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Luck Bros., Inc. v. Agency of Transportation

Supreme Court of Vermont

June 13, 2014

Luck Brothers, Inc.
Agency of Transportation

Editorial Note:

This Opinion is subject to motion for reargument or formal revision before publication. See V.R.A.P. 40

On Appeal from Superior Court, Washington Unit, Civil Division. Robert R. Bent, J.

David Bond of Fead Construction Law, PLC, South Burlington, for Plaintiff-Appellant.

William H. Sorrell, Attorney General, and Toni Hamburg Clithero, Assistant Attorney General, Montpelier, for Defendant-Appellee.

Present: Reiber, C.J., Dooley, Skoglund, Robinson and Crawford, JJ.


Page 998

Reiber, C.J.

[¶1] Plaintiff Luck Brothers, Inc., a construction company that rebuilt a portion of

Page 999

Main Street in the City of Barre pursuant to a contract with defendant Vermont Agency of Transportation, appeals from the superior court's decision granting the Agency's motion to dismiss Luck Brothers' lawsuit on grounds that the company failed to exhaust its administrative remedies before pursuing a remedy in the superior court. In its complaint, Luck Brothers alleged counts sounding in breach of contract and negligent misrepresentation, among others, but also sought a declaratory ruling that it had no obligation to exhaust administrative remedies because the Agency's claims process did not comport with the requirements of the Administrative Procedure Act or due process. We affirm the superior court's decision, but clarify the standard of review in appeals to the Vermont Transportation Board from Agency determinations under the claims process for construction contracts.

[¶2] The following facts are undisputed. In 2011, the Agency advertised for bids to reconstruct a half-mile section of North Main Street in downtown Barre. Luck Brothers submitted the low bid of $10,615,573 and was awarded the contract for the project, which it commenced in the summer of 2011. In June 2012, Luck Brothers submitted a claim to the Agency seeking approximately $855,000 in additional compensation beyond the bid amount based on alleged differing site conditions from those assumed in the contract. One year later, Luck Brothers submitted a supplemental claim, making the total claim approximately $1.1 million.

[¶3] The claim was submitted pursuant to the parties' contract, which incorporated, among other things, the Agency's 2006 Standard Specifications for the Construction Book,, and the General Special Provisions for those Specifications, dated December 7, 2010, The Specifications included provisions mandating a dispute resolution process for resolving claims regarding federal-aid highway construction contracts administered by the Agency, such as the instant one.

[¶4] Under these provisions, claims for additional compensation must be submitted first to the Agency's Construction Engineer, and in the event the claim is denied, to the Agency's Director of Program Development. Specifications, § 105.20. If the Director denies the claim, the contractor may appeal to the statutorily created Transportation Board. See 19 V.S.A. § 3 (" A transportation board is formed to be attached to the agency of transportation." ).

[¶5] On September 7, 2012, less than three months after submitting its $855,000 claim, Luck Brothers filed a complaint against the Agency in superior court seeking, among other things, declaratory relief and compensatory damages. Substantively, the complaint alleged breach of contract, negligent misrepresentation, and breach of an implied warranty on the part of the Agency, and sought penalties under the Prompt Pay Act. In support of these claims, Luck Brothers alleged that it incurred significant, unexpected additional costs as the direct result of the Agency's failure to inform bidders of material information that it was aware of concerning subsurface water conditions and deteriorating sewer lines.

[¶6] Procedurally, the complaint sought a declaratory ruling that Luck Brothers had no obligation to exhaust its administrative remedies with respect to its claims against the Agency because those remedies were inadequate and did not comport with the requirements of due process. In support of this claim, Luck Brothers stated that

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the Transportation Board was empowered to provide only appellate, as opposed to original, jurisdiction over its contract dispute, and that neither the Legislature through the enabling statute nor the Agency through rulemaking had provided a valid or enforceable administrative proceeding for initially adjudicating contract disputes. The complaint stated that the provisions in the Specifications governing contract disputes were " laden with ambiguity," established unreasonably short deadlines for contractors to make claims, and imposed unreasonably burdensome requirements relating to such claims.

[¶7] The Agency moved to dismiss the complaint on grounds of sovereign immunity and failure to exhaust administrative remedies. In an April 5, 2013 decision, the superior court declined to address the Agency's sovereign immunity argument, but granted its motion to dismiss based on Luck Brothers' failure to exhaust its administrative remedies. ...

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