Associated Mech v. HDR Engineering Inc

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ASSOCIATED MECHANICAL
CONTRACTORS, INC.,
Plaintiff-Appellant,
v.
HDR ENGINEERING INCORPORATED
OF THE CAROLINAS, a North Carolina
Corporation,
Defendant-Appellee, No. 97-2737
and
WESTINGHOUSE ENVIRONMENTAL AND
GEOTECHNICAL SERVICES,
INCORPORATED, formerly known as
S&ME, Incorporated, a North
Carolina Corporation,
Defendant.
Appeal from the United States District Court
for the Western District of North Carolina, at Charlotte.
Robert D. Potter, Senior District Judge.
(CA-95-232-P)
Argued: December 1, 1998
Decided: April 29, 1999
Before WILKINSON, Chief Circuit Judge, TRAXLER,
Circuit Judge, and HILTON, Chief United States District Judge for
the Eastern District of Virginia, sitting by designation.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Charlie Chong Ho Lee, WATT, TIEDER, HOFFAR &
FITZGERALD, McLean, Virginia, for Appellant. George Verner
Hanna, III, MOORE & VAN ALLEN, P.L.L.C., Charlotte, North
Carolina, for Appellee. ON BRIEF: M. James Grode, MOORE &
VAN ALLEN, P.L.L.C., Charlotte, North Carolina, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
This case is before the Court on appeal of the District Court's grant
of summary judgment in favor of the defendant on the claims of
indemnification, breach of contract, and on the plaintiff's contention
that the District Court gave improper instructions to the jury. Addi-
tionally, the plaintiff contends that the District Court erred in answer-
ing a jury's question during the deliberations.
Appellant Associated Mechanical Contractors, Inc., ("AMC") was
the general contractor for phase II of the Tuckertown Water Treat-
ment Plant project in Stanly County, North Carolina, near the City of
Albemarle, North Carolina. The City of Albemarle (the "City") was
the owner of the property on which it contracted for the project relat-
ing to the City's water supply system. Appellee HDR Engineering,
Inc. of North Carolina, ("HDR") was hired by the City as the design
engineer and contract administrator for the project. S&ME, Inc. was
the geotechnical engineer hired by the City to conduct subsurface
explorations relating to the Plant site.
HDR, as design engineer, had S&ME perform three separate geot-
echnical explorations; two preliminary reports dated November 9,
1987 and April 29, 1988, and a final report dated June 29, 1988. The
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preliminary 1987 report pertained solely to the subsurface of the raw
water reservoir identifying the presence of impenetrable, unrippable
rock. The 1987 report specifically mentioned that the contractor
should anticipate blasting at the raw water reservoir site. This report
was not dispersed by HDR to prospective bidders for the raw water
reservoir project. HDR gave all bidders a copy of the final June 1988
report dealing specifically with the Tuckertown Water Treatment
Plant. In the final 1988 report, prospective bidders were notified that
two preliminary subsurface exploration reports pertaining to this proj-
ect were available upon request.
The excavation portion of the Contract for the Tuckertown Water
Treatment Plant project was bid unclassified. AMC submitted a bid
and was successful in winning the Contract. AMC's bid did not take
into account the presence of the subsurface unrippable rock, and due
to the necessity for blasting of subsurface rock, ran into project cost-
overruns. AMC submitted this "Rock Claim" to the City, and the
claim was denied. AMC subsequently sued the City and the case was
settled prior to trial. Through the settlement negotiations between
AMC and the City, AMC received a total of $1.1 million, $931,000
of which went for the Rock Claim and assignment of all the City's
possible claims against HDR. AMC, as assignee of the City's claims,
subsequently brought suit against HDR for the $931,000 payment, as
well $294,014.06 due to HDR's alleged defective design of the Tuck-
ertown Water Treatment Plant.
The District Court considered this case on summary judgment. The
complaint alleged indemnification (Count I), breach of contract
(Count II), negligence (Count III), and professional malpractice
(Count IV). The District Court granted summary judgment as to all
claims except the Count II claims for defective design and poor con-
tract administration.
The District Court found the Contract did not impose a duty upon
the City to provide AMC with any other reports other than the final
1988 report, and limited the contractor's reliance to only the "techni-
cal" data in the final 1988 report itself. The Court found that "techni-
cal" data included the boring laboratory data, but did not include
opinions or interpretations by S&ME personnel that related to the
requirement of blasting rock that may be located at the raw water res-
3
ervoir site. Further, if the contractor had determined that it required
additional information, the burden was on the contractor to seek the
information by conducting its own tests. The District Court based its
opinion on the language of the Contract between AMC and the City.
Within the Contract Documents, that portion discussing S&ME's
report stated:
Bidder may rely on the accuracy of the "technical" data
contained in [the final report] but not upon non-technical
data, interpretations or opinions contained therein, or for the
completeness thereof for the purposes of bidding or con-
struction.
[T]he technical data contained therein upon which Bidder
is entitled to rely are incorporated therein by reference. Such
technical data is boring method, location and logs, and labo-
ratory test methods and results.
Before submitting a bid, each Bidder will, at Bidder's
own expense, make or obtain any additional examinations,
investigations, explorations, tests and studies and obtain any
additional information and data which pertain to the physi-
cal conditions, surface or subsurface, at or contiguous to the
site . . . which Bidder deems necessary to determine its Bid
for performing and furnishing the work in accordance with
the time, price and to the terms and conditions of the Con-
tract Documents.
The District Court found for the defendant on AMC's claims of
breach of contract because the excavation portion of the AMC Con-
tract was bid "unclassified." Therefore, AMC bore the risk of the sub-
surface conditions, and the City (and therefore HDR) had provided all
borings and technical data included in S&ME's reports. The City had
no duty to provide any more information to AMC other than that
information contained in the final June 1998 report.
The District Court found HDR was entitled to summary judgment
on Counts II, III, and IV as they pertain to the City's attorney's fees
and litigation disbursements. In the absence of express contractual
language providing for indemnification of attorney's fees, they were
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not subject to an indemnification provision. See United States v.
Fidelity & Guar. Co. v. Davis Mechanical Contractors, Inc., 189
S.E.2d 553, 554 (N.C. Ct. App. 1972). The Court found HDR entitled
to summary judgment on AMC's claims for indemnification relating
to problems with the Plant structures, and for indemnification on all
of the expenses other than the amount allocated to the Rock Claim
because they were not claims as contemplated in the Indemnification
Provision of the Contract. The Court found HDR entitled to summary
judgment on AMC's claims for negligence (Count III) and profes-
sional malpractice (Count IV). In North Carolina, a plaintiff may not
bring an action for negligence or professional malpractice when there
is a contractual relationship between the parties, except in very lim-
ited circumstances not applicable to the parties in the present case.
See North Carolina State Ports Auth. v. Lloyd A. Fry Roofing Co.,
240 S.E.2d 345 (N.C. 1978).
The only claim which survived the District Court's ruling was
Count II as it related to defective design and poor contract administra-
tion. This issue was tried to a jury and, at the conclusion of the evi-
dence, the District Court submitted a verdict form containing four
questions for the jury: 1) Did the City properly assign its claims to
AMC? 2) Did the Contract for design services between the City and
HDR require HDR to design a totally crack-free, leak-free project? 3)
Did HDR breach its Contract for design services with the City? 4)
How much is AMC entitled to recover for HDR's breach?
The District Court instructed the jury that if it answered "no" to any
question on the verdict form, it was to stop and not consider the suc-
ceeding questions.
During the course of deliberations, the jury submitted a question to
the Court asking whether the terms "totally crack free, leak free" from
Question No. 2 meant (1) "cracks that leak" or (2) "totally crack free
and totally leak free." The Court answered that"totally crack free,
leak free" meant "totally crack free and totally leak free." Thereafter
the jury returned the verdict form answering "no" to Question No. 2,
and stopped it's deliberation finding in favor of the defendant.
The standard of review in determining whether the District Court
erred in granting summary judgment in favor of HDR and against
5
AMC on the Rock Claim is de novo. See Wiley v. Mayor and City
Council of Baltimore, 48 F.3d 773 (4th Cir. 1995); Freeman v. Case
Corporation, 118 F.3d 1011 (4th Cir. 1997), cert. denied, 118 S.Ct.
739 (1998). This Court must consider all the pleadings and allegations
in a light most favorable to the non-moving party and decide whether
there is a genuine issue of material fact to be submitted to the trier
of fact. Fed. R. Civ. P. 56(c). If the Court finds the evidence insuffi-
cient to support a reasonable jury verdict in favor of the non-moving
party, the district court's granting of summary judgment must be
affirmed. See Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 251-52
(1986).
The nexus of this lawsuit by AMC is based on the fact that AMC
did not receive the information pertaining to the unrippable rock in
the final 1988 report submitted to all prospective bidders for phase II
of the raw water reservoir project. The facts establish that the excava-
tion portion of the AMC Contract was bid unclassified. The Contract
being bid unclassified resulted in the contractor, AMC, bearing the
risk of subsurface conditions. See Ruby-Collins, Inc. v. City of
Charlotte, 70 F. Supp. 1159 (W.D.N.C. 1990), aff'd, 930 F.2d 23 (4th
Cir. 1991); see also APAC-Carolina, Inc. v. Greensboro-High Point
Airport Auth., 431 S.E.2d 508, 512-13 (N.C. Ct. App.), rev. denied,
438 S.E.2d 197 (N.C. 1993) (where all excavation was"unclassified,"
the contractor was not entitled to compensation at a higher rate for
undercut work it allegedly did not expect to have to perform); see
generally Thompson-Arthur Paving Co., a Div. of APAC-Carolina,
Inc. v. North Carolina Dep't. of Transp., 387 S.E.2d 72 (N.C. Ct.
App.), rev. denied, 394 S.E.2d 186 (N.C. 1990) (bid estimates in a
contract for unclassified excavation do not amount to a warranty of
the amount of excavation to be encountered, so contractor bore the
risk of their inaccuracy).
The appellant in this case does not dispute that AMC's Contract
with the City states that all excavation will be defined as unclassified.
Nor does the appellant contend that upon request, S&ME failed to
provide AMC with a complete copy of the final June 1988 report.
Appellant contends that they should have been provided with the
additional preliminary reports, or allowed to rely upon the informa-
tion that was provided to them in the final 1988 report to determine
6
their total costs for its bid. However, within the Contract Documents,
the Information for Bidders; Subsurface Investigation provided:
Copies of the report entitled "Report of[Sub]Surface
Explorations, Proposed Water Treatment Plant, Albemarle,
North Carolina, S&ME Job No. 1351-88-158" are on file at
the offices of the City of Albemarle, Director Water/Sewer
Utilities; HDR Engineering, Inc. of North Carolina; and at
Soil & Materials Engineers, Inc.
Copies of this report with any related information may be
secured from the above upon written application and pay-
ment to [S&ME].
Additionally, the Contract Documents state that:
Before submitting a bid, each Bidder will, at Bidder's
own expense, make or obtain any additional examinations,
investigations, explorations, tests and studies and obtain any
additional information and data which pertain to the physi-
cal conditions, surface or subsurface, at or contiguous to the
site . . . which Bidder deems necessary to determine its Bid
for performing and furnishing the work in accordance with
the time, price and to the terms and conditions of the Con-
tract Documents.
The Contract Documents clearly placed AMC on notice that addi-
tional S&ME subsurface reports were available at their request. While
AMC alleges that HDR was required to provide this additional infor-
mation, the Contract Documents state that the preliminary reports or
drawings, although made available to potential bidders, were not part
of the Contract Document and not required to be provided with the
contract information. The obligation was on AMC to request the pre-
liminary reports, if it deemed necessary, to formulate the costs for its
bid.
The Contract Documents specifically provided that the bidder,
although allowed to rely upon the accuracy of the"technical" data of
the final 1988 report, may not rely upon the non-technical data, inter-
7
pretations or opinion contained therein, or for the completeness
thereof for the purposes of bidding or construction. The Contract
Documents specifically placed the burden on the Bidder to make its
own "investigations, explorations, tests and studies" to determine its
bid. AMC failed to follow these terms of the Contract.
The Contract Documents put an express burden on bidders to
request any clarifications they deemed necessary. In Paragraph 3(a)
of the General Conditions and referenced by the Information for Bid-
ders, the submission of the Proposal for the Contract proves acknowl-
edgment that the Contractor has carefully examined all the documents
pertaining to the project. If for some reason the Contract Documents
needed clarification, there was a specific procedure for receiving clar-
ification under the General Conditions of the Contract. Specifically,
the Contract states: "If a bidder intends to submit a bid for Work and
is in doubt as to the true meaning of any part of the proposed Contract
Documents, he may submit ... a written request for an interpretation
thereof." (City of Albemarle Contract No.2; General Condition, p. 4).
This provision appears to clearly place the burden on the bidder to
request any additional clarification. However, AMC provided no evi-
dence that it requested any clarifications as to the"technical data" it
was allowed to rely upon as stated in the final 1988 report. AMC was
not owed the preliminary reports by S&ME pertaining to the subsur-
face of the site nor were they entitled to rely solely on the final report
as evidenced in the Information for Bidders. It was the duty of AMC
to find out any additional information necessary for its bid and AMC
failed to request this information, thus, based its bid on its own lack
of investigation.
AMC asserts an indemnification claim against HDR, alleging HDR
breached its duty to the City and that the breach was the sole cause
of the City's damages.
The 1989 Agreement between HDR and the City of Albemarle pro-
vides that "[t]he engineer hereby agrees to indemnify the owner for
all claims arising solely from negligent acts, errors or omissions of the
engineer in the performance of professional services under this
Agreement." (Agreement Between City of Albemarle, N.C. and HDR
Engineering, Inc. of N.C. for Professional Services, p. 13, March 20,
1989) (emphasis added). Thus, if any other party failed to act reason-
8
ably prudent under the circumstances, and that negligence contributed
to the City's loss, the indemnification provision does not apply. N.C.
GEN. STAT. § 22B-1 (1997). For AMC to recover from its indemnifi-
cation claim, AMC must prove that HDR breached a duty to the City
and that the breach was the sole cause of the City's damages.
The record shows that S&ME was the party that prepared all soil
reports relating to the raw water reservoir project. They conducted the
borings and site investigations upon which the reports were based.
HDR did not have involvement in the investigations or the prepara-
tions of the reports, and under the language of the Contract Docu-
ments, did not guarantee their accuracy. S&ME represented in their
June 1988 report and cover letter that the report superseded the earlier
reports and contained all applicable laboratory and soil boring infor-
mation. Therefore, irrespective of whether HDR acted alone in decid-
ing what reports to make available, that decision could be negligent
only if the final June 1988 report did not contain all pertinent techni-
cal data, or the technical data was inaccurate. Because S&ME pre-
pared the report and represented that it was complete, S&ME was also
responsible for any such alleged incompleteness or inaccuracy.
The record shows that AMC contributed to the alleged negligence
by failing to perform a reasonable site investigation. Under the terms
of the Contract Documents, AMC was required to obtain any addi-
tional information relating to subsurface conditions necessary to com-
pute its bid. AMC failed to investigate, thus the cause for their cost
overrun of the bid amounts. Therefore, HDR could not have been the
sole cause of the City's purported damages, allowing for an indemni-
fication cause of action. AMC was not owed the preliminary reports
by S&ME pertaining to the subsurface of the site nor were they enti-
tled to rely solely on the final report as evidenced in the Information
for Bidders. It was the duty of AMC to find out any additional infor-
mation necessary for its bid, and AMC failed to request this informa-
tion, thus, based its bid on its own lack of investigation. See Ruby-
Collins, 740 F. Supp. at 1163. The District Court therefore did not err
in granting summary judgment in HDR's favor.
AMC contends that the District Court erred in submitting Question
No. 2 on the jury verdict form to the jury and instructing the jury not
to continue to Question No. 3 if it answered "no" to Question No. 2.
9
AMC asserts that the issue in number three could be a separate breach
by HDR with the City, and that the jury could have found in its favor.
By not allowing the jury to proceed with its deliberation if it found
against Question No. 2, AMC alleges it was deprived of its right to
have the jury decide whether or not HDR breached the portion of its
Contract with the City that required it to administer the construction
process.
The standard of review for jury instructions in determining whether
the District Court erred is whether there was an abuse of discretion.
In reviewing the adequacy of the District Court's choice of jury
instructions, "we accord the District Court much discretion and will
not reverse provided that the instructions, taken as a whole, ade-
quately state the controlling law." Teague v. Bakker, 35 F.3d 978, 985
(4th Cir. 1994), cert. denied, 513 U.S. 1153 (1995); see also
Lohrmann v. Pittsburgh Corning Corp., 782 F.2d 1156, 1164 (4th Cir.
1986).
The District Court, by giving the jury instruction not to proceed
any further if it answered "no" to any one of the questions, was not
in error. The jury found that the Contract for design services between
the City and HDR did not require HDR to design a totally crack-free,
leak free project. As such, HDR would not have breached its contract
for design services with the City. AMC's complaint addressing Ques-
tion No. 3 was about HDR directly, not the City. Thus, there was not
a separate and independent basis for breach of contract. AMC's asser-
tion that HDR required AMC to perform repairs beyond its contrac-
tual requirements fails to link any allegation that there was a breach
of HDR's duty to the City.
Additionally, AMC asserts that the District Court erred in instruct-
ing the jury on the meaning of the phrase "totally crack-free, leak-
free" to mean "totally creak free and totally leak-free" when ques-
tioned as to the meaning of Question No. 2 on the jury verdict form.
The standard of review in determining whether the District Court
committed reversible error when it answered a question from the jury
during the deliberations is whether the answer fairly responded to the
jury's question without creating prejudice. See United States v. United
Medical & Surgical Supply Corp., 989 F.2d 1390, 1406-07 (4th Cir.
1993); Wellington v. Daniels, 717 F.2d 932, 938 (4th Cir. 1983). The
10
Court will not reverse a judgment because of an erroneous jury
instruction if "viewed as a whole and in the context of the trial, the
charge was not misleading and contained an adequate statement of the
law to guide the jury's determination." Id. at 1407 (quoting United
States v. Park, 421 U.S. 658, 675 (1975)).
During the jury deliberations, the District Court responded to the
jury's inquiry as to the definition of "totally crack free, leak free" in
Question No. 2 on the jury verdict form. The jury questioned whether
the term "totally crack free, leak free" meant"cracks that leak" or "to-
tally crack free and totally leak free." The appellant contends that the
District Court erred when it answered the jury's inquiry stating that
the term meant "totally crack free and totally leak free." The appellant
argues that the definition of "totally creak free, leak free" was a ques-
tion for the jury to determine, and not for the Judge to have instructed
the jury upon.
AMC has not demonstrated that the District Court's interpretation
of the term "totally crack free, leak free" created any prejudice to
AMC. AMC submitted its own proposed jury instructions addressing
the possible design defect by HDR in Question No. 3, stating that "the
design would result in a project that was free of leaks and cracks."
AMC's proposed jury instruction for Question No. 4 again referred
to the project as "free of leaks and cracks." AMC clearly distinguishes
the definition of "totally crack free, leak free" as "totally crack free
and leak free" and not "cracks that leak." The District Court's
response to the jury's question that "totally crack free, leak free"
meant "totally crack free and totally leak free" in essence, follows the
same line of reasoning that AMC asserted in its own argument. There-
fore, this Court can find no error in the District Court's instruction.
Even if the Court were to have found the District Court erred in
giving its instruction, "an error in jury instructions will mandate
reversal of a judgment only if the error is determined to have been
prejudicial, based on a review of the record as a whole." United Medi-
cal & Surgical Supply Corp., 989 F.2d at 1406-07 (quoting
Wellington v. Daniels, 717 F.2d 932, 938 (4th Cir. 1983)). Based on
the review of the record, the Court finds that there was no prejudicial
error that would mandate reversal of the judgment.
AFFIRMED
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