ok sixteen they're six four two eight go supply in manufacturing versus back door jacobs company a o l c oral argument not to exceed fifteen minutes per side and when ready mr samples for the it please the court good morning your honors and thank you for the court's time i would like to reserve five minutes for rebuttal my name is laughlin samples i'm from smith curry and hancock and i'm here on behalf of the appellant bill jacobs company now there are numerous issues that are raised in the briefing but they really boil down to three key points point one is the contract interpretation issue point two is dealing with that faith which stems in large part from the contract interpretation and point three is a concern over whether the district court performed an independent evaluation of the findings of fact and conclusions of law as is evidenced by servile unsupported citations as well as clear contradictions between what is cited  and what the record actually supports and i believe that stems not from any real feeling district court so much as adopting a mack take case that at least i believe the appellee is going to present as a comparable case but what i'd like to deal with first is the actual contract interpretation issue not that of course is subject to a don't over review what the district court found was that in this government contract s c fifteen which governs payment precluded any reliance on the limitations of fun clause or on g c six which we believe is an expressed pay of paid provision and we believe that's important because under the tennessee prompt pay act which provides for attorney fees and interest there is a carve out for an express condition precedent tennessee supreme court and koch has recognised that while disfavored they will enforce pay if paid clauses is an absolute what is it tennessee lars federal contract in law that tells us what to do with pay of paid causes the for pay if paid cause your honor it would be state law the contract provides the law federal government contracting applies unless and if it's silent then tennessee state law wise i mean it's your bechtel you get to do what you want but i guess i'm surprised you don't use federal contracting on this area because there's quite a bit of it about pay have paid clauses your honor there is and the of course there's a federal pay of paid act but what it says is it establishes a a floor and if states want to come in with additional requirements than the state pay of paid can supplement it was raised early in briefings and  was a motion to dismiss was denied based on that aspect of upon further evaluation we do believe that the tennessee pay of pay act would apply and that it's kind of tough on pay of paid causes and to see lines in other words it seems to be correct me if i'm wrong a presumption against your honor there is however tennessee is in the minority in that it will still in force an express pay of pain provision another example would be florida two courts of appeals pay subcontractor it doesn't put any kind of condition precedent and then in the later in that same cause it says condition contractor may as a condition precedent to any payment require the sub project or to submit so you knew how to use the language you didn't use it in that clause and that the payment why you're out of it there i would disagree because if you go to g c three which is dealing with claims claims specifically carves out invoices and the importance of the differentiation there is the  to amounts between the parties and will set aside for a moment that eagle never submitted an invoice for the two are used that are before us today which have a combined changes in the waste exceeds that factors undisputed eagle has not invoice with invoicing in what sense does it if it looks assume a timid him boys are you saying then under that circumstance you would be required to pay irrespective of whether the government had provided you the money no you are i'm saying that by the time you get to invoice seeing that the government has already as a condition precedent either made the funds available or promised to make the funds available and you have to read se fifteen in context with the payment application which directs you to specific form of believe it's exhibit seven to the contract for may one and two and form a one in need to incorporate the limitation of funds clause as well because the importance is that the money is flowing from the part of energy or the federal receiving or or being promised those funds from the department of energy and that's how the twenty one other are used were resolved on this case and includes how the settled claims were also resolve of the parties were able to come to an agreement the claims  presented to the department of energy in the part of energy said we either approve this or we don't approve it funds are either promised or actually provided and then the subcontractors what would happen if you were right about all of this would they be allowed to submit this now and then go to delia i mean what if we otherwise agree with the district court can we just back into that and solve that problem today or is that too late for that you are believe it's too late for one reason being that in two thousand and eight  the department of energy issued a stop payment directive to be j c and i think we have to separate the issue of should evil be paid first who was ultimately responsible for the payment and who is ultimately responsible under g c six and c thirty seven as well your honor says s c thirty six which says that to the extent there's preexisting conditions or unknown's then that the subcontractor will be paid but only to the extent the deal we first pays  under that scenario the money comes from the deal even if the deal we doesn't pay which is what happens here with a deal does not promise to make payments which is we'll see when there were negotiations between bechtel neagle about these equitable adjustments you corps general counsel and tom burring cool who was the one of the senior bechtel people during the performance of it about that topic and about going to the deal we in fact this case was settled as between eagle and b j c subject only to the deal we approving the settlement which they refused to do and that was an express condition in the settlement and i believe that was in two thousand and fourteen what happens if you lose you're going to sue your own about so that's a very interesting question and i could have good grounds the there would be grounds to go after the deal way for the for the nonpayment and it's more complicated by the fact that there was a transition agreement between b jacobs company and you core who was the takeover contractor and how this lawsuit was going to be handled what happens if you win with the flip side what how much of this does it all go away and you will have to go after dio if you win the pay of paid question no your honor because we think in fairness with change order to which was what upgraded the security actually kept the security the same clearance with that directive coming through eagle should be paid something and that was always the negotiation there's been no despite how do they get paid something if there were no deal refunds because if the amount satisfies tina which is not just tina cited by the district court which is the portion talking about the actual certification that sign but tina table fifteen dash to table which lays out all of the requirements for submitting these then we believe the deal we will allocate funds from our conversations with them but what happens if they don't then you don't have to pay well then your honor we're into an issue of what does the contract say in terms of going through the entire disputes provision and my reading of the contract and reading it as a whole says that once the district court enters and i'm out that amount is is what do you we should  ultimately find what this one that you're conceding there is some something they're entitled to what rough amount is that rough two point one million your honor plus interest from the date of the judgment and we would ask interest be at five point two five or five point five percent depending on the actual revision day as as the tennessee finance commission sets no attorney's fees no your honor no attorney's fees attorneys fees are only allowed if there is bad faith found in bad faith  interesting concept what's the rough with the rough differential three million versus ten or twelve a camera but it is your honor believe it was twelve million though to be about three versus twelve but over half of that is interest well over half an hour and i got it that's why i went from two to three this year are going to go back to your discussion about c fifteen for a second to just make sure that i understand your contending contending i think you answered in connection with judge the parts question that this doesn't apply because there wasn't an invoice but your honor that is one is that basically what you said that's a rush so there were there were these areas that were submitted yes your honor and if for some reason correct me if i'm wrong i thought that you couldn't invoice and tell you came to an agreement on what the proper adjustment was for the are in your correct your honor and that the so what that would say then is that you could simply never have to pay because it wasn't an invoice because you didn't reach agreement on what they were seeking as an equitable adjustment that just doesn't sound right unless you consider the balance of the contract which lays out how you handle dispute it claims which is what these were these were disputed claims the enforcing process or for amounts that match up with pay request items that eagle had provided based on their proposal they did not cover the addition the ads for the are you so when are you would be approved it would be added to the pay request and then it would be again that's based on the promise of funding or funding by deal in evil would be paid but although your contract it envisions these equitable adjustments and you admit that you made changes that would justify an equitable adjustment but you simply cantor refused to agree on the amount so therefore there's never an invoice so therefore you can rely upon this pay of paid concept and never pay it that makes sense i understand what you're saying you are see my time is on but i'd like to respond to your question the the pay if paid defense comes into account because b j sees assets per g c six arnot issue the  invoicing provision only deals with amounts that the parties have agreed to for the disputed amounts there's a chain you have to go through that starts at g c three which deals with clay you don't have to have the money from the government if the parties have agreed but you have to have the money from the government the parties doesn't agree that i'm going backwards we still have to have the money from the government the parties agree if there's invoicing then that means that the money has been allocated already to that contract because it's either an approved and it already is not approved until there is funding that has been made available by the department of energy but if you and where do we find in the record this concept that there would not be an invoice unless the money had been set aside is that provided by contract or just by course of conduct your honor it's in the contract and the way you get there tell me just tell me what section to look for the there's several sections you are have to look for your honor but gc's three and four claims and disputes but perhaps the most important provision is s c thirty seven which is the limitation of funds clause which says that if evil is going to exceed the allocated funds for any given year and there were three years that were given the eagle bears the ok good morning your honour's money was brian corgan with kilpatrick townsend in atlanta to represent eagle i'd like to go about my argument covering for topics first of all i'd like to address issues that were raised by  el jacobs which we believe are waived or in their reply brief or i would like to clarify in terms of record support next i'd like to go to the pay when paid issue third i'd like to talk about the bad faith and then fourth i'd like to talk about the in straight under prompt a act first of all in the back to jacobs reply brief they argue that the glasberg and performance evaluation this deals with the issue a bad thing was not properly admitted into evidence in fact the plaintiff's exhibit eighty seven at the appendix thirteen sixty nine to thirteen seventy seven wasn't fact admitted to the evidence without any objection and the record identification is one sixty nine at page two two three one secondly bechtol jacobs has waived its se thirty seven argument that it's put before the court it never raised that issue in its brief as a matter of fact in its brief it actually references an essene thirty seven notice letter that was provided by eagle to bechtel jacobs and i ask the court to take a look at that letter because it's not only significant in terms of its content but it's significant in terms of the history it lays out with respect to the various efforts it made it's an appendix six indicates it indicates to back back to jacobs that there will be an overrun of the amount that's been allocated to this contract and bechtel jacobs never did what was supposed to do and that is put together a funding plan allocated amount we need to sit down and figure out how we're going to get modifications issue so we can get paid in move forward and if we don't keep going with this you're starting pretty far  weeds on this so i'm not i want to make sure i'm understanding what you're saying i don't know if this is the right way to go but you saying you know there's one it's one thing not to make an argument that you forfeited it you didn't raise it below and suddenly you're raising it on your reply brief and courts don't like that i will say it's when it's about a provision of a contract and one whole part of this dispute is what the contract means it's pretty hard for us to keep our eyes from gazing over the whole contract but are you now making the point that they not only didn't raise as c thirty seven but they argued they made arguments inconsistent with what they're saying now absolutely and i'm sorry i wasn't clear ok yes the thirty sessions are switching their position is your point yes yes the thirty's they're taking the position in the reply brief that there was no compliance with this the thirty seven in their opening brief they actually referred to sort that out week letter words are but the words are ok and the the other point i was trying to make in conjunction with that is a month prior to that letter and february sixteenth of two thousand and six eagle said the betel jacobs were entitled substantial equitable adjustments under this contract we're going to run over deals with the ses thirty seven argument we need to sit down and get modifications to the contract or we're going to have to stop work bechtel jacobs response to that was if you stop work we're going to terminate you for default now back to jacob stands in front of the court and says we had no idea that this contract was going to run over we've been prejudiced we can't get reimbursement from the from the deal we that's totally inconsistent that's that's important if that's true that's seems like a problem let's talk about that they call up have paid i mean i love this and you called pay when paid that's great because you're you see it as a timing issue so when is a better word but whether it's pay if paid or that use the language condition proceed there's no language whatsoever contract or shall make payments under the contract from bonds it being answered by the government because you don't have to use the magic language today yes they absolutely do your honor that's under this contract from fines advanced by the government if they're not advanced by the government you don't happen no your honor as a matter of fact in the dire case what the court with the contract provision in the dire case said that the general contractor will only make payment to the sub contractor five days after receiving payment from the from the own the courts and that wasn't good enough this court said that wasn't good enough you have to have express condition proceed in language that makes it clear that the sub contractor is assuming the risk of nonpayment or insolvency of the owner and that language that talismanic language a condition proceed is language that disagreement in any event your honor let's assume it was condition proceed language bechtol jagers would be a stopped from arguing that those conditions proceed had not been satisfied because  jacobs conduct actually prevented the occurrence of those conditions proceed as judge mckeague pointed out under this contract bentyl jacobs position is you can't invoice under the contract a's were never resolved and never presented to the to the d o b also the position that that jacobs is bettle jacobs is now taking is totally inconsistent with the position that they took in in the pretrial order bet that will jacobs says that eagle is entitle to be compensated for for any costs that are determined in this judicial action they are entitled to under the contract and they specifically say that once the ego is deemed to be entitled to recover those but they then become a change order to the sub contract and are due in paypal to eagle that's right out of the pretrial or that's the position they've taken but are they saying they're doing payable from the d o e because they don't they don't say that they say once there is a judicial determination then it is due and payable it is they're entitled to change or eagles entitled to change your such as saying that by virtue of that which seems like an obvious statement to make that they then waived any of these other defenses  it says that if eagle disputes the do you use refusal to front to prove its claims it may file suit to judicially determine the amount owed if any in such a word will be incorporated into the contract as a change doesn't titling eagle to payment all right so how about the t p a you know ten percent versus five point something percent because my first reaction was a little negative towards the district court's decision on somehow ten percent being that the parties the point if there's a tile to prejudgment interest at a specified rate the specified rate actually is the post judgment interest rate statute in tennessee at the time that the contract was entered into which was in two thousand and six i believe the we've seen a lot of prejudgment interest cases i haven't seen too many where you look at the earlier one i usually thought it was at the time of judgement the know the prick prejudgment interest accrues or the right accrues in the right vests at the time of the breach of the contract at the time of the breach of the contract as well as the date that the contract was entered into predated the adjustment of the interest rate from ten percent to five point two percent five point two five percent tennessee case tennessee supreme court says that when parties enter into a  contract that the laws that are in effect as of the date of the contract are incorporated into the contract pickle jacobs hasn't challenge that they waived any challenge to that but if the law they've incorporated is procedural or remedia tennessee specifically says that the the statute only operates perspective it does not act operate retroactively is there any possible difference here between the rate that you get paid from the time you filed the complaint to the that you provided that uses the term vested when it comes to prejudgment interest you know your own we have not but the court the court also says the in the board of professional responsibility case which is the ten supreme court that even if a statute is remedial if the retroactive application would produce an unjust result then it is not applied retroactively would it be because it's depriving back to it's depriving my ego of the interest that it earned based on the statutory and ackman that existed as of the date that the contract was entered into as of the date that the breach in great investment vehicle well your honor the pre judgment interest rate in tennessee the the the regular peach prejudgment interest rate in tennessee is ten percent also and so if that and that under tennessee law  you agree that the prime pay act does provide for relief that you can obtain absolutely yes because remedial statutes include causes of action where you can if things are effect but but a remedial statute as a long tennessee is articulated is it procedurally in nature it doesn't deal with a vested right it doesn't take just quoting from two tennessee cases the other point i'd like to make your honor is that the tennessee pre judgment interest rate is ten percent outside of the prompt a i served in that lies within the  discretion of the the trial judge to make a determination as to whether prejudgment interest should be awarded and i would argue that the the trial judge is determination the bechdel jacobs conducted itself and breached the contract in mind the proper act right for me it was applying the prophecy was applying to promptly and you making the point she has and if you lose under that on remand she has the authority to alternatively impose it under this freestanding is the point i'm making that it now the forfeiture shoes and the other foot i'm afraid and we kind of careful about well here's the order of waiver arguments here well what i'm saying what i'm saying is i believe that the district court did make a determination that would satisfy a finding required for prejudgment interest i think we got it thanks so much for your argument we appreciate it mr sample to think you have some rebuttal time want to start off on the comment that there were no court has in force this type of similar language in terms of the pay if paid cause the florida court of appeals in j j shane found that language that said subcontractors are relying upon  financial responsibility of the owner in performing the work it is understood by subcontractor that payment for the work is to be made from funds received from owner by contractor in respect to the work they found that created an enforceable condition precedent to payment and said until the funds were made available to the contractor go to law have the same presumptions against the tennessee yes your honor very almost identical presumptions to what tennessee has the there's another case that similar robert f wilson also from florida addressing the issue finding that this type of language is enforceable now i want to go to the bad faith for a minute because mr corrigan said that a lot of this was driven by the bad faith and i agree completely that a lot of the district court's decision was driven by the bad faith finding in in the brief are numerous instances that are delineated of problems with the bad faith finding some of the most concerning of which are citing testimony as a basis for a finding of fact or a conclusion of  law where the district court excluded the testimony or sustained an objection and yet it ends up being cited in support of the finding equally concerning would be the lengthy discussion about the pre contract negotiations between bechtel jacobs company and eagle supplying manufacturing or eagle came up after b j c said you know we want to award the eagle the j c said all right cut your price eagle cut their price by four hundred thousand dollars now they could have walked away and they could've said this contract isn't worth it nobody held a gun to mr wall ravens head the head of the eagle and said you have to sign sub contract but they did and once they did all those pre contract negotiations  irrelevant there's a merger clause in this contract there's an integration clause and yet the district court said that that pre contract negotiation provided grounds for bad faith bad faith in tennessee has to be a knowing or reckless disregard for contract rights equal had no contract rights at that time so once you put it in context now what you're left with is really a performance evaluation that was done of mr glasberg an individual who wasn't a b j c who had no authority over our use and who unfortunately was deceased at the time of trial and unable to defend himself the only other remaining ground is the whole deal we i g investigation and the record i think could be cleared up a little bit on what happened a former eagle employee in this is undisputed a former former eagle employee by the name of jennifer wilmot came to be g c and said that her time for previously paid  been overbilled by eagle now under the contract under i believe it's as c thirty eight b j c is obligated to report fraud to the delia i g they did they followed the law they followed their contract they reported the front and that was the end of b j season volved after the deal week on its own convinced a grand jury to issue a subpoena eagle responded to the subpoena it which point the deal we approached b j c and said we'd like a review team to look at these documents for already settled are you and tell us if there's over billing and the undisputed evidence at trial said that there was two hundred twenty thousand thirty seven is addressed in our brief on page thirteen it was addressed at length in our findings of fact in conclusions of law the opening brief when you say yes your honor the opening brief se thirty seven is discussed at length both a one page page that you know your honor it's on numerous pages stop starts on thirteen ok yes your honor and it's discussed again in the context of what the obligations are s c thirty seven is brought up and then there's lengthy discussions both in our initial brief and our reply brief on what the impact of a limitation of funds clauses and if it applies to subcontractors and under international science it does apply policies under eastern district of virginia case it does apply to subcontractors  talking about page thirteen of your brief in front of yes it should be appellants corrected brief page thirteen but what it that's record page thirteen it's page four if you're going by the pages on the bottom i mean the brief below no your honor i said record it's the file stamp pages that are applied when it's electronically filed the i our page four at the bottom it's page thirteen stamped in the upper right hand corner and it's addressed it numerous instances so for those reasons we would ask that the court overrule the district court