Potomac Constructors, LLC v. Efco Corp., Civil No. RWT 06-2918.

530 F.Supp.2d 731

POTOMAC CONSTRUCTORS, LLC, Plaintiff, v. EFCO CORP., Defendant.

Civil No. RWT 06-2918.

United States District Court, D. Maryland.

January 9, 2008.

COPYRIGHT MATERIAL OMITTED

Wilson Lamark White; Keith L. Richardson, Kilpatrick Stockton, LLP, Atlanta, GA, Stephen E. Baskin, Kilpatrick Stockton, LLP, Washington, DC, for Plaintiff.

Cyril Vincent Smith, III, P. Andrew Torrez, Zuckerman Spaeder, LLP, Baltimore, MD, David Laird Charles, Crowley, Haughey, Hanson, Toole and Dietrich, Billings, MT, for Defendant.

Kirk Edward Niemi, Watt, Tieder, Hoffar and Fitzgerald, LLP, McLean, VA, for Movants.

MEMORANDUM OPINION

ROGER W. TITUS, District Judge.

Bridges and contracts have a lot in common. They both unite people, they both make commerce possible, and they both need to be put together very carefully. The parties in this case put considerable care into negotiating their contract for bridge-building equipment and materials. To paraphrase Justice Scalia's observation in Whitman v. American Trucking Ass'n, were it not for the hundreds of pages of memoranda and exhibits submitted by the parties, one would have, thought the contract they signed was relatively clear. 531 U.S. 457, 465, 121 S.Ct. 903, 149 L.Ed.2d 1 (2001). Defendant's Motion for Partial Summary Judgment seeks to exclude damages which it claims were limited by the contract between the parties. Because the Court finds that the plain terms of the contract limit the damages Plaintiff may seek, Defendant's Motion for Partial Summary Judgment on the issue of contractual damages shall be granted.

Plaintiff also seeks damages for costs allegedly caused by Defendant's negligence. The bulk of Plaintiffs negligence and indemnification damages are barred by the economic loss doctrine. However, because a portion of Plaintiffs claim may fall into a narrow exception to that doctrine, Defendant's Motion for Summary Judgment on Plaintiffs negligence and indemnification counts shall be granted in part and denied in part.

SUMMARY OF FACTS

A. THE PROJECT

Plaintiff was the general contractor for the Maryland approach spans in the $2.5 billion dollar project to replace the Woodrow Wilson Bridge.¹ Plaintiffs $191 million dollar contract with the Maryland State Highway Administration included a strict time-line and daily financial penalties for delays. Plaintiff entered into a purchase order agreement with Defendant to engineer and supply steel "formwork" for $2.075 million dollars. The formwork was used to cast concrete segments that would be incorporated into the bridge's support structure. Plaintiff now seeks damages of thirteen million dollars, claiming that the entire project was significantly delayed by (1) Defendant's tardy deliveries, and (2) the poor quality of the formwork.

Plaintiffs Complaint contains three counts. In Count I, Plaintiff alleges that Defendant breached its contract by "failing to deliver the formwork on time, failing to properly design the formwork, [and] by supplying formwork that did not perform as required." Compl. ¶ 45. In Count II, Plaintiff alleges that Defendant was negligent in its design of the formwork, and seeks compensation for damages allegedly caused by Defendant's negligence. In Count III, Plaintiff seeks indemnification from Defendant for "cost[s] from third parties impacted by [Defendant's] negligence."

B. THE CONTRACT

The Purchase Order agreement entered into by the parties contains a section entitled "WARRANTY AND CONDITIONS." This section enumerates the remedies available for breach of the Purchase Order. The relevant language states that:

Seller's liability shall be strictly limited to those charges, expenses, costs and damages expressly provided for in this agreement. Seller shall, in no event, be liable for any additional or consequential damages....

The Property sold hereunder is warranted against defective workmanship or materials only, and Seller's liability is strictly limited to the repair or replacement of any defective property.... In no event shall Seller's liability exceed the actual and direct costs of labor, materials, transportation and equipment reasonably necessary for the repair or replacement of equipment covered, nor include any other incidental, indirect, or consequential damages....

Seller will use all reasonable means to deliver within the time specified, but assumes no liability for loss or damage arising from delay, or no [sic] fulfillment of contract by reasons of fires, strikes, delays in transportation, regulations of the United States Government, or any cause which is unavoidable or beyond its control.

Defendant's Motion for Partial Summary Judgment argues that the language quoted above "excluded incidental, indirect, or consequential damages, and damages for delays," and limits Defendant's liability to the costs of repairing or replacing any defective property sold under the agreement. Plaintiff disputes Defendant's interpretation of the three clauses. Plaintiff argues that this language does not limit incidental damages, and that the "repair and replacement" limitation is "unenforceable because it failed of its essential purpose."

ANALYSIS

A. INCIDENTAL AND CONSEQUENTIAL DAMAGES

The Purchase Order clearly excludes incidental and consequential damages, and limits Plaintiffs potential relief to "the actual and direct costs of labor, materials, transportation and equipment reasonably necessary for the repair or replacement of equipment." Under Maryland Commercial Code § 2-719, parties to a contract may "limit or alter the measure of damages recoverable" in the event of breach. This freedom to limit damages may be used to curtail both consequential and incidental damages. See, e.g., Dowty Comm. v. Novatel Computer Sys. Corp., 817 F.Supp. 581, 585 (D.Md.1992) (holding that incidental and consequential damages were both excluded by language which (1) limited damages to the cost of repair and (2) stated that the defendant would "[i]n no event ... be liable for incidental [or] consequential ... damages"). The statutory authority in Maryland to contractually limit recoverable damages is constrained by § 2-219(3), which prevents enforcement of unconscionable exclusions of consequential damages. MD.CODE ANN., COM. LAW § 2-719(3).

In this case, the first sentence on the warranty and conditions page unambiguously takes the parties out of the default remedies regime of Maryland contract law. It strictly limits Defendant's potential liability to the "charges, expenses, costs and damages expressly provided for in [the] agreement." The second sentence stresses that Defendant "shall, in no event, be liable for any additional or consequential damages." The contract subsequently provides for an express warranty against defective workmanship. However, the warranty is limited to "the repair or replacement of defective property," and explicitly disavows "incidental, indirect, or consequential damages."

Because the contract specifically disallows consequential damages, and Plaintiff has not argued that the exclusion of consequential damages is unconscionable, Plaintiff may not seek consequential damages under this contract. Furthermore, because the contract limits Defendant's potential damages to those expressly provided for in the contract, and the only express warranty in the contract explicitly excludes incidental damages beyond the cost of repair, Plaintiff may not seek additional incidental damages under this contract.

Defendant also argues that the fourth clause on the warranty and conditions page prevents Plaintiff from seeking damages for delays. The clause at issue states that Defendant will "use all reasonable means to deliver within the time specified, but assumes no liability for loss or damage arising from delay, or no [sic] fulfillment of contract by reasons of fires, strikes, delays in transportation, regulations of the United States Government, or any cause which is unavoidable or beyond its control."

Defendant contends that this clause has two effects. First, it excludes all damages caused by delays. Second, it excludes damages for non-fulfillment of the contract due to "fires, strikes, delays in transportation, regulations of the United States Government, or any cause which is unavoidable or beyond [Defendant's] control." Plaintiff argues that this clause, when read in the context of the remainder of the contract, only excludes damages for delays stemming from the specifically enumerated causes. As a matter of contractual interpretation, and as a matter of grammar, Defendant has the superior argument.

Maryland courts recognize a rule of construction which dictates that "a qualifying clause ordinarily is confined to the immediately preceding words or phrase — particularly in the absence of a comma before the qualifying clause." Sullivan v. Dixon, 280 Md. 444, 373 A.2d 1245, 1249 (1977); see also Kane v. Bd. of Appeals of Prince George's County, 390 Md. 145, 887 A.2d 1060, 1070 (2005); Maloof v. Maryland Dept. of the Env't, 136 Md.App. 682, 767 A.2d 372 (1999).

In Sullivan, the Court of Appeals of Maryland interpreted a statute which states that "a professional corporation may invest its funds in real estate, mortgages, stocks, bonds, or any other type of investment, and may own real or personal property necessary for the performance of a professional service." Sullivan, 373 A.2d at 1249. The appellant in Sullivan contended that the phrase "necessary for the performance of a professional service" modified the entire sentence. The Court of Appeals rejected the appellant's interpretation. It held that the qualifying phrase only modified the "clause dealing with ownership of property," and was not intended to "restrict the power of professional corporations to invest their funds." Id. at 1245. The Court of Appeals based this conclusion on its recognition that "the comma after the word `investment' separated the preceding words from the qualifying phrase." Id.; see...