UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

POTTER-SHACKELFORD CONSTRUCTION

COMPANY, INCORPORATED,

Plaintiff-Appellee,

No. 96-1073

v.

LAW ENGINEERING, INCORPORATED,

Defendant-Appellant.

POTTER-SHACKELFORD CONSTRUCTION

COMPANY, INCORPORATED,

Plaintiff-Appellant,

No. 96-1112

v.

LAW ENGINEERING, INCORPORATED,

Defendant-Appellee.

Appeals from the United States District Court

for the District of South Carolina, at Greenville.

Henry M. Herlong, Jr., District Judge.

(CA-95-116-6-20)

Argued: October 29, 1996

Decided: December 23, 1996

Before MURNAGHAN and MICHAEL, Circuit Judges, and

DOUMAR, Senior United States District Judge for the Eastern

District of Virginia, sitting by designation.

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Remanded in part and affirmed in part by unpublished per curiam

opinion.
COUNSEL

ARGUED: Robert O'Neal Fleming, Jr., SMITH & FLEMING,

Atlanta, Georgia, for Appellant. Thomas H. Coker, Jr., HAYNSWORTH, MARION, MCKAY & GUERARD, L.L.P., Greenville,

South Carolina, for Appellee. ON BRIEF: Boyd B. Nicholson, Jr.,

Cynthia Buck Brown, HAYNSWORTH, MARION, MCKAY &

GUERARD, L.L.P., Greenville, South Carolina, for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

Potter-Shackelford Construction Co., Inc. ("Potter-Shackelford"),

sued Law Engineering, Inc. ("Law") for breach of contract, negligence, professional negligence and negligent misrepresentation. The

basis of Potter-Shackelford's claim was Law's alleged failure to provide adequate recommendations regarding the suitability of a concrete

floor slab on a building, with which Potter-Shackelford was involved.

Punitive damages also were sought. At the close of evidence Law

made a motion for judgment as a matter of law as to punitive damages. The district court granted that motion. Thereafter, the jury

returned a compensatory verdict in favor of Potter-Shackelford for

$126,552.73. The district court denied Law's post-trial motion for

judgment notwithstanding the verdict holding that the liability of limitation clause contained in the contract executed by the parties, which

limited Law's liability to $50,000, did not apply to the claims raised

by Potter-Shackelford against Law. Both Potter-Shackelford and Law

have appealed.

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I.

FACTS AND PROCEDURAL HISTORY

In 1988, Hart Corporation ("Hart"), a real estate development company, awarded Potter-Shackelford, a commercial general contractor,

a contract to build a "shell" building for speculative sale. The inside

of the building, to include a floor slab, was left unfinished in order

to allow a potential buyer flexibility in using the building. Hart hired

Law, an engineering company providing soils and construction material testing and related engineering services, to provide geotechnical

engineering services in connection with the project. Before PotterShackelford did any work on the site, Law examined the existing site

in order to make recommendations to Hart regarding, among other

things, the type of soil fill material to be placed in the building's subgrade. Law made recommendations regarding the physical characteristics of the fill material, specifically including recommendations

concerning the "liquid limits" of the soil fill and its maximum "plasticity index."1 Law recommended a maximum plasticity index of 15

for fill materials within the shell building.

In 1991, Hamilton Standard Company ("Hamilton"), a distributor

based in Connecticut, purchased the shell building. Hamilton

requested that Potter-Shackelford and other contractors submit bids to

upfit the building to suit Hamilton's specific needs. These upfits

included the construction of a concrete floor slab, offices, and other

facilities. After receipt of the bids, Hamilton asked Potter-Shackelford

to revise its proposal to provide assurances that the subgrade would

properly support a concrete floor slab. Potter-Shackelford agreed to

Hamilton's proposal, but conditioned its acceptance on Hamilton's

agreeing to pay extra for the removal of unsuitable material found in

the subgrade. Hamilton agreed to do so.

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1 Soils with a high plasticity index have a high potential for swelling

and also have inherent in them the opposite problem of shrinking when

moisture is lost. The plasticity index tells engineers the potential the soil

has for swelling when the soil becomes wet. Soil materials with high

plasticity indexes are generally undesirable for construction and are normally removed because the swelling of the soil causes the floor slab to

be raised in areas above the swelling soil.

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After reaching its agreement with Hamilton, Potter-Shackelford

contacted Law to provide engineering services in connection with the

construction of a concrete floor slab in the building. On January 2,

1992, Art Baiden of Potter-Shackelford spoke with Michael Parker,

an engineer with Law. Baiden and Parker agreed to meet at the building site on January 7, 1992. No work order was executed before the

meeting.

At the site, Baiden, bearing in mind Hamilton's obligation to pay

for unsuitable material found in the subgrade, asked Parker what

needed to be done to make the existing subgrade suitable to support

the proposed concrete floor slab. At that time, Parker recommended

that the subgrade be reconditioned by evacuating the upper one to two

feet of soil, adding moisture, and then replacing and compacting the

soil. Parker also recommended that plateload testing be performed in

three areas, to make sure that the reconditioned soil would have adequate strength to support the proposed concrete floor slab. Parker did

not recommend any further testing of the soil, nor did he discuss with

Baiden the existence of plastic soils within the subgrade.2 Based on

Parker's recommendation, Baiden authorized Law to perform the

plateload testing.

After the meeting, Parker returned to his office and prepared a written proposal, under which Law would conduct field density testing

during preparation of test areas, to conduct plateload tests, and to

report the results. The proposal clearly related to two parts of a single

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2 In October 1991, Parker prepared a report for David Rogers, a Law

customer, concerning the condition of the subgrade of the building.

Law's October 1991 report indicated that soil borings taken by Law had

a plasticity index of 53. The report also stated that the presence of plastic

soils "compromises the ability of the subgrade to provide proper support.

. . ." On December 20, 1991, Law prepared another report, in which Law

recommended that the soils used in compacted fills have a plasticity

index less than 15, and that the subgrade in its present condition did not

appear feasible to support a floor slab. Parker did not prepare the second

report, but was aware of the report. Parker had copies of both reports

when he met with Baiden, but did not discuss the reports with Baiden.

These reports, and Parker's failure to mention them to Baiden form the

basis for Potter-Shackelford's punitive damages claim to be discussed in

more detail hereafter.

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obligation recommendation and the work authorization for accomplishing it. Law's proposal was printed on a form titled "Work Authorization Sheet." That form stated: "The purpose of this sheet is to

obtain your authorization for the work verbally requested and confirm

the terms under which these services are provided as shown below

and on back." On the back of the form are Law's standard "Term and

Conditions," including the following provision:

PROFESSIONAL LIABILITY. Client agrees that Law

Engineering's liability to Client or any third party due to any

negligent professional acts, errors or omissions or breach of

contract will be limited to an aggregate of $50,000 or our

total fee, which ever is greater. If Client prefers to have

higher limits of professional liability, we agree to increase

the limit to a maximum of $1,000,000 upon Client's written

request at the time of accepting our proposal, providing that

Client agrees to pay an additional consideration of ten percent of our total fee, or $500, whichever is greater. The

additional charge for the higher liability limit is because of

the greater risk assumed by us and is not a charge for additional professional liability insurance.

After completion of the plateload testing,3 in February 1992, Law

sent Potter-Shackelford a written report detailing the tests and making

recommendations based on the test results. The report made references to the October 1991 and December 1991 reports, but made no

mention of the problems respecting the high plasticity index values of

the soil present in the subgrade. Prior to receiving the February 1992

report, Potter-Shackelford recompacted the subgrade and began pouring the concrete slab floor over the original subgrade soil. By March,

1992, the concrete floor had been completed. Thereafter, a portion of

the concrete floor, began to buckle and shift, causing the owner

(Hamilton) to become aware of the building problems. After investi-

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3 Potter-Shackelford contends that Law performed the plateload testing

and verbally reported the results of the testing before Baiden signed the

Work Authorization Form. Baiden signed the form on January 16, 1992.

Law's performance of the work before Baiden signed the form does not

appear to be material to the controversy at hand.

 5
gations by several engineers,4 Potter-Shackelford and Hamilton concluded that the high plastic soils in the subgrade were responsible for

the problems with the concrete floor slab. Potter-Shackelford then

removed and replaced approximately 8,500 square feet of the concrete

floor slab.

Potter-Shackelford sued Law for breach of contract, negligence,

professional negligence and negligent misrepresentation in the Court

of Common Pleas, in Greenville, South Carolina. Law removed the

case to the United States District Court for the District of South Carolina based on diversity of citizenship. Law moved for partial summary

judgment limiting its liability to $50,000, in accordance with the limitation of liability clause contained in the work authorization form.

Finding a genuine issue of material fact existed as to whether the limitation of liability applied, on August 21, 1995, the district court

denied the motion.

On November 29, 1995, the district court granted Law's motion for

judgment as a matter of law as to punitive damages. At the close of

Potter-Shackelford's case, and again at the close of all the evidence,

Law sought judgment as a matter of law enforcing the limitation of

liability clause. The district court denied both motions. On November

30, 1995, the jury awarded Potter-Shackelford damages in the amount

of $126,552.73. On December 12, 1995, the district court denied

Law's post-trial motion for judgment as a matter of law with respect

to the liability limitation clause contained in the work authorization

form. Law filed its notice of appeal on January 10, 1996, and PotterShackelford filed its notice of cross-appeal on January 22, 1996.

_________________________________________________________________

4 Law also examined the concrete floor and expressed its belief that

curling may have been responsible for the floor's problems. Curling

occurs when the top of the concrete slab dries faster than its bottom. In

January, 1994, after performing additional tests on the subgrade, Law

issued a report concluding that expansive soils were not causing the

slab's problems because "no evidence [exists] that the overall moisture

content of the subgrade . . . changed significantly." Law's 1994 report

made reference to its October, 1991 and December, 1991 reports. Law's

report also recommended a desired plasticity index of 30.

 6
II.

DISCUSSION

On appeal we must center on whether a limitation of liability provision on the back of Law's Work Authorization Form, which was

signed by Potter-Shackelford's representative is legal and applies. As

the issue raised is one of contract construction, the district court's

decision is subject to plenary review by the court. Bailey v. Blue

Cross & Blue Shield of Virginia, 67 F.3d 53, 54 (4th Cir. 1995), cert.

denied, 116 S.Ct. 1043 (1996). Preliminarily, the parties disagree on

what state law controls in the instant appeal.

A. Choice of Law

The aforementioned limitation of liability provision provides that

the agreement shall be governed by the laws of the State of Georgia.

As Law notes, South Carolina courts have long respected the consistently enforced contractual choice of law provisions, except where the

stipulated law directly conflicts with South Carolina public policy.

Associated Spring Corp. v. Roy F. Wilson Avent, Inc. , 410 F.Supp.

967, 975 (D.S.C. 1976). Furthermore, Law argues that application of

Georgia law relating to exculpatory clauses does not violate South

Carolina public policy.5

The limitation of liability clause here is legal, and hence, Georgia

law will control. In any event, as Potter-Shackelford has candidly

admitted, Georgia's law respecting limitation of liability is no different from that of South Carolina. Potter-Shackelford's Brief, at p. 17

n. 11.

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5 Law cites to two unpublished decisions from the Fourth Circuit to

support its proposition, Georgetown Steel Corp. v. Law Engineering

Testing Co., 7 F.3d 223 (Table), 1993 WL 358770 (4th Cir. Sept. 14,

1993), and Gibbes, Inc. v. Law Engineering, Inc., 960 F.2d 146 (Table),

1992 WL 78830 (4th Cir. Apr. 20, 1992). While the decisions are not

precedent, we find their holdings persuasive. Potter-Shackelford agrees

that they reiterate the general rule that exculpatory clauses like the one

involved in the present case are not void as a matter of public policy.

 7
Under Georgia Law, contractual limitation of liability provisions

are valid and enforceable:

It is the paramount public policy of this state that courts will

not lightly interfere with the freedom of parties to contract.

A contracting party may waive or renounce that which the

law has established in his or her favor, when it does not

thereby injure others or affect the public interest. Exculpatory clauses in Georgia are valid and binding, and are not

void as against public policy when a business relieves itself

from its own negligence. Parties to the contract are presumed to have read their provisions and to have understood

the contents. One who can read, must read, for he is bound

by his contracts.

My Fair Lady of Georgia, Inc. v. Harris, 364 S.E.2d 580, 581 (Ga.

App. 1987).

B. The Applicable Limitation of Liability Provision

In a nutshell, Potter-Shackelford argues that the limitation of liability provision is limited to the performance of plateload tests, not to

Law's recommendations with respect to plateload tests, i.e., performance vs. advice to perform. Potter-Shackelford expresses no dissatisfaction with the actual plateload testing performed by Law. Rather,

Potter-Shackelford argues that Law's recommendation of plateload

testing at the January 7 meeting was faulty, especially in light of

Law's prior experience with the concrete slab. Law was paid for that

recommendation and no limitation of liability form was executed for

that work, Potter-Shackelford contends.

Furthermore, Potter-Shackelford argues that "the most important

evidence on the issue is the authorization form itself." PotterShackelford claims that the authorization form speaks only to Law's

performing and reporting of plateload tests. The form, PotterShackelford contends, makes no mention of providing any consultation services.6

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6 In addition, Potter-Shackelford argues that another authorization form

provided by Law to another client specifically mentions examining the

 8
On the other hand, Law argues what Potter-Shackelford wanted

from Law was its engineering judgment necessary to determine what

needed to be done to the subgrade. Law argues that Law's recommendation of plateload testing, and the subsequent implementation of that

recommendation, are complementary parts of a single transaction.7

Law maintains that the gravamen of Potter-Shackelford's complaint

is that Law's recommendation of plateload testing instead of other

kinds of testing which would have revealed the existence of plastic

soils in the subgrade, amounted to the result of the plateload testing

which Law represented would make the subgrade soils suitable to

support the concrete floor slab. Law responds there was one continuous activity by it or two closely linked activities acting together. Parker prepared a written proposal embodying Law's recommended

course of action and sent that proposal to Potter-Shackelford. The

_________________________________________________________________

subgrade conditions and rendering an opinion "on the suitability of the

soil subgrade to receive a concrete floor slab on grade." Notwithstanding

the irrelevance of another authorization form addressed to another client,

not involved with the present lawsuit, even if that other form was otherwise relevant, the language included in that form bears no relevance to

the language in the present form. Undeniably, Law did not include similar language in the form Law provided to Potter-Shackelford. The lack

of that language, however, does not demonstrate in any way that the recommendations provided by Parker were not a part of the contract executed by the parties. Law was approached by Potter-Shackelford to solve

a problem not to break it into two or more pieces. At best, the absence

of the language represents an oversight by Parker, or sloppy work, or else

perhaps avoidance of needless redundancy.

7 It is as though in baseball one hits a home run. That means a single

hit not four hits (a single, a double, a triple, and a four baser). Or a double play where the ball passes from pitcher to batter, to shortstop, to second baseman to first baseman is overall a single event though involving

different though complementary acts by five different players. In other

words, we are dealing with an A1 and A2 which coalesced into a composite A. Even if we had a situation where two distinct items merged (A

+ B = a successor A), which neither of the parties nor the district judge

has addressed, we might well end up with the same conclusion. DeLong

v. Cobb, 111 S.E.2d 89, 93 (Ga. 1959) ("[Y]et it is a well-settled principle of law . . . that all pertinent representations and negotiations prior to

the preparation and execution of a written contract are merged therein."),

overruled sub nom. on other grounds, Long v. Walls, 177 S.E.2d 373

(Ga. 1970).

 9
proposal was signed and accepted by Potter-Shackelford and became

the contract between the parties. Included within that contract, Law

argues, is the limitation of liability clause.

In an oral ruling, the district court denied Law's motion for judgment as a matter of law at the close of all the evidence on the grounds

that the limitation of liability provision "pertains purely to a separate

specific contract concerning plateload testing, which is not even

claimed in this case as far as the contract action by the plaintiff

against the defendant."8

In our view the ruling of the district court should be amended to

take account of the limitation of liability. Law correctly states that

contract language is to be evaluated in light of surrounding circumstances to ascertain the intention of the parties. Paul v. Paul, 219

S.E.2d 736 (Ga. 1975). Prior to constructing the concrete floor slab,

Potter-Shackelford turned to Law for its advice on the suitability of

the subgrade to support a concrete floor slab. After the January 7

meeting between Baiden from Potter-Shackelford and Parker from

Law, Parker prepared a written proposal in which Law was to provide

an engineer technician to conduct field density testing; conduct three

plateload tests; and report the results of those tests. On the back of the

proposal, the limitation of liability clause appears, as well as the

choice of law provisions.

It is a situation designed to lead to performance if feasible and

continuing to be performed when determined to be feasible. PotterShackelford's argument seems merely an attempt to salvage its jury

verdict through resort to an unrealistic approach to the parties' agreement. After Law completed its work, Law sent Potter-Shackelford a

single invoice in the amount of $3,582.28, which included a charge

of $225 for Parker's time on January 7. That indicated a belief by

Law that a single contract covering both the recommendation of plateload testing and the implementation of the recommendation was

_________________________________________________________________

8 In an earlier written ruling on Law's motion for partial summary judgment on the limitation of liability provision, the district court denied that

motion on the grounds that "[a]t the very least, a genuine issue of material fact exists as to whether the limitation of liability applies."

 10
in existence. Agreement as to such an interpretation by PotterShackelford is demonstrated by its payment without objection of the

entire bill without asking for a separation into distinct activities.

Potter-Shackelford stresses that no work authorization form was

completed with respect to the January 7 meeting, however, the lack

of a work authorization form weighs against Potter-Shackelford. The

fact that no separate work authorization form exists, or was created,

for the January 7 meeting suggests that Parker's January 7 meeting,

and his recommendations are a part and parcel of the proposal Parker

sent to Potter-Shackelford. Parker's recommendations were followed

on without interruption by the plateload testing itself. PotterShackelford's argument that only the actual plateload testing--and

not the plateload recommendation itself--is covered by the limitation

of liability clause ignores the circumstances under which the plateload

testing was done in the first place.

Moreover, Baiden testified that he met with "Parker at the job site

to get his opinion as a geotechnical engineer as to what we needed to

do with the [soil] subgrade to make it suitable to accept the [concrete]

floor slab." Potter-Shackelford does not dispute that Parker recommended plateload testing and Potter-Shackelford promptly accepted

the recommendation. Law argues persuasively that a single operation

needed to be done which included both the recommendation of plateload testing, as well as the performance of that testing and the reporting of the results.

The surrounding circumstances related to the formation and interpretation of the contract include the fact that the parties acted to send

and pay only one invoice for the plateload testing work, including the

recommendation that the testing be done and the fact that PotterShackelford engaged Law's expertise to determine how to make the

subgrade suitable for the concrete floor slab. They amply demonstrate

that the recommendation of plateload testing was part of a single contract entered into between the parties, and hence, the limitation of liability provision should apply.

C. Punitive Damages

In its cross-appeal, Potter-Shackelford appeals the district court's

grant of Law's motion for judgment as a matter of law as to punitive

 11
damages. Potter-Shackelford contends that the district court erred in

ruling as a matter of law on the punitive damages issue because the

record provided substantial evidence that Law withheld crucial information from Potter-Shackelford.

The district court apparently passed over the matter whether breach

of contract would support punitive damages, Floyd v. County Square

Mobile Homes, Inc., 336 S.E.2d 502 (S.C. Ct. App. 1985); Vann v.

Nationwide Ins. Co., 185 S.E.2d 363 (S.C. 1971), ruling that insufficient evidence existed to create a jury question on the punitive damages issue. Potter-Shackelford argues that the standard of review

should be de novo, and we do not disagree. Benedi v. McNeil-PPC,

Inc., 66 F.3d 1378 (4th Cir. 1995).

In diversity cases federal law governs whether an issue is to be

determined by the court or the jury. Johnson v. Hugo's Skateway, 974

F.2d 1408, 1416 (4th Cir. 1992) (en banc). Under federal law, the

grant of judgment as a matter of law is appropriate only when the evidence, viewed in a light most favorable to the non-moving party,

would support only one reasonable verdict. See Williams v. Cerberonics, Inc., 871 F.2d 452, 458 (4th Cir. 1989). The same standard

is applied by the Fourth Circuit in reviewing a district court's granting

judgment as a matter of law. Nehi Bottling Co. v. All American Bottling Co., 8 F.3d 157, 162 (4th Cir. 1993). In determining whether

judgment as a matter of law is appropriate regarding punitive damages, however, a federal court in diversity must apply state substantive law. Defender Industries, Inc. v. Northwestern Mutual Life

Insurance Co., 938 F.2d 502, 504-05 (4th Cir. 1991) (en banc). Under

South Carolina law, punitive damages are appropriate where the conduct of the defendant was willful, wanton or reckless. Barber v.

Whirlpool Corp., 34 F.3d 1268 (4th Cir. 1994). A demonstration of

"conscious wrongdoing" must be made by the plaintiff to justify an

award. Id. at 1278.

Potter-Shackelford argues that sufficient evidence existed to submit

the punitive damages issue to the jury. As support for its position,

Potter-Shackelford notes that at the time Parker met with Baiden,

Law, through its representative Parker, knew, and had reported in the

past, that the project's subgrade contained expansive, plastic soils

which rendered the subgrade unsuitable for a concrete floor slab. Law

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failed to inform Potter-Shackelford of those facts. Potter-Shackelford

argues that "[t]he fact that Law withheld information concerning plastic soils, standing alone, created an issue of fact for the jury to determine whether Parker, as a professional engineer, had willfully or

recklessly withheld information from Potter-Shackelford."

Furthermore, Potter-Shackelford contends that Law continued to

withhold the information about the plastic soils, even after the problems with the subgrade became manifest. In addition, according to

Potter-Shackelford, Law took an affirmative step further to mislead

Potter-Shackelford concerning the subgrade, by noting in its 1994

report, that the maximum plasticity index value for the project site

should be 30. The 30 figure was double the index value given in

Law's three prior reports in 1988, October 1991, and December 1991.

Potter-Shackelford argues that a jury could have reasonably concluded that Law withheld information about the plastic soils in order

to hide the fact that Law performed faulty work on the project in

1988. Potter-Shackelford notes that in 1988, Law monitored the soil

fill placement for Hart, the owner of the site at the time. In 1988, as

well as 1991, Law recommended a maximum plasticity index of 15.

Based on the soil tests performed in 1993 and 1994 showing plasticity

index values ranging from 21 to 74, the jury could have reasonably

inferred that Law failed properly to monitor fill placement in 1988,

and that upon realizing this failure, worked to withhold the information.

In response, Law argues the evidence viewed in a light most favorable to Potter-Shackelford permits only one reasonable conclusion:

Law's failure adequately to apprise Potter-Shackelford about plastic

soils in the subgrade resulted from miscommunication and misunderstanding, not willful misconduct. Law claims that when Parker met

with Baiden from Potter-Shackelford, Parker believed that Baiden had

read both the October 1991 and December 1991 reports because Baiden knew of the existence of the reports. Therefore Parker thought

Baiden was aware of the plastic soils in the subgrade.9

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9 Law relies on Parker's notes recorded contemporaneously with the

telephone conversation on January 2 between Parker and Baiden setting

up the January 7 meeting. The notes, unrebutted, state that "[h]e [Baiden]

does not have either report but obtained Oct copy from Steven Turner

. . . ." Law's Reply Brief, at 8. The notes also state that "he [Baiden]

needs to read both reports so he can determine what to do." Id.

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Moreover, Law contends that Law did not provide copies of the

October 1991 and December 1991 reports to Potter-Shackelford after

the concrete floor slab began manifesting problems because of Law's

standard policy that any report Law prepares is the property of the client, and cannot be provided to a third party without the client's permission. As for Potter-Shackelford's argument that Law failed

reasonably to monitor fill placement in 1988 and upon realizing that

failure, worked to withhold the information, Law contends that Law

was not hired to monitor the plasticity of fill soils during the 1988

construction.

The district court correctly granted Law's motion for judgment as

a matter of law on the punitive damages issue. While Law was probably negligent in not making sure that Baiden had read the October

1991 and December 1991 reports, Potter-Shackelford has not offered

any evidence from which a reasonable jury could conclude that Law's

conduct rose to the level of willfulness or "conscious wrongdoing."

The district court should, therefore, as to punitive damages, be

affirmed.

Accordingly, the recovery judgment should be remanded to be covered by the limitation of liability at $50,000 and the denial of punitive

damages should be affirmed.

REMANDED IN PART AND AFFIRMED IN PART

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