BRB Contractors, Inc. v. Web Water Dev. Ass'n

BRB CONTRACTORS, INC., Plaintiff, v. WEB WATER DEVELOPMENT ASSOCIATION, INC., Defendant.

CIV. NO. 19-4095

UNITED STATES DISTRICT COURT DISTRICT OF SOUTH DAKOTA SOUTHERN DIVISION

February 11, 2021

MEMORANDUM OPINION AND ORDER DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT

Pending before the Court is Plaintiff BRB Contractors, Inc.'s ("BRB") Motion for Partial Summary Judgment seeking an order from the Court that any damages suffered by Defendant WEB Water Development Association, Inc. ("WEB") from its counterclaim alleging breach of contract are limited to "the reasonable cost of restoration, unless such cost is greater than the diminution in value of the [ ] premises, in which case the difference in market value before and after injury would be the proper measure of damages." (Doc. 32 at 1) (quoting Reed v. Consolidated Feldspar Corp., 23 N.W.2d 154, 157 (S.D. 1946)). In addition, in its Motion, BRB asks the Court to rule that WEB has not sustained any damages related to the post-construction condition of the landowners' topsoil conditions because WEB voluntarily incurred costs to reclaim the topsoil without claims or lawsuits asserted by the landowners. For the following reasons, BRB's Motion for Partial Summary Judgment is denied.

BACKGROUND

WEB Water Development Association, Inc. ("WEB") is rural water system containing approximately 6,800 miles of pipe spanning an area approximately 9,300 square miles. (Doc. 38, ¶ 2). WEB, as the owner, and BRB Contractors, Inc. ("BRB"), as the contractor, entered into a written contract effective August 24, 2017 (the "Contract") for the construction of a 3-mile underground water pipeline near Bowdle, South Dakota ("the Project"). (Docs. 33, ¶ 1; 35, ¶ 1). WEB separately retained DGR Engineering ("DGR") to serve as the Project Engineer for the Project. (Docs. 33, ¶ 2; 35, ¶ 2).

The Project crosses 6 farms and WEB acquired pipeline easements from each of the fee-simple landowners for the construction of the Project, as well as temporary easements to access the construction sites. (Docs. 33, ¶ 3; 35, ¶ 3; 34-2, Hammrich Dep. 16:5-9). WEB did not pay any compensation to the landowners to obtain the easements. (Docs. 33, ¶ 4; 35, ¶ 4).

The Contract provides that BRB will complete all work as specified in the Contract Documents, including specifications detailed in the Project Manual, and that WEB will make progress payments prior to Substantial Completion of the Project. (Docs. 34-1 at A-1, A-5). Upon Substantial Completion, the Contract provides that WEB "shall pay BRB an amount sufficient to increase total payments to [BRB] to 95 percent of the Work completed, less such amounts set off by [WEB] pursuant to Paragraph 15.01.E of the General Conditions, and less 200 percent of Engineer's estimate of the value of Work to be completed or corrected as shown on the punch list of items to be completed or corrected prior to final payment." (Doc. 34-1 at A-3). The Project Manual prepared by DGR provided that "[t]opsoil shall be salvaged and replaced on the trenches to a minimum depth of 6" and shall be graded and shaped to original condition." (Doc. 40-6 at 2-14). Per the Contract's terms, BRB was required to add topsoil if necessary to meet completed requirements. (Doc. 40-6 at 2-31). Topsoil is defined by the Contract as "soil typical of the area, which is capable of supporting native plant growth." (Doc. 40-6 at 2-32).

WEB does not have any agreements with landowners concerning the quality of the topsoil on the easements after construction, but made crop reimbursement payments to certain landowners for the 2018 season. (Docs. 33, ¶¶ 5, 7; 35, ¶¶ 5, 7). BRB is not obligated to pay the landowners or reimburse WEB for those crop reimbursement payments (Docs. 33, ¶ 5; 35, ¶ 5).

On November 1, 2018, representatives of WEB, BRB, and DGR conducted the final walkthrough for the Project. (Docs. 33, ¶ 8; 35, ¶ 8). WEB agreed that all items on the punch list dated November 1, 2018, had been completed except for items 4 and 11, both of which were to be completed later in the warranty period. (Docs. 33, ¶ 8; 35, ¶ 8). Although the punch list did not mention the condition of the topsoil, that subject had previously been brought to the attention of BRB prior to November 1, 2018. (Docs. 33, ¶ 8; 35, ¶ 8). Specifically, on June 5, 2018, DGR prepared a daily field observation report in which BRB was "reminded of the 6" minimum topsoil specification" found in the Project Manual. (Doc. 40-2, Pabolo Dep. 17:16-18:23). WEB had received complaints from some landowners about the Project and the condition of the topsoil overthe easements. Specifically, on September 20, 2018, one of the landowners wrote to WEB informing them of the following:

I was informed this spring that Agtegra would no longer be able to continue the test plot contracts in the same area used in previous years due to the digging of WEB water lines & soil composition after digging had commenced. The Agtegra rep stated that this ground had been disturbed to the point that it will likely take 5 years or more to recover to the original density/composition as it was before digging began.

I have therefore lost the income from those contracts—not to mention the benefits that these test plots would have shown us for the different varieties of crops grown on that particular type of soil. These losses are not only for the 2018 growing season, but for a number of years down the road.

We also want to restate our frustrations with the entire digging process—from the integration of sand/gravel into original soil content, to the destruction of posts & fences, damages to driveways, and of course there's the loss of grazing from the 2017 fall grazing season since this project has been ongoing for over a year!! Seems rather strange that some parts of this project can be completed in 2 weeks while the destruction on our property continues for months & months. Before this project started, we were told by WEB representatives that the project was estimated to take a couple of months at most, and that the groundwork, fences, driveways, etc. would be restored to pre-project condition. After digging up parts of the same line for a third time, it is apparent that none of the conditions we were lead to believe (before this project began) will be met.

(Doc. 40-1). Dustin Pabolo, the onsite foreman for the Project, recalls that a section of pipe was dug up several times because the water service kept breaking. (Doc. 40-2, Pabolo Dep. 5:18-20; 28:2-19). Mr. Pabolo testified that soil was insufficient to support the weight of the water service on the vertical 1-inch line which had snapped under the weight. (Doc. 40-2, Pabolo Dep. 28:2:19).

On November 2, 2018, after the final walkthrough, WEB notified DGR that one of the landowners had called WEB "regarding topsoil issues," and DGR engineer Nathan Brandenburg emailed that information to BRB employee Brandon Pabolo. (Docs. 33, ¶ 9; 35, ¶ 9). On November 14, 2018, DGR engineer Nathan Brandenburg sent WEB employee Eric Hansen an email that stated:

Eric,

Based off out [sic] conversation yesterday, I came up with the following potential payment scenarios based off of land values.

Assumptions:

100 linear feet of pipeline installation.

10 linear feet wide area.

$3033 per acre land evaluation for non-irrigated cropland in Edmunds County (2017 average according to SDSU)

1000' x 10' / 43650 acre/ft2 = 0.23 acres

0.23 acres x $3033 per acre = $697.59

For example, Dewald's property crossing is about 2600' long and assuming an average width of 10' across the entire property. So the payment would be approximately $1,813.73.

Let me know if you have any thoughts or suggestions for adjustments.

Thanks,

Nathan A. Brandenburg, PE

(Docs. 33, ¶ 11; 35, ¶ 11). In response to Mr. Brandenburg's email, Mr. Hansen replied:

Nathan,

Do you think you could do an estimate of what it might cost of it was completed the correct way by removing the clay that is placed on the existing topsoil? I know this would involve rolling topsoil to one side and putting topsoil back on trench area.

(Doc. 35, ¶ 11).

On November 13, 2018, WEB received a proposal from a construction company in Aberdeen to correct the topsoil issues and on December 3, 2018, received another estimate from B&B Contracting for $151,000 to remedy topsoil issues in 7,920 lineal feet of the easement across the Dewalds' and Hubers' property. (Doc. 34-2, Hammrich Dep. 60:7-61:20).

On December 3, 2018, BRB informed Nathan Brandenburg at DGR by email that he had reached verbal agreements with two landowners, the Hubers and the Dewalds, resolving potential topsoil issues. (Docs. 33, ¶ 10; 35, ¶ 10; 40-7). Specifically, BRB and the Hubers verbally agreed that BRB would provide the Hubers with eight to ten loads of topsoil to correct any topsoil deficiencies on their property. (Doc. 34-7 at 4; 40-7). BRB would pay Hubers for their time and equipment to spread the topsoil. (Doc. 40-7). BRB's agreement with the Dewalds was to have a neighbor rip his field in the spring as he felt his ground was too compacted and disk in manure. (Doc. 40-7).

When this December 3, 2018, email was passed along to Ms. Hammich at WEB, she inquired whether BRB's proposal adheres to the specifications in the Contract and Mr. Brandenburg responded as follows:

The specifications do not require a specific method for fixing a top soil issue. Which goes back to not controlling means and methods. The specifications callout an end product and in this case, a minimum depth of 6 inches of topsoil and no greater than 12" of grade change above the trench (which cannot extend more than 2 feet on either side of the trench and must provide adequate drainage). For your information I am referencing Section 02221, Paragraphs 3.05.C.2.b and 3.05.C.5. Section 02246 Paragraph 2.01.B. says that topsoil is considered to mean soil typical of the area, which is capable of supporting native plant growth. At this point I don't believe we know enough to say if there

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