Facilities Cost Mgmt. Group v. Otoe Cty. Sch. Dist.
291 Neb. 642
| Neb. | 2015Background
- FCMG (Architect) contracted with Otoe County School District 66-0111 (District) to provide architectural, owner’s representative, and project management services for three school projects; contract based on AIA form but contained custom sections 11.2 and 12.7.
- FCMG’s proposal and Q&A (exhibits 72 and 19) discussed lump-sum fees and guaranteed maximum price (GMP) options; no document titled "Architect’s Response to the District’s Request for Proposal" was attached to the final contract.
- Disputes arose when the District stopped paying FCMG invoices in May 2009 after project costs exceeded the budget by about $2 million; FCMG sued for breach seeking roughly $2,016,748.
- Parties cross-moved for partial summary judgment on whether sections 11.2 and 12.7 were ambiguous and whether a GMP was incorporated into the contract; the district court held both provisions unambiguous and granted FCMG’s motion.
- At trial, the jury returned a verdict for FCMG (~$1.97M). On appeal, Nebraska Supreme Court held section 12.7 is unambiguous but section 11.2 is ambiguous and that giving Jury Instruction No. 2 (stating the contract was not ambiguous) was prejudicial error.
Issues
| Issue | Plaintiff's Argument (FCMG) | Defendant's Argument (District) | Held |
|---|---|---|---|
| Whether §12.7 incorporated precontract materials (exhibits) or created a GMP | §12.7 and proposal show intent to incorporate responses; supports GMP | §12.7 is only "for general reference" and does not incorporate exhibits; no written GMP in agreement | §12.7 not ambiguous; does not incorporate exhibits or create a GMP |
| Whether §11.2 ("scope of work" / lump sum increases) is ambiguous | §11.2 clearly permits proportional fee increases based on scope changes | §11.2 is ambiguous as to how "scope of work" is measured (sq ft vs other items) | §11.2 is ambiguous; meaning is a question for the factfinder |
| Use of extrinsic evidence/course of dealing to resolve ambiguity | Course of dealing (payments, invoicing method) shows parties’ intent and resolves ambiguity | If contract is unambiguous, extrinsic evidence is not allowed; District argued ambiguity | Court: cannot use extrinsic evidence to render an unambiguous contract; but here §11.2 ambiguous so parol evidence should have been allowed |
| Jury instruction stating contract was not ambiguous (Instruction No. 2) | Instruction accurate per district court’s prior summary ruling | Instruction improper if any part of contract ambiguous; prejudicial if it misled jury | Instruction No. 2 was prejudicial error because §11.2 was ambiguous; new trial required |
Key Cases Cited
- Neun v. Ewing, 290 Neb. 963 (standard for affirming summary judgment)
- David Fiala, Ltd. v. Harrison, 290 Neb. 418 (meaning and ambiguity of contract are questions of law)
- Warner v. Simmons, 288 Neb. 472 (review of jury instruction correctness is de novo)
- Davenport Ltd. Partnership v. 75th & Dodge I, L.P., 279 Neb. 615 (parol evidence allowed when contract is ambiguous)
- Gary’s Implement v. Bridgeport Tractor Parts, 270 Neb. 286 (extrinsic evidence not allowed to explain an unambiguous contract)
- Anderzhon/Architects v. 57 Oxbow II Partnership, 250 Neb. 768 (no implied budget limitation absent a written agreement)
- Baker’s Supermarkets v. Feldman, 243 Neb. 684 (incorporation by reference language analyzed)
- Bedore v. Ranch Oil Co., 282 Neb. 553 (court cannot rewrite contracts)
- Spanish Oaks v. Hy-Vee, 265 Neb. 133 (intention of parties must be determined from unambiguous contract)