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Nippo Corporation/International Bridge Corporation v. Amec Earth & Environmental

September 21, 2011


The opinion of the court was delivered by: Rufe, J.


This matter involves claims and counterclaims arising from a construction subcontract between Plaintiff Nippo Corporation/International Bridge Corporation ("the Joint Venture") and Defendant and Counterclaimant AMEC Earth and Environmental, Inc. ("AMEC"). Before the Court are three motions for partial summary judgment: (1) a motion by AMEC for summary judgment as to all but one count, based on the Joint Venture's failure to comply with mandatory notice provisions of the Subcontract, or, in the alternative, for summary judgment as to Counts 2, 3, 4, 5 and 7 on other grounds [doc. no. 80]; (2) a motion by the Joint Venture for summary judgment as to AMEC's withholding of liquidated damages [doc. no. 70]; and (3) a motion by the Joint Venture for summary judgment regarding undisputed Change Orders [doc. no. 79]. For the reasons set forth below, AMEC's motion will be granted in part, the Joint Venture's motion regarding liquidated damages will be denied, and its motion regarding undisputed change orders will be granted in part.


In November 2003, AMEC entered into a prime contract with the United States government through the Air Force Center for Engineering and the Environment (the "Air Force") for various construction projections, including work at the Andersen Air Force Base in Guam. *fn1

On September 27, 2004, the Air Force issued Task Order 0013, which included demolition, removal and replacement of the north runway at Andersen (the "Project"). *fn2 In April 2005, following a competitive bidding process, AMEC awarded the Joint Venture a Subcontract to carry out the Project for a fixed fee exceeding $21 million (the "Subcontract"). *fn3 The Project involved removal of the existing hot mix asphalt ("HMA") runways and their replacement with portland cement concrete ("PCC") pavement, with installation of asphalt at taxiway tie-ins, runway shoulders and overrun, and removal and reinstallation of runway lighting fixtures. *fn4

It is an understatement to say that things did not go well thereafter. Due to a series of problems with the materials required for the Project, the Subcontract's specifications, and installation and completion of the paving, the Project's initial scheduled completion date of April 26, 2006 was extended to June 29, 2006; ultimately, the Project was completed ten months later on May 31, 2007. *fn5 Each party blames the other.

The Joint Venture's Complaint includes seven counts for breach of contract and one count for consequential damages. Count 1 arises from the alleged shortage of compliant aggregate base materials capable of meeting the Subcontract's rapid draining requirements, AMEC's subsequent modification of the base material specifications to permit the use of existing but poorly draining base materials instead of imported materials, and the alleged repercussions of that change on the remainder of the Project, including increased costs and significant delays in Project completion. *fn6 Count 2 arises from the Joint Venture's allegations that AMEC's hot mixed asphalt voids-in-mineral-aggregate ("VMA") *fn7 specification were impossible to meet using only locally available aggregate in the mix, and were unnecessary in Guam's tropical environment, and that AMEC's initial insistence on compliance with that specification ultimately delayed the HMA paving process and required the Joint Venture to remove and replace, in part or whole, 25 lots of HMA pavement. *fn8 Counts 3 and 4 arise from disputes over whether removal and replacement of some 5,000 cubic yards of the PCC pavement placed on Runway 5 by the Joint Venture was necessary, as well as costs and delays related to completion of the paving. *fn9 Count 5 arises from additional costs and productivity losses allegedly suffered by the Joint Venture due to AMEC's allegedly defective design of the runway's electrical and lighting system and unanticipated design changes during the course of the Project. *fn10 Count 6 arises from unresolved change order requests submitted by the Joint Venture when AMEC directed it to perform extra or different work and AMEC's alleged breach of its duty to evaluate and negotiate the change order requests and to equitably adjust the Subcontract price. *fn11 Count 7 generally seeks equitable adjustment of the fixed price Subcontract to account for compensable or excusable performance delays and to adjust the term of the Subcontract for delays for which AMEC is allegedly improperly assessing $837,500 in liquidated damages. *fn12 Finally, Count 8 seeks consequential damages. *fn13 The Joint Venture asserts damages in an amount nearly equal to the initial Subcontract price. *fn14

AMEC has filed counterclaims seeking a declaratory judgment, under 28 U.S.C. § 2201 and Rule 57 of the Federal Rules of Civil Procedure, that AMEC is entitled to deduct $837,500 in liquidated damages from the amount it owes the Joint Venture. *fn15 AMEC also seeks attorneys' fees and expenses associated with defending against the Joint Venture's allegedly false and overstated claims, including demands for payment by the Air Force. *fn16

After fact discovery in this matter closed, the Parties filed their motions for summary judgment. The Joint Venture has filed two motions for partial summary judgment. First, the Joint Venture moves for summary judgment as to AMEC's withholding of liquidated damages, on grounds that the liquidated damages clause is an unenforceable penalty. *fn17 Second, the Joint Venture moves for summary judgment as to nine undisputed change orders approved, but never processed, by AMEC. *fn18

AMEC's motion for partial summary judgment seeks dismissal of all claims except for Count 6 (unresolved change orders) on grounds that the Joint Venture failed to comply with the mandatory notice provisions of the Subcontract. *fn19 Alternatively, AMEC moves to dismiss:

C Count 2, relating to the HMA specifications, and that portion of Count 7 based on delays resulting from the dispute over the HMA specifications, on grounds that the Joint Venture could have met the Subcontract's HMA specifications but failed to submit a compliant HMA design;

C Count 3, relating to removal and replacement of non-compliant PCC pavement, and that portion of Count 7 based on delays relating to removal and replacement of the Lane 5 PCC pavement, on grounds that the Joint Venture is solely responsible for the non-compliant Lane 5 work, and that AMEC's insistence on removal and replacement does not constitute economic waste; and

C Count 2 (relating to HMA), Count 4 (relating to completion of the PCC pavement), and Count 5 (relating to electrical work) on grounds that the Joint Venture is attempting to prove its damages for these counts using a total cost methodology. *fn20

The Joint Venture submitted a declaration of its expert Richard Root as an exhibit to its response in opposition to AMEC's Motion. AMEC moved to strike the declaration as an untimely expert report. *fn21 Earlier this year, the Court granted the motion, striking portions of the declaration that constituted a new expert report, and all references to that portion of the declaration in the Joint Venture's accompanying briefing and statements of material fact. *fn22 The Court, however, permitted the Joint Venture to serve a Supplemental Expert Report, reopened expert discovery limited to the issues related to the supplemental expert opinion, and set a schedule for related supplemental briefing. The Court placed the motions for summary judgment in suspense pending completion of the supplemental expert discovery period and supplemental briefing. That period has now closed, and the motions are ripe for disposition.

Because of the number and complexity of the facts in this case, the Court addresses the relevant facts and factual disputes, beyond those described supra , only as required for resolution of each of the pending motions.


Under Federal Rule of Civil Procedure 56(c), a court may grant summary judgment only "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." *fn23 A fact is "material" if it could affect the outcome of the suit, given the applicable substantive law. *fn24 A dispute about a material fact is "genuine" if the evidence presented "is such that a reasonable jury could return a verdict for the nonmoving party." *fn25

A party moving for summary judgment has the initial burden of supporting its motion by referring to admissible evidence *fn26 showing the absence of a genuine dispute of a material fact or by showing that there is insufficient admissible evidence to support the fact. *fn27 Once this burden has been met, "the non-moving party must rebut the motion with facts in the record and cannot rest solely on assertions made in the pleadings, legal memoranda, or oral argument." *fn28

In considering a summary judgment motion, the Court does not weigh the evidence or make credibility determinations; "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in [its] favor." *fn29


A. AMEC's Motion for Partial Summary Judgment

1. Summary Judgment Regarding Compliance with Mandatory Notice Provisions.

AMEC moves for summary judgment as to all Counts against it, except Count 6 (unresolved change orders), because, it argues, the Joint Venture's claims are barred by its failure to provide contractually-mandated notice of its claims. *fn30 Section 00700 of the Subcontract provides that the Joint Venture is to provide AMEC with notice under various circumstances. First, when the Joint Venture encountered "conditions at the site that materially differ from those shown on the Plans or indicated in the Specifications, [it was to] immediately (within 7 days) give notice thereof to AMEC, and before such conditions are disturbed," and that if such notification is not provided, the Joint Venture would be responsible for costs related to the differing site conditions. *fn31 Additionally, the Subcontract provides that:

The Contract Price may only be changed by a written Change Order executed by AMEC. Any request for an increase in the Contract Price shall be based on written notice delivered to AMEC prior to performance of the proposed work giving rise to the claim, and within 7 days of discovery of conditions that give rise to such a claim, except in the case of emergency. . . . The written notice . . . shall include the amount of the claim with supporting data.*fn32

The Subcontract also incorporates by reference Federal Acquisition Regulations ("FAR"), including FAR 52.243-4 as a supplemental condition. *fn33 FAR 52.243-4 provides that the contractor has a right to additional compensation for costs incurred within 30 days of giving notice and provides that the contractor submit a request for an equitable adjustment within 30 days of providing notice. *fn34

The Subcontract is governed by Nevada law, *fn35 which provides that notice must be sufficient under the circumstances to make the contracting entity aware of the difficulties and permit it to remedy the situation to avoid excess costs, so long as a sufficiently detailed claim follows, when the value of the claim cannot be determined with reasonable accuracy at the outset. *fn36 The Nevada Supreme Court, in Eagle's Nest Ltd. Partnership v. Brunzell, concluded that requiring strict compliance with a provision mandating submission of a claim within a reasonable period of time after the delay would require the contractor to "prognosticate . . . all delay costs before they had been incurred." *fn37

The Joint Venture contends that to the extent Nevada law is unclear, Nevada courts would look to federal common law .*fn38 The Court agrees, particularly given that the Subcontract incorporates FAR clauses pertaining to notice, *fn39 and because Eagle's Nest itself relied on a decision applying federal common law to determine compliance with contractual provisions. *fn40

Under federal common law, notice provisions are liberally construed, with compliance determined by whether the notice given satisfies the purposes of the clause. *fn41 Where the contracting entity has actual or constructive notice of the conditions underlying the claim and an opportunity to investigate, such notice may be sufficient regardless of whether the contractor strictly adhered to the specific requirements of the notice clause. *fn42 Where the contracting officer directs work knowing the likely outcome, strict compliance with notice provisions is unnecessary. *fn43 The "overriding legal principle" is that "[w]ritten notice . . . must be supplied by the contractor before such time that the [contracting entity] would suffer if not apprised of the facts." *fn44 Courts will permit otherwise late claims ...

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