court’s entry of
judgment against it on its counterclaim for damages.6 For the
following reasons, we agree with DOT that footnote 6 is wrong.
The ICA erred by concluding that DOT appealed only the entry of
judgment in favor of TWS on its claim and did not appeal the
circuit court’s judgment on its counterclaim.
6 We note that the ICA cited no basis for its conclusion in footnote 6
that “DOT has not challenged the Circuit Court’s entry of judgment against it
on its counterclaim on appeal.”
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First, the circuit court issued a single judgment in
favor of TWS and against DOT “on all claims asserted in the
action.”7 Pursuant to Hawaiʻi Rules of Appellate Procedure Rule
3(c)(2) (2019), “[t]he notice of appeal shall designate the
judgment, order, or part thereof and the court . . . appealed
from[]” and “[a] copy of the judgment or order shall be attached
as an exhibit.” (Emphasis added.) In this case, DOT filed a
Notice of Appeal “from the [circuit court]’s JUDGMENT filed May
20, 2016” and attached a copy of the judgment as Exhibit 1.
Thus, DOT appealed the entire judgment, and its appeal
necessarily encompassed both the circuit court’s grant of
summary judgment in favor of TWS on its complaint and against
DOT on its counterclaim.
Second, DOT’s appeal in no way indicated that it was
abandoning its counterclaim for damages. Instead, in its
opening and reply briefs, DOT maintained its position that it
was TWS who breached the Contract. DOT disputed TWS’s claims
that (1) the parties modified the Contract; (2) TWS performed
under the Contract, as modified; and (3) DOT issued a final
acceptance. Thus, DOT’s arguments that TWS breached the
Contract and that DOT was entitled to damages were the same
7 Not only did the circuit court enter a single judgment, it also treated
TWS’s complaint and DOT’s counterclaim as a single issue by addressing their
cross-motions for summary judgment in one oral ruling and stating that “a lot
of the issues in both motions . . . just overlap.”
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arguments made by DOT for why TWS was not entitled to the
remaining balance under the Contract. It follows that if there
were genuine issues of material fact as to which party breached
the Contract, DOT is entitled to pursue its claim for damages on
remand.
Third, DOT specifically challenged on appeal the
circuit court’s failure “to give effect to the non-waiver
provision of the contract,” which is only relevant to DOT’s
counterclaim for damages. DOT argued to the ICA that the non-
waiver provision entitled DOT to seek damages from TWS, even if
the circuit court found that TWS did not breach the Contract.
In addition, the relief that DOT requested on appeal was for the
ICA to reverse the circuit court’s judgment in favor of TWS,
enter judgment in favor of DOT “as requested in [DOT]’s motion
for partial summary judgment,” and remand for a trial on DOT’s
damages. (Emphasis added.)
Thus, DOT’s appeal of the circuit court’s judgment
encompassed both the entry of judgment in favor of TWS for the
remaining balance under the Contract and DOT’s counterclaim for
damages. To the extent that the ICA concluded that DOT
failed to challenge on appeal the circuit court’s entry of
judgment against DOT on its counterclaim, the ICA erred. The
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ICA vacated the circuit court’s judgment8 because it concluded
that genuine issues of material fact exist as to whether DOT
agreed to modify the Contract specifications and whether DOT
accepted the AVI System. For that reason, DOT is entitled to
pursue its counterclaim for damages against TWS on remand.
III. CONCLUSION
Accordingly, we vacate in part the ICA’s
February 4, 2020 Judgment on Appeal as to DOT’s counterclaim and
affirm the ICA’s Judgment on Appeal in all other respects. We
remand to the circuit court for further proceedings consistent
with this opinion.
DATED: Honolulu, Hawaiʻi, September 27, 2021.
John H. Price and /s/ Mark E. Recktenwald
William J. Wynhoff
for petitioner /s/ Paula A. Nakayama
Department of Transportation,
/s/ Sabrina S. McKenna
State of Hawaiʻi
/s/ Michael D. Wilson
Keith Y. Yamada,
Kelly G. LaPorte, /s/ Todd W. Eddins
Christopher T. Goodin,
and Trisha H.S.T. Akagi
for respondent Ted’s
Wiring Service, Ltd.
8 To “vacate” a judgment is to “nullify or cancel; make void; invalidate”
it. Black’s Law Dictionary 1862 (11th ed. 2019). Thus, because the ICA
vacated the circuit court’s judgment which disposed of DOT’s counterclaim for
damages, the judgment is void and DOT’s counterclaim necessarily survives.
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