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Mid-Ark Roofing, Inc. v. Employers Mutual Casualty Co.

May 2, 2007

MID-ARK ROOFING, INC. PLAINTIFF
v.
EMPLOYERS MUTUAL CASUALTY COMPANY DEFENDANT



The opinion of the court was delivered by: J. Leon Holmes United States District Judge

OPINION AND ORDER

This is a construction contract dispute. Mid-Ark Roofing, Inc., a subcontractor, brought a claim against Employers Mutual Casualty Company for payment under a bond that Employers Mutual issued to Larich, Inc., a general contractor. Mid-Ark has moved for partial summary judgment as to three issues relevant to its underlying contract with Larich. For the following reasons, Mid-Ark's motion is granted in part and denied in part.

A court should grant summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). The party moving for summary judgment bears the initial responsibility of informing the district court of the basis of its motion and identifying the portions of the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Group Health Plan, Inc. v. Philip Morris USA, Inc., 344 F.3d 753, 763 (8th Cir. 2003). When the moving party has carried its burden under Rule 56(c), the non-moving party must "come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1985) (quoting FED. R. CIV. P. 56(e)). The non-moving party sustains this burden by showing that there are "genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson, 477 U.S. at 250. When a non-moving party cannot make an adequate showing on a necessary element of the case on which that party bears the burden of proof, the moving party is entitled to judgment as a matter of law. Celotex, 477 U.S. at 323. In deciding a motion for summary judgment, the court must view the facts and inferences in the light most favorable to the party opposing summary judgment. Boerner v. Brown & Williamson Tobacco Corp., 260 F.3d 837, 841 (8th Cir. 2001) (citing Rabuska v. Crane Co., 122 F.3d 559, 562 (8th Cir. 1997)). If the evidence would allow a reasonable jury to return a verdict for the non-moving party, summary judgment should be denied. Derickson v. Fidelity Life Assoc., 77 F.3d 263, 264 (8th Cir. 1996) (citing Anderson, 477 U.S. at 248).

I.

Larich served as the general contractor on a construction project for the National Park Service. This project involved the stabilization of six historic bathhouses located in Hot Springs, Arkansas. Mid-Ark and Larich entered into a subcontract under which Mid-Ark was to furnish all necessary labor and materials for the roofing and sheet metal work. Employers Mutual guaranteed payment for labor and materials provided on the project.

During the course of the construction project, Larich requested that Mid-Ark perform additional work, beyond the scope of its original subcontract, that required Mid-Ark to remove tiles from the roof of one of the bathhouses. Mid-Ark performed this work.

These tiles were considered part of the "historic fabric" of the bathhouses and were to be reused in the project. Some of the tiles, however, were broken in the removal process. Larich purchased a pallet of tile, which was the minimum quantity that could be purchased, to replace the broken tile. Not all of this replacement tile was used. The parties do not know the exact number of tiles that were broken by Mid-Ark, but the defendant admits that the cost to Larich for the replacement tiles would have been the same regardless of how many tiles Mid-Ark broke because the minimum amount of tile that Larich could purchase from the supplier was a pallet.

Larich acknowledged that a percentage of tile always break when removed and that there was an allotment in Larich's initial bid to the National Park Service that covered the expense of replacing tile broken in the ordinary course of performing such work. Larich nevertheless charged the cost of the replacement tile to Mid-Ark.

Mid-Ark asserts that Larich breached the subcontract through repeated failures to timely pay Mid-Ark for its work. Employers Mutual contends that Mid-Ark breached the subcontract by providing substandard workmanship and by failing to complete its work according to schedule.

The parties agree that $92,762.50 attributable to invoices submitted by Mid-Ark has been retained. Employers Mutual contends, however, that it is entitled to deduct various sums from this retainage, including $4,856.25 for damage to roof tiles; $1,944.02 for damage to shrubbery; $2,800 for damage to copper flashings; and attorneys' fees in excess of $40,000 incurred in defending this lawsuit.*fn1

The issues presented in this motion for summary judgment relate to whether Employers Mutual is entitled to deduct these sums under the terms of the subcontract. Article IV, paragraph 9, of the subcontract provides:

In the event Subcontractor is in default of, or breaches or fails to comply with any provision, covenant or requirements of this Subcontract or the Subcontract Documents; or in the event any person asserts, or indicates it will assert, any lien, claim, demand, or charge against the project or land or improvements or funds related to the Project, or against the Owner, the Contractor or any surety, arising from Subcontractor's performance of this Subcontract, the Contractor may, at its option, withhold out of any payments due or to become due to the Subcontractor such amounts as the Contractor may deem sufficient to protect and indemnify the Contractor . . . from any and all loss, damage and/or expense therefrom, including attorneys' fees and litigation costs, until the condition requiring such measures has been remedied by the Subcontractor to the satisfaction of the Contractor. . . . . Article III, paragraph 14(c), provides:

That unresolved claims resulting from clean-up by the Contractor, glass breakage, damage to finished surfaces, permanent fixtures or equipment, and such other related occurrences wherein the identity of the responsible party is unknown or undetermined, and for which no insurance settlement may be had, may, upon completion of the Project and at the Contractor's option, be fairly and equitably prorated for assessment to the Contractors account and/or to the accounts of those subcontractors who, in the determination of the Contractor, were engaged on the Work in a manner and at a time or times from which contributory involvement may reasonably be inferred: and the Subcontractor further agrees that Contractor's decisions or determination in such proration shall be final and conclusive.

The last phrase of paragraph 14(c) was stricken as shown above, and representatives of both Larich and Mid-Ark initialed this ...


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