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Klicos Painting Co., Inc. v. Saffo Contractors, Inc.

United States District Court, D. Maryland

July 16, 2018

KLICOS PAINTING COMPANY, INC., Plaintiff/Counter-Defendant,
SAFFO CONTRACTORS, INC., Defendant/Counter-Plaintiff.


          Richard D. Bennett United States District Judge.

         On July 29, 2013, the Maryland Transportation Authority (“MDTA”) awarded the Defendant/Counter-Plaintiff, Saffo Contractors, Inc. (“Saffo”), a contract to repair and paint various highway bridges on I-95 and I-395 in Baltimore just south of Oriole Park at Camden Yards and M&T Bank Stadium (“the 395 Project” or “the Project”). Saffo and the Plaintiff/Counter-Defendant, Klicos Painting Company (“Klicos”), arranged to perform the work together, but the parties disagree as to the terms of that arrangement. Specifically, George Klicos and his cousin Nick Saffo had fundamental disagreements with respect to the relationship of their companies, which ultimately led to this litigation. As a result of their joint efforts in 2014, Saffo paid Klicos $2, 738, 600.73. The parties have made competing claims that this amount constitutes unjust enrichment when compared to the value of the work Klicos performed on the 395 Project. Saffo further contends that Klicos secured $200, 000 of the $2, 738, 600.73 by knowingly misrepresenting its intention to return to work after the winter holiday season in December of 2014.

         As one witness observed, “everybody wanted to be the lead man on the job.” (Tr. at 802.) It is undisputed, however, that Saffo was the General Contractor to which MDTA had awarded the contract for the 395 Project. Klicos was a cleaning and painting subcontractor that supplied about 45.47% of the cleaning and painting production hours in 2014.[1] When Klicos learned that Saffo was not going to include it on another project in Texas, the relationship soured. Ultimately, Klicos sought additional payments without completing any cleaning or painting work in 2015.

         After a seven-day bench trial concluding on June 26, 2018, and for the reasons set forth below, this Court concludes as follows.

1. Klicos intentionally misrepresented its intent to return to the 395 Project in 2015, which caused Saffo to incur $200, 000 in actual damages. Punitive damages are warranted in the amount of $50, 000.2. Klicos retains $8, 377.04 in unjust enrichment based upon Saffo's overpayment for the actual value to Saffo of Klicos' work on the 395 Project. This amount incorporates a deduction for a refund of the $200, 000 fraudulently obtained by Klicos.

3. Judgment shall be ENTERED in favor of Saffo on its intentional misrepresentation claim and on the parties' competing claims of unjust enrichment.

4. Klicos SHALL PAY to Saffo a total of $58, 377.04.

         Pursuant to Federal Rule of Civil Procedure 52(a), the following memorandum constitutes this Court's findings of fact and conclusions of law.


         Klicos filed suit against Saffo on August 24, 2015. (ECF No. 1.) Saffo answered with counter-claims on September 28, 2015. (ECF No. 11.) Klicos answered the counter-claims on October 14, 2015 (ECF No. 13), and filed an Amended Complaint on June 16, 2016 (ECF No. 35). Saffo amended its Answer and Counterclaim. (ECF No. 31.) At that stage, Klicos' claims included breach of contract, unjust enrichment, and quantum meruit. (ECF No. 35.) Saffo's claims included unjust enrichment, conversion, replevin, detinue, fraud - intentional misrepresentation (including punitive damages), negligent misrepresentation, and, in the alternative, breach of contract. (ECF No. 31-1.)

         On April 21, 2017, Saffo moved for summary judgment. (ECF No. 76.) On June 30, 2017, Klicos moved for partial summary judgment, challenging all claims except for portions of Saffo's breach of contract claim. (ECF No. 98.) On September 6, 2017, Judge J. Frederick Motz of this Court granted in part and denied in part both parties' motions. (ECF Nos. 105, 106.) Specifically, Judge Motz granted Saffo's motion for summary judgment as to Klicos' breach of contract and quantum meruit claims, and denied the motion as to the unjust enrichment claim. (Id.) Klicos' motion was granted as to Saffo's claims for conversion, replevin, detinue, negligent misrepresentation, contract damages related to a recycling unit and delayed performance, and for attorneys' fees. (Id.) Klicos' motion was denied as to Saffo's claims for unjust enrichment and intentional misrepresentation, including punitive damages. (Id.)

         Based on the overlapping nature of the parties' unjust enrichment claims, Judge Motz held that the recovery for the competing unjust enrichment claims would be “measured by ‘the actual value realized by the defendant,' and not the market value of the plaintiff's services rendered.” (ECF No. 105 at 9 (citing Dolan v. McQuaide, 215 Md.App. 24, 37-38 (Md. Ct. Spec. App. 2013)).) More specifically, “the operative question will be whether the actual value realized by Saffo for Klicos's work is more or less than $2, 738, 600.73.” (ECF No. 105 at 10.) Judge Motz also stated that Klicos' “expert report outlining Saffo's profits can be used, in conjunction with other witness testimony, to infer the value provided to Saffo by Klicos' work.” (Id.)

         On February 23, 2018, this case was reassigned from Judge Motz to the undersigned. On April 13, 2018, this Court clarified Judge Motz' prior summary judgment ruling and held that the prior entry of summary judgment in Saffo's favor on Klicos' breach of contract claim was limited to the non-existence of a contract on November 21, 2013. (ECF Nos. 122-23.) This decision enabled Klicos to press a breach of contract claim at trial only if Saffo elected to pursue its own breach of contract claim at trial. On April 27, 2018, however, Saffo informed this Court that it would not pursue a breach of contract claim at trial. (ECF No. 129.) The following claims are now pending:

(1) Klicos' claim against Saffo for unjust enrichment,
(2) Saffo's counter-claim for unjust enrichment, and
(3) Saffo's counter-claim for intentional misrepresentation, including punitive damages.

         This Court conducted a seven-day bench trial[2] from Monday, June 18, 2018 through Tuesday, June 26, 2018.


         Having conducted that seven-day bench trial, heard eyewitness and expert witness testimony, and considered documentary evidence submitted by the parties, this Court makes the following findings of fact.

         I. Bid Preparation & Contract Award

         In April 2013, the Maryland Transportation Authority (“MDTA”) issued an Invitation for Bids (“IFB”) for a contract, No. FT-2575-000-006, to repair and paint various bridges on I-95 and I-395 in south Baltimore City (“the 395 Project” or “the Project”). (Ex. 3.)[3] The MDTA conducted a “Pre-Bid Meeting” on April 25, 2013. (Ex. 5 at 41.) Bidding on the Project opened on May 16, 2013. (Id.)

         Michael Ost, the head of Saffo's Bridge Maintenance Division, was in charge of preparing Saffo's bid. This process required a detailed analysis of the work required to complete the contract requirements. With respect to cleaning and painting certain portions of the bridges, Mr. Ost studied the structural plans and visited the actual work site for about three days. (Tr. at 421-22.)[4] Mr. Ost analyzed the square footage that would need to be painted and how difficult it would be to provide the laborers with safe access to all of the locations. (Id.) This analysis informed Mr. Ost's estimate of the total cost to Saffo of performing under the contract. (Ex. 161.) In consultation with Nicholas (“Nick”) Saffo, the company's President, Mr. Ost determined how much profit to build into Saffo's bid. (Tr. at 423-24.) Mr. Ost identified $13, 723, 459.00 as Saffo's total bid price. (Ex. 4 at 18.)

         Having identified the total bid price, Mr. Ost next allocated the total price across the various project milestones, or “items, ” identified in the Schedule of Prices attached to the IFB. (Ex. 3 at 209-24.) Rather than allocate prices based on square footage, Saffo decided to “front-load” the bid by assigning a higher price per square foot to the items that could be accomplished earlier in the Project. (Tr. at 435-36; Ex. 4 at 2-18.) Consistent with industry practice, this approach aims to keep contractors cash-flow-positive throughout the duration of a project. (Tr. at 436, 697-700.)

         The MDTA also required bids to include two attachments regarding the involvement of Minority Business Enterprises (“MBEs”) in the Project. (Ex. 3 at 3-5.) Saffo completed the required forms by identifying certain percentages of the overall bid price that would be paid to the following MBE subcontractors: Pioneer Contracting Company, Inc. (“Pioneer”); Masonry Resurfacing & Construction Co. Inc.; Jo-Lyn Services, Inc.; Batta Environmental Associates; Apex Petroleum Corporation; Acorn Supply & Distributing; and Atlantic Traffic Safety Inc. (Ex. 4 at 27-34.) In total, Saffo's bid-preparation efforts on the bid for the 395 Project took about two weeks (Tr. at 423), and Saffo submitted its bid on May 16, 2013. (Ex. 4 at 18.)

         Later that same day, MDTA announced Blastech Enterprises (“Blastech”) as the winning bidder. (Tr. at 438-440.) Not satisfied with such a result, Mr. Ost drove up to Maryland that evening to review Blastech's bid in person. (Id.) Mr. Ost discovered that Blastech had not complied with the MBE requirements, and he initiated a bid protest. (Id.) The bid protest was successful, and MDTA ultimately awarded the contract to Saffo on July 29, 2013. (Id. at 440; Ex. 5 at 1.)

         Klicos did not submit a bid on the Project. (Tr. at 151-52.) Mr. Ost and Mr. Saffo testified that Klicos did not assist in preparing Saffo's bid or in protesting the initial contract award. (Tr. at 424, 437-38, 877.) On the other hand, George Klicos, Mr. Saffo's cousin (Tr. at 143), testified that he “discussed the numbers” with Saffo and helped Saffo connect with Pioneer to meet the 4% participating threshold for Asian MBEs. (Tr. 58, 60-61.)[5] Despite his assertion that he discussed the numbers with Saffo, George Klicos was careful to testify that there were “never” any discussions about front-loading the contract to earn “easy money” from “easy bridges” earlier in the project. (Tr. at 99-100.)

         This Court is not convinced by George Klicos' generalized assertion of having contributed to the bid by discussing the numbers with Saffo. Regarding the issue of Pioneer, the documentary evidence corroborates Klicos' testimony that, at the very least, Klicos helped Saffo to line up Pioneer as an MBE subcontractor. Specifically, Exhibit 121 contains an email conversation on May 15, 2013 between George Klicos and Mr. Ost in which Klicos provides a bid from Pioneer. (Ex. 121.) This email conversation occurred one day before Saffo submitted its bid featuring Pioneer as an MBE subcontractor. (Ex. 4 at 27.)

         II. Contract Terms & Conditions

         It is undisputed that the MDTA contract for the 395 Project was awarded to Saffo as the sole General Contractor. (Ex. 5 at 4.) Based on Saffo's bid, the total contract price was $13, 737, 459.00. (Id. at 5.) The contract required that Saffo post a Performance Bond and Payment Bond, both in the amount of $13, 737, 459.00. (Ex. 5 at 9, 11, 19.)

         The contract obligated Saffo to complete all work within 540 days of the issuance of the “Notice to Proceed.” (Id. at 7.) Based on that timeframe, the contract contains the following liquidated damages provision:

It is expressly understood and agreed that in the event of failure on the part of the Contractor, for any reason, except with the written consent of the MDT A, to complete the furnishing and delivery of the materials and the doing and performance of the work within the time period granted Five Hundred Fourty (540) calendar days the MDTA shall have the right to deduct from any monies due or which may become due from the Contractor, or, if no monies shall be, the MDTA shall have the right to recover the amount of One Thousand Seven Hundred Sixty Dollars ($1760.00) per day for each and every calendar day elapsing between the time stipulated for the completion and the actual date of completion, in accordance with the terms of this Contract; not as a penalty, but as liquidated damages. Provided, however, that upon receipt of written notice from the Contractor of the existence of causes over which the Contractor has no control and which must delay the completion of work, the MDTA may, at its discretion, extend the period specified for the completion of the work, and in such case the Contractor shall become liable for liquidated damages for delays commencing from the date on which the extended period shall expire.

(Id.) The contract also provides for various rates of liquidated damages for failure “to make good faith efforts to comply with the Minority Business Enterprise (‘MBE') Program and contract provisions.” (Id. at 8.)

         The Schedule of Prices breaks the work down into categories. (See Id. At 311-344.) Category 1, Items 1001 to 1014, covered preparatory operations, and Category 4, Items 4001 to 4060, covered the on-site repair, cleaning, and painting work. (Id.) The contract required Saffo to clean and paint 46 bridge structures, as identified by Items 4001 to 4048[6] in the Schedule of Prices. (Id. at 311-344.) This work was subject to inspection and approval by MDTA. (Id. at 7.)

         In terms of performance specifications, the contract explicitly incorporates the 2008 version of the “Standard Specifications for Construction and Materials” (“Standard Specifications”) by the MDTA State Highway Administration. (Ex. 124.) Mr. Ost described this document as the “Bible” for this and other similar projects in Maryland. (Tr. at 445.)

         Section 108 of the Standard Specifications governs “Mobilization, ” which is described as “preparatory operations that include the movement of personnel and equipment to the project site and the establishment of the Contractor's offices, buildings, and other facilities necessary to begin work.” (Ex. 124 at 32.) “Materials” are “not applicable” under this category of work (id.), and fabricating materials does not constitute mobilization. (Tr. at 687.) According to the Standard Specifications, “[p]ayment of 50 percent of the Mobilization item will be made in the first monthly estimate after the Contractor has established the necessary facilities. The remaining 50 percent will be prorated and paid in equal amounts on each of the next five monthly estimates.” (Ex. 124 at 32-33.) No. further action is required after the first payment of 50% is approved. (Tr. at 457-58, 689-90.) The Mobilization Line Item is intended to cover all of the General Contractor's costs for mobilization, and is not limited to only the mobilization necessary for cleaning and painting. (Id. at 34.)

         Section 436 of the Standard Specifications governs “Cleaning and Painting Existing Structural Steel.” (Id. at 34.) This section identifies the acceptable cleaning systems, paint systems, health and safety requirements, and Quality Control (“QC”) procedures. The Contractor is required to provide various plans and drawings, known as “submittals, ” to the MDTA detailing how it will comply with all of these performance requirements. (Id. at 38.)

         Another undisputed element of the MDTA contract is that “[t]he contractor shall be responsible for certifying and submitting to [Maryland Department of Labor, Licensing and Regulation (“DLLR”)] all of their subcontractors' payroll records covering work performed directly at the work site.” (Prevailing Wage Instructions for the Contractor and Subcontractor, Ex. 5 at 91.) This “certified payroll” requirement is intended to ensure the Contractor is complying with Maryland's wage and hour laws. (Id.; see also Tr. at 523.)

         Payment for onsite cleaning and painting production work, however, was not based on certified payroll. Rather, the contract calls for “lump sum” payments for each bridge. (Ex. 5 at 311-344.) In practice, MDTA's onsite Project Engineer, Jason Smith, oversaw the inspection of the onsite work for the purpose of, inter alia, deciding when to make monthly lump sum “Progress Estimate” payments for the work completed. (Tr. at 692-96.) Multiple witnesses testified that this process involved some negotiation between Mr. Smith and Saffo's Project Superintendent, Greg Hahn, to determine what percentage of the work on each bridge had been completed according to the Standard Specifications. (Id. at 488 (Ost), 693-96 (Smith), and 786-87 (Hahn).)

         III. Preparations

         A. Bonds

         On July 19, 2013, Saffo, as the General Contractor, executed the required Performance Bond and Payment Bond, both in the amount of $13, 737, 459.00. (Ex. 5 at 11, 19.) Klicos provided no bonds for the Project and did not guarantee or participate in Saffo's bonds. (Tr. at 168-69.)

         B. Saffo's Submittals

         Saffo attended a pre-construction meeting with representatives of MDTA. (Tr. at 442-43.) Klicos did not attend the pre-construction meeting. (Tr. at 159-60, 443.) Following this meeting, the MDTA issued a Notice to Proceed, effective October 7, 2013, giving Saffo until on or about March 30, 2015 (540 calendar days later) to complete the contract or risk liquidated damages. (Tr. at 443-45.) Saffo prepared various schedules and engineering drawings detailing Saffo's project plans and submitted these plans to MDTA for review. (Exs. 11, 13, 14; Tr. at 446-47.) MDTA approved these “submittals” in December 2013 and January 2014. (Exs. 11, 13, 14.) Klicos had no involvement in preparing the original submittals. (Tr. at 160-64, 446-51.)

         C. Mobilization by Saffo

         Saffo mobilized onsite in December 2013 (Tr. at 451), and on December 12, 2013, Saffo sent a letter to MDTA requesting the initial 50% payment of Mobilization, Item 1011. (Exs. 10, 12.) In MDTA's Progress Estimate No. 1, which covered the period of October 7, 2013 to December 19, 2013, MDTA approved the first 50% payment of the Mobilization line item, which came to $350, 000.00. (Ex. 12.) Klicos had no involvement in Saffo's onsite mobilization in December 2013. (Tr. at 459-60.)

         D. Klicos' Off-site Pre-Production Work

         Klicos was aware of the 395 Project before bidding opened (Ex. 5 at 41), and it engaged in negotiations to work as Saffo's cleaning and painting subcontractor. (Tr. at 57-58, 460-461, 878-879.)[7] It was not until March 18, 2014, however, that Saffo formally submitted a Contractor's Request for Approval of Subcontractor that listed Klicos Painting Company as a subcontractor for “Cleaning & Painting Services; Labor Equipment.” (Ex. 16.) In early 2014, after the original containment designs had been submitted and approved by Saffo, George Klicos began working with the David R. Schmidt Company to design additional containment systems for plate birders and joints on the 395 Project. (Tr. at 160-62, 450.) On or about March 18, 2014, Klicos had personnel on-site in Baltimore for a tour of the work-site. (Ex. 133; Tr. at 169.)

         From January 29, 2013 through April 23, 2013, Klicos devoted 2, 592.5 labor hours towards fabricating and transporting equipment for the job. (Ex. 146A; Tr. at 1059-1061.) Saffo paid Klicos at least $178, 600.73 for the labor and materials involved in that effort. (Ex. 22; Tr. at 551-52.) Exhibit 22 contains Klicos Invoice 2, which George Klicos acknowledged was paid in full in a timely fashion (Tr. at 247) and which indicates that Klicos had already received payment for Invoice 1. (Ex. 22 at 3.) Klicos Invoice 2 is dated April 4, 2014 and therefore does not cover work performed between that date and April 23, 2014. Klicos Invoice 3, which would have presumably covered this time period, was never introduced at trial. The trial record therefore only establishes that Saffo paid Klicos $178, 600.73 for pre-production work.

         IV. Cleaning & Painting Production

         A. Project Management

         MDTA's on-site Project Engineer was Jason Smith. As an employee of Greenman-Pederson, Inc., Mr. Smith worked on behalf of MDTA to ensure that the work laid out in the contract for the 395 Project was completed according to the MDTA's quality standards. (Tr. at 678-79.) A team of inspectors reported to him on a daily basis, and he oversaw the work of all contractors on the Project. (Id. at 682, 694.) Mr. Smith held progress meetings at least once a month with Saffo and other subcontractors as needed. (Id. at 685.) Mr. Smith also decided how much MDTA would pay Saffo each month. (Id. at 694-696.)

         Saffo's on-site Project Superintendent was Greg Hahn. He worked closely with Mr. Smith on a daily basis to manage all aspects of the 395 Project, which covered repair work in addition to cleaning and painting. (Id. at 819.) Carlos Gonzaga, a Saffo employee, supervised the cleaning and painting laborers on Saffo's payroll. (Id. at 482-83, 575, 986.) In terms of Saffo executives, Mr. Ost communicated with Jason ...

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