Robert R. Schroeder Construction, Inc. v. Minnesota Department of Transportation v. W. ...

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A23-0228

Robert R. Schroeder Construction, Inc.,
Respondent,

vs.

Minnesota Department of Transportation,
Respondent,

vs.

W. Gohman Construction Co. d/b/a Artistic Stone and Concrete,
Appellant.

Filed November 20, 2023
Affirmed in part, reversed in part, and remanded
Larkin, Judge

Chippewa County District Court
File No. 12-CV-21-314

Nathan R. Sellers, Fabyanski, Westra, Hart & Thomson, PA, Minneapolis, Minnesota
(for respondent Schroeder Construction)

Keith Ellison, Attorney General, Erik M. Johnson, Assistant Attorney General, St. Paul,
Minnesota (for respondent department)

Gordon H. Hansmeier, Matthew W. Moehrle, Rajkowski Hansmeier Ltd., St. Cloud,
Minnesota (for appellant)

Considered and decided by Larkin, Presiding Judge; Wheelock, Judge; and Smith,

John, Judge.


Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.
 NONPRECEDENTIAL OPINION

LARKIN, Judge

This appeal stems from the summary disposition of a general contractor’s

indemnification claim against appellant subcontractor, which had been assigned to the

department of transportation, and subcontractor’s counter claim against the general

contractor. Subcontractor challenges the district court’s approval of a settlement

agreement assigning the general contractor’s indemnification claim to the department of

transportation, the district court’s grant of summary judgment to respondent department of

transportation on the assigned claim, and the district court’s denial of subcontractor’s

request for summary judgment on its counterclaim against the general contractor. We

affirm in part, reverse in part, and remand.

FACTS

This appeal stems from a dispute regarding indemnity claims for monetary

deductions and liquidated damages resulting from failure to meet contractual construction

deadlines. The relevant undisputed facts are as follows.

Respondent Minnesota Department of Transportation (MnDOT) entered into a

contract (the general contract) with respondent Robert R. Schroeder Construction Inc.

(contractor) for a project to restore a historic bridge on a state highway, for a fixed price of

$7,767,894.06.1 The general contract incorporated Standard Specifications for

Construction, 2018 Edition (MnDOT specifications). The general contract authorized

1
Contractor did not submit briefing in this appeal.

2
monetary deductions of $2,500 for each day it took contractor to achieve interim

completion after the project’s interim-completion date. The interim-completion date was

the date that the road would open to traffic. The general contract also authorized liquidated

damages of $3,000 for each day it took contractor to achieve actual completion after the

project’s final-completion date, as well as the deduction of those damages from payments

due to contractor. The final-completion date was the date that all the work on the project

would be completed.

Contractor and appellant W. Gohman Construction Co. (subcontractor) entered into

a subcontract (the subcontract) for subcontractor to complete historic stone riprap2 work

on lands adjacent to both ends of the bridge for a price of $2,965,370. The subcontract

provided that subcontractor was bound by the terms of the general contract and was

required to comply with all provisions of the general contract and to assume toward

contractor all obligations and responsibilities of contractor under the general contract. The

subcontract contained an indemnification provision that required subcontractor to

indemnify contractor for any and all losses or damage caused by subcontractor’s failure to

carry out the provisions of the subcontract.

The parties operated under several construction schedules, all with different

timelines. The original final-completion date under the general contract was November

16, 2019. That date was pushed into 2020 as the result of high-water levels that made work

2
According to subcontractor, “[r]iprap is rock put in place to protect shoreline structures
from erosion.”

3
on some parts of the bridge futile. MnDOT agreed to provide an extension of the

final-completion date based on that delay.

Contractor sent subcontractor a schedule directing subcontractor to begin its work

replacing the riprap by May 27, 2020, to do so concurrently on both sides of the bridge,

and to complete its work within 90 days. Contractor later adjusted subcontractor’s start

date to May 20, 2020, with a completion date of August 18, 2020.

Subcontractor did not start work in May 2020 as directed. Instead, subcontractor

began replacing the riprap on July 13, 2020. On July 30, August 6, and August 27 of 2020,

contractor communicated to subcontractor its dissatisfaction with subcontractor’s untimely

work and insufficient manpower at the job site. In the last communication, contractor

stated that it would “consider passing on LQD’s”3 if subcontractor did not comply with

contractor’s request for increased “manpower and equipment to work both sides of the

river.” Subcontractor responded that it could complete the riprap work on the west and

east sides of the bridge in October 2020.

In October 2020, contractor began withholding payments from subcontractor based

on subcontractor’s failure to comply with requests to increase efforts to finish its work on

the project. Subcontractor did not finish installing the riprap in 2020.

In 2021, the project delays soured the relationship between MnDOT and contractor.

Negotiations regarding a time extension of the final-completion date ceased, and MnDOT

3
We understand “LQD’s” to be a reference to liquidated damages, which is consistent with
the parties’ arguments on appeal.

4
eventually withheld payments to contractor based on the delay. Contractor, in turn,

withheld $665,262 from its payments to subcontractor.

In June of 2021, subcontractor was still attempting to finish the riprap installation.

Several relevant events occurred around this time. First, subcontractor notified contractor

that it had performed five additional weeks of work that were not contemplated in the

general contract and subcontract as a result of specifications required by MnDOT and

MnDOT’s historical consultant, Gemini Research. Second, contractor sued MnDOT for

breach of contract, challenging MnDOT’s withholding of payments based on delay.

Contractor alleged that MnDOT refused to grant contractor “reasonable time extensions

for delays . . . which were beyond [contractor’s] reasonable control.” Third, MnDOT

counterclaimed against contractor for liquidated damages and monetary deductions under

the general contract. And fourth, contractor brought a third-party indemnity claim against

subcontractor, seeking indemnification for the delay damages sought by MnDOT.

In August 2021, contractor achieved final completion of the bridge project. Also in

August, subcontractor asserted a counterclaim against contractor for payment of the

remaining subcontract balance (i.e., the $665,262 that contractor had withheld from its

payments to subcontractor).

The parties attempted to settle their claims through mediation. After those efforts

failed, subcontractor and MnDOT moved for summary judgment. In July 2022, before

resolution of the summary-judgement motions, MnDOT and contractor agreed to settle

contractor’s claims against MnDOT for an amount less than the total payments that

MnDOT had withheld from contractor. MnDOT and contractor arrived at that amount by

5
agreeing that 272 days of delay were excusable and by extending the original

final-completion date from November 15, 2019, to August 12, 2020. MnDOT and

contractor agreed that “any remaining delay is not excusable because it was a delay ‘due

to . . . subcontractor’s . . . mismanagement’” and that “as a result of [subcontractor’s]

failure to carry out the provisions of the [s]ubcontract, [subcontractor] is responsible to

[contractor] for [MnDOT’s] claims against [contractor].” As part of the settlement

agreement, contractor assigned to MnDOT “all claims and defenses it has in the Lawsuit

against [subcontractor].”

According to the settlement agreement, MnDOT had withheld $2,377,000.66 from

contractor as monetary deductions and liquidated damages. MnDOT and contractor agreed

to compromise on contractor’s claims against MnDOT for $1,961,738.66 and that MnDOT

would release that amount to contractor. MnDOT and contractor also agreed to

compromise on MnDOT’s claims against contractor for $1,445,500, which would be

payable only out of the proceeds of the indemnity claims that contractor assigned to

MnDOT.

Neither subcontractor nor the district court was aware of MnDOT and contractor’s

efforts to settle the dispute without subcontractor. The settlement agreement was first

disclosed in MnDOT’s summary-judgment submissions in district court. At the

summary-judgment hearing, subcontractor objected to the settlement agreement and urged

the district court to reject it. The district court approved the agreement, reasoning that it

was “proper for [MnDOT] to assume [contractor’s] third-party liability claim.” The district

6
court further reasoned that a settlement, such as the one at issue here, served judicial

economy by turning a three-sided dispute into a two-sided dispute.

The district court granted MnDOT’s motion for summary judgment, concluding that

there was no genuine issue of material fact regarding whether MnDOT, standing in the

shoes of the contractor, was entitled to indemnification under the subcontract, including a

recovery for contractor’s attorney fees and costs. The district court entered judgment for

MnDOT in the amount of $948,274.28.4 The district court denied subcontractor’s request

for summary judgment on its counterclaim against contractor and dismissed that claim.

Subcontractor appeals.

DECISION

This case comes to us for review of the district court’s summary-judgment rulings.

The district court must grant summary judgment if the moving party shows “there is no

genuine issue as to any material fact” and the moving party is “entitled to judgment as a

matter of law.” Minn. R. Civ. P. 56.01. The party moving for summary judgment must

support his assertion that there is no genuine issue as to any material fact by “citing to

particular parts of materials in the record” or by “showing that the materials cited do not

establish the absence or presence of a genuine issue for trial.” Minn. R. Civ. P. 56.03(a).

We review a district court’s grant of summary judgment de novo. Dukowitz v.

Hannon Sec. Servs., 841 N.W.2d 147, 150 (Minn. 2014). In doing so, we “view the

4
The district court calculated damages as follows: total liquidated damages of $1,455,500,
less an offset of $665,262 for the amount contractor had withheld from subcontractor, plus
attorney fees and costs of $168,036.28. That calculation yields damages of $958,274.28.
Thus, there appears to be a $10,000 typographical error in the judgment.

7
evidence in the light most favorable to the party against whom summary judgment was

granted to determine whether there are any genuine issues of material fact and whether the

district court correctly applied the law.” Id. Summary judgment is inappropriate if

reasonable people can draw different conclusions from the evidence presented. DLH, Inc.

v. Russ, 566 N.W.2d 60, 69 (Minn. 1997). But the nonmoving party “must do more than

rest on averments or denials of the adverse party’s pleading.” Stringer v. Minn. Vikings

Football Club, LLC, 705 N.W.2d 746, 754 (Minn. 2005). The nonmoving party must

identify specific facts that establish the existence of a triable issue of fact. Papenhausen v.

Schoen, 268 N.W.2d 565, 571 (Minn. 1978).

I.

Subcontractor contends that MnDOT is not entitled to summary judgment on its

indemnification claim, arguing that there are genuine issues of material fact regarding

whether subcontractor’s delays were excusable.

The district court’s grant of summary judgment was implicitly based on provision

6.3 in the subcontract (the indemnity provision) in which subcontractor agreed to:

Defend, indemnify and save harmless Contractor from any and
all losses or damage occasioned by Subcontractor’s failure to
carry out the provision of this Subcontract, unless such failure
results from causes not the responsibility of Subcontractor.
Loss or damage shall include, without limitation, legal fees and
disbursements paid or incurred by Contractor as part of the loss
or damage or to enforce the provisions of this paragraph, unless
that failure results from causes that are not Subcontractor’s
responsibility.

(Emphasis added.) Under that provision, indemnity liability exists if: (1) contractor

incurred losses or damage, (2) that were caused by subcontractor’s failure to carry out a

8
provision of the subcontract, and (3) unless such failure resulted from causes not the

subcontractor’s responsibility. MnDOT argues that subcontractor has not shown a genuine

issue of material fact regarding any of those circumstances.

We agree that there is no genuine issue of material fact regarding the first

circumstance: the contractor was assessed liquidated damages under the general contract

as a result of its failure to complete the project within the timelines set forth in the general

contract. But for the reasons that follow, we conclude that there are genuine issues of

material fact regarding the second and third aspects of the underlying indemnification

claim.

The Cause of Contractor’s Damages

In district court, MnDOT asserted that contractor’s monetary deductions and

liquidated damages were caused by subcontractor’s failure to carry out subcontract

provisions regarding notice of delay and incorporated schedules. The district court adopted

that reasoning, concluding that subcontractor “was bound to the project schedule” and

“also . . . failed to give notice of why there should be excuse for the delays.”

On appeal, MnDOT emphasizes subcontractor’s failure to comply with a notice

provision in the subcontract (the notice-of-delay provision), under which subcontractor

agreed to:

Give written notice to Contractor of all claims for extras, for
extensions of time and for damages for delay or otherwise in
accordance with the General Contract, allowing Contractor to
give timely notice to [MnDOT]. Timely notice shall mean
three (3) working days before the expiration of the relevant
notice period in the General Contract.

9
 It is undisputed that subcontractor failed to complete its work within the timelines

set forth in the general contract. It is also undisputed that subcontractor provided only one

notice of delay to contractor: subcontractor notified contractor that it had performed five

additional weeks of work that were not contemplated in the general contract and

subcontract, as a result of specifications required by MnDOT and MnDOT’s historical

consultant. Finally, it is undisputed that subcontractor did not provide contractor with

notice of delay based on the circumstances that subcontractor now points to as an excuse

for its delay.

MnDOT asserts that subcontractor’s failure to give contractor notice of delay

“deprived [contractor] of the opportunity to avoid delay damages.” Specifically, MnDOT

argues that, because subcontractor did not notify contractor of the circumstances that

subcontractor now points to as an excuse for its delay, contractor did not provide notice to

MnDOT or seek a time extension from MnDOT based on those circumstances. MnDOT

further argues that, because contractor did not do so, contractor waived any claim that delay

attributable to subcontractor was excusable and therefore lost the opportunity to possibly

avoid monetary deductions and liquidated damages for those delays. See, e.g., MnDOT

specification 1402.1 (explaining that contractor’s failure to provide requisite notice

“constitute[d] a waiver of the [c]ontractor’s entitlement to compensation or a time

extension”); 1403.1 (explaining that MnDOT will “consider requests for [c]ontract

revisions only if the notification procedures . . . are followed”); 1403.2-.6 (setting forth the

notification procedures regarding contract revisions); 1517.1 (requiring contractor to give

notice in writing if it intends to file a claim for a time extension).

10
 MnDOT argues that there is no genuine issue of material fact that subcontractor’s

failure to carry out the notice-of-delay provision caused contractor to incur monetary

deductions and liquidated damages. For the reasons that follow, we disagree.

MnDOT’s causation theory presumes that if subcontractor had provided notice of

delay, then contractor would have provided notice to MnDOT and requested a time

extension from MnDOT and that MnDOT would have granted the request. But under

MnDOT specification 1806.1, MnDOT “will only extend the Contract Time if an excusable

delay [as defined in MnDOT specifications] delays Work on the Critical Path.” (Emphasis

added.) MnDOT specification 1806.2C defines non-excusable delays as “delays that are

the [c]ontractor’s fault or responsibility.”

In district court, MnDOT argued that “a delay caused by [subcontractor’s persistent]

understaffing is ‘the Contractor’s fault or responsibility’ and is not excusable and so would

not provide justification for a time extension.” In addition, in its settlement with contractor,

MnDOT agreed that “any remaining delay [by subcontractor] is not excusable because it

was a delay ‘due to . . . the subcontractor’s . . . mismanagement.’” See MnDOT

specification 1806.2C(1) (stating that a “non-excusable delay” includes a delay due to

subcontractor’s “mismanagement”).

In fact, MnDOT has consistently taken the position that subcontractor’s delays were

inexcusable and likely the result of subcontractor’s mismanagement of staffing resources.

MnDOT argued in district court and to this court that subcontractor has failed to raise a

genuine issue of material fact regarding whether its failure to comply with the general

contract’s schedule provisions resulted “from causes not the responsibility of

11
[s]ubcontractor.” MnDOT insists that there is no record evidence showing that

subcontractor’s delays were excusable.

But if subcontractor’s delays were inexcusable—as MnDOT has consistently

argued—then the general contract and the incorporated MnDOT specifications prohibited

a time extension based on those delays. See MnDOT specification 1806.1 (providing that

MnDOT will only extend the contract time for “an excusable delay” as defined in MnDOT

specification 1806.2B or 1808.2A). And without a time extension, contractor was subject

to monetary deductions and liquidated damages. And because contractor is not entitled to

indemnification for damages caused by subcontractor’s failure to carry out the subcontract

if “such failure results from causes not the responsibility of [s]ubcontractor,” if there is a

genuine issue of material fact regarding whether any of subcontractor’s delay was

excusable, it cannot be said—as a matter of law—that subcontractor’s failure to provide

notice of delay caused contractor to incur damages, such that contractor was entitled to

indemnification.

MnDOT argues that there is no genuine issue of material fact that subcontractor

failed to comply with the schedule provisions of the general contract as incorporated in the

subcontract or that such failure caused contractor to incur monetary deductions and

liquidated damages. Subcontractor counters that, under the indemnity provision,

subcontractor is not required to indemnify contractor if subcontractor’s failure to comply

with the incorporated-schedule provisions “result[ed] from causes not the responsibility of

[s]ubcontractor.”

12
 Subcontractor has presented evidence that untimely site preparation by another

subcontractor affected subcontractor’s ability to complete the riprap as directed by

contractor in the summer of 2020. That evidence raises a genuine issue of material fact

regarding whether subcontractor’s delay resulted from causes not the subcontractor’s

responsibility and, therefore, whether subcontractor is liable under the indemnity

provision.

On this record, applying de novo review, we conclude that there are genuine issues

of material fact regarding (1) whether subcontractor’s failure to give notice of delay caused

contractor to incur the monetary deductions and liquidated damages; and (2) whether

subcontractor’s failure to carry out the incorporated schedule provisions of the general

contract “result[ed] from causes not the responsibility of [s]ubcontractor.” We therefore

reverse the grant of summary judgment for MnDOT, including the award of attorney fees,

costs, and disbursements and remand for further proceedings on MnDOT’s claim.5

II.

Subcontractor contends that requiring subcontractor to indemnify contractor for all

of contractor’s monetary deductions and liquidated damages results in an unreasonable and

impermissible penalty against subcontractor.

As to liquidated damages:

The term liquidated damages signifies the damages the
amount of which the parties to a contract stipulate and agree,

5
Because we reverse summary judgement for MnDOT, we do not address subcontractor’s
argument that the district court’s offset against the summary judgment, in the amount of
payments withheld from subcontractor, is “akin to an award of damages to [subcontractor]”
and constitutes a “full award of [subcontractor’s] counterclaim against [contractor].”

13
 when the contract is entered into, shall be paid in case of
breach. It is well settled that the parties to a contract may
stipulate in advance as to the amount to be paid in
compensation for loss or injury which may result in the event
of a breach of the agreement. A stipulation of this kind is
enforceable, at least in those cases where the damages which
result from a breach of the contract are not fixed by law or are
in their nature uncertain and where the amount stipulated does
not manifestly exceed the injury which will be suffered.

Schutt Realty Co. v. Mullowney, 10 N.W.2d 273, 276 (Minn. 1943) (emphasis added)

(quotation omitted).

The principles governing the use of liquidated-damages provisions are explained in

Gorco Construction Co. v. Stein, 99 N.W.2d 69 (Minn. 1959). Our research indicates that

those principles remain valid today. We therefore quote them here:

The modern trend is to look with candor, if not with favor, upon
a contract provision for liquidated damages when entered into
deliberately between parties who have equality of opportunity
for understanding and insisting upon their rights, since an
amicable adjustment in advance of difficult issues saves the
time of courts, juries, parties, and witnesses and reduces the
delay, uncertainty, and expense of litigation. Accordingly this
court has long regarded provisions for liquidated damages as
prima facie valid on the assumption that the parties in naming
a liquidated sum intended it to be a fair compensation for an
injury caused by a breach of contract and not a penalty for
nonperformance.
Although favorably disposed to giving effect to a
provision for liquidated damages, this court has not hesitated,
however, to scrutinize a particular provision to ascertain if it is
one for a penalty or one for damages. In determining the issue
neither the intention of the parties nor their expression of
intention is the governing factor. The controlling factor, rather
than intent, is whether the amount agreed upon is reasonable or
unreasonable in the light of the contract as a whole, the nature
of the damages contemplated, and the surrounding
circumstances.

14
 The law adopts as its guiding principles that the injured
party is entitled to receive a fair equivalent for the actual
damages necessarily resulting from failure to perform the
contract and no more.
Punishment of a promisor for breach, without regard to
the extent of the harm that he has caused, is an unjust and
unnecessary remedy and a provision having an impact that is
punitive rather than compensatory will not be enforced.

....

This court has held that where the actual damages
resulting from a breach of the contract cannot be ascertained or
measured by the ordinary rules, a provision for liquidated
damages not manifestly disproportionate to the actual damages
will be sustained. On the other hand, when the measure of
damages resulting from a breach of contract is susceptible of
definite measurement, we have uniformly held an amount
greatly disproportionate to be a penalty.

Gorco, 99 N.W.2d at 74-75 (footnotes omitted) (quotation omitted).

Subcontractor argues that “an award of delay-related damages against

[subcontractor]—especially in the amount called for in [the general contract] ($3,000

daily)—is punitive, not compensatory.” Subcontractor further argues that the amount of

liquated damages assessed against contractor are “manifestly disproportionate” to any

actual damages suffered by MnDOT as a result of subcontractor’s failure to satisfy the

incorporated-schedule provisions. Specifically, subcontractor argues that its work “had no

direct impact on the public’s ability to use the road and bridge.”6 In district court,

6
In district court, subcontractor bluntly stated its position: “The public was not harmed or
damaged by not seeing rough laid stones on the slopes of the roadway while they drove
past going 60 miles per hour.”

15
subcontractor argued that whether “the liquidated damages can be supported under the

circumstances is a question of fact not susceptible to summary judgment.”

MnDOT counters that it is not attempting to collect liquidated damages directly

from subcontractor, that it is merely attempting to enforce contractor’s indemnification

rights, and that the liquidated-damages award is reasonable as to contractor. MnDOT

argues that subcontractor’s “arguments about the validity of liquidated damages are

inapplicable because the only claim at issue against [subcontractor] was indemnity.”

MnDOT also argues that subcontractor has not raised a genuine issue of material fact

regarding the validity of the liquidated-damages provision.

Neither party cites legal authority regarding whether it is appropriate to assess the

reasonableness of the liquidated-damages award in this case in the context of the actual

harm caused by subcontractor, as opposed to in the context of the anticipatory harm that

was the basis for the liquidated-damages provision in the general contract. Although

subcontractor argued to the district court that requiring subcontractor to indemnify

contractor for all of the monetary deductions and liquidated damages would constitute an

impermissible penalty, the district court did not explicitly address that argument or explain

its implicit rejection. We therefore leave resolution of that issue to the district court in the

first instance on remand.

III.

Subcontractor contends that contractor’s indemnity claim should be dismissed on

summary judgment because contractor failed to give subcontractor notice of its claim for

indemnification, as required under a notice provision in the subcontract. Subcontractor

16
argues that the relevant notice provision creates a “condition precedent for [contractor’s]

liquidated damages claim” against subcontractor.

“A condition precedent is a contract term that calls for the performance of some act

or the happening of some event after the contract is entered into, and upon the performance

or happening of which the promisor’s obligation is made to depend.” Capistrant v.

Lifetouch Nat’l Sch. Studios, Inc., 916 N.W.2d 23, 27 (Minn. 2018) (quotation

omitted). “[P]arties to a contract may expressly agree that written notice of breach is a

condition precedent to bringing a breach of contract claim and that the failure to give

written notice bars a subsequent claim.” Valspar Refinish, Inc. v. Gaylord’s, Inc.,

764 N.W.2d 359, 365 (Minn. 2009).

“The primary goal of contract interpretation is to determine and enforce the intent

of the parties.” Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271

(Minn. 2004). “Where there is a written instrument, the intent of the parties is determined

from the plain language of the instrument itself.” Id. If a contract is clear and

unambiguous, courts should apply the plain language of the contract and “not rewrite,

modify, or limit its effect by a strained construction.” Id. In addition, we construe a

contract as a whole. Chergosky v. Crosstown Bell, Inc., 463 N.W.2d 522, 525

(Minn. 1990).

Subcontractor relies on a notice provision in the subcontract (the notice-of-claim

provision), by which the contractor agreed to:

Give written notice to Subcontractor of all known claims that
may affect Subcontractor within a reasonable period, but not

17
 more than thirty (30) calendar days, after knowledge of the
claim.

That provision does not expressly state that notice of a claim is a condition precedent

to a claim for indemnification. In fact, the notice provision does not even refer to the

indemnification provision. Moreover, the indemnification provision does not state that

contractor must provide notice to pursue an indemnification claim against subcontractor.

As support for its position, subcontractor relies on a single supreme court decision:

Buchman Plumbing Co. v. Regents of the Univ. of Minnesota, 215 N.W.2d 479 (Minn.

1974). A contractual notice provision in Buchman stated:

If Contractor (Buchman) claims any instructions, latent
conditions or otherwise involves extra cost under this contract,
he shall make claim for extra cost in writing within ten days
after such instruction or observance of conditions. Claims
made after this time, or not made in writing, will be refused
and no claim shall be valid unless so made.

215 N.W.2d at 486 (emphasis added). The supreme court held that, under that language,

written notice of claim was a condition precedent to a breach-of-contract action. Id.

The contract language in this case is materially different than the language in

Buchman. In that case, the contract language expressly stated that a claim was invalid if

the claimant failed to comply with certain procedural requirements (i.e., timing and writing

requirements). The subcontract in this case does not contain similar language expressly

stating that a claim by contractor against subcontractor is invalid if contractor fails to

comply with the notice-of-claim provision.

18
 Subcontractor notes that the supreme court quoted a second notice provision in

Buchman, which does not include language expressly invalidating a claim based on failure

to comply with procedural requirements. That provision stated:

If either party to the contract should suffer damage in
any manner because of any wrongful act or neglect of the other
party or of anyone employed by him, then he shall be
reimbursed by the other party for such damage. Claims under
this clause shall be made in writing to the party liable and
within a reasonable time from the first observance of such
damage and not later than the time of final payment, except as
expressly stipulated otherwise.

Id. (emphasis added). Subcontractor argues that the Buchman court’s condition-precedent

determination was based on this second notice provision.

Because the issue in Buchman was whether Buchman could bring his claim despite

failing to comply with the notice provision, and the first-quoted notice provision applied

specifically to Buchman, we understand the supreme court’s condition-precedent holding

to be based on the first-quoted clause, which contained language expressly invalidating any

noncompliant claim request by Buchman.

Moreover, subcontractor has not cited, and we are not aware of, any precedential

case applying the reasoning of Buchman to contract language that does not expressly state

that a claim is invalid if the claimant does not comply with procedural requirements related

to the claim. Instead, our research revealed three nonprecedential decisions in which this

court applied Buchman and held that claims were not actionable because the claimant failed

19
to comply with certain procedural requirements and contractual language expressly

mandated compliance with those requirements to perfect a claim.7

In sum, the plain language of the subcontract does not support subcontractor’s

argument that notice by contractor was a condition precedent to contractor’s claim for

indemnification. See Savela v. City of Duluth, 806 N.W.2d 793, 797 (Minn.

2011) (rejecting a party’s interpretation that would have required the supreme court to add

words to a contract). We therefore affirm the district court’s denial of summary judgment

for subcontractor, without addressing the parties’ disagreement regarding whether

contractor complied with the notice provision by emailing subcontractor that it would

“consider passing LQD’s” on to subcontractor.

In addition to denying summary judgment for subcontractor, the district court

dismissed subcontractor’s counterclaim against contractor. In doing so, the district court

reasoned that subcontractor’s “breach of contract for untimely performance excuses

7
See, e.g., Lunda Constr. Co. v. County of Anoka, No. A18-0515, 2019 WL 178511, at
*1-2 (Minn. App. Jan. 14, 2019) (explaining that MnDOT contract provision stated that
failure to provide requisite notice “constitute[d] a waiver of . . . entitlement to
compensation or a time extension” and that failure to submit claim within specified
timeframe “waive[d] all claims for additional compensation in connection with the work
already performed”), rev. denied (Minn. Mar. 27, 2019); Contractors Edge, Inc. v. City of
Mankato, No. A14-0223, 2016 WL 102430, at *2 (Minn. App. Jan. 11, 2016) (“No Claim
for an adjustment in Contract Price or Contract Times will be valid if not submitted in
accordance with this Paragraph 10.05.”); Polk County v. Widseth.Smith.Nolting, No.
A04-681, 2004 WL 2940847, at *1 (Minn. App. Dec. 21, 2004) (“No Claim for an
adjustment in Contract Price or Contract Times (or Milestones) will be valid if not
submitted in accordance with [the notice provision].”); see also Cameo Homes, Inc. v.
Kraus-Anderson Constr. Co., No. Civ.022894, 2003 WL 22867640, at *4 (D. Minn. Dec.
3, 2003) (noting that the contract stated that any claims for payment of money “shall be
referred initially to the Architect for action” and that Architect’s decision “shall be required
as a condition precedent to . . . litigation”), aff’d, 394 F.3d 1084 (8th Cir. 2005).

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[contractor’s] obligation to pay the contract price.” Because subcontractor has raised a

genuine issue of material fact regarding whether some of its delay was excusable and

contractor is not entitled to indemnity for damages that “result[ed] from causes not the

responsibility of [s]ubcontractor,” it cannot be said—as a matter of law—that contractor

was entitled to withhold the entire unpaid balance of the subcontract price. We therefore

reverse the dismissal of subcontractor’s counterclaim against contractor and remand for

further proceedings on that claim.

IV.

Finally, subcontractor contends that the district court abused its discretion by

approving the settlement agreement between MnDOT and contractor. We review a district

court’s decision to approve a settlement agreement for an abuse of discretion. Vill. Lofts

at St. Anthony Falls Assn’s v. Hous. Partners III-Lofts LLC, 924 N.W.2d 619, 635 (Minn.

App. 2019), aff’d in part, rev’d in part, 937 N.W.2d 430 (Minn. 2020) (reversing on other

grounds without addressing the settlement agreement in its review); see Breza v. Kiffmeyer,

723 N.W.2d 633, 636 (Minn. 2006) (relying on a legal principle from a prior case that was

reversed on other grounds).

Here, in approving the settlement agreement, the district court reasoned that “the

current dispute between [MnDOT], [subcontractor], and [contractor] is indistinguishable

from Rice Lake,” a case in which this court approved a Two Harbors settlement agreement

in a construction context.8 See Rice Lake Contracting Corp. v. Rust Env’t & Infrastructure,

8
A Two Harbors settlement agreement is one in which a defendant agrees to pay the
plaintiff out of a conditional promissory note and the defendant is authorized to pursue an

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Inc., 616 N.W.2d 288, 292-93 (Minn. App. 2000) (holding that a Two Harbors settlement

agreement between a contractor and city was enforceable), rev. denied (Minn. Oct. 26,

2000). MnDOT argues that the district court was within its discretion to approve the

settlement agreement because it “was consistent with the agreement approved in Rice

Lake.”

In Rice Lake, this court said that settlement agreements—in which a contractor is

authorized to pursue a project owner’s claims against a third-party—“serve judicial

efficiency by turning three-sided disputes into two-sided conflicts.” Id. at 292. We

affirmed the district court’s approval of such an agreement, reasoning:

the issues [the non-settling party] faced at trial after
the . . . settlement were precisely those it confronted before the
settlement. There was some realignment of the parties, but, at
bottom, [the settling defendant] was simply put in the role of a
neutral. In most cases, turning a party into a neutral will
simplify the trial.

Id.

We more recently affirmed the district court’s rejection of a Two Harbors settlement

agreement purportedly modeled after the so-called Two Harbors agreement in Rice Lake.

Vill. Lofts, 924 N.W.2d at 637. In doing so, we concluded that certain aspects of Miller v.

Shugart, 316 N.W.2d 729 (Minn. 1982), are appropriately considered when determining

whether to approve a Two Harbors settlement.9 Id. at 636. We explained:

indemnity action against a third party who was not a party to the settlement agreement.
Rice Lake Contracting Corp., 616 N.W.2d at 292.
9
“A Miller-Shugart settlement agreement is a settlement between a plaintiff and an insured
defendant in which the defendant, having been denied coverage for the claim, agrees that
the plaintiff may enter judgment against it for a sum collectible only from the insurance

22
 Although a stipulated judgment naturally is binding as
between the stipulating parties, it is binding on an
indemnifying third party only if it is reasonable and prudent.
The test as to whether the settlement is reasonable and prudent
is what a reasonably prudent person in the position of the
defendant would have settled for on the merits of plaintiff’s
claim. This involves a consideration of the facts bearing on the
liability and damage aspects of plaintiff’s claim, as well as the
risks of going to trial. In addition, a . . . settlement agreement
may be rejected if it is the product of fraud or collusion.
A . . . settlement agreement is collusive if there was a lack of
opposition between a plaintiff and an insured that otherwise
would assure that the settlement is the result of hard
bargaining.

Id. at 636-37 (quotations omitted).

Subcontractor complains that the district court did not consider whether the

settlement is unreasonable and the product of collusion. As to collusion, subcontractor

argues that the agreement was reached in secret without any notice to subcontractor or the

district court and that contractor abandoned significant liability defenses by agreeing to the

settlement.

As to unreasonableness, subcontractor argues that “the amounts negotiated for

liquidated damages and monetary deductions in the settlement are excessive, and thus

unreasonable, and are not what a prudent person in [contractor’s] position would agree to.”

Subcontractor emphasizes that prior to agreeing to the settlement, contractor “vehemently

disputed” MnDOT’s imposition of monetary deductions and liquidated damages.

policy.” King’s Cove Marina, LLC v. Lambert Commercial Constr. LLC, 958 N.W.2d 310,
313 n.1 (Minn. 2021) (citing Miller, 316 N.W.2d at 729).

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 The district court’s order does not address subcontractor’s arguments that the

settlement agreement was unreasonable and the product of collusion. We are not surprised

because, although subcontractor objected to the settlement in district court, subcontractor

did not cite legal authority for its assertions that the settlement was unreasonable and

collusive. Generally, we do not consider issues that were not raised and determined in the

district court. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988). Because we are

reversing and remanding on other grounds, and because a decision whether to accept a

settlement agreement is discretionary, it should be made in the district court in the first

instance based on all relevant considerations—including reasonableness and collusion. We

therefore reverse and remand the district court’s approval of the settlement agreement

between MnDOT and contractor for reconsideration.

In conclusion, we affirm the denial of subcontractor’s request for summary

judgment on its counterclaim, but we reverse the dismissal of that counterclaim. We also

reverse the grant of summary judgment for MnDOT and the district court’s approval of the

settlement agreement between MnDOT and contractor. We remand for further proceedings

consistent with this opinion.

Affirmed in part, reversed in part, and remanded.

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