EC Ernst, Inc. v. Manhattan Const. Co. of Tex., Civ. A. No. 6340-70-T.

• Decision Date: 11 December 1974
• Docket Number: Civ. A. No. 6340-70-T.
• Citation: 387 F. Supp. 1001
• Parties: E. C. ERNST, INC., Plaintiff, v. MANHATTAN CONSTRUCTION COMPANY OF TEXAS et al., Defendants, v. MANHATTAN CONSTRUCTION COMPANY OF TEXAS, Plaintiff by Counterclaim, v. E. C. ERNST, INC., et al., Defendants by Counterclaim.
• Court: U.S. District Court — Southern District of Alabama

387 F. Supp. 1001

E. C. ERNST, INC., Plaintiff, v. MANHATTAN CONSTRUCTION COMPANY OF TEXAS et al., Defendants, v. MANHATTAN CONSTRUCTION COMPANY OF TEXAS, Plaintiff by Counterclaim, v. E. C. ERNST, INC., et al., Defendants by Counterclaim.

Civ. A. No. 6340-70-T.

United States District Court, S. D. Alabama, S. D.

December 11, 1974.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Willis C. Darby, Jr., Mobile, Ala., for Providence Hospital.

Glower W. Jones, Smith, Currie & Hancock, Atlanta, Ga., Edward S. Sledge, III, Gallalee, Denniston & Edington, Mobile, Ala., Arthur Friedman, Tanner & Friedman, New York City, for E. C. Ernst, Inc.

David M. Thornton, Thornton & Stamper, Tulsa, Okl., for Manhattan Const. Co. of Texas.

Maurice Bishop, Bishop & Carlton, Clarence L. McDorman, Jr., London, Yancey, Clark & Allen, Birmingham, Ala., for Charles H. McCauley Associates, Inc.

Louis E. Braswell, Hand, Arendall, Bedsole, Greaves & Johnston, Mobile, Ala., for Fairbanks-Morse, Inc.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

DANIEL HOLCOMBE THOMAS, District Judge.

HISTORY OF CASE

1. This proceeding should serve for years to come as a classic example of the economic futility of litigation of this nature and the need for settlement of such controversies.

2. In 1967, Providence Hospital of Mobile (Providence), a Catholic hospital operated by the Sisters of Charity, decided to substantially expand its facilities and to renovate and remodel its existing buildings. Providence obtained a Hill-Burton Federal Grant in the amount of $1,000,000.00. On October 27, 1967, Providence entered into a standard form architectural contract with Charles H. McCauley Associates, Inc. (McCauley), a large architectural firm in Alabama with wide experience in hospital construction. Pursuant to this contract, McCauley prepared plans, specifications and contract documents. On April 12, 1968, McCauley advertised the job for bids to be received until July 18, 1968. Seven contractors submitted bids. On July 29, 1968, the contract was let by Providence to Manhattan Construction Company of Texas (Manhattan) for a total contract price of $6,117,500.00. Manhattan entered into a subcontract with E. C. Ernst, Inc. (Ernst) under which Ernst agreed to furnish the materials and equipment and perform all of the electrical work for a cost of $982,215.00.¹ Under this subcontract, Ernst was required to provide emergency generators which it later contracted to purchase from Fairbanks-Morse, Inc. (Fairbanks-Morse), a fifth party to this litigation.

3. The contract between Manhattan and Providence incorporated the plans and specifications prepared by McCauley and provided that Manhattan was required to complete the project within 730 days. If the project was not completed within this specified period and any granted extensions of time, Manhattan agreed to pay liquidated damages of $250.00 per day until completion. The subcontract between Manhattan and Ernst provided the same time schedule and liquidated damages plus an indemnification agreement from Ernst to Manhattan.

4. The order to proceed was issued August 19, 1968. Therefore, the original completion date was August 18, 1970. During the period of construction, the time was extended by appropriate change orders for 185 days. Accordingly, the revised completion date was February 19, 1971. The job was accepted on May 17, 1972, making an overrun of 453 days.

5. This extended litigation was commenced on August 28, 1970, by Ernst filing a complaint against all other parties seeking a declaratory judgment and order "preventing the purchase and installation of any substitute equipment" in place of the Fairbanks-Morse emergency generator, with engines, which Ernst had proposed to install under its contract with Manhattan. The Court set the matter for hearing on January 27, 1971, on the sole issue of the sufficiency of the Fairbanks-Morse emergency generator system. Hearing on this issue was concluded on February 4, 1971, when this Court issued an order specifically finding that:

"The emergency generator system (proposed to be furnished) does not meet the requirements of the specifications",

and that:

"The Dorman engines proposed by Fairbanks-Morse to power the emergency generator system do not fulfill the horsepower requirements of the specifications.

"The Court finds from the evidence that the material submitted to McCauley by Fairbanks-Morse, Ernst and Manhattan, or any one or more of them, failed to establish that the emergency generator system proposed to be supplied by Fairbanks-Morse, met the requirements of the specifications."²

6. This suit triggered a long pleading war with a series of amendments, cross-claims, counterclaims, and motions, bearing little resemblance to the original complaint and resulting in many issues between and among the parties.

7. On April 11, 1973, this matter was set down for pretrial, and the attorneys were instructed to have present at the pretrial, a representative of each litigant who had authority to negotiate settlement of this matter. Besides all attorneys being present, the litigants were represented as follows: Ernst, by a Vice President; Fairbanks-Morse, by a director; McCauley, by its liability carrier; Manhattan, by a Vice President; Providence, by its Administrator. At the commencement of the pretrial, the Court made the following statement:

"Gentlemen, this is a case which should be settled between the parties. In present day thinking, it seems to be the idea that any problem can be cured in a Federal District Court. This, I assure you, is an erroneous approach. There is not a lawyer in this courtroom capable of operating the Providence Hospital. There is not a lawyer in this courtroom capable of running Manhattan Construction Company; there is not a lawyer in this room capable of running McCauley Associates; nor a lawyer in this room capable of running Fairbanks-Morse; nor a lawyer capable of running Ernst, and I assure you there is not a Judge in this courtroom capable of doing so. All of you litigants are successful operators or you would not be participating in a six million dollar contract. Lawyers in their zeal to represent their clients many times fail to see but one side of the litigation and that is the side of his client. This litigation is not a one-sided bit of litigation, it is a five-sided bit of litigation.

I stated at the outset that this was a case that should be settled between the parties. I said that because this is a classic example where the cost of proper preparation of the case for trial is completely disproportionate to the benefits any of the parties could hope to derive. You'all are represented by capable attorneys. None of the attorneys want to go to trial in this case unless and until they have properly and thoroughly prepared their case for trial. This entails much pretrial discovery and pretrial discovery entails much lawyer time, much travel, much hotel expense. The point is, it is extremely expensive.

Not only does this continued litigation require discovery expenses, it entails expenses in the appellate court. This case is already no stranger to the Fifth Circuit nor the U. S. Supreme Court. Yes, litigation is expensive, but remember the courts do not create litigation, it is created by the litigants. I have asked that you representatives of the litigants be here today. Although I know you have been kept abreast of this litigation by your attorneys, I wanted you to hear directly from the trial judge his thoughts on this matter. You litigants are in a fairly closely related field. Being trained in this field, you are in a far better position to adjust your differences than those untrained in these related fields. As an illustration, I, who have had no training whatsoever in engineering, had to determine whether or not the emergency generator system proposed to be furnished by Fairbanks-Morse, met the specifications, when experts couldn't agree. That is a strange bit of logic.

If this case is not settled quickly, it is going to trial quickly, properly prepared or otherwise. To try this case will probably take not only days, but weeks, and I wish to state to all of you litigants and all attorneys here and now, if this case is not settled, it will be tried during the month of August, 1973, and it will take the precedence over vacations or any other business conflict.

The object of litigation is to do substantial justice between the parties litigant, but the parties litigant should realize that, in most situations, they are by their particular training better able to accomplish this among themselves.

This is your court, it is the peoples' court. It is properly staffed and ready, willing and able to try this case and will do so in August.

Regardless of the outcome, an appeal is almost certain. This will entail more expense and more delay.

Having thusly expressed myself, we will now proceed with the pretrial of this case. I will ask you representatives of the litigants to remain throughout this pretrial as your presence will most likely be helpful."

8. The case was not settled, and the trial was commenced on August 6, 1973. It entailed 40 days of court time, 41 witnesses (34 live and 7 by deposition) and 1056 exhibits. Presentation of the evidence was finally concluded on November 27, 1973. Thereafter, the litigants were given until the 28th day of January, 1974, within which to file Findings of Fact and Conclusions of Law. This time was extended to February 11, 1974. The Court after studying these Findings and Conclusions set the matter for final argument on May 22, 1974, each litigant being given one hour's time. The pretrial order entered in this case on the 26th day of April 1973, and amended on the 6th day of July 1973, is attached hereto and made a part of this Finding hereof as Exhibit 2. As stated above, portions of this case have already been before the Fifth Circuit and the Supreme Court. Docket numbers...