The opinion of the court was delivered by: Gladys Kessler United States District Judge
Third-party Plaintiff Winmar, Inc., a Washington, D.C.-based construction firm, brings this claim for breach of contract and unjust enrichment against Third-party Defendant Al Jazeera International, a division of Al Jazeera Satellite Network, an international news network headquartered in Doha, Qatar.*fn1 Al Jazeera International counter-claims against Winmar for breach of contract, mistake, and unjust enrichment. This dispute arises out of a 2005 contract between Al Jazeera and Winmar to construct a state-of-the-art television studio and office space at 1627 K Street, N.W., Washington, D.C. On June 30, 2010 through July 2, 2010, a bench trial was held in which eight witnesses testified. Based on the testimony presented by those witnesses, the exhibits admitted into evidence, the parties' representations of what facts were not in dispute, and the applicable caselaw, the Court makes the following findings of fact and conclusions of law.
1. Third-party Plaintiff Winmar, Inc. ("Winmar" or "Plaintiff") is a corporation organized under the laws of the District of Columbia with its principal place of business located in the District of Columbia. Defendant Al Jazeera International ("Al Jazeera" or "Defendant") is a division of Al Jazeera Satellite Network, an entity organized under the laws of the Government of the State of Qatar which has its principal place of business in Doha, Qatar.
2. In 2005, Al Jazeera and Winmar entered into a contract ("the Contract") for the construction of a state-of-the-art television studio and office space on the fourth and seven floors rented by Al Jazeera in a building located at 1627 K Street, N.W., Washington, D.C. (the "Project"). The Contract consisted of the Standard Form of Agreement Between Owner and Contractor, AIA Document A101-1997 ("Standard Form") and AIA Document A201-1997 ("General Conditions"), as modified by the parties, as well as other "Contract Documents," including a one-page Monthly Cash Flow Statement and a four-page Construction proposal dated September 16, 2005.
3. The Contract is governed by the laws of the District of Columbia. Jurisdiction and venue in this district are proper both for Winmar's claims against Al Jazeera and Al Jazeera's counterclaims against Winmar. Pursuant to § 4.6.2 of the General Conditions of the Contract, Winmar and Al Jazeera have waived their right to a jury trial.
4. Although the Contract was not executed until November 23, 2005, Winmar began work on the Project on October 16, 2005, and was scheduled to reach substantial completion 136 days later,*fn2 on March 1, 2006. For the duration of Winmar's work on the Project, John J. Kirlin, Inc., a Maryland-based firm, performed the Project's mechanical engineering work and Pel-Bern, Inc., also a Maryland-based firm, performed the Project's electrical work as Winmar's sub-contractors.
5. The Project's architect was Janson Design Group ("Architect"), a New York-based architecture firm. As the Project's Architect, and pursuant to § 4.2.1 of the General Conditions, Janson Design Group acted as Al Jazeera's representative throughout the events discussed herein.
6. In September 2005, Winmar submitted the sole bid in response to the Architect's solicitation to perform construction work on the Project. The bid included a project summary, as well as specific line items derived from the set of plans received from the Architect and the bids that Winmar received from sub-contractors.
Winmar bid to perform the Project for $2,351,615 under a lump-sum contract. The amount bid did not include extra charges for any change orders submitted by the Architect. On September 16, 2005, as a part of its bid, Winmar included a one-page Monthly Cash Flow Projection Sheet and a four-page Construction Proposal.
7. On October 4, 2005, Winmar sent a letter of intent to Al Jazeera proposing "to furnish and install all necessary labor and materials for the interior construction per the plans that have been issued and the bid proposal that has been given and the scope of work that is listed" for $2,351,615, plus a $365,135 premium time contingency. On October 5, 2010, Gary Napier, the Al Jazeera representative who oversaw the Project's financing, approved and acknowledged the letter of intent. Winmar began work on the Project on October 16, 2005.
8. It was not until November 23, 2005, after over a month of negotiations between Winmar and Al Jazeera, that the parties executed the Contract.
9. Section 4.1 of the Standard Form provides that "[t]he Owner shall pay the Contractor the Contract Sum in current funds for the Contractor's performance of the Contract. The Contract Sum shall be two million three hundred fifty one thousand six hundred fifteen dollars ($2,351,615.00), subject to additions and deductions as provided in the Contract Documents." This Contract Sum did not include any change orders.
10. The Contract Documents incorporated into the Contract included in part (1) the Monthly Cash Flow Projection Sheet with a base contract amount of $2,351,615, revised at the time of the Contract's execution to include an additional $522,135*fn3 for the Architect's October 11, 2005 Change Orders (Number 1, to furnish and install a Multistak Chiller and Number 2, for premium time), for a total contract amount of $2,873,750, and (2) the Construction Proposal, which allocated the base contract amount of $2,351,615 across categories of work.
11. On November 23, 2005, when the Contract was signed, the parties agreed to a total contract amount of $2,873,750, subject to any further additions and/or reductions resulting from additional change orders submitted by the Architect. The Contract is a fixed price or lump sum contract, and therefore the total Contract amount is not subject to any adjustment on the basis of the costs incurred by Winmar in performing the work.
12. The Contract required Al Jazeera to make progress payments on the total Contract amount throughout the period of Winmar's work.*fn4 These progress payments were essential to assure an adequate cash flow for the Project, since Winmar was often required to make advance deposits, large purchases for both custom-made and standard equipment and other pre-orders, and payments to sub-contractors.
13. Article 5 of the Standard Form sets forth the procedures for making the progress payments: specifically, Al Jazeera agreed to deposit the amounts provided on the Monthly Cash Flow Projection Sheet into an escrow account*fn5 no later than the last day of the month preceding the month in which the work was to be performed. Section 126.96.36.199 of the Standard Form provides that any failure by Al Jazeera to deposit the amounts listed on the Monthly Cash Flow Projection Sheet constitutes a "material breach" of the Contract, giving Winmar the right to immediately suspend or terminate work after one day's notice to Al Jazeera.
14. In order to actually receive payments, Winmar was required to submit an Application and Certification for Payment ("Payment Application") to the Architect certifying that current payment is due for the work covered in the Payment Application. Section 5.1.5 of the Standard Form of the Contract states that "Applications for Payment shall indicate the percentage of completion of each portion of the Work as of the end of the period covered by the Application for Payment." Under § 5.1.6, the Applications for Payment shall be computed by taking "that portion of the Contract Sum properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Work by the share of the Contract Sum allocated to that portion of the Work in the schedule of values, less retainage [of 5%] [plus] "that portion of the Contract Sum properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the completed construction . . . ."
15. Section 4.2.5 of the General Conditions states that "[b]ased on the Architect's evaluations of the Contractor's Applications for Payment, the Architect will review and certify the amounts due the Contractor and will issue Certificates for Payment in such amounts." Within seven days of receipt of Winmar's Payment Application, the Architect was obligated under § 9.4.1 of the General Conditions to either issue a Certificate for Payment to Al Jazeera, with a copy to Winmar, for such amount as the Architect determined was properly due, or notify Al Jazeera and Winmar in writing of the Architect's reasons for withholding certification. After the Architect certified a Payment Application, the funds deposited in the escrow account by Al Jazeera were to be released to Winmar within three calendar days.
16. Section 9.4.2 of the General Conditions states that the Architect's certification "constitute[s] a representation by the Architect to the Owner, based on the Architect's evaluation of the Work and the data comprising the Application for Payment, that the Work has progressed to the point indicated and that, to the best of the Architect's knowledge, information and belief, the quality of the Work is in accordance with the Contract Documents."
17. On October 20, 2005, the Architect certified that an initial deposit of $645,164, an amount which was required under § 188.8.131.52 of the Standard Form, should be paid into the escrow account by Al Jazeera.*fn6 Al Jazeera submitted the deposit in full one week later, on October 27, 2005.
18. Beginning on October 20, 2005, Winmar, through its President, Edwin Villegas, also submitted a series of Payment Applications for amounts due for work executed which were not covered by the $645,164 deposit. Specifically:
* On October*fn7 20, 2005, Winmar submitted Payment Application Number 2, claiming it was due $474,677, and Payment Application Number 2b, claiming an additional $115,872, for work done in the period ending October 31, 2005;
* On November 21, 2005, Winmar submitted Payment Application Number 3, claiming it was due $775,913, for work done in the month of November 2005; and
* On December 7, 2005, Winmar submitted Payment Application Number 1, claiming it was due $471,678, for work done on change orders for the period ending December 7, 2005.
19. Thus, by December 2005 Winmar had submitted Payment Applications claiming a total of $2,483,304 for work executed. After taking into consideration the $645,164 initial deposit paid by Al Jazeera, the total outstanding amount that Winmar claimed it was owed by Al Jazeera for work completed in December 2005 was $1,838,140.
20. All of the Payment Applications were based on Winmar's certification that the amount due represented the "total completed and stored to date," minus a ten percent retainage fee for Payment Application Numbers 2, 2b, and 3 and a zero percent retainage fee for Payment Application Number 1.
21. The amounts claimed in Winmar's Payment Applications were calculated based on the Monthly Cash Flow Projection Sheet. For example, the amounts claimed for the months of October and November--$590,549 and $775,913, respectively--match the projected amounts listed on the Monthly Cash Flow Projection Sheet. Those projected monthly amounts were based on an estimate that 70% of the construction work on the Project would be completed by the end of November 2005. Winmar submitted its Payment Applications before the end of the month in which they were due. The amounts claimed by Winmar were projections of the work forecast to be completed by the end of the month in which the Payment Application was submitted. However, Winmar claims that the work estimated was in fact completed at the end of the payment period.
22. On December 7, 2005, the Architect's project manager, Francisco Tsai, certified Payment Applications Numbers 1, 2, 2b, and 3 for the amounts claimed by Winmar. Tsai was given specific information about Winmar's progress on the Project before certifying Winmar's Payment Applications. For example, Steven Nease, who was employed by Al Jazeera as a consultant to manage the day-to-day progress of the Project from September 2005 through February 2006, met daily with Winmar and was on the construction site every day, usually from 8:00 a.m. until 8:00 p.m., to observe and report on progress. Nease worked regularly with Tsai to confirm that work was done before the Payment Applications were certified.
In addition, Tsai performed walk-throughs of the work site in order to decide what payments should be certified for Winmar.
23. On December 12, 2005, Al Jazeera wired $474,677 for the certified Payment Application Number 2 to Winmar, reducing the total amount due from $1,838,140 to $1,363,463.
24. Al Jazeera made no other payments to Winmar. The total amount paid by Al Jazeera was therefore $1,119,841.
25. On December 22, 2005, Christopher Condon, Vice President of Winmar, sent Al Jazeera a Notice of Default and Direction to Cure stating that Al Jazeera was in material breach of the Contract for failure to pay the remaining amount owed, as certified by the Architect, of $1,363,463.
26. Later that month, Al Jazeera engaged Mark G. Anderson Consultants, a Washington, D.C.-based design and construction consulting firm, as Construction Manager on the Project in order to resolve the disputed billing issues, to determine if Winmar was over-billing, and to speed up completion of the Project. By letter and Proposed Construction Management Agreement dated December 29, 2005, Kris Collins of Mark G. Anderson Consultants represented to Al Jazeera that he believed Winmar to have completed at least fifty to sixty percent of the work on the Project.
27. On January 4, 2006, after not having received any further payment from Al Jazeera or response to its Notice of Default, Winmar informed Al Jazeera that it was suspending performance of the Contract pursuant to § 184.108.40.206 of the Standard Form because it had not been paid those amounts certified by the Architect. Winmar's letter stated that, "[i]f AJI can provide Winmar with all amounts owed under the contract amounting to $1,363,463 by Friday, January 6, 2006, Winmar may decide not to assess the $3,500 [per day] amount against AJI" to which it was entitled under § 220.127.116.11.*fn8
28. One day later, on January 5, 2006, in a letter to Winmar, the Architect rescinded his certification of Payment Application Numbers 1, 2b, and 3, which encompassed the total amount of $1,363,463. The Architect stated that the certifications had been made in error, and were being withdrawn due to "a number of discrepancies in the . . . Application documents, as well as the lack of appropriate supporting documentation."
29. On January 6, 2006, the Architect wrote a second letter to Condon which clarified the discrepancies and documentation needed in order to "re-certify" the rescinded certifications:
(1) Partial lien releases for Winmar, all subcontractors and suppliers, indicating initial contract amounts, showing payments to date, and showing payments pending for work in place. Such lien releases should be on [sic] a form acceptable to AJI. Please submit your form of lien release to our owner's representative, Mark G. Anderson Consultants, with copy to our firm.
(2) Evidence in the form of purchase orders and delivery dates for long lead time equipment (generators, chillers, air handling equipment, electrical gear) indicating receipt of deposits. Previous evidence from the subcontractor is not acceptable - it needs to be from the manufacturer, showing that the equipment has been ordered. Also, an appropriate value for the released equipment needs to be agreed to, prior to releasing funds. Winmar has not provided the value of this equipment, from review of our available documents.
(3) Backup for the overtime expenditure to date, including a calculation of how the premium time rates are calculated. Provide backup indicating what subcontractors have billed, along with self-performed work. We would expect time sheets, and the superintendent's daily reports indicating man power levels by trade.
(4) Correction of Winmar's Requisitions, which contains [sic] mathematical errors, and billings in excess of approved change order amounts.
(5) Provide full back up for change order numbers 6A, 6C and 10.
(6) Previously submitted subcontractor backup for change orders does not provide adequate information for review / verification. Provide further backup for all change orders, including material breakdown, rates, markups, fees, and other charges, with a breakdown by subcontractor, general conditions and fees.
30. The items listed in the Architect's letter of January 6, 2006, were based on the recommendations made by Kris Collins of Mark G. Anderson Consultants in a January 6, 2006 letter to the Architect. These requests were recommended by Collins based on his view that § 5.1.6 of the Standard Form "requir[es] payment for 1) costs of actual work in place, and 2) appropriate advance funding for actual equipment and/or materials that have been ordered." In his letter to the Architect, Collins also stated his view that, under the Contract, the Monthly Cash Flow Projection Sheet "is not in fact a payment schedule for direct payments to Winmar, but an escrow-funding vehicle."
31. Winmar refused to provide the documentation requested by the Architect, believing that it was not obligated to do so under the Contract.
32. On January 11, 2006, a meeting was held between Villegas and Condon of Winmar, Collins and Mark G. Anderson of Mark G. Anderson Consultants, and Clive Brady of Al Jazeera. Counsel for Winmar and Al Jazeera were also present.
33. The parties disagree about the purpose of the January 11, 2006, meeting and whether it was held for the purpose of "settlement discussions." In fact, no agreement was ever reached between Winmar and Al Jazeera at that meeting as to the amounts due Winmar for work completed, or as to the percent of progress completed in each category of work.*fn9
34. At the end of the meeting, counsel for Al Jazeera informed counsel for Winmar that Al Jazeera would be terminating the Contract for convenience under § 14.4 of the General Conditions, and followed up with a letter confirming that termination on January 12, 2006.
35. In an effort to recoup some of the money Winmar claimed it was due, Winmar subsequently submitted two revised Payment Applications that substantially reduced the amounts previously claimed.
36. First, on January 18, 2006, Winmar submitted a revised version of Payment Application Number 3, described as "Final Closeout," claiming $653,449, rather than the total amount of $1,363,463 claimed in Winmar's earlier Payment Applications, for the entire period of Winmar's work ending January 11, 2006. Winmar prepared this submission on the basis of the figures Villegas believed that Chris Condon and Mark G. Anderson had agreed to at the January 11, 2006 meeting.
37. This revised Payment Application was submitted to Mark G. Anderson Consultants. Kris Collins responded by fax, dated January 23, 2006, that the Architect had the sole authority to certify invoices. He also indicated that he had forwarded the revised Payment Application to the Architect, who, on January 19, 2006 refused to certify it in the absence of documentation.
38. On January 23, 2006, Winmar submitted, through counsel, a second revised version of Payment Application Number 3, claiming $355,297 due for the period ending January 11, 2006. Winmar's President calculated this amount as follows: he started with the first revised version of Payment Application Number 3, which claimed $653,449, and then subtracted approximately $300,000 on the basis that he would have had to spend that amount if the dispute had to be litigated.
39. The second revised submission was sent to a number of people on the Project, but no response was made.
40. On or about January 30, 2006, Al Jazeera's bank, Qatar National Bank ("QNB"), erroneously transferred $474,677 to Winmar's holding account in response to Al Jazeera's request to confirm that its December 12, 2005 payment of that amount had been made.*fn10
41. Winmar used the funds received as a result of QNB's erroneous transfer to pay all its sub-contractors for work performed and all other outstanding bills related to its work on the Project.
42. On February 3, 2006, Al Jazeera informed Winmar that, according to its calculations, it had overpaid Winmar by approximately $200,000, apart from the $474,677 erroneous transfer by QNB. Al Jazeera accordingly submitted a formal claim on February 24, 2006 to the Architect, with notice to Winmar, for refund of the overpaid amounts. Winmar replied, through counsel, that it "[was] unaware until [Al Jazeera's February 24, 2006] letter was received that any wire had been accomplished on January 31, 2006."
43. On March 9, 2006, Winmar tendered to Al Jazeera a check in the amount of $119,380--the difference between the $355,297 claimed in Winmar's second revised Payment Application Number 3 and the erroneous $474,677 payment it had received from QNB.
44. On March 20, 2006, the Architect ruled on Al Jazeera's claim for $200,000. The Architect stated that he rescinded certification of Payment Applications Numbers 1, 2b, and 3 because they were certified in error, given his interpretation of the Contract, the lack of supporting documentation from Winmar, and inconsistencies in invoices submitted by Winmar. The Architect then ruled that he was rescinding his certification of Payment Application Number 2 for $474,677, which Al Jazeera had paid, for lack of appropriate documentation. The Architect further ruled that, "[p]ursuant to Section 4.3 and 4.4 of the General Conditions and based on the services performed by Winmar prior to Al Jazeera International's termination of the Contract, Winmar has been overpaid by the amount of $855,976 and Al Jazeera International is due a refund in that amount less that portion of the overhead and fee for which Winmar may be entitled as a result of Al Jazeera International's termination of the Contract."
45. By letter dated March 21, 2006, to Chris Condon of Winmar, the Architect rescinded his certification of Payment Application Number 2 "for change order No. 1 and No. 2 in the amount of $157,000 and $225,000 respectively until such time as they can be corrected or otherwise supported ...