United States District Court, E.D. Kentucky, Central Division, Lexington
MEMORANDUM OPINION AND ORDER
C. REEVES, UNITED STATES DISTRICT JUDGE
Construction, Inc., (“Gray”) is seeking damages
for Envirotech Construction Corporation's
(“Envirotech”) breach of contract arising from
the construction of “More Than A Bakery” in
Versailles, Kentucky (hereafter referred to as “the
Project”). Gray seeks to recover the amount it had to
pay to avoid mechanic's liens by Envirotech's
subcontractors, the amount it paid for supplemental
contractors to finish Envirotech's Scope of Work, costs
associated with project delays, attorney's fees, and
interest. After considering all relevant evidence presented
by the parties, the Court concludes that Gray is entitled to
damages in the amount of $656, 335.58. Further, Gray will be
awarded $12, 073.00 in prejudgment interest.
Court has summarized many of the relevant facts in prior
opinions. Those that apply to the remaining question of
damages are outlined below.
and Envirotech entered into a Subcontract under which
Envirotech was to provide all labor and materials necessary
for the installation of insulated metal panels for the
Project. [Record No. 66-1] Envirotech defaulted on the
Subcontract and subsequently abandoned the it. [Record No. 1]
Gray terminated the Subcontract on August 1, 2017, and filed
suit in this Court on December 7, 2017. [Record No. 1] The
Court previously granted Gray's motion for summary
judgment, in part, concluding that Envirotech breached the
Subcontract. [Record No. 77] All that remains to be resolved
is the amount of damages, interest, and attorney's fees
to which Gray is entitled under the Subcontract.
Court held a damage hearing on March 18 and 19, 2019. Gray
presented testimony, invoices, lien releases, internal
e-mails, and checks to support its damage calculations.
Envirotech objected that Gray's evidence was not timely
disclosed and that Gray was requesting damages for payments
and labor that were not within Envirotech's Scope of
Work. It further asserted that there should be an
inefficiency deduction for each of the four supplemental
contractors hired to complete Envirotech's Scope of Work.
Motion to Exclude
filed a motion on April 15, 2019, to exclude evidence Gray
planned to present at the hearing on April 18, 2019. [Record
No. 86] It contended that certain copies of checks and
internal e-mails were not disclosed during the discovery
period. [Id.] The Court provisionally allowed the
exhibits to be entered, pending briefing on the motion. Gray
filed a response to the motion and argued that many of the
documents were produced in discovery and, for the ones that
were not disclosed, the omission was harmless. [Record No.
Rule of Civil Procedure 26(a)(1)(A)(iii) requires a party to
provide its opposition with “a computation of each
category of damages claimed by the disclosing party- who must
also make available for inspection and copying as under Rule
34 the documents or other evidentiary material, unless
privileged or protected from disclosure, on which each
computation is based, including materials bearing on the
nature and extent of injuries suffered.” The parties
must supplement disclosures under Rule 26(a) if they are
incomplete or incorrect. See Fed. R. Civ. p. 26(e).
A party who fails to provide the information required by Rule
26(a), “is not allowed to use that information . . . to
supply evidence on a motion, at a hearing, or at a trial,
unless the failure was substantially justified or is
harmless.” Fed.R.Civ.P. 37(c)(1).
test for exclusion under Rule 37(c) is “very simple:
the sanction is mandatory unless there is a reasonable
explanation of why Rule 26 was not complied with or the
mistake was harmless.” Bessemer & Lake Erie
R.R. Co. v. Seaway Marine Transp., 596 F.3d 357, 370
(6th Cir. 2010) (internal quotations omitted). An omission is
“harmless” if it involves “an honest
mistake on the part of a party coupled with sufficient
knowledge on the part of the other party.” Vance ex
rel. Hammons v. United States, No. 98-5488, 1999 U.S.
App. LEXIS 14943 *1, *17 (6th Cir. June 25, 1999) (emphasis
asserted that any delay in producing the overlooked exhibits
was harmless and Envirotech has been aware of the itemized
damages Gray is seeking since last summer. [Record No. 90');">90, p.
2] Gray also argues that Envirotech is objecting to exhibits
supporting damages that Envirotech already agreed Gray paid
to third-parties. [Record No. 90');">90, p. 4] Gray also noted that
Envirotech was required to object by February 27, 2019, or
risk waiving any objections. [See Record No. 90');">90, p.
3 (citing Record No. 17, ¶ 14).] Envirotech argues in
its reply that Gray tacitly admitted it did not disclose 100
documents substantiating its damages and its motion was
timely. [Record No. 94] Further, it repeated that Gray cannot
recover damages based on documents that were not disclosed.
motion to exclude will be denied because the omission of the
challenged documents (certain checks and internal e-mails)
was harmless. First, testimony from both Brad Piatt and Sarah
Rowe during the damage hearing confirmed that payments were
made by Gray regardless of the canceled checks.[1" name="FN1" id="FN1">1] Their testimony
was supported by the invoices and lien waivers provided by
Gray during the discovery process that indicated the amounts
of the canceled checks.
noted, Envirotech also claims that Gray cannot recover
damages for amounts based on undisclosed documents, even
though it agreed previously that Gray had paid certain
contractors and suppliers. For example, Envirotech claims now
that it has no proof of payment for Hayden by Gray, but had
previously agreed that Gray paid $84.012.85 to Hayden.
Similarly, Envirotech reduced the amount of “Gray proof
of payments, ” even though it had previously agreed
that Gray had paid greater amounts to Gott Caulking, Sunbelt,
and AFAB. Lastly, Envirotech had the chance to depose Brad
Piatt and discussed Gray's damage calculations during the
discovery period. Therefore, the failure to disclose certain
documents was harmless and the motion to exclude will be
Measure of Damages
“[T]he measure of damages for breach of contract is
that sum which will put the injured party into the same
position he would have been in had the contract been
performed.” Hogan v. Long, 922 S.W.2d 368, 371
(Ky. 2009) (internal citations and quotations omitted).
“Contract damages must always be proven with reasonable
certainty. Thus, uncertain, contingent, and speculative
damages are generally not recoverable.” Ford
Constr., Inc. v. Ky. Transp. Cabinet, 429 S.W.3d 397,
407 (Ky. Ct. App. 2014) (internal citations and quotations
Court for a sister district in United States ex rel. CKF
Excavating, LLC v. ACC Constr., Inc., explained that the
proper measure of damages would be the sum the defendant paid
above the contract amount to complete performance, if it was
reasonable and necessary. 2012 U.S. Dist. LEXIS 1090');">9070 *1,
*14 (W.D. Ky. Aug. 3, 2012). Next, that amount would be
reduced by the unpaid amount for work actually performed by
the plaintiff under the contract. Id. (referencing
Campbell v. Snyder, 154 S.W.2d 724');">154 S.W.2d 724, 726 (Ky. 1941)
(“the measure of damages for breach of contract is the
reasonable and necessary cost of complete the work according
to the terms of the contract”); Carl Const. Co. v.
Miller, 29 S.W.2d 545, 547 (Ky. 1930)).
multiple provisions of the Subcontract contemplate the types
of damages Gray can recover based on Envirotech's breach.
DEFAULT: NOTICE TO CURE. If the Subcontractor refuses or
fails to supply enough properly skilled workers, proper
materials, or maintain the Schedule of Work, or fails to
achieve Substantial or Final Completion, . . . or fails to
correct defective work as determined by Gray, or threatens to
or refuses to perform, . . . then Gray, without prejudice to
any other rights or remedies, shall have the right to any or
all of the following remedies:
(a) supply such number of workers and quantity of materials,
equipment and other facilities as Gray deems necessary for
the completion of the Subcontractor's Work, or any part
thereof which the Subcontractor has failed to complete or
perform after the aforesaid notice, and charge the cost
thereof to the Subcontractor, who shall be liable for the
payment of such costs, including reasonable overhead, profit,
as well as for other damages, and attorney's fees and
dispute resolution costs;
(b) contract with one or more additional contractors to
perform such part of the Subcontractor's Work as Gray
shall determine will provide the most expeditious completion
of the total Work and charge the cost thereof to the
(c) withhold payment of any monies due the Subcontractor
pending corrective action or completion of the
Subcontractor's Work to the extent required by and to the
satisfaction of Gray;
(d) set-off Gray's damages attributable to
Subcontractor's default against any monies due
Subcontractor under this Agreement or under any other
contract between Gray and the Subcontractor; and/or
(e) terminate the Subcontract Agreement as set forth below.
TERMINATION BY GRAY. If the Subcontractor fails to commence
and satisfactorily continue correction of a default within
three (3) working days after receipt by the Subcontractor of
the notice issued under Section 11.1, then Gray may terminate
this Agreement by written notice to the Subcontractor and its
surety, if any, and use any materials, equipment and/or
employ such workers or Subcontractors as Gray deems necessary
to complete the Work.
the costs incurred by Gray in so performing the
Subcontractor's Work, including reasonable overhead,
profit and attorney's fees shall be deducted from any
monies due or to become due the Subcontractor. The
Subcontractor shall be liable for the payment of any amount
by which such expense may exceed the unpaid balance of the
Payments that Envirotech Agreed Gray Paid
agreed that Gray spent $180, 389.00 for equipment, labor,
doors, fasteners, and miscellaneous materials from Chase,
Trillum, Art's, Pro Fastening, Snodgrass, a-1 portable,
Fastener Systems, Art's Rentals, Labor Works, and Parker.
Originally, Envirotech agreed Gray paid Met-l Span $62, 000.
However, during the damages hearing, Envirotech took the
position that this amount included payment for panels beyond
the scope of Envirotech's work. Gray confirmed that a
direct payment to Met-l Span for $62, 000 was substantiated
and not in dispute based on e-mails exchanged by counsel.
Thus, Gray incurred costs of $242, 389.00 for payments that
Envirotech previously agreed that Gray had paid.
entitled to damages for paying for Envirotech's unpaid
invoices to supplemental contractors and for the work done
after Envirotech abandoned the Project to finish
Envirotech's Scope of Work.
CEO Janet Charles objected to Gray's damage calculations
due to inefficiency of the four supplemental contractors.
Charles testified during the damage hearing that she
developed a 50% inefficiency factor based on past projects
about a week before the hearing. Charles explained that she
created the inefficiency factor by looking at her estimated
man hours and bid, and then compared it to the actual hours
worked on the Project. She noted that by performing this
calculation she arrived at ¶ 61% inefficiency rate;
however, she then reduced the number to 50% because of the
narrowness of the building. Charles was never qualified as an
expert and her testimony as a fact witness stating that she
never previously complained about any inefficiencies undercut
her testimony developing the inefficiency factor.
Charles never complained about the supplemental
contractors' alleged inefficiencies to any of the
contractors themselves or to Gray, she never asked for
contractors to be moved around or kicked off the Project.
Further, she never asked that the supplemental contractors
not be paid due to their inefficiency. Additionally, Charles
hired two of the four contractors and oversaw their work
until Envirotech abandoned the Project. The only mention
Charles made of potential inefficiency was in an e-mail to
Piatt regarding American Igloo. [DX-006.001]
also mentioned during the damage hearing that “trade
stacking” (multiple contractors in the same space doing
the same work) contributed to the inefficiency of the
contractors. But Piatt explained that the Project involved a
200, 000 square foot warehouse and the supplemental
contractors could be (and were) working in different areas.
Piatt further testified that American Igloo was working a
night shift and Delta-T was working on smaller walls and the
ceiling. Also, Envirotech never complained about trade
stacking until the time of the damage hearing. Based on the
foregoing, the Court declines to apply the 50% inefficiency
factor. As outlined above, the issue was not raised prior to
the hearing, Charles was never qualified as an ...