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United States v. Fischer Excavating, Inc.

United States District Court, C.D. Illinois, Rock Island Division

September 8, 2017

UNITED STATES OF AMERICA and STATE OF ILLINOIS for the use and benefit of Iowa Based Milling, LLC an Iowa Limited Liability Company, Plaintiff,
v.
FISCHER EXCAVATING, INC., and CONCRETE STRUCTURES OF THE MIDWEST, INC., and WESTERN SURETY COMPANY and CONTINENTAL CASUALTY COMPANY, Defendants.

          ORDER

          Jonathan E. Hawley U.S. MAGISTRATE JUDGE

          A bench trial was held in this matter from May 15, 2017 to May 16, 2017. At the conclusion of all the evidence, the Court directed the parties to file post-trial briefs by July 19, 2017 setting forth proposed findings of fact and conclusions of law. The Court has reviewed all of the evidence as well as the parties' Trial Briefs (Docs. 110, 112) and the Court finds as set forth below.[1]

         I[2]

         The Plaintiff Iowa Based Milling, LLC (Iowa Based Milling) filed its original Complaint against Defendants Fischer Excavating, Inc. (Fischer Excavating), Concrete Structures of the Midwest, Inc. (Concrete Structures), Western Surety Company (Western Surety), and Continental Casualty Company (Continental Casualty) on August 31, 2012.[3] The Defendant Concrete Structures won a contract to resurface a runway at Quad Cities International Airport. Defendant Concrete Structures hired a subcontractor, Defendant Fischer Excavating, who then allegedly hired the Plaintiff via an oral agreement to mill the runway on several occasions. Defendant Concrete Structures obtained a bond on the project from Defendant Continental Casualty and Defendant Fischer Excavating obtained a bond on the project from Defendant Western Surety. Thereafter, Fischer Excavating allegedly failed to pay Plaintiff Iowa Based Milling $85, 181.67 for its work at the Airport. The Plaintiff set forth its claims in the original Complaint as follows: breach of contract; quantum meruit and unjust enrichment; fraud in the inducement and misrepresentation; and claims under the Miller Act payment bond and under the Illinois Public Construction Bond Act (Little Miller Act). (Doc. 1). All four Defendants filed Motions to Dismiss the original Complaint on January 22, 2013. That same day, Defendant Fischer Excavating filed a Counterclaim against Plaintiff Iowa Based Milling for breach of contract, breach of contract on a theory of duress, and fraud by economic duress. (Doc. 27).

         On September 26, 2013, the Court entered an Order (Doc. 43) dismissing Counts I-IV of the original Complaint with the exception of Count I (breach of contract) against Defendant Fischer Excavating and Count II (quantum meruit and unjust enrichment) against Defendants Fischer Excavating and Concrete Structures. The Court further ordered that should the Plaintiff Iowa Based Milling amend its complaint, it needed to clearly explain what causes of action were being brought against which Defendants.

         On October 17, 2013, the Plaintiff filed an Amended Verified Complaint (Doc. 44) alleging the following seven counts: breach of contract against Defendant Fischer Excavating; breach of contract against Defendants Concrete Structures and Continental Casualty based upon a third-party beneficiary contract or a first-party contract analysis; quantum meruit and unjust enrichment against Defendants Fischer Excavating and Concrete Structures; fraud and misrepresentation against Defendant Fischer Excavating; bond claims under the Miller Act against Defendant Continental Casualty for the failures of Defendant Fischer Excavating and Defendant Concrete Structures; bond claims under Illinois's “Little Miller Act” against Defendants Continental Casualty and Western Surety; and breach of contract and/or bond claim under the bond obtained by Defendant Fischer Excavating from Defendant Western Surety. On November 7, 2013, all four Defendants filed Motions to Dismiss the Amended Verified Complaint, and Defendant Fischer Excavating filed a Verified Answer to Count I of Plaintiff's Amended Complaint and Affirmative Defenses to that count (Doc. 49). On September 17, 2014, the Court entered an Order (Doc. 56) denying all four Defendants' Motions to Dismiss in their entirety.

         A discovery schedule was put in place on October 31, 2014. On February 6, 2015, Plaintiff Iowa Based Milling filed a Motion for Judgment on the Pleadings (Doc. 61) requesting the Court to dismiss Defendant Fischer Excavating's counterclaims II (breach of contract on a theory of duress) and III (fraud by economic duress) of its Counterclaim. The Court granted via written Order (Doc. 70) the Plaintiff's Motion and dismissed with prejudice Defendant Fischer Excavating's second and third counterclaims. On July 15, 2015, the parties consented to the jurisdiction of the Magistrate Judge in this matter. A settlement conference before a different Magistrate Judge was held on October 8, 2015, but no settlement was reached at that time. In the months intervening October 2015 and January 2017, various discovery and sanctions issues were raised and resolved. On January 24, 2017, Plaintiff Iowa Based Milling and Defendants Concrete Structures and Continental Casualty filed a Stipulation of Dismissal with Prejudice and Order of Dismissal (Doc. 96). The Stipulation expressly provided that, “This dismissal does not release and/or dismiss Iowa Based Milling, LLC's claims against Defendant Fischer Excavating, Inc. or Defendant Western Surety Company or any claims brought against Iowa Based Milling, LLC, by Defendants Fischer and/or Western Surety Company.” (Doc. 96 at pg. 2). Thereafter, the Plaintiff's attempts to defeat the two remaining Defendants Fischer Excavating and Western Surety by way of default judgment, striking pleadings, and motions in limine were all unsuccessful.

         Finally, on May 1, 2017, the parties filed a proposed Final Pre-Trial Order (Doc. 109) and the next day they filed their Trial Briefs (Docs. 110, 112). In its Trial Brief, Plaintiff Iowa Based Milling framed the issues for trial as follows: Iowa Based Milling entered into a contract with Defendant Fischer Excavating, but the contract was not in written form; a material breach of a contract excuses performance; Defendant Fischer Excavating should pay for Iowa Based Milling's attorney fees on account of its bad faith, deceit, and misrepresentation; interest is properly awarded to Iowa Based Milling under the terms of the written invoices submitted to Fischer Excavating which have been incorporated into the contract; if the Court determines that no contract existed between Iowa Based Milling and Fischer Excavating then Iowa Based Milling asks for relief under the legal doctrines of unjust enrichment and/or quantum meruit; and Iowa Based Milling's claim for false/fraudulent misrepresentation is recognized in Illinois thus this state law cause of action includes a right to ask for exemplary or punitive damages.

         Defendants Fischer Excavating and Western Surety framed the issues for trial as follows: Plaintiff Iowa Based Milling breached the contract between Defendant Fischer Excavating and Iowa Based Milling; legal fees claimed by the Plaintiff against Fischer and Western Surety; pre-judgment interest claimed by Plaintiff Iowa Based Milling against Fischer and Western Surety; treble damages for fraud and misrepresentation claimed by Iowa Based Milling against Fischer; and bond claim against Western Surety.

         At the time the parties commenced trial on May 15, 2017, the following claims remained: Plaintiff Iowa Based Milling's claim for breach of contract against Defendant Fischer Excavating; Iowa Based Milling's claim for quantum meruit and unjust enrichment against Defendant Fischer; Iowa Based Milling's claim for fraud and misrepresentation against Defendant Fischer; Iowa Based Milling's bond claims under the “Little Miller Act” against Defendant Western Surety; Iowa Based Milling's breach of contract and/or bond claim against Defendant Western Surety; and Defendant Fischer Excavating's Counterclaim for breach of contract against Plaintiff Iowa Based Milling. The parties' numerous affirmative defenses as set forth in the Plaintiff's Answer and Affirmative Defenses to Counterclaim (Doc. 38) and Defendant Fischer Excavating's Amended Answer (Doc. 106) remained as well.

         II

         The Court finds the following facts by a preponderance of the evidence.

         This case involves a construction dispute that arose from the Quad City International Airport Runway 9/27 Reconstruction Project (hereinafter “the Project”). The Project consisted of resurfacing a runway, installation of new lighting for the runway, installation of a new drainage system and landscaping. The general contractor for the Project was Concrete Structures. Fischer Excavating was a first tier excavating contractor that was responsible for milling of the runway, grading of the shoulders, the underground pipe work, concrete and paving removal. Iowa Based Milling is an Iowa limited liability company based in Dubuque, Iowa. Peter Simon is the sole member of Iowa Based Milling and has been since 2010. Iowa Based Milling is in the business of pavement milling work which involves operating machines which grind and remove layers of asphalt and concrete typically for the preparation for pavement resurfacing projects.

         Iowa Based Milling received an invitation to submit a proposal for milling work on the Project from Fischer Excavating. The invitation identified the project name and listed the engineering firm for the Project. Peter Simon gave his assistant, Karen Hoefler, his notes concerning proposals for several projects, including the Project at issue here, and he included a proposal for the Project with the other notes he gave her. (Tr. 15:22-16:15) Karen Hoefler sent the proposal to Fischer Excavating. Id. Peter Simon did not plan to submit a proposal for the Project until he had received a set of project plans. (Tr. 15:22-16:15) The proposal that Ms. Hoefler transmitted is Exhibit 1. (Tr. 17:3-10). That bid is dated June 8, 2010. In the bid, Iowa Based Milling offered to mill 143, 800 yards of payment scarification (or milling) for the Airport Project, at a unit price of $1.05 per square yard. The proposal also contained a mobilization charge of $2, 400.00. Iowa Based Milling also proposed to provide their own fuel and water in this bid.

         Several months went by without action on Iowa Based Milling's bid until, in November 2010, Mike Doty of Fischer Excavating called Peter Simon to inquire whether Iowa Based Milling had a 12 foot milling machine. During Peter Simon's initial telephone conversation with Mike Doty in November 2010, Mike Doty informed Peter Simon that a 12 foot milling machine with a 3/8 inch cut was required to meet project specifications. Mike Doty also informed Peter Simon that the specifications required milling to a depth of 14 inches. Peter Simon responded that he was unaware of those specifications because he had not seen the plans for the Project. Peter Simon communicated to Mike Doty during the same telephone call that he did not have the equipment required to meet the specifications of the job.

         Peter Simon's next contact with Fischer Excavating was in January 2011 when he received a telephone call from Tony Gilbertson. Tony Gilbertson informed Peter Simon that Iowa Based Milling was awarded the job, although by now it had been nearly eight months since Iowa Based Milling's bid had been sent to Fischer Excavating and no written notice of acceptance of the bid had been signed and sent to Iowa Based Milling up to that time. Peter Simon informed Tony Gilbertson that the proposal was sent by accident and that Iowa Based Milling did not have the equipment capable of doing the job.

         Tony Gilbertson called Peter Simon again in March 2011 and invited Peter Simon to a preconstruction meeting. Peter Simon attended the preconstruction meeting and concluded that Iowa Based Milling's ten year old machines would be unable to perform the required work. Peter Simon shared these concerns with Fischer Excavating personnel at the preconstruction meeting and in response, Fischer Excavating proposed that Iowa Based Milling start performing the milling work on the “haul road” and if Iowa Based Milling could not perform the work, Iowa Based Milling could leave the job. Peter Simon agreed.

         Thus, an oral contract was formed at the preconstruction meeting with Tony Gilbertson and Joe Fischer of Fischer Excavating and Peter Simon for Iowa Based Milling. The terms of the agreement were as follows: Iowa Based Milling would mobilize to the Project to mill the required material for Fischer Excavating to construct the haul road at the price submitted on Iowa Based Milling's proposal and if Iowa Based Milling was unable to perform the work, it could quit the job. (Tr. 27:23-29:1; 29:24-30:20) There was no written agreement memorializing this oral contract. Iowa Based Milling's original bid was never signed and returned to Iowa Based Milling before the litigation ensued. (P. Exh. 1; Tr. 29:2-16)

         Although Fischer Excavating attempted to persuade Iowa Based Milling to commit in writing to perform the entire job pursuant to Iowa Based Milling's original bid and sent Peter Simon a written contract to that effect, Peter Simon on behalf of Iowa Based Milling refused to sign the written contract, insisting that he would only agree to perform the work on a trial basis as agreed upon in the oral contract reached at the preconstruction meeting.

         Iowa Based Milling began work on April 11, 2011. Problems began almost immediately. The Teamsters Union and the Operators Union requested that six men be employed to operate the milling machine. Yet, Iowa Based Milling normally operates each machine with two men. Furthermore, the Teamsters Union required a union driver for the Iowa Based Milling water truck. Iowa Based Milling and the unions did reach a compromise whereby Iowa Based Milling could use two of its own personnel on each machine and then hire one additional Teamster plus one union driver for the water truck. Additionally, on April 13, 2011, the engine on one of Iowa Based Milling's two milling machines failed.

         After the Iowa Based Milling machine failed, Peter Simon told Frank Bolenski of Concrete Structures that the job was not working for him and that Iowa Based Milling was leaving the job. Frank Bolenski contacted Wayne Fischer for a meeting with Peter Simon at the onsite job trailer. Peter Simon told Wayne Fischer that he wasn't making any money and Iowa Based Milling was pulling off the job. (Tr. 43:21-46:12) Wayne Fischer asked Peter Simon if he could remain on the job for the remainder of the week so that Fischer Excavating could complete the haul road. Peter Simon agreed to do that.

         On April 18, Peter Simon returned to the Project to demobilize and Wayne Fischer asked Peter to stay onsite to mill one more day. Peter Simon agreed. Peter Simon understood that under the terms of his first oral agreement with Fischer Excavating made at the preconstruction meeting, that the work from April 11 through April 18, 2011 was performed at a proposal price of $1.05 per square yard. (Tr. 49:7- 51:23) Peter Simon prepared an invoice which calculated his work at $0.45 per square yard. (P. Exh. 7, p. Iowa Based Milling 1) This $0.45 per square yard was determined by taking the $1.05 per square yard at 14 inches in depth from the proposal and prorating that price to the 6 inch milling depth that he performed between April 11 and April 18, 2011 and then multiplying that by the number of square yards milled. (Tr. 49:7-51:23) The invoice also included a $1, 200 mobilization charge that related to the mobilization charge quoted in Plaintiff's Exhibit 1. Id In May 2011, Joe Fischer called Peter Simon and asked him to return to help Fischer Excavating finish the job. Peter Simon agreed to return to the Project only if Fischer Excavating would pay Iowa Based Milling $650 per hour, supply the fuel and water and hire any additional personnel the union required at Fischer Excavating's expense. (Tr. 53:3-17) Based on this new agreement, Iowa Based Milling returned to the Project on May 16, 2011. The Foreman Worksheets compiled by Iowa Based Milling confirm many of the terms of the oral agreement between Peter Simon and Joe Fischer. (P. Exh. 7) The Foreman Worksheets indicate that Iowa Based Milling returned on May 16, 2011 with only two employees, Peter Simon and his son, Austin Simon. The Foreman Worksheets also indicated that all fuel and water was supplied by Fischer Excavating beginning with his return to the Project on May 16, 2011 all the way through Iowa Based Milling's final work on the Project on September 1, 2011. (P. Exh. 7, p. Iowa Based Milling 159-Iowa Based Milling 183)

         The second invoice Iowa Based Milling submitted to Fischer Excavating confirmed that Iowa Based Milling was now working on an hourly basis. (P. Exh. 7, p.158) In the May 25, 2011 invoice, Iowa Based Milling billed Fischer Excavating at a rate of $600 per hour. (P. Exh. 7, p. Iowa Based Milling 158) Peter Simon indicated that the invoice(s) dated May 25, 2011 contained an error in the billing rate in that Iowa Based Milling mistakenly billed at an hourly rate of $600 per hour instead of the agreed upon rate of $650 per hour due to miscommunication between his office assistant, Karen Hoefler, but was corrected on later billings. (Tr. 57:3-11; P. Exh. 7, p. Iowa Based Milling 158) Further, Peter Simon noted that the mobilization charge shown on the invoices was not specifically discussed or agreed upon by Fischer Excavating but was one-third of his normal mobilization. (P. Exh. 7, p. Iowa Based Milling 158; Tr. 56:18-58:3).

         Fischer Excavating soon fell behind in paying Iowa Based Milling. Peter Simon became concerned because he had not been paid for his April or May work. Peter Simon reported several conversations with Kathy at Fischer Excavating and later had conversations with Joe Fischer. Joe Fischer initially told Peter Simon that they submitted pay requests that the State of Illinois had not processed then later, Peter Simon was told that the State of Illinois shuts down in June at the end of their fiscal year and that no payments would be processed until July. At no time during their discussions with Fischer Excavating about the slow pay did Fischer Excavating ever question Iowa Based Milling's rate at $650 per hour. Iowa Based Milling returned to the job site on July 18 and milled on July 18, July 20, July 21 and July 22. Iowa Based Milling submitted an invoice dated July 28, 2011 for its work in July and applied the correct $650 per hour rate. (P. Exh. 7, p. Iowa Based Milling 173) Iowa Based Milling performed additional work on the Project on August 11, from August 25 through August 29, and September 1, 2011-invoicing this work as well. For the work performed on August 11 and September 1, the parties agreed to modify the terms of the contract to allow for billing at a rate of $1, 000 per hour. (D. Exh. 2; D. Trial Brief at ECF p. 9).

         After Iowa Based Milling finished its work on the Project, Peter Simon contacted Kathy at Fischer Excavating to inquire about being paid. (Tr. 82:2-19) Kathy told Peter Simon that Fischer Excavating did not know what Fischer Excavating owed Iowa Based Milling and that Peter would have to discuss the situation with Tony Gilbertson. Id. Peter Simon called Tony Gilbertson but did not receive any return calls. Id. In addition, Peter Simon made contact with Neo Lorenzo of Concrete Structures. Neo Lorenzo told Peter Simon that he would look into the nonpayment issue and get back to him. (Tr. 84:11-85:4) Neo Lorenzo failed to do that.

         The last contact that Peter Simon had with Fischer Excavating was a September 22 telephone call from Joe Fischer. (Tr. 85:5-11) During that telephone call, Joe Fischer told Peter Simon that Fischer Excavating was going to pay $10, 815. During that telephone call, Joe Fischer also made a comment threatening Iowa Based Milling's business if it did not accept that payment in satisfaction of the outstanding invoices. (Tr. 85:12-15).

         By this time, Fischer Excavating owed Iowa Based Milling $85, 181.67 for its work on the oral contracts. Eventually, in October and November of 2011, Iowa Based Milling filed bond lien claims, containing an interest rate of 18% per annum. (P. Exh. 12 and 13) Iowa Based Milling also continued to bill Fischer Excavating for the accruing interest at 18% per annum. (P. Exh. 19).

         III

...


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