Corval Constructors, Inc. v. FPD Power Development, LLC ( 2015 )

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).
STATE OF MINNESOTA
IN COURT OF APPEALS
A14-0706
Corval Constructors, Inc.,
Respondent,
vs.
FPD Power Development, LLC,
Appellant.
Filed March 23, 2015
Affirmed
Larkin, Judge
Ramsey County District Court
File No. 62-CV-12-4231
Ernest F. Peake, Patrick J. Lindmark, Leonard, O’Brien, Spencer, Gale & Sayre, Ltd.,
Minneapolis, Minnesota (for respondent)
Mark J. Heley, John A. Markert, Stephen F. Buterin, Heley, Duncan & Melander, PLLP,
Minneapolis, Minnesota (for appellant)
Considered and decided by Halbrooks, Presiding Judge; Johnson, Judge; and
Larkin, Judge.
UNPUBLISHED OPINION
LARKIN, Judge
In this dispute stemming from the construction of a power-generating station,
appellant subcontractor challenges (1) the district court’s grant of summary judgment to
respondent general contractor and its summary dismissal of appellant’s counterclaim,
(2) the district court’s imposition of a sanction against appellant for abusing the subpoena
process, and (3) the district court’s award of certain costs to respondent. We affirm.
FACTS
Respondent Corval Constructors, Inc. (Corval) contracted with Northwestern
Energy Corporation to serve as a general contractor for the construction of a power-
generating station in Montana. Corval subcontracted part of the work to appellant FPD
Power Development, LLC (FPD). Under the subcontract, FPD agreed to provide
electrical services and equipment and to install the equipment.
Although FPD agreed to a fixed price, article six of the subcontract provides for
additional compensation in the event that Corval made project changes during
construction. The subcontract refers to these changes as “directed changes” and sets forth
a detailed procedure that FPD had to follow to obtain additional compensation for such
changes. Of note here, FPD had to submit a written request for a “change order” to
Corval within three days of a directed change. The subcontract states that a request for
additional compensation that “does not fully comply with the [subcontract] shall not be
considered a [c]hange [r]equest under the [s]ubcontract.” The subcontract also states that
FPD is not eligible for additional compensation unless FPD received a written change
order from Corval and that if FPD performed work related to a change without a written
change order, “[FPD] shall be deemed to have knowingly and intentionally waived and
released all claims for additional compensation . . . regardless of any written or verbal
protests or claims by [FPD] to the contrary,” and “[Corval] shall be under no obligation
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to . . . pay or reimburse [FPD] for any cost or expense related to an [u]napproved
[c]hange.”
During the course of the project, substantial changes were necessary. Ultimately,
11 plan revisions became part of the subcontract. FPD submitted nearly 150 change-
order requests, and Corval approved most of them. Approximately one-third of the
change-order requests were approved and paid even though FPD did not adhere to the
three-day notice requirement and the parties did not adhere to other aspects of the
change-order process in the written subcontract.
Weeks after the project was basically complete, FPD submitted several change-
order requests, seeking additional compensation. Many of the items for which FPD
sought compensation had been the subject of dispute and discussion during the project
and some had been partially resolved. Corval denied the change-order requests, partly
because FPD failed to follow the change-order process in article six of the subcontract.
FPD filed a construction lien against the property on which the power station was
built. Later, Corval commenced the present action for breach of contract and declaratory
judgment, seeking a declaration that it does not owe FPD additional compensation under
the subcontract. FPD counterclaimed, asserting breach-of-contract, unjust-enrichment,
account-stated, and declaratory-judgment claims. The breach-of-contract and
declaratory-judgment claims are at issue here.1
1
The district court dismissed FPD’s unjust-enrichment claim under Minn. R. Civ. P. 12.
And FPD notified the district court, in summary-judgment proceedings, that the court
could dismiss its account-stated claim. FPD does not challenge the district court’s
dismissal of those claims.
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The breach-of-contract count of the counterclaim states, in relevant part, that:
36. FPD complied with the terms of the Contract in
all respects, including those terms relating to making a claim
for additional compensation. FPD submitted various change
order requests to Corval for additional compensation due to
the issues listed in the paragraphs above, as well as for other
reasons. Corval approved some of FPD’s change order
requests[,] but the majority were not approved.
37. Despite repeated demands, Corval fails and
refuses to approve and pay FPD for the legitimate change
order requests made by FPD and therefore is in breach of the
terms of the Contract.
The declaratory-judgment count of the counterclaim states that Corval tendered a
payment bond as substitute security for the construction lien FPD filed and that
FPD is entitled to declaratory relief determining that Corval is
in breach of its subcontract agreement with FPD, that FPD is
entitled to recover damages under its subcontract
agreement[,] . . . and that FPD is entitled to recover under the
Bond any portion of its judgment against Corval that remains
unpaid following entry of final judgment.
Corval moved to dismiss FPD’s counterclaim under Minn. R. Civ. P. 12.02(e) for
failure to state a claim upon which relief can be granted. As to FPD’s breach-of-contract
claim, Corval argued that “the subcontract is for a fixed price that can only be modified
through written change order requests made prior to completing the work” and that FPD
“failed to provide Corval with any written notice of [the] claimed additional costs until
several months after all of the work was completed.” In a written memorandum
responding to Corval’s motion to dismiss, FPD argued that it had properly pleaded the
elements of breach of contract. FPD also argued that Corval’s argument “is not
supported by the language of the Subcontract” because the “plain language of [sections]
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6.4.1 and 6.4.2 contradicts Corval’s claim that FPD cannot collect for any additional
work that was not authorized by a change order prior to the work proceeding,” and that
the “plain and ordinary meaning of the language in [s]ection 5.3 states that FPD shall be
provided an equitable adjustment for delays and acceleration.”
At the hearing on Corval’s motion to dismiss, the district court agreed with Corval
that FPD’s pleading did not contain a “common course of dealing” theory. But the
district court denied Corval’s motion to dismiss FPD’s breach-of-contract and
declaratory-judgment claims, stating, “At this point, FPD has pled the [s]ubcontract,
timely compliance with all contractual terms, and Corval’s breach.”
After discovery was complete, Corval moved for summary judgment. Corval
argued that FPD “ignore[d] material terms of the subcontract” and “all of [its] claims for
extra compensation are contractually barred because the requests were not timely and
FPD had already completed the work prior to obtaining written authorization for the
additional compensation.” In its responsive brief, FPD did not argue that it followed the
change-order process in article six of the subcontract, as it had when defending Corval’s
motion to dismiss under rule 12. Instead, FPD argued equitable-estoppel, waiver, and
contract-modification theories. FPD asserted that “Corval regularly and repeatedly
ignored and waived the requirements of [s]ection 6.4 with respect to FPD’s changes and
. . . it actively encouraged—even demanded—that FPD do the same.” FPD therefore
argued that “Corval is estopped from enforcing terms of [the] subcontract to defeat FPD’s
claims”; “Corval’s actions and representations modified the [change-order process] thus
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Corval is estopped from enforcing the requirements of section 6.4 of the subcontract”;
and “Corval unilaterally waived enforcement of section 6.4.2.”
Corval opposed FPD’s reliance on equitable-estoppel, waiver, and contract-
modification theories, arguing that they were not raised in FPD’s pleading. At the
summary-judgment hearing, the district court questioned whether FPD had raised
modification or equitable estoppel in its counterclaim. FPD suggested that, if the court
was concerned that Corval was not on notice of those theories, FPD should be allowed to
amend its pleading to clarify the theories.
The district court granted Corval’s motion for summary judgment. In doing so,
the district court explained that its order denying Corval’s motion to dismiss under rule
12 was based on “FPD’s written and oral representations that it plead[ed] nothing more
than a claim for damages based on its compliance and Corval’s breach of the contract as
written” and that its order “is the law of the case.” The district court noted that “FPD did
not plead estoppel properly and never pled waiver.” The district court also noted that
“[a]t no time did FPD move to amend its answer or its counterclaim” and that permitting
FPD to amend would prejudice Corval and “be an exercise in futility.” The district court
therefore refused to consider FPD’s equitable-estoppel, waiver, and contract-modification
theories. The district court also refused to consider testimony that FPD offered from a
former Corval employee, W.K., on the ground that FPD abused the subpoena process.
The district court dismissed FPD’s counterclaim and ruled that, “with [FPD’s]
counterclaim dismissed, [Corval] is entitled to the relief requested in its complaint.” The
district court therefore granted summary judgment for Corval, declaring that “[FPD] is
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barred from receiving any additional compensation in connection with the Mill Creek
Generating Station project.” The district court later awarded costs to Corval, including
reimbursement for the expense of securing a bond. This appeal follows.
DECISION
FPD challenges (1) the district court’s grant of summary judgment for Corval,
(2) the district court’s imposition of a sanction against FPD, and (3) the district court’s
award of costs. We address each issue in turn.
I.
“A motion for summary judgment shall be granted when the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue of material fact and that either party
is entitled to a judgment as a matter of law.” Fabio v. Bellomo, 504 N.W.2d 758, 761
(Minn. 1993). Appellate courts “review a district court’s summary judgment decision de
novo. In doing so, we determine whether the district court properly applied the law and
whether there are genuine issues of material fact that preclude summary judgment.”
Riverview Muir Doran, LLC v. JADT Dev. Grp., LLC, 790 N.W.2d 167, 170 (Minn.
2010) (citation omitted).
At the summary-judgment hearing, FPD conceded that it had not followed the
procedure necessary to obtain additional compensation under the subcontract as written
and “that if FPD is held strictly to the [s]ubcontract as written, Corval’s motion must be
granted.” FPD therefore relied on equitable-estoppel, waiver, and contract-modification
theories to defeat summary judgment. The district court refused to consider those
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theories, partly reasoning that it had denied Corval’s request for dismissal under rule 12
“based upon FPD’s written and oral representations that it plead[ed] nothing more than a
claim for damages based upon its compliance and Corval’s breach of the contract as
written.” The district court noted that FPD did not plead “course of conduct equitable
estoppel” or waiver and that it would not allow amendment to include those theories at
that point in the litigation.
When issues beyond the scope of the pleadings are raised for the first time in a
memorandum in opposition to summary judgment, the district court need not consider
them. See Great Am. Ins. Co. v. Golla, 493 N.W.2d 602, 605 (Minn. App. 1992)
(holding that where a party attempted to revive a claim that it had removed from a
complaint, the district court did not err by not considering the claim when it was raised in
opposition to summary judgment). That is because the pleadings frame the issues for the
district court, and a party is bound by its pleadings unless other issues are litigated by
consent. Id.
As the district court noted, FPD’s response to Corval’s summary-judgment motion
“sharply departs from its earlier [rule-12] assertion of contract compliance.” In response
to Corval’s motion to dismiss under rule 12, FPD argued that it adequately pleaded
compliance with the plain language of the subcontract. In ruling on Corval’s rule-12
motion to dismiss, the district court noted that the parties’ dispute centered on “whether
the subcontract provides one (the change-order process) or more than one way for FPD to
receive additional compensation due to changes in the work during contract
performance,” referring to FPD’s argument that equitable compensation is possible
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outside of the change-order process. The district court concluded that the subcontract is
not ambiguous and that “compliance with the change-order process is [FPD’s] sole means
to secure any equitable or additional compensation.” Notably, the district court’s
memorandum explaining its rule-12 ruling does not mention equitable estoppel, waiver,
or contract modification. The district court ruled that “[a]t this point, FPD has pled the
[s]ubcontract, timely compliance with all contractual terms, and Corval’s breach.”
The district court’s summary-judgment order explains its rule-12 ruling as follows:
“The motion to dismiss was denied based on FPD’s written and oral representations that
it plead[ed] nothing more than a claim for damages based on its compliance and Corval’s
breach of the contract as written.” The district court’s construction of its rule-12 ruling is
consistent with its earlier explanation of the rule-12 issues and its analysis of those issues.
See Tarlan v. Sorensen, 702 N.W.2d 915, 919 (Minn. App. 2005) (“[A] district court’s
construction of its own ruling is given great weight on appeal”). Because the district
court previously ruled that FPD’s pleading adequately set forth a breach-of-contract
claim based solely on the contract as written and because FPD did not obtain leave to
amend its pleading to include the equitable-estoppel, waiver, and contract-modification
theories that it relies on in defense of summary judgment, the district court did not err by
refusing to consider those theories. See Golla, 493 N.W.2d at 605.
Nor did the district court err by refusing to grant, sua sponte, leave to amend in
response to FPD’s suggestion, at the summary-judgment hearing, that amendment would
be proper if necessary to clarify its pleading. “A party may amend a pleading by leave of
court, and amendments should be freely granted, except where to do so would result in
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prejudice to the other party. The trial court has wide discretion to grant or deny an
amendment, and its action will not be reversed absent a clear abuse of discretion.” Fabio,
504 N.W.2d at 761 (citations omitted). “The liberality to be shown in the allowance of
amendments depends in part upon the stage of the action and in a great measure upon the
facts and circumstances of the particular case.” Dale v. Pushor, 246 Minn. 254, 262, 75
N.W.2d 595, 601 (1956).
Although FPD did not move for leave to amend, the district court indicated that it
would not allow amendment, noting that at “this late stage” discovery had ended, “all
deadlines in the scheduling order [had] passed and the case [was] supposed to be trial
ready.” The district court noted that after the discussion at the rule-12 hearing, in which
the district court agreed with Corval that FPD’s complaint did not set forth a common-
course-of-dealing theory, and the court’s order denying Corval’s rule-12 motion, “FPD
was on notice that both [Corval] and the court treated the counterclaim as a cause of
action on the contract as written. Moreover, FPD was on notice that Corval considered
the pleading deficient as to any claim for course of conduct estoppel.” The district court
observed that “FPD had plenty of time to file a motion to amend” and that it was
“surprising that FPD never sought to amend its counterclaim.” But the district court
reasoned that at the time of the summary-judgment hearing, “Corval would be
substantially prejudiced by way of time and expense if an amendment is permitted,”
because permitting an amendment would require reopening discovery, warrant another
Corval dispositive motion, and delay trial.
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The district court’s reliance on the late stage of the proceeding and the resulting
prejudice to Corval was proper under caselaw. See Cybyske v. Indep. Sch. Dist. No. 196,
Rosemount-Apple Valley, 347 N.W.2d 256, 264 (Minn. 1984) (affirming district court’s
denial of a motion to amend because “[p]laintiff delayed over a year after the filing of her
complaint, until the eve of defendants’ summary judgment motion, to make her motion to
amend”). Given the late stage and the potential prejudice, the district court did not
clearly abuse its discretion in refusing to grant, sua sponte, FPD leave to amend its
pleading.2
In sum, the district court properly limited its consideration of Corval’s motion for
summary judgment to the issue of whether FPD complied with the subcontract as written.
On that point, there is no genuine issue of material fact. FPD acknowledges that the
“undisputed evidence” establishes that it routinely submitted change-order requests “that
did not strictly comply with or follow the procedures set forth in the parties’ written
subcontract.” Because it is undisputed that FPD did not follow the change-order
procedures in the subcontract as written, which was necessary to obtain additional
compensation, the district court did not err by summarily dismissing FPD’s counterclaim
and granting Corval summary judgment on its declaratory-judgment action.
2
The district court also reasoned that amendment would be futile, addressing the merits
of FPD’s equitable-estoppel, waiver, and contract-modification theories. We do not
reach this ruling because it is unnecessary to our analysis.
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II.
We next consider FPD’s argument that the district court erred by refusing to
consider the sworn statement of a former Corval employee when ruling on summary
judgment.
In its order granting summary judgment, the district court explained that the
parties agreed to depose a former Corval employee, W.K., and stipulated to “the entry of
a court order permitting issuance of a Colorado subpoena compelling [W.K.]’s
attendance at a deposition.” FPD’s counsel obtained the subpoena, which was served on
W.K. Because W.K. was not available on the deposition date noticed in the subpoena,
FPD’s counsel and W.K. agreed to an alternative date. After Corval’s counsel declined
that date due to short notice, FPD’s counsel did not arrange a new date with opposing
counsel. Instead, counsel asked W.K. if he would provide a “sworn statement” on the
deposition date. W.K. agreed and provided sworn testimony before a court reporter. The
district court concluded that, “[u]nder the circumstances, it is unlikely that [W.K.]
understood the difference between a court-ordered deposition by subpoena and a
voluntary sworn statement following service of a subpoena.” The district court further
concluded that counsel for FPD “abused the court’s process by improperly leading the
witness to believe that his attendance was court compelled.” As a sanction, the district
court ruled that “[W.K.’s] deposition is stricken from the record of this case.”
“[C]ourts are vested with considerable inherent judicial authority necessary to
their vital function—the disposition of individual cases to deliver remedies for wrongs
and justice freely and without purchase; completely and without denial; promptly and
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without delay, conformable to the laws. The task of determining what, if any, sanction is
to be imposed is implicated by the broad authority provided the trial court.” Patton v.
Newmar Corp., 538 N.W.2d 116, 118-19 (Minn. 1995) (citations and quotations omitted).
“This court reviews an award of sanctions under an abuse-of-discretion standard.”
Frazier v. Burlington N. Santa Fe Corp., 788 N.W.2d 770, 782 (Minn. App. 2010), rev’d
on other grounds, 811 N.W.2d 618 (Minn. 2012).
In its order imposing the sanction, the district court stated the following:
The reprehensible manner in which the deposition was
scheduled is further amplified by the secretive manner in
which the subpoena and deposition notice were served, the
way Corval’s counsel was falsely led to believe that a
deposition was still being arranged after it was already
completed, and the fact that a completed deposition was
covered up until after the discovery and dispositive motion
filing deadlines passed.
FPD takes issue with the district court’s treatment of W.K.’s statement as a
“deposition,” arguing that it was “little different than a sworn affidavit.” Regardless of
the district court’s word choice, the district court based its ruling on FPD’s secretive and
deceptive conduct and the resulting abuse of the subpoena process. Under the
circumstances, the district court acted well within its discretion by striking W.K.’s
testimony from the record.
III.
Lastly, we consider FPD’s argument that the district court abused its discretion in
awarding costs to Corval. “An award of costs and disbursements has generally been
allowed within the sound discretion of the trial judge. As such, [appellate courts] review
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for an abuse of that discretion.” Kellar v. Von Holtum, 605 N.W.2d 696, 703 (Minn.
2000) (citation omitted).
FPD argues that “the district court improperly awarded Corval $57,378.00 for
premiums it paid to secure a bond that discharged FPD’s mechanic’s lien . . . . This was
not a necessary cost of the litigation and, therefore, is unreasonable.” But the subcontract
specifically provides:
Should there be any . . . lien asserted before or after
final payment is made that arises from [FPD’s] Services,
[FPD] shall reimburse [Corval] for any costs and expenses,
including attorneys’ fees, costs and expenses, incurred by
[Corval] in satisfying, discharging or defending against any
such . . . lien . . . provided [Corval] is making payments or
has made payments to [FPD] in accordance with the terms of
this Agreement.
Because the district court ruled that Corval did not owe FPD any additional
payments under the subcontract, Corval had “made payments to [FPD] in accordance
with the terms of [the] Agreement.” Thus, under the plain language of the subcontract,
Corval was entitled to reimbursement for the cost of the bond necessary to discharge the
lien.
Affirmed.
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