A Pyrrhic victory? City prevails in playground lawsuit - Contract did not specify "how to pay"

Submitted by Adam Kaufman

December 18, 2014 2:00 p.m.

In 280 BC and 279 BC Greek King Pyrrhus of Epirus defeated the Romans at Heraclea and Asculum but his army sustained such casualties and staggering losses he is quoted as remarking “another such victory and I am undone.”

A “Pyrrhic victory” has come to mean a victory that is costly to the point of negating or outweighing the expected benefits.

A view of $20,000 worth of playground equipment located at Sunrise Park along Egan's Creek.

On December 16, a Circuit Court in the State of Oregon ruled in favor of the City of Fernandina Beach denying a claim that the City was required to pay approximately $20,000 to the Columbia Cascade Company of Oregon, a manufacturer of playground equipment. The City purchased equipment made by that company in the fall of 2011. The lawsuit was filed on October 30, 2012 alleging that the City violated its contract with Columbia Cascade by not directing payment for the purchase of that equipment to the company as was required by the agreement.

In making its ruling, the Circuit Court acknowledged that there was no real dispute about what it called “the essential, if discouraging, facts” presented in the case.

Columbia Cascade delivered playground equipment to the City. The City sent a check for $19,896.35 for the purchase of that equipment to Site Creations, LLC, a Neptune Beach firm then representing Columbia Cascade in this area of Florida. Site Creations did not convey the funds to Columbia Cascade. Columbia Cascade then sued the City to recover payment for the cost of the equipment.

The City’s insurance carrier, after review, concluded that there was no coverage for the claim and the lawsuit and further determined that it was not obligated to provide legal defense on behalf of the City.

The City and its taxpayers will bear the costs of defense of this litigation. The costs, assuming no appeal by Columbia Cascade of the Circuit Court ruling, are now between $45,000 and $50,000 according to estimates provided to the Observer by the City.

Columbia Cascade contends that the City’s obligation pursuant to its contract was to pay Columbia Cascade and that the City breached the contract. Columbia Cascade also alleges that it had submitted an invoice for payment prior to the time payment was made to Site Creations.

The City argued that its contract was with Site Creations, LLC. Site Creations and its principal owner are also named defendants in the lawsuit but the Circuit Court’s order only addresses the City and Columbia Cascade. Site Creations apparently has no assets.

In reaching its determination that it was “not unreasonable” for the City to conclude “that paying Site Creations was acceptable” pursuant to the contract and the Oregon law of “agency,” the Circuit Court navigated its way through a series of documents representing the negotiations for the equipment purchase and those reflecting the parties’ inter-relationships.

A portion of the cost included a playground rules sign (top) and attached interactive equipment (bottom).

The Circuit Court found that the “relevant documents refute the City’s contention” that the contract for the purchase of playground equipment was with Site Creations. The Court found that the negotiations for the playground equipment and the “deal” that resulted, by its terms, was between the City and Columbia Cascade.

The Circuit Court also determined that the “contractor/vendor” to whom payment “shall be made” under the City’s standard “terms and conditions” that are incorporated in the “Purchase Order” for the playground equipment is Columbia Cascade.

The Circuit Court observed, however, that while the contract required the City to pay Columbia Cascade, “it didn’t specify how to pay for it.”

The contract, said the Circuit Court, did not specify that the payment had to be made directly to Columbia Cascade or that it could not be made to Columbia Cascade “indirectly, through its agent, Site Creations.” The City had negotiated modifications of the terms of the Confirmation of its Purchase Order through Site Creations. That Confirmation Order, noted the Circuit Court, acknowledged that the order was placed through Columbia Cascade’s “regional representative Site Creations, LLC.”

The Circuit Court also noted that Columbia Cascade’s agreement with Site Creations provides that Site Creations does not have any authority to contract on behalf of Columbia Cascade, but it does not contain a similar disclaimer of authority to receive payments on Columbia Cascade’s behalf.

Under Oregon law, said the Court, persons dealing with a known agent have a right to assume, in the absence of information to the contrary, that “the agency is general.” The Court concluded “that Site Creations had apparent, if not actual, authority to accept payments.” Payment to Site Creations was thus payment to Columbia Cascade, said the Circuit Court, and there was no breach of contract by the City.

In May 2014, City Attorney Tammi Bach when asked about this proceeding and why the City would incur legal expenses that exceed the amount in question advised that the decision to pursue legal action as opposed to settling a case is made by the City Commission.

There is no indication as to whether or not Columbia Cascade will appeal this decision.

Adam Kaufman is a semi-retired mediator and attorney. A graduate of Northwestern University School of Law, he was born and raised in the Bronx, NY. and attended NYC public schools, including Stuyvesant High School. He still serves on the American Arbitration Association Labor Panel. From 1994 - 2005, he was Regional Director for the New York State Public Employment Relations Board.