Court Opinion

ID: 1022589
Source: CourtListenerOpinion
Date Created: 2013-07-04 23:24:40.8481+00
Date Added: 2024-06-11T10:37:41.395418
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                            No. 06-1591

DRC, INCORPORATED,

                                             Plaintiff - Appellee,

          and

DRC INTERNATIONAL, LLC; ROBERT J. ISAKSON;
ALBERT J. ISAKSON; ROBERT J. ISAKSON, II,

                                                       Plaintiffs,

          versus

CUSTER BATTLES, LLC,

                                            Defendant - Appellant,

          and

SCOTT CUSTER; JOSEPH T. MORRIS; MICHAEL J.
BATTLES; MURTAZA LAKHANI; MOHAMMED ISSAM ABU
DARWISH; SECURE GLOBAL DISTRIBUTION; MID EAST
LEASING, INCORPORATED; CUSTER BATTLES LAVANT;
JOHN   &   JANE   DOE   A-Z;   AMERICAN-IRAQI
CONSTRUCTION SOLUTIONS, LLC; WILLIAM “PETE”
BALDWIN; SOLUTIONS GROUP INTERNATIONAL, LLC;
LARU, LIMITED,

                                                       Defendants.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. T. S. Ellis, III, District
Judge. (1:04-cv-01499-TSE)
Argued:   March 14, 2007                   Decided:   May 16, 2007

Before WILKINSON, GREGORY, and DUNCAN, Circuit Judges.

Affirmed in part and remanded by unpublished opinion.   Judge
Gregory wrote the opinion, in which Judge Wilkinson and Judge
Duncan joined.

ARGUED: Rochelle B. Raposo, Fall River, Massachusetts, for
Appellant.     Michael Earl Barnsback, DIMUROGINSBERG, P.C.,
Alexandria, Virginia, for Appellee.         Bernard J. DiMuro,
DIMUROGINSBERG, P.C., Alexandria, Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

                                2
GREGORY, Circuit Judge:

     Custer Battles, LLC, appeals the award a jury granted to DRC,

Inc.,   in    its   dispute     with   Custer        over       a    broken        business

arrangement.        Custer    claims   that        the   jury       lacked    sufficient

evidence to award DRC $968,892 in quantum meruit and $370,761 for

tortious     interference     with   contract.           At    oral     argument,      DRC

conceded that the jury awarded a double recovery in the amount of

$130,000.       Because      sufficient       evidence        supports       the    jury’s

findings, we affirm the district court’s denial of Custer’s post-

judgment motions but remand so that the district court may adjust

the judgment to reflect a remittitur in the amount of $130,000.

                                              I.

     In June 2003, Custer was in the process of securing a contract

from the Coalition Provisional Authority (“CPA”) in Iraq to provide

security for the Baghdad International Airport (“BIA”), which was

to re-open in July.       To make their successful bid, Custer arranged

with DRC near the end of June to construct a permanent camp at the

airport and to recruit former British Army Gurkhas to constitute

the security force.       Although both Custer and DRC considered their

relationship a contractual one, there was no written document

memorializing their agreement.

     Because the BIA was scheduled to open around July 10 or 17,

2003, Custer needed to have the Gurkhas at the airport and to

                                          3
provide housing for them before then.        DRC arrived in Iraq on June

30   and   began   constructing   a   permanent   camp   where   the   Custer

personnel and the Gurkhas were to live for the year of Custer’s

contract with the CPA.      DRC realized that Custer’s personnel were

living in a local hotel and acknowledged that it could not finish

the permanent camp before the Gurkhas arrived, so it transformed

the empty Terminal C of the BIA into a temporary camp.                    To

accomplish this transformation, DRC cleaned the terminal, converted

rooms into bunkrooms, renovated the bathrooms to include showers,

installed air conditioning units, re-established the electricity

and water supplies, and improved the kitchen and dining facilities.

DRC assigned one of its managers to maintain the temporary camp

while it was inhabited. During this time, DRC hired local laborers

and subcontractors to work on the permanent camp.

      In the beginning of July, DRC completed its obligation to hire

a security force for the BIA.             DRC hired Albert Isakson, the

brother of DRC’s founder, Robert Isakson, to travel to Nepal to

recruit Gurkhas.      Albert arrived in Nepal on July 4, interviewed

candidates, had fifty-four of them sign contracts with DRC, and

paid for their flights to Iraq, where they all arrived by July 10.

DRC understood the Gurkhas to be employed by DRC and leased to

Custer. Custer trained and supervised the Gurkhas in their role as

the security force for the BIA.

                                      4
     DRC claimed that it completed construction of the permanent

camp on July 29.    Custer expressed dissatisfaction with the timing

of the completion, the quality of the work done, and the quality of

the living conditions at the temporary camp, among other things,

and fired DRC as its subcontractor on July 30.            Custer then took

complete charge of the Gurkha security force and required them to

sign new contracts.     DRC subsequently filed a complaint against

Custer in the Eastern District of Virginia.

     During   the   October   2005   trial,     DRC   claimed    that    Custer

breached its contract with DRC to lease the temporary and permanent

camps from DRC.     Custer argued that its contract with DRC was

instead a “turnkey” contract for DRC to provide life support for

Custer’s personnel for one year at a fixed price.           DRC also argued

that Custer had tortiously interfered with its contracts with the

Gurkhas.   In its complaint, DRC asserted claims against Custer for

breach of contract, open account, quantum meruit, conversion, false

imprisonment,   battery,      tortious    interference      with      contract,

statutory conspiracy to interfere with business relations, and

several other actions at common law.        Custer counter-claimed that

DRC had breached its contract with Custer, misappropriated trade

secrets,   tortiously   interfered       with   contracts       and    business

expectancies, breached its covenant of good faith and fair dealing,

and committed fraud.

                                     5
     After several days of testimony, the district court allowed

the jury to return verdicts on only six claims.                The jury found

that Custer had breached a contract but awarded DRC no damages.             It

found that DRC had not breached a contract with Custer and awarded

DRC $130,430 for its claim of open account.            It found an implied

contract between DRC and Custer and awarded DRC $969,892 in quantum

meruit damages for the value of the work it did on the camps.

Finally, it found that Custer had tortiously interfered with DRC’s

contracts with the Gurkhas and awarded DRC $370,761.

     After the jury returned its verdict, Custer filed a motion

under Federal Rule of Civil Procedure 50 for a judgment as a matter

of law and, in the alternative, for a new trial under Rule 59.              In

its motion, Custer claimed that the jury had no legally sufficient

basis   to   award   damages   for   the    quantum   meruit    and   tortious

interference claims. The district court denied the motion, finding

that sufficient evidence existed to support both awards and that

the awards were not against the weight of the evidence.                Custer

appeals the district court’s denial of its motion but does not

appeal the open account verdict.

                                          II.

     We review a district court’s denial of a motion for judgment

as a matter of law de novo.     Bryte v. Am. Household, Inc., 429 F.2d

469, 475 (4th Cir. 2005).       We consider the evidence in the light

                                      6
most favorable to the non-moving party.         Id.   A trial court may

only grant a motion under Rule 50 if after a full          hearing by a

jury, “the court finds that a reasonable jury would not have a

legally evidentiary basis to find for the party on that         issue.”

Fed. R. Civ. P. 50; Price v. City of Charlotte, 93 F.3d 1241, 1250

(4th Cir. 1996).     The district court should “accord the utmost

respect to jury verdicts and tread gingerly in reviewing them.”

Price, 93 F.3d at 1250.

                                      III.

                                       A.

       Under Virginia law, which governs this diversity action,

plaintiffs may recover in quantum meruit reasonable compensation

for the value of services they provide under a contract implied in

law.   Po River Water & Sewer Co. v. Indian Acres Club of Thornburg,

Inc., 495 S.E.2d 478, 482 (Va. 1998).        Plaintiffs bear the “burden

of proving with reasonable certainty the amount of damages and the

cause from which they resulted.”        Carr v. Citizens Bank & Trust

Co., 325 S.E.2d 86, 90 (Va. 1985).      The Supreme Court of Virginia

warns that “speculation and conjecture cannot form the basis of

recovery.”    Id.

       Custer claims that the district court erred in upholding the

jury’s award of $969,892 for the reasonable value of the services

DRC provided under its implied contract to build and maintain the

                                  7
temporary and permanent camps for Custer. According to Custer, DRC

did not prove with reasonable certainty the amount of money it

expended or the value of the services it provided in constructing

and maintaining the temporary camp.               Custer also points out that

the    life-support     services     DRC       provided   were    not   worth   the

“occupancy” and catering charges of $100 and $35 per day per

person, respectively, DRC claimed to the jury.                    Custer states:

“The       conditions   of   the    camp       were   inhumane,    described     as

‘substandard’ and posed threats to the physical and mental health

of the guards that had to endure its conditions and actually caused

the men to be physically sick.”                  Appellants’ Br. 16.        Custer

finally argues that DRC should not be able to recover damages in

quantum meruit for the services it provided in constructing the

permanent camp because the jury found that a contract to construct

the camp existed, and a quantum meruit verdict can only stand if

the jury finds no extant contract.1

       Despite Custer’s claims, the district court did not err in

upholding the jury’s award of damages in quantum meruit.                  Although

the jury found that Custer breached an actual contract that it had

with DRC, the general verdict form did not specify which contract

the jury found breached.           In its order dismissing Custer’s post-

       1
      See S. Biscuit Co. v. Lloyd, 6 S.E.2d 601, 606 (Va. 1940)
(“An express contract defining the rights of the parties
necessarily precludes the existence of an implied contract of a
different nature containing the same subject matter.”)

                                           8
judgment motions, the district court noted that it is likely that

the jury understood the breached contract as a contract between DRC

and Custer concerning the Gurkhas and not the construction of the

two camps.    The district court stated that by finding for DRC on

its quantum meruit claim, the jury must have concluded that no

contract concerning the construction and maintenance of the camps

existed.     We agree with the district court’s conclusion.     The

evidence presented at trial would have allowed a reasonable jury to

conclude that DRC and Custer did not come to a meeting of the minds

on the terms of the construction and maintenance contract but that

DRC deserved to be compensated for the work it did pursuant to its

understanding that it had contracted with Custer. Without detailed

findings from the jury, we will not overturn the verdict on the

basis of Custer’s speculation that the jury determined that a

specific contract existed.

     We further find that a reasonable jury could have concluded

that DRC proved the reasonable value of its services under this

implied contract with reasonable certainty.    Both sides presented

a great deal of evidence about the amount of money each paid in the

camp construction process.    DRC offered invoices and spreadsheets

detailing its expenditures.    Custer offered the testimony of an

accounting expert who studied the documents and opined that DRC did

not expend as much money as it claimed.       On cross-examination,

however, Custer’s expert admitted that he only counted the payments

                                  9
that had sufficient documentation and conceded that DRC might have

paid more money.       DRC also presented evidence that it provided

services at both camps that Custer’s expert did not take into

account.

     Both sides presented evidence about the conditions at the

camp.    Custer’s witnesses said that the work DRC did and the

services DRC provided were sub-par.               They complained about the

quality of the food, they pointed out that the bathrooms had

standing water, and they stated that the camp was not clean.            DRC’s

witnesses praised the cleanliness and ingenuity of the camp.             They

admitted that the bathrooms had a drainage problem, but they

claimed to have provided a proper solution.            They stated that they

served only four or five days worth of pre-prepared food and that

the remaining meals they cooked at the camp.                 The overhead and

labor charges DRC presented during testimony might have been more

than Custer thought they were worth, but a reasonable jury could

have credited DRC’s estimates over the protestations of Custer’s

witnesses.      This    Court   will        not   overturn   the   credibility

determinations of the jury.

     DRC also presented considerable evidence of the expenses it

incurred in constructing both camps.              Custer did little to rebut

DRC’s claims of payments to its own subcontractors and Iraqi labor

force.     DRC even admitted where the jury’s verdict overshot the

evidence.    Because it could find no evidence to support the entire

                                       10
amount that the jury awarded, DRC at oral argument conceded that

the jury must have counted $130,000 twice in its calculation of the

award.     Excluding that $130,000, we find sufficiently specific

evidence to support the jury’s award of damages for DRC’s quantum

meruit claim.

                                      B.

     Custer gives three reasons why the district court should not

have upheld the jury’s tortious interference with contract verdict.

First, Custer claims that DRC’s contract with the Gurkhas was void

because it violated the statute of frauds. Custer next argues that

it could not have tortiously interfered with DRC’s Gurkha contract

because DRC was acting as Custer’s agent in procuring the Gurkhas.

Finally, Custer states that the evidence was insufficient to prove

that Custer tortiously interfered with DRC’s relationship with the

Gurkhas.    We reject these arguments.

     Custer claims that DRC’s contracts with the Gurkhas were for

a term longer than a year and were not in writing.      Virginia’s

statute of frauds requires a contract “that is not to be performed

within a year” to be in writing and signed by the parties.     Va.

Code Ann. § 11-2(8) (West 2006).   DRC responds that the employment

contracts were indeed in writing and that Custer has waived its

statute of frauds defense by presenting it for the first time on

appeal.

                                 11
       We will not consider an issue raised for the first time on

appeal “unless the refusal to consider it would result in a

fundamental miscarriage of justice.”              U.S. Dep’t of Labor v. Wolf

Run Mining Co., 452 F.3d 275, 283 (4th Cir. 2006).                     Custer should

have raised a defense based on the statute of frauds in its

original answer and counter-claim, but it did not.                     It could have

raised this defense in its post-judgment Rule 50 motion, but it did

not.       According to the docket sheet, both sides participated in

extensive post-trial briefing of issues, and Custer never raised

this       defense.      Because   it   does    not   result    in   a   fundamental

miscarriage of justice, we refuse to consider this defense raised

at such a late stage in the proceedings.2

       Custer     next    claims   that   the    district      court     should   have

disregarded the jury’s verdict in favor of DRC on the tortious

interference claim because DRC acted as an agent for Custer in

securing the services of the Gurkhas.                 DRC replies that it was an

independent contractor that formed its own contracts with the

Gurkhas, whom it then leased to Custer.                By finding for DRC on the

tortious interference claim, the jury necessarily found that Custer

       2
      Assuming, arguendo, that Custer has not waived its statue of
frauds defense, the defense still fails. DRC presented evidence,
both documentary and testimonial, that it had executed written and
signed employment contracts with the Gurkhas.        DRC witnesses
testified that they lost those contracts when Custer forced them to
leave the BIA. Custer presented no evidence that supports their
current claim that DRC’s employment contracts with the Gurkhas were
never in writing. Given this evidence, were we to consider the
statute of frauds defense, we would reject it.

                                          12
was neither a party to the contract nor DRC’s principal in an

agency relationship.

      The district court instructed the jury that it could not find

that Custer tortiously interfered with DRC’s contracts with the

Gurkhas if it found that DRC was acting as an agent for Custer when

it recruited them.        Following the law established by this Court,

the district court further instructed:

           Where a party is part of a business
           relationship and therefore acting within the
           scope of its own financial interests, it’s not
           an intermeddler and there is no claim for
           tortious interference. Where the party is not
           a competitor seeking an advantage, but rather
           a party to the relationship acting in its own
           economic interests to limit liability, there
           is no claim for tortious interference.

J.A. 616; see Zoby v. Am. Fid. Co., 242 F.2d 76, 79-80 (4th Cir.

1957).    Neither    party     objected      to   these   instructions.          The

touchstone    for   the   difference       between   agents      and   independent

contractors   in    Virginia   law    is    the   concept     of    control.      An

independent contractor is “one who undertakes to produce a given

result without being in any way controlled as to the method by

which he attains the result.”         Craig v. Doyle, 19 S.E.2d 675, 677

(Va. 1942).

      The evidence presented at trial showed that Custer asked DRC

to recruit the Gurkhas who would provide security for the BIA.                   DRC

had   complete   control     over    this    process.       It     hired   its   own

recruiter, paid for the agency and travel expenses, interviewed and

                                       13
signed contracts with the Gurkhas, and supervised the Gurkhas when

they were not working security details for Custer.           DRC also

presented evidence that it agreed with Custer to lease the Gurkhas

to Custer at cost plus a thirty percent fee.    Also in evidence was

an email from Scott Custer, the co-owner of Custer Battles, that

shows that DRC was indeed in control of recruitment and hiring of

the Gurkhas:

            I am not sure how you want to handle the
            Gurkhas, as I know we had originally talked
            about you providing them at cost.     However,
            the best way to run the Gurkhas is likely as a
            true subcontract, either with a firm fixed
            price or cost+ arrangement.    I will let you
            decide, however as a subcontractor you will be
            expected to invoice use for costs.

J.A. 150.    This evidence tends to show that DRC was not acting as

an agent under Custer’s control but as an independent contractor.

It also supports a reasonable jury’s finding that DRC had executed

individual employment contracts with the Gurkhas to which Custer

was not a party.

     Custer finally claims that the evidence presented at trial was

insufficient to prove that Custer interfered with DRC’s contracts

with the Gurkhas. DRC, however, presented unrebutted evidence that

after Custer fired DRC and forced its personnel to leave the BIA,

DRC had no opportunity for further contact with the Gurkhas, and

Custer made the Gurkhas sign employment contracts with Custer so

that they could continue to provide security.    Because Custer thus

                                 14
prevented DRC from maintaining its employment relationship with the

Gurkhas, we affirm the jury’s award of $370,761 for lost profits.

                                     IV.

     We hold that sufficient evidence supports the jury verdicts in

favor of DRC on its quantum meruit and tortious interference with

contract claims.   We therefore affirm the district court’s denial

of Custer’s post-judgment motion.          Because, however, the jury

appears to have awarded DRC $130,000 in double recovery for the

quantum meruit claim, we grant a remittitur in that amount and

remand to the district court to modify the judgment accordingly.

                                       AFFIRMED IN PART AND REMANDED

                                15