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Accurate Electric Construction, Inc. v. The Ohio State University

Court of Appeals of Ohio, Tenth District

December 5, 2019

Accurate Electric Construction, Inc., Plaintiff-Appellant,
v.
The Ohio State University, Defendant-Appellee.

          APPEAL from the Court of Claims of Ohio No. 2014-00961

         On brief:

          McDonald Hopkins, LLC, Peter D. Welin, and Jason R. Harley, for appellant.

          Dave Yost, Attorney General, James E. Rook, and William Becker, for appellee.

         Argued:

          Peter D. Welin.

          James E. Rook.

          DECISION

          BROWN, J.

         {¶ 1} Plaintiff-appellant, Accurate Electric Construction, Inc. ("Accurate"), appeals from a judgment of the Court of Claims of Ohio granting the motion for summary judgment of defendant-appellee, The Ohio State University (the "University" or "OSU"). For the reasons which follow, we affirm in part and reverse in part the judgment of the Court of Claims.

         {¶ 2} The present case arises from a construction contract dispute between Accurate and the University regarding the South High Rise Dormitory Project (the "Project"). The Project consisted of demolition, renovation, and expansion of five student housing facilities located on the University's main campus. The Project was constructed under the multi-prime model of contracting.

         {¶ 3} There were "several moving parts and pieces" to the Project. (Purtee Depo. at 39.) The Project was split into three phases of construction with multiple bid packages. Phase one involved Bid Packages 1 through 5 and concerned utility relocation and chiller bunker work. Phase two involved Bid Package 6 and Bid Package 7 ("BP7") and concerned additions and renovations to the Stradley and Park dormitories. Phase three involved Bid Package 8 ("BP8") and concerned additions and renovations to the Smith, Steed, and Siebert dormitories.

         {¶ 4} Accurate served as the electrical prime contractor on BP7 and BP8. A document titled "General Conditions" was "the contract between the University and Accurate for the electrical work on the Project." (Mot. for Summ. Jgmt., Ex. A ("Purtee Affidavit"), ¶ 3; Ex. 1004 (the "contract").)

         {¶ 5} Smoot Construction Company ("Smoot") served as the University's construction manager on the Project, and Schooley Caldwell Associates ("Schooley") served as the associate architect on the Project (collectively, the University, Smoot, and Schooley will be referred to as the "Management Team"). When the Project began, contractors were informed that all communications regarding the Project were to be routed through Smoot. Greg Palmer was Smoot's project manager on the Project. Patricia Purtee was the University's senior construction manager on the Project.

         {¶ 6} Both BP7 and BP8 were on aggressive scheduling timelines. There was "[i]ntercoordination amongst those phases" of the Project, and each phase of construction depended on the preceding phase being completed timely. (Palmer Depo. at 30.) The Project completion dates were critical because the dorms needed to be ready to house incoming students when they arrived at the University.

         {¶ 7} As such, when contractors submitted their bids, the University informed them that all contractual milestone dates had to be met. Milestone dates "are target dates usually critical to certain activities on a schedule that will allow other work to follow." (Purtee Depo. at 52-53.) At pre-construction meetings, the University informed the contractors there would be no time extensions on the Project and no change to the contract end date.

         {¶ 8} The parties had a pre-construction meeting for BP7 on June 3, 2011, and the contractual occupancy date for the BP7 buildings was July 6, 2012. By February 2012, BP7 had fallen behind schedule and Smoot expressed concerns over meeting the deadline. BP7 ultimately finished a couple weeks behind schedule; the state issued a certificate of occupancy for the BP7 buildings on July 25, 2012.

         {¶ 9} Throughout the Project, the Management Team sought to take a "fair and reasonable" approach to dealing with contractor issues. (Palmer Depo. at 51.) Palmer noted that, if a contractor fell behind because of delays on predecessor activities, the Management Team would need the contractor to "make it up, then [the Management Team] would seek out to compensate them for whatever costs they incurred as a result of that." (Palmer Depo. at 51.)

         {¶ 10} Accurate experienced delays and other issues throughout BP7. On March 31, 2012, Accurate sent Smoot an e-mail indicating it was seeking additional compensation for the issues that arose during BP7. Accurate and Smoot communicated regarding Accurate's BP7 claims throughout 2012 and early 2013. The Management Team and Accurate resolved Accurate's BP7 claims at a field level resolution meeting on January 24, 2013.

         {¶ 11} The pre-construction meeting for BP8 occurred on March 26, 2012. BP8 ultimately completed on time; the state issued a certificate of occupancy for the BP8 buildings on June 17, 2013. The University began occupying the BP8 dorms on August 15, 2013.

         {¶ 12} Accurate experienced a number of issues throughout BP8. In September 2012, a pipe burst in an underground tunnel on the Project and caused substantial flooding. The flood caused "damage to a lot of equipment in the bunker," and Accurate "performed some of the remedial work to get things back up and running" after the flood. (Purtee Depo. at 200.)

         {¶ 13} In January 2013, the Management Team realized that Accurate had installed flexible conduit on the fire alarms in both the BP7 and BP8 buildings. Although the contract specifications called for rigid conduit, Accurate had installed flexible conduit in the mockup room without objection from the Management Team. On January 21, 2013, Smoot issued a notice to comply to Accurate stating the flexible conduit did not comply with the Project documents.

         {¶ 14} Purtee informed Accurate the University could force Accurate to "tear off the drywall in five buildings" and "backcharge them" for the related costs. (Purtee Depo. at 209.) Purtee explained that, although it "wouldn't be appropriate" to actually make Accurate tear out the drywall, it remained "an option for the University." (Purtee Depo. at 211; Palmer Depo. at 184.) The University ultimately sought to obtain a credit from Accurate for the flexible conduit. The University "established a change order and provided [Accurate] with the opportunity to sign the change order" regarding the proposed credit for the flexible conduit, but Accurate did not agree with the amount of the credit and refused to sign the change order. (Purtee Depo. at 211.)

         {¶ 15} On February 13, 2013, Smoot sent change order 363 to Tony Evans, Accurate's project manager, and asked Evans to sign the change order. Change order 363 was a zero cost change order which revised a number of the milestone dates in BP8. Although change order 363 pushed some of the milestone dates back by several months, it did not change the Project completion date. Accurate refused to sign change order 363 and the University processed it unilaterally, i.e., without Accurate's signature.

         {¶ 16} Accurate was supposed to install spare conduit in a trench at the 12th Avenue crossing. Due to miscommunication between Accurate and the geothermal contractor, Accurate missed the initial trench opening. The trench had to be reopened for Accurate to install the conduit. In a June 10, 2013 e-mail, Palmer informed Evans that the Management Team believed both contractors should share the expense of reopening the trench. Accurate did not agree that it should have to share the cost of the trench work and the issue was resolved by "a unilateral process change order." (Palmer Depo. at 208.)

         {¶ 17} Thus, throughout BP8, the Management Team unilaterally processed a number of change orders concerning Accurate. Purtee explained she processed change orders unilaterally in order "to make sure that the contractors got paid something on their change orders, whether they agreed to the amount or not." (Purtee Depo. at 284.) Purtee admitted she did not know if the contract allowed for change orders to be processed unilaterally.

         {¶ 18} Article 7 of the contract, titled "Contract Modifications," provided for three different methods of a contract modification: a change order, a field work order, or a minor change in the work. Minor changes were changes which did not affect the contract sum (the amount payable to the contractor) or the contract time (the time period for the completion of the work). A change order was a written instrument "signed" by the Management Team and the contractor, stating their agreement on the change to the work, the amount of adjustment to the contract sum, and the extent of adjustment to the contract time. Thus, a change order had to be signed by both the Management Team and the contractor. By signing a change order "the Contractor irrevocably certifie[d] that the elements of a Change Order [were] completely satisfied, and waive[d] all rights, if any, to seek further adjustment of the Contract Sum or Contract Time." (General Conditions, 7.3.2.)

         {¶ 19} In contrast, the contract provided that a field work order "shall be used to direct a change in the Work in the absence of total agreement on the terms of a Change Order." (General Conditions, 7.2.2.3.) Upon receipt of a field work order, the contractor had to "promptly proceed with the change in the Work involved." (General Conditions, 7.2.2.4.) A contractor could sign the field work order to indicate acceptance of its terms. If the contractor did not sign the field work order, the University was obligated to determine the adjustments, if any, to the contract sum and contract time caused by the field work order. If the contractor did not agree with the University's determination regarding the adjustment to the contract sum and/or contract time resulting from a field work order, the contractor was obligated to "initiate a claim under Article 8 within 10 days of the date on which the [University] issues its determination." (General Conditions, 7.2.2.7.)

         {¶ 20} Article 8 of the contract, titled "Dispute Resolution," obligated a contractor to "initiate every claim by giving written notice of the claim" to the Management Team "within 10 days after occurrence of the event giving rise to the claim." (General Conditions, 8.1.2.) Article 8 provided that a contractor's failure to initiate a claim "as and when required under this paragraph 8.1 shall constitute the Contractor's irrevocable waiver of the claim." (General Conditions, 8.1.4.)

         {¶ 21} Accurate brought the issues that arose throughout BP8 to the attention of the Management Team. On October 16, 2013, the Management Team held a field level resolution meeting with Accurate to try to resolve some of Accurate's BP8 claims. Some claims were resolved as a result of the meeting and others remained pending.

         {¶ 22} By the end of December 2013 it became clear to Accurate "that the field level discussion[s] that were ongoing would not lead to total agreement" between the parties on the BP8 issues. (Memo in Opp. to Summ. Jgmt., Ex. A, Evans Affidavit ("Evans Affidavit"), at ¶ 13.) As such, on December 23, 2013, Accurate filed a request for a change order seeking additional compensation from the University on Accurate's BP8 claims. The December 23, 2013 change order identified the following list of unpaid changes to Accurate's work:

A Flex to smokes $12, 000.00
B Conduit to cable tray CM's Misuse of R.S. Means $103, 000.00
C Best Locks $3, 881.00
D Viking Phones $10, 733.48
E Additional Beams $3, 389.80
F Flooding of Bunker $5, 167.00
G Graphic Display Panels PK 8 $17, 396.00
H 12th Ave crossing $4, 682.23
I Mod bus Meters $2, 558.00
J Fixture Deduct bulletin 638 $34, 693.00
K Technology Conduit Fill $3, 166.14
L Manipulating Milestones Change Order $1, 390, 480.00

(Evans' Aff., Ex. A-2.)

         {¶ 23} Accurate notes that Smoot rejected its change order request the following day on December 24, 2013. Accurate filed its Article 8 claim ten days later, on January 3, 2014. Accurate's January 3, 2014 Article 8 claim sought compensation for the following issues: (A) flexible conduit for fire alarm system, (B) unilaterally processed change orders 416, 503R1, 682, 612A, 612B, 668R2, 662, 693, 683, 727, 710, 671, 703R2, (C) best locks, (D) Viking phones, (E) unilaterally processed change order 587, (F) display panels bulleting 633, (G) 12th Ave. Crossing, (H) modification of bus meters, (I) data and light fixtures in the connector bulletin 632, (J) technology conduit fill, (K) change order 877, and (L) change order request for disputed milestone impact.

         {¶ 24} Accurate's claims proceeded through the Article 8 process. The University architect ruled on the claims on June 25, 2015. The architect addressed the merits of each claim and additionally noted the claims were untimely. The architect denied most of Accurate's claims, but granted Accurate's claims for the display panels bulletin 633 and the technology conduit fill requirements. The architect stated its decision to grant the two claims was made "without waiving any rights or provisions of the contract, including but not limited to the late submission of this claim." (Purtee Aff, Ex. 7.)

         {¶ 25} On December 9, 2014, Accurate filed its complaint in the Court of Claims asserting the following counts: (1) breach of contract, (2) equitable adjustment, (3) breach of express and implied warranties, and (4) breach of the duty of good faith and fair dealing. Accurate asserted it had exhausted its administrative remedies, and asserted that despite its "requests for its outstanding contract balance, OSU continue[d] to hold $304, 514.13 in undisputed contract balance separate and apart from Accurate's claim." (Compl. at ¶ 31.)

         {¶ 26} Accurate requested a referee be assigned to hear and determine the case pursuant to R.C. 2743.03(C)(3).[1] The Supreme Court of Ohio appointed a referee.

         {¶ 27} The University filed a Civ.R. 56 motion for summary judgment on March 1, 2016. The University asserted it was entitled to summary judgment on Accurate's breach of contract and equitable adjustment claims because Accurate did not file its underlying claims against the University within the ten-day time limit set forth in Article 8 of the contract. Regarding the third and fourth counts of the complaint, the University asserted that Accurate "could not identify any real express or implied warranties it alleges the University breached," and asserted that a claim for breach of the duty of good faith and fair dealing could not "stand without a separate breach of contract claim." (Mot. for Summ. Jgmt. at 2.) The University asserted Accurate did not have a right to receive final payment under the contract as Accurate had not completed the required close-out documents.[2]

         {¶ 28} Accurate filed a memorandum in opposition to the University's motion for summary judgment on May 27, 2016. Accurate asserted the Court of Claims should deny the University's motion as Accurate had "complied with the Article 8 notice requirements" and/or because the University "waived the Article 8 notice requirements by its course of conduct." (Memo. in Opp. at 3.) Accurate noted it complied with the Article 8 notice requirement by filing its claim within ten days from the date the University denied its change order request. Accurate asserted the University waived the Article 8 requirements because it "waived the Article 8 requirements for other contractors on the Project, it waived the Article 8 requirements for Accurate's claim on [BP7] of the Project, and it paid for some of Accurate's claims on [BP8] of the Project." (Memo. in Opp. at 36.)

         {¶ 29} On June 9, 2016, the University sought leave to file a reply to Accurate's memorandum in opposition instanter. Accurate filed a memorandum in opposition, asking the court to deny the University's motion for leave or, if it granted the motion, to grant Accurate leave to file a surreply brief.

         {¶ 30} On August 18, 2016, the referee issued a recommendation granting the University's motion for summary judgment on Counts 1 and 2 of the complaint. The referee also granted the University's motion for leave to file a reply brief, and found that a surreply brief from Accurate was unnecessary.

         {¶ 31} The referee concluded that Article 8 of the contract was "clear and unambiguous" and that all of Accurate's claims" 'arose' prior to ten days before the assertion of [Accurate's] claim." (Recommendation of the Referee on the Mot. for Summ. Jgmt. at 7.) Specifically, the referee stated that because students were occupying the dorms by August 15, 2013, "all of the matters that 'arose' must have taken place at least four months prior to the filing of the claim." (Recommendation of the Referee on the Mot. for Summ. Jgmt. at 7.) As such, the referee concluded that Accurate's claims for breach of contract and equitable adjustment were untimely under the Article 8 notice of claims provision.

         {¶ 32} Regarding Accurate's waiver argument, the referee acknowledged that Accurate presented a number of "examples that it believes demonstrates that OSU, by its conduct, waived the Article 8 requirements throughout the Project." (Recommendation of the Referee on the Mot. for Summ. Jgmt. at 9.) However, the referee concluded there was "no evidence that OSU waived the Article 8 requirements for this project." (Recommendation of the Referee on the Mot. for Summ. Jgmt. at 9.) The referee concluded the University was entitled to summary judgment on the contract balance issue because Accurate failed to respond to the University's motion for summary judgment with evidence demonstrating it had filed the close-out documents.

         {¶ 33} The referee noted there was a lack of argument and/or explanation from the parties regarding Accurate's claims for breach of warranties and breach of the duty of good faith and fair dealing. As such, the referee requested the parties submit additional briefing on these claims. On September 2, 2016, the parties filed briefs in response to the referee's request for additional briefing.

         {¶ 34} On September 2, 2016, Accurate also filed the following objections to the referee's August 18, 2016 recommendation: (1) the referee erred by weighing the evidence, (2) the referee misunderstood Accurate's argument regarding the University's failure to comply with its contractual obligations, (3) the referee misapplied the contractual notice requirement, (4) the University waived the Article 8 notice requirements by failing to follow its own contract procedures, (5) the referee erred in granting summary judgment as to the remaining contract balance, and (6) the referee erred by granting the University leave to file a reply brief but denying Accurate's motion for leave to file a surreply brief.

         {¶ 35} On November 18, 2016, the referee issued a decision granting the University summary judgment on Counts 3 and 4 of the complaint. The referee concluded Accurate's breach of warranties claim was substantively a breach of contract claim, and that Accurate waived the claim by failing to give timely notice under Article 8. The referee further concluded that, because there was "no genuine issue of material fact regarding whether or not [Accurate] waived its right to pursue an Article 8 claim related to breach of contract, the claim for a breach of good faith and fair dealing must consequentially be dismissed." (Nov. 18, 2016 Referee Decision at 5-6.) Accurate filed an objection to the referee's November 18, 2016 decision on December 1, 2016.

         {¶ 36} On February 15, 2017, the Court of Claims issued a decision and judgment entry overruling Accurate's objections, adopting the referee's recommendations as its own, and granting the University summary judgment. The court concluded the referee had not weighed the evidence in resolving the waiver issue, as the referee found "no evidence of OSU's waiver." (Decision at 3.) The court stated that, although its "independent review of the record" demonstrated that "Accurate did provide some evidence which it argued demonstrates OSU's waiver of the Article 8 process," the court found "no evidence in the record that OSU waived the Article 8 process." (Decision at 3.)

         {¶ 37} The court observed the referee made "no determination as to when, during the project, the individual claims actually arose." (Decision at 5.) Regardless, because Accurate did not file its claims until "four months after the completion of the project," the court determined Accurate's claims were untimely under Article 8. (Decision at 5.) As such, the court concluded Accurate had waived its claims against the University by failing to comply with the Article 8 notice requirements.

         {¶ 38} As Accurate failed to produce evidence demonstrating that it had filed its final pay application, the court concluded the University was entitled to summary judgment on the contract balance. The court agreed with the referee's conclusion that Accurate's breach of warranties claim was substantively a breach of contract claim, which Accurate waived due to its untimely Article 8 notice. The court also agreed that, in the absence of a breach of contract claim, Accurate's breach of the duty of good faith and fair dealing claim had to be dismissed.

         {¶ 39} Accurate appeals, assigning the following errors for our review:

[I.] THE TRIAL COURT ERRED IN GRANTING APPELLEE'S MOTION FOR SUMMARY JUDGMENT BECAUSE APPELLANT PRESENTED GENUINE ISSUES OF MATERIAL FACT THAT THE TRIAL COURT MISAPPLIED THE CONTRACTUAL NOTICE REQUIREMENTS.
[II.] THE TRIAL COURT ERRED IN GRANTING APPELLEE'S MOTION FOR SUMMARY JUDGMENT BECAUSE APPELLANT PRESENTED GENUINE ISSUES OF MATERIAL FACT THAT APPELLEE WAIVED THE CONTRACTUAL NOTICE REQUIREMENTS, AND THE TRIAL COURT IMPROPERLY WEIGHED THE EVIDENCE.
[III.] THE TRIAL COURT ERRED IN GRANTING APPELLEE'S MOTION FOR SUMMARY JUDGMENT BECAUSE GENUINE ISSUES OF MATERIAL FACT EXIST THAT APPELLANT IS ENTITLED TO THE UNDISPUTED CONTRACT BALANCE.
[IV.] THE TRIAL COURT ERRED IN GRANTING APPELLEE'S MOTION FOR SUMMARY JUDGMENT BECAUSE THE REFEREE INCORRECTLY GRANTED APPELLEE LEAVE TO FILE A REPLY BRIEF - WHICH IMPROPERLY RAISED NEW ARGUMENTS FOR THE FIRST TIME - AND DENIED APPELLANT'S MOTION FOR LEAVE TO FILE A SUR-REPLY TO ADDRESS THESE NEW ARGUMENTS.
[V.] THE TRIAL COURT ERRED IN GRANTING APPELLEE'S MOTION FOR SUMMARY JUDGMENT BECAUSE APPELLEE FAILED TO MEET ITS INITIAL BURDEN WITH RESPECT TO COUNTS III AND IV OF APPELLANT'S COMPLAINT.
[VI.] THE TRIAL COURT ERRED IN GRANTING APPELLEE'S MOTION FOR SUMMARY JUDGMENT BECAUSE APPELLANT DEMONSTRATED THAT GENUINE ISSUES OF MATERIAL FACT EXIST REGARDING COUNTS III AND IV OF APPELLANT'S COMPLAINT.

         {¶ 40} Appellate review of summary judgment motions is de novo. Helton v. Scioto Cty. Bd. of Commrs., 123 Ohio App.3d 158, 162 (4th Dist.1997). "When reviewing a trial court's ruling on summary judgment, the court of appeals conducts an independent review of the record and stands in the shoes of the trial court." Mergenthal v. Star Banc Corp., 122 Ohio App.3d 100, 103 (12th Dist.1997). We must affirm the trial court's judgment if any of the grounds raised by the movant at the trial court level are found to support it, even if the trial court failed to consider those grounds. Coventry Twp. v. Ecker, 101 Ohio App.3d 38, 41-42 (9th Dist.1995).

         {¶ 41} Summary judgment is proper only when the party moving for summary judgment demonstrates that: (1) no genuine issue of material fact exists, (2) the moving party is entitled to judgment as a matter of law, and (3) reasonable minds could come to but one conclusion and that conclusion is adverse to the party against whom the motion for summary judgment is made, that party being entitled to have the evidence most strongly construed in that party's favor. Civ.R. 56(C); State ex rel. Grady v. State Emp. Relations Bd., 78 Ohio St.3d 181, 183 (1997). "Where the evidence presented allows conflicting inferences, a court considering a summary judgment motion may not weigh the evidence." Thyssen Krupp Elevator Corp. v. Constr. Plus, Inc., 10th Dist. No. 09AP-788, 2010-Ohio-1649, ¶ 20.

         {¶ 42} When seeking summary judgment on grounds that the non-moving party cannot prove its case, the moving party bears the initial burden of informing the trial court of the basis for the motion and identifying those portions of the record that demonstrate the absence of a genuine issue of material fact on an essential element of the non-moving party's claims. Dresher v. Burt, 75 Ohio St.3d 280, 293 (1996). The moving party does not discharge this initial burden under Civ.R. 56 by simply making a conclusory allegation that the non-moving party has no evidence to prove its case. Id. Rather, the moving party must affirmatively demonstrate by affidavit or other evidence allowed by Civ.R. 56(C) that the non-moving party has no evidence to support its claims. Id. If the moving party meets its burden, then the non-moving party has a reciprocal burden to set forth specific facts showing there is a genuine issue for trial. Civ.R. 56(E); Dresher at 293. If the non-moving party does not so respond, summary judgment, if appropriate, shall be entered against the non-moving party. Id.

         {¶ 43} R.C. 2743.03(C)(3) provides that proceedings before a referee appointed to hear a public construction contract case shall be in accordance with Civ.R. 53. Civ.R. 53(D)(4)(d) provides that "[i]f one or more objections to a magistrate's decision are timely filed, the court shall rule on those objections." "In reviewing objections to a [referee's] decision, the trial court must make an independent review of the matters objected to in order 'to ascertain [whether] the [referee] has properly determined the factual issues and appropriately applied the law.'" Randall v. Eclextions Lofts Condominium Assn., 10th Dist. No. 13AP-708, 2014-Ohio-1847, ¶ 7, quoting Civ.R. 53(D)(4)(d). See also Roe v. Heap, 10th Dist. No. 03AP-586, 2004-Ohio-2504, ¶ 34, quoting Nolte v. Nolte, 60 Ohio App.2d 227 (8th Dist.1978), paragraph two of the syllabus. An appellate court reviews a trial court's adoption of a referee's decision for an abuse of discretion. Meccon, Inc. v. Univ. of Akron, 10th Dist. No. 12AP-899, 2013-Ohio-2563, ¶ 15.

         {¶ 44} Accurate's first assignment of error asserts the Court of Claims erred in granting the University's motion for summary judgment because the Court of ...


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