U.S. Pipeline, Inc., appellee,
Northern Natural Gas Company, appellant.
Trial: Witnesses: Evidence: Appeal and
Error. In a bench trial of an action at law, the
trial court is the sole judge of the credibility of the
witnesses and the weight to be given their testimony; an
appellate court will not reevaluate the credibility of
witnesses or reweigh testimony but will review the evidence
for clear error.
Judgments: Appeal and Error. The trial
court's factual findings in a bench trial of an action at
law have the effect of a jury verdict and will not be set
aside unless clearly erroneous.
__:__. In reviewing a judgment awarded in a bench trial of a
law action, an appellate court considers the evidence in the
light most favorable to the successful party and resolves
evidentiary conflicts in favor of the successful party, who
is entitled to every reasonable inference deducible from the
Judgments: Directed Verdict: Appeal and
Error. In reviewing rulings on motions for directed
verdict and judgments notwithstanding the verdict, an
appellate court gives the nonmoving party the benefit of all
evidence and reasonable inferences in his or her favor, and
the question is whether a party is entitled to judgment as a
matter of law.
Contracts: Judgments: Appeal and Error. The
meaning of a contract is a question of law, in connection
with which an appellate court has an obligation to reach its
conclusions independently of the determinations made by the
Damages: Appeal and Error. The amount of
damages to be awarded is a determination solely for the fact
finder, and its action in this respect will not be disturbed
on appeal if it is supported by evidence and bears a
reasonable relationship to elements of damages proved.
Contracts: Damages: Appeal and Error. The
issue of whether damages are consequential under a contract
is a question of law that an [303 Neb. 445]appellate court
reviews de novo, but the factual determinations underlying
such a characterization are reviewed for clear error.
Expert Witnesses: Appeal and Error. The
standard for reviewing the admissibility of expert testimony
is abuse of discretion.
Contracts: Waiver: Damages. Generally, a
contractual waiver or exclusion of consequential damages will
be upheld unless the provision is unconscionable.
Contracts: Damages. Consequential damages,
as opposed to direct damages, do not arise directly according
to the usual course of things from a breach of contract
Direct damages refer to those which the party lost from the
contract itself-in other words, the benefit of the
bargain-while consequential damages refer to economic harm
beyond the immediate scope of the contract.
Trial: Evidence: Appeal and Error. Unless an
objection to offered evidence is sufficiently specific to
enlighten the trial court and enable it to pass upon the
sufficiency of such objection and to observe the alleged
harmful bearing of the evidence from the standpoint of the
objector, no question can be presented therefrom on appeal.
Appeal and Error. An issue not properly
presented and passed upon by the trial court may not be
raised on appeal.
In order to be considered by an appellate court, an alleged
error must be both specifically assigned and specifically
argued in the brief of the party asserting the error.
Waiver: Appeal and Error. Errors not
assigned in an appellant's initial brief are waived and
may not be asserted for the first time in a reply brief.
Trial: Directed Verdict: Appeal and Error.
In an appeal of a trial court's refusal to enter a
directed verdict, the appellate court should consider solely
those grounds urged by the appellant to the trial court in
support of its directed verdict motion.
__:__:__ . If a party fails to set forth certain arguments as
grounds in a motion and renewed motion for directed verdict,
such arguments will not be properly preserved for appeal.
Contracts: Waiver. The determination of
whether a contractual provision has been waived is a factual
Contracts: Waiver: Damages. A contractual
provision for liquidated damages for delay in performance may
Waiver: Estoppel. In order to establish a
waiver of a legal right, there must be clear, unequivocal,
and decisive action of a party showing such purpose, or acts
amounting to estoppel on his or her part.
Neb. 446]21. Contracts: Waiver:
Proof. A written contract may be waived in whole or
in part, either directly or inferentially, and the waiver may
be proved by express declarations manifesting the intent not
to claim the advantage, or by so neglecting and failing to
act as to induce the belief that it was the intention to
Contracts: Waiver. Even a provision in a
written contract that specifies that a waiver of the
conditions and terms of the agreement must be in writing may
be waived by acts or conduct.
from the District Court for Douglas County: Timothy P. Burns,
Gregory C. Scaglione, J. Daniel Weidner, Minja Herian,
Michele E. Young, and Cassandra M. Langstaff, of Koley
Jessen, PC, L.L.O., for appellant.
D. Renner and Richard P. Jeffries, of Cline, Williams,
Wright, Johnson & Oldfather, L.L.P, and Barrett H.
Reasoner, Ayesha Najam, and Ross M. MacDonald, of Gibbs &
Bruns, L.L.P, for appellee.
Heavican, C.J., Cassel, Stacy, Funke, and Freudenberg, JJ.
NATURE OF CASE
2014, a natural gas company solicited bids for a pipeline
replacement and relocation project in northern Michigan. The
natural gas company accepted a bid from a pipeline company,
and the parties entered into a detailed construction
contract. The contract provided that the project would be
substantially completed by September 2014. However, because
of extra work orders by the natural gas company and for
various other reasons, the project was not substantially
completed by that date. Based on a liquidated damages
provision in the contract, the natural gas company withheld
the maximum amount of liquidated damages allowable under the
contract for the delay in the project's completion. The
natural gas company also refused to pay certain costs
requested by the pipeline company [303 Neb. 447] related to
the extra work orders. At the center of the lawsuit is
whether the natural gas company should pay for the costs
associated with the extra work and be allowed to withhold
January 2016, U.S. Pipeline, Inc., a corporation engaged in
the business of constructing oil and gas pipelines and
related energy infrastructure facilities, filed a complaint
in the district court for Douglas County against Northern
Natural Gas Company (Northern), a corporation headquartered
in Omaha, Nebraska, and engaged in the business of providing
natural gas transportation and storage services. U.S.
Pipeline sought compensation under a pipeline replacement and
relocation project contract for costs incurred to perform
work that was outside of the original contract price (Extra
Work). U.S. Pipeline sought relief under a breach of contract
theory, as well as alternative theories, including claims for
misrepresentation and fraudulent concealment.
response to U.S. Pipeline's amended complaint,
Northern's answer and counter-complaint denied that it
owed U.S. Pipeline any compensation for the Extra Work and
resources U.S. Pipeline did not anticipate and denied any
liability to U.S. Pipeline for U.S. Pipeline's low bid.
Northern's counter-complaint further alleged that
pursuant to the contract, U.S. Pipeline materially missed the
substantial completion date and overtoiled Northern for the
work it performed. Based on this and a liquidated damages
provision within the parties' contract, Northern sought a
declaratory judgment upholding Northern's decision to
withhold payment of $351, 000 from U.S. Pipeline as
liquidated damages. Northern also sought a declaration from
the district court upholding Northern's withholding of
$320, 000 in payment from U.S. Pipeline as a credit for U.S.
Pipeline's change in the construction plan that resulted
in a cost savings.
Neb. 448] 2. Summary Judgment
to trial, the court granted Northern partial summary judgment
on the issue of whether U.S. Pipeline is entitled to indirect
or consequential damages. The district court found that U.S.
Pipeline admitted that it is not seeking damages for
"indirect or consequential damages." The district
court overruled Northern's motion for summary judgment on
the remaining issues.
Motions for Directed Verdict
trial was held pursuant to a jury waiver contained in the
parties' contract. At the close of U.S. Pipeline's
case. Northern moved for a directed verdict, asserting that
(1) U.S. Pipeline's damages were barred by the
consequential damages waiver and (2) there was no genuine
issue of fact on U.S. Pipeline's
misrepresentation/fraudulent concealment claims regarding
"geotechnical information." The court denied the
motion. Northern later renewed the motion at the close of all
the evidence, adding no further new grounds, and the court
again denied the motion.
following evidence was adduced during the parties' 2-week
Bidding and Northern's Original Project Plans
2013, Northern decided to replace or relocate approximately
29, 450 feet, or 5.58 miles, of its Marquette main line
(Marquette Replacement) and approximately 8, 000 feet, or
1.52 miles, of its Ishpeming branch line (Ishpeming
Relocation) (collectively the Project), both located in the
Upper Peninsula of Michigan.
designers prepared drawings for the Project. Northern's
construction drawings called for the installation of new
underground piping using open-cut installation and horizontal
directional drilling (HDD) techniques. Generally, [303 Neb.
449] underground pipeline is installed through either an
open-cut process or HDD. For an open-cut installation, a
trench is excavated and the pipe is placed in the bottom of
the trench and covered. An HDD, in contrast, is a steerable,
trenchless method of installing underground pipe in an arc
along a prescribed bore path by using a surface-launched
drilling rig. HDD drilling is more complicated and expensive
Northern's construction drawings called for six
HDD's-four locations along the Marquette Replacement
(including the "Highway 476/Ely Creek" crossing)
and two HDD's on the Ishpeming Relocation (including the
"Cliffs Road" crossing). In addition, each set of
Northern's drawings specified an arc radius of 525 feet
on the 12-inch-diameter pipeline and 600 feet on the
6-inch-diameter pipeline. A governmental permit was granted
for these specifications. The design arc radius or design
radius of curvature is the radius of directional changes
along the drill path. The arc radius is determined by several
factors, including the desired distance between entry and
exit points, the desired drill depth, direction changes for
the drill path, and how much the drill stem and installed
pipe can bend without being damaged.
March 2014, Northern opened the bid process for the Marquette
Replacement and Ishpeming Relocation. Northern issued notice
of a mandatory onsite, pre-bid meeting and route inspection
to be held on May 13 and 14, 2014. One of the purposes for
the route inspection was to walk the pipeline route to
provide bidders a better understanding of the site
conditions, project layout, and access issues. Three
prospective bidders and their subcontractors, along with
Northern representatives, attended the pre-bid meeting and
Pipeline sent Kris Osborn to represent U.S. Pipeline at the
meeting and route inspection. Osborn drove to the pipeline on
May 13, 2014, but he did not walk the route like other
bidders. The meeting and route inspection continued on May
14, but Osborn did not attend. U.S. Pipeline's
representative who created its bid for the Project confirmed
that he was informed [303 Neb. 450] that Osborn did not walk
the pipeline route with the other bidders and Northern's
used an online bid communication portal called Ariba to
receive and transmit bid information to the interested
bidders. Northern posted a summary of the meeting and route
inspection on Ariba. Northern also posted the bid drawings, a
form contract, the scope of work, questions and answers from
bidders, meeting and route inspection notices, and summaries
of meetings and inspections. U.S. Pipeline accessed the
information posted on Ariba.
the questions and answers posted on Ariba during the pre-bid
phase included a bidder's request that Northern
"provide geotechnical information associated with the
original 12" MIM10101 installation." Northern
responded by stating, "No geotechnical information
associated with the original 12 inch MIM10101 is
available." Broadly, geotechnical information is
information about the geology and the estimated amount of
rock in an area. This type of information provides insight as
to the type of blasting that may be required for a drilling
question posted on Ariba inquired:
Without any geotechnical information, it is difficult at best
to determine how much blasting, rock shield, or import
padding to include in the bid.
a. How many CY of ROW blasting does [Northern] want the
Contractor to include in the bid?
b. How many LF of ditch blasting does [Northern] want the
Contractor to include in the bid?
replied, "[Northern] cannot speculate on the quantity
and amount of blasting required for the [P]roject. The onsite
visit was designed to familiarize bidders with the site
conditions and bid accordingly."
connection with its proposed work on the Project, Northern
submitted "Resource Report No. 6" with the Federal
Energy Regulatory Commission (FERC), the commission in charge
of interstate pipeline construction and installation
projects. [303 Neb. 451] Compiled by an environmental
consultant, Resource Report No. 6 estimated that excavators
would encounter "approximately 3.77 miles" of
"shallow bedrock that may require blasting" along
the portion to be replaced on the Marquette main line.
Although Resource Report No. 6 was publicly available as part
of Northern's FERC filings, Northern did not post a copy
of Resource Report No. 6 to Ariba. The contract eventually
entered into with U.S. Pipeline, however, expressly advises
that "[e]xtensive rock structures occur throughout the
order for geotechnical information to be obtained, a
"geotechnical survey" or investigation must be
done. A "geotechnical survey" consists of taking
exploratory borings to collect soil samples for
classification and laboratory analysis. In creating Resource
Report No. 6, Northern did not take or analyze bore samples
from the Project site. Rather, the report discussed
"geological data," which is information that is
publicly available from various sources, including a national
resource bank of soil and rock information in the area.
Pipeline and two other companies placed bids on the Project.
Northern ultimately awarded the bid for both the Marquette
Replacement and Ishpeming Relocation to U.S. Pipeline. U.S.
Pipeline and Northern signed the contract at issue on July 24
and August 1, 2014, respectively.
the contract, U.S. Pipeline agreed to fabricate, test,
dewater, dry, and install approximately 29, 450 feet (5.58
miles) of 12-inch-diameter pipeline for the Marquette
Replacement and 8, 000 feet (1.52 miles) of 6-inch-diameter
pipeline for the Ishpeming Relocation. U.S. Pipeline and
Northern agreed on a lump-sum price of $15, 312, 050 for the
completion of the Project. Pursuant to the contract, the
substantial completion date for the Project was September 24,
2014. The parties expressly agreed that time was of the
contract for the Project also provided that liquidated
damages due to delayed completion of the Marquette [303 Neb.
452] Replacement were to be set at $11, 700 per day beyond
the substantial completion date, with a cap of $351, 000. The
Ishpeming Relocation had a similar liquidated damages
provision, but it did not become applicable.
parties agreed to a mutual waiver of indirect or
consequential damages under the contract. The waiver's
language defines consequential damages as
"INCLUDING BUT NOT LIMITED TO LOSS OF PROFIT, BUSINESS
INTERRUPTION, LOSS OF REVENUE, LOSS OF USE, LOSS OF CONTRACT,
LOSS OF THROUGHPUT, LOSS OF GOODWILL. INCREASED COST OF
WORKING OR LOSS OF BUSINESS OPPORTUNITY[.]"
contract also contained provisions related to the omission of
contractually required work or performance of additional work
not specified under the contract, referred to as "Extra
Work," under the contract:
[Northern] may omit work, or may require [U.S. Pipeline] to
perform additional work or furnish additional materials or
equipment, or the use thereof, in connection with the Work,
which are not included in this Agreement (hereinafter
referred to as "Extra Work"). Extra Work may be
occasioned by material changes in Plans and Specifications or
project lay out requiring additional work or materials of a
different nature, kind and cost from that contemplated at the
time of execution of this Agreement ....
All requests for Extra Work must be prepared by [U.S.
Pipeline] in the form attached as Exhibit "L" and
approved in writing in advance by the [Northern]
Representative or [Northern] Vice President of Operations.
Such requests shall describe the work to be done ...