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(A
revised version of this article appears in The Construction
Lawyer, Volume 20, No. 3, July 2000, published by the
American Bar Association's Forum on the Construction Industry.)
By John W. Ralls
A
North Dakota-based earth-moving contractor encountered many
more rocks than it expected in performing work for the State
of Wyoming. Although the contractor initially anticipated
having to move 600 cubic yards of rock, it uncovered approximately
120,000 cubic yards of rock. The contractor began encountering
excessive rock in January 1991 but did not request additional
compensation based on unforeseen site conditions until May
28, 1991.
The
contract contained two notice clauses. The first, entitled
"Unforeseen Physical Conditions," provided: "CONTRACTOR
shall promptly notify OWNER and ENGINEER in writing, within
fifteen days, of any subsurface or latent physical conditions
at the site differing materially from those indicated on
the Surface or in the Contract Documents."
The
second notice clause, entitled "Change of Contract
Price," provided: "Any claim for an increase in
the Contract Price shall be based on written notice delivered
to OWNER and ENGINEER within fifteen days of the occurrence
of the event giving rise to the claim."
The
State of Wyoming denied the claim, and the contractor sued
the state. The contractor was represented in the suit by
a North Dakota lawyer, who associated Wyoming counsel. The
state moved for summary judgment on grounds that the contractor
failed to follow the contractual notice requirements and
that the contractor's claim was insufficient pursuant to
the Wyoming Governmental Claims Act. The Wyoming trial court
granted the state's motion.
The
contractor failed to appeal the summary judgment ruling,
apparently because its North Dakota attorney was unfamiliar
with the Wyoming deadline for appeal from a summary judgment
order. The contractor then sued its North Dakota attorney
in North Dakota state court for malpractice. The attorney
in the malpractice action filed a motion for summary judgment
on the ground that the summary judgment ruling was proper
under Wyoming law.
The
contractor contended that the North Dakota attorney not
only failed to file a timely appeal but also failed to argue
that the "Unforeseen Physical Conditions" clause
applied, not the "Change of Contract Price" clause.
The contractor contended "which contract provision
applies is significant because while determining 'the occurrence
of the event giving rise to the claim' requires application
of an objective test, determining [the existence of] 'any
subsurface or latent physical conditions at the site differing
materially from those indicated on the Surface or in the
Contract Documents' requires application of a subjective
test.…"
The
court rejected this argument on the ground that the "Unforeseen
Physical Conditions" clause "must be interpreted
from the perspective of what the contractor knew, or what
a reasonable contractor should have known, under the circumstances."
The court concluded that the contractor knew or reasonably
should have known more than 15 days before May 28, 1991,
both that an event triggering a claim for a contract price
increase and a subsurface condition differing materially
from the surface conditions existed. Dan Nelson Constr.,
Inc. v. Nodland & Dickson, 2000 N.D. 61, 2000 N.D.
LEXIS 63 (2000).
The
court also rejected the contractor's arguments that the
state had waived, or should be estopped from asserting,
the notice requirements. "Even if the State had actual
knowledge of [the contractor's] claim, actual knowledge
of a potential claim by the government does not in itself
estop the government from raising the untimely filing of
the claim as a defense absent a showing 'that the delay
in filing was induced by [the government], or that [the
government] misled [the claimant] as to the need to file
a claim,' " quoting Cranston v. Weston County Weed
& Pest Board, 826 P.2d 251, 256-57 (Wyo. 1992).
The
court also found that the general contractor's claim was
not a sufficiently "itemized statement in writing"
for purposes of the Wyoming Governmental Claims Act. Although
the claim described the locations of the rocks and the additional
amounts expended to remove the rocks in each location, the
claim was insufficient "[g]iven the Wyoming Supreme
Court's strict construction of the claims procedure statute"
in prior cases, citing In re Board of Trustees of the
University of Wyoming v. Bell, 662 P.2d 410 (Wyo. 1983)
and Amrein v. Wyoming Livestock Bd., 851 P.2d 769
(Wyo. 1993).
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