Appeals from the United States No. 09-1494 District Court for the Southern District of Iowa.
The opinion of the court was delivered by: Bye, Circuit Judge.
Submitted: December 17, 2009
Before BYE, BEAM, and COLLOTON, Circuit Judges.
Hoot General Construction appeals the district court's*fn1 verdict against it and in favor of John T. Jones Construction in an action brought on a contract between the two companies. Jones, in turn, appeals the district court's refusal to award certain liquidated damages and the district court's decision not to award attorneys fees related to claims against third parties. We affirm.
The Des Moines Metropolitan Wastewater Reclamation Authority (WRA) initiated a public improvement project to update one of its wastewater treatment facilities. WRA hired Black & Veatch Corporation (B&V) as engineers on the project and had B&V create a set of specifications so WRA could bid the project out to general contractors. As part of the project, liners needed to be installed in the wastewater holding tanks to prevent erosion of the concrete interiors of those tanks. B&V created specifications for the tanks which described a particular liner system created by a company called Linabond. WRA required B&V to add the words "or equal" at the end of those specifications. The contract gave B&V, as project engineer, discretion to determine what to accept as "equal." WRA solicited bids for restoration of the wastewater treatment facility.
Jones Construction is a general contractor. Hoot Construction is a subcontractor specializing in installation of protective lining in wastewater storage tanks. Hoot only installs systems made by Linabond's main competitor, Ameron. Jones, which had worked with Hoot recently on a similar project, informed Hoot it was accepting subcontractor bids in order to compile a general bid for the WRA project. When Hoot examined the specifications for the project, it was concerned the liner specification appeared to be a "single source" specification, requiring the installation of Linabond. Hoot communicated this concern to Jones and informed Jones that Hoot would be proceeding on the "or equal" basis if it bid the project. Hoot contacted Ameron and received assurances from the company that Ameron systems are considered equal to Linabond in the industry. Hoot conveyed this information to Jones and informed Jones it had never had Ameron rejected as "or equal" on a project. Hoot then submitted a bid for the installation of its Ameron liner system. Jones used this bid in its main bid, and was awarded the project.
Around July 19, 2004, the contract administrator at Jones wrote to Hoot enclosing Jones's standard subcontract form and requesting that Hoot sign and return it within ten days. The subcontract required Hoot to perform the work as described in the main contract and incorporated the main contract as an exhibit. On July 22, 2004, Jones sent a fax informing Hoot the submittals for the project were due July 30, 2004. Phil Hoot, the owner of Hoot Construction, and Theta McDurham, a project administrator, altered the subcontract to add language basing compensation for the project on actual square footage installed, as opposed to on the estimates in the bid. On August 4, 2004, McDurham sent the altered subcontract signed by Hoot to Jones and informed Jones the submittals would be mailed that day.
Hoot's company policy was to incorporate its original bid into any subcontract as a means of limiting the scope of its work to the contents of the bid. Hoot had followed this policy with Jones on the previous project. However, McDurham forgot to include the bid as an exhibit to the contract when she sent it to Jones. On August 11, 2004, before Jones responded to the original communication, McDurham faxed the bid to Jones and asked that it be attached as Exhibit B to the contract. She also called Scott Nath, Jones's project manager for the WRA project, who said either he or Jeff Jones, one of the owners of Jones Construction, would sign and return it to Hoot. McDurham's notes from the call read, "Scott Nath/John T. Jones/Des Moines, IA... requested 'Exhibit' be added to subcontract as was done for Springfield, MO subcontract. [Springfield was the previous project on which Hoot and Jones had worked together.] Done -- faxed Exhibit (attached) Scott or Jeff T. Jones will approve, sign and return by fax." Jeff Jones signed the subcontract on August 18, 2004 and mailed it on Friday, August 20, 2004. Hoot received the signed and approved subcontract on August 23, 2004. The signed contract did not include Exhibit B. McDurham informed Mr. Hoot of the omission but Hoot did not pursue the matter.
After receiving the executed contract, and before the deadline specified by Jones, Hoot sent the project submittals to Jones. Jones received the submittals on August 25, 2004, and sent them on to B&V for approval the same day. On September 2, 2004, B&V rejected the liner submittal because it did not meet the specification requirements. Jones informed Hoot of the problem and Hoot contacted B&V directly to request an explanation. B&V responded, pointing out several differences in the systems (primarily relating to the way the systems are bonded to the underlying structure) on September 28, 2004. On October 20, 2004, Hoot contacted Ameron and requested help convincing B&V the systems were equal. After much back and forth, B&V definitively rejected Ameron as an acceptable equivalent under the project specifications.
On December 1, 2004, Nath wrote to Hoot about an upcoming milestone date which could trigger liquidated damages for Jones under the general contract if the liner system were not installed by that time, and informing Hoot that Hoot would be responsible for such damages. Nath suggested Hoot either install the (more expensive) Linabond system or hire a Linabond installer to complete the work. On December 9, 2004, Nath spoke to McDurham and sent a fax informing Hoot that Jones would have to involve an attorney if Hoot did not respond to the December 1 letter.
On December 10, 2004, Hoot's attorney responded to Nath's letter. Referring to "Exhibit B to the Subcontract" she wrote Hoot had contracted to install an Ameron liner system and the wrongful rejection of Ameron as equal under the project specifications prevented Hoot's performance. The attorney accused Jones of breaching the subcontract by failing to gain approval for the Ameron system and requested Jones either approve the submittal or agree to termination of the contract. Jones wrote back explaining its position that Hoot was responsible for installing a lining system in accord with the specifications under the main contract as incorporated by the subcontract and suggesting more ways to attempt to convince B&V to accept an Ameron liner. Jones also explained Exhibit B (the Ameron bid) had not been incorporated into the executed subcontract. On January 7, 2005, Hoot's attorney wrote to Jones reiterating the contentions in her earlier letter and terminating the contract effective immediately. Jones replied with its position that Hoot was responsible for installing a liner in accord with the main contract and that Hoot would have to pay any costs Jones incurred for installation. Jones also rejected the attempted termination of the subcontract.
On February 22, 2005, Hoot sent a packet of information on the Ameron system to Jones, which submitted it to B&V as a resubmittal for the lining system work. The submittal was returned without review.
On March 24, 2005, Jones gave Hoot written notice that Hoot was in default under the contract and had three days to cure. On March 30, 2005, Jones followed that notice with a seven-day notice of contract termination informing Hoot that if it did not cure its breach of the contract Jones would hire others to complete ...