Davis Group, Inc. v. Ace Electric, Inc., 2015 U.S. Dist. LEXIS 83368 (M.D. Fla. June 26, 2015)

This action arose out of a construction project to build a new Radar Approach Control Facility at Seymour Johnson Air Force Base in Goldsboro, North Carolina (“Project”). The United States Army Corps of Engineers (“COE”) contracted with general contractor Davis Group, Inc. (“TDG”) to construct the Project. TDG entered into a subcontract with Ace Electric, Inc. (“Ace”) to perform the electrical work on the Project (the “Subcontract”).

The Subcontract included various provisions addressing delays in completion of the work. In particular, the parties agreed that Ace was entitled to a reasonable extension of time and/or additional compensation if its work was delayed, through no fault of Ace, by the COE, TDG or other subcontractors. If on the other hand, Ace was responsible for a delay in completion of the work, then the parties agreed that Ace would “reimburse [TDG] for the entire cost and expense suffered or incurred as a result of” the delay, including any liquidated or other damages the COE might assess against TDG for delays to the Project as a whole. The Subcontract further provided that, if “such damages are caused by [Ace] and another person or entity,” TDG could “reasonably apportion such damages between the parties, and any such apportionment shall be final and binding upon [Ace].”

The Project was ultimately assessed liquidated damages by the COE for finishing 262 days after the expected substantial completion date. Once the Project was complete, TDG undertook a critical path method analysis to determine which, if any, trades contributed to the Project delays. TDG concluded that Ace was responsible for 82 of the 262 days of delay and sought to pass through the liquidated damages assessed for this period at the rate of just under $700 per day. TDG also claimed 82 days of field overhead against Ace at the rate of approximately $600 per day. Ace refused to pay any delay damages. Ace maintained that it did not cause delays to the Project, that TDG’s apportionment of damages was unreasonable and that TDG failed to account for the unpaid Subcontract balance due to Ace, including additional compensation for damages Ace sustained as a result of the delays.

TDG brought suit in the United States District Court for the Middle District of Florida and moved for summary judgment on its claim against Ace for breach of the Subcontract. TDG argued that it acted within its rights under the Subcontract and that the apportionment to Ace was final and binding on Ace as a matter of law. The Court disagreed.

Under the plain language of the Subcontract, the Court found that TDG was entitled to apportion damages between Ace and other persons or entities only if “such damages are caused” at least in part by Ace. The Court agreed that the Subcontract gave TDG discretion in apportioning damages between responsible parties and made TDG’s apportionment “final and binding” on Ace, but reasoned that this did not give TDG the discretion to determine whether Ace “caused” a particular delay. Thus, the Court held that the provision granting TDG discretion to apportion damages amongst at-fault parties did not entitle TDG to impose liquidated and delay damages upon a subcontractor who had not been shown to have caused a delay.

Consequently, the Court denied TDG’s motion for summary judgment on its claim against Ace for breach of the Subcontract.

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