Peach State Roofing, Inc. v. Kirlin Builders, LLC

PEACH STATE ROOFING, INC., Plaintiff, v. KIRLIN BUILDERS, LLC,formerly known as John J. Kirlin Special Projects, LLC,and BMH ENGINEERING, LLC, Defendants.

KIRLIN BUILDERS, LLC, Counter Claimant, v. PEACH STATE ROOFING, INC., Counter Defendant.

KIRLIN BUILDERS, LLC, Third Party Plaintiff, v. NORTH AM. SPECIALITY INS. CO., Third Party Defendant.

CIV. ACT. NO. 1:15cv526-CSC (WO)

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF ALABAMA SOUTHERN DIVISION

February 5, 2020

MEMORANDUM OPINION and ORDER

INTRODUCTION

Plaintiff Peach State Roofing, Inc. ("Peach State") filed this action on July 22, 2015, against defendants Kirlin Builders, LLC ("Kirlin")¹ and BMH Engineering, LLC ("BMH")² alleging claims of anticipatory breach of contract and breach of contract, wrongful termination, promissory estoppel, quantum meruit, negligence, negligent misrepresentation, respondeat superior, suppression, deceit, non-disclosure and concealment of material facts.

The Court has jurisdiction over these claims pursuant to its diversity jurisdiction and applied Maryland law based on the choice of law provisions in the contract documents. See 28 U.S.C. § 1332(a)(1). Pursuant to 28 U.S.C. § 636(c)(1) and M.D. Ala. LR 73.1, the parties consented to the United States Magistrate Judge conducting all proceedings in this case and ordering the entry of final judgment.

A bench trial was held on December 12, 2016, and on June 22, 2019, the Court entered a memorandum opinion and order granting judgment in favor of Peach State and against Kirlin on Peach State's breach of contract and wrongful termination claims

Because the parties were unable to resolve the amount of damages owed Peach State, the parties submitted briefs setting forth their positions and detailing their damages calculations. The issue of damages is fully briefed and ripe for resolution. Upon consideration of the evidence, the briefs of the parties, and Maryland law, the Courtconcludes that Peach State is entitled to damages in the amount of $570,212.52 which constitutes the amount of Peach State's unpaid job costs plus ten (10) percent as contemplated by the Subcontract. The Court further concludes that Peach State is entitled to prejudgment interest, but it is not entitled to damages for lost profits or an award of attorney's fees. The Court will award costs to Peach State, but those are not properly before the Court at this time.³

DISCUSSION

In its memorandum opinion and order dated June 22, 2018, the Court concluded that Kirlin materially breached the terms of the Subcontract when it hindered Peach State from completing work on the roof by withholding critical information and actively misleading Peach State. (Doc. 111). The Court found in favor of Peach State on its breach of contract and wrongful termination claims. (Id.).

Under Maryland law, a court must "give force and effect to the words of the contract without regard to what the parties to the contract meant or what they intended it to mean." Hashmi v. Bennett, 416 Md. 707, 7 A.3d 1059, 1068 (Md. 2010) (internal citation and quotation marks omitted). In other words, the court interprets a contract by determining "from the language of the agreement itself what a reasonable person in the position of the parties would have meant at the time it was effectuated." Id. (internal citation and quotation marks omitted).

JJK Group, Inc. v. VW Intern., Inc. 2015 WL 1459841 (D.Ct. Md. Mar. 27, 2015).

Because there is no dispute that Peach State and Kirlin owed contractual duties to each other pursuant to the Subcontract, the express provisions of the Subcontract also govern the award of damages.

A. Unpaid Job Costs. Paragraphs 15 and 30 of the Subcontract govern Peach States' damages in this case. Paragraph 15 provides in pertinent part as follows:

In the event a termination of Subcontractor's performance under this Subcontract for default is subsequently determined by . . . a court of competent jurisdiction to be wrongful, then such termination shall be deemed to have been a (sic) terminated by JJK without cause under the provisions of Paragraph 30, Termination for Convenience, and the compensation due Subcontractor, if any, shall be determined accordingly.

(Tr. Ex. 7, para. 15).

Paragraph 30 controls the amount of damages to which Peach State is entitled in the event Kirlin is deemed to have breached the Subcontract.

. . .Termination for default under Paragraph 15, if wrongfully made, shall be treated as a termination for convenience. Settlement of the Subcontract shall be made in accordance with the provisions of the Termination for Convenience clause in the Contract documents. If none, the Subcontractor shall be paid only the actual cost for work and labor in place, plus ten percent (10%), or a prorata percentage of the Subcontract Price equal to the percentage of completion, whichever is less. Subcontractor shall not be entitled to anticipated profits on unperformed portions of the work or any other consequential or direct damages of any kind or description.

(Id. at para. 30).

Peach State argues that the Subcontract supports its position that it is entitled to additional damages such as lost profits and attorney's fees. According to Peach State, the Subcontract specifically contemplates additional damages because the Subcontractor "shall have the rights and remedies available at law or in equity." (Id. at para. 15). Peach State, however, ignores the introductory phrase that limits its damages. The Subcontract specifically states that "[e]xcept as limited by this Subcontract," Peach State has rights andremedies in law and equity. Because the Subcontract specifically limits Peach State's damages to actual cost of work and labor, plus ten percent (10%), Peach State is entitled to no more than that.

The parties do not dispute that if Paragraph 30 governs, Peach State is entitled to be paid for its unpaid job costs in the amount of $518,375.02.⁴ The parties also agree that pursuant to that paragraph, Peach State is also entitled to ten percent (10%) of that amount which equals $51,837.50. Pursuant to Paragraph 30 of the Subcontract, the Court concludes that Peach State is entitled to an award of damages in the amount of $570,212.52. Under Maryland law, "pre-judgment interest as a matter of right is the exception rather than the rule." Ver Brycke v. Ver Brycke, 379 Md. 669, 702, 843 A.2d 758, 777 (2004) (quoting Buxton v. Buxton, 363 Md. 634, 770 A.2d 152 (2001). Kirlin offers no reason why the Court should not award Peach State prejudgment interest. The amount of Peach State's unpaid job costs are "certain, definite and liquidated (calculable) as of that specific date prior to judgment." Harford County v. Saks Fifth Ave. Distribution Co., 399 Md. 73, 96, 923 A.2 1, 14 (2007). Consequently, the Court concludes that Peach State is entitled to prejudgment interest at the rate of six percent per annum in accordance with Maryland law.⁵ "The determination of a certain rate of prejudgment interest is generally a matter of discretion on the part of the district court, . . . [and] [c]ourts have held that state law appliesto questions involving prejudgment interest in diversity cases." See U.S. v. Dollar Rent A Car Sys., Inc., 712 F.2d 938, 940 (4th Cir. 1983).

Relying on Paragraph 15 of the Subcontract, Peach State argues that it is entitled to other rights and remedies including lost profits and attorney's fees. In addition, Peach State contends that Kirlin's attempt to limit its liability for a breach in Paragraph 30 renders Paragraph 30 illusory, and Kirlin should not be permitted to avoid liability. The Court disagrees that Paragraph 30 is illusory or that Kirlin cannot limit its liability.

Peach State's reliance on the language in Paragraph 15 about rights and remedies is misplaced for two reasons. First, Peach State ignores the introductory phrase which states "Except as limited by this Subcontract." (Tr. Ex. 7 at para. 15). Second, Paragraph 30 specifically precludes damages for lost profits.

Subcontractor shall not be entitled to anticipated profits on unperformed portions of the work or any other consequential or direct damages of any kind or description.

(Id. at para. 30).

Maryland "adhere[s] to the principle of the objective interpretation of contracts." Myers v. Kayhoe, 391 Md. 188, 198, 892 A.2d 520, 526 (2006). See also Clancy, 405 Md. at 557.

[A] court "should keep the analysis simple when the language permits: 'Where the instrument includes clear and unambiguous language of the parties' intent, we will not sail into less chartered waters to interpret what the parties thought that the agreement meant or intended to mean.'" Long Green Valley, 432 Md. at 314, 68 A.3d 843 (quoting Garfink v. Cloisters at Charles, Inc.,392 Md. 374, 393, 897 A.2d 206 (2006)).

This rule ensures certainty in contracting. If a contract's language is unambiguous, it is simple enough to "give effect to that language 'unless prevented from doing so by public policy or some established principle of law.'" SDC 214, LLC, 395 Md. at 434, 910 A.2d 1064 (quoting Miller, 393 Md. at 637, 903 A.2d 938).

Newell v. John Hopkins Univ., 215 Md.App. 217, 236, 79 A.3d 1009, 1020 (2013). The language of Paragraph 30 specifically repudiates an award of "anticipated profits on unperformed portions of the work or any other consequential or direct damages of any kind or description." Thus, the plain language of the Subcontract governs, and the Court concludes that Peach State is not entitled to an award of damages for lost profit.

B. Lost Profits Damages. Even if the Court were to find that lost profits damages were available under the Subcontract, the Court concludes that Peach State has failed to meet its burden of demonstrating that the amount of lost profits sought has "been proved with reasonable certainty." Thomas v. Capital Med. Mgmt. Assocs., LLC, 189 Md.App. 39, 464, 985 A.2d 51, 66 (2009).

Peach State argues that it is entitled to damages of lost direct profits in the...