794 F.Supp.3d 1093
E.D. Okla.2025Background
- Morse Electric, Inc. (MEI) was hired by Stearns, Conrad and Schmidt, Consulting Engineers, Inc. (SCS) to perform electrical construction for the Pine Bend Renewable Natural Gas Production Facility in Minnesota.
- The subcontract was a fixed price, lump sum contract with provisions for change orders, retainage, and a requirement that MEI perform the work diligently and continue work during disputes.
- Project drawings were periodically updated via bulletins; MEI was responsible for requesting change orders if updates impacted costs/schedule.
- Disputes arose over payment, scope changes, delays, and whether SCS or MEI breached their contractual obligations first; MEI walked off the job in February 2022, after submitting contested change orders and invoices.
- SCS then hired PCL Industrial Services, Inc. to complete the remaining electrical work; SCS counterclaimed for breach of contract.
- The court held a bench trial and ruled for SCS on all substantive claims, awarding it damages and attorney’s fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of Contract by SCS | SCS delayed, incorrectly handled change orders, failed to pay invoices, and hindered performance | MEI walked off job, failed to follow dispute provisions, SCS fulfilled duties; any delays or payment withholdings were justified | MEI first materially breached by abandoning the site; SCS performed under the contract |
| Right to Additional Payment (Change Orders) | MEI entitled to increased payment due to changes in scope/bulletins not clouded properly | MEI failed to timely request change orders for changes; MEI responsible for tracking and requesting adjustments | SCS did not materially breach by denying late change orders or failing to cloud drawings; MEI's claim denied |
| Minnesota Prompt Payment Act Violation | SCS failed to promptly pay for undisputed work after receiving owner payments | Invoice and changes were disputed, payments not due prior to SCS receiving funds, and non-payment was not a breach | SCS did not violate the MPPA; no payment was due for disputed invoices |
| Recovery of Damages by SCS | SCS not entitled or unreasonably claimed excessive completion costs by hiring PCL on time & materials basis | SCS reasonably hired PCL to finish abandoned work and calculated damages as contract allows | SCS entitled to recover $698,674 in reasonable excess completion costs |
Key Cases Cited
- Nelson v. Am. Fam. Mut. Ins. Co., 899 F.3d 475 (8th Cir. 2018) (sets forth elements of breach of contract under Minnesota law)
- Carlson Real Est. Co. v. Soltan, 549 N.W.2d 376 (Minn. Ct. App. 1996) (prior material breach precludes recovery for subsequent breaches)
- Blaine Econ. Dev. Auth. v. Royal Elec. Co., 520 N.W.2d 473 (Minn. Ct. App. 1994) (damages for contract default include reasonable cost of completion)
- Christenson v. Milde, 402 N.W.2d 610 (Minn. Ct. App. 1987) (damages should place non-breaching party as if contract performed)
- Zobel & Dahl Constr. v. Crotty, 356 N.W.2d 42 (Minn. 1984) (contract performance excused if hindered by other party)
- Grant v. Munch, 55 N.W. 902 (Minn. 1893) (time is of the essence clause interpreted strictly when expressly included)