Opinion
Case No. 00-4024-JAR
July 9, 2002
MEMORANDUM ORDER DENYING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT
Defendants Conectiv Services, Incorporated ("Conectiv"), Fidelity Guaranty Insurance Company, and United States Fidelity Guaranty Company filed a Motion for Partial Summary Judgment, on Plaintiff Pro Controls Corporation's ("Pro Controls") negligent misrepresentation claim. Because the Court finds genuine issues of material fact, Defendants' motion is denied.
The Court has determined these facts are uncontroverted. Several issues remain in dispute and will be discussed in the context of Plaintiff's negligent misrepresentation claim.
Conectiv obtained a government contract to renovate four military barracks at Fort Riley, Kansas and sought subcontractors for the automatic temperature control portion of the project. Pro Controls submitted a bid for $410,000. Following the submission of the bid, Conectiv contacted each subcontractor and negotiated prices. Near the end of negotiations, Bill Hutchinson of Conectiv spoke with Doug Reitmeyer of Pro Controls. Reitmeyer asked Hutchinson whether Plaintiff's bid was "in the ballpark" and Hutchinson responded that the bid was "right in there" and "just about the same as the other bidders." It is disputed whether a contract had already been formed when these statements were made. Plaintiff was eventually awarded the contract for $410,000. Subsequently, Plaintiff discovered that its bid was too low and should have been $610,000, rather than $410,000. Plaintiff brought suit against Conectiv for negligent misrepresentation based on Hutchinson's statements and asked for $200,000 in actual damages.
Summary Judgment Standard:
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." A factual dispute is "material" only if it "might affect the outcome of the suit under the governing law." An issue of fact is genuine if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party.
Fed.R.Civ.P. 56(c); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Vitkus v. Beatrice Co., 11 F.3d 1535, 1538-39 (10th Cir. 1993).
Anderson, 477 U.S. at 248.
Id. at 251-52.
The moving party bears the initial burden of showing that there is an absence of any genuine issue of material fact. Once the moving party meets its burden, the burden shifts to the nonmoving party to demonstrate that genuine issues remain for trial "as to those dispositive matters for which it carries the burden of proof." The nonmoving party may not rest on its pleadings, but must set forth specific facts.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Hicks v. Watonga, 942 F.2d 737, 743 (10th Cir. 1991).
Applied Genetics Int'l, Inc, v. First Affiliated Secs., Inc., 912 F.2d 1238, 1241 (10th Cir. 1990) (quoting Celotex, 477 U.S. at 324).
Id.
The Court determines "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." In making such a determination, the Court should not weigh the evidence or credibility of witnesses. In determining whether any genuine issues of material fact exist, the Court must construe the record liberally in favor of the party opposing the summary judgment motion. If an inference can be deduced from the facts that would allow the nonmovant to prevail, summary judgment is inappropriate.
Anderson, 477 U.S. at 251-52.
Travelers Ins. Co. v. Nixon, 1991 WL 33516, at *3 (D.Kan. Feb. 20, 1991).
McKibben v. Chubb, 840 F.2d 1525, 1528 (10th Cir. 1988) (citation omitted).
United States v. O'Block, 788 F.2d 1433, 1435 (10th Cir. 1986) (citation omitted).
Negligent Misrepresentation Claim:
Both parties have stipulated that the substantive legal issues are governed by New Jersey law. Negligent misrepresentation is a legally sound concept in New Jersey. A false statement negligently made, and on which justifiable reliance is placed, may be the basis for the recovery of damages for injury sustained as a consequence of such reliance.
See, e.g., Pabon v. Hackensack Auto Sales, Inc., 63 N.J. Super. 476, 164 A.2d 773 (1960).
Id. at 143 (citing Russell v. First Nat'l Stores, 96 N.H. 471, 79 A.2d 573 (Sup.Ct. 1951)).
Defendants argue that the required element of reliance is not present because the contract was already formed at the time of the alleged misrepresentations. Portions of the record support this conclusion. For example, Plaintiff testified that the parties were merely "ironing out a few details" at the time of the alleged misrepresentations. Defendants also point to Plaintiff's admission that its bid was submitted before the alleged misrepresentations of Conectiv. Because it is impossible to submit a bid in reliance on a statement made after the bid was submitted, Defendants argue summary judgment is proper.
Plaintiff contends reliance is present because the bid process was negotiated and not sealed. Thus, Plaintiff claims the contract was not entered into until after final negotiations between the parties and those negotiations occurred after the alleged misrepresentations. The record supports Plaintiff's contention that this was a negotiated bid. After receiving the initial bid proposals, Conectiv would negotiate the prices with the subcontractors, including Plaintiff, until a final price was reached. There is also evidence in the record supporting Plaintiff's contention that the contract was not finalized until after the misrepresentations. Reitmeyer testified that the misrepresentation occurred just prior to signing the contract and that he relied on Hutchinson's impression that Plaintiff's bid was "in the ballpark."
Both Plaintiff and Defendants have pointed to portions of the record which support their arguments. Evidence exists indicating that reliance could not have occurred because the contract was already formed at the time of the misrepresentation, but other evidence shows that only after the misrepresentation was the contract final. Because genuine issues of material fact exist regarding whether Plaintiff relied on the misrepresentations before entering into the contract, summary judgment is inappropriate.
Defendants further claim that, assuming arguendo Plaintiff did rely on the misrepresentations, the reliance was unjustifiable and therefore summary judgment should be granted. Defendants stress that the misrepresentations took place during a single phone conversation between Hutchinson and Reitmeyer. Because Reitmeyer was only peripherally involved in one conversation at the end of contract negotiations, Defendants claim Plaintiff's reliance on this conversation is unjustifiable.
Defendants direct the Court to several cases supporting their argument that reliance on an oral statement is unreasonable, none of which the Court finds persuasive. First, Defendants cite In re Northwestern Mutual Life Ins. Co. Sales Practice Litigation for the proposition that alleged reliance on an oral representation is unreasonable as a matter of law. However, the Court finds this case inapplicable to the current situation. In Northwestern, the court held that it was unreasonable for an insurer to rely on verbal assurances which conflicted with his written insurance policy. Unlike Northwestern, Plaintiff was not relying on verbal statements in conflict with a written contract because no written document regarding the reasonableness of Plaintiff's bid existed.
70 F. Supp.2d 466 (D.N.J. 1999).
Id. at 488.
Defendants' reliance on Zielinski v. Professional Appraisal Associates is also misplaced. In Zielinski, the plaintiff relied on an appraisal which she had not seen. The court concluded that it was unreasonable for her to rely on the appraisal because she was not aware of its disclaimers. The current case is markedly different. Plaintiff was not relying on a document he had never seen, but rather on assurances made in a phone conversation. Zielinski is simply inapplicable to the current situation.
740 A.2d 1131 (N.J.Super. 1999).
Id. at 1136.
Defendants also rely on Most v. Monti. Most involved a plaintiff who relied on a verbal assurance that property was fully assessed before purchasing it. Because the plaintiff could have easily determined that the property was not fully assessed, the court determined that the reliance was unjustifiable. Plaintiff's situation is distinguishable from Most because there was no easily accessible "means available to him of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation." Unlike the simple inquiry necessary in Most to determine whether the verbal assurance was correct, Plaintiff could not have easily determined whether its bid was "in the ballpark." Because the Court finds the cases Defendants have cited unpersuasive and that a reasonable jury could find Plaintiff's reliance on verbal assurances to be justified, summary judgment is improper.
91 A.D.2d 606 (1982)
Id. at 606.
Id.
IT IS THEREFORE ORDERED BY THE COURT that Defendants Motion for Partial Summary Judgment pursuant to Fed.R.Civ.P. 56 is DENIED.