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Facilities Cost Management Group, LLC v. Otoe County School District 66-0111

Supreme Court of Nebraska

January 26, 2018

Facilities Cost Management Group, LLC, appellant,
Otoe County School District 66-0111, also known as Nebraska City Public Schools, appellee.

         1. Juries: Verdicts. A jury, by its general verdict, pronounces upon all or any of the issues either in favor of the plaintiff or the defendant.

         2. Juries: Verdicts: Presumptions. Because a general verdict does not specify the basis for an award, Nebraska law presumes that the winning party prevailed on all issues presented to the jury.

         3. Trial: Evidence: Appeal and Error. In a civil case, the admission or exclusion of evidence is not reversible error unless it unfairly prejudiced a substantial right of the complaining party.

         4. Jury Instructions: Proof: Appeal and Error. In an appeal based on a claim of an erroneous jury instruction, the appellant has the burden to show that the questioned instruction was prejudicial or otherwise adversely affected a substantial right of the appellant.

         5. Trial: Courts: Juries: Attorneys at Law: Notice: Appeal and Error. In Nebraska, the failure of the court to notify counsel of a jury's question is reversible error only if prejudice results.

         6. Rules of Evidence: Juries. Pursuant to Neb. Rev. Stat. § 27-606(2) (Reissue 2016), juror affidavits cannot be used for the purpose of showing a juror was confused, as that would relate directly to the juror's mental processes in rendering the verdict.

         7. Pretrial Procedure: Appeal and Error. A trial court's ruling on a discovery sanction will not be disturbed on appeal absent an abuse of discretion.

         8. Pretrial Procedure. The determination of an appropriate discovery sanction is to be considered in the factual context of the particular case.

         9. Rules of the Supreme Court: Pretrial Procedure: Expert Witnesses. The Nebraska Court Rules of Discovery in Civil Cases allow a party to discover facts known and opinions held by opposing experts.

         [298 Neb. 778] 10. ___: ___: ___. A party may, through interrogatories, require the other party to identify each person intended to be called as an expert witness, disclose the subject matter on which the expert is expected to testify, and state the substance of the facts and opinions to which the expert is expected to testify.

         11. ___: ___: ___. Generally, a party who has responded to a discovery request with a response that was complete when made is under no duty to supplement the response. However, a party has a duty to seasonably supplement its discovery response with respect to any question directly addressed to the identity of experts expected to be called at trial, the subject matter on which the expert is expected to testify, and the substance of the expert's testimony.

         12. Pretrial Procedure: Expert Witnesses. When determining what discovery sanction is appropriate, a trial court should consider the explanation for the failure to comply, the importance of the expert's testimony, the surprise to the opposing party, any time needed to prepare to meet the testimony from the expert, and the possibility of a continuance.

         13. Judgments: Verdicts: Directed Verdict. A motion for judgment notwithstanding the verdict may be granted when the movant's previous motion for directed verdict, made at the conclusion of all the evidence, should have been sustained.

         14. Judgments: Verdicts. To sustain a motion for judgment notwithstanding the verdict, the court resolves the controversy as a matter of law and may do so only when the facts are such that reasonable minds can draw but one conclusion.

         15. ___: ___. On a motion for judgment notwithstanding the verdict, the moving party is deemed to have admitted as true all the relevant evidence admitted that is favorable to the party against whom the motion is directed, and, further, the party against whom the motion is directed is entitled to the benefit of all proper inferences deducible from the relevant evidence.

         16. Motions for New Trial: Appeal and Error. An appellate court reviews a denial of a motion for new trial for an abuse of discretion.

         Appeal from the District Court for Douglas County: J. Michael Coffey, Judge. Affirmed.

          John A. Svoboda and Adam J. Wachal, of Gross & Welch. PC, L.L.O., for appellant.

          Larry E. Welch, Jr., Damien J. Wright, and Larry E. Welch, Sr., of Welch Law Firm, PC, for appellee.

          [298 Neb. 779] Heavican, C.J., Miller-Lerman, Cassel, Stacy, and Funke, JJ.

          Stacy, J.

         This case, which is before us for a second time, involves a dispute over amounts owed under a contract between Facilities Cost Management Group (FCMG) and Otoe County School District 66-0111, also known as Nebraska City Public Schools (the School District). In the first appeal, we found the jury had been given an erroneous instruction and we reversed a verdict in favor of FCMG and remanded the cause for a new trial.[1]On retrial, the jury returned a verdict in favor of the School District. FCMG appeals, assigning error to the admission and exclusion of certain evidence, to the jury instructions, and to the court's ruling on posttrial motions. Finding no reversible error, we affirm.

         I. FACTS

         1. General Background

         In 2008, FCMG entered into a contract with the School District to perform certain architectural, owner representative, and project management services related to a large construction project undertaken by the School District. The project spanned almost 5 years. During that time, a dispute arose over amounts due FCMG under the contract.

         FCMG ultimately filed a breach of contract action against the School District. After a jury trial, FCMG was awarded approximately $1.9 million in damages. The School District appealed, and we reversed, and remanded for a new trial after finding the trial court had improperly instructed the jury that § 11.2 of the parties' contract was unambiguous.[2]

         The case was then retried. The second jury trial generally focused on two issues. The first was how FCMG's fees were [298 Neb. 780] to be calculated under the contractual provision we found was ambiguous, § 11.2, which provided in part:

These fees and costs are intended to be converted to Lump Sum amounts with the initial approval by the Owner and Architect of the Project Scope, Budget, and concept to be advanced for funding. Lump Sum amounts and inclusions shall remain effective for the duration of the Project(s), except in the event of approved changes in the scope of work or alternatives to be bid adding two percent or more to the scope. In such event the Lump Sum fees and costs shall be increased proportionately to reflect the full percentage of changes.

         The second issue was the School District's affirmative defenses. The School District asserted that FCMG fraudulently induced it into entering the contract by representing that the contract contained a guaranteed maximum price. In this regard, the School District claimed FCMG led it to believe that once the School District approved the initial scope and budget, FCMG would manage the project to that fixed budget, and that project costs would not change unless the School District approved scope changes or selected alternative construction options. The School District also alleged as an affirmative defense that FCMG misrepresented the fees it intended to charge and that the School District entered into the contract in reliance on that misrepresentation.

         2. Precontract Negotiations

         In 2006, the School District decided to construct a new grade school and make significant renovations to its existing grade school and high school. Merle Rambo, the sole shareholder, director, and officer of FCMG, submitted a proposal for the project to the School District. The proposal emphasized that FCMG was not a traditional architectural firm, but instead would serve as the project's architect, owner's representative, and manager. It stated that because of this, FCMG had the "unique ability" to "offer guaranteed maximum cost options."

         [298 Neb. 781] After Rambo presented his proposal, the School District submitted various questions to him. One question asked whether there was a "guaranteed maximum price for the project, " and Rambo responded, "Yes, " followed by an explanation. Another question asked what happened if the bids came in over the budget, and Rambo responded FCMG would match the bids to the budget. The School District also asked whether the fees FCMG showed in the proposal were "all inclusive, " and Rambo responded the "costs are all inclusive, incorporating construction, equipment, site development and related project management expenses."

         The School District decided to hire FCMG, and Rambo sent a standard form agreement for architectural services to Thomas Farrell, the School District's representative. The parties customized certain parts of the standard form agreement, including the fee agreement in § 11.2.

         Rambo signed the customized contract on July 18, 2007. Farrell did not sign until August 9. During the interim, Farrell asked Rambo questions regarding § 5.2.2 of the contract, which stated that "[n]o fixed limit of Construction Cost shall be established as a condition of this Agreement . . . ." Farrell thought this was inconsistent with FCMG's responsibility, as outlined in its proposal, to perform as the owner's representative and project manager and to manage the project to a fixed budget. To address these concerns, the parties added § 12.7 to the contract. This section states that FCMG's earlier proposal was attached "for general reference purposes." Farrell testified that by doing this, he thought the parties were incorporating a guaranteed maximum price into the contract. He further testified that he would not have signed the contract if a guaranteed maximum price was not part of the deal.

         Farrell also discussed fees with Rambo prior to signing the contract. Farrell was confused because there was a fee schedule in § 11.2, but other sections of the contract referenced "OR/ PM" or "Owner Representative/Project Management" fees. According to Farrell, Rambo told him the final fees would be [298 Neb. 782] approximately 11 percent of the project budget, plus reimburs-ables. Farrell testified that he would not have signed the contract had he known this was not the fee agreement.

         At trial, Rambo acknowledged telling Farrell the fees would be 10 to 12 percent, but explained he thought Farrell was asking about only architectural fees, and not owner representative or project management fees. Rambo also explained that the fee rates in his proposal covered only architectural fees and did not cover owner representative or project manager fees.

         3. Approval of Project Scope

         In January 2008, Rambo prepared a project budget and presented it to the School District at a school board meeting. The budget was presented in the form of a grid, which showed the costs for the project broken down into categories such as site and construction, equipment, professional services, and connection systems. The parties generally agree that this was the point where FCMG's fees were to be converted into a "Lump Sum" pursuant to § 11.2 of the contract.

         The January 2008 budget grid showed a project cost of $24.6 million. During Rambo's presentation, the School District asked him to identify the lump-sum fee in the grid. He indicated the fee was shown in the category titled "professional services" in the amount of $1, 944, 000. At trial, Rambo testified that this answer referred only to his architectural fees, as that is what he thought the School District was referencing. Rambo prepared a trial exhibit showing that in aggregate, the 2008 budget grid actually showed fees, in various categories, in the amount of $3, 824, 000. Trial testimony established, however, that at least some of these fees were not ascertainable by the School District at the time the budget grid was presented in January.

         4. Additions to Project Scope

         In August 2008, Rambo presented the School District a list of alternatives to consider for the construction projects. Each alternative was presented with a corresponding cost. The [298 Neb. 783] School District understood the costs associated with the alternatives were "the cost that would be incurred to the overall Project"[3] if selected. The School District approved the alternatives with associated costs listed by Rambo of $1.4 million. The School District understood this should have increased the project budget from $24.6 million to $26 million.

         In May 2009, FCMG emailed the School District a revised budget. This budget showed total project costs of $27.5 million. The School District asked why the budget was shown as $27.5 million, when it understood it was now $26 million. FCMG responded with a one-page memorandum attempting to explain several scope increases. The School District also asked Rambo to explain how his fees were being calculated, but he did not respond.

         FCMG presented evidence that the School District approved and added over $4.8 million in scope changes to the projects. The School District presented evidence that it added only approximately $2.9 million in scope changes.

         5. Expert Testimony

         (a) Robert Mabrey

         Both parties presented expert testimony on how FCMG's fees should be calculated under the provisions of § 11.2 of the contract. Robert Mabrey, an architect who testified for the School District, explained how to calculate FCMG's "proportionate" adjustment of fees under § 11.2. Mabrey testified that the calculation required determining the proportionate relationship between fees and construction costs at the time the original lump sum was agreed upon, and then applying that percentage to determine FCMG's fees for increases in the scope of construction. As a hypothetical example, if the initial approved construction costs were $20 million, and the initial lump-sum fee was $2 million, then FCMG would be entitled to an additional fee of 10 percent of the cost of any approved scope increases or selected alternatives.

         [298 Neb. 784] Mabrey then looked to the January 2008 budget grid to determine the lump sum. He found it included construction costs of $ 19.9 million. Mabrey acknowledged the parties did not agree on what that budget grid included for FCMG's fees; FCMG argued the budget grid showed approximately $3.8 million in fees, while the School District contended it showed only $1.9 million in fees. Because of this dispute, Mabrey prepared two calculations of the proportional difference-one based on FCMG's fee numbers and the other based on the School District's fee numbers.

         Using FCMG's assertion that the budget grid included fees of $3.8 million, Mabrey concluded that was 19.23 percent of the construction cost of $19.9 million. He then applied this percentage to the additional construction costs incurred during the course of the project, which he calculated at $2.9 million. This computation resulted in Mabrey's finding that FCMG would be entitled to an additional fee of $562, 302. In sum, FCMG's fees would be the $3.8 million plus $562, 302, for a total of approximately $4.3 million. It was undisputed that FCMG previously had been paid $3, 661, 127 in fees, so according to Mabrey, the amount due using that computation would be $725, 195.

         Mabrey also did the computation using the School District's assertion that the budget grid lump-sum fee amount was $1.9 million, not $3.8 million. Under that scenario, the percentage of fees to construction costs was 12.65, and applying that percentage to the $2.9 million in scope changes resulted in increased fees of $369, 974. This computation resulted in Mabrey's finding that FCMG was entitled to total fees of approximately $2.8 ...

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