Kiewit Power Constructors Co. v. City of Los Angeles ( 2020 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAY 8 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
KIEWIT POWER CONSTRUCTORS CO., No. 18-56218
a Delaware corporation,
D.C. No.
Plaintiff-counter- 2:16-cv-02590-AB-GJS
defendant-Appellee,
v. MEMORANDUM*
CITY OF LOS ANGELES, acting by and
through the Department of Water and
Power,
Defendant-counter-claimant-
Appellant.
KIEWIT POWER CONSTRUCTORS CO., No. 18-56537
a Delaware corporation,
D.C. No.
Plaintiff-counter- 2:16-cv-02590-AB-GJS
defendant-Appellant,
v.
CITY OF LOS ANGELES, acting by and
through the Department of Water and
Power,
Defendant-counter-claimant-
Appellee.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Appeal from the United States District Court
for the Central District of California
Andre Birotte, Jr., District Judge, Presiding
Submitted May 4, 2020**
Pasadena, California
Before: OWENS and BADE, Circuit Judges, and MOSKOWITZ,*** District
Judge.
The City of Los Angeles, acting through the Department of Water and
Power (“LADWP”), appeals from the judgment and award of damages for the
breach of the implied covenant of good faith and fair dealing to Kiewit Power
Constructors Co. (“Kiewit”), and the district court’s prior denial of LADWP’s
motion for summary judgment. LADWP also appeals the denial of its motion for a
judgment as a matter of law and post-judgment motions. Kiewit cross-appeals
from post-trial rulings denying prejudgment interest and costs. We have
jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.
1. LADWP contends that the jury’s verdict should be vacated as a matter
of law because it is contrary to California law regarding public works contracts.
Under California law, “public works contracts are the subject of intensive statutory
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Barry Ted Moskowitz, United States District Judge for
the Southern District of California, sitting by designation.
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regulation and lack the freedom of modification present in private party contracts.”
P&D Consultants, Inc. v. City of Carlsbad, 119 Cal. Rptr. 3d 253, 262 (Ct. App.
2010) (emphasis in original) (quoting Amelco Elec. v. City of Thousand Oaks, 38
P.3d 1120, 1129 (Cal. 2002)). Lower California courts have recognized that public
contracts cannot be modified orally, enforced by estoppel, or enforced under quasi-
contract theories or implied-in-fact contract theories. See, e.g., Green Valley
Landowners Assoc. v. City of Vallejo, 194 Cal. Rptr. 3d 19, 29 (Ct. App. 2015);
Katsura v. City of San Buenaventura, 65 Cal. Rptr. 3d 762, 765 (Ct. App. 2007).
But the California Supreme Court recognizes that the implied covenant of good
faith and fair dealing applies in all contracts. Cates Constr., Inc. v. Talbot
Partners, 980 P.2d 407, 415 (Cal. 1999) (citing Foley v. Interactive Data Corp.,
765 P.2d 373, 389 (Cal. 1988)). Here, both LADWP and Kiewit asserted and
prevailed on claims of the implied covenant of good faith and fair dealing.1
LADWP recognizes that the key issue on appeal is the scope of that covenant in
this case. See Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 826 P.2d 710,
727 (Cal. 1992) (“[T]he scope of conduct prohibited by the covenant of good faith
is circumscribed by the purposes and express terms of the contract.”). Considering
the California Supreme Court’s recognition that the implied covenant of good faith
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LADWP did not object to the jury instructions or the special verdict form that
included Kiewit’s breach of the implied covenant of good faith and fair dealing.
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and fair dealing applies in all contracts, we decline to vacate the jury’s verdict in
this case as a matter of law.
2. LADWP contends that if the implied covenant of good faith and fair
dealing applies, the judgment awarding Kiewit damages should be vacated because
application of that covenant circumvents the express language of the parties’
contract and, thus, Kiewit did not have a reasonable expectation of payment. The
implied covenant of good faith and fair dealing only protects “legitimate
expectations of the parties which arise from the contract.” Brandt v. Lockheed
Missiles & Space Co., 201 Cal. Rptr. 746, 749 (Ct. App. 1984) (citation omitted).
Although Kiewit did not comply with the contract’s provision governing change
orders, section 3.16, that provision was not the sole mechanism for Kiewit to seek
additional compensation for costs it incurred to meet the original substantial
completion date despite the delayed delivery of key equipment by LADWP’s
original equipment manufacturer (“OEM”). Section 3.19 provided another means
for Kiewit to protest and seek additional compensation if Kiewit considered
LADWP’s demands “outside the requirements of” the contract. As the district
court found, summary judgment was not appropriate because a genuine issue
existed on whether LADWP made demands outside the requirements of the
contract, thereby triggering section 3.19. See Fed. R. Civ. P. 56(a).
The evidence supports a conclusion that Kiewit considered LADWP’s
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demand that Kiewit meet the original substantial completion date despite the
OEM’s late equipment delivery to be outside the requirements of the contract.
Thus, applying the implied covenant of good faith and fair dealing does not create
obligations that are inconsistent with the terms of the contract. Carma Developers,
826 P.2d at 727.
LADWP further argues that Kiewit did not comply with the requirements for
submitting a claim under section 3.19 and, thus, still lacked a legitimate
expectation of payment arising from the contract. See Brandt, 201 Cal. Rptr. at
749. A genuine issue of fact on whether Kiewit’s communications with LADWP
satisfied section 3.19’s requirements precluded summary judgment in favor of
LADWP. See Fed. R. Civ. P. 56(a).
Construing the evidence in favor of Kiewit, as we must on review of the
denial of LADWP’s Rule 50 motions, does not lead to only one conclusion that is
contrary to the jury’s verdict. See Pavao v. Pagay, 307 F.3d 915, 918 (9th Cir.
2002). The evidence supports the conclusion that, on February 10, 2016,
LADWP’s tone changed from its earlier communications indicating that it was
considering Kiewit’s requests for additional compensation. Considering that shift,
Kiewit’s March 2, 2016 letter taking issue with LADWP’s position that the
“parties had agreed to a schedule without cost implications” was promptly
delivered. The jury could have reasonably concluded the March 2, 2016 letter was
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a protest for additional compensation under section 3.19(A). Section 3.19(A) did
not specify the form of a “written statement of protest,” and the March 2, 2016
letter expressed Kiewit’s dissent to LADWP’s position and thus, was a protest
under that word’s plain meaning. See Protest, Black’s Law Dictionary (11th ed.
2019) (A protest is “a formal statement or action expressing dissent or
disapproval”); see also Valencia v. Smyth, 110 Cal. Rptr. 3d 180, 185-86 (Ct. App.
2010) (recognizing the plain meaning rule).
The jury could also have reasonably concluded that Kiewit certified that it
believed the damages requested in its claim actually and accurately reflected
LADWP’s liability. Section 3.19(C) of the contract required that “all claims” shall
be so certified but did impose a certification requirement on the written statement
of protest. While the March 2, 2016 letter did not use the word “certify” or the
other language in section 3.19(C), it indicated that Kiewit was submitting its cost
information pursuant to LADWP’s requests and attached supporting
documentation regarding Kiewit’s costs. Considering the ambiguity in section
3.19’s provisions, the jury reasonably could have concluded that, when considered
as a whole, the March 2, 2016 letter and supporting documentation regarding
Kiewit’s costs certified that Kiewit believed LADWP was liable for those costs in
compliance with section 3.19(C).
Because the contract provided a mechanism for Kiewit to seek additional
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compensation, section 3.19, and because the jury could reasonably conclude that
Kiewit satisfied section 3.19’s requirements for a protest, Kiewit had a reasonable
expectation of payment and the implied covenant of good faith and fair dealing
created a duty for LADWP to negotiate Kiewit’s protest and the amount of
compensation. Therefore, we reject LADWP’s argument that the judgment
awarding Kiewit damages should be vacated on the ground that the application of
the implied covenant of good faith and fair dealing circumvents the express
language of the parties’ contract. See Carma Developers, 826 P.2d at 727.
3. Prejudgment interest is a substantive matter governed by California
law. See Sea Hawk Foods, Inc. v. Exxon Corp. & Exxon Shipping Co. (In re Exxon
Valdez), 484 F.3d 1098, 1101 (9th Cir. 2007). Under California Civil Code section
3287(a), a court must award prejudgment interest when a plaintiff is “entitled to
recover damages certain, or capable of being made certain by calculation.” For
purposes of section 3287(a), “[d]amages are deemed certain or capable of being
made certain . . . where there is essentially no dispute between the parties
concerning the basis of the computation of damages if any are recoverable but
where their dispute centers on the issue of liability giving rise to damages.”
Warren v. Kia Motors Am., Inc., 241 Cal. Rptr. 3d 263, 280-81 (Ct. App. 2018)
(internal quotation omitted). But section 3287(a) does not “authorize prejudgment
interest where the amount of damages . . . depends upon a judicial determination
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based upon conflicting evidence [and] . . . cannot be resolved except by verdict or
judgment.” Id. (alteration and quotation omitted). We review the district court’s
denial of prejudgment interest for abuse of discretion. Champion Produce, Inc. v.
Ruby Robinson Co., Inc., 342 F.3d 1016, 1020 (9th Cir. 2003).
The district court applied section 3287(a) and concluded that Kiewit was not
entitled to prejudgment interest because the amount of damages was not certain until
the jury’s verdict. The amount of damages Kiewit requested varied over time by
over $2 million. This difference is not minor. See Chesapeake Indus., Inc. v. Togova
Enters., Inc., 197 Cal. Rptr. 348, 354 (Ct. App. 1983) (finding that the “large
discrepancy” between the amount claimed, $115,000.00, and the final judgment,
$34,830.04, supported the conclusion that the amount was not calculable).
Additionally, as the district court noted, productivity losses was the major category
of Kiewit’s additional costs. Kiewit’s own expert testified that there are several
bases for measuring productivity on a construction site and many different methods
for determining what productivity loss is attributable to what cause. The parties
disputed the methods for determining Kiewit’s costs, whether Kiewit had provided
information sufficient to determine those costs, and the accuracy of Kiewit’s
assumptions about those costs. Kiewit itself offered several different methods for
calculating its costs and reduced its evaluation of damages during the litigation.
Considering the foregoing, the district court did not abuse its discretion in denying
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Kiewit prejudgment interest. See id.; Nicholson-Brown, Inc. v. City of San Jose, 133
Cal. Rptr. 159, 164-65 (Ct. App. 1976), disapproved of on other grounds by Bullis
v. Sec. Pac. Nat’l Bank, 582 P.2d 109 (Cal. 1978).
4. Federal Rule of Civil Procedure 54(d) governs the award of costs
“even in diversity cases.” Champion Produce, 342 F.3d at 1022. Rule 54(d)
creates a presumption in favor of awarding costs to the prevailing party. See Fed.
R. Civ. P. 54(d). But when the judgment is mixed, the district court has the
discretion to require “each party to bear its own costs.” Amarel v. Connell, 102
F.3d 1494, 1523 (9th Cir. 1996). This court reviews for an abuse of discretion a
district court’s decision to award or deny costs. Ass’n of Mexican-Am. Educators
v. California, 231 F.3d 572, 592 (9th Cir. 2000) (en banc).
Here, the district court gave sufficient reasons for denying costs to Kiewit
including that the judgment was mixed, the issues in the case were close and
difficult, and the difficulty of allocating costs. These are appropriate reasons for
denying costs. See Champion Produce, 342 F.3d at 1023; Amarel, 102 F.3d at
1523. Because the district court provided sufficient reasons to supports its
decision, it did not abuse its discretion in denying Kiewit costs.
AFFIRMED. Each party shall bear its own costs on appeal.
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