S.J. Louis Construction, Inc. v. Water District No. 1 of Johnson County

S.J. Louis Construction, Inc., Appellant, v. Water District No. 1 of Johnson County, Appellee.

No. 122, 165

Court of Appeals of Kansas

April 30, 2021

NOT DESIGNATED FOR PUBLICATION

Appeal from Johnson District Court; Paul C. Gurney, judge.

Timothy J. Davis, of Bryan Cave Leighton Paisner LLP, of Kansas City, Missouri, for appellant.

Michelle R. Stewart and Jennifer R. Johnson, of Hinkle Law Firm LLC, of Overland Park, for appellee.

Before Bruns, P.J., Green and Atcheson, JJ.

MEMORANDUM OPINION

Per Curiam:

S.J Louis Construction, Inc. (SJL) appeals the trial court's order dismissing its lawsuit against Water District No. 1 of Johnson County (WaterOne), striking its defenses to WaterOne's counterclaim, entering default judgment in WaterOne's favor, and ordering it to pay WaterOne's attorney fees associated with the costs of preparing and filing its motions to compel and for sanctions. The trial court entered the preceding sanctions after finding that SJL deliberately violated its previous order to compel discovery. SJL, however, contends that it never violated the trial court's compel order. Thus, it argues that the trial court erred as a matter of law when it imposed any sanctions upon it. Alternatively, SJL contends that the trial court's sanctions of dismissing its claims, striking its defenses, and entering default judgment in WaterOne's favor were too severe for its particular violations of the trial court's compel order. As a result, SJL argues that at the very least, this court should vacate the trial court's order imposing sanctions and remand to the trial court for completion of discovery. We agree, in part, and reverse, in part, the trial court's sanctions of the following: (1) the dismissal of SJL's claims against WaterOne, (2) the striking of SJL's defenses to WaterOne's claim for liquidated damages, and (3) the entering of default judgment against SJL on WaterOne's claims for liquidated damages.

We affirm, however, the trial court's order requiring SJL to pay attorney fees in the amount of $4, 557 for the cost of preparing the initial motion to compel and for the filing and preparation of the motion for sanctions set out in the trial court's journal entry of judgment, dated February 16 2018.

Thus, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

The Pipeline Project

In October 2013, SJL, a Minnesota-based company, contracted with WaterOne to construct a 42-inch diameter water pipeline, which would run 16, 214 linear feet, and a 60-inch diameter water pipeline, which would run 11, 456 linear feet, for $11, 094, 183. Black & Veatch, which designed the pipeline project plans for WaterOne, served as the pipeline project engineer.

SJL started constructing the 42-inch water pipeline in March 2014. Then, about two months later, in May 2014, SJL started constructing the 60-inch water pipeline. Ultimately, in April 2016, SJL completed the pipeline project.

Although it is unclear from the record on appeal when exactly SJL was supposed to finish constructing the pipeline project, the parties agree that under SJL's contract, SJL should have finished the pipeline project before April 2016. Moreover, the parties agree that multiple unplanned construction delays occurred during the building of the pipeline project. Yet, the parties have always disagreed about who caused the unplanned construction delays and should therefore bear the cost of those delays.

Ultimately, the parties' dispute came to a head in August 2016. At that time, SJL submitted project change requests to WaterOne. In those change requests, SJL alleged that it incurred $140, 698.87 in extra costs because of unplanned construction delays caused by WaterOne in two ways: First, SJL alleged that WaterOne caused the unplanned construction delays by negligently approving Black & Veatch's project plans despite those plans containing certain inaccuracies. Second, SJL alleged that WaterOne caused the unplanned construction delays by unilaterally altering Black & Veatch's project plans midway through construction.

WaterOne, however, denied SJL's post-project change requests because it alleged that SJL created its "post-project change requests . . . after the fact, in an effort to avoid assessment of liquidated damages" for not timely completing the pipeline project. In addition, WaterOne alleged that SJL, through its poor workmanship, had caused the disputed construction delays. Thus, WaterOne did not pay SJL the requested $140, 698.87 in change request costs. Additionally, because it concluded that SJL contractually owed it $612, 000 in liquidated damages for the construction delays, WaterOne kept the contract retention money, which totaled $554, 837.11.

The Lawsuit

Because WaterOne refused to pay the costs associated with SJL's post-project change order requests and withheld the contract retention money, SJL sued WaterOne in December 2016. In its petition, SJL asserted that by denying its change order requests and by keeping the contract retention money, WaterOne breached its contract, breached its warranties, and breached its duty of good faith and fair dealing. SJL also asserted that because WaterOne caused the construction delays and thus wrongly denied its change order requests and kept the contract retention money, it was entitled to payment of the $140, 698.87 in costs associated with its change order requests and $554, 837.11 in contract retention money under the doctrines of quantum meruit, promissory estoppel, and negligent misrepresentation. SJL also made an action on account claim.

In February 2017, WaterOne answered SJL's petition by denying all wrongdoing. It then filed a counterclaim against SJL. In its counterclaim, WaterOne argued that SJL's failure to timely complete the pipeline project constituted a breach of contract that entitled it to $612, 000 in liquidated damages and more than $416, 510 in actual damages.

Afterwards, SJL answered WaterOne's counterclaim by denying all wrongdoing. And in its answer, SJL further asserted that because it was WaterOne, not itself, that caused the disputed pipeline project construction delays, WaterOne's underlying breach of contract counterclaim was meritless. So SJL argued that WaterOne should bear any costs stemming from the disputed pipeline project construction delays.

The Discovery Disputes

In its first request for document production, WaterOne asked SJL for its full pipeline projects job file as well as all e-mails within its employees' e-mail accounts and all text messages on its employees' company-issued cell phones including internal correspondences, in which its employees discussed the following issues: (1) discussing issues regarding "'increased costs on the project'" or "additional compensation" requests; (2) discussing issues with time extension requests; (3) discussing conditions encountered that were not included in the contract documents or that were different from the contract documents; (4) discussing work sequence and operations that it believes WaterOne "'authorized, directed, or ca[u]sed'"; (5) discussing WaterOne's or WaterOne's representatives' "changes and/or alterations . . . to the scope and character of the work"; (6) discussing WaterOne's or WaterOne's representatives' "'fail[ure] to effectuate timely means to mitigate' the alterations, changes, obstructions and/or impediments"; (7) discussing "any instance wherein [it] contend[s] WaterOne 'intentionally and purposely administered the Contract in a devious or self-interested manner'"; (8) discussing "any instance wherein [it] contend[s] WaterOne "'delay[ed] and hinder[ed] Contract performance in order to impose liquidated damages and reduce the Contract Price'"; (9) discussing "any instance wherein [it] contend[s] WaterOne intentionally or negligently communicated information [to] influence [its] actions"; and (10) discussing any instances where it alleges WaterOne made demands inconsistent with the law. Although WaterOne did not specifically request SJL's internal communications when asking, WaterOne also requested that SJL turn over any communications, including e-mails, wherein it "provided WaterOne or [Black & Veatch] with notice of or information regarding issues with changed conditions on the project," it "provided WaterOne or [Black & Veatch] with notice of or information regarding issues with increased costs on the project," and it "requested time extensions from WaterOne or [Black & Veatch]" upon "advis[ing] [it] of issues with changed conditions [and] increased costs."

SJL responded to WaterOne's first request for document production on March 27, 2017. In its response, SJL lodged no objections to any of the preceding document production requests from WaterOne. Instead, in response to those document production requests, SJL simply stated, "All documents responsive to this request will be produced." In addition to document production requests explicitly asking that e-mails be produced, WaterOne also made general document requests for any documents involving many pipeline project subjects, including SJL's pre-bid requests for clarification, SJL's pipeline project start date, and SJL's mitigation efforts. As with the preceding requests, SJL answered WaterOne's more general document requests by saying, "All documents responsive to this request will be produced."

After SJL responded to WaterOne's first request for document production, the trial court entered a case management order. Under this April 2017 case management order, the parties had to complete discovery no later than March 12, 2018.

Next between May 2017 and July 2017, it seems the parties engaged in settlement negotiations. But by early August 2017, those settlement...