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Gannett Fleming, Inc. v. Corman Construction, Inc.

Court of Special Appeals of Maryland

November 21, 2019

GANNETT FLEMING, INC.
v.
CORMAN CONSTRUCTION, INC.

          Circuit Court for Anne Arundel County Case No. C-02-CV-17-003798

          Fader, C.J., Kehoe, Berger, JJ.

          OPINION

          KEHOE, J.

         This is an appeal from a judgment of the Circuit Court for Anne Arundel County that denied a petition to stay an arbitration proceeding governed by the Maryland Uniform Arbitration Act. Our opinion addresses two issues. The first appears to be a question of first impression in Maryland: whether, in the absence of waiver or a specific deadline imposed by contract, a party forfeits the right to demand arbitration if the demand is not made within the limitations period which would apply if the claim were brought in an action at law. The second is whether the dispute in this case is substantively arbitrable, that is, whether it falls within the scope of the arbitration provision in one of two agreements between the parties. Because we answer no to the first question and yes to the second, we will affirm the judgment of the circuit court.

         Background

         The Agreements

         Gannett Fleming, Inc. is a civil engineering firm. Among other activities, Corman Construction, Inc. builds and repairs roads and bridges. In 2011, the two companies agreed to work together to prepare bids for several highway construction projects in North Carolina. To be qualified to submit bids to the North Carolina Department of Transportation ("NCDOT"), the companies formalized their commitment to work together in a written contract (the "Teaming Agreement"). Under the Teaming Agreement, signed November 7, 2011, Gannett Fleming agreed to provide quantity and pricing estimates for the building materials needed to complete the highway projects. Corman would act as the team's general contractor, using Gannett Fleming's estimates to prepare the bids that it ultimately submitted.

         The Teaming Agreement also set out what would happen if Corman's bids for the highway projects were successful:[1]

In the event of contract award to Corman by NCDOT, the parties will enter into a subcontract agreement consistent with the terms of this Teaming Agreement, encompassing Gannett Fleming's proposed services, and consistent with [Corman's contract with NCDOT]. Such subcontract will also include ACG Document No. 420 "Standard Form of Agreement Between Design-Builder and Architect/Engineer for Design-Build Projects - as Modified by Corman" and is made a part hereof. Any such form will contain the requirement that Gannett Fleming is to provide professional liability insurance in an amount not less than $2, 000, 000 in aggregate for each separate contract and will cover errors and omissions arising out of the performance of, or failure to perform, professional services. If the parties are unable to mutually agree on the terms of a subcontract after good faith efforts, then neither party will have any obligation to the other.
Pricing and scope furnished by Gannett Fleming at time of Bid are considered firm and are to be incorporated into the subcontract agreement subject to any post award changes directed or allowed by NCDOT and/or Corman.

         Three other aspects of the Teaming Agreement are particularly relevant to the parties' appellate contentions.

         First, the Teaming Agreement provided that, if Corman's bid were not accepted by NCDOT, Gannett Fleming would receive as payment for its pre-bid services any stipend received from the department. This was promised to Gannett Fleming "[i]n recognition of the highly unusual effort required" in assisting with the bid preparation.

         Second, the Teaming Agreement limited Gannett Fleming's liability for its provision of pre-bid services:

Gannett Fleming's liability for engineering services provided during the proposal preparation phase will be limited to the amount of stipend actually received by Gannett Fleming pursuant to Paragraph 7 of this Teaming Agreement.
This limitation of liability provision does not apply to work or services performed by either party after award of a contract to Corman by NCDOT and the subsequent execution of a subcontract between the parties.

         Third, the Teaming Agreement did not contain a provision for arbitration of disputes between the companies.

         Corman was a successful bidder and was awarded a contract to replace seven bridges and five culverts in North Carolina. In August 2012, Corman and Gannett Fleming entered into a subcontract agreement for the project (the "Design Subcontract"), as the Teaming Agreement required them to do. The Design Subcontract provided that it was to be governed by Maryland law and laid out the parties' duties as they worked together to complete the project. The relevant provisions are outlined below.

         Article 3 of the subcontract agreement defined Gannett Fleming's post-bid responsibilities, including a provision for "Basic Services" (emphasis added):

3.2 BASIC SERVICES Gannett Fleming's Basic Services consist of a review of the Project information furnished by Corman and the provision of the Preliminary Design Documents, Design Development Documents, Construction Documents, bidding or negotiation assistance, Construction Phase Services, and other basic services as may be provided in this agreement. . . . These services shall be performed in accordance with the schedule established by the Design-Builder pursuant to Article 5. Any Basic Services provisions that are not required under this Agreement shall be stricken.

         Next, the Design Subcontract designated as "not applicable" several subsections normally reserved for some of these basic services-including "Preliminary Design Documents" and "bidding and negotiation assistance." These pre-bid services were not required of Gannett Fleming under the Design Subcontract because they had already been performed under the terms of the Teaming Agreement.

         Article 5 of the Design Subcontract provided that Gannett Fleming "shall provide the Services required by this Agreement at such reasonable times as will enable Corman to complete its work in accordance with the schedules established by the Design-Builder." It further stated (emphasis added):

5.1 DELAYS BY ENGINEER If the progress or completion of the Project is delayed by reason of any negligent act, error or omission of Gannett Fleming, Gannett Fleming shall compensate Corman for and indemnify it against costs, expenses, liabilities or damages which accrue as a result of such delay. . . .

         Article 6.1 provided that Corman would compensate Gannett Fleming for all "Basic" and "Additional Services" provided. The stipulated fee of $1, 236, 703.16 covered both "Design" and "Post Design" services. Article 7.1.3 of the agreement also limited Gannett Fleming's potential liability to $5 million.

         Finally, Article 9 of the Design Subcontract provided a mechanism for resolving disputes between Gannett Fleming and Corman (emphasis added):

9.1 INITIAL DISPUTE RESOLUTION If a dispute arises out of or relates to this Agreement or its breach, the parties shall endeavor to settle the dispute first through direct discussions. If the dispute cannot be settled through direct discussions, the parties shall endeavor to settle the dispute by mediation under the Construction Industry Mediation Rules of the American Arbitration Association before recourse to the dispute resolution procedures contained in this agreement. Once a party files a request for mediation with the other party and with the American Arbitration Association, the parties agree to conclude such mediation within sixty (60) days of filing of the request. . . .
* * *
9.4 DISPUTE BETWEEN DESIGN-BUILDER AND ENGINEER . . . Any disputes not resolved by mediation shall be decided by arbitration under the Construction Industry Arbitration Rules of the American Arbitration Association.

         The Dispute

         The parties' relationship began to sour when Corman came to believe that some of the pre-bid quantity estimates provided by Gannett Fleming were faulty.[2] According to Corman, Gannett Fleming's errors resulted in delays, cost overruns, and, ultimately, substantial financial losses. In March 2015, Corman invoked the three-phase dispute- resolution procedure outlined in Article 9 of the Design Subcontract. Corman scheduled a meeting with Gannett Fleming to begin direct discussions to attempt to settle Corman's claim against Gannett Fleming.

         In October 2016, while these direct discussions were still ongoing, Gannett Fleming and Corman entered into a tolling agreement. This allowed Corman to investigate claims against Gannett Fleming, "for loss, cost, expense, or damage, or any other matter, breach, act, error or omissions, arising from design information provided to Corman," and to seek a settlement "without regard to the time constraints that exist because of any future expiration of any applicable statute of limitations, to the extent the Tolled Claims are within the applicable statute of limitations." The companies agreed "not [to] file suit or commence an arbitration proceeding" until the tolling agreement expired on January 31, 2017 (emphasis added). The parties extended the tolling period three times.

         While the tolling agreement was still in effect, the parties also engaged in mediation, as required by the terms of the Design Subcontract. Mediation proved unsuccessful, however, and on August 15, 2017, the day the third extension of the tolling agreement expired, Corman filed a demand for arbitration with the American Arbitration Association. The demand described the dispute to be arbitrated as a ...


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