Weitz Co. LLC v. MacKenzie House, LLC ( 2011 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 10-3713
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The Weitz Company LLC, *
*
Appellant, *
*
v. * Appeal from the United States
* District Court for the
MacKenzie House, LLC; * Western District of Missouri.
MH Metropolitan, LLC; *
Arrowhead Contracting, Inc.; *
Concorde Construction Co., Inc., *
*
Appellees. *
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Submitted: September 20, 2011
Filed: December 8, 2011
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Before MELLOY, SMITH, and BENTON, Circuit Judges.
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BENTON, Circuit Judge.
The Weitz Company, LLC sued MacKenzie House, LLC and MH Metropolitan,
LLC for breach of a construction contract. Arrowhead Contracting, Inc. and Concorde
Co., Inc. are third-party defendants. MH Metropolitan counterclaimed for breach of
the same contract, seeking liquidated damages and the cost to complete the project.
Arrowhead also counterclaimed. The jury returned a verdict of $4,991,970.87 for MH
Metropolitan, of $556,110 for Arrowhead, and for Concorde on Weitz’s claim. The
district court1 denied post-judgment motions. Weitz appeals. Jurisdiction being
proper under 28 U.S.C. § 1291, this court affirms.
I.
MacKenzie House was the developer of a multi-building apartment project
known as the Metropolitan Apartments. MacKenzie was also the managing member
of MH Metropolitan, the owner of the Apartments. MH Metropolitan hired Weitz as
the general contractor. Weitz initially agreed to complete the project within 458 days
for a maximum price of $13,498,006. The time for completion was ultimately
extended to 507 days, with the maximum price increased to $14,401,609. Weitz
subcontracted with Arrowhead and Concorde, among others.
Work on the Apartments was delayed. Weitz attributes the delays to its
subcontractors. MH Metropolitan blames Weitz, asserting several material breaches,
including failing to provide required lien waivers, allowing liens to be filed against
the project, providing poor quality construction, and falsifying a pay application. MH
Metropolitan contends it exercised its contractual right to withhold payment on two
of Weitz’s applications. Weitz stopped work on December 26, 2006. By then, the
first Building of the project was four months late, and the entire project two months
late. On January 18, 2007, MH Metropolitan terminated Weitz for cause, finishing
the project without Weitz.
The next month, Weitz sued MacKenzie House and MH Metropolitan for the
unpaid contract balances. MH Metropolitan counterclaimed for breach of contract,
seeking liquidated damages and the cost to complete. According to MH Metropolitan,
Weitz’s mismanagement was cause to stop payment and cancel the contract. Weitz
1
The Honorable Ortrie D. Smith, United States District Judge for the Western
District of Missouri.
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made third-party claims against Arrowhead and Concorde for their allegedly defective
work, the cost to complete their work, and the delays they allegedly caused.
Arrowhead counterclaimed for amounts due under its subcontract, arguing Weitz
terminated it improperly.
The jury awarded MH Metropolitan liquidated damages of $3,022,520 due to
project delay, and $1,969,450.87 for the cost of completion. The jury also awarded
Arrowhead $556,110, and found for Concorde. The district court denied post-
judgment motions, entering judgment on the jury’s verdict. Weitz appeals.
II.
Weitz contends that the district court erred as a matter of law in six ways by:
not granting judgment as a matter of law against MH Metropolitan; excluding
evidence of two other construction projects involving the parties; miscalculating the
liquidated damages and completion costs; declining to enter judgment on Weitz’s
breach-of-contract claims against Arrowhead; not entering a default judgment against
Concorde for failing to appear at trial; and ruling that MacKenzie House could not be
vicariously liable for the acts of MH Metropolitan.
A.
Weitz argues that the district court erred in failing to grant it judgment as a
matter of law on MH Metropolitan’s breach-of-contract claim.
This court reviews de novo a denial of a motion for judgment as a matter of law.
Chalfant v. Titan Distrib., Inc., 475 F.3d 982, 988 (8th Cir. 2007). Judgment as a
matter of law is granted if “a party has been fully heard on an issue and there is no
legally sufficient evidentiary basis for a reasonable jury to find for that party on that
issue.” Fed. R. Civ. P. 50(a)(1). This court makes all reasonable inferences in favor
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of the nonmoving party and views the facts most favorably to that party. Chalfant,
475 F.3d at 988.
During the twelve-day trial, MH Metropolitan presented evidence that Weitz
committed several material breaches — failing to provide the required lien waivers,
allowing liens to be filed against the project, causing substantial delays in the project,
completing poor quality construction, and falsifying a pay application. MH
Metropolitan submitted testimony and videos showing Weitz’s poor quality
construction. The jury also heard that Weitz could not properly prepare, update, or
follow its schedules, which contributed to delaying the project. The project architect
concluded that Weitz breached the contract in at least these respects. The evidence
at trial also established other breaches. As a result, MH Metropolitan exercised the
contractual right to withhold payment and terminate Weitz for cause. As the jury
instructions noted, to recover for breach of contract, a party must show its own
substantial compliance with the contract. Brockman v. Soltysiak, 49 S.W.3d 740, 745
(Mo. App. 2001). Weitz alleges that it complied with the contract, but whether a
contract has been substantially performed depends on the facts and circumstances of
the particular case. In re Estate of English, 691 S.W.2d 485, 489 (Mo. App. 1985).
The jury as fact finder resolved this issue against Weitz. See Browning v. President
River Boat Casino-Missouri, Inc., 139 F.3d 631, 634 (8th Cir. 1998) (“Appellate
review of a jury verdict is extremely deferential”). There was a legally sufficient
evidentiary basis for the jury’s verdict. See 8th Cir. R. 47B.
B.
Weitz maintains that the district court incorrectly excluded evidence of two
other construction projects — one ending in litigation2 — involving the parties.
2
Weitz Co. v. MH Washington, 631 F.3d 510 (8th Cir. 2011).
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This court respects the district court’s “‘wide discretion in admitting and
excluding evidence, and its decision will not be disturbed unless there is a clear and
prejudicial abuse of discretion.’” McPheeters v. Black & Veatch Corp., 427 F.3d
1095, 1101 (8th Cir. 2005) (citation omitted). To warrant reversal, such a prejudicial
abuse of discretion must also affect the substantial rights of a party. Id. Likewise, the
denial of a motion for a new trial is reviewed for an abuse of discretion. Chalfant,
475 F.3d at 992. “The crucial determination ‘is whether a new trial should have been
granted to avoid a miscarriage of justice.’” PFS Distrib. Co. v. Raduechel, 574 F.3d
580, 589 (8th Cir. 2009) (citation omitted).
MacKenzie House was the developer on the two other projects Weitz references
(other corporate entities MacKenzie House managed owned the projects). Even
assuming that MH Metropolitan and MacKenzie House are one entity, however,
evidence of prior or other acts “is not admissible to prove the character of a person
in order to show conformity therewith.” Fed. R. Evid. 404(b). “[P]rior acts include
prior lawsuits.” Batiste-Davis v. Lincare, Inc., 526 F.3d 377, 380 (8th Cir. 2008).
Evidence of prior or other acts “may, however, be admissible for other purposes, such
as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or
absence of mistake or accident.” Fed. R. Evid. 404(b). This type of evidence is
admitted only when one of these legitimate purposes is at issue in the case. King v.
Arens, 16 F.3d 265, 268 (8th Cir. 1994); Donald v. Rast, 927 F.2d 379, 381 (8th Cir.
1991).
The only claims in this case are for breach of contract. The issue at trial was
whether the parties complied with the contract. Proving a breach here does not put
motive, intent, plan, or knowledge at issue. See Unit Drilling Co. v. Enron Oil &
Gas Co., 108 F.3d 1186, 1194 (10th Cir. 1997). Weitz argues that MH Metropolitan
“opened the door” to the evidence, but points to no instance where MH Metropolitan
focused on the other projects. In addition, the district court instructed the jury not to
speculate about the previous projects and to decide the case solely on the law and the
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evidence in this trial. In light of the instruction, the few instances where MH
Metropolitan alluded to another project do not affect Weitz’s substantial rights. The
district court properly exercised its discretion in excluding the evidence of other
projects.
C.
According to Weitz, the district court erred in miscalculating the liquidated
damages and completion costs.
Weitz asserts that the liquidated damages clause is a penalty. The interpretation
of a contract is a question of law, reviewed de novo. Simeone v. First Bank N.A., 971
F.2d 103 (8th Cir. 1992). Here, the liquidated damages clause was a reasonable
forecast of delay damages — as the parties agreed at the time of contracting — and
is thus enforceable. See Diffley v. Royal Papers, Inc., 948 S.W.2d 244, 246 (Mo.
App. 1997); Information Sys. & Networks Corp. v. City of Kansas City, 147 F.3d
711, 714 (8th Cir. 1998) (applying Missouri law).
Weitz argues that the liquidated damages are overstated because they were
measured based on the wrong number of buildings. The district court properly ruled
that the parties’ agreement is unclear about how many buildings should be used.
Because of this ambiguity, the issue was properly submitted to the jury, and this court
will not overturn their reasoned verdict. See Graham v. Goodman, 850 S.W.2d 351,
354 (Mo. banc 1993) (“The trial court must then determine from the evidence whether
the surrounding circumstances are such that a fact issue exists for the jury to
resolve.”); Fitch v. Doke, 532 F.2d 115, 117 (8th Cir. 1976) (“Where, however, the
contract is ambiguous, the meaning of its terms is to be determined by the jury in the
light of the evidence of the surrounding circumstances and the practical construction
of the parties.”). See generally Browning, 139 F.3d at 634 (“Appellate review of a
jury verdict is extremely deferential”).
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Weitz seeks to apply a Missouri Supreme Court decision limiting liquidated
damages for construction delay to the time before the owner removes the contractor
from the project. Moore v. Board of Regents, 115 S.W. 6, 12-13 (Mo. 1908). The
facts in Moore were different from those here: there, the project was not yet late when
the owner terminated the contract. Id. at 12-13. More importantly, if faced with this
case, the Missouri Supreme Court would not follow Moore. Moore relied on a New
York case for the principle that liquidated damages are not the correct measure of
damages when the contractor does not complete the project. Gallagher v. Baird, 66
N.Y.S. 759, 763 (App. Div. 1900). Gallagher actually stands for the proposition that
the cost to complete is a better measure of damages when a contractor abandons the
project before the contracted completion date. Id. at 762-63 (“There was no
completion or attempt to complete, but an utter abandonment, and such [liquidated
damages] clause was not intended to cover such a case, nor was provision made in the
contract for such a contingency.”).3 That conclusion does not resolve the calculation
of liquidated damages in this case where the project is late when the owner terminates
the contract.
Weitz also invokes a Missouri intermediate appellate case that acknowledges
the divided authorities, but follows Moore. Twin River Const. Co. v. Public Water
Dist. No. 6, 653 S.W.2d 682, 693-94 (Mo. App. 1983). Intermediate court decisions,
however, are not dispositive as to how a state’s highest court would resolve a matter.
E.g., Bogan v. General Motors Corp., 500 F.3d 828, 831 (8th Cir. 2007); cf. Six
Companies of California v. Joint Highway Dist. No. 13, 311 U.S. 180, 188 (1940)
3
At any rate, other cases in New York allow liquidated damages against a
contractor who abandons a project. See generally Jay M. Zitter, Annotation, Liability
of Contractor who Abandons Building Project Before Completion for Liquidated
Damages for Delay, 15 A.L.R. 5th 376, §§ 4-5 (1993) (compiling two contrary lines
of New York cases about whether the abandoning contractor can or cannot be held
liable for liquidated damages for period of time reasonably necessary to complete
project).
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(instructing federal appellate courts to follow intermediate state appellate court
decisions when “there is no convincing evidence that the law of the State is
otherwise.”); Washington v. Countrywide Home Loans, Inc., 2011 WL 3962831, *3
(8th Cir. 2011) (noting intermediate appellate court decisions must be followed if they
are the best evidence of the law). In the absence of guidance from the highest state
court (or a statute on point), the federal court’s task is to predict how the Missouri
Supreme Court would rule if confronted with the issue today. E.g., Pennsylvania
Nat’l Mut. Cas. Ins. Co. v. City of Pine Bluff, 354 F.3d 945, 952 (8th Cir. 2004);
Maschka v. Genuine Parts Co., 122 F.3d 566, 573 (8th Cir. 1997). If the Missouri
Supreme Court were to address the issue today, it would allow liquidated damages for
a reasonable time after abandonment by the contractor or termination by the owner.
Weitz contends that the contract precluded MH Metropolitan from claiming
certain damages as part of the completion costs. “When a breach [in a construction
contract] results from a combination of defective construction and a failure to
complete the work, the owners’ damages are calculated using the reasonable cost of
reconstruction, repair, and completion in accordance with the contract.” Ernery v.
Freeman, 84 S.W.3d 529, 536 (Mo. App. 2002); see also Information Systems, 147
F.3d at 713 (applying Missouri law). Weitz would categorize some of MH
Metropolitan’s damages as “delay damages” and “theft and property damages” that
the contract bars MH Metropolitan from recovering. MH Metropolitan responds that
the damages are in fact costs to complete incurred when it became the contractor on
the project. The district court correctly decided that these are issues of fact for the
jury. The jury rejected Weitz’s damages arguments, and this court will not overturn
its reasoned verdict. See Browning, 139 F.3d at 634 (“Appellate review of a jury
verdict is extremely deferential”).
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D.
Weitz claims that the district court should have entered judgment as a matter
of law for it on the breach-of-contract claims against Arrowhead.
This court reviews de novo a denial of a motion for judgment as a matter of law
and grants it if “a party has been fully heard on an issue and there is no legally
sufficient evidentiary basis for a reasonable jury to find for that party on that issue.”
Chalfant, 475 F.3d at 988; Fed. R. Civ. P. 50(a)(1). This court makes all reasonable
inferences in favor of the nonmoving party and views the facts most favorably to that
party. Chalfant, 475 F.3d at 988.
Weitz largely reargues its version of the facts. On each point, there was
sufficient evidence to reject Weitz’s position. The jury was entitled to credit
Arrowhead’s evidence that Weitz committed the first material breach and did not
substantially perform its agreement with Arrowhead, excusing Arrowhead from
performance. After receiving the evidence, the jury chose — as it was entitled to do
— to reject Weitz’s evidence. This court finds a legally sufficient evidentiary basis
for that choice. See 8th Cir. R. 47B.
E.
Weitz asserts that the district court erred in refusing to enter a default judgment
against Concorde when it failed to appear at trial, or in the alternative, refusing to
grant Weitz judgment as a matter of law on its claims against Concorde. This court
reviews decisions on default judgments for abuse of discretion. Forsythe v. Hales,
255 F.3d 487, 490 (8th Cir. 2001).
Concorde was represented by counsel for much of the litigation — filing an
answer, complying with all pretrial orders, and responding to all discovery requests
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and dispositive motions. By these acts, particularly by filing an answer, Concorde did
defend, and the district court was not required to enter a default judgment against it.
See United States v. Harre, 983 F.2d 128, 130 (8th Cir. 1993) (“Because [the party]
filed an answer . . . he indicated a desire to defend against the action.”); cf. Ackra
Direct Marketing Corp. v. Fingerhut Corp., 86 F.3d 852, 857 (8th Cir. 1996) (stating
it is within the district court’s discretion to enter default judgment even after filing of
answer if party’s later conduct includes ‘willful violations of court rules,
contumacious conduct, or intentional delays.’ (citation omitted)). About two and a
half weeks before trial, Concorde’s attorneys moved to withdraw; the court granted
the motion on January 13, 2010. On the morning of January 25, when trial began,
Concorde was not represented by counsel. The district court denied Weitz’s motion
for a default judgment, and Weitz — unopposed — submitted its claims against
Concorde to the jury. Choosing not to appear for trial — especially after defeating
motions to dismiss a counterclaim — does not necessarily constitute the “willful
violation” of court rules that places a defendant in default. See Harre, 983 F.2d at
130. (Default judgment for failure to defend is appropriate when the party's conduct
includes “willful violations of court rules, contumacious conduct, or intentional
delays.”). The jury rejected Weitz’s claims, and the district court properly allowed
that decision to stand. Cf. Pfanensteil Architects, Inc. v. Chouteau Petroleum Co.,
978 F.2d 430, 433 (8th Cir. 1992) (“When there are multiple defendants who may be
jointly and severally liable for damages alleged by plaintiff, and some but less than
all of those defendants default, the better practice is for the district court to stay its
determination of damages against the defaulters until plaintiff's claim against the
nondefaulters is resolved. . . . to avoid the problems of dealing with inconsistent
damage determinations . . . .”)
As the district court concluded, it would be unjust to grant judgment to Weitz
after the jury rejected its contentions.
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F.
Weitz contends that the district court should have ruled that MacKenzie House
— which did not sign the contract — could be vicariously liable for the acts of MH
Metropolitan. Because the district court properly found against Weitz on all issues,
there is no reason to consider the issue of vicarious liability.
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The judgment of the district court is affirmed.
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