2009 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 9-15-2009 

# F le ming S t eel C o v

. WM S chlo s se r C o Inc P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 08-4617

F o l low thi s a nd a dd it ion al work s at : http://d i git alc ommon s .l a w . vi l l a nova . e du/thir dc ir c uit_2009

Thi s de c i sion i s br ou ght t o you for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a no va U nive r sity S choo l of L a

w Di git al Reposit or y

. It h as be e n a c c ept e d for inclusion in 2009 D e c i sion s b y a n author i z e d a dmini s tr at or of V i l l a no va U nive r sity S choo l of L a

w Di git al Reposit or y

. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C a rl s on@l a

w . vi l l a no va . e du . Re c omme nde d C it at ion " Fle min g S t e e l C o v

. W M S chlos s e r C o Inc " (2009). 2009 D e cisio n s . P ape r 661. http://d i git alc ommon s .l a

w . vi l l a nova . e du/thir dc ir c uit_2009/661NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

_____________ N os . 08- 4617 and 08- 4618

_____________ F L E M I NG S T E E L CO M P ANY

v. W . M . S CHLOS S ER C OM P ANY , I NC. ( D . C . C i vi l N o. 02- 00828)

____________ W . M . S CHLOS S ER C OM P ANY , I NC.

v. CO NT I NE NT AL CA S UAL T Y C OM P ANY ( D . C . C i vi l N o. 03- 01338) Fl emi ng St eel C om panyand C o n t i n e n t a l C a s u a l t y C o m p a n y, A ppel l ant s i n N o. 08- 4617 W .M . S c h lo s s e r C o m p a n yIn c ., A ppel l anti n N o. 08- 4618

__________ O n A p p ea l from the U n it ed S tat es D istri ct C o u rt f o r th e W e ste rn D istric t o f P e n n sy lv a n ia ( D . C . C i vi l N os . 02- cv- 00828 and 03- cv- 01338) D i stri ctJudg e: H on orabl e W i l l i am L . S t and i sh

__________T he s peci fi c or der s chal l enged byA ppel l ant s ar e the O r derof J ul y10, 2006 gr ant i ng 1 s um m aryj udgm ent , t he O r derof J ul y14, 2006 di s m i s s i ng obj ect i ons t o t he s peci al m as t er ’ s r epor tand r ecomm endat i ons , t he J udgm entO r derof J ul y14, 2006 ent er i ng j udgm enti n favorof Schl os s er , t he O r derof A ugus t7, 2006 deny i ng a mot i on by A ppel l ant s forr econs i der at i on, and the J udgm entO r derof O ct ober21, 2008 gr ant i ng a d d itio n a l d a m a g e s p u rs u a n t to a m o tio n b yS c h lo s s e r. 2 Subm i t t ed U nderT hi r d C i r cui tL A R 34. 1( a)

on Sept ember8, 2009 B efor e: SC I R I C A , C hi ef J udge, and R E N D E L L and A L D ISE R T , C i rcui tJudg es. ( Fi l ed: Sept ember15, 2009)

__________ OPI NI ON O F THE COURT

__________ R E N D E L L , C i r cui tJ udge. Subcont r act orFl emi ng St eel C o. ( “Fl emi ng”) , and per for m ance bond i s s uer C ont i nent al C as ual t yC o. ( “C ont i nent al ”) , appea l or der s of the D i s t r i ctC our tgr ant i ng s um m aryj udgm ent , damages , and att or ney ’ s fee s i n favorof pr i m e contr act or W . M . Schl os s erC o. , I nc. ( “Schl os s er ”) , on cl ai m s ar i s i ng fr om a U . S. N avycons t ruct i on contr act . Schl os s ercr os s - appea l s , ar gui ng t hati tw as aw ar ded i ns uffi ci enti nt er es t . For

1 t h e r e a s o n s d i s c u s s e d b e l o w, we wi l l a f f i r m. W e w r i t e fort he bene fi tof the part i es and onl ybr i efl ys um m ar i ze the r el evant f a c ts. T h e N a v ya w a rd e d S c h lo ss e r a c o n tra c t to c o n stru c t a “ h u sh h o u se ” a t N a v a l A ir St at i on O cea na i n V i r gi ni a B eac h, V i r gi ni a. A hus h hous e i s a t es tfac i l i t yi n w hi ch j et3

engi nes m aybe run athi gh pow ers et t i ngs , and i s des i gned t o s uppr es s t he i nt ens e s ound g e n e ra ted d u rin g su c h ru n s. S c h lo ss e r su b c o n tra c ted w ith F lem in g to p ro d u c e slid in g a ir i nt ake door s fort he fa ci l i t y , and C ont i nent al exec ut ed a pe r for m ance bond on t he s ubcontr act . T he part i es agr ee that , undera choi ce of l aw pr ovi s i on, V i r gi ni a l aw governs th e s u b c o n tr a c t. K eys ound- s uppr es s i ng component s of the door s ar e 18 “s pl i t t erbaff l es , ” made of s t ai nl es s s t eel and cove r ed i n fi ber gl as s cl ot h. T he s peci fi cat i ons i n t he pr i m e contr actfor th e s e b a f f le s w e re in c o rp o ra te d in to th e s u b c o n tr a c t. S e c tio n 1 3 3 0 0 P a ra g ra p h 2 .1 .5 .b r equi r ed the fi ber gl as s cl ot h t o be pr eci s el y0. 0065 i nches t hi ck, and s peci fi ed that “[n] ot w i t hs t andi ng anyot herr equi r ement s of th[e] contr act , no ot herpr oductw i l l be acc ept ed. ” Par agr aph 1. 4. 2. 1 r equi r ed Fl emi ng t o pr oduce a ful l - s i zed pr e- pr oduct i on s peci m en of a baff

l e thatw oul d “conf

or m t o al l of the r equi r ement s of the contr act i ncl udi ng qual i t ycontr ol , t es t i ng, for m , fi t , s i ze a nd funct i on and s hal l m eetal l of the r equi r ement s of the contr actdocument s . ” W hen appr oved byt he N avy ’ s contr act i ng offi cer , t hi s s peci m en w as t o “s erve as t he r efe r ence fores t abl i s hi ng t he ac cept abi l i t yof a ll f a b ri c a te d . . . b a f

f le s .” Fl emi ng pr oduced a s ampl e baf fl e, and i ti s undi s put ed thatt hi s s ampl e w as appr oved byt he N avy ’ s contr act i ng offi cer . Fl emi ng t hen bega n pr oduci ng t he baf fl es inten d ed fo r i n stal lat ion in the d o o r. Insp ec ti o n s rev ea led th at he at fro m F lem ing ’s w el di ng pr oces s bur ned aw ayfi ber gl as s cl ot h i n cert ai n pl ace s on ni ne of the pr oduct i on4

baff l es . R e- i ns pect i on of the s ampl e baf fl e r evea l ed thatt he cl ot h on t he appr oved s ampl e al s o had burn s pot s . T he N avyconcl uded thatthe burned baf fl es fai l ed t o m eet s peci fi cat i ons , and al s o det erm i ned thata r epai rm ethod pr opos ed byFl emi ng w as in a d e q u a te. T h e N a v yiss u e d c u re n o tice to S c h lo ss e r, w h ich in tu rn iss u e d c u re n o tice to F lem in g . S c h lo ss e r th e re a f ter f o u n d F lem in g to b e in d e f a u lt, ter m in a ted th e su b c o n tra c t, and s oughtr epl ace m entbaff l es fr om anothers our ce. A r t i cl e 8 of the s ubcontr actpr ovi ded thati f Schl os s ert erm i nat ed the s ubcontr act d u e to F lem in g ’s b re a c h , F lem in g w o u ld b e liab le f o r th e c o sts o f

c o m p letio n , alo n g w ith ot herdamages and expe ns es . A r t i cl e 29 pr ovi ded that , i f the contr actw as t erm i nat ed by Schl os s erfori t s ow n conveni ence , Fl emi ng w oul d be ent i t l ed t o t he ac tual cos t s of the w or k and l abori n pl ace , pl us a ce r t ai n al l ow ance . F lem ing fil ed a d iversityac ti o n in the U n it ed S tat es D istri ct C o u rtfo r th e W estern D i s t r i ctof Penns y l vani a forbr eac h of contr actagai ns tSchl os s er , ar gui ng t hatt he t erm i nat i on w as forconveni ence . Schl os s erans w er ed w i t h a count er cl ai m forbr eac h of co n tr ac t aga inst F lem ing . S ch losse r also f il ed a c lai m o n an ind em n ifi ca ti o n theo ry agai ns tC ont i nent al i n t he U ni t ed St at ed D i s t r i ctC our tfort he D i s t r i ctof V i r gi ni a, w hi ch w as t r ans ferr ed and c ons ol i dat ed w i t h t he form eract i on. A ft erdi s coveryand a s er i es of rul i ngs on var i ous m ot i ons , t he D i s t r i ctC our tgr ant ed part i al s um m aryj udgm enton b e h a lf o f S c h lo ss e r, d e c id in g a s a m a tter o f law th a t th e N a v y ’s a p p ro v a l o f th e sa m p le baff l e di d notr el i eve Fl emi ng fr om s t r i ct l ycompl y i ng w i t h t he w r i t t en contr act5

s peci fi cat i ons . T he D i s t r i ctC our tal s o gr ant ed s um m aryj udgm enton behal f of Schl os s er on t he i s s ue of l i abi l i t y . T he D i s t r i ctC our tt her eaf t eradopt ed the fi ndi ngs of a s peci al m as t erw i t h r egar d t o damages , and al s o aw ar ded att or ney ’ s fee s , cos t s , and a port i on of the p rejud g m en t and p o stj u d g m en t i n terest urg ed b yS ch losse r. F l e m i n g a n d C o n t i n e n t a l f i r s tc h a l l e n g e t h e D i s t r i c tC o u r t ’ s g r a n to f s u m m a r y j udgm enton behal f of Schl os s er . T he D i s t r i ctC our thad j ur i s di ct i on overt hi s m at t er p u r s u a n tt o 2 8 U. S . C. § 1 3 3 2 , a n d we h a v e a p p e l l a t e j u r i s d i c t i o n p u r s u a n tt o 2 8 U. S . C. § 1291. O urr evi ew of the D i s t r i ctC our t ’ s gr antof s um m aryj udgm ent“i s pl enary , and w e appl yt he s ame st andar d as t he D i s t r i ctC our t . ” B u sc h v . M a rp le N e w to n S c h . D ist. , 5 6 7 F .3 d 8 9 , 9 5 n .7 (3 d C ir. 2 0 0 9 ). S u m m a ryju d g m e n t sh o u ld b e g ra n ted o n lyif th e re is no gen uine i ssue as t o an ym at eri al fact , and t he m ov ant i s ent i t l ed to j ud gm ent as a m a tte r o f la w . I d. A p p e llan ts’ p o sitio n o n w h a t leg a l ef f e c t th e N a v y ’s a p p ro v a l o f th e sa m p le b a f

f le s houl d have on Fl emi ng’ s r es pons i bi l i t i es r equi r ed cl ar i fi cat i on i n t he D i s t r i ctC our t , and m a yn o t h a v e b e e n e n tirelyc o n sis ten t. A s S c h lo ss e r f ra m e s A p p e llan ts’ a rg u m e n t, A ppel l ant s as s er tt hatt he N avy ’ s appr oval of the s ampl e w ai ved anys peci fi cat i ons t hat w ou l d o t herw i se have been viol at ed b yt he b urned f i bergl ass cl oth. A tl eastbefo re us, A ppel l ant s do notar gue w ai ver , buti ns t ead c ont end that , beca us e the contr actdi d not sp e c if ica llyre q u ire th e a b se n c e o f b u rn m a rk s, th e re is a g e n u in e iss u e o f f a c t as to6

w hethert he baf

fl es m ett he w r i t t en contr acts peci fi cat i ons . W e ar e notper s uaded by e ith e r a rg u m e n t. Fl emi ng w as r equi r ed underSect i on 13300 Par agr aph 1. 4. 2. 1 t o pr oduce a speci m en that“con form [ed] t o all of the requi rem ents of the con t ract . ” F or al l baff l es, Par agr aph 2. 1. 5. d es t abl i s hed that“[n] ot w i t hs t andi ng any other r equi r ement s of th[e] c o n tra c t,” in c lu d in g p re su m a b lyth e sp e c im e n a p p ro v a l re q u ire m e n t, an yf ib e rg las s c lo th th a t f a ile d to m e e t th e w ri tte n s p e c if ic a tio n s w a s u n a c c e p ta b le . (e m p h a s is a d d e d ). M or eover , t he s ubcontr acti ncorpor at ed 48 C . F. R . § 52. 246- 12 ( A ug. 1996) , a cl aus e of t he Feder al A cqui s i t i on R egul at i on governi ng t he i ns pect i on of cons t ruct i on, w hi ch provides that “G ov ernm ent i nspecti on s and tes t s ar e f orthe s ol e bene

f i tof the G over nm ent

a n d d o n o t . . . relie v e th e C o n tra c to r o f re sp o n sib ili tyf

o r p ro v id in g a d e q u a te qual i t ycontr ol m eas ur es , ” and a l s o t hatan i ns pect ori s not“author i zed t o change any t erm orcondi t i on of the s peci fi cat i on w i t houtt he C ont r act i ng O ffi cer ’ s w r i t t en author i zat i on. ” ( emphasi s added) . T her e i s no evi dence t hatt he contr act i ng offi cergave an yw ri tt en au tho ri za ti o n to alter th e f iberg lass sp ec ifi ca ti o n s. T h u s, the D istri ct C o u rt c o rre c tlyc o n c lu d e d th a t, as a m a tter o f law , F lem in g w a s re q u ire d to c o m p lyw ith a ll contr acts peci fi cat i ons , not w i t hs t andi ng t he N avy ’ s appr oval of the s peci m en baf fl e. W e a lso c o n c lu d e th a t th e re is n o g e n u in e iss u e a s to w h e th e r th e b a f f les w ith b u rn e d f ib e rg las s c lo th f

a iled to sa tisf

yth e w ritten c o n tra c t sp e c if ica tio n s. It is undi s put ed thatFl emi ng’ s w el di ng pr oces s bur ned fi ber gl as s cl ot h aw ayi n cert ai n pl ace sA lth o u g h it s d ec isi o n is no t un d er rev iew in the instan t app ea l, the D istri ct C o u rt 2 r eac hed thi s s ame concl us i on w hen i tdeni ed a mot i on fors um m aryj udgm entbyFl emi ng b yO rd e r o f

A u g u s t 1 9 , 2 0 0 5 . 7 on t he spli t t er baffl es i n q uest i on , t hu s al t eri ng t he thi ckn ess of t he clot h. Iti s al so undi s put ed thatPar agr aph 2. 1. 5. d of Sect i on 13300 of the s ubcontr actr equi r ed the f ib e rg las s o n th e b a f

f les to b e 0 .0 0 6 5 in c h e s in th ick n e ss . U n d e r a n yre a so n a b le i nt erpr et at i on of the contr act , Fl emi ng fai l ed t o m eet , ata mi ni m um , t he unambi guous th ick n e ss sp e c if

ica tio n o f

th e c o n tra c t at th e se b u rn p o in ts. F o r th e se re a so n s, w e w ill 2 aff i r m t he or derof the D i s t r i ctC our tgr ant i ng par t i al s um m aryj udgm enton t he i s s ue of t he N avy ’ s appr oval of the s peci m en, and s um m aryj udgm enton behal f of Schl os s eron th e is s u e o f

lia b ility. N ext , A ppel l ant s ar gue thatt he D i s t r i ctC our terr ed byent er i ng j udgm enton damages bas ed on the r ecomm endat i ons of the s peci al m as t er . Schl os s ercont ends t hat A ppel l ant s ’ ar gum ent s on appea l ar e i m pr operbeca us e A ppel l ant s fai l ed t o s ubm i tany contr aryevi dence r el at i ng t o damages , and neve rr eques t ed a he ar i ng ort r i al on t he i s s ue b e f o re th e D is tr ic t C o u rt . A s s u m in g , ar guendo , tha t A p p e llan ts’ a rg u m e n ts a re p ro p e rly befor e us , w e have no bas i s t o di s turb t he D i s t r i ctC our t ’ s rul i ng. W e w i l l uphol d t he fac tual fi ndi ngs of a s peci al m as t ert hatar e adopt ed bya di s t r i ctcour t , unl es s t he fi ndi ngs a re c le a rl ye rr o n e o u s . A r co Pi pel i ne C o. v. SS Trade St ar , 6 9 3 F . 2 d 2 8 0 , 2 8 0 -81 (3d C ir . 1982) . T he s peci al m as t ercar eful l ydocument ed and s uppor t ed i t s comput at i on of damages , and, aft erm aki ng cert ai n deduct i ons fr om t he amountur ged, r ecomm ended a n8

aw ar d i n t he amountof $640, 010. 43. T he D i s t r i ctC our tadopt ed thi s fi gur e and, aft er deduct i ng t he bal ance due Fl emi ng undert he s ubcontr act , arr i ved ata damages fi gur e of $354, 646. 43. U pon car eful r evi ew of the r ecor d, w e fi nd no defe cti n t he comput at i on of damages , byei t hert he s peci al m as t erort he D i s t r i ctC our t , t hatcoul d amount t o cl ear erro r. Fi nal l y , A ppel l ant s ar gue thatt he D i s t r i ctC our terr ed byaw ar di ng at t or ney ’ s fee s t o Schl os s er . A ppel l ant s cont end thatFl emi ng coul d notbe l i abl e forat t or ney ’ s fee s undert he t erm s of the s ubcontr act , and thatt he l i abi l i t yof C ont i nent al , as s ur ety , coul d be n o g re a te r t h a n th e lia b ility o f F le m in g . S c h lo s s e r c o n te n d s , in tera lia , that att o rne y ’s fee s w er e ava i l abl e di r ect l yagai ns tC ont i nent al undert he expr es s t erm s of the per for m ance bond. A s t he D i s t r i ctC our tnot ed, “U nderV i r gi ni a l aw , t he obl i gat i on of t he of the s ur etyi s m eas ur ed byt hatof the pr i nci pal , ‘ unl es s t he bond pr ovi des ot herw i s e, ort he s ur etyhas been r el eas ed bys om e ac tof the obl i gee. ’ ” ( A pp. 62) ( quot i ng C ohen v. Mayf l ow erC or

p. , 8 6 S .E . 2 d 8 6 0 , 8 6 6 (V a . 1 9 5 5 )). T h e p e rf o rm a n c e b o n d e x p re ss ly pr ovi ded that , i n t he eve ntof Fl emi ng’ s br eac h, C ont i nent al w oul d be l i abl e t o Schl os s er fo r “a ll fe es, da m ag es, an d ex p en ses, i n clud ing co sts an d att o rne y ’s fe es.” (A p p . 1 3 8 . ) Si nce Cont i nent al w as l i abl e forat t or ney ’ s fee s undert he t erm s of the per for m ance bond, the D istri ct C o u rtd id n o t err i n aw ard ing su ch fe es to S ch losse r.T he s peci fi c or der s chal l enged byt he C r os s - A ppel l antar e the J udgm entO r derof 3 O ct ober21, 2008, and the Second A m ended J udgm entO r derof February5, 2009. 9 Schl os s ercr os s - appea l ed tw o j udgm entor der s , ar gui ng t hati ts houl d have be en 3 aw ar ded more pr ej udgm entand pos t j udgm enti nt er es t . W e have car eful l yr evi ew ed the re c o rd a n d c a n n o t sa yth a t th e D istric t C o u rt e rre d in a c o n c lu sio n o f law o r a b u se d its d isc re tio n w ith re g a rd to th e c o m p u tatio n o f in ter e st. F o r th e re a so n s d isc u ss e d a b o v e , w e w ill A F F IR M th e O rd e rs o f th e D istric t C o u rt.