ITT Water & Wastewater USA, Inc. v. L. D’Agostini & Sons, Inc., 2016 Mich. App. LEXIS 579 (March 17, 2016)

This action arises out of a contract dispute between plaintiff, ITT Water & Wastewater USA, Inc. (“ITT”), and defendant, L. D’Agostini & Sons, Inc./Lakeshore Engineering Services, Inc. Joint Venture (“D’Agostini”), related to ITT’s supply of eight water pumps to D’Agostini on a project to construct a sanitary and storm water treatment and pumping station. D’Agostini filed a counterclaim against ITT, alleging that ITT’s late pump delivery delayed the project by 103 days. The trial court granted ITT’s motion for partial summary disposition and ruled that D’Agostini could not rely upon the Eichleay formula for determining its alleged home office overhead damages. The parties then dismissed, without prejudice, the remaining claims and D’Agostini appealed.

On appeal, the court first determined whether D’Agostini was entitled to recover home office overhead pursuant to the terms of the parties’ contract. D’Agostini contended that the contract prohibited ITT from recovering home office overhead damages, but not the reverse. It argued that in the absence of such prohibition applicable to D’Agostini, it could recover home office overhead from ITT. The court disagreed, refusing to read into the parties’ contract a term permitting D’Agostini to recover home office overhead damages from ITT.

D’Agostini also argued that the terms of the prime contract between it and the owner were incorporated into the parties’ contract and the prime contract permitted D’Agostini to recover home office overhead from ITT. The court disagreed for two reasons. First, the relevant portions of the prime contract were not attached to the motion filed with the trial court and were only attached to D’Agostini’s motion for reconsideration. Therefore, the evidence was not properly before the trial court or the appellate court. Second, even considering the terms of the prime contract, the court concluded that it did not give D’Agostini the right to recover home office overhead from ITT. The court explained that the language at issue gave D’Agostini the right to recover home office overhead from the owner only “if an extension of time is negotiated between” D’Agostini and the owner. Thus, the court concluded that the provision allowed D’Agostini to recover home office overhead from the owner, but not from ITT or any other subcontractor or supplier.

Finally, even assuming D’Agostini could recover home office overhead, the court considered whether it presented any evidence of increased home office overhead caused by the alleged delays. The court concluded that, despite offering evidence that ITT’s late pump deliveries delayed the project, D’Agostini failed to offer any evidence that the alleged delays caused it to incur additional home office overhead expenses. The court explained that D’Agostini “attempted to use the Eichleay formula as a means of presuming that it experienced increased home office expenses . . . without proof that such expenses actually occurred.” While recognizing that damage estimates, such as the Eichleay formula, may be appropriate in certain cases, the court explained that in this case, where D’Agostini failed to establish any evidence of home office overhead damages, it was barred from seeking recovery. Because there was no evidence that it actually experienced any increase in its home office overhead as a result of ITT’s late pump deliveries, D’Agostini could not establish it was entitled to home office overhead damages, whether estimated by the Eichleay formula or otherwise. Thus, the court affirmed the trial court’s order granting ITT partial summary disposition on D’Agostini’s home office overhead claim.

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