Massachusetts Bay Transp. Authority v. U.S.

• Citation: 129 F.3d 1226
• Decision Date: 03 November 1997
• Docket Number: No. 96-5128,96-5128
• Parties: 42 Cont.Cas.Fed. (CCH) P 77,290 MASSACHUSETTS BAY TRANSPORTATION AUTHORITY, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

Page 1226

129 F.3d 1226

42 Cont.Cas.Fed. (CCH) P 77,290

MASSACHUSETTS BAY TRANSPORTATION AUTHORITY, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.

No. 96-5128.

United States Court of Appeals, Federal Circuit.

Decided Nov. 3, 1997.

Rudolph F. Pierce, Goulston & Storrs, of Boston, MA, argued for plaintiff-appellant. With him on the brief was William A. Horne.

Agnes M. Brown, Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellee. With her on the brief were Frank W. Hunger, Assistant Attorney General, and David M. Cohen, Director. Of counsel on the brief was Gareth Rosenau, Federal Railroad Administration, of Washington, DC.

Before RICH, NEWMAN and CLEVENGER, Circuit Judges.

NEWMAN, Circuit Judge.

In this dispute arising from the renovation of Boston's South Station, the Massachusetts Bay Transportation Authority ("MBTA") appeals the grants of summary judgment by the Court of Federal Claims, ¹ ruling that MBTA has no entitlement to recover against the United States for any breaches of contract that may have occurred. The Court of Federal Claims held that a warranty disclaimer provision in the contract between MBTA and the Federal Railroad Administration ("FRA") was superior to other remedial provisions, and shielded FRA from the consequences of breach of other provisions of the contract. We conclude that this interpretation of the contract is not correct. The grant of summary judgment on this issue is reversed. We remand for further determination of whether breach of contract in fact occurred and, if so, the assessment of appropriate damages. We also reverse the grant of summary judgment with respect to the Headhouse floors; the issue requires trial. Finally, we conclude that MBTA is a qualified entity for prejudgment interest under the Intergovernmental Cooperation Act.

BACKGROUND

Pursuant to the Railroad Revitalization and Regulatory Reform Act of 1976, 45 U.S.C. § 801 et seq., FRA was charged with implementing the Northeast Corridor Improvement Project for passenger rail service and stations from Washington, D.C. to Boston. Included was renovation of Boston's South Station, owned by MBTA. FRA retained the firm of DeLeuw, Cather/Parsons ("DeLeuw") in 1976 to be the prime architect-engineer for design of the project. The contract between DeLeuw and FRA, as well as the contracts between DeLeuw and various subcontractor architects, engineers, and design professionals, provided that these contracts were with and for "the sole benefit of the United States and [DeLeuw]" and that the local station owners were not third-party beneficiaries thereof.

In 1980 FRA and MBTA entered into the Boston South Station Improvement Project Design Agreement ("the Design Agreement").

FRA agreed to procure and supply designs for the construction of platforms and tracks, renovation of the station house, construction of additions to the station house, and correction of building code deficiencies. MBTA was allowed "input" and direct communication with the designers, who were instructed to accommodate MBTA for improvements fully funded by MBTA. Although the parties dispute the extent of MBTA's design authority, the Design Agreement at § 3(n) provides that "[t]he parties shall use their best efforts to approve the final design documents" and "[a]greement on final design shall be evidenced by an exchange of letters between [MBTA] and [FRA]."

In 1983 FRA and MBTA entered into the Boston South Station Transportation Center Project Cooperative Construction Agreement ("the Construction Agreement"). The Construction Agreement explained the cost distribution in its Agreement Summary:

FRA will bear 100 percent of the costs of the "operational" improvements (those primarily benefitting Amtrak service) and 50 percent of the costs of the "cost-shared" improvements (rail-related improvements not primarily benefitting Amtrak). MBTA will bear the other 50 percent of the costs of the cost-shared improvements, as well as 100 percent of the costs of certain "local" improvements.

The Construction Agreement set in motion construction at South Station according to the designs procured by FRA under the Design Agreement. The agreement provided that MBTA could not deviate from the design documents without first obtaining permission from FRA. Thus FRA bore responsibility for design of the project while MBTA bore responsibility for implementing its construction.

The Construction Agreement contained several provisions directed to potential liability issues. Section 220(a) gave FRA the authority to approve or reject settlements of contractor claims proposed by MBTA, which approval could not be unreasonably withheld by FRA. In § 220(b) the Agreement required that either FRA or MBTA would pay contractor claims, depending on the aspect of the construction to which the claim pertained:

§ 220(b). The settlement costs of contractor claims caused by circumstances outside the parties' reasonable control shall be considered Project costs. Contractor claims costs caused by the action of a party shall be borne exclusively by that party, by being made accountable to the Operational Improvements, if FRA is the party, or to the Local Improvements, if MBTA is the party.

The Construction Agreement contemplated possible defective designs and specifications, and obligated FRA to seek compensation from the architect-engineers for design defects:

§ 220(c). FRA shall pursue with its design-phase A-E all contractual rights concerning correction of errors, omissions, and deficiencies.

FRA disclaimed any warranty to MBTA concerning the plans and specifications procured by FRA from the architect-engineers:

§ 222(a). Title to the Project Design Documents shall pass to MBTA upon acceptance by MBTA. MBTA acknowledges that the Project Design Documents are being prepared by an A-E acting as a contractor to FRA, not as FRA's agent. FRA makes no warranties, express or implied, concerning the Project Design Documents. No FRA or MBTA approval given under this Agreement shall be construed as a warranty of any kind.

The Construction Agreement required FRA to obtain insurance endorsements from the architect-engineers for the benefit of MBTA:

§ 222(c). FRA shall secure from each of its consultant architect-engineers ("A/E's") an endorsement to the benefit of the MBTA on the professional liability insurance policy or policies carried by such A/E's with respect to any A/E errors, omissions, or acts of negligence in the design of the Facility. FRA shall furnish the MBTA evidence of such endorsements.

In accordance with the Construction Agreement, MBTA solicited bids for construction of the South Station project. The contract was awarded to J.F. White Construction To resolve various issues of liability and responsibility, MBTA brought a declaratory action against J.F. White in Massachusetts Superior Court, also asserting claims against the architect-engineers and design professionals and against Amtrak, Boston Edison Company, and the Northeast Railroad Construction Company. The Massachusetts suit was settled for $3,810,000, wherein MBTA paid J.F. White $1.9 million, the design professionals paid J.F. White $1.8 million, Amtrak and Boston Edison paid the remaining $110,000, and MBTA released its claims against J.F. White and its direct claims against the architect-engineers and design professionals. FRA encouraged the settlement and for this purpose entered into mutual releases with the architect-engineers and design professionals.

Company ("J.F.White") on its bid of $48.775 million. During the course of construction J.F. White informed MBTA that the design plans contained several serious defects. The project was completed 956 days late at a cost of approximately $69 million. J.F. White submitted a claim to MBTA for increased costs of $23,680,228 that J.F. White asserted were caused by delay and loss of productivity due to the design defects. MBTA conducted an extensive study, and concluded that "design error, omissions and deficiencies were largely responsible for delays and disruptions experienced by J.F. White."

Meanwhile, MBTA brought this suit against FRA in the Court of Federal Claims, alleging that FRA breached the Construction Agreement by (1) failing to secure insurance endorsements from the architect-engineers to the benefit of MBTA as required by § 222(c), (2) failing to pay contractor claims as required by § 220(a) and § 220(b), (3) failing to pursue its contractual rights against the architect-engineers for the correction of design errors as required by § 220(c), and (4) failing to pay for the replacement of the wooden Headhouse floors as required by the cost allocation provisions of the Design Agreement. The case was stayed pending resolution of the Massachusetts litigation.

Following the settlement of the Massachusetts case, the Court of Federal Claims lifted the stay. The court then granted FRA's motions for summary judgment, based primarily on contract interpretation. The court ruled that the § 222(a) warranty disclaimer of the Construction Agreement overrode the § 222(c) provision that FRA would secure insurance endorsements for the benefit of MBTA. The court held that the warranty disclaimer shielded FRA from all liability for damages due to design error, even if FRA had breached § 222(c) or other contract provisions relating to the design, and that this foreclosed all of MBTA's claims.

Relying on the warranty disclaimer provision, the Court of Federal Claims also held that MBTA could not recover the cost of settling the J.F. White delay claim, or the amount of MBTA's released claims against J.F. White, or MBTA's attorney fees and litigation expenses. The court held that delay damages and other damages associated with design errors were "too remote, speculative, and consequential to be compensable as damages."

The court also held that the warranty disclaimer barred MBTA's...