Free Motion in Limine - District Court of Colorado - Colorado

Case 1:03-cv-02669-MSK-PAC

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Case No. 03-cv-2669-MSK-PAC LEPRINO FOODS COMPANY, Plaintiff, v. BIG-D CONSTRUCTION CORP. - CALIFORNIA, a Utah corporation; BIG-D CONSTRUCTION CORP., a Utah corporation; BIG-D CORPORATION, a Utah corporation; BIG-D CAPITAL CORP., a Wyoming corporation; and Does 1-100, inclusive, Defendants/Counterclaimants, BIG-D CONSTRUCTION CORP. - CALIFORNIA, a Utah corporation; BIG-D CONSTRUCTION CORP., a Utah corporation; and Does 1-100, inclusive, Third Party Plaintiffs, v. MARELICH MECHANICAL CO., INC. dba UNIVERSITY MARELICH MECHANICAL, a California corporation, Third Party Defendant. MARELICH MECHANICAL CO., INC. dba UNIVERSITY MARELICH MECHANICAL, a California corporation, Third Party Plaintiff/Counterclaimant, v. BIG-D CONSTRUCTION CORP. - CALIFORNIA, a Utah corporation; FEDERAL INSURANCE COMPANY, an Indiana corporation; and Roes 20 through 80, inclusive, Counterdefendant/Third Party Defendants. PLAINTIFF' MOTION IN LIMINE NUMBER 8: S TO PRECLUDE DAMAGES FOR DELAY, OR, ALTERNATIVELY, TO STRIKE DELAY CLAIMS

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Plaintiff Leprino Foods Company ("LFC") moves the Court for an Order in limine to preclude the parties, their witnesses, and their attorneys from referring to, and/or attempting to assert or offer evidence of, damages due to alleged delay caused by LFC, or, in the alternative, to strike claims for delay damages. CERTIFICATE OF COMPLIANCE WITH D.C.COLO.LCivR 7.1A Pursuant to D.C.COLO.LCivR 7.1A., in an effort to confer prior to filing this motion, undersigned counsel emailed a copy of this motion to counsel for the Big-D Defendants and Third-Party Defendant Marelich Mechanical Co., Inc. and requested their position. As of the filing of this motion, undersigned counsel has not received any responses from counsel for the Big-D Defendants and Third-Party Defendant Marelich Mechanical Co. I INTRODUCTION This action arises from delays in the construction of a cheese manufacturing and dairy storage facility in Lemoore, California ("Project"). LFC, as owner, entered into a general contract on September 1, 2000, with Defendant Big-D Construction Corp.-California, a subsidiary/affiliate of other Big-D entities ("Big-D") to construct the Project ("Contract"). Third-Party Defendant Marelich Mechanical Co., Inc. d/b/a University Marelich Mechanical ("UMM") was a mechanical subcontractor to Big-D on the Project. The need for this motion regarding delay damages originates from the discovery in this matter where it became evident Big-D was attempting to hold LFC responsible for UMM' s alleged delay damages. Because the Contract between LFC and Big-D contains a "no damages for delay" clause, neither Big-D nor its subcontractors can pursue a claim against LFC for delay

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on the Project. Although Big-D has no factual or legal basis with which to support the theory that LFC is liable for damages due to alleged delay on the Project, LFC believes Big-D might attempt to improperly present evidence of delay and attribute the responsibility for such related damages to LFC. Since the Contract between LFC and Big-D contains a "no damages for delay" clause and a clause establishing that any contracts entered into between Big-D and its subcontractors shall comply with the terms of the Contract, such evidence and references by Big-D or UMM to delay damages should be excluded. II ARGUMENT A. The Court has the authority to issue pre-trial orders barring evidence.

Although not expressly authorized by the Federal Rules of Civil Procedure or the Federal Rules of Evidence, "motions in limine are well recognized in practice and by case law." Rutter Group Prac. Guide: Federal Civil Trials & Evidence (TRG), § 4.322. A district court' grant of s a motion in limine is ordinarily reviewed for an abuse of discretion. U.S. v. Gutierrez-Gonzalez, 184 F.3d 1160, 1164 (10th Cir. 1999). The timing of motions in limine "should be left to the discretion of the trial court with a reminder that advance planning helps both parties and the court." U.S. v. Cook, 608 F.2d 1175, 1186 (9th Cir. 1979), overruled on other grounds, Luce v. U.S., 469 U.S. 38 (1984). B. UMM Change Estimate 319 and related "delay" claims are barred by the agreement.

Leprino denies UMM was damaged by delay, other than potential delay caused by its own malfeasance. Change Estimate 319 ("CE 319") seeks a contract increase of over $3 million for acceleration (i.e., to recover for delay) due to delay. The Contract establishes a provision

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barring Big-D from seeking reimbursement for delay damages. See, General Conditions section 45 entitled "Delays and Extensions of Time." Section 45.2 states in pertinent part: The Owner may grant an extension of time pursuant to a Change Order equivalent to the time lost . . . provided the completion of the Work . . . has actually been delayed as a result of: . . .d. Any acts or omissions of the Owner. Section 45.5 provides in pertinent part: The only remedy available to the Contractor for a claimed delay shall be an extension of time. The Contractor agrees that, whether or not any delay shall be the basis for an extension of time, it shall have no claim against the Owner for: a. b. An increase in the Contract Sum. A payment or allowance of any kind for damage (including, without limitation, lost profits or consequential damages), loss or expense resulting from delays. Any damage, loss or expense resulting from interruptions to, or suspensions of, its Work to enable other Contractors to perform their work.

c.

It is well established that courts will uphold no damages for delay clauses that were bargained for by the parties. Peter Kiewit Sons'Co. v. Iowa Southern Utilities Co., 355 F. Supp. 376 (1973). This is due to the fact "that one of the main purposes of construction contracts is to allocate the risks of construction among the parties, [thus] no-damages-for-delay clauses are used to assign the risk of delays, for whatever cause, upon one of the contracting parties, with the assumption that the party bearing the risk has bargained for a price that covers the burden of carrying the risk." Kiewit Construction Co. v. Capital Electric Construction Co., 2005 U.S. Dist. LEXIS 23621 (Dist. of Nebraska). Likewise, Big-D bargained for each provision in the

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Contract, and affixed a signature of its representative on each page of the Contract, signaling its acceptance. Many courts have recognized and enforced no damages clauses, including the United States District Court for the District of Colorado. In W.C. James, Inc. v. Phillips Petroleum Co., 485 F.2d 22 (1973), this Court disagreed with the contractor' position that no damages clauses s are unenforceable. The Court stated, "such clauses are commonly used in the construction industry and are generally recognized as valid and enforceable." Id. at 25. Furthermore, a contractor may be precluded from recovering damages for delay where a contract provision specifically eliminates such recovery, even if the delay was caused by the owner. Siefford v. Housing Authority of the City of HumboldtI, 223 N.W.2d 816 (Neb. 1974). The courts often base enforcement of no damages clauses on the fact that an alternative remedy is available, including a request for extension of time as provided in the Contract at issue. As stated in City of Seattle v. Dyad Construction, Inc., 565 P.2d 423, 432 (Wash. App. 1977), "where the contract clause provided for a waiver of damages for hindrance and delay but permitted corresponding time extensions, . . . such a provision barred the contractor from recovering damages for delays caused by plan changes . . ." The court based its reasoning on prior court decisions and stated, "the decisions have uniformly held that if an extension of time for performance is provided for in the contract as the remedy for delay caused by the owner, the contractor is precluded from recovering damages because the contingency of delay has been foreseen and provided for." Id. at 432. Similarly, the Contract at issue here set forth a no damages provision with a remedy of an extension of time in General Conditions section 45.2. The fact that Big-D failed to request an extension of time in writing within the prescribed time

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cannot now be remedied by usurping the bargained for and agreed upon contract provisions barring damages for delay. The courts are very clear on this issue and uniformly enforce no damages clauses in this situation, as the contractor has the option to avail himself of the remedy of a request for extension of time. Failure to do so does not grant Big-D the right to now question the bargained-for no damages provision. Since the Contract specifically states that the construction documents were not completely prepared at the time of commencing the project, surely the delay alleged by Big-D was within the realm of delay contemplated by the parties when negotiating the no damages clause. In such cases, the courts have determined that recovery in quantum meruit is unavailable where an alternate remedy has been established by the contract language: "[I]f owner-caused delay in construction was of a nature contemplated by the parties and specific provisions of their contract provide a remedy, or the contract otherwise supplies a means of compensation for such delay, then the delay cannot be deemed unreasonable to the extent the contract terms should be abandoned in favor of quantum meruit recovery." (Citation omitted). In other words, damages cannot be awarded for delays contemplated by the parties and should be controlled by the contractual remedies, unless the delays can be said to be so excessive and unreasonable as to fall outside the scope of the contract and warrant an additional recovery in quantum meruit. Allen-Howe Specialties Corp. v. U.S. Construction, Inc., 611 P.2d 705 (Utah 1980). Big-D was compensated for the no damages clause by several different means. First, as previously discussed, Big-D was provided an alternate remedy of an extension of time. Further, as a sophisticated general contractor, Big-D should have compensated itself for the no damages provision by including a contingency or by increasing its bid. In fact, Big-D did just this. In a bid comparison worksheet produced by Big-D entitled "Comparison of Original Proposed Estimate to Current", a contingency fee of $4,695,924.00 is set forth as part of the original $98 million bid. Furthermore, Big-D negotiated a 4.5% fee on the total cost of the project, allowing

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additional profit where the cost of the project increased. In essence, Big-D compensated itself for the contract provision barring recovery for delay damages through the contingency money and percentage fee, allowing additional income of over $7 million. C. "No damages for delay" clauses are to be upheld absent fraud, bad faith, coercion or other inequitable conduct by the owner.

The consensus of courts to enforce no damages clauses clearly denotes general contract principles that parties are free to bargain for any terms included in the contract. LFC and Big-D bargained for and entered into the Contract, and it would be inequitable for Big-D to now attempt to deprive LFC of a benefit of the Contract simply because the Contract provision does not agree with Big-D' agenda. In such cases, the courts have suggested that "[i]f a party to a s contract with such a clause acts honestly within the fair and legal import of its terms, he cannot be deprived of the benefit thereof unless his conduct indicates bad faith or some other tortious intent, as every contract implies fair dealing between the parties." Peter Kiewit Sons'Co., 355 F. Supp. at 396, quoting Psaty & Fuhrman v. Housing Auth., 68 A.2d 32, 36 (R.I. 1949). While there are exceptions to the applicability of no damages clauses, Big-D has not alleged any such exceptions in its attempt to render the no damages clause inapplicable. Thus, Big-D' claim for s reimbursement of any portion of the cost associated with CE 319, or any other claim premised on delay, is precluded because Big-D agreed that its sole remedy was to seek a time extension, which it did not do. D. Big-D cannot claim the Contract contradicts the no damages clause.

LFC asserts that the portion of the so-called "pass through" claim for which UMM seeks damages for delay is not permitted under the Contract. Big-D may respond by misinterpreting Article 8.1.6, of the Contract, which states, in part, the Cost of the Work includes payments to

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subcontractors "for Work performed pursuant to the Subcontracts executed by Contractor in accordance with this Agreement." (emphasis added). Big-D may assert this is at odds with the no damages for delay clause, quoted above (General Conditions, Section 45.5). Contract

Article 11, and specifically 11.10, states Big-D is "responsible for and shall take such steps as are necessary to provide that all Subcontracts... conform to the requirements of the Contract Documents." This ties into the provision of Article 8.1.6 that payments to subcontractors in accordance with the Contract are included in the Costs of the Work. If Big-D failed to conform the UMM subcontract, it breached Article 11.10 of the Contract.1 III CONCLUSION Big-D' contractually precluded delay damages claims should be precluded or stricken in s limine because Big-D cannot satisfy its burden of establishing that its claims are sanctioned under the Contract and because allowing Big-D to present to the jury evidence of damages that are contractually precluded would only confuse the jury with irrelevant evidence in this complex case. Evidence of the precluded damages should not be allowed, pursuant to Fed. R. of Evid. 401, because it is irrelevant, and pursuant to Fed. R. of Evid. 403, because it is confusing and unfairly prejudicial. The confusion of the jury and prejudice to LFC posed by the evidence of contractually precluded claims can only be avoided by striking the claims or precluding evidence of the claims at the threshold. Accordingly, Defendants and their attorneys and witnesses should be ordered to refrain from making any reference before the jury to claims by Big-D against LFC for damages that Big-D is precluded by contract from recovering because they were untimely submitted, or, in the alternative, such claims by Big-D should be stricken.
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General Conditions, Section 45.5

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Respectfully submitted this 21st day of February 2006. LEPRINO FOODS COMPANY

By:

/s/ Michael G. Bohn Michael G. Bohn Bret M. Heidemann Campbell Bohn Killin Brittan & Ray, LLC 270 St. Paul Street, Suite 200 Denver, Colorado 80206 Telephone: (303) 322-3400 Facsimile: (303) 322-5800 [email protected] [email protected] Patrick T. Markham Jacobson & Markham 8880 Cal Center Drive, #100 Sacramento, California 95826 Telephone: (916) 854-5969 Facsimile: (916) 854-5965 [email protected]

CERTIFICATE OF SERVICE I hereby certify that on the 21st day of February 2006, I electronically filed the foregoing PLAINTIFF' MOTION IN LIMINE NUMBER 8: TO PRECLUDE DAMAGES FOR S DELAY, OR, ALTERNATIVELY, TO STRIKE DELAY CLAIMS with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following email addresses: Christopher J. Hersey of [email protected] Francis (Frank) J. Hughes of [email protected] Patrick Quinn Hustead of [email protected] Peter J. Ippolito of [email protected] Richard Carl Kaufman of [email protected] John David Mereness of [email protected] C. Michael Montgomery of [email protected] Daniel James Nevis of [email protected] Laurence R. Phillips of [email protected] N. Kathleen Strickland of [email protected] /s/ Cori Atteberry Cori Atteberry, Legal Assistant 9