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Date: 06-01-2007

Case Style: Rambo Associates v. South Tama County

Case Number: 06-1695

Judge: Arnold

Court: United States Court of Appeals for the Eighth Circuit on appeal from the Northern District of Iowa (Linn County)

Plaintiff's Attorney: Unknown

Defendant's Attorney: Unknown

Description:

Rambo Associates, Inc., brought an action for breach of contract and unjust enrichment against the South Tama County Community School District. Following a bench trial, the district court entered a $2,500 judgment in favor of Rambo on the breach of contract action and entered judgment for South Tama on the unjust enrichment claim. Rambo Assocs., Inc. v. South Tama County Cmty. Sch. Dist., 414 F. Supp. 2d 887 (N.D. Iowa 2006). Rambo appeals the judgment. We affirm the judgment with respect to the contract claim but vacate the judgment with respect to the unjust enrichment claim and remand for further proceedings regarding that claim.

I.

Rambo is an architectural firm and an educational-facilities consultant based in Nebraska. South Tama is a school district in Eastern Iowa. In 1995, South Tama was considering building a new school; it had several older buildings, all built before 1969. South Tama's superintendent, Dr. Clarence Lippert, contacted architectural firms to ask whether they were interested in conducting a study to determine what would be necessary to put South Tama's existing buildings in condition to provide its students with a quality education for the next thirty to fifty years and to determine what new construction might be needed. South Tama identified Rambo as a candidate for conducting the study, and Rambo later made a presentation to the board of South Tama about Rambo's services and its business model. The district court found that Rambo differed from traditional architectural firms because it had many former educators and school administrators on its staff and had "tremendous experience with the funding for public school projects and in the public relations necessary to be successful in a local school bond election." Id. at 890.

In 1996, after Rambo sent South Tama a proposed agreement and the parties agreed on some modifications to its terms, Rambo and South Tama entered into a contract for Rambo to do the study. South Tama maintains that the parties agreed only that Rambo would prepare the study and assist the school district in passing a bond issue to fund a new school building that was included in the study. Rambo, however, asserts that the contract obligated South Tama either to use Rambo's services until the completion of any project in the study that South Tama implemented or to compensate Rambo for the reasonable value of all of the services that it provided.

Initially, we note that the agreement here is as far from a model of clarity as any that we can recall ever having reviewed. The contract consisted of a first page titled "standard agreement between owner and educational facilities consultant" and two attachments. The first page included general terms, referred to the attachments, and was signed by the parties. Attachment A described the work included in the study and the fees for that work. Attachment B was a standard form contract between an architect and an owner, which the parties had modified.

The contract began with the following agreement:

The Owner/District [South Tama] and Educational Facilities Consultant [Rambo] agree to the scope of consultation work set forth below and in Attachment A, and subsequent attachments jointly approved addressing school facilities ... incorporated in initial and/or subsequent phases of Educational Facilities Consultation. [Rambo], at the request of [South Tama], shall continue to provide services through further planning and implementation phases of facilities projects ... addressed in initial consultation phases."

The parties stated above their signatures that they "entered into [the agreement] ... with endorsement of the work outlined in Attachment A and authorization to proceed."

Attachment A, after explaining what was included in the study (Phase One), provided that Rambo would receive no more than $5,900 in fees and $4,000 in expenses for Phase One; the attachment also referred to the $5,900 fee "as a retainer for [Rambo's] work as outlined through presentation of the study to the board."

On the first page of the agreement, the parties referred to Attachment B:

[Rambo's] services shall, at the request of [South Tama], specifically extend curriculum-based Master Planning completely through the funding or Bond issue period, Educational Programming, Schematic Design and Design Development Phases, and Project Management and Cost Management Systems utilized. Definitions of these services and other terms and conditions integral to this Agreement are provided in Attachment B. Subsequent phases may be authorized by [South Tama] for addressed projects or related portions or variations thereof or [sic] subject to the terms of [Attachment B] unless otherwise mutually agreed in writing.

Attachment B, which referred to Rambo as the "Architect," rather than the "Educational Facilities Consultant," stated that it was an agreement between the parties "[f]or the following project":

School facilities, including outdoor and other support facilities, through all Educational Consultation, Planning, and Construction Phases addressed within this Agreement.

This Agreement applies to work on facilities projects or portions thereof addressed in Educational Facilities Consultation and Master Planning by Rambo.

Attachment B did not use the term "Phase One" but described the "scope of [Rambo's] basic services" during certain phases: During the "schematic design" and "design development phase[s]," Rambo would provide "planning and design services", and during the "construction documents," bidding or negotiation," and "construction phase[s]," Rambo would provide "technical architectural services." Attach. B, Art. 2. "Additional services" were also listed in Attachment B, and the parties inserted the words "See Attachment 'A' " after three of the additional services: "analyses of the owner's needs and programming" the project's requirements, "financial feasibility or special studies," and "planning surveys, site evaluations or comparative studies of prospective sites," §§ 3.4.1, 3.4.2, 3.4.3, which Rambo's president, Merle Rambo, testified were services that Rambo agreed to perform as part of Phase One. Attachment B also referred to Rambo's "assistance during fund preparation." The last page of the attachment was a fee schedule of "recommended compensation" for architectural services. After stating on the signature page of the agreement that South Tama "may authorize" "[s]ubsequent phases," the parties agreed that "[f]or services to be completed by [Rambo], fees shall be negotiated as a lump sum or other basis appropriate to each project, with total compensation not to exceed" those in the fee schedule in Attachment B.

After the contract was signed in 1996, Rambo began working with South Tama on Phase One and on an effort to get a bond issue passed to finance building the new school that was included in Rambo's study. In 1999, however, the voters rejected the bond issue. Before the election, South Tama paid Rambo $9,875.88, a sum that was calculated based on fees and expenses for Phase One set out in Attachment A.

For most of the next three years, the parties had little contact with each other. In 2002, Dr. Lippert retired, and South Tama hired a new superintendent, Larry Molacek, in July of that year. Shortly afterward, a representative of Rambo contacted Mr. Molacek seeking to work with South Tama on building the proposed school. Rambo then did extensive work on developing a financing plan for the school and assisting South Tama with another attempt to pass a bond issue. The unsuccessful 1999 bond issue was to be financed solely by increased property taxes; this time, with Rambo's assistance, the school district decided to seek funding for the necessary bonds through a sales tax increase and a "physical plant and equipment levy" (PPEL) funded, at least in part, by an "income surtax," see Iowa Code Ann. § 298.2.

Mr. Molacek first asked Rambo to prepare information to use to get support from the school board; Rambo prepared, inter alia, a long-term tax management and facilities master plan that included charts illustrating how the PPEL and sales-tax funding would be blended. Mr. Rambo also provided a sample budget for building the $8.995 million school, which listed the cost of Rambo's services at $599,000. At Mr. Molacek's request, Mr. Rambo led a finance workshop for the board in the summer of 2003. According to the minutes of an October board meeting, Mr. Rambo presented "an overview of a tax management plan" related to construction projects that the district was contemplating; Mr. Rambo described this meeting as an "opening statement" to tell the public and press about how funding could be obtained for a new school. Mr. Rambo testified that South Tama decided in November, 2003, to present the matter to the voters. In the election campaign that followed, Rambo, in particular employee Kelli O'Brien, worked closely with the school district. Rambo's work for South Tama during the 2002-2004 period included other services, such as calculating the cost of altering the planned school building (designed to house pre-kindergarten through fifth-grade) so that grades six through eight could be added in the future.

In February, 2004, the increased sales tax was presented in a county-wide election, and the measure passed. But the next month, the school district's voters narrowly defeated the bond issue, without which South Tama could not use the funds passed in February to construct the school. After this latter election, Ms. O'Brien began working on an effort to return the bond issue to the voters in October. But South Tama's board decided not to continue working with Rambo and was negotiating an agreement with another architect, and with a construction manager as well. South Tama informed Rambo of the change in July, 2004. The district court found that after the March, 2004, election, South Tama was "left in the unusual position of having a funding mechanism for payment of bonds but no ability to issue bonds," but that the voters "[u]ltimately ... understood that irony" and passed the bond issue in October. Rambo, 414 F. Supp. 2d at 895. By the time of trial, South Tama was in the midst of building a school designed by the new architect for pre-kindergarten through fifth grade.

When Rambo first learned that another company might be hired, a Rambo representative told South Tama that it would have to pay $80,000 to terminate Rambo's services. The representative later indicated that South Tama would have to pay between $130,000 and $135,000 for termination; he then raised the figure again, this time to $200,000. When the parties were unable to resolve the dispute, Rambo initiated this lawsuit. South Tama moved for summary judgment, contending that Rambo was entitled to $9,875.88 in compensation and had been paid in full. Applying Iowa law, the district court denied the motion, concluding that there "was an ambiguity in the contract as to the scope of work initially authorized and how requests for additional services were to be authorized." Id. at 890.

After a bench trial, the court again found an ambiguity in the contract "as to the scope of work authorized," id. at 893; it concluded, however, based on extrinsic evidence, that South Tama authorized "only the Phase One work and services" in the agreement and "would not agree to more," id. at 898-99. It further found that South Tama "never intended to authorize" Rambo to provide other services except for assisting the school district in passing a bond issue, for which Rambo's fees were limited to $2,500 under Attachment B, § 12.2.2. Id. at 899.

The parties agree that the contract authorized Rambo to complete the study and that South Tama authorized Rambo's assistance in obtaining funding. But the parties disagree both as to how much Rambo should be compensated for its work and whether South Tama authorized Rambo to perform other services for which it should be paid. Rambo claims that it is entitled to more than $200,000 in additional compensation.

Outcome: Since the district court did not make a finding on how much these services were worth to South Tama, or, indeed, what exactly those services were, we vacate the judgment on the quantum meruit claim and remand the claim to the district court for reconsideration. The district court should not take new evidence: Rambo has had its day in court and its case must rise and fall on the present record. The district court, keeping in mind that Rambo bears the burden of proof, should examine the record to determine what services Rambo has rendered that can give rise to a quantum meruit claim and how much, if anything, Rambo is entitled to recover. Of course, Rambo cannot recover for any services that it rendered as a "public service" under Attachment A of the contract. We will retain jurisdiction over the case and await the district court's further determination.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: None



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