The opinion
STATE OF MAINE SUPERIOR COURT
HANCOCK, SS. CIVIL ACTION
Docket No. CV-04-36 '
\ ,.
-.J
I) ~ l\ I L!
L;---; -" nl) J v - / ,<
~ c.~' '/'> .
Northeast Marine Towing and
Construction, Inc.,
Plaintiff
v. Decision and Judgment
OONALDL.GARBRECHT
LAW LIBRARY
City of Ellsworth et aI.,
Defendants 1-,1 AY '.1 h .
A consolidated hearing was held on the complaint of plaintiff Northeast Marine
Towing and Construction, Inc. (NEM) and on the counterclaim of defendant City of
Ellsworth. At trial, a representative of NEM and counsel for NEM were present. The
defendants appeared through counsel and, during portions of the trial, through
representatives of those parties.
The pending claims arise out of a contract between NEM and the City, under
which NEM agreed to dredge a portion of the City's harbor in the Union River. For the
reasons stated in this order, the court concludes that NEM materially breached its contract
and that the City terminated the contract for cause. On this basis, the court awards relief
to the City. The court also concludes that defendant Woodard & Curran, Inc. (W&C)
was not a party to the contract, that it acted entirely as the City's agent and that it is not
liable to NEM.
A. Findin2s of fact
1. The project and the contract
The Union River extends from Union Bay, a saltwater body, to Ellsworth and
beyond. In the late 1990's, the Army Corps of Engineers (ACOE) initiated a project to
perform maintenance dredging of the federal navigational channel within the Union River
between Union Bay and the City's harbor. The purpose of this project was to improve
the quality of the channel for use by boats and other vessels. In coordination with the
1
ACOE project, the City initiated its own efforts to dredge sections of the harbor abutting
the terminus of the federal channel, near the City's public boat landing. The City's
dredging plans was one aspect of a harbor revitalization program. The proposed City
dredge would encompass both intertidal and subtidal areas of the harbor, covering
approximately 5 acres. The planned dredge would create a subsurface depth of five feet
below mean low water, which would be similar to the dredged depth of the federal
channel. The City initially estimated that, to achieve these goals, the dredge would result
in the removal of 28,000 cubic yards of sediment and other spoils.
The City engaged W&C to act as its agent in obtaining the permits necessary to
proceed with the dredge. W&C, as the City's agent, then filed a permit application with
the Maine Department of Natural Resources, which is within the Department of
Environmental Protection. See exhibit 8. In that application, the City disclosed to DEP
that W&C was acting as its agent. See exhibit 9b. W&C also filed a permit application
with ACOE. In December 1999 and July 2000 respectively, those agencies issued
permits to the City authorizing the municipal dredge project. See exhibit 18 (project
manual, which includes copies of the permits). With those permits in hand, in January
2001, the City - through W&C - issued a project manual with invitations to bid, as part
of the process of soliciting interest from marine dredging contractors. [d. W&C
subsequently amended the January 2001 project manual to provide that projected volume
of dredged material would be increased from 29,000 cubic yard to 35,500 CY. See
exhibit 225. James Moody, W&C's project manager for the proposed dredge, sent a copy
of the project manual to NEM's principal, Robert Twitchell. See exhibit 20. Moody
forwarded the project manual to six other contractors. NEM did not submit a bid, and in
fact the City received only one bid, which was from Prock Marine, a marine contractor
based in Rockland. See exhibit 21. Prock was the contractor that had also contracted
with ACOE to dredge the federal channel in the Union River. Prock's bid was based on a
price of $13.25 per cubic yard of spoils removed from the harbor. The City decided not
to accept Prock's bid because of the absence of any competitive bidding. See exhibit 23.
In April 2001, W&C issued a second project manual in a renewed effort to solicit
interest in the dredging project. See exhibit 24. This time, NEM submitted a bid, in
which it proposed to be paid at the rate of $12.50 per cubic yard. See exhibit 27. In its
2
proposal, NEM advised that to perform the work, it intended to acquire 2 barges, each
with a 250 cubic yard capacity. [d. Twitchell had intended to dump the dredged material
into one of those barges while the other one, which would already be filled, was hauled to
the dumping ground several miles away. This way, Twitchell planned to dredge and
remove 500 cubic yards per day (one load daily in each barge). In the end, however,
Twitchell purchased only one barge, which had a 300 CY capacity. Twitchell looked at a
second barge and was not satisfied with its condition. However, as he testified at trial, he
would not have purchased a second barge even if he had found one that was seaworthy.
In its bid, NEM expressly recognized that some parts of the project area might be
more difficult to dredge than others, and it therefore reserved the right to negotiate a
higher rate of compensation "prior to dredging." [d. NEM chose its proposed rate of
$12.50, nonetheless, for the specific purpose of attempting to underbid Prock, based on
the bid that Prock submitted previously. In its written bid, NEM represented that it was
"fully aware" of the terms and contents of the April 2001 project manual and the location
of the area to be dredged. [d. The City viewed NEM's bid favorably, and Twitchell and
the City's then-manager, Timothy King, held a pre-contract meeting on July 19,2001, to
further discuss the proposed dredging project. See exhibit 30.
Ultimately, on September 13,2001, NEM and the City entered into a contract
under which NEM would perform the dredging operation in the harbor area. See exhibit
32. As indicated in the contract, the parties estimated that the amount of material to be
dredged was 35,500 cubic yards. See id. at Bates 2347, 2349-50. Based on the amount
of materials that were projected to be dredged and removed, the total expected contract
price that the City would pay to NEM was $481,250 (25,000 CY at the rate of $12.50 per
CY, and 11,250 CY at the rate of $15 per Cy).l See id. at Bates 2292, 2349-50. Prior to
this project, the largest job that NEM had undertaken was worth approximately $40,000.
In previous projects, NEM used as many as six workers. For this job, NEM began with a
total of three workers, including Twitchell. One of those workers left NEM during the
first season, thus leaving only two workers during the balance of the time when NEM
was engaged in the dredge. Despite this history, the contract required NEM to provide
1 In January 2002, the contract price to $516,022 after the parties agreed to a change order
that affected the unit price per cubic yard of some of the spoils. See exhibit l04b.
3
competent and qualified personnel to do the work, see id. at Bates 2318, and it authorized
the City to terminate the contract for cause if NEM persistently failed to provide
"sufficient skilled workers or suitable materials or equipment" to conduct the dredging
operation, see id. at Bates 2340.
The contract expressly identified NEM and the City as the parties to the
agreement. W&C was not a party to the contract, and in fact the terms of the agreement
recite that W&C acted as the City's representative. See, e.g., exhibit 32 at Bates 2291,
2326. Thus, under the contractual arrangement to which NEM agreed, W&C was an
agent for a fully disclosed principal. The contract further provided that W&C's
involvement in the dredge project would not expose it to liability under claims sounding
in "contract, tort or otherwise... ," so long as W&C had acted in good faith when it
engaged in the otherwise actionable conduct. See exhibit 32 at Bates 2328.
Pursuant to the contract, time was stated to be "of the essence," and NEM was
required to substantially complete its performance by April 1,2002. See exhibit 32 at
Bates 2291-92,2347. NEM was required to work during specified hours six days per
week: Monday through Saturday. [d. at Bates 2344. NEM was entitled to be paid based
on the amount of material it removed from the dredge area. As is noted above, most of
spoils would generate payment of $12.50 per cubic yard. [d. at Bates 2349-50. For
several categories of material that was more difficult to remove, NEM would be paid at
the higher rate of $15 per cubic yard. [d. The amount of material that NEM removed
would be calculated based on pre-dredge and post-dredge surveys of the harbor floor. [d.
As would become apparent later in the dredging process, material removed from the
harbor would "fluff' and increase in bulk. However, NEM was entitled to payment based
on an in situ measurement, that is, the volume of the material before it was disturbed and
removed. Thus, the difference between the amounts of material on the harbor floor as
shown in the pre-dredge survey and post-dredge survey would establish the amount of
material that NEM removed in situ. /d. This would form the basis on which NEM's
payments would be established. Under the contract, NEM was responsible for providing
the survey work. [d. at Bates 2351-52. This arrangement stands to reason, because it is
in the contractor's interest to determine the amount of work that it has performed.
4
Under the contract, NEM was responsible for locating the boundaries of the
dredge area. See exhibit 32 at Bates 2351. The City's dredge area was a function of the
federal channel that Prock dredged. The City bore the responsibility to provide NEM
with information that would allow it (NEM) to establish the City's dredge boundaries.
Id. at Bates 2312. W&C was given the contractual authority to determine if the
information provided by the City to NEM was sufficient to allow NEM to locate the
dredge area. Id. This information was in the form of a map developed by or for ACOE,
which showed the location of federal channel coordinates. Those coordinates marked the
corners or angles of the federal channel boundary. Although the map, identified as C-7, 2
depicted a number of such coordinates, only any two of them were a sufficient basis to
layout the boundaries of the dredge. Twitchell testified that he did not receive a copy of
the map until mid-December 2001, which was subsequent to the date that NEM was to
commence its work. However, prior to that date, NEM was provided with a number of
documents that each referred to C-7 as an exhibit. Those documents included the January
2001 project manual, the April 2001 project manual, the August 2001 project manual
(which became the contract), a final project manual issued and sent to NEM in November
2001, and a separate transmittal in November 2001 (see exhibit 37). See also exhibit 35
at p. 2 (referring to deli very of three sets of plans to Twitchell; these plans included C-7).
The court finds it unlikely that the C-7 map would be omitted from so many different
documents, all of which Twitchell in fact received. Twitchell acknowledges that he did
receive the C-7 map in December and could not start the dredge until then. Taken by
itself, this delay is not significant. However, evidence that three C-7 maps were sent to
NEM calls Twitchell's testimony on this point into question, which affects the court's
assessment of other disputed factual points. Further, as is discussed below, NEM
developed a pattern of failing to comply with the scheduling requirements associated with
the dredging project, and this represents an early instance of that problem.
Along with many other provisions, the contract specified the procedure for change
orders and for resolution of disputes arising under the instrument. Finally, the contract
2 In one instance, a document that the City alleges included C-7 was described as "S-7."
With respect to ACOE documents, an "S" exhibit refers to a map of a structural feature or
object. The harbor did not include any structural elements, and so the best explanation is
that "S-7" was an incorrect reference to a document that actually was C-7.
5
authorized the City to terminate the contract either "for cause" or "for convenience." See
exhibit 32 at Bates 2340. The grounds that would justify a termination for cause are
identified in the agreement. See id. A termination not for cause would be a termination
for convenience. The parties' remedies associated with either form of termination are
also set out in the contract.
2. Execution of the contract throul:h the end of first season (September 2001
.January 2002)
Under the terms of the contract, work was to commence on or after November 1,
2001, or whenever the City issued a "Notice to Proceed." The City issued that notice on
November 7,2001. See exhibit 32 at Bates 2297. As a condition to the commencement
of work, the City required NEM to submit a "schedule of values," which is used to
determine the amount that the City would pay to NEM as the project progressed. NEM
did not provide the City with such an outline prior to the time it began work in December
2001 - and in fact NEM never submitted a schedule of values at any time.
At the July 19 pre-contract meeting, NEM advised the City that it intended to
begin work at the end of October and continue through the end of January 2002. From
the time the contract was executed through the end of October, however, the City had no
contact with NEM. Because the City needed two weeks notice prior to the
commencement of NEM's dredging work, the start date was compromised. At the end of
October, Pat Ryder, an administrative assistant for the City, contacted Twitchell to
inquire if he could start the dredge work in mid-November. See exhibit 34. On
November 7, King, Twitchell and several others who were involved in the project met to
discuss the impending project. See exhibit 35. Twitchell advised that he would be in the
harbor on November 19 and anticipated that he would need 90 days to complete the
work. At the meeting, however, Twitchell indicated that he was unaware that he was
responsible to arrange for the pre-dredge survey of the project area. The City offered to
assist Twitchell in lining up a marine surveyor, despite the allocation of responsibility
under the contract, because the City wanted the project to get underway. By the date
when Twitchell had expected to begin the dredge, work had not commenced, in part
because of the delay in securing a surveyor. See, e.g., exhibit 39. However, NEM could
6
not have engaged in actual dredging operation until November 16, which is when the
City received permission to dump the spoils in the intended dumping area. See exhibit
184.
Twitchell eventually secured the firm of Plisga & Day to conduct the pre-dredge
survey. Stan Plisga traveled to the dredge site on December 4 for an initial view.
Twitchell was unavailable to meet Plisga there that day, apparently because he was
otherwise engaged, and so he asked Ryder to find someone to show Plisga the area.
Ryder and Moody, W&C's project manager, met with Plisga that day and to provided
him with information relevant to the survey work. See exhibits 41, 43. On December 4,
Moody also wrote to Twitchell about NEM's failure to begin work, despite NEM's prior
assurance that the dredge would begin in mid-November. See exhibit 42. On December
4, either in response to Moody's letter of the same date, or simply by coincidence,
Twitchell told Ryder that he could not begin work until December 11 because of
mechanical problems with the tugboat that NEM planned to use for the dredge. See
exhibit 43. Despite these representations, work did not actually begin until December 19,
more than a month after NEM could have started.
In December, an issue arose regarding the location of the City dredge. Under the
contract, the City was required to provide NEM with reference points that would allow
NEM to locate the dredge area on the face of the earth. See exhibit 32 at Bates 2312.
W&C, as the project engineer, was given the contractual authority to determine the
sufficiency of that information. [d. Then, it fell to NEM to establish a surveyed location
of the project boundaries based on the reference points provided by the City. [d. at Bates
2351. This would be the survey performed by Plisga & Day. This survey also had the
dual function, noted above, of allowing a determination of the amount of material that
NEM ended up removing during the course of the project, when that pre-dredge survey
was compared with a post-dredge survey.
The location of the City dredge was tied directly to the location of the federal
channel, because the two abutted each other. The ACOE survey was the definitive source
of information identifying the location of the latter. W&C, as the final arbiter on the
sufficiency of information that NEM would use to locate the project area, treated the
information that way, and this view is corroborated by the testimony of several non-party
7
witnesses. That survey provided navigational coordinates, or reference points,
associated with the location of the federal channel. See exhibit 17a (the C-7 survey). In
fact, that survey identified a number of such coordinates. However, the location of the
federal channel could be established by using only two of them, because once two such
points were located on the face of the earth, the surveyor could use the remaining
information in the survey to establish the courses and distances of the remaining lines.
When Plisga conducted the pre-dredge survey in December, NEM had not provided him
with the ACOE survey. Therefore, Plisga could only try to locate the City dredge area by
comparing and overlaying several other surveys to try to make them line up with each
other. This approach appeared to have good results. See exhibits 44, 175.
On December 19, NEM began the dredge. As is noted above, although NEM had
advised the City that it would be using two barges, it only acquired and used one. On the
first day of the dredge, Twitchell found that an area that he intended to dredge had
already been cleared on sediment and spoils - in other words, that it had already been
dredged. Accordingly, Twitchell reported that there were inconsistencies between the
ACOE survey that identified the coordinates for the federal channel, and the recent Plisga
& Day survey. See exhibit 226. Twitchell claims that he did not receive the federal
survey (the C-7) map until December 19. Although Twitchell did receive a copy of that
plan on that day, as is noted above the court finds that it was also provided to him earlier
in time. However, by December 21, Twitchell, who was now using the coordinates from
the ACOE survey, concluded that he had sufficient information to locate the City dredge
area and that the Plisga & Day survey needed to be corrected. See exhibits 50, 174.
Although it remained NEM's responsibility to resolve this issue, W&C's project
engineer, James Wilson, undertook to relay information from the federal survey to Plisga.
See exhibit 50. Several days later, however, Twitchell again expressed concerns about
discrepancies in the surveys, and the City's project representative, Charles Leavitt,
suggested that a meeting be held with W&C representatives and Twitchell to address the
issue. See exhibit 49. In fact, on December 26, Twitchell arrived at the dredge site and
asked Leavitt where Leavitt wanted him to dredge. See exhibit 175.
Brent Bridges, an employee of W&C who worked a project manager on the City
dredge, continued to try to work as a liaison between NEM and Plisga & Day to help
8
ensure that NEM was providing the surveyor with information that would be important to
the surveying work and identifying the correct location of the dredge area, as the contract
required NEM to do. See exhibit 175. However, it appears that as late as the end of
December or early January, Plisga & Day still did not have the coordinates that were
included in the C-7 ACOE survey. Id. By January 5, Twitchell nonetheless was satisfied
that he knew the location of the City channel and was dredging within those limits. See
exhibit 53. As Twitchell testified at trial, Leavitt, the City's on-site dredge inspector,
checked with him each day to see if NEM was carrying out the dredge in the correct
location, and he (Twitchell) was able to assure Leavitt that it was.
In addition to Twitchell's initial uncertainty regarding the location of the City's
dredge project, a second issue arose. When NEM began the dredging operation, Twitchell
found that there was an unexpectedly significant amount of lumber and timbers
embedded in the harbor floor. Most likely, this material had washed down the Union
River into the harbor when an upstream dam had failed many years earlier. The nature of
this material made the dredging process difficult because, with NEM's equipment, the
size and shape of the timbers made it difficult to secure and then to load then onto the
barge that NEM used to transport the dredging spoils to the dump area. Prior to the time
the parties entered into the contract, W&C had evaluated the harbor floor through probes.
See exhibit 29. That exploration did not reveal the presence of the wood or timbers that
NEM came across later. When the City applied for a DEP permit that would authorize
the dredge, it noted that the spoils would include, among other things, debris from the
dam washout. See exhibit 8 at section 1. Such material, however, does not appear to
have been specifically identified in the City's contract with NEM. 3
In a dredging operation, it is not uncommon for the dredging contractor to
encounter material that is different from what the parties expected. In fact, the parties'
contract addressed that possibility by establishing their resulting rights and
3 In a letter to the City Manger, Timothy King, W&C's project engineer, James Wilson,
noted that the project specifications referred to debris from the dam. The court was
unable to locate that referenced passage in the exhibits. For the reasons noted in the text,
however, even if NEM had been placed on advance notice of this material that proved
difficult to remove, the parties themselves agreed to a resolution, and so the issue is not
material to the adjudication of the parties' claims.
9
responsibilities in the portion of the contract that incorporates standard contractual terms.
See exhibit 32 at Bates 2311. Additionally, in its original written proposal to the City,
NEM foresaw some possibility that the dredge would involve spoils that were difficult to
remove, and NEM reserved the right to renegotiate the price for its work in that instance.
See exhibit 27. And at the meeting held in July 2001, prior to the time the parties
formally entered into the contract, Twitchell and representatives from the City and W&C
discussed the possibility that if the dredged materials were more difficult to remove than
the parties anticipated, there would be an adjustment to the price based on volume of
spoils, and in fact the area of the dredge project could be reduced because of the
increased cost to the City. See exhibit 30b.
Under the terms of the contract, NEM was authorized to seek a modification of
the agreement based on site conditions that turn out to be different from those described
in the contract itself. Such a request would be in writing. The City invited NEM to
submit such' a change order, and on January 22,2002, Twitchell did so. See exhibit 55.
In its proposed change order, NEM sought an increase in the amount it was paid "'per
yard dredged. '" Id. The City responded with a proposal for three rates of compensation
per cubic yard of spoils. See defendant's exhibit 57. Of the three, the rate applicable to a
particular load would be determined by the length of time it took NEM to dredge that
material comprising that load. Thus, for loads that took longer to dredge and load, NEM
would be paid more than for those loads that took less time. This proposal did not
purport to change the in situ unit of measurement. More importantly to this case, the
City's proposal was not one that would entitle NEM to be paid based on time alone. The
amount of time spent by NEM would be relevant only in determining which level of
compensation would be triggered. The amount of payment still was to be predicated on
the amount of spoils, measured by the cubic yard, that NEM recovered. This distinction
is germane because of Twitchell's trial testimony that under the change order, the basis
for payment was converted from volume of dredged materials to the amount of time for
the dredge. Upon persistent examination on the issue, Twitchell ultimately
acknowledged that the payment formula remained based on the volume of material that
NEM dredged and that the City's payments to NEM were not a function of time alone. In
evaluating his credibility on disputed matters, the court considers Twitchell's
10
equivocation of this fundamental aspect of the contract and his own proposed change
order, which the City accepted and which thereby became part of the contract.
NEM accepted the City's proposed change to the payment scheme. See exhibits
75,77. Made with NEM's full knowledge of the nature of the material to be dredged,
this change reflects the parties' agreement on the compensation structure. The change
order remained in effect for the balance of the first dredging season and for the entire
second dredging season.
During the first dredge season, NEM ended up working for a total of 40 days.
3. End of first season throu2h end of second season (January 2001-January
2002)
In July 2002, Twitchell advised City Manager King that NEM would begin the
second season of dredging on November 1, 2002, after mobilizing for that work in late
October. See exhibit 61. Twitchell also stated that NEM had obtained a second barge
and would use a larger excavator. [d. In fact, NEM did not move any of its equipment to
the harbor area until November 18. See exhibit 64. Twitchell testified at trial that he was
not able to begin the dredging work when he planned, because Prock was also in the
harbor working on the federal channel. However, when the City learned of this potential
conflict in October, it initiated a meeting with ACOE representatives because it did not
want NEM's work to be delayed. As Twitchell acknowledged, at the meeting, which was
held on October 25, 2002, the City pressed ACOE on the issue, and ACOE ultimately
agreed that NEM could begin its dredging operation on November 1. Although, both at
trial and at the time, Twitchell blamed Prock's presence as the reason why NEM did not
begin its work on November 1, the best evidence is that Prock did not pose such an
impediment. See, e.g., exhibit 65. In reality, NEM was not prepared to start on
November 1 because it was in the process of repairing a barge. See exhibits 63, 64. At
least some of the damage needing repairs occurred during the first dredge season, and at
least by the summer of 2002 Twitchell had decided to put a new bottom on the vessel.
He was still working on it in November and thus was unable to start at the time he had
represented to the City.
11
NEM did not begin the dredging operation for the second season until November
26. See exhibit 72. When NEM got underway, the work went slowly. One contributing
factor was a heavy layer of ice that formed in the harbor and in the dumping area. NEM
was unable to break through the ice and in fact asked to City to solicit ice-breaking
services from the Coast Guard. Contractually, however, it was NEM's responsibility to
provide all equipment and services necessary to perform its work. See exhibit 32 at Bates
2318, 2345. Because of the slow progress, the City was able to secure an extension of the
dredging season, enlarging the end of the season from mid-April to the end of that month.
See exhibit 84. Nonetheless, the delayed commencement of work at the beginning of the
second season caused NEM to lose time in the harbor prior to the onset of the ice.
For the second season, NEM used a different excavator. The new one had a
"thumb," which made it easier to secure and then move bulky objects such as timber. It
also had a larger capacity. The one used by NEM during the first season had a % CY
capacity; the successor could contain 2.5 CY in its bucket.
By the end of the 2002-03 dredging season, as calculated by the surveyor that
NEM had selected, NEM had removed 9,662 cubic yards of spoils, when measured in
situ. See exhibit 95b. This represented slightly more than 25% of the total amount to be
dredged. These calculations are based on Plisga & Day pre-dredge survey and an interim
survey that was conducted in mid-2003. See exhibits 95a-95d (surveys and meeting
minutes). As of the end of the second dredging season, however, the City had paid NEM
$266,082.75 -- more than half of the contract price. See exhibit 73a (payments for first
season), 93a (payments through end of second season), 102b, 150a. This discrepancy
was a function of the method by which the City made progress payments to NEM. Those
payments were based on visual estimates of the amount of material that NEM dredged
from the harbor area. As is discussed below, the dredged material expands in volume
when it is removed. Therefore, the visual estimate of volume after the material is brought
to the surface and loaded into a vessel tends to overstate the volume of material that
would be measured in situ. Consequently, when viewed as a function of the overall
amounts of material that NEM was obligated to remove and the total contract price, by
the end of the second dredge season NEM had been substantially overpaid for the work it
had completed up to that point.
12
NEM worked through the second dredge season pursuant to the January 2002
change order, which fixed the price per cubic yard that NEM dredged based on the
amount of time NEM took to dredge that particular load. NEM did not raise any
objection to that formula. As Twitchell testified at trial, by then NEM was aware of the
nature of the materials in the harbor floor. Therefore, NEM operated under the change
order, even as its work involved dredging and removing the timbers that led to the
parties' agreement in early 2002 to adjust the way the payments due to NEM were
calculated. And as is noted below, NEM expressed an intention to return for the third
dredge season pursuant to the payment schedule embodied in the January 2002 change
order.
No issues regarding the location of the City dredge arose during the second
dredging season. In early December 2002, there was a slight change in the location of
one of the coordinates that marked the federal channel. See exhibit 67. That one data
point moved less than one foot and had no material affect on the City's project or the
location of the dredge area.
4. End of second season throul:h termination of contract and completion of
dredl:e (April2003-December 2005)
As is noted above, even prior the end of the second dredging season, NEM
assured the City that it would return to the site and complete the dredging project
pursuant to the change order to which the parties had agreed in January 2002. See exhibit
77. When the 2002-03 season ended, NEM requested the City to release amounts that,
under the agreement, the City had retained and contractually was entitled to hold pending
satisfactory completion of the entire project. See exhibit 90. The amount of that
retainage was 10% of the payment otherwise due to NEM. See exhibit 32 at Bates 2292.
NEM would have a claim to all or a portion of that retainage only when it had completed
its performance under the agreement. Id. NEM based its request on its contention that it
had finished a portion of the dredge project and therefore felt entitled to receive the
retainage withheld for that part of the job. In its letter, NEM did not suggest that it felt
entitled to receive the retainage because of the bulking effect of the material as it was
dredged, which is discussed in more detail below. The City declined to give NEM those
13
retained amounts, largely because the payments it had made already to NEM were far in
excess of the proportion of work that NEM was required to perform under the contract.
Clearly, the City was within its rights to deny NEM the retainage at that time because the
contract did not provide for an interim release of the retainage and because the City had
overpaid NEM to date anyway. Nonetheless, NEM's very request for money it was not
entitled to receive holds significance because, along with other evidence noted in this
order, it demonstrates NEM's efforts to be paid in amounts exceeding its contractual
rights.
Prior to a letter dated October 20, 2003, NEM provided no suggestion of any
problem that would interfere with the dredging project that was set to resume for its third
season. King had left the position of City Manager during the summer of 2003, and in
October another municipal official wrote Twitchell to confirm that NEM would resume
the dredge on November 1. See exhibit 100. The City needed that confirmation in order
to prepare for that work. In response, Twitchell wrote back on October 20 and indicated,
rather tersely, that there were "issues" that needed to be addressed, and he requested a
meeting with dredge officials. See exhibit 101. This is the first notice NEM provided to
the City about any problem affecting the upcoming dredge season. Such a meeting was
held on November 10, see exhibit 102, which was ten days after the date when the third
dredging season was to have begun. During the meeting, Twitchell raised two issues.
First, Twitchell said that the dredging process caused the removed material to "fluff," or
increase in volume. This meant that the amount of material NEM handled was in a
greater volume than in its undisturbed state, and this in turn meant more work for NEM.
The extent of bulking varied, depending on the nature of the material being dredged. The
greatest extent of bulking occurred with spoils that included the timbers. Other spoils
that were free from the timbers did bulk, but to a lesser extent than the materials that
incorporated the timber and wood.
Tammy Pinkham, who also represented NEM, advised that the company could
not afford to do this work because of the magnitude of the fluffing. See exhibit 102a.
For the reasons noted above, because of the phenomenon by which the volume of the
dredged materials increases during the dredging process, the City had substantially
overpaid NEM for the work it had performed to date. NEM became aware of this
14
problem no later than the end of July 2003, when it was reported in the local media. See
exhibit 95e. Nonetheless, it did not raise the issue until it sent the letter of October 20,
and even then, NEM did not specify the nature of the problem it envisioned. Rather,
NEM did not identify the issue in a meaningful way until the November 10 meeting.
The second "concern" of Twitchell was the difficulty NEM encountered in lining
up a dredge inspector, who would be responsible for estimating the amount of material
that NEM dredged as it progressed with its work. Those estimates are used to determine
the amount of weekly progress payments paid to NEM. Under the contract, NEM bore
the responsibility to secure a qualified inspector. See exhibit 32 at Bates 2353. NEM, in
fact, had failed to pay the dump inspector who monitored the dredge earlier in the project.
See exhibit 88. Ultimately, the City secured an inspector who was to work during the
third dredge season. See exhibits 102b at Bates 1645; 196. (fhe City had to assure the
new inspector that it would guarantee payment for his services, because NEM had not
paid his predecessor.) Later, in December, after NEM was advised that the City had
found an inspector for the third season, NEM indicated that it was able to find two others
who would cost less. See exhibit 105.
At the November 10 meeting, the City instructed NEM to submit a written
proposal to address the bulking problem. Such a procedure is required by the contract.
See exhibit 32 at Bates 2329, 2332. However, as Twitchell acknowledged during his trial
testimony, Pinkham later advised the City that NEM was not willing to so. Thus, because
of NEM's refusal, W&C assessed the issue. Wilson, the W&C project engineer, then
wrote to Twitchell on December 3. See exhibit l02b. In that letter, Wilson offered a
detailed analysis of the fluffing effect and proposed an adjustment to the price of the
contract based on that circumstance. The proposal would increase the amount of the
contract price by approximately $20,000. That increase was predicated on the City's
analysis of the dredging work associated with the removal of the timbers and the
sediment in the areas where the timbers were embedded in the harbor floor. Under the
City's analysis, the price it would pay for spoils in areas not affected by the timber
material would continue to be controlled by the contract and the January 2002 change
order. Wilson also reiterated the need for NEM to provide additional information and to
submit its own proposed change order associated with the bulking issue because any
15
increases in the payment rate to NEM could require the City to reduce the amount of the
dredge area in order to stay within the City's budget for the project overall. Wilson
instructed NEM to reply by December 8.
By December 11, NEM had not responded to Wilson or the City. Wilson wrote
Twitchell again. See exhibit l04a. That letter enclosed a change order that W&C itself
had prepared, see exhibit l04b, even though the contract required NEM to create and
submit the proposal. Based on the amount of material that NEM still had to remove,
Wilson advised Twitchell that completion of the project by the end of the third dredge
season would require it to remove two barge loads per day, six days each week.
As of December 15, NEM still had not submitted materials relevant to its
complaint, and so a meeting with Twitchell was held that day at his insistence. See
exhibit 105. The meeting was held on short notice. At the meeting, Twitchell contended
that the City should release the retainage of approximately $25,000 to NEM, as it had
previously requested in April; that the City pay NEM based on the volume of spoils after
the spoils were dredged rather than in situ (in other words, based on its fluffed or bulked
volume); and that the amount paid by the City to NEM to date be deemed full
compensation for the work that NEM had performed to date and that the City would pay
NEM in full for all future work without regard to the overpayments that the City had
made to NEM already. As was described by Michelle Beal, the City's finance director
and a participant at the December 15 meeting, the City viewed Twitchell's proposal as
one that would repudiate the contract because it fundamentally deviated from the
payment terms of the existing contract as modified by the January 2002 change order.
Nonetheless, Twitchell was told that unless NEM made its own proposal to change the
payment structure of the contract, the City would not be in a position to entertain the
Issue.
During the meeting, Twitchell also advised that NEM would not work six days
per week, although NEM had failed to submit a proposed work schedule as the contract
required and as the City had requested. At trial, Twitchell initially indicated that he was
uncertain whether the contract required NEM to conduct the dredging work six days each
week. As he ultimately acknowledged at trial, however, the original contract in fact
requires NEM to work on the project six days per week during the dredging season. See
16
exhibit 32 at Bates 2344. Despite the contractual requirement obligating NEM to submit
a proposed schedule, see exhibit 32 at Bates 2308-09,2318, and despite repeated requests
from W&C for such a schedule, see, e.g., exhibits 36b, 42, 102a, 102b at Bates 1645,
NEM never submitted one. Twitchell also told City representatives that because NEM
was tied up with another project in Brooklin, it would not begin work in the harbor until
some unspecified date in January. See exhibits 105 (indicating that Twitchell reported
that NEM's other project was "behind schedule"), 109.
Significantly, of the issues that Twitchell raised at the December 15 meeting,
neither he nor any other representative of NEM complained that the City dredge
exceeded the terms of the dredge permits. As is discussed below, the City later sought an
amendment to the DEP permit to address the quantities of material removed during the
dredge and the relative location of the federal channel and the City dredge area. As part
of its legal claim against the City and W&C, NEM contends that the governmental permit
did not authorize the work that NEM was to perform under the contract. However,
Twitchell did not make such an allegation at the meeting, and he did not offer any such
concerns as a justification for NEM's failure to have resumed the dredge for the third
dredge season. In fact, Twitchell was not aware of any such issue affecting the permit
until January 2004, when he retained an engineer as a consultant to the project. See
exhibits 114, 185.
In a letter dated December 19, Twitchell wrote to Wilson. See exhibit 107. In
that letter, Twitchell advised that NEM could not begin dredging activities because of an
overlay problem that, he suggested, raised questions about the location of the dredging
area. As Twitchell described it in his letter, the overlay problem was the one that Wilson
himself had brought up in his December 3, 2003, letter to Twitchell. See exhibit 102b at
Bates 1645. In that letter, Wilson advised that he was going to explore the issue further
with ACOE and Plisga & Day, but he also asked Twitchell for his "input" because NEM
was responsible for coordinating the surveying responsibilities with Plisga & Day. As is
noted above, NEM was responsible for locating the dredge area. And as is discussed
further below, the overlay issue that Wilson noted in his December 3 issue ultimately
arose from a change made in 2003 to the location of the federal channel. This issue was
unrelated to the one that arose and was resolved during the first dredging season.
17
In his December 19 letter to Wilson, Twitchell also requested information about
the pre-dredging calculations and probes conducted prior to the formation of the contract.
Finally, Twitchell wrote, "Northeast Marine does not accept Woodard and Curran as the
on-site engineer to measure and calculate loads. An independent engineer, shall be hired,
agreeable to all parties involved. (no conflict of interest)." [d. In fact, under the
contract, W&C was authorized to determine the quantity of work that NEM performed as
the dredge progressed. See exhibit 32 at Bates 2327. Based on those measurements,
W&C would then make recommendation to the City about the amount of progress
payments that the City should pay to NEM. [d. at Bates 2336.
Twitchell wrote a separate letter of the same date, rejecting the City's proposal
outlined in Wilson's December 11 letter and describing its own proposed changes in the
contractual payment formula. See exhibit 108. In this second letter, NEM sought an
additional amount in excess of $100,000 for work already done, even though under the
existing contract, the City had substantially overpaid NEM for work performed to date.
This additional payment included NEM's expenses for equipment and ice breaking, even
though under the contract, NEM was responsible for all costs of materials and services
necessary to perform the work. See exhibit 32 at Bates 2345. This can only include
icebreaking work that might be necessary to allow NEM to continue the dredge. This
means that the expenses of performance, such as icebreaking, are not compensable by
themselves, and NEM could only recover such expenses through payments it received
from the City based on the in situ volume of materials it dredged. Any separate payment
for expenses of performance therefore would constitute a double payment. Additionally,
as proposed in the December 11 letter, NEM requested an increase in the amount paid per
cubic yard for future dredging. The proposed increase would have amounted to more
than twice the in situ rates to which the parties agreed previously in the original contract,
as modified in the January 2002 change order.
In a letter dated December 23, Wilson wrote Twitchell on behalf of the City
formally advising NEM that the City rejected the changes that NEM had proposed to the
payment structure. See exhibit 109. Wilson made it express that this decision triggered
the dispute resolution procedures established in the contract, and he reminded Twitchell
that under the contract, NEM was required to continue its performance under the contract
18
even while the dispute remained outstanding. Pursuant to the contract, W&C's rejection
of NEM's December 19 proposal would be the final word on the matter, unless NEM
appealed that rejection or requested dispute resolution. See exhibit 32 at Bates 2329.
NEM did not take either approach, and it also did not sign or agree to W&C's proposed
changes offered to NEM in the proposed change order dated December 11 (exhibit l04b).
In his letter, Wilson also informed Twitchell that, in the City's view, NEM was
responsible for unreasonable delays in the resumption of the dredging project because it
did not raise issues about the level of compensation within the time allowed by the
contract. Under the contract, any request for relief must be made "promptly" but within
no more than 30 days of the date a party learns of the basis for that relief. See exhibit 32
at Bates 2329. Wilson instructed Twitchell to provide a "realistic schedule" to complete
the project, prior to NEM's resumption of the dredge. The contract required NEM to do
this. See exhibit 32 at Bates 2339-40. (As is noted above, on several prior occasions, the
City had requested NEM to provide a progress schedule.) As an additional condition to
that resumption, Wilson also directed Twitchell to provide proof of an agreement that
NEM was to reach to secure a dump inspector. Wilson advised Twitchell that the City
expected NEM to comply with these conditions and mobilize in the harbor no later than
January 15,2004, and that failure to do so could be construed as a breach of the parties'
contract. Finally, Wilson wrote that W&C would coordinate with NEM in preparing a
"departure agreement with the City" in the event that NEM decided that it would not
continue its work on the dredge project
Several days later, Twitchell wrote to Beal and requested various information and
documents, including data from the probes that W&C conducted in 2001 and information
relevant to the pre-dredge survey. See exhibit 113. Twitchell imposed receipt of the pre
dredge survey information as a condition to NEM's resumption of the dredge, which he
nevertheless stated would occur by January 15. Plisga & Day, however, had already
conducted the pre-dredge survey, which would be used - and was used - to establish a
baseline against which, with the use of a post-dredge survey, it would be possible to
calculate the amount of material removed during the dredge. NEM itself had selected
that surveying firm. In early January, NEM also retained an engineering firm to consult
about the extent and location of the dredge. See exhibit 114.
19
On January 5, the City declared a breach and formally notified NEM that it
demanded non-binding mediation to address the issues in dispute. See exhibit 163a. This
procedure is required under the contract. See exhibit 32 at Bates 2346. Because the
contract does not provide that the pendency of such a process tolls or suspends the
contractor's obligation to continue its performance, the City maintained contact with
NEM in anticipation that it would resume the dredging operation in January, as NEM
represented it would do. On this basis, Wilson again wrote Twitchell with directions
about which areas of the harbor should be dredged, in light of the fact that considerable
time had passed without any progress. See exhibit 116. Wilson also reiterated the need
for Twitchell to provide a proposed work schedule and for additional information.
As it turned out, the weather in mid-January, when Twitchell said he intended to
resume work, was difficult. On January 28, Twitchell's attorney wrote Beal and asked
for the City's assistance in securing the Coast Guard to break up ice that had formed in
the harbor and in the dumping area. See exhibit 121. As is noted above, NEM - and not
the City -- bore the responsibility to provide equipment and services necessary for the
dredge. Counsel also suggested that the City delay the ice-breaking work, to avoid the
possibility that the areas would freeze over again. The suggested delay was "a couple
weeks," which would mean that NEM would not resume work until mid-February. Also
in late January, NEM's attorney requested a meeting to discuss the issue regarding the
locations of the federal and city channels and regarding whether the DEP permit
accurately identified the location of the city dredge. See exhibit 185.
Such a meeting was never held. Instead, on February 4,2004, the City issued a
notice terminating the contract with NEM. See exhibit 123. As the contract authorized it
to do, the City purported to terminate the contract for cause rather than for convenience,
although the notice also provided that if the grounds underlying a termination for cause
were insufficient, the notice should be construed as one terminating the contract for
convenience. In that notice, the City recited five grounds for the termination: that NEM
persistently failed to perform its obligations under the contract; that NEM did not
perform in a timely way; that it disregarded the authority vested by the contract in W&C
as the project engineer; that NEM did not submit information as required, resulting in
further delays; and that NEM did not provide necessary equipment and personnel to
20
perform its obligations. In the notice, the City also demanded reimbursement of the
money that it contended it had overpaid NEM for work performed to date.
After the City severed its contractual ties with NEM, it began the process of
securing another marine contractor to complete the dredging project. In the end, it
entered into an agreement with Prock to finish the work. In late 2005, Prock dredged the
harbor area. At first, Prock used two 300 cubic yard capacity vessels (one dump scow
and one flatbed barge), and then replaced the barge with a 500 CY capacity scow. Prock
used an excavator with a bucket that held 6 CY of material. (NEM had began its dredge
using a 3A CY bucket and then used a larger, 2.5 CY bucket during the 2002-03 dredging
season.) As is shown by the records of Prock's work, see exhibit 145d, and through the
testimony of Prock's project manager, over the course of less than six weeks in
November and December, Prock removed more than 19,000 cubic yards of material from
the dredge area. In contrast to Prock's work, in the two seasons NEM carried out
dredging work, NEM had removed less than 10,000 cubic yards. Prock did not remove
all of the spoils that were the subject of NEM's contractual obligation, because under the
contract it executed with Prock, the City's budget did not allow that much work, and
because Prock dredged to a deeper depth (six feet below low water) than NEM was
required to do (five feet). It bears note that the prospect of reducing the area of the
dredge was something that existed even prior to the time the City entered into the
contract with NEM. At the July 2001 pre-contract meeting between the City and NEM,
the parties' principals discussed the possibility that if the dredging work was more
difficult than expected and the cost of the dredge increased as a result, the City would
reduce the scale of the dredge project in order to remain within budget. See exhibit 30b.
In the permit that the Maine Department of Environmental Protection had issued
to the City in December 1999, the agency authorized the City to dredge in both intertidal
and subtidal areas in and near the municipal harbor. Under the contract, the City was
responsible for obtaining all permits that were necessary for the dredge project. See
exhibit 32 at Bates 2345. With respect to the intertidal area, the permit authorized the
City to dredge 2,000 cubic yards of sediment from an area of 13,750 square feet, which is
approximately .3 acres. See exhibit 12. In May 2000, through correspondence with
ACOE, the city identified three areas within the intertidal zone where it planned to
21
dredge. See exhibit 13. See also exhibit 210. Those areas were located across from the
town dock (9,600 square feet, or .22 acres); the northwest corner of the dredge area
0,300 square feet, or .03 acres); and the area near Card's Cove 05,300 square feet, or
.35 acres). Put together, these three intertidal areas constitute 29,500 square feet, or
approximately .6 acres, which is twice the dredge area approved by DEP.
The discrepancy between the area estimates communicated to DEP and later to
ACOE resulted from the omission of the Card's Cove area as a section of intertidal land.
Card's Cove was within the overall dredge area allowed by DEP, but in its permit
application, the City viewed this area as subtidal. In fact, as it later learned, Card's Cove
was intertidal. Nevertheless, the City proceeded with the dredge project on the basis of
the DEP permit issued in 1999, which included Card's Cove as a subtidal portion, rather
than intertidal portion, of the dredge area. W&C did not seek to amend the permit
because whether Card's Cove was subtidal or intertidal, it was within the boundary of the
permitted dredging area, and W&C believed from prior experience that the matter would
not be of significance to DEP. Prior to the time the City terminated the contract with
NEM, NEM never raised the issue and never expressed an intention to terminate its work
because of a claim that the City had not secured a permit that would authorize all work
required under the contract. In fact, as Twitchell testified, NEM was not even aware of
this permit issue until sometime in January 2004, when it retained an engineer regarding
its work on the project. Rather, the issue came up in a March 2004 letter sent to NEM's
attorney by Stacie Beyer, the DEP representative who was involved with the dredge
project. See exhibit 124. Beyer's letter responded to a letter that NEM's attorney had
sent her. It does not appear that the record includes counsel's letter, and thus it is unclear
whether counsel raised the issue in his letter or whether Beyer herself raised it as part of a
discussion about the dredge project boundaries.
Nonetheless, in February 2005, W&C sought a modification of the DEP permit,
so that the permit would cover the additional volume of intertidal sediment and the
additional area from which that sediment had been removed. See exhibit 141a. The
modification would allow the removal of 7,050 CY from an intertidal area of 35,950
square feet. DEP granted the modification. See exhibit 141 b, 186. The modification
order noted that the amended permit did not affect the dredge boundaries. DEP issued its
22
amended permit after the intertidal area had been dredged. Thus, the amended permit
was retrospective (Le., after the fact, or "ATF'). Although Beyer's March 2004 letter to
NEM's counsel did note the importance of adhering to the limits established in the
original permit, a year later DEP readily amended the permit to allow the intertidal
dredging work that had already been performed because, as expressed in the order, the
work at issue had not breached the boundaries of the City dredge; because it actually
decreased the amount of subtidal dredging; and because it did not create any
environmental problems. As the DEP characterized it in its amended permit, the change
was "minor."
DEP's favorable treatment of the City's request for a modification to the dredge
permit corroborates the testimony of Michelle Beal, the City's finance director who also
served as the acting city manager in later 2003 and early 2004, after King left. Because
of the issues raised by NEM and its counsel earlier in 2004, the City wanted to meet with
Beyer to determine if a problem actually existed. Beal and Beyer met in September
2004. The meeting was brief, because Beyer told Beal that she (Beyer) was aware of the
issue. Beyer took the position, later embodied in the modified permit, that so long as the
City dredge did not breach the outer dredge boundaries set in the original permit, DEP
was not concerned with any deviation from the terms of the project as allowed by the
permit. In fact, despite DEP's awareness of the issue even prior to the meeting between
Beyer and Beal, the agency had not taken any enforcement action, and it did not even
communicate a concern to the City about the issue. Indeed, the City sought the amended
permit on its own initiative, rather than at DEP's suggestion.
In the middle of September 2003, Plisga & Day updated the survey of the City's
channel and of the dredging work that NEM had performed to date. As part of that
process, Plisga & Day requested and received information from ACOE about a new
survey it had commissioned. See exhibit 98. That information included coordinates of
the boundaries of the federal channel in the area of the City dredge. See id. The location
of the federal channel was significant to the City's project because, as is noted above, the
location of the latter was a function of the former. After receiving this information,
Plisga & Day prepared a new survey map. See exhibit 99. As part of its analysis of the
bulking factor that NEM raised in late 2003, W&C obtained the updated Plisga & Day
23
survey, and, Wilson (W&C' s project manager) testified, he then recognized that the
location of the federal channel appears to have moved from the location used in 2001.
See exhibit 141a (referring to a "change" in the location of the federal channel). Federal
authorities are authorized to change the location of a federal channel, and in fact they do
so. See also exhibit 119 (demonstrating that the location of the federal channel is subject
to occasional changes so as to enclose the deepest depths within the channel). The
change that arose from the 2003 survey was a separate issue from the one that arose in
December 2001. As is discussed above, that earlier problem arose because Plisga & Day
was not provided with the coordinates set out in the federal survey (C-7), which was the
touchstone for locating the City dredge.
The best evidence reveals that these boundary data that W&C received in 2003
did not have the effect of changing the location of the outer boundaries of the area that
DEP authorized for the City dredge. Rather, the apparent changes in the location of the
federal channel could have affected the common boundary of the federal channel and the
City dredge area. However, the City dredge area essentially surrounded the terminus of
the federal channel, and so any movement of the City-federal boundary did not constitute
a deviation from the outside perimeter of the City's dredge area. In its February 2005
application for a modification to the original DEP permit, Wilson explained this situation
to Beyer. See exhibit 141a. DEP recognized and acknowledged the situation and still
issued the amended permit because there was no change in the outer boundary of the
combined federal/City dredge area. See exhibit 141a, 186.
Despite Twitchell's occasional uncertainty about the location of the City dredge
project at the beginning of the first dredging season and the 2003 change in the location
of the internal federal-City dredge location, the evidence establishes that all of the
dredging work that NEM performed in the City dredge area was within the permitted
location and that NEM did not exceed the boundary created in the DEP permit.
B. Discussion and conclusions of law
NEM has asserted claims against the City and W&C for breach of contract (count
1). It also has set out a claim for recovery of damages from the City, associated with its
contention that the City terminated the contract for convenience, rather than for cause
24
(count 4).4 The City has asserted a counterclaim against NEM for breach of contract
(count 1 of the counterclaim) and for unjust enrichment (count 2 of the counterclaim).
The court will consider these claims separately.
1. NEM's claims a~ainst the City
NEM argues that the City breached the dredging contract in three ways: first, by
failing to secure a permit that would allow NEM to perform under the contract; second,
by failing to correctly identify the location of the City dredge; and third, by failing to
disclose the nature of the material that NEM would be contractually required to dredge.
The court concludes that NEM has not proven that the City is liable based on any of these
claims.
(a) Sufficiency of the dredge permit
NEM argues that the permit issued by DEP to the City did not allow it (NEM) to
perform the dredge work required by the contract. Under the contract, the City was
required to obtain a permit that would authorize the contracted dredge work to be done.
NEM argues that the DEP permit was deficient in two ways: first, that the permit only
allowed the City to dredge 2,000 CY of sediment from intertidal areas within the City's
overall dredge boundaries; and second, that the permit allowed the City to dredge .3 acres
of intertidal habitat. NEM's argument correctly states the terms of the permit's
restrictions. After the City obtained the DEP permit, it learned that the intertidal aspect
of the project exceeded both limits. The court nonetheless concludes that even if the City
failed to comply with its contractual obligation to obtain a permit that authorized the
extent of dredging in the intertidal areas of the City's dredge area that was actually done,
any such breach was not material.
The Law Court has defined the distinction between a total breach and a partial
breach of a contract:
When one party breaches a contract, the nonbreaching party may, depending on
the circumstances, either treat the breach as partial or total. A total breach of
contract is a non-performance of duty that is so material and important as to
justify the injured party in regarding the whole transaction as at an end ... If [the]
4 In its complaint, NEM also alleged that the City and W&C are liable for both fraudulent
and negligent misrepresentation (counts 2 and 3). Prior to trial, the court entered
summary judgment for the defendants on those two counts, leaving the claims noted in
the text.
25
breach is not sufficiently material and important for this, the breach is called a
partial breach. If a party elects to treat the breach as partial, however, it must still
perform its obligations in order for it to avoid also breaching the contract.
Down East Energy Corp. v. RMR, Inc., 1997 ME 148, ~ 10,697 A.2d 417, 421. For
purposes of this discussion, the court assumes that the City committed a breach of the
contract when it failed to obtain a permit from the Maine Department of Environmental
Protection that did not fully conform to the actual dredging project due to the two
deviations noted above.
The magnitude of any such breach - and the legal effects flowing from it - is best
gauged by the DEP's response to the City's application for an amendment to the original
permit. The requested amended permit was to reflect the work that was actually
performed in excess of the originally permitted dredge work. For that reason, it was to be
an ATF (after the fact) authorization. Perhaps through communications with NEM's
attorney after the City terminated the contract, DEP became aware in early 2004 that the
vol ume and area of intertidal dredging exceeded the limits established in the original
permit. Even when armed with that information, the agency did not take any steps to
intervene in the dredge project either through an enforcement action or with a simple
communication to the City advising it of a problem. Later in 2004, Beal, as a city
representative, took the initiative to meet with Beyer, the DEP agent involved in the
project, in order to discuss this very issue. Beyer assured Beal that the agency was not
concerned about the deviation. This perspective was subsequently embodied in the
amended permit issued by DEP in 2005. Among the findings that the agency articulated
to explain its decision to grant the amended permit, it characterized the intertidal
boundary and volume issues as "minor."
From this, the court concludes that any breach by the City was a partial breach.
Under the Down East Energy formulation, the breach would not justify a refusal by NEM
to perform its obligations under the contract. More importantly, however, NEM did not
invoke any deficiencies in the permit as a basis for non-performance. Rather, as is
discussed at greater length below, NEM's intransigence in performing its obligations in
late 2003 was ultimately rooted in its efforts to secure higher level of payment from the
City for work that it was already required to perform. NEM was not even aware that the
26
permit may not have covered the proposed dredge work until early January 2004, when it
retained independent engineering services.
Further, any such breach did not cause NEM to sustain damages. There were no
resulting delays in NEM's ability to work on site. Rather, NEM had declined to resume
its dredging work for unrelated reasons. Further, DEP did not seek any sanction from
any party to this action. NEM therefore was not exposed to penalties or other
consequences from any work that exceeded the limitations imposed in the original
permit. Therefore, NEM did not sustain any harm or prejudice because of any work it
performed beyond that authorized in the DEP permit, and consequently it has not proven
any damages arising from a breach of contract.
(b) Location of the City dredge
NEM's contention that the City breached the contract in this second way must be
predicated on an argument that the City did not provide it with sufficient information on
which it (NEM) could adequately establish the location of the City dredge project on the
face of the earth. This analysis is necessary, because under the contract, the City was
obligated only to provide NEM with reference points or other information that NEM
could then use to locate the City dredge area. Under the contract, W&C's involvement
on this issue was to assess whether the data provided by the City would allow NEM to
map out the location of the project.
On this record, there is no meaningful dispute that the coordinates for the federal
channel are a sufficient basis for locating the City dredge area. The City dredge area was
intended to compliment and coordinate with the federal channel, and so once the federal
channel is located, the location of City dredge area could be determined. The location of
the federal channel is defined by the coordinates or reference points set out in the C-7
survey. This means that because the City and W&C provided NEM with the C-7 survey,
they discharged their contractual responsibility. The remaining task of establishing the
location of the City dredge area as a function of the C-7 coordinates was NEM's
obligation.
NEM argues that there was a ongoing question about the location of the City's
dredge project throughout the duration of NEM's participation in it. However, the
evidence reveals that there were two distinct episodes that arguably raised questions
27
about the City dredge boundaries. Neither amounts to a breach of the contract
attributable to the City. The first occurred in late 2001, when NEM began the dredging
work. Although Twitchell disputes it, the preponderance of the evidence indicates that
NEM had been provided with the C-7 survey even prior to the beginning of the dredge
season. Even Twitchell agrees, however, that he received that document and the
accompanying information by December 19, 2001. Nonetheless, the record also
establishes that the surveying firm, Plisga & Day, did not come into possession of that
information until later. This meant that earlier in December, when the surveyors were
attempting to locate the City dredge area, they did not have the benefit of infonnation that
would be instrumental to that task. Instead, Stan Plisga had to try to align several surveys
in order to define the dredge area. Within the first few weeks of the dredging operation
in late December 2001 and early January 2002, Twitchell went back and forth on the
question of whether he was satisfied with the infonnation that Plisga & Day produced.
Ultimately, however, Plisga & Day acquired the information from the federal survey, and
Twitchell indicated that he knew the location of the dredging boundaries and was
satisfied that he was working within them. Indeed, surveys that were conducted after the
second dredging season, which was after NEM had performed all of the dredging work
that it ended up providing to the City, establish that NEM conducted its dredge fully
within the boundaries of the project. This tends to confirm that, instead of having
received faulty data, NEM actually had correct information about the project's location
and then used that information effectively.
Separate and distinct from this episode, in 2003 W&C discovered that the federal
channel had been re-Iocated. Despite NEM's argument that this was not a new
development but rather constituted a problem that existed throughout the time it worked
on the project, the court concludes that the better evidence establishes that questions
about the location of the federal channel - and thus of the City'S dredge area - were
generated by a federal survey conducted in 2003, which indicated that the location of the
federal channel had changed since 2001. W&C came across the new date as Wilson, a
W&C project manager, examined the bulking issue that was the focus of NEM's
reluctance to resume its dredging work. As part of that process, he analyzed the new
surveys that contained information about the amount of material that NEM had dredged
28
to date. It was these surveys that also revealed information about new federal
coordinates. When Wilson came across this information, he advised Twitchell about it in
his December 3 letter. Twitchell, on the other hand, had not raised any question about
the location of the City dredge area since January 2002, when he became confident that
NEM was dredging in the correct area after Plisga & Day was provided with the federal
coordinates from the C-7 survey.
The revelation of the new federal data in 2003 cannot be viewed as a breach by
the City of its contractual obligation to provide NEM with information that would allow
it to locate the dredge grounds. The City had just come across that information
unexpectedly and was in the process of evaluating it, when other factors led the City to
terminate the contract in early January 2004. Therefore, even if the new federal reference
points constituted a modification of the terms to the original contract because of its effect
on the location of the City dredge area, then the City did not breach its corresponding
obligation to provide those data to NEM.
(c) Nature of dredged materials
Almost immediately after NEM began the dredging work in December 2001, it
found that the dredge area was the site of timbers. This had not been fully revealed in the
information that the City, through W&C, had provided to NEM and other prospective
contractors. Timbers posed a considerable problem for NEM because of the equipment it
had brought to the dredge site. The bucket on the excavator was relatively small and thus
could not easily capture objects such as timbers, unlike more typical spoils such as
sediment that could be scooped up more easily. Additionally, the timbers were difficult
to load onto the barge that NEM used to transport the material to the dumping ground.
This type of complication was certainly not unforeseeable or unforeseen. In its
bid proposal, NEM acknowledged that if the material in the harbor made the dredge more
difficult than the parties expected, it expected to be able to renegotiate the price per cubic
yard that it would be paid. Additionally, even the standard form portion of the parties'
actual contract opened the door to price renegotiations in this circumstance. Thus, it is
plain from the record that in the marine dredging business, once a dredge operation gets
underway, it is not uncommon for the dredging contractor to encounter spoils that
enhance the difficulty of the dredging operation. That was the situation here.
29
The City promptly learned of the difficulty that NEM had begun to encounter in
December 2001. The parties conferred, and at the City's recommendation, NEM
followed the procedure established in the contract to propose a change order that would
adjust the amount of money that the City would pay to NEM due to the increased
difficulty. The City responded to NEM's proposal, and NEM accepted the City's
proposal. The court concludes that the resulting modification of the price structure in the
original contract represented a dispositive, final and informed accommodation of the
problem. In other words, once NEM was in the harbor and found that it would be
required to dredge materials that were different from what the parties had anticipated, the
parties responded with an adjustment that fully accounted for that new information.
Because NEM agreed to this resolution, it cannot be heard now to complain that the City
had breached the contract by failing to provide the very information that formed the basis
for the parties' accord.
To the extent that NEM is also alleging that it was harmed by the presence of
materials in the harbor floor other than the timbers, this argument also fails. When NEM
sought a substantial change in the payment formula in November and December 2003, it
contended that the increase in bulk of the dredged material correspondingly increased the
amount of work it would have to do. The effect of the timber on this "fluffing factor"
had been resolved with the January 2002 change order. This would leave only the
bulking effect of the other spoils in the dredge area. Nothing in the record suggests that
bulking of the non-timber material upon dredging is an unforeseeable and unexpected
phenomenon. Indeed, common sense suggests that this will happen. Therefore, there is
no basis on which NEM can argue that the City can be charged with any lack of
awareness of spoils material other than the timbers.
Even if the City were at fault in some way because it failed to disclose material
that bulked more than the parties could have expected, NEM has not preserved any claim
for relief here. In late December 2003, after considerable prodding, NEM submitted a
proposed change order to address the bulking factor. The City rejected that proposal.
Under the contract, that rejection became final unless NEM pursued an appeal or some
other form of recourse, such as mediation, prescribed in the contract. NEM did not take
any of those steps that were available to it. Consequently, it became bound by the City's
30
rejection of its proposed change order, which meant that the existing pricing formula
which included the change order to which NEM itself had agreed in January 2002
remained in place. Because that pricing arrangement remained unchanged, the City
cannot be deemed to have breached the contract.
3. NEM's claims al:ainst W&C
In NEM's count that remains against W&C, NEM alleges that it is liable for
breach of contract. As is noted in the summary judgment order, NEM's remaining claim
against W&C is limited to its contention that W&C failed to provide NEM with
clarifications and interpretations as required by the contract. This claim requires proof
that W&C was a party to the contract, because otherwise W&C would not owe an
independent contractual duty to NEM. 5
W&C was not a party to the contract. The only parties to the contract were NEM
and the City. The contract expressly identifies W&C as the City's agent, and W&C held
itself out in that capacity throughout its work in the case. Because the contract fully
disclosed the existence of the agency relationship between W&C and the City, W&C
cannot be deemed a party to that contract. See RESTATEMENT (THIRD) OF THE LAW OF
AGENCY § 6.01 (2006); RESTATEMENT (SECOND) OF THE LAW OF AGENCY § 320(1958).
An exception to this general principal exists where the agent and the third-party (here,
NEM) agree that the agent is a party to the contract. See RESTATEMENT (THIRD) OF THE
LAW OF AGENCY § 6.01(1). The third-party bears the burden of proving such an
agreement. See id. at cmt. d(1). NEM has not argued that W&C entered into an
agreement with it (NEM) under which W&C would become a party to the contract, and
such an argument would not have support in this record. As the Restatement notes, "[a]n
agent is not a party to a contract if any portion of the parties' writing makes clear that the
agent acts solely in a representative capacity on behalf of a disclosed principal." /d. That
is the case here: the contract expressly designates W&C's role as that of the City's agent.
5 NEM does not argue that it is a third-party beneficiary of the contract between the City
and W&C under which the W&C had a separately enforceable duty to provide
engineering and other services associated with the dredge project. Although W&C has
offered an argument against such a contention, NEM does not pursue it as a theory of
liability, and so the court does not reach it here.
31
The contract also addresses the extent of any liability to which W&C would be
exposed on account of its work as the project engineer. Under its terms, W&C is
immunized from any claims based on decisions and actions made in good faith. Simply
put, NEM has not established that W&C acted in a way that fell short of good faith in any
aspect of its role. As is discussed further below, W&C and the City gave NEM
considerable opportunity to perform under the contract. They were tolerant of repeated
material delays, and even when NEM declined to resume the third season dredge, W&C
and the City showed considerable patience with the contractor.
NEM has argued that the City did not adequately disclose the intertidal aspects of
the dredge project to DEP when it sought the agency's permit. As is discussed above, it
appears that prior to the execution of the contract and the commencement of the actual
dredge work, W&C and the City knew or should have known that with respect to the
intertidal dredge the quantitative information in the permit application, and thus in the
terms of the permit itself, was inaccurate. However, the DEP representative ultimately
concluded that the inaccuracies were "minor," and the DEP issued the amended permit
that brought those deviations back within the allowable scope of work. Thus, because
this was not a significant issue, and because the problem did not create any harm to
NEM, any failure by W&C to clarify the issue with the agency prior to 2004 did not fall
short of good faith performance of its own obligations as the City's agent, and it did not
result in any independent liability or harm to NEM.
3. City's claims al:ainst NEM
In its counterclaim against NEM, the City alleges that it terminated its contract
with NEM for cause and that it is entitled to recover damages pursuant to the formula for
relief set out in the contract. In a separate count, it also seeks recovery for overpayments
it made to NEM during the course of the dredging operation, framing this issue as one for
unjust enrichment. The court concludes that the City was entitled to terminate the
contract for cause and that the rights and responsibilities of the City and NEM are
determined both pursuant to the remedial terms of the contract associated with such a
termination and under common law principles.
32
The contract authorized the City to tenninate the contract for cause in any of four
circumstances. See exhibit 32 at Bates 2340. The contract describes one of those
circumstances in the following way:
1. CONTRACTOR'S persistent failure to perform the Work in
accordance with the Contract Documents (including, but not limited to, failure to
supply sufficient skilled workers or suitable materials or equipment or failure to
adhere to the progress schedule...as adjusted from time to time...)....
ld.
The City has established by a preponderance of the evidence that NEM
persistently failed to perform its obligations under the contract in accordance with those
contractual requirements. NEM's persistent failure to satisfy its contractual perfonnance
culminated in its effective refusal to resume dredging operations in the third season, after
it unjustifiably delayed making the complaints about the terms of the agreement. The
events of 2003, however, must be seen in light of significant but less detenninative
circumstances that arose during the first two dredging seasons. The contract authorized
the City to terminate for cause only if NEM's failure to perform under the contract were
"persistent," thus making those prior circumstances relevant.
In the contract, NEM acknowledged that time for performance was "of the
essence." NEM agreed to substantially complete its performance by April 1,2002, which
turned out to be the end of merely the first dredging season. Further, the contract
required NEM to work six days per week. As late as December 15, 2004, - more than
two years after NEM entered into the contract --, NEM appeared to have been unaware of
this requirement, and Twitchell actually told City and W&C representatives that he
would refuse to work on that schedule.
In July 2001, Twitchell represented that NEM would begin work at the end of
October, which was when the permitted dredging season began. However, the City had
no further contact from NEM until a City employee initiated contact with NEM in late
October. The absence of any communication from NEM by itself delayed the start of the
dredge, because the City needed several weeks advance notice of that start date in order
to make arrangements for that work to begin. As of the beginning of November,
however, NEM had not arranged for a pre-dredge survey, and at the pre-dredge meeting
held on November 7, Twitchell seemed unaware that, despite the plain requirements of
33
the contract, he was responsible for securing that survey. This caused an additional
delay, despite the City's efforts to help NEM secure a surveyor. Even if NEM had
arranged for the survey, it could not have begun the dredge on a timely basis because its
tug needed repairs. The dredge finally began on December 19, more than a month and a
half late.
Once it was underway, the dredge progressed slowly during the first season
because NEM found that the harbor floor contained timbers, which made the dredging
work more difficult. None of the parties anticipated this situation, despite the probing
analysis that W&C had conducted even prior the time NEM and the City entered into the
agreement. Because this problem was unexpected, the resulting delays during the first
dredge season after that point cannot be charged to NEM. Nonetheless, these events
reveal the beginnings of a pattern of delay.
This pattern continued into the second season. In response to the slow pace that
characterized the first season, NEM obtained a second barge and a larger bucket for its
excavator, which also could move timbers more effectively. And in July 2002, NEM
advised the City that it would commence work on November 1,2002, which would be
the first day that dredging could be performed. However, NEM was not prepared to start
on that date because its barge was still under repairs for damage that, at least in part,
occurred during the first dredging season. NEM has not offered a satisfactory
explanation why, when the barge was damaged well prior to November 2002, the repairs
were not completed in time for the dredge to begin then as scheduled. It is significant
that at trial, Twitchell attempted to blame the presence of the federal dredging contractor,
Prock Marine, in the harbor as the explanation for NEM's late start. However, as
Twitchell ultimately acknowledged and as extrinsic evidence establishes, NEM was fully
aware that it could have worked in the harbor at the same time as Prock.
NEM ultimately began dredging the harbor for the second season in late
November. By then, it had lost nearly a month of valuable time to work. It had to
suspend operations for part of the winter because the harbor froze over. This
compounded the effects of the delay in November, because NEM became unable to make
up lost ground. NEM's lack of access to the dredge area also has significance on another
aspect of its failure to perform. Under the contract, NEM was required to provide
34
suitable equipment that would preclude a persistent failure to perform. NEM was unable
to work through the second season because it could not break up the ice in the harbor.
The same problem would have arisen during the third season, as would be demonstrated
by NEM's January 2004 request for the City to arrange for icebreaking services.
The end of the second season represented the last of NEM's work in the harbor.
As is noted above, some delays in NEM's progress during the first season were
understandable because of the unexpected encounters with the timbers among the dredge
spoils. However, NEM was fully aware of this issue when it began the second season,
and in fact, by securing more suitable equipment, it had taken steps to prepare for
dredging that material. Nonetheless, despite the absence of surprises, by the end of the
second season, NEM had completed barely more than one-quarter of the work required
under the contract. The court attributes this to the delays and lost work opportunities that
NEM created during the first two seasons. Additionally, because the harbor floor was
now a known quantity, the slow progress must also be seen as a reflection of insufficient
resources that NEM was dedicating to this project. As will be seen, this point is clearly
demonstrated by the effectiveness of the dredging work that Prock performed after NEM
was terminated from the project.
NEM's willingness to perform under the contract shifted in a fundamental way
sometime between February 2003 and October 2003. This change embodied a persistent
failure to perform, thus justifying the City's decision to terminate the contract in February
2005. By letter sent in early February 2003 to Timothy King, the City manager,
Twitchell provided assurances that NEM would return to the harbor in the fall and
resume work at that time and that it would continue the work pursuant to the existing
agreement. NEM had no contact with the City or with W&C until Twitchell responded to
a letter sent to him by King's successor in October. In that letter of October 20,
Twitchell reported that there were "issues that need to be resolved before the dredging
will resume." This raises the question, what happened between February and October
that prompted NEM to threaten a termination of its work? The court finds that in the
interim, through media accounts of the dredge project, NEM became aware that the City
had overpaid NEM for work performed to date. As is discussed above, this was caused
by the method of calculating the progress payments that the City made to NEM. Those
35
payments were based on visual estimates of the amount of material that NEM removed
from the harbor. Because the in situ volume is less than the volume after the spoils are
dredged, it had appeared that NEM had performed more work than it actually did.
Because NEM was paid based on the volume of dredged material, the City ended up
paying more than NEM had earned under the contract.
NEM's realization of the financial status of its work explains its responses in
November and December 2003. The focus of those substantive concerns as expressed to
the City and to W&C was on the amount of money it was to be paid for its work.
Although in February 2003 NEM expressed full willingness to work under the existing
contractual payment formula, by the end of that year NEM had made a demand for a
huge increase in the amount of those payments and for payments of expenses for which,
under the contract, it was responsible - even though there had not been any change in the
project or working conditions since NEM had sent its letter in February 2003 stating its
intention to return to the harbor under the contract.
Several aspects of NEM's demands justified the City'S termination of the contract
for cause. First, at best for NEM, NEM's dissatisfaction with the existing payment terms
arose in July 2003, when local media reported the fact that the City had overpaid NEM.
Under the contract, NEM was required to put the City on notice in writing of any dispute
"promptly" after the grounds for the dispute arise, but within no more than 30 days. This
means that if NEM did not know of the overpayment until July, it was required to notify
the City of a resulting dispute by August. Instead, NEM waited more than two months
after that contractual deadline. This resulted in a material delay in the project: because
NEM raised the issue on the cusp of the beginning of the third dredge season, valuable
time was lost during that season. That NEM waited as it did justified the City in
concluding that NEM did not intend to adhere to its performance obligations.
In fact, at least part of the basis for NEM's dissatisfaction with the payment terms
rests on the bulking factor caused by the timbers. This problem became apparent when
NEM first began its dredging work in December 2001. To this extent, NEM was not
entitled to ground a claimed dispute on the timbers, because it failed to raise the issue in a
timely way and because, just as importantly, the parties fully addressed and resolved this
issue through the January 2002 change order. Beyond this, to the extent that the bulking
36
issue that NEM raised in October 2003 was based on the bulking of spoils other than the
timbers, NEM must have been aware of that issue as it conducted the dredge of the
harbor during the first two seasons. Therefore, the basis for the dispute referenced in
Twitchell's October 2003 letter had been known to NEM for a considerable length of
time. As is noted immediately above, the contract required NEM to communicate a
dispute to the City at least by August 2003. However, because the basis for that
complaint was evident well prior to July 2003 (when the media reported the
overpayments), NEM's complaint first articulated in October 2003 may have been even
more untimely.
Additionally, when the parties' principals met on November 10, Twitchell was
instructed to submit a proposed change order reflecting a new payment formula that it felt
would address its complaint. This is the procedure required by the contract, and it is the
same procedure that, on W&C's suggestion, NEM followed in January 2002 when the
parties recognized that the timbers buried in the harbor floor would warrant an
adjustment of the payment terms. Despite this and subsequent requests for a proposed
change order, NEM did not submit one until December 19. At one point in the interim, a
NEM representative, Tammy Pinkham, told W&C that NEM would not provide a change
order. In the face of this, W&C prepared one on behalf of the City for NEM's own
consideration. In addition to revealing NEM's own refusal to perform under the contract,
these developments demonstrate the extent of the City's willingness to go beyond its own
responsibilities under the contract in an attempt to save the contractual relationship with
NEM.
When NEM did provide the City with a proposed change order, W&C promptly
evaluated it, and the City promptly rejected it. When W&C notified NEM of this ac!ion,
it also reminded NEM of NEM's recourse under the contract, which consisted of an
appeal or demand for dispute resolution. NEM did not invoke either of these procedures,
which meant, as W&C also noted in its rejection advice, that the contract would remain
in effect without change. Nonetheless, NEM still refused to resume its dredging
operation.
As these events were progressing, NEM provided even further evidence that it did
not intend to attach importance to the timeliness of its performance. First, at a meeting
37
held on December 15, Twitchell advised that NEM did not intend to work in the harbor
six days per week. In a letter that Wilson sent previously to Twitchell, W&C projected
that based on the amount of material that still needed to be removed from the harbor,
NEM would need to use two barges six days per week to complete the dredge during the
third season. Twitchell's refusal to submit to that proposed work schedule contravened
the terms of the contract. However, it also left open the question of how NEM itself
intended to complete the dredge job. Twitchell rejected W&C' s proposed schedule, but it
did not propose any alternative. Indeed, W&C had requested NEM to provide a progress
schedule a number of times. Despite these requests and the contractual requirement,
NEM never did so.
NEM's failure to resume the City dredge project for the third season resulted from
another reason unrelated to the terms of the contract. NEM was working on an unrelated
job and thus was unavailable to return to the harbor anyway. Twitchell advised the City
that this diversion would continue into sometime in January 2004. Then, in January, after
the City had declared a default but prior to its termination for cause in early February,
NEM's attorney advised the City that because of ice conditions in the harbor, NEM could
not dredge. Counsel suggested that because of anticipated weather conditions, NEM
could not be expected realistically to begin its work until mid-February.
The evident effects of NEM's refusal to return to the harbor were compounded by
the pace of the work performed during the first two seasons. Despite its presence in the
harbor for two winters, it had removed only approximately 25% of the material that was
involved in the project. The slow pace during the first season was justified because of the
problems removing the timber. However, NEM was on notice of that issue for the
second season and prepared for that known condition by obtaining different equipment.
Despite this, NEM remained unable to accomplish much of the work required by the
contract. The inadequacy of the resources that NEM brought to bear are shown not only
by this slow rate of progress, but by the manner in which Prock, as the successor
dredging contractor, accomplished the work that the contract required NEM to perform.
In less than two months (i.e., roughly one-third of a single dredging season), Prock
removed approximately twice the amount of spoils that NEM had dredged in two
seasons. Even if one were to allow for the possibility of differing work conditions (if, for
38
example, the areas that Prock dredged were not encumbered by timbers - although Prock
did fact some unique difficulty because it encountered boulders, see exhibit 263), the
court views this as powerful evidence that a properly equipped and staffed dredging
contractor would be fully capable of dredging the harbor expeditiously.
Thus, when NEM balked at resuming its work for the third season, the City then
began to lose even more time on the project by a contractor whose work progressed very
slowly even when it was performing. The history of unjustified and improper delays,
aggravated by the slow pace of progress, established that NEM had engaged in a
persistent failure to perform its work under the contract. For the reasons set out in the
discussion of NEM's claims against the City, NEM's failure to perform was not legally
justified. The court concludes that NEM was simply not equipped to manage this project.
NEM submitted a low bid for the contract, attempting to present a more attractive
proposal than the one it knew Prock had submitted previously. NEM began the project
late and then ran into unexpected problems with the timbers. However, the parties, now
aware of the problem, addressed it and agreed to an accommodation. Despite the
additional knowledge about the harbor conditions, NEM stilI was overmatched by the
project. In April 2003, NEM requested the City to turn over the retainage of
approximately $25,000, to which it had no present claim under the contract. Then, by
July 2003 when NEM learned that it had been paid more than it was entitled to receive
under the contract and thus might owe money back to the City for work performed to
date, the company took a hard line in an attempt to effect an extraordinary increase in the
compensation structure. This included retaining the overpayments, increasing the level
of future payments, and receiving reimbursement for the expenses of its work. The City
rejected that proposal; NEM did not seek any relief from that position; NEM did not
resume the dredge; and the City formalized the end of the relationship through notices of
default and termination for cause.
For these reasons and without reaching the other grounds urged by the City in
support of its claim for breach of contract, the court concludes that NEM committed a
material breach of contract and that is liable to the City for damages.
39
This leads to the question of damages arising from the City's termination of the
contract for cause. The contract identifies the elements and measure of damages when
the contractual relationship comes to an end under those circumstances:
If the unpaid balance of the Contract Price exceeds all claims, costs, losses, and
damages (including but not limited to all fees and charges of engineers, architects,
attorneys, and other professionals and all court or arbitration or other dispute
alternative costs) sustained by OWNER arising out of or relating to completing
the Work, such excess will be paid to CONTRACTOR. If such claims, costs,
losses, and damages exceed such unpaid balance, CONTRACTOR shall pay the
difference to OWNER. ...When exercising any rights or remedies under this
paragraph OWNER shall not be required to obtain the lowest price for the Work
performed.
. . .Where CONTRACTOR'S services have been so terminated by
OWNER [for cause], the termination will not affect any rights or remedies of
OWNER against CONTRACTOR then existing or which may thereafter accrue.
See exhibit 32 at Bates 2340.
The total contract price was $516,022, which includes the increased payments to
NEM based on the adjustments to the payment formula established in the January 2002
change order. See exhibit 104b. Of this amount, the City paid NEM $266,083. See
exhibit 150a. The unpaid balance is the difference between the two, or $249,939. This
figure, representing the amount that the City contracted to - but did not - pay for the
dredging project, is then compared to the combined costs arising from the breach and the
expenses to complete the work. If those costs exceeded the amount the City would have
paid NEM to perform in accordance with the contract, then the City is contractually
entitled to recover that difference from NEM. The contract thereby embodies the
common law notion that these damages put an aggrieved party "in the same position that
he or she would have enjoyed had there been no breach." Lee v. Scotia Prince Cruises
Ltd., 2003 ME 78, ~ 22, 828 A.2d 210, 216. The City claims that in this case, those post
termination expenses and costs consist of the costs to complete the project and the
expenses incurred to adjudicate its claim against NEM. Under the contract, these
amounts are recoverable. The next step is to quantify them.
The largest single element of the City's damages claim against NEM is the cost
incurred by the City to have Prock perform the dredge work. That cost exceeded
$400,000. See exhibit 263. NEM argues that the project performed by Prock was
40
different that the project that it (NEM) contracted to perform. The basis of this
contention is the divergence between the amount of work required by the contract and the
more limited scope of work as set out in the original DEP permit, because the permit
authorized less dredging in the intertidal area than the contract indicated. However,
NEM's contractual obligation owed to the City was defined by the contract, which
included the depictions of the area to be dredged. The permit was a necessary step in the
execution of the project, and the City had the responsibility to obtain the permit. The
City did so, and subsequently it also easily obtained an amended permit that was in
accord with the actual work required by the contract. In the end, however, NEM was
contractually required to dredge the areas that were identified in that instrument, which
later became reflected in the amended permit. Prock's work was within the scope of the
contract that NEM had executed with the City, and so the City is entitled to recover the
expense incurred by the City to acquire performance by Prock for the work that NEM
itself was to provide.
NEM also opposes this element of damages because Prock dredged deeper into
the harbor floor than NEM was required to dig. Under the contract, NEM was to dredge
five feet below mean low water. Prock was paid based on a depth of six feet. 6 However,
Prock dredged a smaller volume than the amount that remained for NEM to remove, as of
the time the City terminated that contract. Further, Prock's work was within the NEM
contractual dredge area. Therefore, when measured by volume of spoil and by
geographical parameters, Prock's work did not exceed the overall scope of the dredge
work that NEM was to have performed. Because of these considerations, the different
dredge configuration defining Prock's work - deeper into the harbor floor but not to the
full limit of the contractual dredge boundaries - does not undermine the City's contention
that its damage analysis includes the full cost of Prock's work. Finally, the evidence
establishes that Prock's charges to the City were fair and reasonable.
In addition to the actual amount of money that the City paid to Prock, the City
incurred expenses for engineering and surveying services and other charges associated
6As Prock's project manager testified, in some areas Prock dredged seven feet deep,
although the City paid for six feet.
41
with the post-termination work. They are not in material dispute. The court accepts the
evidence of those costs as outlined in exhibit 263.
Finally, the City incurred dispute resolution costs and court expenses, including
attorney's fees of $87,699.13. 7 See exhibit 263, affidavit of attorney's fees. The
attorney's fees established in the affidavit of counsel includes a deductible of $5,000,
which is also included in exhibit 263. The amount of the City's deductible is therefore
not awarded separately. The costs of litigation have not been placed in material dispute.
The court independently concludes that those expenses are reasonable, including the
attorney's fees that may be gauged against the legal fees claimed by NEM.
Exclusive of attorney's fees, the total amount of the City's expenses incurred to
complete the dredge project and pursue dispute resol ution of the pending claims is
$481,995.15. This exceeds the unpaid balance of the NEM contract price by
$232,118.15. The City is entitled to recover this amount from NEM. The City is also
entitled to an award of attorney's fees in the amount of $87,699.13.
The City is also entitled to recover from NEM the amount that the City overpaid
NEM for the work it performed prior to the contract termination. The amount of the
City's excess payments is $107,375. Recovery of such damages is not specifically cited
in the contract. However, the damages provisions of the contract make plain that the
contractual measure of damages does not limit any other remedies that are available to
the City. This allows the court to consider this aspect of the City's damages claim.
The City has framed its claim to recover the overpayment as both a form of
contract recovery and as one for unjust enrichment. A party is entitled to relief for unjust
enrichment only when it does not stand in a contractual relationship with the breaching
party. See Cummings v. Bean, 2004 ME 93, 119,853 A.2d 221,224. Here, of course, the
City and NEM were parties to a contract. The City therefore cannot recover on that basis.
However, because NEM breached the contract and the City terminated the contract for
cause, the City is entitled - as a result of NEM's breach - to recover the amount that
NEM was paid but did not earn. An award based on this overpayment is necessary to
7 The City'S attorney has filed an affidavit in support of the claim for attorney's fees.
Counsel followed the affidavit with a letter dated May 1,2006, making a minor
correction in the total fees claimed.
42
restore the City to the position it would have been in absent the breach. Lee, 2003 ME 78,
, 22, 828 A.2d at 216.
Accordingly, the City has proven damages for breach of contract in the total
amount of $339,493.15, plus attorney's fees.
The entry shall be:
On the complaint, judgment is entered for the defendants.
On count 1 of the counterclaim, judgment is entered for the counterclaim plaintiff
City of Ellsworth and against counterclaim defendant Northeast Marine Towing and
Construction, Inc. in the amount of $339,493.15, plus pre-judgment interest at the annual
rate of 4.28% and post-judgment interest at the annual rate of 9.42%. Counterclaim
plaintiff is also awarded attorney's fees of $87,699.13. On count 2 of the counterclaim,
judgment is entered for the counterclaim defendant.
Defendant Woodard & Curran is awarded its costs of court. The award of costs of
court to defendant City of Ellsworth is included in the attorney's fees award and is not
addressed separately.
Dated: April 9, 2008
REceIVED 8: FILED
APR 17 2DDB
HANCOCK COUNTY
COURTS
43