Opinion
19-P-813
07-16-2020
SPECIALTY MATERIALS, INC. v. HIGHLAND POWER CORP.
NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28, as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
After a jury-waived trial in the Superior Court, the defendant Highland Power Corp. (Highland), appeals from a judgment in favor of the plaintiff, Specialty Materials, Inc. (Specialty), on a breach of contract claim arising from a billing dispute. We affirm.
Background. Specialty is a manufacturer of high-performance continuous boron and silicon carbide fibers. Commencing around June 2006, and continuing through March 2013, Highland provided maintenance and repair services for Specialty's generators, which supply critical power in support of its manufacturing process. The services were provided under a written contract executed in June 2006 (contract). The contract specified two types of billing categories, one for routine operation and maintenance billed on a weekly flat rate (maintenance work); and the other for repair work billed on a time and materials basis (repair work). One of Highland's technicians performed most of the maintenance work three days a week (maintenance technician). While the maintenance technician also did some of the repair work, most of the repair work was provided by additional teams of Highland technicians.
Maintenance work is described in item one of the contract: "Highland will have a technician visit the site three times per week, take readings, observe equipment operation, make log entries, and coordinate with plant management." Item one routine maintenance work was to be billed at a flat fee of $600 per week. Repair work is described in items two through seven of the contract: (2) monthly scheduled maintenance, (3) repair services as required, (4) remove/replace generator sets as authorized, (5) twenty-four hour response, (6) qualified service technicians, and (7) certain specialized services as requested. Repair work was to be billed according to Highland's standard terms and conditions, which listed labor rates for various positions and mileage rates for travel.
In 2013, after conducting an internal investigation of Highland's billings, Specialty sued Highland claiming that Highland had breached the contract by overbilling for the time and mileage of the maintenance technician between November 2007 and March 2013. Specialty alleged that the maintenance technician submitted bills for hourly billed repair work that either was not provided, or should have been included in the weekly flat rate for maintenance work. Specialty sought damages in the amount of $265,815, and asserted claims for breach of contract, violation of G. L. c. 93A, and an equitable claim for money had and received. Highland denied the overcharges, pleaded affirmative defenses including waiver and estoppel, and counterclaimed for unpaid invoices of $17,696.70 for work done in February and March of 2013. On Highland's motion for summary judgment, a motion judge dismissed Specialty's c. 93A claim, and granted judgment in Highland's favor as to three unpaid invoices for flat-fee services, leaving the remaining two invoices for repair work (February and March 2013) for trial.
Specialty did not contest Highland's flat-fee billings with respect to routine maintenance work.
A three-day bench trial was held in November 2016. The trial judge found that Highland had improperly billed for 1,592.1 hours and 28,600 miles, and, accordingly, awarded Specialty compensation in the amount of $120,550.24 for overbilled labor charges and mileage. The amount was adjusted to account for the unpaid invoices Specialty owed Highland, plus interest. Final judgment issued on March 20, 2019, with Specialty's award totaling $202,135.35, including interest and costs.
Specialty submitted a proposed judgment which included statutory twelve percent interest from the date of its complaint. See G. L. c. 231, § 6C (providing for twelve percent prejudgment interest from date of complaint in contract actions). Highland opposed on the basis that the statutory rate is unconstitutionally excessive and punitive.
Discussion. Following a jury-waived trial, we review the trial judge's rulings of law de novo and factual findings for clear error. Trace Constr., Inc. v. Dana Barros Sports Complex, LLC, 459 Mass. 346, 351 (2011). See Mass. R. Civ. P. 52 (a), as amended, 423 Mass. 1402 (1996). The trial judge, "who has a firsthand view of the presentation of evidence" (citation omitted), is in the best position to assess the credibility of the witnesses and the weight of the evidence, especially in a case involving conflicting testimony. Demoulas v. Demoulas Super Mkts., Inc., 424 Mass. 501, 509-510 (1997).
1. Waiver. Highland asserted in its defense that Specialty waived any claim to being overcharged because it had reviewed, approved, and failed to object to the invoices before paying them. Highland argues on appeal that (a) the trial judge erred by failing to rule on the issue, and (b) in any event, waiver was established as a matter of law.
"Under the common law of contracts, waiver is the 'intentional relinquishment of a known right.'" BourgeoisWhite, LLP v. Sterling Lion, LLC, 91 Mass. App. Ct. 114, 119 (2017), quoting Dynamic Mach. Works, Inc. v. Machine & Elec. Consultants, Inc., 444 Mass. 768, 771 (2005). Waiver may be an "express and affirmative act" or "inferred by a party's conduct" as long as that conduct is "consistent with and indicative of an intent to relinquish voluntarily a particular right" and where "no other reasonable explanation of [the] conduct is possible" (citations omitted). KACT, Inc. v. Rubin, 62 Mass. App. Ct. 689, 695 (2004). Where waiver is not explicit, one must show proof of "clear, decisive, and unequivocal conduct" indicating an intent to waive the terms of the parties' contract. Id., quoting Glynn v. Gloucester, 9 Mass. App. Ct. 454, 462 (1980).
Following the trial, the judge ordered the parties to submit briefs on Highland's waiver defense. However, the judge did not issue a separate order on the question. Instead, the judge awarded damages in Specialty's favor (adjusted to reflect the amount owed to Highland). Following this order, the judge also ruled on Highland's request for additional findings of fact and rulings of law. With respect to waiver, and without elaboration, the judge simply stated that he "confirms [his] preliminary findings." We take this statement, together with the award of damages to Specialty, to mean that the judge rejected Highland's waiver defense.
In support of its argument that the judge erred as to whether Specialty had waived its breach of contract claim by paying the invoices upon receipt, Highland points to the following stipulated facts: Highland's invoices informed Specialty of the hours and mileage it was charged, and Specialty had reviewed each invoice before paying it; Specialty had repeatedly expressed satisfaction with Highland's work, and had never complained to Highland about overcharges for repair work until the filing of this action in 2013; Specialty had closely monitored and interacted with Highland's technicians, including the maintenance technician; and, at the time it paid the invoices, Specialty was in possession of the same, if not more, information, that it later relied on in support of its complaint.
Missing from Highland's articulation of the facts, however, is any evidence that Specialty knew at the time it paid the invoices that Highland was overbilling it for repair work that was not performed, or for work that should have, by the terms of the contract, been considered routine maintenance. The absence of this knowledge precludes a finding that Specialty expressly or affirmatively waived its rights to later contest the overcharges. Nor can we conclude that merely by paying the invoices Specialty indicated an intent to accept Highland's breach of the parties' contract. See S.M. v. M.P., 91 Mass. App. Ct. 775, 786 (2017) (contractual terms can be waived "by continuing to perform or to receive performance from the other party" only where there is knowledge that terms are not being performed). While Specialty's discovery of the injury it sustained by the overcharges may have occurred only in 2013, as long as its complaint was timely filed under the statute of limitations (which it was), Specialty's breach of contract claim is not subject to waiver under the facts before us. Accordingly, the judge did not err in denying Highland's affirmative defense of waiver; Highland failed to establish that Specialty either expressly or affirmatively agreed to waive -- or engaged in conduct that clearly, decisively, and unequivocally established its intent to waive -- its right to timely claim a breach of the contract.
In each of the cases Highland cites as an illustrative example of waiver, there was evidence that the waiving party either had actual knowledge of the opposing party's nonperformance (or breach of contract), or had clearly, decisively, and unequivocally demonstrated an intent to relinquish their right to seek relief.
2. Estoppel. Highland next argues that Specialty was estopped from claiming it was overcharged when it was repeatedly asked about Highland's performance but remained silent as to the improper billing until filing its complaint. Highland argues that Specialty's silence prevented it from investigating and discovering any irregularities. The judge denied the defense, stating that Specialty had not known about the overcharges because of Highland's "fraud," which we interpret to be a reference to the judge's finding that Highland had "falsely" billed time for repair work that was either not performed or which constituted regular maintenance work.
To establish estoppel, a party must show (1) a representation, or conduct amounting to a representation, intended to induce reliance on the part of a person to whom the representation is made; (2) an act or omission by that person in reasonable reliance on the representation; and (3) detriment as a consequence of the act or omission. Weston Forest & Trail Ass'n v. Fishman, 66 Mass. App. Ct. 654, 659 (2006). "Silence may satisfy the first element of estoppel where it constitutes a representation of consent." Reading Co-Operative Bank v. Suffolk Constr. Co., 464 Mass. 543, 556 (2013).
For the same reasons discussed previously about its lack of knowledge that it was being overbilled, Specialty's failure to object at the time it paid the invoices does not constitute consent to being overbilled for work that was in breach of the contract; nor could such a failure to contest constitute a reasonable inducement of reliance on Highland's part. We find no error in the judge's determination that the doctrine of estoppel did not preclude Specialty's claim.
3. Breach of contract. The trial judge determined that Highland had overbilled Specialty by billing for work that Highland either did not perform, or work that should have been considered routine maintenance and included in the weekly flat fee, rather than repair work billed hourly with associated mileage. On appeal, Highland contends that the judge's determination of overbilling was unsupported by, and contrary to, the evidence.
Although the judge did not explain his methodology in calculating damages, he provided a table, detailing specific hours of overbilling on almost 500 separate days between 2007 and 2013. From a review of that table, it appears that the judge did not credit the repair hours billed for the maintenance technician when the maintenance technician worked alone at Specialty on his regularly scheduled days (Mondays, Wednesdays and Fridays). Any mileage associated with the maintenance technician on those days was also discounted. Highland argues that the evidence did not permit the judge to infer that those billed hours and miles were false because there were no documents detailing the specific tasks performed by the maintenance technician on a daily basis to enable a review of whether the tasks constituted routine maintenance or repair and there were no witnesses who could verify the specific tasks done by the maintenance technician on any given day.
The documentary evidence largely consisted of monthly Highland invoices to Specialty, which described the repair work performed during the course of the month and listed the number of hours each worker worked (and number of miles driven) on each day. The invoices did not detail what specific work was done on each day or by each worker. Although Highland employees did complete daily timesheets, the relevant timesheets were destroyed during an office renovation.
There was, however, evidence that the maintenance technician arrived at Specialty's Lowell site on his regularly scheduled maintenance days "between 8:30 and 9:00" in the morning, he consistently left "by noon," and that "90% of the time," the maintenance technician arrived back at Highland's Brockton shop to do his timesheets some time before the Highland bookkeeper left for the day at 3:30 P.M. There was also evidence that, although Specialty paid a flat fee for the maintenance service, Highland estimated that "3.5 hours was a fair allocation of time for the fixed rate work" and instructed the maintenance technician "to put 3.5 hours down for readings and the rest of the time would be on repairs." As to the repair work that was done by the maintenance technician, there was evidence that the maintenance technician largely assisted the other workers who were doing repairs by purchasing parts, organizing and cleaning the parts and work site. The evidence allowed the judge to infer that, given the time necessary to do the maintenance work and the time that the maintenance technician routinely arrived and left work (taking into consideration travel time between locations), much of the repair time billed for the maintenance technician was "exaggerated."
Although there was no specific evidence about the travel time between the two locations, every employee who billed for mileage, including the maintenance technician, charged one hundred miles per day, corresponding roughly with a round trip between Highland's Brockton shop and Specialty's Lowell site. The maintenance technician testified that he included travel time in his timesheet, although Highland's president testified that Specialty was not to be charged for travel time.
At trial, the maintenance technician agreed that his "timesheets reflect[ed] the same number of hours worked for repairs and maintenance almost every day" -- 3.5 hours for maintenance and 4.5 hours for repairs, thereby comprising an eight-hour work day. The judge could have, and apparently did, reject the claim that the maintenance technician engaged in repair work every day.
Highland additionally argues that, even if there was evidence of overbilling, it was insufficient to allow for a credible calculation of damages. "When determining damages for a breach of contract, the plaintiff need not prove [its] damages with mathematical certainty, as long as the damages are not too remote, speculative, or hypothetical." Hlatky v. Steward Health Care Sys., LLC, 484 Mass. 566, 589 (2020). "[T]he extent of damages often must be left to estimate and judgment." Coady v. Wellfleet Marine Corp., 62 Mass. App. Ct. 237, 245 (2004), quoting Our Lady of the Sea Corp. v. Borges, 40 Mass. App. Ct. 484, 488 (1996). "Under our cases, an element of uncertainty is permitted in calculating damages and an award of damages can stand on less than substantial evidence" (citation omitted). Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co., 439 Mass. 387, 413 (2003). "Evidence that enables the [factfinder] to arrive at an approximate estimate of damages is sufficient." Coady, supra, citing Agoos Leather Cos. v. American Foreign Ins. Co., 342 Mass. 603, 609 (1961).
Here, the evidence did allow the judge to calculate a reasonable estimate of damages. The judge had invoices that listed the daily repair hours claimed by the maintenance technician. The invoices also listed the days on which additional Highland workers did repair work at Specialty. As there was evidence that the repair work done by the maintenance technician was largely in support of other repair workers, the judge reasonably credited the repair hours billed by the maintenance worker on days that other workers also did repair work at Specialty. The judge also reasonably discounted mileage for the maintenance technician on days that he had to be on site for the flat-fee maintenance work; his repair work on those days did not cause him to have to make a special trip to the site, as it did for the other workers. The evidence was sufficient to allow the judge to make a reasonable estimate of damages. See Coady, 62 Mass. App. Ct. at 245.
On appeal, Highland argues that the contract did not limit mileage to repair work only and that it could have charged mileage for the maintenance technician's work, relying on Highland's standard terms and conditions, which included mileage rates for transportation. Contrary to this claim, the contract provided that "service labor" on the routine maintenance work would be subject to a "flat rate" and that "[a]ll other services according to [Highland's] standard terms and conditions." Thus, the flat-fee service was not subject to the standard terms and conditions, which provided for transportation fees. Additionally, Highland's president agreed that the contract did not allow for mileage in connection with the flat-fee routine maintenance work.
Highland points out a few alleged discrepancies in the judge's damages calculation. For example, the judge found overbilling on March 30, 2009, and March 4 and 7, 2011, even though the maintenance technician did not submit any hours for those days. The judge could have found that the single employee who billed 4.5 hours on each of those days was stepping in for the maintenance technician and similarly overbilled. Additionally, the judge discounted the maintenance technician's repair hours on September 10, 2010, even though there is a corresponding log sheet indicating repair work done. The judge was not required to credit the log sheet, particularly where the purpose of it was not to memorialize repairs, but rather to provide "a basis for maintaining consistent O&M services, recording issues as they arise, planning corrective action and documenting discrepancies." Again, mathematical certainty is not required.
4. Additional claims. Highland contends that the judge awarded Specialty "double recovery" by failing to offset its damages by the benefit conferred upon it by Highland "undercharging" Specialty over the years. Such undercharges consisted of refraining from escalating its labor charges and not charging mileage to the extent that it could have under the contract. Highland has failed to cite any authority to support the proposition that its voluntary decision not to bill Specialty resulted in a "recovery" by Specialty such that a damages award premised on amounts actually (wrongly) billed constitutes "double recovery." We reject it.
Highland also objects to the twelve percent interest rate for prejudgment interest, claiming that the statute governing the award of prejudgment interest in contract cases, G. L. c. 231, § 6C, is unconstitutional. Relying on Ford v. Uniroyal Pension Plan, 154 F.3d 613, 618 (6th Cir. 1998), Highland argues that the statutory prejudgment interest rate is excessive and punitive. That case is not controlling and did not, in any event, hold that a twelve percent prejudgment interest rate is unconstitutional. See id. (trial court did not abuse discretion in not utilizing Michigan's twelve percent prejudgment interest rate where purpose was to compensate plaintiffs for delay in receiving damages award as well as for litigation expenses). Prejudgment interest was properly added to the judgment pursuant to G. L. c. 231, § 6C.
Highland also claims that the judge treated Specialty's breach of contract claim as a fraud claim, and, as such, the claim was untimely. There is no dispute that Specialty's claim was for breach of contract. The judge's characterization of Highland's conduct as "fraud" did not convert the action into one for fraud. The claim was not time-barred.
Finally, Highland argues that the judge erred in denying it attorney's fees under the contract as it was "successful" in its counterclaim for breach of contract. While Highland had some success in its counterclaim, its damages were offset by Specialty's more substantial damages, such that Highland cannot claim to have been successful overall. See, e.g., Bank of Am., N.A. v. Prestige Imports, 75 Mass. App. Ct. 741, 767 (2009) (plaintiff in breach of contract action not entitled to attorney's fees as prevailing party as amount of its recovery was less than recovery of other party).
Judgment affirmed.
By the Court (Massing, Neyman & Singh, JJ.),
The panelists are listed in order of seniority.
/s/
Clerk Entered: July 16, 2020.