530 F.3d 269 (3rd Cir. 2008), 06-3595, Wartsila NSD North America, Inc. v. Hill International, Inc.

Docket Nº:06-3595.
Citation:530 F.3d 269
Party Name:WARTSILA NSD NORTH AMERICA, INC. v. HILL INTERNATIONAL, INC., Third-Party Plaintiff v. John H. Clegg, Esquire; Daphne McNutt, Esquire; Chaffe, McCall, Phillips, Toler & Sarphy, L.L.P., Third-Party Defendants Hill International, Inc., Appellant.
Case Date:June 20, 2008
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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Page 269

530 F.3d 269 (3rd Cir. 2008)

WARTSILA NSD NORTH AMERICA, INC.

v.

HILL INTERNATIONAL, INC., Third-Party Plaintiff

v.

John H. Clegg, Esquire; Daphne McNutt, Esquire; Chaffe, McCall, Phillips, Toler & Sarphy, L.L.P., Third-Party Defendants

Hill International, Inc., Appellant.

No. 06-3595.

United States Court of Appeals, Third Circuit.

June 20, 2008

Argued April 16, 2008.

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[Copyrighted Material Omitted]

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David L. Braverman (Argued), Braverman Kaskey, M. Frances Ryan , James I. Downes , Christopher C. Lund, Dechert LLP, Philadelphia, PA, Attorneys for Appellants.

Richard E. Brennan , Michael O. Adelman (Argued), Drinker, Biddle & Reath, Florham Park, NJ, Attorneys for Appellee.

Kathleen O. Barnes , Mark A. Sgarlata , Christopher J. Brasco , Christopher M. Anzidei (Argued), Watt, Tieder, Hoffar, & Fitzgerald, LLP, McLean, VA, Attorneys for Amicus Curiae-Appellant Construction Management Association of America, Inc.

Before: SLOVITER, JORDAN and ALARCÓN [*] , Circuit Judges.

OPINION

ALARCÓN, Circuit Judge.

I

Hill International, Inc. (“Hill" ) appeals from the denial of a post-trial motion it called a “Motion to Mold the Verdict and Enter Judgment Consistent with the Parties' Written Contract" (“the Motion" ). Hill was found liable for negligence and breach of its contract with Wartsila NSD North America, Inc. (“Wartsila" ). The jury awarded Wartsila $2,047,952 in damages.

Hill filed its Motion, requesting that the District Court enter judgment in favor of Hill consistent with an exculpatory clause in the Consulting Agreement (“Agreement" ). The District Court denied the Motion. First, the District Court concluded that the exculpatory clause was unenforceable under Maryland law. Second, the District Court concluded that the damages awarded by the jury were direct damages, and therefore not barred by the exculpatory clause. We will vacate the order denying the Motion and remand this matter to the District Court for a retrial solely regarding the damages that are due to Wartsila because of Hill's breach of contract.

II

The events underlying this litigation arose out of a contract entered into by Wartsila and Hill on January 24, 1995. Wartsila, an engineering and construction company, hired Hill, a construction consulting firm, to provide consulting services for the construction of a power plant Wartsila was building in Nejapa, El Salvador (“Project" ).

In July 1994, Wartsila Diesel, Inc., the predecessor to Wartsila, entered into a contract with Coastal Salvadorian Ltd. (“Coastal" ), wherein Wartsila agreed to design, engineer, procure, construct, start up, and test a diesel engine power plant in Nejapa, El Salvador. At the time, Wartsila's business primarily involved the sale and maintenance of diesel engines. Wartsila subcontracted the construction Project to other entities, including Black and Veatch International (“BVI" ). The Project quickly fell behind schedule, resulting in numerous disputes between Wartsila,

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BVI, and Coastal. As a result, Wartsila sought a construction consultant that could provide advice and management for the Project.

On January 18, 1995, Hill submitted a proposal for the consulting position. It recommended that Richard LeFebvre, a Hill senior consultant, be assigned to the Project. Attached to this proposal was LeFebvre's resume, which represented that LeFebvre: (1) had received a B.S. in electrical engineering from Pennsylvania State University (“Penn State" ) in 1966; (2) had earned a B.A. in business administration from Duquesne University in 1969; (3) had taken courses in business law at the University of North Florida in 1983; and (4) was registered and licensed as a professional engineer in Pennsylvania, New York, and Massachusetts.

On January 24, 1995, Wartsila and Hill entered into a written consulting agreement (“Agreement" ) that incorporated the January 18, 1995 proposal by reference. Pursuant to the terms of the Agreement, Hill assigned LeFebvre to work as a senior consultant on the Project. The Agreement contained an exculpatory clause,1 which stated:

In no event shall Consultant (Hill) be liable in contract or tort or otherwise to Company (Wartsila) for any lost, delayed or diminished profits, revenues, or opportunities, losses by reason of shutdown or inability to utilize or complete the Project, or any other incidental, special, indirect or consequential damages of any kind or nature whatsoever resulting from Consultant's performance or failure to perform services under this Agreement.

J.A. at 66.

LeFebvre was quickly promoted by Wartsila to the position of Project Manager, and continued to work on the Project as a Hill employee until May 25, 1995. One of LeFebvre's responsibilities was to analyze issues bearing on potential claims and defenses in contractual disputes between Wartsila and BVI. On June 1, 1995, with Hill's approval, Wartsila hired LeFebvre directly as an independent contractor to provide assistance with construction and claims management on the Project.

The Project was not completed on time. In May 1996, Wartsila and BVI entered into arbitration before the American Arbitration Association. The parties made delay claims against one another relating to the fact that the Project was not completed on time, and that Coastal had refused to pay the early completion bonus. Also, each side claimed that it had been forced to spend more money than anticipated on the work of the Project due to the other party's delays.

In August 1997, the arbitration hearings commenced. LeFebvre was a key witness in the proceedings due to his extensive knowledge of the facts underlying the points of contention between the two parties. At a September 8, 1997 arbitration

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proceeding, LeFebvre was questioned about the academic and professional credentials listed on his resume. Toward the end of the direct testimony, Wartsila became aware that there were questions regarding LeFebvre's educational and professional credentials when counsel for BVI requested that LeFebvre execute a release for background academic information. Later that day, after the proceedings adjourned, LeFebvre admitted to Wartsila's attorneys that the statements on his resume concerning his business degree from Duquesne University (“Duquesne" ) were not accurate and that Hill had asked him to overstate the extent of his training at Duquesne.

The next morning, LeFebvre requested and received a revised resume from Hill. It omitted any reference to a business degree from Duquesne or business law courses from the University of North Florida. It also modified the date on which he claimed to have received an electrical engineering degree from Penn State. When the proceedings resumed later that day, BVI's attorneys cross examined LeFebvre regarding the inconsistencies between the two resumes. LeFebvre testified that the revised resume was accurate and truthful. After BVI's counsel exposed LeFebvre's false testimony, Wartsila began its own investigation. By the conclusion of that day's proceedings, Wartsila conceded that it uncovered no evidence that LeFebvre had ever received an engineering degree from Penn State or attended any of the schools listed on his first resume. Wartsila also stated that it found no evidence LeFebvre had been licensed as a professional engineer in either New York, Pennsylvania, or Massachusetts.

Wartsila's counsel withdrew LeFebvre's testimony in light of his perjury. The arbitration panel granted Wartsila a short recess to restructure its case. During that time, the company re-examined materials prepared by LeFebvre and discovered that he had improperly altered original “claim support" documents. Consequently, Wartsila withdrew certain claims. On March 5, 1998, the arbitration panel issued a judgment of $4.65 million in favor of BVI.

On September 22, 1999, Wartsila filed this action against Hill to recoup the losses it sustained because Hill furnished a consultant with a fraudulent resume. In its complaint, Wartsila attributed the size of the arbitration award to LeFebvre's false resume and testimony. Wartsila alleged three causes of action against Hill: (1) negligence; (2) fraud; and (3) breach of contract. The trial commenced on February 14, 2006.

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