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Hobson Fabricating Corp., An v. Se/Z Construction

December 19, 2012


Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada County. Hon. Ronald J. Wilper, District Judge.

The opinion of the court was delivered by: Burdick, Chief Justice

Twin Falls, August 2012

2012 Opinion No. 144

Stephen W. Kenyon, Clerk

District court decision regarding costs and attorney fees, affirmed.

Appellants Hobson Fabricating Corp. (Hobson) and SE/Z Construction, LLC (SE/Z) appeal the district court's decision in their case against the State of Idaho, Department of Administration, Division of Public Works (DPW) regarding costs and attorney fees. Prior to the


district court's decision, the parties had settled all of their claims but for costs and attorney fees. The district court declared that all parties had prevailed in part and were to bear their own costs and fees. Hobson and SE/Z appeal the decision, arguing that the district court abused its discretion and should have found that they were the overall prevailing party.


In 2003, DPW hired SE/Z as the general contractor on its Bio-Safety Level 3 Laboratory project. SE/Z subsequently awarded Hobson a subcontract for the mechanical construction portion of the project work. Over a year a later and before the project's completion, DPW terminated its contract with SE/Z pursuant to a termination for convenience clause, which led SE/Z to terminate its contract with Hobson for convenience as well.

On October 26, 2005, Hobson filed a complaint against SE/Z and DPW, which included claims for breach of contract, breach of implied warranty, and termination for convenience and claimed damages of over 1.5 million dollars. However, SE/Z and Hobson had already entered into a Claims Prosecution Agreement to jointly pursue their respective claims and defend against DPW's claims. Thus, Hobson initiated the action against SE/Z in order to assert pass through claims against DPW. SE/Z then filed a cross-claim against DPW in which it asserted claims on behalf of itself and Hobson totaling $1,973,107.38.

DPW answered with a counterclaim against Hobson and a counter cross-claim against SE/Z, claiming that it had to terminate the contract for convenience after numerous attempts to move the project forward. Subsequent to Hobson's and SE/Z's replies to DPW's claims, Hobson filed a complaint against six DPW or State of Idaho employees in their individual capacities for various claims, which were consolidated with this action.

Over the next thirty months, the district court had the opportunity to rule on multiple motions from the parties. In the first of these decisions, the district court granted Hobson and SE/Z's motion for summary judgment regarding the issue of whether Hobson and SE/Z (hereafter jointly referred to as "Contractors") were entitled to recover for work executed and for proven losses, but denied it on the issue of whether DPW was precluded from asserting any defenses or cross-claims. The district court found that the provisions in the contract regarding termination for convenience were clear and unambiguous and entitled the Contractors to recover for costs and losses. As for the preclusion issue, the district court found that subsection 13.4.2 of the contract preserved DPW's claims against the Contractors.

Next, the district court granted Hobson's motion for partial summary judgment, dismissing DPW's counterclaims against Hobson because there was no contractual relationship between the parties. Additionally, the district court denied SE/Z's motion for partial summary judgment, finding that there was a genuine issue of material fact regarding compliance with the contractual notice provision.

In the third of such decisions, the district court granted DPW's motions for summary judgment against Hobson's claims against DPW and the partial summary judgment against SE/Z, denying any damages related to issues with the hot gas bypass segment of construction. The district court also granted the individual defendants' motions for summary judgment against Hobson, dismissing all claims against the individuals. Finally, the district court also denied Hobson's Motion in Limine seeking to preclude DPW from introducing evidence of any claims against the contractors until DPW could provide evidence that it complied with the contractual notice provisions.

A mistrial was declared in this action on October 31, 2008, and the district court ordered a stay on all new discovery and ordered that leave of court be sought before filing any substantive motions. Prior to the retrial, the district court ruled on additional motions in limine filed by Hobson, even though the court found that the motions were really substantive motions of reconsideration on prior rulings. The district court ordered that DPW was precluded from introducing evidence "of cross-claim damages for repair or replacement for any item of work for which it failed to provide Defendant SE/Z notice and an opportunity to cure" because DPW "admittedly failed to discover the alleged defects until after it had terminated the contract for convenience." This ruling was contrary to its previous rulings denying partial summary judgment motions seeking to dismiss DPW's affirmative claims and those issues pertaining to the contractual notice provision. Thus, the court now found that the failure to provide notice and opportunity to cure foreclosed DPW from pursuing its claims against the Contractors. The court's order also denied the Contractors' claim that the post-termination damages would be calculated by the "total cost method" rather than under the contract's fixed price terms.

In response to subsequent motions in limine looking for clarification on the district court's order, the court stated:

The scope of the damages Plaintiff Hobson and Defendant SE/Z may claim is very narrow, consisting only of claims for the work authorized by the contract which they had performed in compliance with the plans and specifications, for which they had not yet been paid as of the date of termination of the ...

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