Valley Paving, Inc. v. Stanley Consultants, Inc. ( 2016 )

`This opinion will be unpublished and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
A15-1321
Valley Paving, Inc.,
Appellant,
vs.
Stanley Consultants, Inc.,
Respondent.
Filed May 9, 2016
Affirmed in part, reversed in part, and remanded
Jesson, Judge
Hennepin County District Court
File No. 27-CV-13-16607
Justin P. Short, Kerry C. Raymond, Ashleigh M. Leitch, Best & Flanagan LLP,
Minneapolis, Minnesota (for appellant)
Anne W. Awsumb, Amy R. Baudler, Glenn E. Purdue, Purdue Awsumb & Baudler P.A.,
Minneapolis, Minnesota (for respondent)
Considered and decided by Kirk, Presiding Judge; Peterson, Judge; and Jesson,
Judge.
UNPUBLISHED OPINION
JESSON, Judge
Appellant Valley Paving, Inc., challenges the district court’s summary-judgment
order dismissing its professional-negligence, breach-of-warranty, and breach-of-contract
claims. Because we conclude that the district court properly granted summary judgment
on Valley Paving’s professional-negligence and breach-of-warranty claims, but erred by
dismissing Valley Paving’s breach-of-contract claim, we affirm in part, reverse in part,
and remand. We also conclude that the district court erred by granting the motion of
respondent Stanley Consultants, Inc., for summary judgment on its counterclaim.
FACTS
In November 2011, the Minnesota Department of Transportation (MnDOT) issued
a request for bids on a highway-improvement project. The project was a design-build
using a guaranteed-maximum-price contract. This meant that MnDOT and a general
contractor would agree to a contract price based on the amount of the contractor’s bid,
and that even if the ultimate cost of performing the contract substantially exceeded the
contract price, the contractor would not be entitled to additional payment from MnDOT.
Valley Paving was interested in submitting a bid for the project. Stanley, an
engineering firm, helped Valley Paving develop its bid by calculating the quantities of
work necessary to complete the project. Stanley provided estimates for paving, milling,
excavation, grading, fill, pipe-and-culvert work, pavement markings, and traffic signage.
Stanley used information provided by MnDOT in preparing these estimates and gave
them to Valley Paving. Shortly before the bid was due, Stanley’s lead engineer on the
project informed Valley Paving that he was 95% sure that Stanley’s work-quantity
estimates were accurate. Valley Paving then used these work-quantity estimates to
formulate its bid and submitted the bid to MnDOT. Stanley had no contract with Valley
Paving at this point and was not compensated for its work during the bid phase of the
project.
2
Valley Paving submitted the lowest bid and was awarded the contract in late
January 2012. Valley Paving’s bid of $10,234,000 was $11,705 lower than the next
lowest bid. Valley Paving agreed to a contract with MnDOT. Shortly after Valley
Paving and MnDOT entered into a contract, Valley Paving subcontracted with Stanley to
provide final design engineering services on the project. The contract contained a
warranty provision requiring Stanley to “conform to current professional engineering
principles generally accepted as standards of the industry.” The contract also included
two notice provisions that Valley Paving claims required Stanley to inform it of any
errors in the MnDOT information or other contract documents and of any event that
might allow Valley Paving to seek a price increase on its contract with MnDOT. One of
these provisions required Stanley to “notify” Valley Paving “[i]n the event of any conflict
between or ambiguities in any documents which are part of this Agreement.” The other
required Stanley to give Valley Paving written notice of “the happening of any event
which [Stanley] believes may give rise to a claim by [Stanley] for an increase in the
Contract Price or in the scheduled time for performance, and for which [Valley Paving]
may make a corresponding claim against [MnDOT] under the Prime Agreement.”
In June 2012, New Look Contracting, Inc., with which Valley Paving had
subcontracted for excavating services, notified Valley Paving that its work quantities
were far above what Stanley had originally estimated. This resulted in Valley Paving
paying New Look significantly more for New Look’s work on the project than Valley
Paving should have, considering Stanley’s initial estimates (cost overruns). There were
also cost overruns in other areas of the project. Valley Paving asked Stanley for an
3
explanation and ceased paying Stanley, pending a resolution of the issues. The project
was substantially complete and opened to vehicle traffic in August of 2012. In
September of 2012, Stanley submitted a memo to Valley Paving, explaining that the cost
overruns were the result of errors in its work-quantity estimates, caused in part by
reliance on information provided by MnDOT.
Valley Paving estimates the total amount of cost-overruns at $911,950. It claims
that $233,000 of these cost overruns are solely the result of Stanley’s errors and that the
remaining amount is the result of Stanley’s reliance on erroneous MnDOT information.
Despite the cost overruns, Valley Paving admits that it made a profit on the project.
Valley Paving’s vice president indicated in a deposition that, although he was unsure of
the exact amount, Valley Paving may have made somewhere between $100,000 and
$500,000 in profit on the project.
Valley Paving filed this suit against Stanley. Valley Paving claimed that Stanley
committed professional negligence during the bid phase of the contract, which resulted in
the cost overruns. Valley Paving also claimed that, after it entered into the contract with
Stanley, Stanley was negligent and breached the warranty-and-notice provisions of the
contract by failing to notify Valley Paving of the cost overruns in a timely manner.
Stanley counterclaimed for the remaining $305,007 owed under the contract. The district
court granted Stanley’s motion for summary judgment, dismissing Valley Paving’s
claims and entering judgment in favor of Stanley on its counterclaim. This appeal
follows.
4
DECISION
I.
Valley Paving challenges the district court’s grant of summary judgment to
Stanley on Valley Paving’s claims of professional negligence, breach of warranty, and
breach of contract. The district court dismissed these claims because it determined that
Valley Paving failed to produce evidence creating a genuine issue of material fact as to
whether Stanley’s negligence and breaches of contract caused Valley Paving damages.
The district court addressed three damage scenarios under which Valley Paving
claimed it would have made a greater profit if not for Stanley’s negligence, breach of
warranty, and breach of contract. First, Valley Paving argued that, if Stanley had
accurately calculated the work quantities or had informed Valley Paving of MnDOT’s
inaccurate work quantities during the bid phase of the project, Valley Paving could have
revised or withdrawn its bid. Valley Paving claimed that by submitting a higher bid to
MnDOT, it could have made a much higher profit on the project, and alternatively, had it
been able to withdraw its bid, it could have made a higher profit on a different project.
Second, Valley Paving claimed that, had Stanley informed it of the cost-overrun issues
earlier in the post-bid phase of the project, Valley Paving could have made a claim
against MnDOT for an increase in the contract price. Finally, Valley Paving asserted that
if Stanley had informed it of the cost overruns in a timely fashion during the post-bid
phase of the project, Valley Paving could have made a greater profit on the project by
renegotiating with subcontractors and managing the project more efficiently.
5
Valley Paving’s quantification of damages for these different scenarios is
straightforward: an itemization of the cost overruns resulting from erroneous work-
quantity estimates. Even if the district court did not accept this approach, Valley Paving
argues that it proved that it sustained some level of damages.
On appeal from summary judgment, this court reviews de novo whether there are
any genuine issues of material fact and whether the district court erred in applying the
law. Ruiz v. 1st Fid. Loan Servicing, LLC, 829 N.W.2d 53, 56 (Minn. 2013). “We view
the evidence in the light most favorable to the party against whom summary judgment
was granted.” STAR Ctrs., Inc. v. Faegre & Benson, L.L.P., 644 N.W.2d 72, 76-77
(Minn. 2002). A genuine issue of material fact exists when there is sufficient evidence
that could lead a rational trier of fact to find for the nonmoving party. DLH, Inc. v. Russ,
566 N.W.2d 60, 69 (Minn. 1997).
In its decision, the district court reasoned that each of the three damage scenarios
failed to show that, “but for” the erroneous quantity estimates and Stanley’s failure to
notify Valley Paving of the cost overruns, Valley Paving’s outcome would have been
better. The district court noted that because Valley Paving did not lose money on the
contract it “cannot rely solely on the quantity overruns . . . to demonstrate that Stanley
caused it to suffer damages.” The district court also addressed the challenge of seeking
nearly one million dollars in cost-overrun damages for a contract Valley Paving might
not have been awarded, had the correct work-quantity estimates been used. After
carefully examining each alternative damage scenario, the district court determined that
6
Valley Paving failed to present specific evidence of a benefit that its actions would have
produced “but for” the wrong quantity estimates and Stanley’s failure to notify.
We agree with the district court that Valley Paving failed to introduce evidence
necessary to establish damages for its professional-negligence claim, which requires
concrete evidence of both (1) what the plaintiff would have done but for the negligence
and (2) what those actions reasonably would have produced. Christians v. Grant
Thornton, LLP, 733 N.W.2d 803, 812-13 (Minn. App. 2007), review denied (Minn.
Sept. 18, 2007). But this case also involves a breach-of-contract claim, which in this case
is driven by expectation damages. Logan v. Nw. Bank Minn., N.A., 603 N.W.2d 659, 663
(Minn. App. 1999); Restatement (Second) of Contracts § 344(a) (1981). Expectation
damages attempt to place the non-breaching party in the position it would have been in
had the contract been fully performed. Peters v. Mut. Benefit Life Ins. Co., 420 N.W.2d
908, 915 (Minn. App. 1988).
This case leads us to examine the historical distinction between contract and tort
law. After doing so, we conclude that the district court appropriately granted summary
judgment on the professional-negligence-related claims but applied the wrong legal
standard to Valley Paving’s remaining breach-of-contract claim.1 Accordingly, we affirm
1
At oral argument and in its reply brief, Valley Paving also argued that the
indemnification clause in the parties’ contract entitles it to damages. Valley Paving did
not defend against Stanley’s summary-judgment motion on this basis in district court, and
the district court did not address this issue. Other than as a defense to Stanley’s
counterclaim, Valley Paving also did not raise indemnification in its principal brief. This
court does not address issues not argued to and considered by the district court or matters
not raised in an appellant’s principal brief. Fontaine v. Steen, 759 N.W.2d 672, 679
(Minn. App. 2009). We therefore do not address the indemnification issue. We note,
7
summary judgment on the professional-negligence-related claims and reverse and remand
the breach-of-contract claim.
Professional-Negligence Related Claims
We first address Valley Paving’s professional-negligence claim. Stanley’s work-
quantity estimates—the basis for the professional-negligence claim—were provided to
Valley Paving before the parties entered into a contract. But even where there is no
contract, the common law imposes an obligation on engineers to perform their services
with reasonable care and competence and makes them liable for damages caused by a
failure to do so. Gammel v. Ernst & Ernst, 245 Minn. 249, 253-54, 72 N.W.2d 364, 367
(1955). As the Minnesota Supreme Court has held regarding design engineers: “One who
undertakes to render professional services is under a duty to the person for whom the
service is to be performed to exercise such care, skill, and diligence as [persons] in that
profession ordinarily exercise under like circumstances.” City of Eveleth v. Ruble, 302
Minn. 249, 253, 225 N.W.2d 521, 524 (1974). The supreme court has explained:
Architects, doctors, engineers, attorneys and others deal in
somewhat inexact sciences and are continually called upon to
exercise their skilled judgment in order to anticipate and
provide for random factors which are incapable of precise
measurement. The indeterminate nature of these factors
makes it impossible for professional service people to gauge
them with complete accuracy in every instance. . . . Because
of the inescapable possibility of error which inheres in these
services, the law has traditionally required, not perfect results,
however, that indemnity is generally only available when the plaintiff has incurred a legal
obligation to pay damages to a third party as a result of the defendant’s breach of contract
or negligence. Keefer v. Al Johnson Constr. Co., 292 Minn. 91, 98-99, 193 N.W.2d 305,
310 (1971). Valley Paving does not allege that a legal claim has been asserted against it
by a third-party as a result of Stanley’s negligence or breach of contract.
8
but rather the exercise of that skill and judgment which can be
reasonably expected from similarly situated professionals.
City of Mounds View v. Walijarvi, 263 N.W.2d 420, 424 (Minn. 1978).
The imposition of this duty on engineers, like other professionals, through the
common law is the result of the evolution of tort law. Originally, tort law of negligence
focused on securing compensation for losses due to physical injury or injury to property.
Dan B. Dobbs, The Law of Torts § 111 (2000). As time progressed, tort law began to
recognize emotional and psychological injuries, in addition to economic damages due to
professional negligence. See Purcell v. St. Paul City Ry. Co., 48 Minn. 134, 50 N.W.
1034 (1892) (recognizing claim for negligent infliction of emotional distress); Waldor
Pump & Equip. Co. v. Orr-Schelen-Mayeron & Assocs., Inc., 386 N.W.2d 375, 377
(Minn. App. 1986) (holding professional engineers liable in negligence for economic
losses to those foreseeably relying on their services). But while tort law expanded to
damages beyond personal injury, it has also generally required proof that those damages
would not have occurred “but for” the defendant’s negligence. See Dobbs, supra, § 168
(discussing application of “but for” test to “the great mass of [negligence] cases”). This
but-for analysis has developed strict requirements in the legal-malpractice realm, where
plaintiffs are required to prove both that their attorney was negligent and that but for that
negligence they would have prevailed in a prior claim. Id., § 486. Varying applications
of this stringent but-for analysis have also been applied in non-attorney malpractice
cases. See, e.g., Christians, 733 N.W.2d at 808, 812-13 (applying but-for causation test
in auditor-malpractice case.)
9
We conclude that the Minnesota Supreme Court’s framing of the “but for” test in
transactional legal malpractice matters best fits the case before us. Under that test, to
sustain its action for professional negligence Valley Paving must prove four elements:
(1) the existence of a duty; (2) breach of that duty; (3) that Stanley’s negligence was the
proximate cause of Valley Paving’s damages; and (4) that, but for Stanley’s negligence,
Valley Paving would have obtained a more favorable result. Jerry’s Enters., Inc. v.
Larkin, Hoffman, Daly & Lindgren, Ltd., 711 N.W.2d 811, 816, 819 (Minn. 2006). We
ask, regarding the fourth element of the claim for professional negligence (but-for
causation), whether Valley Paving has shown that, but for Stanley’s conduct, it would
have made more money on the transaction than the result obtained. Id. at 819. To do so,
Valley Paving needed to provide concrete evidence of a hypothetical alternative to
answer the question—what would have happened if Stanley had not been negligent? See
Christians, 733 N.W.2d at 813 (requiring specific evidence of hypothetical alternative);
see generally Dobbs, supra, § 169 (discussing the role of the “hypothetical alternative” in
the but-for causation analysis).
We examine each of Valley Paving’s damage scenarios in turn. While some of the
scenarios painted by Valley Paving might provide the “hypothetical alternative” required
by the “but for” causation requirement, Minnesota law requires more than a hypothetical.
It requires some facts to demonstrate that the plaintiff would have made more money in
the hypothetical situation. Christians, 733 N.W.2d at 813.
Valley Paving first argues that, if Stanley had properly calculated the work
quantities, its contract bid would have been much higher and it, therefore, would have
10
earned a much greater profit on the project. As the district court explained, however,
because the second lowest bid was only $11,705 higher than Valley Paving’s bid, Valley
Paving would not have submitted the lowest bid if not for Stanley’s negligence. Valley
Paving claimed at oral argument that it could have won the project without submitting the
lowest bid. This, however, is mere speculation. Damages that are remote and speculative
are not recoverable. Jackson v. Reiling, 311 Minn. 562, 563, 249 N.W.2d 896, 897
(1977). There is no evidence in the record indicating that Valley Paving would have been
awarded the project if its bid had been over $900,000 higher. In addition, there was no
evidence submitted to the district court that Valley Paving could have earned a greater
profit on a different project if it had not won the bid or decided, after receiving accurate
estimates from Stanley, not to submit the bid.
Minnesota caselaw provides numerous examples of failure to meet the “but for”
causation standard in similar professional-negligence cases. In Blue Water Corp. v.
O’Toole, the plaintiffs alleged professional negligence against an attorney for failing to
timely file an application for a bank charter. 336 N.W.2d 279, 282 (Minn. 1983). After a
jury verdict for the plaintiffs, the supreme court reversed and remanded with instructions
to grant judgment for the attorney because the plaintiffs failed to show that the
application would have been accepted had the attorney filed it on time. Id. Just as there
was no evidence in Blue Water that the application would have been granted if not for the
attorney’s negligence, there is no evidence in this case that Valley Paving would have
received the project if not for Stanley’s erroneous quantity estimates.
11
In Christians, a bankruptcy trustee for a corporate debtor brought an auditor-
malpractice claim, alleging that an accounting firm’s audit showed that the corporation
was solvent, when in fact it was not. 733 N.W.2d at 807. The trustee claimed that if the
corporation had known it was insolvent earlier, it could have filed for bankruptcy and
conducted a successful Chapter 11 reorganization. Id. at 812-13. We affirmed summary
judgment for the auditing firm because the trustee failed to present any “concrete
evidence” that the corporation actually would have come out of bankruptcy in a better
position had the audit informed it of its insolvency. Id. at 813. Similarly, Valley Paving
failed to produce any concrete evidence that it would have received the project had its bid
reflected the proper work quantities.
Like the plaintiffs in Blue Water and Christians, Valley Paving failed to submit
any concrete evidence showing how Stanley’s negligence in the bid phase of the project
caused it damages.
Valley Paving argues that in the post-bid phase of the project, Stanley also was
negligent in its failure to provide earlier notice of the cost overruns. Valley Paving
claims that with proper notice it could have earned greater profits by making a claim
against MnDOT for an increase in the contract price, or renegotiated its agreements with
subcontractors and managed the project more efficiently. These damage scenarios suffer
from the same deficit as the claim above: they assume that Valley Paving would have
received the contract with MnDOT. Because of the lack of concrete evidence to support
this hypothetical, summary judgment was appropriate.
12
Finally, Valley Paving attempts to shoehorn its professional-negligence claims
into the subsequent contract through the warranty provision contained in the contract with
Stanley, signed after Valley Paving received the MnDOT contract. The provisions of the
contract that refer to warranty and quality of services, however, simply hold Stanley to
the same standard of care applied by the common law in professional-negligence cases.
See Gammel, 245 Minn. at 253-54, 72 N.W.2d at 367 (stating this standard of care). The
contract explicitly states that the warranty “shall not be construed to elevate [Stanley’s]
standard of care. . . concerning the quality of [Stanley’s] services.” This court has
previously held that the but-for causation element in professional-negligence claims
applies equally to malpractice claims that arise out of contract. Christians, 733 N.W.2d
at 808. Because we conclude that Valley Paving’s breach-of-warranty claim is
essentially a malpractice claim, it fails to meet the but-for causation element as discussed
above.
Valley Paving failed to introduce the concrete evidence necessary to allow jurors
to reach a nonspeculative conclusion as to how it would have earned a larger profit on the
project, but for Stanley’s negligence. Because there are no genuine issues of material fact
as to causation of damages, we conclude that the district court properly granted summary
judgment and dismissed Stanley’s professional-negligence and related breach-of-
warranty claims.
Breach-of-Contract Claim
Unlike Valley Paving’s professional-negligence related claims, the breach-of-
contract claim does not require Valley Paving to meet the professional-negligence
13
causation standard, which calls into question whether Valley Paving would have received
the MnDOT contract “but for” the low work-quantity estimates. The starting place for a
breach-of-contract claim is straightforward: is there a contract? Thomas B. Olson &
Assocs., P.A. v. Leffert, Jay & Polglaze, P.A., 756 N.W.2d 907, 918 (Minn. App. 2008),
review denied (Minn. Jan. 20, 2009). Here, a contract is in place. The next two questions
are whether that contract was breached by Stanley and, if so, whether damages resulted
from Stanley’s breach. Border State Bank v. Bagley Livestock Exch., Inc., 690 N.W.2d
326, 336 (Minn. App. 2004), review denied (Minn. Feb. 23, 2005).
Contract actions protect a different interest from tort claims—they “protect the
interest in having promises performed.” D & A Dev. Co. v. Butler, 357 N.W.2d 156, 158
(Minn. App. 1984). The determination of what damages (if any) result from a contract
breach reflects this distinction. The role of contract damages is to place the aggrieved
party in the position it would have been in if the contract had been performed, Peters, 420
N.W.2d at 915, or to compensate a party for losses resulting from a change in position
due to reliance on the contract. Ngyuyen v. Control Data Corp., 401 N.W.2d 101, 105-06
(Minn. App. 1987). Valley Paving seeks the former, which are referred to as
“expectation damages.” These damages are intended to reflect the expectations of the
parties as set out in the contract. Starlite Ltd. P’ship v. Landry’s Rest. Inc., 780 N.W.2d
396, 398 (Minn. App. 2010). Significantly in this case, the contract-damage standard is
different from, and less stringent than, the “but for” standard required in professional-
negligence claims.
14
Here, Valley Paving claimed that Stanley breached the parties’ contract by failing
to notify it of the cost overruns in a timely manner. The parties’ contract required
Stanley to inform Valley Paving “[i]n the event of any conflict between or ambiguities in
any documents which [were] part of” the parties’ agreement and to inform Valley Paving
of any “event” that might have allowed Valley Paving to seek an increase on its contract
with MnDOT. The damages attributed to breach of these provisions fall into two
scenarios. First, Valley Paving’s vice president stated in his deposition that, based on his
experience with MnDOT and his company’s ongoing relationship with MnDOT, if
Valley Paving had been promptly informed of the issues resulting in the cost overruns,
Valley Paving would have been in a position to seek a price adjustment from MnDOT.2
Second, Valley Paving claims that had it known about the cost overruns earlier, it could
have notified subcontractors and asked them to revisit their bids or found more efficient
ways to manage the project. If it had been able to undertake one of these actions (with
appropriate notice from Stanley), Valley Paving argues that it would have been able to
recoup some or all of the cost overruns that it claims as damages.
Given the multi-faceted world of construction contracting, these damage claims
may have survived summary judgment, had the appropriate legal standard (expectation
damages) been applied. The contract between MnDOT and Valley Paving indicates that
Valley Paving would not have been entitled to an increase on the contract based on cost
overruns. This could be seen as limiting the expectations of Valley Paving and Stanley
2
We note that because Valley Paving and Stanley had no contract in the pre-bid phase of
the project, Valley Paving’s breach-of-contract claims relate only to post-bid activities.
15
by foreclosing the possibility of an increase on the MnDOT/Valley Paving contract. On
the other hand, the contract between Valley Paving and Stanley (which was drafted by
Stanley) specifically provides for written notice of an event that may give rise to a claim
against MnDOT under the MnDOT/Valley Paving contract. This provision could be
viewed as defining the expectations of Valley Paving and Stanley that a claim against
MnDOT for increased payments was possible. This interpretation of the parties’
expectations appears reasonable in light of the deposition of Valley Paving’s vice
president stating that, if brought in a timely fashion, such a claim would indeed have been
possible.
Nor is the scenario unreasonable that, with notice, Valley Paving may have been
able to find efficiencies in a ten-million-dollar contract in order to cover some of the cost
overruns. This was a project under their control. The allegation that some of the eight
subcontractors, which may have or desire long-term relationships with Valley Paving,
would work with the company to make reductions is not unreasonable in the construction
industry. Commentators have observed that the construction industry “involves the
efforts of contractors, professionals, analysts, artisans, and laborers” often engaged in
“extended long-term relationships.” Thomas J. Stipanowich, Reconstructing
Construction Law: Reality and Reform in a Transactional System, 1998 Wis. L. Rev.
463, 465 (1998).
Valley Paving provided a precise calculation of the total amount of cost overruns.
Although the exact extent to which Valley Paving may have been able to recoup some of
these funds through renegotiations or other efficiencies is unclear, Valley Paving is not
16
required to prove the amount of damages to a certainty. See Leoni v. Bemis Co., 255
N.W.2d 824, 826 (Minn. 1977) (stating this principle). Valley Paving need only provide
proof of a reasonable basis upon which damages can be estimated. Id. And the amount
of damages is generally a question of fact for the jury. Snyder v. City of Minneapolis,
441 N.W.2d 781, 789 (Minn. 1989).
The district court dismissed Valley Paving’s breach-of-contract claim because it
determined that Valley Paving could not prove that Stanley’s alleged breach caused it
damages. The district court also found that Valley Paving failed to provide a reasonable
basis upon which to estimate the amount of damages. In assessing Valley Paving’s
breach-of-contract claim, the district court applied the but-for element of causation of
damages. The district court compared Valley Paving’s damages to the damages alleged
in two professional-negligence cases, Christians, 733 N.W.2d at 803, and Schmitz v.
Rinke, Noonan, Smoley, Deter, Colombo, Wiant, Von Korff & Hobbs, Ltd., 783 N.W.2d
733, 741 (Minn. App. 2010), review denied (Minn. Sept. 21, 2010). The district court
also cited these cases as providing the essential elements of Valley Paving’s breach-of-
contract claim. But, as stated above, the strict but-for causation element applied in these
cases is only relevant to Stanley’s professional-negligence related claims.
When the district court applies an incorrect legal standard to a party’s claim, we
may remand for application of the proper standard. Gradjelick v. Hance, 646 N.W.2d
225, 235 (Minn. 2002). Accordingly, we reverse the district court’s dismissal of Valley
Paving’s breach-of-contract claim and remand the matter for reconsideration in light of
the principles we have described and without regard to the but-for causation element.
17
We also note that the district court did not consider whether Valley Paving
submitted sufficient evidence of breach to survive summary judgment on its contract
claim. The district court also did not rule on the admissibility of the testimony of Valley
Paving’s expert witness. On appeal, we do not consider matters not addressed by the
district court. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988). To the extent that
they remain applicable, the district court shall address these issues on remand.
II.
Finally, Valley Paving argues that the district court erred by granting Stanley’s
motion for summary judgment on its counterclaim for the remainder of money owed
under the contract. We agree. A material breach of contract allows a party to withhold
payment on the contract. BOB Acres, LLC v. Schumacher Farms, LLC, 797 N.W.2d 723,
728 (Minn. App. 2011), review dismissed (Minn. Aug. 12, 2011). Also, a prevailing
party may offset the amount it owes on a contract from its damages. Solidification, Inc.
v. Minter, 305 N.W.2d 871, 873 (Minn. 1981). Because we reverse the district court’s
grant of summary judgment to Stanley on Valley Paving’s breach-of-contract claim,
summary judgment is premature on Stanley’s counterclaim.
Affirmed in part, reversed in part, and remanded.
18