LAW: The Contractor's Side

A rock could break the bank

Article June 11, 2001
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In a recent case a contractor sought to recover additional costs from a DOT on the basis that the DOT failed to disclose an obs


In a recent case a contractor sought to recover additional costs from a DOT on the basis that the DOT failed to disclose an obstruction previously constructed by the same contractor. As explained below, in Massman Construction Co. v. Missouri Highways & Transportation Commission, a case finally decided in 2000, the contractor spent several years and undoubtedly significant legal fees to win its case.


Refusing to budge


In 1983, Massman entered into a contract with the Missouri Highways & Transportation Commission to construct substructure work for a bridge over the Missouri River. Before Massman began construction, Massman and the Commission discovered that a rock revetment, which was not shown on the Commission’s project plans, would interfere with the placement of one of the bridge’s piers. The Commission directed Massman to remove it at its cost. Massman sued the Commission for a breach of warranty and sought damages arising from its having to remove the rock revetment from the river.


The litigation between Massman and the Commission began in 1988 and resulted in three trials and four appeals.


In the first trial, the trial court ruled in favor of Massman on the issue of liability. The jury then awarded Massman $1,922,821.28. The Court of Appeals reversed the liability ruling and stated the jury should have heard the Commission’s evidence on whether Massman knew of the obstruction.


In the second trial, the jury returned a verdict of only $250,000 for Massman, which promptly asked the court to increase the verdict to the amount awarded by the original jury. The trial court denied the request, but found that the jury’s award was inadequate and ordered a new trial on damages only.


The Commission appealed, and the Missouri Supreme Court remanded the case back to the trial court. On remand, the trial court entered an order increasing the jury verdict from $250,000 to $750,000, but it gave the Commission the option of accepting the increased verdict or having a new trial on the issue of damages only. The Commission again appealed and the Court of Appeals reversed and remanded with instructions that the trial court offer the Commission the choice of accepting the $750,000 award to Massman or retrying the case on all issues.


When given the choice, the Commission chose a new trial on all issues. That third trial of the case resulted in a judgment for Massman in the amount of $850,000 plus interest.


The Commission once again appealed the judgment, claiming the trial court should have ruled that Massman could not recover for breach of warranty because Massman had constructed the obstruction. The Commission asserted Massman could not show it lacked knowledge of the obstruction.


No indication


On the most recent appeal, the U.S. Court of Appeals in Missouri began by stating that a contractor must prove: (1) the governmental entity made a positive representation of material fact that was false; (2) the contractor lacked knowledge of the falsity; and (3) the contractor relied on and sustained damages as a direct result of the governmental entity’s positive representation of material fact.


The court then considered the evidence which established that when Massman submitted its bid to the Commission for the substructure work for the bridge, the Commission’s project plans did not indicate the presence of the rock revetment in the river. In formulating its bid, Massman relied on the Commission’s plan and did not account for the removal of the revetment in its bid.


The Commission contended, however, that as a matter of law Massman could not—and cannot—satisfy the requirement that it lacked knowledge about the rock revetment because Massman placed the rock revetment in the river in constructing a project for the U.S. Army Corps of Engineers.


Massman did not dispute that it put the rock revetment in the river in 1979. However, it denied that it knew that the revetment would interfere with the bridge’s construction at pier 6.


The evidence established that in the 10 years before the bridge project Massman had over 40 contracts with the Corps of Engineers to build more than 2,000 structures in the river, including revetments. The contract for the revetment at issue in this case required Massman to build other rock structures involving multiple types of construction in 23 locations over 28 miles of the river. The evidence also established that the Corps of Engineers placed approximately 120 structures, including revetments or dikes, in the river a year and that they altered existing structures and even removed some revetments from the river.


The Court of Appeals concluded that Massman presented sufficient evidence for the jury to conclude that it did not know that the revetment would interfere with construction of pier 6. Given the evidence, the trial court did not err in denying the Commission’s motion for judgment notwithstanding the evidence.


I strongly favor alternative dispute resolution methods to resolve claims against DOTs. The litigation of this claim was both costly and time consuming. Verdicts ranging from $250,000 to $1,922,821.28 reflect that presenting construction cases to juries is tantamount to rolling the dice.


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