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Bill Darrah Builders, Inc. v. Hall at Makena Place, LLC

United States District Court, D. Hawaii

January 31, 2018

HALL AT MAKENA PLACE, LLC, et al. Defendants.


          J. Michael Seabright, Chief United States District Judge


         Defendants Hall at Makena Place, LLC, and Craig and Kathryn Hall (collectively, “Hall” or “the Halls”) move for summary judgment on all Counts against them in Plaintiff Bill Darrah Builders, Inc.'s, (“BDB”) Complaint, and they move for partial summary judgment on their First Amended Counterclaim (“FACC”) against Bill Darrah (“Darrah”) and BDB. ECF No. 112. Darrah and BDB move for summary judgment on all Counts asserted in the FACC. ECF No. 108. Because the court finds disputed issues of material fact, Hall's Motion is DENIED. BDB and Darrah's Motion is GRANTED as to Count IV of the FACC, deceptive trade practices under Hawaii Revised Statutes (“HRS”) § 481(A), but it is DENIED as to all other Counts.


         A. Factual Background

         Defendant Hall at Makena Place, LLC, (“Hall Company”) owns a property on Maui that was the subject of a renovation project (“the Project”). FACC ¶ 7. Through Matt Mumford (“Mumford”), Defendants Kathryn and Craig Hall's representative, Hall Company entered into a “Cost Plus Contract” (the “Contract”) with BDB for the Project. Mumford Decl. ¶ 2, ECF No. 113-2; ECF No. 113-14. According to Darrah, when he and Mumford “began discussing the renovation, only approximately four pages of rough architectural plans and some structural drawings had been completed for use by prospective contractors. The accompanying project description was limited to high-level bullet points by area with no specific materials specified.” Darrah Decl. ¶ 7, ECF No. 113-5. Based on these drawings, Darrah estimated the cost of the Project at approximately 3.1 million dollars. Id. Ex 5, ECF No. 113-5 at 28. This “Estimated Budget, ” as well as the preliminary construction and structural drawings, were incorporated into the Contract, and the Contract provides that these “Contract Documents” “shall become part of this Contract and shall include all labor, materials, equipment and supplies for the [P]roject.” Contract §§ 1(C), 4(D); ECF No. 113-15.

         But the Contact clearly contemplates that the original plans would be augmented. The Contract refers to “additional work orders that are not included in the original Scope of Work, ” and it states that “[w]ork not expressly shown or written on the Construction Drawings” may be required. Id. §§ 3(A)(4), 4(D). It also acknowledges that “[a]dditional work may require additional cost and may not be included in the Estimated Budget.” Id. § 4(D). And it provides that the Estimated Budget shall not “limit or otherwise modify or be construed to limit or modify Owner's obligation to pay all of the costs of the work.”[1] Id. § 3(E)(8).

         The Contract includes the following provision regarding “Changes or Additional Work.”

The Owner may request changes to the work or additional work. Any additions, deletions or other changes to the written Scope of Work, Construction Drawings, the work, or the terms of this Contract shall be made by written change orders signed by both the Owner and Contractor (“Change Order”). Contractor shall not be obligated to perform such change until a written Change Order on Contractor's then current standard form, describing the change and any change in the Estimated Budget (defined in Section 3.E.8) and in the Final Completion date relating to that change, has been signed by both Owner and Contractor. However, Contractor may elect at its' (sic) option, to perform a change that has been verbally approved or requested by Owner, prior to a written Change Order being signed by Owner and Contractor for that change, in order to prevent delay or increased costs or fees, and if Contractor so performs such change, Owner agrees to sign a Change Order for that change, describing that change and adjusting the Estimated Budget and the Final Completion date. Contractor will use a rate of 15% of all net increases in the total cost of the work resulting from each Change Order that exceeds the estimated budget . . . . Payments for Change Orders are due and payable as the cost of the work is incurred in accordance with the payment schedule in Section 3.I.3.

Id. § 3(D).

         The Contract also includes provisions regarding the allocation of costs.

         E. Costs to be Reimbursed or Paid Directly by Owner

         The term “cost of the work” shall include costs set forth below incurred in the proper performance of the Contractor's work and paid by the Contractor or directly by Owner:

1. Wages paid for labor, including overtime for employees of the Contractor in the performance of the work, State Unemployment Taxes, Federal Unemployment Taxes, Social Security, medical and other benefits paid to employees. The Wage Rate Schedule is as follows:


rate at

$48 per hour


rate at

$62 per hour

Finish Carpenter

rate at

$69 per hour

Lead Carpenter

rate at

$75 per hour


rate at

$85 per hour

Project Manager

rate at

$85 per hour

Bill Darrah

rate at

$150 per hour

         F. Costs not to be Reimbursed

         The cost of the work shall not separately include:

1. Any general insurance costs and state and federal taxes of Contractor (e.g., workers' compensation, comprehensive general liability insurance, auto insurance, health insurance, or labor burden expenses such as state and federal employer taxes, etc.). Contractor has factored these costs into the Wage Rate Schedule for Contractor's employees . . . above, or these costs will be paid out of the Contractor's Fee.

Contract § 3.

         In addition to the “costs to be reimbursed to the Contractor, ” the Contract requires payment of a “fixed fee equal to $325, 000” as well as a $75, 000 bonus for timely completion of the Project. Id. § 3(A). And it provides that “[i]f the Total Cost of the Work (including the fixed fee and bonus) exceeds $3, 100, 000 then the Contractor will be paid an additional Contractors fee of 15% on all costs of the work that exceed $3, 100, 000.” Id. § 3(A)(3). Regarding the payment schedule, the Contract requires initial deposits and biweekly payments based on invoices submitted by BDB. Id. § 3(I)(3)(a-b). Such payments are to include a “pro rata amount of the Contractor's Fee” and are to be paid within ten days of receipt. Id.

         BDB began work on the Project in March 2014. Mumford Decl. ¶ 21, ECF No. 113-2. By July, the parties were at odds over costs, which had increased to a new estimate of over five million dollars. Id. ¶¶ 32-35. Hall appears to concede that some of the additional costs were warranted based on unforeseen problems with the existing structure and systems as well as design changes and/or finish selections, and the record includes twelve “change order proposals” that are signed by both Darrah and Mumford. ECF No. 113-19, -21, -25 to 31. The exact amount of increased charges Hall believes is legitimate, however, is unclear.

         Hall attributes most of the increased costs to mismanagement on the part of BDB, including estimating errors, improper cost control, and excessive or improper wage and overtime charges. See Mumford Decl. ¶¶ 25, 32-33, 37, 43, 49; Mumford Letter, Aug. 25, 2014, ECF No. 113-42; Hall Mot. at 17-18. BDB contends that the increased costs were due to changes in the scope of work, continual design changes, and high-end material and finish choices. Opp. at 104, ECF No. 148; Darrah Decl. ¶¶ 11-15. BDB also contends that it understood Hall's highest priority was meeting the contract ...

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