WOMEN'S DEVELOPMENT v. Central Falls

• Citation: 764 A.2d 151
• Decision Date: 11 January 2001
• Docket Number: No. 98-207-Appeal, 99-87-Appeal, 99-293-Appeal.,98-207-Appeal, 99-87-Appeal, 99-293-Appeal.
• Parties: WOMEN'S DEVELOPMENT CORPORATION, et al. v. CITY OF CENTRAL FALLS.
• Court: United States State Supreme Court of Rhode Island

764 A.2d 151

WOMEN'S DEVELOPMENT CORPORATION, et al. v. CITY OF CENTRAL FALLS.

No. 98-207-Appeal, 99-87-Appeal, 99-293-Appeal.

Supreme Court of Rhode Island.

January 11, 2001.

Present WEISBERGER, C.J., LEDERBERG, BOURCIER, FLANDERS, and GOLDBERG, JJ.

Peter J. McGinn, Alden Harrington, Providence, for Plaintiff.

Lauren E. Jones, Marc DeSisto, Providence, J. William Harsch, Carolyn Ann Mannis, for Defendant.

OPINION

FLANDERS, Justice.

The materiality of various breaches of contract, the sufficiency of evidence to support a fraud counterclaim, and the propriety of certain attorney's fee awards are before us on these cross-appeals. A Superior Court trial justice disposed of the parties' various claims and counterclaims by entering judgment as a matter of law, prompting both sides on appeal to challenge various aspects of her rulings.

Facts and Travel

The plaintiffs, Women's Development Corporation and Women's Opportunity Realty Corporation (collectively, WDC),¹ appeal from a Superior Court judgment for the defendant City of Central Falls (the city or Central Falls). The court dismissed WDC's breach-of-contract claims after it granted the city's motion for judgment as a matter of law. Each side had asserted breach-of-contract claims against the other. In its counterclaim, Central Falls also accused WDC of fraud, and the city appeals from that portion of the court's judgment that ruled as a matter of law in favor of WDC and dismissed the city's fraud claim.

This case involves a contractual dispute pertaining to the development of a Central Falls low-income housing project funded by the federal Community Development Block Grants (CDBG) program. The CDBG program used public money to develop low-income and moderate-income housing. In each year of the program's existence, the federal government appropriated money for this purpose, and then apportioned it among the fifty states according to a formula established by federal law. See Housing and Community Development Act of 1974, 42 U.S.C.A. §§ 5301 through 5321 (West 1995). As required by federal law, the state accepted the CDBG money on condition of complying with a host of federal rules and regulations. See, e.g., 24 C.F.R. §§ 570.480 through 570.497 (2000).

The state distributed its CDBG money to participating municipalities on a statewide basis through a competitive bidding process. In 1994 and 1995, Central Falls applied for and obtained CDBG money to support a local program known as the Centennial Urban Renewal Enterprise (CURE). One aspect of CURE involved housing rehabilitation designed to generate multiple units of affordable housing for the low-to-moderate-income rental market. WDC, a nonprofit entity formed to develop low-income housing, consulted with Central Falls about a particular CURE housing-development project (the CURE project) in the city. WDC represented that it possessed significant expertise in administering this kind of housing-development project. For each year of the two years that the state granted the city CDBG funding to proceed with the CURE project, the city entered into a separate contract with WDC. For each of these two years (1994 and 1995) the city also entered into a contractwith the state. (The parties anticipated that the CURE project would require a number of years to build; thus, the state, city, and WDC understood and agreed that the city would contribute money to the CURE project over three consecutive grant years.)

Under its two contracts with the city that are at issue here (the 1994 and 1995 contracts), WDC was responsible for property acquisition, design, development, construction, financing, and overall administration of the CURE project. Both the city-WDC contracts and the city-state contracts were subject to extensive federal regulations. Indeed, the city-WDC contracts explicitly recognized this fact. Of particular relevance to this dispute were certain contractual obligations imposed by federal law. According to its contract with the city, WDC was required to (1) include "anti-kickback" and "equal employment opportunity" (EEO) language in all its subcontracts; (2) obtain written approval from the city before subcontracting various services it was to perform under the contract; and (3) use competitive procurement procedures when subcontracting for services specified in the contract.

For services rendered under its 1994 contract, WDC submitted two requisitions to the city totaling $123,618.90. The state approved these requisitions and transmitted that money to the city, which then paid it to WDC for contractual services rendered. WDC later submitted three more requisitions — totaling $186,660.10² — for services completed under both the 1994 and 1995 contracts. The state approved each of these requisitions and transmitted to the city the money required to pay WDC for this work.

In January 1996, Lee Matthews took office as the new mayor of Central Falls. Thereafter, according to WDC, the city's attitude toward the CURE project and WDC dramatically changed. As Mayor-elect, Matthews told John McAlmont, the city manager, that he intended to "dismantle" the CURE project. As the new mayor, Matthews refused to release the funds relating to the three approved WDC requisitions, and he refused to act upon a fourth requisition totaling $29,930. Although both the city and the state acknowledged they owed money to WDC for services completed under the contracts, the city failed to pay WDC for these services. Significantly, the city did not notify WDC of any alleged deficiencies in its methods of subcontracting or in its contractual documentation. Indeed, the city manager testified that, before the city notified WDC of its termination as a city contractor, WDC always had undertaken appropriate corrective action whenever he had identified any deficiencies with regard to its contractual documentation. When the city refused to pay over to WDC the money for WDC's three requisitions and when it refused to close on the sale of three properties that were to be developed as part of the CURE project (all of which had received prior approval), WDC filed a breach-of-contract suit in Providence County Superior Court in March 1996.

On April 10, 1996, the mayor sent a letter to WDC in which he stated that the city was terminating its WDC contracts "for cause." Even though the city had not previously complained to WDC about its alleged deficient performance under the contracts, the letter cited WDC's failure to provide accurate documentation to the city in connection with the CURE project as justification for terminating its contracts with WDC. The letter also stated that WDC had "failed to cooperate" with an audit of the project, had submitted "false and misleading invoices," and had made "material misrepresentations" to secure approval of various elements of the project.

Because WDC's complaint included a claim under 42 U.S.C. § 1983 (alleging violations of federal statutory and constitutional rights in addition to state law breach-of-contract claims), the city elected to remove the case to United States District Court for the District of Rhode Island. Ultimately, the city filed an amended counterclaim against WDC, alleging breach-of-contract and fraud. On June 11, 1997, the federal district court dismissed WDC's 42 U.S.C. § 1983 claim. Because no other basis for federal jurisdiction remained, the federal district court remanded the case to the Superior Court.

Before trial began in the Superior Court, WDC moved to dismiss the city's fraud counterclaim. It asserted that this claim lacked the particularity that Rule 9(b) of the Superior Court Rules of Civil Procedure required for pleading fraud claims. After the trial justice denied this motion, the parties tried the case before a Superior Court trial justice sitting with a jury. At trial, WDC's vice president testified that it had performed "one hundred percent" of the services specified in the contracts. Although the city introduced no evidence directly challenging WDC's substantial completion of these services, it did establish (through WDC's admissions) that WDC had failed to (1) include the requisite anti-kickback and EEO language in its subcontracts, (2) obtain the city's advance written approval before entering into various subcontracts, and (3) use competitive procurement procedures for all of its subcontracts. After the parties rested, the city moved (pursuant to Rule 50 of the Superior Court Rules of Civil Procedure) for judgment as a matter of law on the parties' respective breach-of-contract claims, and WDC (again, pursuant to Rule 50) moved for judgment as a matter of law against the city's fraud claim.³ Finding that, as a matter of law, WDC's admitted noncompliance with the above-specified contractual requirements constituted material breaches of the contract, the trial justice granted the city's Rule 50 motion and awarded the city monetary relief. Specifically, the trial justice ordered WDC to reimburse the city for the $123,618.90 that the city already had paid to WDC for its services under the 1994 contract. The court also ruled that the city was not obliged to make any further payments to WDC pursuant to the state-approved but unpaid requisitions. Finally, the trial justice granted WDC's motion for judgment as a matter of law on the city's fraud claim.

Post-trial proceedings focused upon the city's attempts to execute on the judgment in its favor and upon WDC's liability for the attorney's fees incurred by the city in connection with this litigation. After entry of the order granting the motion for judgment as a matter of law on the city's breach-of-contract claims, the city moved for an award of attorney's fees under G.L. 1956 § 9-1-45 (which allows an award of attorney's fees for a party's prosecution of nonjusticiable breach-of-contract claims). The trial justice ultimately assessed attorney's fees and costs totaling $114,853.22 against WDC for the legal...