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Nar Business Park, LLC v. Ozark Automotive Distributors, LLC

United States District Court, N.D. Illinois, Eastern Division

December 30, 2019



          ROBERT M. DOW, JR. JUDGE.

         Before the Court are Defendant's motion for summary judgment [95] and Plaintiff's cross-motion for partial summary judgment [105] on Plaintiff's Counts I and II; Plaintiff's [113] and Defendant's [115] cross motions for summary judgment on Defendant's two counterclaims; and Plaintiff's motion for leave to file a sur-reply [111]. For the reasons set forth below, the Court grants Defendant's motion for summary judgment [95] on Plaintiff's Counts I and II, and judgment is accordingly entered in Defendant's favor on those counts. The Court also grants Plaintiff's motion for leave to file a sur-reply [111]. Plaintiff's partial cross motion for summary judgment [105] on Count I is denied. Plaintiff's and Defendant's respective cross-motions for summary judgment [113, 115] on Defendant's Counterclaims I and II are each granted in part and denied in part. Judgment is entered in Plaintiff's favor and against Defendant on Defendant's Counterclaim II. The case is set for further status on January 15, 2020 at 9:00 a.m.

         I. Background

         The Court takes the relevant facts from the parties' Local Rule 56.1 statements of undisputed material facts and supporting exhibits: [57], [72-73], [77], [79-1-7], [80], [85], [97], [103], [106], and [108-10]. The Court construes the facts in the light most favorable to the nonmoving party on any given issue. The following facts are undisputed unless otherwise noted. “When we cite as undisputed a statement of fact that a party has attempted to dispute, it reflects our determination that the evidence cited in the response does not show that the fact is in genuine dispute.” King v. Chapman, 2013 WL 6709623, at *3 (N.D. Ill.Dec. 16, 2013).

         Plaintiff NAR purchased a large parcel (“Parcel”) in Naperville, IL in 2006 or 2007. [103 at 3, ¶ 12.] The topographically low-lying land was, at the time, used for farming. [Id.] Roughly contemporaneously, Plaintiff contracted with Naperville to excavate another (unrelated) site. [Id., ¶ 13.] Killing two birds with one stone, Plaintiff transported the excavated land to the Parcel, filling it in. [Id.] The extent to which Plaintiff measured the soil density in the Parcel is disputed, as are the measures taken to ensure that the land was properly filled. [Id., ¶¶ 14-15.] The quality of excavated soil taken from the other parcel is also in dispute. [108 at 3, ¶ 5.]

         Plaintiff contracted with Ozark Automotive Distributors[1] on September 17, 2012; it agreed to sell the Parcel for $5, 171, 400. [103 at 2, ¶ 10.] The parties also agreed, however, that a condition precedent to the land sale was a construction contract. [Id.] The construction contract contemplated a 400, 000 square foot automotive distribution center upon the empty Parcel. [Id.]; [Id., ¶ 8.] Defendant's distribution centers receive and ship inventory to Defendant's retail stores; these centers generally service dozens of stores. [80 at 8, ¶ 13.]

         Before the construction contract was executed, Defendant hired a geotechnical engineering consultant, Terracon Consultants, Inc. (“Terracon”), to test the soil and determine the feasibility of completing a construction project on the Parcel. [103 at 4, ¶ 16.] Terracon tested 24 soil-depths at various locations on the Parcel and submitted a report on March 15, 2013 that summarized its findings. [Id. at 5, ¶ 17]; see also generally [97-6]. Terracon was concerned about the existing fill, finding that the “composition, moisture content and standard penetration test blow counts * * * were variable” and therefore unsuitable for laying foundations for the construction project. See [97-6 at 10]; see also [103 at 5, ¶¶ 18-19]. Terracon recommended that the foundation not be built on the existing fill, and instead opined that “excavations for the building foundations should extend through the fill to the underlying native soils.” [103 at 5, ¶ 18]. Terracon also recommended that if these excavations uncovered soft or low-density native soils, then the native soils should be excavated until “suitable bearing soils” were uncovered. [103 at 5, ¶ 19]. The Terracon Report was included in the bidding documents, and Plaintiff admits that it received the report and never objected or requested clarification. [103 at 5-6, ¶¶ 20-21.]

         Plaintiff and Defendant executed a construction contract on July 2, 2013. [103 at 3, ¶ 8.] The contract consisted of the “Lump Sum Contract, ” an addendum, General Conditions, and various architectural Specifications. [72 at 3, ¶¶ 8-9]; [103 at 5, ¶ 21.] The default provisions of the contract placed the risk of loss on Plaintiff: “Contractor at its sole cost, risk, and expense shall construct, supply equipment, provide, purchase, pay for, and furnish all of the Work in accordance with the Contract Documents.” [57-1 at 22, Art. 2.] In exchange for providing construction services, Plaintiff was to receive $21, 309, 412.21. [97-1 at 4, Art. 4.] The parties do not dispute that the contract incorporated structural engineering and architectural “Specifications.” [103 at 5, ¶ 21.] Those Specifications, in turn, incorporated the Terracon Report by reference, requiring that the Terracon Report “be included as an integral part of the project specifications. Site preparation and foundation construction shall be in accordance with the recommendations of said report.” [103 at 6, ¶ 22]; see also generally [97-7]. The contract also included an integration clause, defining the contract documents as the entire agreement between the parties. [103 at 7, ¶ 25.]

         Plaintiff began work on the project on August 20, 2013. [72 at 3, ¶ 11.] Almost immediately, Plaintiff ran into trouble with the fill. [103 at 9, ¶ 32.] On August 28, 2013, Plaintiff formally requested that Defendant increase the contract sum in light of the extensive excavations (also called “undercuts”) required to conform to the Terracon Report. [Id. at 8-9, ¶¶ 30-31]. Two days later, Defendant responded that it would not modify the contract sum because the recommendations of the Terracon Report were well-known when the contract was signed and incorporated by reference as part of the contract itself. [Id., ¶¶ 32-33.] Plaintiff again sought to increase the contract sum in light of the undercutting in September 2013 and was again rebuffed. [Id., ¶ 34]. Plaintiff completed the excavations and continued with its construction. See [108 at 10-12, ¶¶ 19-20, 22, 24.] It is undisputed that in other instances, the contract sum was increased by over $1, 000, 000 for various changes and modifications. See, e.g., [110 at 2].

         Plaintiff had 365 days to complete the work-that is, until August 20, 2014. See [97-1 at 3, Art. 3.1]. Unfortunately, not all of the project components were completed on time. The parties do not dispute that as of August 20, 2014 Plaintiff had not done the following: (1) completed a sidewalk (or issued a bond to the city of Naperville in lieu of completing the sidewalk); (2) completed some landscaping work; (3) repaired an adjacent road; (4) completed an entrance for a neighboring facility; (5) paved a cul-de-sac; and (6) repaved part of a parking lot. [80 at 4, ¶ 10.] The parties dispute whether Plaintiff should be held liable for these delays. [Id., ¶ 9]. The parties also agree that two other tasks-fixing a problem with the “hazardous room” and finalizing the “record drawings”-were outstanding and delayed certification but disagree whether they were within Plaintiff's or Defendant's responsibilities.[2] [85 at 3-4, ¶¶ 5, 6.] Regardless, a permanent Certificate of Occupancy (CO) was not issued until December 15, 2015. [80 at 7, ¶ 11.] During this lag-time, Defendant sent three letters to Plaintiff complaining that the work had not been substantially completed, and (in some letters) outlining the outstanding work. [73 at 85-91.] Notwithstanding Plaintiff's delays in getting the permanent CO, Plaintiff was able to obtain a temporary CO on August 26, 2014 (that is, less than a week after the Contract Date). See [72 at 4-5, ¶¶ 15-16 (disputing that Plaintiff had completed its work by that date, but not disputing that a temporary CO was issued)]. Likewise, Defendant was more-or-less able to get its distribution center up-and-running on schedule. See [id., ¶ 16 (“[Defendant] does not dispute that it could occupy and use the distribution center on August 26, 2014.”)]

         In July 2017, Plaintiffs sued Defendant in state court for breach of contract, [3] arguing that the extensive undercutting was not within the scope of work. Plaintiffs now seek $334, 486.07 for its undercutting work.[4] [104 at 14.] Plaintiff also seeks $103, 487.36 that Defendants have withheld in partial satisfaction of its liquidated damages counterclaim (discussed below). Defendant removed to federal court [1] and counterclaimed to enforce the liquidated damages provision in the contract: Defendants seek $2, 000 for each day that the permanent CO was delayed after August 20, 2014-483 days (and $966, 000) in all. [41 at 16, ¶¶ 13-14.] Defendant also wants Plaintiff to indemnify it for any losses it may accrue in Plaintiff's original breach of contract claim and attorneys' fees. [Id. at 17, ¶¶ 19-20.]

         Before the Court are four cross motions for summary judgment. Defendant seeks full summary judgment [95] on Plaintiff's Claim I; Plaintiff cross moved for partial summary judgment [105] on that claim, arguing that it is at the very least entitled to the withheld funds. Plaintiff has abandoned its Claim II. See [104 at 20]. Plaintiff has also filed a sur-reply on Defendant's motion for summary judgment over Claim I [111]. Plaintiff moved for summary judgment [113] on Defendant's two counterclaims, and Defendant cross moved for summary judgment [115] on those claims as well.

         II. Legal Standard

         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine dispute as to any material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining summary judgment motions, “facts must be viewed in the light most favorable to the nonmoving party only if there is a ‘genuine' dispute as to those facts.” Scott v. Harris, 550 U.S. 372, 380 (2007). However, the Court will not draw inferences that are “supported by only speculation or conjecture, ” Williams v. Brooks, 809 F.3d 936, 944 (7th Cir. 2016) (quoting Argyropoulos v. City of Alton, 539 F.3d 724, 732 (7th Cir. 2008)) (internal citations omitted), and “[c]onclusory allegations alone cannot defeat a motion for summary judgment.” Thomas v. Christ Hosp. & Med. Ctr., 328 F.3d 890, 892 (7th Cir. 2003). The party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).[5]

         Summary judgment is proper where “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Gibbs v. Lomas, 755 F.3d 529, 536 (7th Cir. 2014) (quoting Jewett v. Anders, 521 F.3d 818, 821 (7th Cir. 2008)). “A party asserting that a fact cannot be or is genuinely disputed must support the assertion by: (A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; or (B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P. 56(c)(1). “The court need consider only the cited materials, but it may consider other materials in the record.” Fed.R.Civ.P. 56(c)(3).

         “Once a party has made a properly-supported motion for summary judgment, the opposing party may not simply rest upon the pleadings but must instead submit evidentiary materials that ‘set forth specific facts showing that there is a genuine issue for trial.' ” Harney v. Speedway SuperAmerica, LLC, 526 F.3d 1099, 1104 (7th Cir. 2008) (quoting Fed.R.Civ.P. 56(e)); see also Anderson, 477 U.S. at 250. A genuine issue of material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248. The party seeking summary judgment has the burden of establishing the lack of any genuine issue of material fact. See Celotex, 477 U.S. at 323. The Court construes all facts in the light most favorable to the nonmoving party and draws all reasonable inferences in favor of the nonmoving party. Bell v. Taylor, 827 F.3d 699, 704 (7th Cir. 2016).

         III. Analysis

         A. Plaintiff's Breach of Contract Claim (Claim I)[6]

         Plaintiff's Claim I is for breach of contract: Plaintiff alleges that it performed “extra work” by undercutting the soil, and was therefore entitled to payment for those services. Defendant has moved for summary judgment, arguing that the express language of the contract (and documents incorporated by reference) required undercutting the soil, and therefore this work was not “extra.” Plaintiff counters that the contract is ambiguous as to the status of the undercuts, and therefore summary judgment is inappropriate. Plaintiff has also moved for partial summary judgment on this count, arguing that irrespective of any ambiguity in the contract, it is entitled to funds withheld by Defendant in partial satisfaction of liquidated damages (discussed below).

         “Under Illinois law, in order for a contractor to recover money for ‘extra work,' it must show by clear and convincing evidence that the work was 1) outside the scope of the original contract; 2) ordered at the direction of the owner; 3) agreed to be paid for by the owner either by words or by conduct; 4) not voluntarily furnished by the contractor; and 5) not rendered necessary by fault of the contractor.” Brant Const. Co., Inc. v. Metropolitan Water Reclamation Dist. of Greater Chicago, 967 F.2d 244, 246 (7th Cir. 1992) (reviewing Illinois cases). The argument here focuses on the first requirement-whether any “extra work” was outside the scope of the original contract.[7]

         The Court turns to Illinois[8] contract law to determine whether the disputed undercutting was within the scope of the contract. “The primary objective in construing a contract is to give effect to the intent of the parties.” Gallagher v. Lenart, 226 Ill.2d 208, 232 (2007). The language of a contract provides the best indication of that intent. Id. (citation omitted); see also Right Field Rooftops, LLC v. Chi. Cubs Baseball Club, LLC, 870 F.3d 682, 690 (7th Cir. 2017) (applying Illinois contract law) (“A court must initially look to the language of a contract alone, as the language, given its plain and ordinary meaning, is the best indication of the parties' intent.”). If the contract's language is facially unambiguous, its words “must be given their plain, ordinary, and popular meaning.” Central Illinois Light Co. v. Home Ins. Co., 213 Ill.2d 141, 154 (2004). If the contract's language is susceptible of more than one meaning, it is ambiguous and the court can consider extrinsic evidence to determine the parties' intent. Right Field Rooftops, 870 F.3d at 690. All portions of a contract should be “construed as a whole, viewing each part in light of the others.” Gallagher 226 Ill.2d at 233 (citation omitted). In so construing a contract, a court should “attempt to give meaning to every provision of the contract and avoid a construction that would render a provision superfluous.” Land of Lincoln Goodwill Indus., Inc. v. PNC Fin. Servs. Grp., Inc., 762 F.3d 673, 679 (7th Cir. 2014).

         Here, the contract unambiguously required Plaintiff to undercut the existing fill. As explained above, the contract documents included architectural Specifications, which required Plaintiff to hew to the Terracon Report's recommendations when laying the foundation. [103 at 5- 6, ¶¶ 21-22]. The Terracon Report, in turn, described the existing fill as “variable” and recommended excavating and replacing all of it. [97-6 at 10-11]. Likewise, the Terracon Report advised that native soils may need to be undercut as well. [Id. at 10-11, 15.] In short, the unambiguous terms of the Contract Documents (i.e., the Specifications) required Plaintiff to undercut the fill and weak native soils. Because the undercuts were not “outside the scope of the contract” Plaintiff is not entitled to additional compensation. Brant Const, 967 F.2d at 246.

         This case is almost identical to a Seventh Circuit case in which the court determined that under-compensated “overexcavation” was not “extra work” when the contract specifications contemplated excavations. See generally Brant Const, 967 F.2d at 246. There, the buyer supplied specifications and a geoengineering report containing the “soil borings and soil analyses on which those plans were based. It also provided bidders with the opportunity to conduct further tests of their own.” Id. at 245-46. The contract in that case provided a per-cubic-yard rate of reimbursement for excavation. Id. at 246. Although it later turned out that the “overexcavation” was of a different, costlier nature the contractor anticipated, the Seventh Circuit concluded that the contract settled this issue, and that the contractor could only be reimbursed for the lower, contract price. Id. at 247. So too here-the contract expressly required Plaintiff to excavate the Parcel in accordance with the Terracon Report; even if these were costlier or more extensive than Plaintiff anticipated, the Court cannot ignore the parties' intent as reflected in the contract language.

         Plaintiff's arguments to the contrary are unconvincing. Plaintiff first argues that there is a conflict between the contract of land sale and the construction contract. [104 at 4-5.] As noted above, the litigants entered into two separate contracts. The land-sale contract provided that the land would be sold “AS-IS.” [108, ¶ 1.] Plaintiff argues that this provision saddles Defendant with the risk that contingencies may arise in the construction of the distribution center. [104 at 5.] But the land sale contract required that Plaintiff further contract with Defendant to build a distribution center; that construction contract, in turn, required that construction follow certain protocols, including excavating the extant fill and possibly even excavating weak native soils. [103-3, ¶ 10]; see also [97-7 at 2 (incorporating the Terracon Report)]. If Plaintiff's reading of the words “AS-IS” is correct, then the entire construction contract (not to mention the condition precedent within the land sale agreement) is superfluous-Defendant bought an empty lot “as is, ” so it is entitled to nothing more than an empty lot. The Court cannot accept this interpretation. See Land of Lincoln Goodwill, 762 F.3d at 679.

         Plaintiff also argues that the requirement that “foundation construction shall be in accordance with the recommendations of [the Terracon Report]” conflicts with other contractual documents, revealing an ambiguity that cannot be resolved on the face of the contract. [104 at 5- 7.] Plaintiff points to “Document 003132-Geotechnical Data.” See [103-5 at 10]. D003132 is part of the bidding documents and explains that the Terracon Report was provided “for contractor's convenience and [is] intended to supplement rather than serve in lieu of contractor's own investigations.” [Id.] ¶ 003132 states that it (i.e., D003132) is not part of the Contract Documents. [Id.] Plaintiff argues that D003132 is a Contract Document and its guidance that contractors conduct their own observations conflicts with the Specifications. Plaintiff is not correct, and there is no ambiguity in the integrated contract. As explained above, Article 1 of the Lump Sum Contract defines the Contract Documents; it unambiguously includes the Specifications (which in turn require that the Terracon Report guide laying the foundation). [97-1, Art. 1]; see also [103, ΒΆΒΆ 21- 22 (admitting that the Specifications are incorporated into the contract and require adhering to the Terracon Report's recommendations)]. Article 1, however, does not list D003132 as a Contract Document. Plaintiff attempts to get around this by arguing that D003132 was included in a packet of bidding documents, which also included the General Conditions, and therefore is a Contract Document. [104 at 6.] Plaintiff's argument is not pellucid, but it appears to argue that since the General Conditions are part of the Contract ...

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