2300 Pennsylvania Avenue, LLC v. Harkins Builders, Inc.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-1346
2300 PENNSYLVANIA AVENUE, LLC,
Plaintiff - Appellee,
v.
HARKINS BUILDERS, INC.,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Liam O’Grady, District
Judge. (1:10-cv-01321-LO-IDD)
Argued: January 31, 2013 Decided: March 4, 2013
Before MOTZ, KING, and AGEE, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: William Rutherford Mauck, Jr., SPOTTS FAIN, PC,
Richmond, Virginia, for Appellant. Patricia Ann Millett, AKIN,
GUMP, STRAUSS, HAUER & FELD, LLP, Washington, D.C., for
Appellee. ON BRIEF: Mark S. Dachille, HUDDLES JONES SORTEBERG &
DACHILLE, PC, Columbia, Maryland, for Appellant. Hyland Hunt,
AKIN, GUMP, STRAUSS, HAUER & FELD, LLP, Washington, D.C., for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
2300 Pennsylvania Avenue, LLC, brought this action
against Harkins Builders, Inc., alleging breach of contract,
fraud, and negligence arising out of a contract for the
construction of a building project in Washington, D.C. The
district court granted summary judgment to 2300 as to Harkins’
liability for liquidated damages. Following a bench trial, the
court entered judgment for 2300, in the total amount of
$3,922,189 in damages. Harkins appeals, raising several
arguments. We affirm.
I.
In August 2008, 2300, as owner and developer, and
Harkins, as general contractor, entered into a written contract
for the construction of a mixed-use apartment and retail
building project in Washington, D.C. The contract consisted of
several documents, including AIA Document A101-1997, the
“Standard Form of Agreement Between Owner and Contractor,” AIA
Document A201-1997, the “General Conditions of the Contract for
Construction,” and “Modifications issued after execution of” the
A101-1997, which include the various numbered Change Orders.
A.
Relevant to this appeal, the contract requires windows
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meeting the performance requirements of an “HC-70 window,” a
high-performance window. In December 2009, Harkins discovered
some of the windows leaked. After initial remediation efforts
failed, Harkins learned that a manufacturing defect caused the
leaks. Between December 2009 and October 2010, Harkins and its
subcontractors undertook at least five remediation efforts on
the windows, testing after each remediation. These efforts
involved drilling holes, injecting foam compound and seam
sealer, applying new sealant and caulking, and installing
redesigned sashes. On August 2, 2010, 2300 retained a testing
agency that tested 24 window openings. Two openings failed but
were remediated and tested with successful results that same
day. At least as late as December 2010, the project architect
observed some window leaks.
Also in December 2009, Harkins observed approximately
twenty leaks in the garage walls. The leaks appeared at
approximately the same height and in “pretty consistent
intervals.” Harkins’ sub-contractor, Prospect Waterproofing
Co., said that “capillary action” caused the uniform leaks in
the walls and denied responsibility. Harkins accepted
responsibility for the leaks; Prospect conducted the repairs.
Despite several rounds of repairs, which included injecting
cement and chemical grout in the leaking areas, the project
architect continued to observe leaks in late 2010 and spring
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2011. The architect noted that the leak heights correlated to
the approximate horizontal boundary between the two
waterproofing systems. In light of the “pattern created by the
water penetration,” the architect also determined that “the
waterproofing in the garage was either damaged or not installed
properly,” due to “poor quality waterproofing, improper
installation, or postinstallation damage.”
The contract requires Harkins to achieve “Substantial
Completion” of the entire building by April 25, 2010. Under the
contract, the architect’s “Certificate of Substantial Completion
shall establish the date of Substantial Completion.”
The architect’s certification must be made “in
accordance with Section 9.8,” which provides that the architect
will determine that the building is substantially complete when
it “is sufficiently complete in accordance with the Contract
Documents so that [2300] can occupy or utilize the [building]
for its intended use.” Substantial completion is to be
determined building-wide, rather than on a unit-by-unit basis.
Under the contract, Harkins is liable for liquidated damages if
it did not achieve substantial completion by April 25, 2010.
The D.C. Department of Consumer and Regulatory Affairs
issued a Certificate of Occupancy on February 25, 2010, and
tenants began moving into units two days later. A month later,
on March 30, Harkins requested payment of a $150,000
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“Substantial Completion Incentive Bonus” established by Change
Order 9, which modified the liquidated damages and bonus
provisions of the contract. In Change Order 91 dated April 23,
2010, the architect approved and 2300 agreed to pay Harkins a
$150,000 bonus, which was called a “Certificate of Occupancy
Bonus.”
By letter dated July 13, 2010, Harkins requested that
the architect issue the Certificate of Substantial Completion.
On September 23, 2010, the architect issued the certificate,
which set August 2, 2010 as the Date of Substantial Completion.
The architect attached to the certificate a “punch list” of
tasks that Harkins was to complete before final payment would
issue. On October 5, 2010, Harkins advised 2300 that it would
not execute the Certificate unless the Date of Substantial
Completion was changed to April 25, 2010, and the punch list
removed. 2300 did not do this but did execute the certificate
on October 7, 2010.
B.
On November 19, 2010, 2300 filed a five-count
complaint against Harkins in the United States District Court
for the Eastern District of Virginia. In its complaint, 2300
alleged that Harkins breached its express and implied
obligations to 2300 by furnishing deficient windows and damaged
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garage waterproofing, and by failing to properly construct and
install the roof, adhere to specified building dimensions
required by federal law, timely complete the work, and submit
required documentation to 2300. 2300 further alleged that
Harkins failed to act in good faith and deal fairly with 2300,
and breached its express and implied warranties under the
contract. Finally, 2300 alleged that Harkins negligently
“breached its duty to exercise reasonable care and competence by
performing substandard and defective work.”
Harkins answered the complaint and asserted a
counterclaim for breach of contract, alleging that 2300 had
withheld the $510,000 contract balance even though Harkins
“fully and properly fulfilled all of its obligations under the
contract.” In March 2011, after being granted leave to do so,
2300 filed an amended complaint, adding a fraud count, which
Harkins answered.
Shortly thereafter, upon the close of discovery, each
party moved for partial summary judgment. The court granted
summary judgment to 2300 as to liability on its liquidated
damages claim, finding Harkins had failed to achieve substantial
completion under the contract prior to August 2, 2010. The
court denied the parties’ remaining motions for summary
judgment. After a bench trial, the court issued a memorandum
opinion and order for judgment to 2300, finding that Harkins had
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breached the contract with respect to the windows and
waterproofing. The court further found that 2300 failed to
demonstrate by a preponderance of the evidence that the roof did
not meet contract specifications, but in light of the parties’
agreement, found 2300 entitled to compensation to relocate the
roof condenser. The court awarded 2300 damages in the amount of
$3,922,189, which included $2,683,962 for window replacement,
$210,000 for waterproofing repair and maintenance, $3,500 to
relocate the roof condenser, $637,200 in liquidated damages, and
$387,527 in associated fees and costs. As to 2300’s fraud and
negligence claims, the court awarded judgment to Harkins. The
court rejected Harkins’ counterclaim for recovery of the
$510,000.00 contract balance and refused to credit the amount to
Harkins.
Harkins timely noted this appeal.
II.
After carefully considering the record, the briefs,
and the applicable law, and having the benefit of oral argument
from the parties, we affirm the judgment in favor of 2300 for
the reasons well-stated in the district court's memorandum
opinion. We engage in further discussion only to address two
issues: the district court’s ruling on summary judgment, which
was entered orally from the bench; and the calculation of
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damages, which Harkins asserts must be remanded to address
mathematical errors.
A.
Under Change Order 9 of the contract, Harkins was
“liable for and shall pay to the Owner . . . Liquidated Damages
. . . if substantial completion has not been reached as per” the
contract by a certain date. The parties’ cross-motions for
summary judgment on liability for liquidated damages focused on
the definition of “substantial completion” under the contract.
We review de novo the district court’s award of
partial summary judgment on liquidated damages to
2300. See Wash. Metro. Area Transit Auth. v. Potomac Inv.
Props., Inc., 476 F.3d 231, 234 (4th Cir. 2007). Because this
appeal invokes our diversity jurisdiction, we apply state
substantive law and federal procedural law. See Gaspirini v.
Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996).
The parties agree that District of Columbia law
governs the contract at issue in this case. Under District law,
“summary judgment is appropriate where a contract is
unambiguous” on its face. Holland v. Hannan, 456 A.2d 807, 815
(D.C. 1983). When interpreting a contract under District law,
we must determine “what a reasonable person in the position of
the parties would have thought the [contract] meant.” 1010
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Potomac Assocs. v. Grocery Mfrs. of Am., Inc., 485 A.2d 199, 205
(D.C. 1984). To do so, we interpret the contract “as a whole,
giving a reasonable, lawful, and effective meaning to all its
terms, and ascertaining the meaning in light of all the
circumstances surrounding the parties at the time [it] was
made.” Nest & Totah Venture, LLC v. Deutsch, 31 A.3d 1211, 1219
(D.C. 2011).
Properly applying District law, the court determined
that the contract unambiguously defines substantial completion.
Pursuant to the contract, “[w]hen the Work or designated portion
thereof is substantially complete, the Architect will prepare a
Certificate of Substantial Completion which shall establish the
date of Substantial Completion.” Further, Harkins’ submission
of certain documents to the architect is a prerequisite to
achieving substantial completion. If the architect notifies
Harkins that an item “is not sufficiently complete in accordance
with the Contract Documents,” Harkins’ completion or correction
of that item is a prerequisite to issuance of the Certificate of
Substantial Completion.
As Harkins correctly notes, the contract does provide
that at the time of substantial completion, “the Work or
designated portion thereof is sufficiently complete in
accordance with the Contract Documents so that the Owner can
occupy or utilize the Work for its intended use.” However, the
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contract also expressly provides that substantial completion is
not a prerequisite to occupancy or use. Moreover, the argument
Harkins advances reads the requirement of the architect’s
certification out of the definition of substantial completion
and, thus, fails to give “effective meaning to all its terms” as
District law requires. Nest & Totah Venture, 31 A.3d at 1219.
Given the clarity of the contract when viewed as a
whole, the district court did not err in granting partial
summary judgment to 2300, finding Harkins liable for liquidated
damages. Id.
B.
The remaining issue we address here concerns the
district court’s calculation of damages following the eight-day
bench trial. Harkins argues that the court miscalculated total
damages due to mathematical errors. Specifically, Harkins
claims that the district court miscalculated bond costs, permit
fees, and the General Contractor fee.
Under District law, the damages amount need be only a
“just and reasonable estimate based on relevant data,” and need
not be “proven with mathematical precision.” Affordable
Elegance Travel, Inc. v. Worldspan, L.P., 774 A.2d 320, 329
(D.C. 2001). Moreover, we have recognized that “[t]he trial
court, as a fact-finder, possesses considerable discretion in
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fixing damages, and its decision will be upheld absent clear
error.” Little Beaver Enters. v. Humphreys Rys., 719 F.2d 75,
79 (4th Cir. 1983). We find that the court’s damages award,
even if it did not precisely calculate total damages,
nonetheless was “just and reasonable.” Further, we reject
Harkins’ challenges to the district court’s evidentiary rulings,
finding no abuse of discretion in the court’s admission of lay
opinion testimony. See Fed. R. Evid. 701; Noel v. Artson, 641
F.3d 580, 591 (4th Cir. 2011). Finally, we note that, upon
review of the record, we agree with 2300 that Harkins waived its
claim that the court neglected to remove $82,600 in costs
related to roof repair. Accordingly, we affirm the amount of
the award.
III.
For these reasons, and for the reasons stated by the
district court, judgment in favor of 2300 in the amount of
$3,922,189 is
AFFIRMED.
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