Albin Carlson & Co. v. State of Illinois

ORDER

KUBASIAK, J.

THIS MATTER is before the Court on Respondent’s Motion for Summary Judgment.

NATURE OF THE CLAIM

Albin Carlson Co. (“Claimant”) contracted with the Illinois Department of Natural Resources (“Respondent”) to construct improvements to the Yorkville Dam in the Fox River. The improvements were to consist of three phases. Phase 1 began in 2006 with the construction of a stepped spillway. In 2008, Claimant began Phase 2, which is the subject of this dispute. The terms and conditions governing payments and extra work were the same in both Phase 1 and Phase 2, and Respondent issued multiple Change Orders in both phases of construction.

In July 2008, while constructing the improvements required by Phase 2, Claimant found that the soils to be excavated and hauled off-site were contaminated with heavy metals (“Differing Site Conditions”), and would not be accepted by CCDD landfills as contemplated by the contract. Thereafter, Respondent’s Resident Engineer directed Claimant to cease removal of the material while Respondent collaborated with the Illinois Environmental Protection Agency (“IEPA”) to determine how to address this issue. While awaiting direction from Respondent in early-September 2008, Claimant’s project manager warned that the Differing Site Conditions had impacted the installation of a roller compacted dam, which was weather dependent and critical to the overall schedule of the project. Scheduling was important, and based upon its experience in Phase 1, Claimant formulated a planned sequence of work for Phase 2. When work is performed out of sequence, the result is construction delays and increased costs.

In mid-September 2008, while awaiting Respondent’s decision about the Differing Site Conditions, rainfall in excess of twelve inches caused the Fox River to exceed 18,000 CFS per the United States Geological Survey (“USGS”) water data. The contract between the parties defined a flood event that exceeds 17,697 CFS as a “100-year flood event” - a “cataclysmic event,” by contractual definition. As a result, Claimant requested a time extension under the contract on October 1, 2008.

By October 30, 2008, Respondent had not yet made determinations as to whether to grant Claimant’s requested time extension, or how to address the Differing Site Conditions. Claimant’s [*170] project manager informed Respondent that as a result of the delays, the construction of the RCC dam in November was impractical due to the temperatures required by the contract specifications. As a solution, Claimant proposed utilizing poured concrete to construct the dam (“PCC Dam”), which would “provide a higher quality end product” and would allow work to continue through the adverse weather. Claimant informed Respondent that if the use of winter protection were required, it would seek reimbursement for such costs. Throughout the winter of 2008-09 and into the spring of 2009, Claimant continued to construct the improvements necessary under the contract. Complicating the situation were four (4) additional flood events. While not in and of themselves “cataclysmic events,” Claimant argues that the damage caused by these subsequent floods was much greater than it would have been but for the delays caused by Respondent in addressing the Differing Site Conditions, the “cataclysmic” flood, and Claimant’s requested time extension.

Respondent eventually granted the time extension in Change Order 4, on June 12, 2009; 8 and ½ months after the initial request was made. According to Claimant, this delay caused it to face liquidated damages of almost $2,000 per day - resulting in unavoidable increased costs in excess of $1,000,000. Claimant sent a series of letters to Respondent seeking additional compensation for the winter protection necessary for the PCC Dam, the damage caused by “cataclysmic” flood and subsequent flooding, and the Differing Site Conditions. Respondent denied each of Claimant’s request for additional compensation.

On or about January 25, 2012, Claimant filed its multi-count Complaint in this Court seeking compensation for damages allegedly arising out of this contract. In its complaint, Claimant seeks a total of $1,585,961.53 beyond the compensation set forth in the contract. Respondent filed an answer and affirmative defenses to the complaint denying all material allegations thereto, and moved for Summary Judgment on the matter.

ANALYSIS

A. Count I:

In Count I, Claimant seeks additional compensation for work caused by Differing Site Conditions. Respondent asserts that the additional work for which compensation is sought was done without prior written authorization, and is therefore not compensable. To support its argument, Respondent references Articles 104.02 and 109.04 of the contract terms.

In response, Claimant argues that Respondent waived compliance with Articles 104.02 and 109.04 - citing ARA Services v. State, 32 Ill. Ct. Cl. 567 (1979) (considering the issue of waiver where services were performed without written authorization). In ARA, the Court focused on the fact that the additional work was performed with the knowledge of the state agency. In making an award to Claimant, the ARA Court cited the decision in Marhoefer v. State, 25 Ill. Ct. Cl. 139 (1965), wherein the Court held:

There can be no clearer waiver of that provision than the fact that the weekly

meetings were held during the course of the dispute period which reviewed the

work and authorized the continuation of work. The representatives of the State [*171]

were at all times aware that the changes were being made for which extra

compensation would be sought.

In the present circumstance, Respondent’s Resident Engineer and Claimant’s Project Managers met daily at the construction site. Other representatives of Respondent were on-site weekly, and frequently discussed the project with Claimant’s workers. Respondent was aware that Claimant was seeking additional compensation, as evidenced by a May 9, 2009 letter to Respondent’s Resident Engineer. Furthermore, Claimant points to its work in Phase 1, where Respondent “repeatedly requested Albin Carlson to perform work without prior written authorization, granting change orders only after Albin Carlson performed the work.” By virtue of this conduct, Claimant asserts that Respondent waived any right to demand strict compliance with the contract’s preauthorization provisions. Martz v. MacMurray College, 255 Ill.App.3d 749, 752-53, 627 N.E.2d 1133, 1135 (4th Dist. 1993).

Based on the proffered arguments, there remains a genuine issue of material fact as to whether Respondent knew that additional compensation would be sought, and therefore “waived” the written approval requirement. Accordingly, Respondent’s Motion for Summary Judgment is denied as to Count I.

B. Count II:

In Count II, Claimant seeks additional compensation for work caused when multiple “extraordinary” flood events overtopped and breached the project’s cofferdam system during construction. Respondent argues that these flooding costs were a risk specifically assumed by Claimant under the contract, and therefore are not compensable. Respondent cites to a special provision in the contract which it believes to specifically address the complained of issue:

Temporary Cofferdam System. …The Contractor shall assume all risks of

damages to his equipment and the work caused by flooding to his selected

cofferdam system. The Contractor is responsible for the safety of his personnel

and cost of cleanup and cofferdam restoration in the case of cofferdam

overtopping and failure.

Respondent believes this specific provision placed the risk and responsibility for the alleged flooding costs upon Claimant. Respondent further asserts that the flooding costs for which additional compensation is sought was never determined by Respondent’s Engineer to have been caused by a “cataclysmic event,” as required by the contract. In support of its position, Respondent points to Section 107.30, which sets forth the following requirements and limitations for a contractor to receive compensation for cataclysmic events:

The Contractor and the Department understand and agree that the definition of

what constitutes a cataclysmic event cannot be written with precision, and that

application of this exception can be the subject of dispute. Therefore, the

Contractor and the Department agree that the Engineer will determine the

occurrence of a cataclysmic event, the eligibility for reimbursement, and the

expenses and costs to be reimbursed in accordance with this exception to the [*172]

Contractor’s responsibility for the work. All determinations of the Engineer shall

be final … (See Standard Specifications, Exhibit A-7, Article 107.30).

To the contrary, Claimant argues that the September 2008 flood was a “cataclysmic event” by definition, thereby automatically entitling it to damages. The standard specifications of the contract include in the definition of a “cataclysmic event:”

“…A flood, defined as water elevation in excess of the channel capacity of a

river, stream or other body of water in a cataclysmic event, unless the flood water

elevation exceeds the 100-year flood elevation as defined in the contract.”

The contract plans defined the “100-year flood” level as 17,697 CFS. The river flow during the flood event in September 2008 was in excess of 18,000 CFS, as established by the data from the USGS. Accordingly, Claimant argues that Respondent’s Engineer is required to make a determination that the flood was a cataclysmic event. Claimant believes that this obligation is not discretionary, and by failing to make such a determination in light of the evidence, Respondent failed with respect to its contractual responsibilities. See Robinthorne Construction Corp. v. Snyder, 113 Ill.App.2d 288, 297 (4th Dist. 1969) (“Where a party has materially breached a contract, he cannot take advantage of the terms of the contract which benefit him nor recover damages from the other party of the contract.”).

Application of “Special” v. “Standard” Provisions

The main inquiry for the Court is whether the “special” or “standard” contract provisions apply. Respondent argues that the standard provision (Section 107.30) governing “cataclysmic events” does not apply to Claimant’s claim for damages - but instead, that the contract’s special provision governing cofferdam and routine flooding apply. According to Respondent, the special provision terms clearly override the standard specification terms. Pursuant to the special provisions: “[t]he following Special Provisions supplement the Standard Specification … and in the case of conflict with any part, or parts, of said Specifications, the said Special Provisions shall take precedent and shall govern.” (See Special Provisions, Exhibit A-3, p. 1, par. 2).

Claimant contends that Respondent’s interpretation is misplaced because: (i) Respondent never “determined” that a conflict existed, as required by the terms of the contract; and (ii) the ambiguity constitutes a question of fact and must be construed in favor of Claimant. While Claimant concedes that the special provisions do in fact provide that Claimant assumed the risk of foreseeable flooding, Claimant asserts they do not address “cataclysmic events,” such as 100- year floods. Instead, Claimant believes Section 101.70 and 107.30 of the standard specifications - which place the risk of loss on Respondent - apply. According to Claimant, Respondent’s argument violates the rules requiring that these provisions be read in harmony as consistent with one another.

When the Court considers the contract as a whole, there remains a question of fact as to whether Respondent intended the standard specifications of Sections 101.70 and 107.30 to apply in this circumstance. In multiple instances, the special provisions specifically modified and/or replaced various other sections of the standard specifications. Had Respondent intended to delete [*173] “cataclysmic events” and 100-year floods from the items to which it bore potential liability, it could explicitly have done so. However, by choosing to replace some provisions and leave other untouched, Respondent is presumed to have intended Sections 101.70 and 107.30 to apply. “Where there is any ambiguity in a contract, it should be construed most strongly against the party who drafted the language.” Fru-Con Corp., 50 Ill. Ct. Cl. 50, 58 (1996); Dowd & Dowd, Ltd. v. Gleason, 181 Ill.2d 460, 479 (1998) (“Any ambiguity in the terms of a contract must be resolved against the drafter of the disputed provision.”).

This Court believes that the rights and responsibilities granted to Respondent’s Engineer cannot be simply arbitrary. To the extent that there is conflicting language, it must be construed against the drafter. Accordingly, because Respondent drafted the provisions that it now tries to explain, any ambiguities must be construed against Respondent. This leaves a genuine issue of material fact, and therefore, Respondent’s Motion for Summary Judgment is denied as to Count II.

C. Count III:

As to Count III, Claimant seeks additional compensation for winter work completed. Similar to its argument in Count I, Respondent contends that because the winter protection work was completed without prior written authorization by Respondent, the additional work is not compensable. On the other hand, Claimant alleges that its claim is justified by standard specification Article 503.22 (“Basis for Payment”) - which states:

“Concrete protected according to Article 1020.13(d) may be paid for at the

adjusted unit prices which will be the following percentages of the contract price

for the classes of concrete involved. These adjustments will be made only when

they are authorized in writing by the Engineer…” (See Standard Specifications,

Exhibit A-7, Article 503.22).

Respondent interprets the language of this Article as requiring written authorization by its Engineer. According to Respondent, this Court has consistently held that without authorization via a valid written change order, Claimant is not entitled to compensation for extra work. See Fidelity and Deposit Co. v. State, 35 Ill. Ct. Cl. 129 (1982).

However, Claimant contends that Respondent waived its right to strict compliance with the contract’s terms regarding prior authorization through its conduct in Phase 1 and Phase 2. Here, in an attempt to overcome the delays, Claimant suggested modifying the method of construction to allow work to continue through the adverse weather. Claimant informed Respondent that it would seek compensation in the event winter protection was necessary. (See Ex. 5C and Mr. Cutting’s October 30, 2008 Letter included therein). Respondent authorized the alternative method of construction, and never indicated that it would not compensate Claimant for such work. Rather, Respondent’s Resident Engineer watched Claimant install the winter protection.

In support of its argument, Claimant cites Stark Excavating, Inc. v. Carter Const. Servs., Inc., 2012 IL App (4th) 110357, 867 N.E.2d 465, 468 (2012), where the court reversed an entry [*174] of summary judgment against a contractor on its winter protection claim. In Stark, the contractor explicitly excluded winter protection. Id. at 5. The owner delayed commencement of the project to the point where winter protection was necessary. Id. at 6-8. The contract had a provision similar to that contained in standard specification Section 503.22 requiring written authorization for extra costs. Id. at 9. In reversing the grant of summary judgment, the Stark court emphasized that the general contractor knew that the subcontractor expected to be paid for the winter protection prior to the work being performed, and that the winter protection was not rendered necessary by the fault of the subcontractor. Id. at 32-34.

Lastly, Claimant addresses Respondent’s general argument that by signing a change order addressing some related item, Claimant “waived its right” to present its claim in this forum. Claimant again stresses that throughout the project, Respondent repeatedly authorized additional compensation to Claimant after the fact: in Change Order 3, Respondent authorized payment for additional concrete that was used in constructing the Flow Augmentation Culvert after it was installed; and in Change Order 6, Respondent authorized additional compensation after the fact for extra Riprap that was installed. Claimant believes these facts to show that more often than not, Respondent authorized payment after work was performed. Consequently, Claimant contends that if any party has waived its rights, it is Respondent, through its course of conduct. See Martz v. MacMurray College, 255 Ill.App.3d 749, 752-53 (4th Dist. 1993) (A party to a contract may waive, by its course of conduct, its legal right to strict performance of the terms of the contract).

Based on these arguments, there remains a genuine issue of material fact as to whether Respondent knew that additional compensation would be sought, and therefore “waived” the written approval requirement. Accordingly, Respondent’s Motion for Summary Judgment is denied as to Count III.

IT IS HEREBY ORDERED that Respondent’s Motion for Summary Judgment is DENIED.