Engineering & Construction Innovations, Inc. v. Bradshaw Construction Corp.

Background

The City of Minneapolis planned a project requiring a microtunnel beneath the Mississippi River. ECI entered into a prime contract with the City and subcontracted the microtunneling work to Bradshaw. The subcontract required Bradshaw to provide the labor, materials, services, and equipment for installing a 60-inch steel casing. It also made Bradshaw responsible for the means, methods, techniques, sequences, and procedures used to perform its work.

During construction, groundwater entered and flooded the shaft and tunnel. Bradshaw later encountered high jacking loads that prevented significant progress. Bradshaw submitted two differing-site-condition claims, seeking additional time or compensation based on conditions it contended differed from the contractual geotechnical baseline. ECI terminated Bradshaw and hired another company to complete the project. ECI sought damages from Bradshaw and Travelers, including additional project costs, extended general-conditions damages, overhead and profit, and amounts assessed by the City as liquidated damages.

Bradshaw asserted eight counterclaims against ECI: breach of contract, wrongful termination, a prompt-payment claim, professional negligence, breach of express and implied warranty, misappropriation of property, attorney’s fees, and a bond claim. Travelers also asserted counterclaims, but ECI did not seek summary judgment on those claims in this order.

Expert-testimony motions

The court applied Federal Rule of Evidence 702, which allows qualified expert testimony when it will help the factfinder, rests on sufficient facts or data, uses reliable principles and methods, and reliably applies those methods. The court also considered whether challenges concerned admissibility or merely the weight and credibility of the testimony.

The court denied defendants’ motion to exclude Arthur McGinn. Although McGinn had worked on only two microtunneling projects, he had a doctorate in geotechnical engineering, a master’s degree in civil engineering, professional licenses in six states and the District of Columbia, and more than 25 years of relevant experience. The court also denied defendants’ challenge to McGinn’s opinions about ground permeability and muck ring return rates, concluding that his opinions were based on sufficient facts and data. To the extent defendants sought to strike the testimony as a discovery sanction, the court denied that request because it was untimely.

The court denied defendants’ motion to exclude Mark Gentry, ECI’s scheduling and damages expert. The court concluded that defendants’ disagreements with Gentry’s interpretation of the subcontract and his reliance on ECI’s financial information concerned the factual basis and credibility of his opinions, rather than their admissibility.

The court granted ECI’s motion to exclude Donald Bergman to the extent Bergman offered opinions on engineering and geological topics beyond his expertise. Bergman had extensive experience planning and bidding on microtunneling projects but was not a professional engineer, hydrologist, or geological professional engineer, and the record did not establish sufficient specialized knowledge supporting his opinions on those subjects. The court denied ECI’s motion in all other respects. It denied as moot the challenge to Bergman’s legal conclusions because both parties agreed those conclusions were inadmissible and defendants said they would not elicit them. The court also allowed Bergman’s opinions about differing-site-condition claims, factual statements that supplied the foundation for his opinions, and test borings.

The court denied ECI’s motions to exclude Kimberlie Staheli and Scott Bender. The court held that challenges to Staheli’s investigative methods and Bender’s qualifications regarding grouting went to the weight of their testimony, not its admissibility.

Summary judgment for defendants

Defendants sought partial summary judgment on ECI’s damages claims. The court denied the motion in full.

First, defendants argued that the subcontract did not permit ECI to recover both actual delay damages and liquidated damages. The court found that the subcontract allowed ECI to charge the subcontractor for costs to complete or correct the work, delay or disruption damages, and liquidated or actual damages. Because a genuine dispute remained about how the claimed extended general-conditions damages should be categorized, defendants were not entitled to judgment as a matter of law.

Second, defendants argued that ECI lacked standing to recover $2,583,041 connected to a City change order because the City had not properly assigned the claim. ECI responded that it was seeking its own additional costs and that any recovery up to that amount would be distributed to the City under a cooperation agreement. Viewing the evidence in ECI’s favor, the court held that defendants had not shown the absence of a genuine material factual dispute and denied summary judgment on this issue.

Third, defendants argued that ECI’s claim for liquidated damages assessed by the City was not ripe because ECI had not yet paid the amount. The court rejected that argument. The City had assessed the liquidated damages and requested payment, making ECI’s alleged injury sufficiently impending. The court held that ECI had standing to pursue the claim and denied summary judgment on this ground.

Summary judgment for ECI

The court granted in part and denied in part ECI’s motion for summary judgment on Bradshaw’s counterclaims.

Breach of contract. The court granted ECI summary judgment on Bradshaw’s breach-of-contract claim concerning the differing-site-condition claims. The first claim was untimely because Bradshaw first encountered the condition on November 7, 2019, but did not notify ECI until November 15, 2019, despite the contract’s three-day notice requirement. As to the second claim, the court found a factual dispute about when Bradshaw first encountered the condition, but held that Bradshaw could not establish a Type I differing-site-condition claim because the geotechnical baseline report did not address the tunnel voids at issue. The court therefore granted ECI summary judgment on Bradshaw’s breach-of-contract claim.

Wrongful termination. The court denied ECI summary judgment. ECI argued that the subcontract allowed termination for cause because Bradshaw unreasonably failed to proceed on schedule or stated that it would not perform. The court found that ECI provided no support showing the delays were unreasonable, and Bradshaw presented evidence that it continued trying to microtunnel and sought guidance while investigating solutions. The court also rejected ECI’s alternative argument based on a termination-for-convenience clause because ECI had terminated Bradshaw for cause and had not invoked the convenience clause.

Prompt payment. The court denied ECI summary judgment on Bradshaw’s claim under Minnesota Statutes § 337.10(3). The record did not establish that no payments remained owed to Bradshaw or that all of Bradshaw’s work was disputed.

Professional negligence. The court granted ECI summary judgment because Bradshaw agreed that it had failed to meet the required pleading and expert-disclosure requirements for its professional-negligence claim under Minnesota Statutes § 544.42, subdivision 2.

Warranty. The court denied ECI summary judgment on Bradshaw’s express- and implied-warranty claims. Although ECI pointed to contract language disclaiming warranties about actual subsurface conditions, the court concluded that ECI had not expressly disclaimed the warranties asserted by Bradshaw. The court also found a factual issue about whether Bradshaw had discretion to depart from the project specifications despite being responsible for its means and methods.

Misappropriation of property. The court granted ECI summary judgment. It held that Minnesota does not recognize a common-law tort of misappropriation of property. The authorities Bradshaw cited concerned embezzlement, trade-secret misappropriation, or intellectual-property misappropriation and did not establish the claimed tort.

Bond and attorney’s-fee claims. The court denied ECI summary judgment on Bradshaw’s bond claim because some of Bradshaw’s other claims survived. It also denied summary judgment on Bradshaw’s attorney-fee claim because Minnesota’s public-work bond statute may allow reasonable fees, costs, and disbursements when a bond action is successfully maintained or appealed, and Bradshaw’s bond claim remained pending.

Order

The court denied defendants’ motions to exclude McGinn and Gentry; granted in part and denied in part ECI’s motion to exclude Bergman; denied ECI’s motions to exclude Staheli and Bender; denied defendants’ motion for summary judgment; and granted in part and denied in part ECI’s motion for summary judgment. The order states that judgment should be entered accordingly.