Court Opinion

ID: 10541
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:55:06+00
Date Added: 2024-06-11T11:09:03.685749
License: Public Domain

UNITED STATES COURT OF APPEALS
                           FOR THE FIFTH CIRCUIT

                         _______________________

                               No. 95-10723
                         _______________________

CARROTHERS CONSTRUCTION CO., INC.,

                                                            Plaintiff-Appellee,

                                       versus

DALLAS TX CITY OF; NAT’L PROJECTS, INC.,

                                                      Defendants-Appellants.

_________________________________________________________________

           Appeal from the United States District Court
                for the Northern District of Texas
                          (3:90-CV-70-BD)
_________________________________________________________________

                                October 11, 1996

Before KING, JONES, and SMITH, Circuit Judges.

EDITH H. JONES, Circuit Judge:*

             This case concerns claims by Carrothers Construction

Company ("Carrothers") against the City of Dallas ("the City") and

National Projects, Inc. ("NPI") for the breach of two construction

contracts.    After a three week trial, the jury found that NPI and

the   City   had    breached    both    contracts   and     awarded    Carrothers

$1,914,030     in    damages.      The     trial    court    entered    judgment

      *
         Pursuant to Local Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in Local Rule 47.5.4.
accordingly and assessed an additional $1,517,402 in pre-judgment

interest against NPI and the City.               The court also awarded against

NPI only attorney's fees of $629,120 for the trial and up to

$70,000 for the appeal.           NPI and the City now appeal.             We affirm

the trial court's judgment.

                                  I.    BACKGROUND

            In    1984,    the     U.S.    Environmental      Protection        Agency

determined that the City was not in compliance with federal clean

water standards.          To comply with the EPA's mandate, the City

entered    into    a   $104      million       contract   with    Blount      Brothers

Construction Company to enlarge its Southside Wastewater Treatment

Plant.    This enlargement consisted of the construction of nine new

buildings which would be connected by an underground piping system.

            One    year     after       hiring     Blount,       the   City    became

dissatisfied with its performance and terminated the contract.                      In

its place, the City hired NPI to manage the completion of the

construction begun by Blount.             NPI devised a plan whereby the City

would re-bid the project, utilizing, 14 prime contracts to finish

the enlargement. NPI would coordinate the bids and advise the City

on awarding the contracts.             NPI and the City also agreed that the

City would assign its contracts with the prime contractors to NPI,

NPI would manage the project, and the City would pay the prime

contractors.

                                           2
            Carrothers bid on several of the prime contracts.                        In

July 1987, the City awarded Carrothers Contract 87-712, in the

amount of $880,000, for the construction of the flow splitter and

grit buildings, and Contract 87-730, in the amount of $1,525,000,

for the construction of the filter building.                        Carrothers was

responsible      for   completing       the   concrete     and   resteel      of    the

buildings;    other    contractors       would    complete    their     mechanical,

electrical, and piping systems.

            Carrothers entered into contracts with the City for both

projects, and the City assigned the contracts to NPI.                   Because of

the EPA's     order,    the    contracts      recognized     that    "time    was    of

essence" in completing the wastewater treatment plant enlargement.

Contract 712 required Carrothers to start work on the flow splitter

and grit buildings by July 27, 1987 and to complete performance by

January 15, 1988.       Contract 730 required Carrothers to start work

on July 20, 1987 and to complete work by April 3, 1988.

            In    turn,      the   contracts      provided       that   NPI    would

"coordinate the work at the project site"; "manage the construction

of the project and the performance of the construction work"; be

responsible      for   the    project    Master    Schedule,        coordinate      the

construction, and administer the contract; "furnish as indicated in

the contract documents and not later than the date when needed by

the contractor, the lands upon which the work is to be done";

promptly investigate any complaint that a contractor was failing to

                                          3
coordinate its work with other contractors; and inspect all work

performed.

            To    carry      out   these   responsibilities,     the    contracts

provided that NPI had the right "to request any contractor or

subcontractor cease work at a particular location" and move to

another location; to suspend temporarily the work of one contractor

to coordinate or expedite the work of other contractors; and to

withhold payments to a contractor for unsatisfactory progress.

Carrothers's work necessarily intermingled with the work of other

contractors.

            Immediately after the contracts were executed, problems

erupted.        Carrothers contends that NPI and the City failed to

disclose information necessary for its work; failed to respond

timely     to    Carrothers's       requests   for    information;      concealed

deficiencies      at   the    construction     site   and   in   work   by   other

contractors, causing Carrothers’s work to be delayed; insisted

Carrothers begin work when it knew that the site was not ready; and

generally failed to manage the project properly.                   In the end,

Contract 712, which was originally scheduled to take 172 days, took

an additional 274 days to be completed, for a total of 446 days.

Contract 730, which was scheduled to take 258 days, took an

additional 243 days to be completed, for a total of 501 days.

Although NPI and Carrothers resolved a few of their disputes with

change orders, which gave Carrothers additional time to complete

                                           4
its work and absolved NPI pro tanto of any monetary damages,

Carrothers and NPI and the City remained at odds over many aspects

of the contract work.

             Carrothers filed the instant diversity action against NPI

and the City for breach of the two contracts and sought to recover

the extra costs it incurred because of the delay in completing its

work. The jury found that NPI and the City had actively interfered

with Carrothers's performance of its contracts and that Carrothers

had   suffered   substantial   damages    as    above   noted.    From   the

judgment, including attorneys’ fees and prejudgment interest, the

City and NPI timely appealed.

                            II.   DISCUSSION

             NPI and the City raise seven challenges to the trial

court's judgment. They contend that (a) the "no damages for delay"

provisions in the contracts preclude Carrothers from recovering

monetary damages against them; (b) Carrothers failed to segregate

the costs due to its own delay from the costs due to external

delays in calculating damages; (c) the contracts provided that

Carrothers waived pre-judgment interest and attorneys' fees; (d)

the trial court erred in instructing the jury on calculating

damages; (e) the damage calculations erroneously included costs by

Carrothers's corporate parent, Pemco, Inc.; (f) the trial court

erred   in   determining   that   NPI   was    liable   for   damages   as   a

                                    5
contractual assignee; and (g) the damage awards were grossly

excessive.    Each of these will be discussed in turn.1

      A.    No Damages for Delay Clause

            NPI and the City first contend that Contracts 712 and 730

precluded Carrothers from obtaining monetary damages against them.

The contracts contain "no damages for delay" provisions, which

state:

            ... and no adjustment shall be made to the
            contract price and the contractor shall not be
            entitled to claim or receive any additional
            compensation as a result of or arising out of
            any delay resulting in adjustment to the
            working time hereunder, including delays
            caused by the act or negligence of the owner.
                                 * * *
            If the work of a contractor is delayed because
            of any act or omission of any other
            contractor, contractor shall have no claim
            against owner or construction manager on that
            account other than an extension of time.
                                 * * *
            Contractor shall accept the risk of any delay
            in delivery of equipment or materials procured
            by owner, and if the work is delayed, he shall
            have no claim for damages or contract
            adjustment other than an extension of time and
            the waiving of liquidated damages caused by
            the delay.

      1
            This court applies its customary standards of review. "A motion for
judgment as a matter of law in an action tried by a jury is a challenge to the
legal sufficiency of the evidence supporting the jury's verdict." Texas Farm
Bureau v. U.S., 53 F.3d 120, 123 (5th Cir. 1995). We review the district court's
ruling on a motion for judgment as a matter of law de novo. Conkling v. Turner,
18 F.3d 1285, 1300 (5th Cir. 1994). Such a motion should be granted only if,
"after considering all the evidence in the light and with all reasonable
inferences most favorable to the [non-movant], the facts and inferences point so
strongly and overwhelmingly in favor of one party that ... reasonable persons
could not arrive at a contrary verdict." Texas Farm Bureau, 53 F.3d at 123
(internal citations omitted).
            We review the denial of a motion for a new trial for an abuse of
discretion. Calcasieu Marine Nat'l Bank v. Grant, 943 F.2d 1453 (5th Cir. 1991).

                                       6
           While Texas courts generally uphold provisions preventing

damages for delay, the provisions are not absolute.                     Texas courts

have held that no damages for delay clauses do not preclude a

contractor from recovering damages when the delay (a) is not

contemplated    by   the    parties;   (b)    is    so    long     as    to    justify

abandonment of the contract; (c) is caused by the owner's fraud or

bad faith; or (d) is caused by the owner's active interference with

the contractor's     performance.          City    of    Houston    v.     R.F.   Ball

Construction Company, Inc., 570 S.W.2d 75, 77 & n.1 (Tex.Civ.App.

--Houston[14th Dist.] 1978, writ ref'd n.r.e.).

           The leading Texas decision on the exceptions to no damage

for delay clauses, Housing Authority of Dallas v. Hubbell, 325
S.W.2d 880   (Tex.Civ.App.     --Dallas     1959,       writ     ref'd      n.r.e.),

addressed a situation not unlike the instant case.                       The Housing

Authority had contracted with several principal contractors for the

construction of a then-$15 million dollar housing project.                      One of

the contractors sued to recover damages it incurred because of

delays in its work.        Its contract contained a no damages for delay

provision.     However, the court upheld damages against the Housing

Authority because it had engaged in eleven acts and omissions which

substantially interfered with the contractor's performance.                        The

court explained that these acts and omissions included:

           (1)   Failure   to    plan   development   and
           construction of the whole project; (2) Failure
           to furnish master progress schedule; (3)
           Failure to coordinate work of various prime
           contractors; (4) Failure to proceed with

                                       7
           underground utilities contract until August 1,
           1952; (5) Failure to proceed with the sidewalk
           contract until July 1, 1953; (6) Failure to
           expedite flow of information; (7) Failure to
           decide on type of water heater; (8) Failure to
           deliver water heaters; (9) Arbitrary and
           capricious requirements of Architects; (10)
           Instructions to asphalt tile sub-contractors;
           (11) Refusal to accept the buildings within a
           reasonable time after August 25, 1953.

Id. at 889.     The court explained that "[t]he 'no damages for

delays' provision did not give the Owner a license to cause delays

'willfully,' by 'unreasoning action,' 'without due consideration,'

and in 'disregard for the rights of other parties,' nor did the

provision grant Owner immunity from damages if delays were caused

by Owner under such circumstances."     Id. at 890.

           In the instant case, the evidence was sufficient for a

reasonable jury to find that NPI and the City actively interfered

with Carrothers's completion of the contracts.             The evidence

supports   Carrothers's   contentions   that   NPI   and   the   City   (1)

generally failed to coordinate the work of the contractors; (2)

failed to disclose the Master Schedule, despite repeated requests

from Carrothers and other contractors; (3) failed to disclose that

NPI and the City knew before awarding Carrothers's contracts that

some form of corrosion protection system (cathodic protection)

would have to be installed before Carrothers could begin work on

the filter building, even though NPI and the City knew that this

system would substantially delay Carrothers's work; (4) issued a

notice to proceed to Carrothers when they knew the site was not

                                  8
ready; (5) failed to disclose that NPI and the City had granted the

piping contractor a 42-day extension, which substantially delayed

Carrothers's work, even though NPI and the City had granted the

extension before awarding the contracts to Carrothers; (6) failed

to disclose that Carrothers would have to perform remedial work,

such as installing pier drillers in the filter building, before it

could begin construction there; (7) failed to arrange for remedial

work on the 66-inch pipeline connecting the ends of the filter

building; (8) failed to disclose that defective work had to be

remedied on the filter building, even though NPI and the City knew

at the time the contracts were awarded that work had to be done;

(9) failed to inform Carrothers that NPI and the City had not

acquired a pump for the filter building; (10) failed to respond

timely to requests for information on the grit building; and (11)

failed to supply appropriate pre-cast panels for the grit building.

          Further, there was sufficient evidence to find that these

actions and omissions by NPI and the City substantially hindered

Carrothers's performance.    Numerous witnesses testified about how

each of appellants’ actions and omissions delayed Carrothers's

work.    Carrothers   also   maintained   extensive   contemporaneous

documentation of the delays it encountered during construction and

the costs it incurred because of NPI’s and the City's interference.

These costs included extra days of labor, extra days’ rent on

equipment, increased insurance and bonding costs, efficiency losses

because Carrothers had to re-sequence its work, productivity losses

                                  9
because the contract site was crowded, costs incurred because work

had to be performed in the winter rather than in the summer and

fall, and losses from lower worker productivity as the project

dragged on.

            NPI and the City contend, however, that they did not

actively interfere with Carrothers's work.                  First, they point out

that Carrothers       requested     the     notice    to    proceed    on    the    flow

splitter,   and   thus    they      should      not   be    responsible       for    the

construction   site’s     not      being    ready.         We   do   not    find    this

contention persuasive.       Carrothers requested the notice based on

appellants’ representations about the state of the project.                          Had

Carrothers been fully informed that its work could not begin, it is

highly unlikely appellee would have requested the notice.                      NPI and

the City should have informed it that the construction site was not

ready.

            Second,    NPI   and    the     City   contend      that   they    had    no

contractual duty to disclose the Master Schedule. That fact is not

dispositive. NPI and the City had a contractual duty to coordinate

the contractors' work schedules and to respond to requests for

information about scheduling difficulties.                 Given those duties and

the ensuing problems, NPI had a responsibility either to disclose

the Master Schedule so the contractors could schedule their work

around each other or to ensure otherwise that their work was

coordinated.   The evidence supported Carrothers's contentions that

NPI and the City did neither.

                                           10
            Third, NPI and the City contend that they had no duty to

disclose that they had granted the piping contractor a 42-day

extension, even though the extension had been approved at the time

the contracts were awarded to Carrothers.           To the contrary, it is

undisputed that Carrothers could not begin its work until after the

piping contractor had finished.            That NPI and the City required

Carrothers to mobilize at the site, knowing that Carrothers could

not begin work at that point, constituted active interference. See

U.S. Steel Corp. v. Missouri-Pacific R.R. Co., 668 F.2d 435, 438-39

(8th Cir.), cert. denied, 459 U.S. 836 (1982).

            Fourth, NPI and the City contend that they had not made

a decision about the cathodic protection until after Carrothers had

been awarded the contracts. The evidence showed, however, that NPI

and the City knew they would have to install some type of cathodic

protection    when   they   awarded    the    contracts;    that   they   were

evaluating different types of cathodic protection when they awarded

the contracts; that they knew they would install some type of

cathodic protection when they awarded the contracts; and that they

knew installing that protection would delay Carrothers's work.

            Fifth, NPI and the City contend that Carrothers was not

delayed as a result of the remedial work done on the 66-inch

pipeline, and that Carrothers had itself caused a 45-day delay by

its installation of the 36-inch pipe.           But numerous witnesses --

including    appellants’    expert--    testified    that   Carrothers     was

delayed because of remedial work on the 66-inch pipeline. Further,

                                      11
the evidence showed that Carrothers was delayed in installing the

36-inch pipeline because NPI and the City failed to respond timely

to Carrothers's requests for information.

          Sixth, NPI and the City contend that they took steps to

coordinate all the prime contractors, such as holding weekly

meetings and placing employees at the site. However, those actions

do not relieve NPI and the City of their duties to disclose

material information affecting Carrothers's work and to represent

accurately the state of the project.

          Generally, NPI and the City contend that they did not

actively interfere with Carrothers's work, but merely failed to

take various actions, their oversights amounting to negligence

rather than to the intentional conduct that is not covered by a no

damages for delay provision.    This distinction ignores the jury

findings, supported by the evidence and based on unobjected-to

instructions that they could only hold appellants liable for delay

caused by (a) active interference; (b) misrepresentations or bad

faith; or (c) delay of an unreasonable length of time.

     B.   Carrothers's Calculation of Damages

          Next, NPI and the City challenge the jury's finding that

Carrothers suffered $1,914,030 in damages.         They contend that

Carrothers failed to segregate the damages it incurred because of

its own actions from the damages caused by NPI and the City's

interference.   Specifically,   NPI    and   the   City   contend   that

                                12
Carrothers's calculations erroneously included damages incurred

because of (a) Carrothers's own 45-day delay in installing the 36-

inch pipe; (b) 14 days’ charges that had been resolved by a change

order; (c) delays after the pier drillers had been installed, even

though no external forces then prevented Carrothers from completing

the flow splitter; and (d) Carrothers’s inability to fulfill its

own unrealistic work schedule.

             Our careful review of the evidence before the jury shows

that it does not compel a finding for appellants.                Numerous

witnesses testified that Carrothers was not responsible for any of

the delays.     In addition to Carrothers's personnel and experts,

Carrothers's superintendent on the site, who at the time of trial

was employed by NPI's corporate parent Morrison-Knudsen, Inc.,

testified that none of the delays were caused by Carrothers.

Similarly, NPI's construction coordinator at the site testified

that he could not recall any instance in which Carrothers delayed

its own work.     Indeed, the only person testifying that Carrothers

caused any delays was appellants’ expert witness, whom the jury was

not required to believe.

             Further, Carrothers extensively documented its damage

calculations. Carrothers presented lengthy testimony setting forth

the target dates for certain items of work, the dates on which the

work was actually performed, and the interferences that extended

the   time   required   by   Carrothers   to   complete   the   work,   and

explaining its damage calculations.            Carrothers separated its

                                   13
calculations into two time periods --the time covered by the change

orders and the time after the change orders-- and into several

categories --extended equipment rentals, additional labor, extended

field office overhead, additional materials costs, additional home

office costs, and additional bond and insurance costs.                 These

calculations were sufficient to prove Carrothers's damages to a

reasonable certainty.

     C.     Pre-Judgment Interest and Attorney's Fees

            NPI   and   the   City   next   argue   that   their   contracts

precluded   Carrothers    from   recovering    pre-judgment    interest   or

attorney's fees. The contracts contain an addendum providing that:

            Unless otherwise authorized by the Dallas City
            Council, at the request of the City Manager,
            no contractor of the City of Dallas shall be
            entitled to interest on any delayed, disputed,
            or delinquent payment, or attorney's fees in
            any dispute to collect such payment.

            This addendum appears in the contract section concerning

payment of monthly and final progress payments.            The addendum was

probably intended to limit a contractor's right to recover against

the City under TEX. CIV. STAT. ART. 601f (1992) (now repealed), which

created a right for contractors to recover against a governmental

entity that failed to pay timely for the contractor's goods or

services.    The instant case does not involve whether the City

timely paid for Carrothers's work: the City has paid Carrothers the

original contract amounts.           Moreover, Carrothers's suit sought

damages beyond the contract amounts --costs incurred for extra days

                                      14
of labor, extra days of equipment rental, and the like.                            The

addendum does not appear to exclude interest or attorneys’ fees on

contract damages of these types.

            NPI and the City's cited cases, stating the general

proposition that parties to a contract may waive or limit damages,

are factually inapposite.           In Computer-Link Corp. v. Recognition

Equipment, Inc., 670 F. Supp. 455 (D.Mass. 1987), aff'd without

published opinion, 860 F.2d 1072 (1st Cir. 1988), the District of

Massachusetts addressed whether a contractual clause stating that

"neither party shall be liable for any indirect, special, or

consequential damages arising out of this agreement," precluded the

contractor from recovering damages.                  No such clause exists in the

instant    contracts.           Cantrell        v.   Broadnax,     306 S.W.2d 429

(Tex.Civ.App. --Dallas 1957, no writ) concerned the forfeiture of

improvements on real estate because of the owner’s default in

making    payments.       Temple    Eastex,          Inc.   v.   Old   Orchard    Creek

Partners, Ltd., 848 S.W.2d 724, 729 (Tex.App. --Dallas 1992, writ

denied) concerned a waiver for damages covered by insurance.

     D.     Jury Instructions on Damages

            Next, NPI and the City contend that the trial court did

not clearly instruct the jury that they should only award damages

which     were   caused    by     appellants’         active     interference      with

Carrothers's work.        We reject this contention.              Taken as a whole,

the charge so informed the jury:

                                           15
                  What sum of money, if paid now in cash,
            would    fairly   and   reasonably   compensate
            Carrothers    Construction   Company   for  the
            damages, if any, caused by the defendant's
            breach of Contract 87-712 [and 87-730]?

                 Do not include any damages from delays
            unless you find that: (a) the defendants
            actively interfered with Carrothers's work;
            (b)    the     damages    were     caused    by
            misrepresentation or other bad faith; or (c)
            the damages were caused by delay which has
            extended such an unreasonable length of time
            that the party delayed would have been
            justified   in    abandoning   the    contract.
            (emphasis added)

                 You are instructed that the term "active
            interference" means that the City of Dallas
            would have to have committed some affirmative,
            willful act, in bad faith, to unreasonably
            interfere with Carrothers's compliance of the
            terms of the construction contract.

This instruction does not create a substantial doubt as to whether

the jury was properly instructed.      The instruction states that the

jury can only calculate damages that resulted from NPI and the

City's active interference.      Moreover, the evidence, including

testimony from one of Morrison-Knudsen's employees, suggested that

all of Carrothers's delays were caused by appellants’ active

interference, a situation that would render any instructional error

harmless.

     E.     Pemco's Costs

            NPI and the City contend that the trial court erred in

allowing Carrothers to include in its damages calculations overhead

and home office costs incurred by its corporate parent, Pemco, Inc.

                                  16
They contend that Carrothers should not be able to collect those

costs because Pemco was not in privity of contract with NPI and the

City.   We disagree.   Substantial evidence demonstrated the closely

related nature of Carrothers as a wholly owned subsidiary of Pemco.

Carrothers’s damages were Pemco’s damages, and vice versa. Just as

a contractor under Texas law may recover damages for third parties

who are acting on its behalf, see, e.g., North Harris Cty. Junior

College Dist. v. Fleetwood Const. Co., 604 S.W.2d 2467, 255 (Tex.

Civ. App. -- Houston [14th Dist.] 1980, writ ref. n.r.e.), so it

would follow that Carrothers’s damages should include the very

important expenses of contract performance borne by Pemco.

     F.     NPI's Liability as an Assignee

            NPI and the City contend that the district court erred in

entering judgment against NPI.            They contend that, because NPI

acted as an agent on behalf of a known principal, it cannot be held

liable.     Appellants     waived   any    objections   to   NPI’s   separate

liability   by   failing    to   object    to   the   court's   instructions

accompanying Jury Questions 1 and 3, which state that "[f]or the

purposes of this case, NPI and the City of Dallas are both bound by

the provisions of the contract and the implied duties arising

thereunder."

     G.     The Damage Awards

                                     17
            NPI and the City contend that the damage awards were

grossly    excessive   and   that   $434,000     is    the   maximum   amount

Carrothers should be awarded.        We disagree.      The $435,000 figure

apparently was obtained from Carrothers/Pemco's accountants and

represents the amount necessary for Carrothers to recover in order

to continue bidding on public projects.               That figure does not

represent the amount of damages actually incurred because of the

delays in the instant contracts.          Further, as discussed above,

Carrothers presented extensive documentation of its calculation of

damages.

                             III.   CONCLUSION

            For the foregoing reasons, we AFFIRM the trial court's

judgment.

                                     18