D.A. Nolt, Inc. v. Phila. Mun. Auth.

463 F.Supp.3d 539

D.A. NOLT, INC., Plaintiff

v.The PHILADELPHIA MUNICIPAL AUTHORITY, et al., Defendants

CIVIL ACTION No. 18-4997

United States District Court, E.D. Pennsylvania.

Filed May 28, 2020

George E. Pallas, Jennifer R. Budd, Cohe, Seglias, Pallas, Greenhall & Furman PC, Dean E. Weisgold, Dean Weisgold, PC, Philadelphia, PA, for Plaintiff.

Amy Marie Kirby, Michael Wu-Kung Pfautz, Sean J. McGrath, City of Philadelphia Law Department, Philadelphia, PA, for Defendants.

MEMORANDUM

Pratter, United States District Judge

The parties dispute whether the liquidated damages provision included in a construction contract was itself constructed on a base of reasonable forecast of actual damages. The City of Philadelphia and the Philadelphia Municipal Authority seek to enforce a $10,000 per diem liquidated damages provision based only on their project director's recollections of pre-estimates of probable actual damages that had been used to set provisions in other construction contracts negotiated and written decades ago. General contractor D.A. Nolt, Inc. moves for partial summary judgment and seeks to dismiss the defendants' claim for liquidated damages. For the reasons discussed below, the Court grants Nolt's motion.

BACKGROUND

The City, through the Philadelphia Municipal Authority,¹ sought to relocate the Philadelphia Police Department's headquarters to 4601 Market Street. The relocation required a renovation project that was scheduled to be completed in three construction phases. The City contracted Nolt, a general contractor, to complete $13,473,817.02 worth of work on the building façade and roof improvements during the project's second phase. However, the project fell through when Mayor James Kenney announced that the police headquarters would be relocated elsewhere. According to Nolt, the City failed to pay Nolt for some of the work it completed prior to the cessation of the project,² allegedly resulting in damages in excess of $2,564,329.37.³ Accordingly, Nolt brought this suit against the City. The City, in turn, raised a counterclaim asserting that Nolt breached the contract by allegedly delaying the project for 255 days. Although the City primarily argues that it incurred nearly $2.7 million in actual damages due to Nolt's alleged breach, it alternatively asserts that Nolt owes the City $2.55 million pursuant to a $10,000 per diem liquidated damages provision in the contract. Nolt's motion takes aim at the City's effort to enforce the liquidated damages provision.

A. Liquidated Damages Provision

The project manual consists of the City's Standard Contract Requirements for Public Works Contracts and the City's Special Contract Requirements. In pertinent part, the City's Standard Contract Requirements state:

If, for reasons other than those stated above, any portion of the work remains uncompleted after the Contract date specified for its completion, notwithstanding Substantial Completion of the work, the Project Manager shall deduct from payments due the Contractor, as liquidated damages an amount per diem, according to the following schedule:

Contract Value	Agreed Delay Damages Per Diem
$0-$100,000	$250
$100,001-$500,000	$500
$500,001-$1,000,000	$750
Over $1,000,000	$1,000

These per diem delay damages are assessed as agreed liquidated damages because the Parties have considered the difficulty of determining the City's actual damages and agreed that computation of the City's actual damages is impossible ....

Pl.'s Ex. 3 at § 26(f) (Doc. No. 24-6).

The Special Contract Requirements modified the standard schedule as follows:

Contract Value	Agreed Delay Damages Per Diem
$0-$100,000	$250
$100,001-$500,000	$500
$500,001-$1,000,000	$1,000
Over $1,000,000	$10,000

Id. at 12.F (emphasis added). Thus, the modification increased the per diem damages for contract values greater than $1,000,000 from $1,000 to $10,000. Because Nolt's contract value exceeded $1,000,000, the $10,000 per diem liquidated damages provision applies here.

B. Pedro Pinto's Deposition Testimony

Nolt's arguments initially focused on the deposition testimony of Pedro Pinto, a professional civil engineer employed as a project manager and Philadelphia Municipal Authority representative. Mr. Pinto testified that although he was part of the process to increase the per diem amount from $1,000 to $10,000, he did not perform any analysis to forecast the daily amount of liquidated damages for the project, and he was unaware of anyone else who performed such an analysis.

C. James Lowe's Declaration and Deposition Testimony

In defending against Nolt's motion, the City relies on the declaration of James Lowe, the Project Director for the City of Philadelphia's Department of Public Property. In his declaration, Mr. Lowe stated that he finalized and executed the City's contract with Nolt, including the $10,000 per diem liquidated damages provision. According to Mr. Lowe, the City determined that the $10,000 per diem provision "was accurate based on an analysis of projects of similar scope and magnitude." Lowe Decl. at ¶ 6 (Doc. No. 28-2). The liquidated damages provisions for these prior projects were based on calculations which had estimated daily costs to the City in the event of any delays in those projects. In his declaration, Mr. Lowe also states that the City determined that it would be difficult to determine actual damages for breaching the contract at the time the parties entered into the Nolt contract, and that the City intended the $10,000 liquidated damages amount to cover any damages it may incur if Nolt breached the contract.

After the City submitted Mr. Lowe's declaration to the Court, Nolt deposed Mr. Lowe. When questioned about his declaration, Mr. Lowe testified that he "believe[d]" that his department, "back in the [1990s]," considered "some relative costs that [it] might incur" regarding prior large-scale projects "that had some detention component[s]." Lowe Dep. at 226:18-24; 227:13-14 (Doc. No. 40-1). Specifically, the earlier projects Mr. Lowe referenced included the Curran Fromhold Correctional Facility, the Riverside Women's Correctional Facility, and the Philadelphia Youth Center. Mr. Lowe testified that these projects each cost more than $70 and $100 million. Mr. Lowe believes that the analyses for at least two of these projects could have factored in probable rental costs for housing inmates at other locations. Because these past contracts were entered into and performed before he began working for the City, Mr. Lowe had not personally requested or analyzed the calculations that had been completed to prepare the liquidated damages provision included in those contracts. Mr. Lowe stated that he could not locate any documentation detailing the earlier analyses conducted to formulate the liquidated damages provisions included in the past contracts.

LEGAL STANDARD

A court can grant a motion for summary judgment "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). An issue is "genuine" if there is a sufficient evidentiary basis on which a reasonable jury could return a verdict for the non-moving party. Kaucher v. Cnty. of Bucks , 455 F.3d 418, 423 (3d Cir. 2006) (citing Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). A factual dispute is "material" if it might well affect the outcome of the case under governing law. Id. (citing Anderson , 477 U.S. at 248, 106 S.Ct. 2505 ). Under Rule 6 of the Federal Rules of Civil Procedure, the Court must view the evidence presented in the motion in the light most favorable to the non-moving party and draw all evidence in that party's favor. Id. However, "[u]nsupported assertions, conclusory allegations, or mere suspicions are insufficient to overcome a motion for summary judgment." Betts v. New Castle Youth Dev. Ctr. , 621 F.3d 249, 252 (3d Cir. 2010).

The movant bears the initial responsibility for informing the Court of the basis for the motion for summary judgment and identifying those portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the non-moving party bears the burden of proof on a particular issue, "the burden on the moving party may be discharged by ‘showing’—that is, pointing out to the district court—that there is an absence of evidence to support the non-moving party's case." Id. at 325, 106 S.Ct. 2548. After the moving party has met its initial burden, the non-moving party then must set forth specific facts showing that there is a genuinely disputed factual issue for trial by "citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations ..., admissions, interrogatory answers, or other materials" or by "showing that the materials cited do not establish the absence or presence of a genuine dispute." FED. R. CIV. P. 56(c). Summary judgment is appropriate if the non-moving party fails to rebut by making a factual showing "sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex , 477 U.S. at 322, 106 S.Ct. 2548.

DISCUSSION

"In Pennsylvania, liquidated damages are defined as ‘the sum a party to a contract agrees to pay if he breaks some promise, and which, having been arrived at by a good faith effort to estimate in advance the actual damage that will probably ensue from the breach, is legally recoverable ... if the breach occurs.’ " Benson v. Budget Rent A Car Sys., Inc. , No. 08-4512, 2011 WL 4528334, at *5 (E.D. Pa. Sept. 29, 2011) (citations omitted). "[C]ontracting parties may provide for pre-determined liquidated damages in the event one party fails to perform, particularly in circumstances where actual damages would be difficult to...