The Weitz Co. v. Mh Wash.
| Decision Date | 15 February 2011 |
| Docket Number | 09–3649,09–3118,09–3635.,Nos. 09–3116,s. 09–3116 |
| Citation | 631 F.3d 510 |
| Parties | The WEITZ COMPANY, Appellee,v.MH WASHINGTON, et al., Appellants.The Weitz Company, Appellee,v.Summit Steel Fabricators, Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
OPINION TEXT STARTS HERE
James S. Kreamer, argued, Kansas City, MO, for MH Washington and MacKenzie House.Philip C. Graham, argued, St. Louis, MO, Carl J. Geraci, on the brief, for Summit Steel Fabricators.Andrew M. DeMarea, argued, Overland Park, KS, Christopher P. Sobba and Catherine Bell, on the brief, Kansas City, MO, for The Weitz Company.Before MURPHY, BEAM, and BENTON, Circuit Judges.BENTON, Circuit Judge.
The Weitz Company, LLC, sued MH Washington, LLC, MacKenzie House, LLC, and Summit Steel Fabricators, Inc., for breach of contract. The jury returned verdicts for Weitz against MH Washington/MacKenzie House (for $981,976) and against Summit Steel (for $326,839). The jury also found for MH Washington/MacKenzie House on its breach-of-contract counterclaim against Weitz (for $285,400.07). The district court 1 denied post-judgment motions and awarded Weitz attorney's fees, costs, and pre-judgment interest. The defendants appeal the judgments, the denial of the post-trial motions, and the awards of attorney's fees, costs, and pre-judgment interest. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.
From 2004 to 2006, the 46th & Washington Townhomes were constructed near the Country Club Plaza in Kansas City, Missouri. The project consisted of 18 units in three buildings: A, B, and C/D. The Weitz Company, LLC (“Weitz”), an Iowa company, was general contractor until terminated in September 2006. Summit Steel Fabricators, Inc. (“Summit”), a Texas corporation, was a steel subcontractor to Weitz pursuant to a written subcontract. MacKenzie House, LLC, a Colorado real estate company, was the developer of the project, and the managing member of MH Washington LLC (a combination of the initials for MacKenzie House and the Washington Street location of the project).
The project was built pursuant to a “prime contract” consisting of two contract documents published by the American Institute of Architects. AIA Document A111 is a standard form agreement between owner and contractor on large projects requiring a guaranteed maximum price, when the basis of payment to the contractor is the cost-of-work plus a fee. A111 adopts by reference AIA Document A201, “General Conditions of the Contract for Construction.” A201 sets forth the rights, responsibilities, and relationships of the owner, contractor, and architect. The A111 contract at issue here states that it is between Weitz and MH Washington, LLC. It is signed by Don MacKenzie as President of MH Washington. However, the A201 “General Conditions” contract (incorporated by reference in the A111 contract) states that the “THE OWNER” of the project is MacKenzie House LLC.2
Weitz subcontracted most work on the project. After the prime contract was signed, Weitz began seeking proposals from its list of pre-qualified subcontractors with whom it had prior good outcomes. However, MH Washington had final authority over which subcontractors were used. After seeing several bids from Weitz's trusted subcontractors, MH Washington informed Weitz that the bids were too high and began soliciting subcontractors on its own.
After receiving the reduced bids, Weitz was concerned that the new subcontractors' excessively low bids (in Weitz's opinion) created risks of higher costs in the long run for the project. For example, defendant Summit's steel subcontract bid was $115,000 lower than the next bidder. Weitz sent MH Washington a risk analysis quantifying the risks of using low-cost subcontractors. MH Washington insisted on using the cheaper subcontractors, some of which could not obtain performance bonds. Weitz and MH Washington eventually modified the prime contract by adding a nonstandard Article 10.4 to the A111 contract: “[I]n recognition of the fact that the Owner has requested that Contractor not require that its subcontractors provide performance and payment bonds, Owner agrees to accept all risk for the performance and payment defaults of the Contractor's subcontractors in the performance of the Work ...”
After work on the project began, it became apparent the scheduled completion date of October 24, 2005, was likely to be delayed. Weitz attributed these delays to shoddy work and lack of personnel by the cheaper, high-risk subcontractors; MH Washington blamed mismanagement by Weitz. More than once, Weitz advanced the costs of hiring replacement subcontractors to correct and complete work.
Summit Steel Fabricators was one of the subcontractors selected by MH Washington that fell behind schedule and performed defective work on the project. Summit was hired to fabricate and install ornamental steel and steel balcony decks, stair treads, handrails, and the like. During the summer of 2005, Summit received written notice that its work was noncompliant. Testimony at trial showed that Summit's work included defective welds, deformed steel, stairways and other steel elements that did not fit the opening provided, handrails that wobbled, and a general lack of personnel, equipment, and quality work. In October 2005, Weitz forwarded an architect's report to Summit documenting a number of defects with Summit's work, characterized as “typical in all units.” Weitz issued two formal “failure to perform” notices to Summit that provided an option to cure. Weitz terminated Summit's contract in November 2005. Weitz eventually paid more than $325,000 to have the defects in Summit's work repaired.
The Summit subcontract called for progress payments as its work on the project proceeded, and Summit was paid periodically. The project's progress-payment system required Summit and the other subcontractors first to file an application for payment with Weitz certifying that work had been done. Then, Weitz submitted applications for partial payments certifying to MH Washington that “to the best of the Contractor's knowledge, information, and belief,” the work was completed in accordance with the subcontract. In response to the progress payments, Weitz executed lien waivers, releasing in favor of MH Washington any related liens Weitz had on the project property. Pursuant to this partial-pay process, Summit Steel was paid $212,534.00 of an original subcontract sum of $227,486.00, and was certified to have completed 91 percent of its work.
In contrast, Weitz itself was not paid on time. Although the parties dispute who breached first, the jury and district court believed that MH Washington first breached the prime contract by withholding $701,876 in payment from Weitz. Weitz intended to use this money to pay several subcontractors. Because Weitz failed to pay on time, several subcontractors filed mechanic's liens on the property. Weitz offered MH Washington lien bonds in exchange for releasing payments to Weitz, an arrangement the architect endorsed. However, MH Washington declined to resume scheduled payments to Weitz, even after several mechanic's liens were released. The chicken-and-egg cycle was completed by MH Washington's suspension of future payments to Weitz due to the liens, pursuant to a provision in the prime contract that obligated Weitz to keep the project free from liens.
Although delays and acrimony plagued the project, eventually it was completed. Temporary Certificates of Occupancy were issued for all units between December 2005 and February 2006. Sales of most of the townhomes closed between January and March of 2006. However, for each building, work remained on the “punch list”—the report of unfinished work identified during an inspection by the owner and contractor just before completion of a building. In the midst of continuing disputes over payment and completion of the final punch-list items on two of the three buildings, MH Washington terminated the prime contract with Weitz in September 2006.
By July 2006, Weitz had already sued, alleging that MH Washington/MacKenzie House breached the contract by: 1) failing to pay Weitz for base scope work it performed; 2) failing to pay Weitz for change order work (changes to the scope of the work originally agreed to) that MH Washington/MacKenzie House directed Weitz to perform; and 3) improperly terminating Weitz.
In early 2007, MH Washington counterclaimed against Weitz for breach of contract, seeking liquidated damages and costs to complete. According to MH Washington, Weitz's mismanagement caused the liens to be filed on the project, removing any obligation of MH Washington to pay Weitz under the contract. The liens and shoddy workmanship on the project, in turn, gave MH Washington grounds to terminate Weitz for cause, removing any further contractual obligation to pay Weitz. Weitz then brought third-party actions against five subcontractors on the job, including Summit Steel, for breach of contract, indemnity, and contribution.
After a three-week trial, the jury returned verdicts in favor of Weitz against MH Washington/MacKenzie House (for $981,976) and against Summit Steel (for $326,839), and in favor of MH Washington on its breach-of-contract counterclaim (for $285,400.07). The district court set off the amounts owed between MH Washington/MacKenzie House and Weitz, and entered an amended judgment in favor of Weitz for $696,575.93. The district court denied post-judgment motions and awarded Weitz attorney's fees and costs from both MH Washington/MacKenzie House and Summit Steel. Pre-judgment interest was awarded to Weitz from MH Washington/MacKenzie House pursuant to Missouri's Prompt Payment Act for a contractor who is “the prevailing party” in an action for payment of amounts scheduled for payment.
The defendants appeal the underlying judgments, the post-trial motions, and the awards of attorney's fees, costs, and...
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