Carrothers Const Co v. Dallas Tx City of

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 95-10723
_______________________
CARROTHERS CONSTRUCTION CO., INC.,
Plaintiff-Appellee,
versus
DALLAS TX CITY OF; NAT’L PROJECTS, INC.,
Defendants-Appellants.
_________________________________________________________________
Appeal from the United States District Court
for the Northern District of Texas
(3:90-CV-70-BD)
_________________________________________________________________
October 11, 1996
Before KING, JONES, and SMITH, Circuit Judges.
EDITH H. JONES, Circuit Judge:*
This case concerns claims by Carrothers Construction
Company ("Carrothers") against the City of Dallas ("the City") and
National Projects, Inc. ("NPI") for the breach of two construction
contracts. After a three week trial, the jury found that NPI and
the City had breached both contracts and awarded Carrothers
$1,914,030 in damages. The trial court entered judgment
*
Pursuant to Local Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in Local Rule 47.5.4.
accordingly and assessed an additional $1,517,402 in pre-judgment
interest against NPI and the City. The court also awarded against
NPI only attorney's fees of $629,120 for the trial and up to
$70,000 for the appeal. NPI and the City now appeal. We affirm
the trial court's judgment.
I. BACKGROUND
In 1984, the U.S. Environmental Protection Agency
determined that the City was not in compliance with federal clean
water standards. To comply with the EPA's mandate, the City
entered into a $104 million contract with Blount Brothers
Construction Company to enlarge its Southside Wastewater Treatment
Plant. This enlargement consisted of the construction of nine new
buildings which would be connected by an underground piping system.
One year after hiring Blount, the City became
dissatisfied with its performance and terminated the contract. In
its place, the City hired NPI to manage the completion of the
construction begun by Blount. NPI devised a plan whereby the City
would re-bid the project, utilizing, 14 prime contracts to finish
the enlargement. NPI would coordinate the bids and advise the City
on awarding the contracts. NPI and the City also agreed that the
City would assign its contracts with the prime contractors to NPI,
NPI would manage the project, and the City would pay the prime
contractors.
2
Carrothers bid on several of the prime contracts. In
July 1987, the City awarded Carrothers Contract 87-712, in the
amount of $880,000, for the construction of the flow splitter and
grit buildings, and Contract 87-730, in the amount of $1,525,000,
for the construction of the filter building. Carrothers was
responsible for completing the concrete and resteel of the
buildings; other contractors would complete their mechanical,
electrical, and piping systems.
Carrothers entered into contracts with the City for both
projects, and the City assigned the contracts to NPI. Because of
the EPA's order, the contracts recognized that "time was of
essence" in completing the wastewater treatment plant enlargement.
Contract 712 required Carrothers to start work on the flow splitter
and grit buildings by July 27, 1987 and to complete performance by
January 15, 1988. Contract 730 required Carrothers to start work
on July 20, 1987 and to complete work by April 3, 1988.
In turn, the contracts provided that NPI would
"coordinate the work at the project site"; "manage the construction
of the project and the performance of the construction work"; be
responsible for the project Master Schedule, coordinate the
construction, and administer the contract; "furnish as indicated in
the contract documents and not later than the date when needed by
the contractor, the lands upon which the work is to be done";
promptly investigate any complaint that a contractor was failing to
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coordinate its work with other contractors; and inspect all work
performed.
To carry out these responsibilities, the contracts
provided that NPI had the right "to request any contractor or
subcontractor cease work at a particular location" and move to
another location; to suspend temporarily the work of one contractor
to coordinate or expedite the work of other contractors; and to
withhold payments to a contractor for unsatisfactory progress.
Carrothers's work necessarily intermingled with the work of other
contractors.
Immediately after the contracts were executed, problems
erupted. Carrothers contends that NPI and the City failed to
disclose information necessary for its work; failed to respond
timely to Carrothers's requests for information; concealed
deficiencies at the construction site and in work by other
contractors, causing Carrothers’s work to be delayed; insisted
Carrothers begin work when it knew that the site was not ready; and
generally failed to manage the project properly. In the end,
Contract 712, which was originally scheduled to take 172 days, took
an additional 274 days to be completed, for a total of 446 days.
Contract 730, which was scheduled to take 258 days, took an
additional 243 days to be completed, for a total of 501 days.
Although NPI and Carrothers resolved a few of their disputes with
change orders, which gave Carrothers additional time to complete
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its work and absolved NPI pro tanto of any monetary damages,
Carrothers and NPI and the City remained at odds over many aspects
of the contract work.
Carrothers filed the instant diversity action against NPI
and the City for breach of the two contracts and sought to recover
the extra costs it incurred because of the delay in completing its
work. The jury found that NPI and the City had actively interfered
with Carrothers's performance of its contracts and that Carrothers
had suffered substantial damages as above noted. From the
judgment, including attorneys’ fees and prejudgment interest, the
City and NPI timely appealed.
II. DISCUSSION
NPI and the City raise seven challenges to the trial
court's judgment. They contend that (a) the "no damages for delay"
provisions in the contracts preclude Carrothers from recovering
monetary damages against them; (b) Carrothers failed to segregate
the costs due to its own delay from the costs due to external
delays in calculating damages; (c) the contracts provided that
Carrothers waived pre-judgment interest and attorneys' fees; (d)
the trial court erred in instructing the jury on calculating
damages; (e) the damage calculations erroneously included costs by
Carrothers's corporate parent, Pemco, Inc.; (f) the trial court
erred in determining that NPI was liable for damages as a
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contractual assignee; and (g) the damage awards were grossly
excessive. Each of these will be discussed in turn.1
A. No Damages for Delay Clause
NPI and the City first contend that Contracts 712 and 730
precluded Carrothers from obtaining monetary damages against them.
The contracts contain "no damages for delay" provisions, which
state:
... and no adjustment shall be made to the
contract price and the contractor shall not be
entitled to claim or receive any additional
compensation as a result of or arising out of
any delay resulting in adjustment to the
working time hereunder, including delays
caused by the act or negligence of the owner.
* * *
If the work of a contractor is delayed because
of any act or omission of any other
contractor, contractor shall have no claim
against owner or construction manager on that
account other than an extension of time.
* * *
Contractor shall accept the risk of any delay
in delivery of equipment or materials procured
by owner, and if the work is delayed, he shall
have no claim for damages or contract
adjustment other than an extension of time and
the waiving of liquidated damages caused by
the delay.
1
This court applies its customary standards of review. "A motion for
judgment as a matter of law in an action tried by a jury is a challenge to the
legal sufficiency of the evidence supporting the jury's verdict." Texas Farm
Bureau v. U.S., 53 F.3d 120, 123 (5th Cir. 1995). We review the district court's
ruling on a motion for judgment as a matter of law de novo. Conkling v. Turner,
18 F.3d 1285, 1300 (5th Cir. 1994). Such a motion should be granted only if,
"after considering all the evidence in the light and with all reasonable
inferences most favorable to the [non-movant], the facts and inferences point so
strongly and overwhelmingly in favor of one party that ... reasonable persons
could not arrive at a contrary verdict." Texas Farm Bureau, 53 F.3d at 123
(internal citations omitted).
We review the denial of a motion for a new trial for an abuse of
discretion. Calcasieu Marine Nat'l Bank v. Grant, 943 F.2d 1453 (5th Cir. 1991).
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While Texas courts generally uphold provisions preventing
damages for delay, the provisions are not absolute. Texas courts
have held that no damages for delay clauses do not preclude a
contractor from recovering damages when the delay (a) is not
contemplated by the parties; (b) is so long as to justify
abandonment of the contract; (c) is caused by the owner's fraud or
bad faith; or (d) is caused by the owner's active interference with
the contractor's performance. City of Houston v. R.F. Ball
Construction Company, Inc., 570 S.W.2d 75, 77 & n.1 (Tex.Civ.App.
--Houston[14th Dist.] 1978, writ ref'd n.r.e.).
The leading Texas decision on the exceptions to no damage
for delay clauses, Housing Authority of Dallas v. Hubbell, 325
S.W.2d 880 (Tex.Civ.App. --Dallas 1959, writ ref'd n.r.e.),
addressed a situation not unlike the instant case. The Housing
Authority had contracted with several principal contractors for the
construction of a then-$15 million dollar housing project. One of
the contractors sued to recover damages it incurred because of
delays in its work. Its contract contained a no damages for delay
provision. However, the court upheld damages against the Housing
Authority because it had engaged in eleven acts and omissions which
substantially interfered with the contractor's performance. The
court explained that these acts and omissions included:
(1) Failure to plan development and
construction of the whole project; (2) Failure
to furnish master progress schedule; (3)
Failure to coordinate work of various prime
contractors; (4) Failure to proceed with
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underground utilities contract until August 1,
1952; (5) Failure to proceed with the sidewalk
contract until July 1, 1953; (6) Failure to
expedite flow of information; (7) Failure to
decide on type of water heater; (8) Failure to
deliver water heaters; (9) Arbitrary and
capricious requirements of Architects; (10)
Instructions to asphalt tile sub-contractors;
(11) Refusal to accept the buildings within a
reasonable time after August 25, 1953.
Id. at 889. The court explained that "[t]he 'no damages for
delays' provision did not give the Owner a license to cause delays
'willfully,' by 'unreasoning action,' 'without due consideration,'
and in 'disregard for the rights of other parties,' nor did the
provision grant Owner immunity from damages if delays were caused
by Owner under such circumstances." Id. at 890.
In the instant case, the evidence was sufficient for a
reasonable jury to find that NPI and the City actively interfered
with Carrothers's completion of the contracts. The evidence
supports Carrothers's contentions that NPI and the City (1)
generally failed to coordinate the work of the contractors; (2)
failed to disclose the Master Schedule, despite repeated requests
from Carrothers and other contractors; (3) failed to disclose that
NPI and the City knew before awarding Carrothers's contracts that
some form of corrosion protection system (cathodic protection)
would have to be installed before Carrothers could begin work on
the filter building, even though NPI and the City knew that this
system would substantially delay Carrothers's work; (4) issued a
notice to proceed to Carrothers when they knew the site was not
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ready; (5) failed to disclose that NPI and the City had granted the
piping contractor a 42-day extension, which substantially delayed
Carrothers's work, even though NPI and the City had granted the
extension before awarding the contracts to Carrothers; (6) failed
to disclose that Carrothers would have to perform remedial work,
such as installing pier drillers in the filter building, before it
could begin construction there; (7) failed to arrange for remedial
work on the 66-inch pipeline connecting the ends of the filter
building; (8) failed to disclose that defective work had to be
remedied on the filter building, even though NPI and the City knew
at the time the contracts were awarded that work had to be done;
(9) failed to inform Carrothers that NPI and the City had not
acquired a pump for the filter building; (10) failed to respond
timely to requests for information on the grit building; and (11)
failed to supply appropriate pre-cast panels for the grit building.
Further, there was sufficient evidence to find that these
actions and omissions by NPI and the City substantially hindered
Carrothers's performance. Numerous witnesses testified about how
each of appellants’ actions and omissions delayed Carrothers's
work. Carrothers also maintained extensive contemporaneous
documentation of the delays it encountered during construction and
the costs it incurred because of NPI’s and the City's interference.
These costs included extra days of labor, extra days’ rent on
equipment, increased insurance and bonding costs, efficiency losses
because Carrothers had to re-sequence its work, productivity losses
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because the contract site was crowded, costs incurred because work
had to be performed in the winter rather than in the summer and
fall, and losses from lower worker productivity as the project
dragged on.
NPI and the City contend, however, that they did not
actively interfere with Carrothers's work. First, they point out
that Carrothers requested the notice to proceed on the flow
splitter, and thus they should not be responsible for the
construction site’s not being ready. We do not find this
contention persuasive. Carrothers requested the notice based on
appellants’ representations about the state of the project. Had
Carrothers been fully informed that its work could not begin, it is
highly unlikely appellee would have requested the notice. NPI and
the City should have informed it that the construction site was not
ready.
Second, NPI and the City contend that they had no
contractual duty to disclose the Master Schedule. That fact is not
dispositive. NPI and the City had a contractual duty to coordinate
the contractors' work schedules and to respond to requests for
information about scheduling difficulties. Given those duties and
the ensuing problems, NPI had a responsibility either to disclose
the Master Schedule so the contractors could schedule their work
around each other or to ensure otherwise that their work was
coordinated. The evidence supported Carrothers's contentions that
NPI and the City did neither.
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Third, NPI and the City contend that they had no duty to
disclose that they had granted the piping contractor a 42-day
extension, even though the extension had been approved at the time
the contracts were awarded to Carrothers. To the contrary, it is
undisputed that Carrothers could not begin its work until after the
piping contractor had finished. That NPI and the City required
Carrothers to mobilize at the site, knowing that Carrothers could
not begin work at that point, constituted active interference. See
U.S. Steel Corp. v. Missouri-Pacific R.R. Co., 668 F.2d 435, 438-39
(8th Cir.), cert. denied, 459 U.S. 836 (1982).
Fourth, NPI and the City contend that they had not made
a decision about the cathodic protection until after Carrothers had
been awarded the contracts. The evidence showed, however, that NPI
and the City knew they would have to install some type of cathodic
protection when they awarded the contracts; that they were
evaluating different types of cathodic protection when they awarded
the contracts; that they knew they would install some type of
cathodic protection when they awarded the contracts; and that they
knew installing that protection would delay Carrothers's work.
Fifth, NPI and the City contend that Carrothers was not
delayed as a result of the remedial work done on the 66-inch
pipeline, and that Carrothers had itself caused a 45-day delay by
its installation of the 36-inch pipe. But numerous witnesses --
including appellants’ expert-- testified that Carrothers was
delayed because of remedial work on the 66-inch pipeline. Further,
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the evidence showed that Carrothers was delayed in installing the
36-inch pipeline because NPI and the City failed to respond timely
to Carrothers's requests for information.
Sixth, NPI and the City contend that they took steps to
coordinate all the prime contractors, such as holding weekly
meetings and placing employees at the site. However, those actions
do not relieve NPI and the City of their duties to disclose
material information affecting Carrothers's work and to represent
accurately the state of the project.
Generally, NPI and the City contend that they did not
actively interfere with Carrothers's work, but merely failed to
take various actions, their oversights amounting to negligence
rather than to the intentional conduct that is not covered by a no
damages for delay provision. This distinction ignores the jury
findings, supported by the evidence and based on unobjected-to
instructions that they could only hold appellants liable for delay
caused by (a) active interference; (b) misrepresentations or bad
faith; or (c) delay of an unreasonable length of time.
B. Carrothers's Calculation of Damages
Next, NPI and the City challenge the jury's finding that
Carrothers suffered $1,914,030 in damages. They contend that
Carrothers failed to segregate the damages it incurred because of
its own actions from the damages caused by NPI and the City's
interference. Specifically, NPI and the City contend that
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Carrothers's calculations erroneously included damages incurred
because of (a) Carrothers's own 45-day delay in installing the 36-
inch pipe; (b) 14 days’ charges that had been resolved by a change
order; (c) delays after the pier drillers had been installed, even
though no external forces then prevented Carrothers from completing
the flow splitter; and (d) Carrothers’s inability to fulfill its
own unrealistic work schedule.
Our careful review of the evidence before the jury shows
that it does not compel a finding for appellants. Numerous
witnesses testified that Carrothers was not responsible for any of
the delays. In addition to Carrothers's personnel and experts,
Carrothers's superintendent on the site, who at the time of trial
was employed by NPI's corporate parent Morrison-Knudsen, Inc.,
testified that none of the delays were caused by Carrothers.
Similarly, NPI's construction coordinator at the site testified
that he could not recall any instance in which Carrothers delayed
its own work. Indeed, the only person testifying that Carrothers
caused any delays was appellants’ expert witness, whom the jury was
not required to believe.
Further, Carrothers extensively documented its damage
calculations. Carrothers presented lengthy testimony setting forth
the target dates for certain items of work, the dates on which the
work was actually performed, and the interferences that extended
the time required by Carrothers to complete the work, and
explaining its damage calculations. Carrothers separated its
13
calculations into two time periods --the time covered by the change
orders and the time after the change orders-- and into several
categories --extended equipment rentals, additional labor, extended
field office overhead, additional materials costs, additional home
office costs, and additional bond and insurance costs. These
calculations were sufficient to prove Carrothers's damages to a
reasonable certainty.
C. Pre-Judgment Interest and Attorney's Fees
NPI and the City next argue that their contracts
precluded Carrothers from recovering pre-judgment interest or
attorney's fees. The contracts contain an addendum providing that:
Unless otherwise authorized by the Dallas City
Council, at the request of the City Manager,
no contractor of the City of Dallas shall be
entitled to interest on any delayed, disputed,
or delinquent payment, or attorney's fees in
any dispute to collect such payment.
This addendum appears in the contract section concerning
payment of monthly and final progress payments. The addendum was
probably intended to limit a contractor's right to recover against
the City under TEX. CIV. STAT. ART. 601f (1992) (now repealed), which
created a right for contractors to recover against a governmental
entity that failed to pay timely for the contractor's goods or
services. The instant case does not involve whether the City
timely paid for Carrothers's work: the City has paid Carrothers the
original contract amounts. Moreover, Carrothers's suit sought
damages beyond the contract amounts --costs incurred for extra days
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of labor, extra days of equipment rental, and the like. The
addendum does not appear to exclude interest or attorneys’ fees on
contract damages of these types.
NPI and the City's cited cases, stating the general
proposition that parties to a contract may waive or limit damages,
are factually inapposite. In Computer-Link Corp. v. Recognition
Equipment, Inc., 670 F. Supp. 455 (D.Mass. 1987), aff'd without
published opinion, 860 F.2d 1072 (1st Cir. 1988), the District of
Massachusetts addressed whether a contractual clause stating that
"neither party shall be liable for any indirect, special, or
consequential damages arising out of this agreement," precluded the
contractor from recovering damages. No such clause exists in the
instant contracts. Cantrell v. Broadnax, 306 S.W.2d 429
(Tex.Civ.App. --Dallas 1957, no writ) concerned the forfeiture of
improvements on real estate because of the owner’s default in
making payments. Temple Eastex, Inc. v. Old Orchard Creek
Partners, Ltd., 848 S.W.2d 724, 729 (Tex.App. --Dallas 1992, writ
denied) concerned a waiver for damages covered by insurance.
D. Jury Instructions on Damages
Next, NPI and the City contend that the trial court did
not clearly instruct the jury that they should only award damages
which were caused by appellants’ active interference with
Carrothers's work. We reject this contention. Taken as a whole,
the charge so informed the jury:
15
What sum of money, if paid now in cash,
would fairly and reasonably compensate
Carrothers Construction Company for the
damages, if any, caused by the defendant's
breach of Contract 87-712 [and 87-730]?
Do not include any damages from delays
unless you find that: (a) the defendants
actively interfered with Carrothers's work;
(b) the damages were caused by
misrepresentation or other bad faith; or (c)
the damages were caused by delay which has
extended such an unreasonable length of time
that the party delayed would have been
justified in abandoning the contract.
(emphasis added)
You are instructed that the term "active
interference" means that the City of Dallas
would have to have committed some affirmative,
willful act, in bad faith, to unreasonably
interfere with Carrothers's compliance of the
terms of the construction contract.
This instruction does not create a substantial doubt as to whether
the jury was properly instructed. The instruction states that the
jury can only calculate damages that resulted from NPI and the
City's active interference. Moreover, the evidence, including
testimony from one of Morrison-Knudsen's employees, suggested that
all of Carrothers's delays were caused by appellants’ active
interference, a situation that would render any instructional error
harmless.
E. Pemco's Costs
NPI and the City contend that the trial court erred in
allowing Carrothers to include in its damages calculations overhead
and home office costs incurred by its corporate parent, Pemco, Inc.
16
They contend that Carrothers should not be able to collect those
costs because Pemco was not in privity of contract with NPI and the
City. We disagree. Substantial evidence demonstrated the closely
related nature of Carrothers as a wholly owned subsidiary of Pemco.
Carrothers’s damages were Pemco’s damages, and vice versa. Just as
a contractor under Texas law may recover damages for third parties
who are acting on its behalf, see, e.g., North Harris Cty. Junior
College Dist. v. Fleetwood Const. Co., 604 S.W.2d 2467, 255 (Tex.
Civ. App. -- Houston [14th Dist.] 1980, writ ref. n.r.e.), so it
would follow that Carrothers’s damages should include the very
important expenses of contract performance borne by Pemco.
F. NPI's Liability as an Assignee
NPI and the City contend that the district court erred in
entering judgment against NPI. They contend that, because NPI
acted as an agent on behalf of a known principal, it cannot be held
liable. Appellants waived any objections to NPI’s separate
liability by failing to object to the court's instructions
accompanying Jury Questions 1 and 3, which state that "[f]or the
purposes of this case, NPI and the City of Dallas are both bound by
the provisions of the contract and the implied duties arising
thereunder."
G. The Damage Awards
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NPI and the City contend that the damage awards were
grossly excessive and that $434,000 is the maximum amount
Carrothers should be awarded. We disagree. The $435,000 figure
apparently was obtained from Carrothers/Pemco's accountants and
represents the amount necessary for Carrothers to recover in order
to continue bidding on public projects. That figure does not
represent the amount of damages actually incurred because of the
delays in the instant contracts. Further, as discussed above,
Carrothers presented extensive documentation of its calculation of
damages.
III. CONCLUSION
For the foregoing reasons, we AFFIRM the trial court's
judgment.
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