Gilbane Bldg. Co. v. Federal Reserve Bank of Richmond, Charlotte Branch

Citation80 F.3d 895
Decision Date01 April 1996
Docket Number93-2449,Nos. 93-2448,s. 93-2448
Parties, 44 Fed. R. Evid. Serv. 130 GILBANE BUILDING COMPANY, a Corporation; Applied Retrieval Technology Corporation, Plaintiffs-Appellees, and Holland Glass Company, Incorporated; Metromont Materials; Landmasters, Inc.; B & B Contracting Company, Incorporated; CACI, Incorporated--Federal; Pettit Construction Company, Incorporated, Plaintiffs, v. FEDERAL RESERVE BANK OF RICHMOND, CHARLOTTE BRANCH, Defendant-Appellant, International Fidelity Insurance Company, Defendant & Third Party Plaintiff-Appellee, and Electricon, Incorporated, Defendant & Third Party Plaintiff. APPLIED RETRIEVAL TECHNOLOGY CORPORATION, Plaintiff-Defendant & Third Party Defendant-Appellant, and Holland Glass Company, Incorporated; Metromont Materials; Landmasters, Inc.; B & B Contracting Company, Incorporated; CACI, Incorporated--Federal; Pettit Construction Company, Incorporated; Plaintiffs, Gilbane Building Company, a Corporation; Plaintiff-Third Party Defendant-Appellee, v. FEDERAL RESERVE BANK OF RICHMOND, CHARLOTTE BRANCH, Defendant & Third Party Defendant-Appellee, International Fidelity Insurance Company, Defendant & Third Party Plaintiff-Appellant, and Electricon, Incorporated, Defendant & Third Party Plaintiff.
CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)

Appeals from the United States District Court for the Western District of North Carolina, at Charlotte. Robert D. Potter, Senior District Judge. (CA-90-374-C-C-P, CA-90-274-C-C-P, CA-91-99-C-C-P, CA-91-237-C-C-P, CA-91-281-C-C-P, CA-91-293-C-C-P, CA-91-384-C-C-P, CA-90-318-C-C-P).

ARGUED: George Verner Hanna, III, Moore & Van Allen, Charlotte, North Carolina, for Appellant. Robert Lewis Burchette, Johnston, Taylor, Allison & Hord, Charlotte, North Carolina, for Appellee Gilbane; Mitchell Allen Stein, Stein & Associates, P.C., New York City, for Appellee Applied Retrieval. ON BRIEF: Randel E. Phillips, Mary Elizabeth Erwin, Moore & Van Allen, Charlotte, North Carolina, for Appellant. Patrick E. Kelly, Greg C. Ahlum, Gary J. Welch, Johnston, Taylor, Allison & Hord, Charlotte, North Carolina, for Appellee Gilbane.

Before MURNAGHAN, ERVIN, and WILKINS, Circuit Judges.

Affirmed in part and reversed in part by published opinion. Judge ERVIN wrote the opinion, in which Judge MURNAGHAN and Judge WILKINS joined.

OPINION

ERVIN, Circuit Judge:

This case arose from construction in Charlotte, North Carolina, of a branch of the Federal Reserve Bank of Richmond ("FRB"). By agreement of the parties, the claims at issue in this appeal were tried initially before a court-appointed special master. The district court awarded damages to FRB against general contractor Gilbane Building Company. Gilbane does not appeal. The district court also awarded damages against FRB in favor of Gilbane, and trebled the entire amount for unfair or deceptive trade practices under North Carolina's Unfair Trade Practices Act ("UTPA"), N.C. Gen.Stat. § 75-1.1 et seq. Some of the trebled damages were to pass through Gilbane to various subcontractors, including Applied Retrieval Technology Corp. ("ART"), but the district court ruled that the trebling would benefit Gilbane only. FRB appeals only the trebling of the award. Finally, the district court awarded damages to FRB against ART and its surety--International Fidelity Insurance Company ("IFIC"). 1 ART appeals that award, and contests the district court's refusal to treble the damages it received from FRB through Gilbane.

We disagree with the district court's decision to treble FRB's liability. But we find no error in its awards to FRB against ART. Thus we reverse the finding of unfair and deceptive trade practices, and affirm on all remaining issues.

I.

Litigation of these disputes began in North Carolina state court, and North Carolina substantive law controls. But the case properly was removed to federal district court under 12 U.S.C. § 632, which establishes federal subject matter jurisdiction over any civil suit in which a Federal Reserve Bank is a party. Appellate jurisdiction is appropriate under 28 U.S.C. § 1291, because the parties' appeals are from final judgments.

II.

On October 3, 1986, FRB and Gilbane entered into a contract under which FRB would pay Gilbane an amount greater than $32 million to serve as general contractor and project manager for construction of FRB's Charlotte branch. In 1990, several subcontractors initiated lawsuits against Gilbane and FRB for failing to pay for the subcontractors' work. Gilbane cross-claimed against FRB for withholding payment.

On April 16, 1991, FRB and Gilbane entered into the "Dooley Agreement," which suspended the litigation and appointed contractor R.T. Dooley to judge performance under the contract. To settle disputes not resolved by the Dooley Agreement, Gilbane and FRB moved the district court for appointment of a special master. The court appointed Walter L. Hannah, a North Carolina construction attorney, to hear both the construction disputes between Gilbane and FRB ("the construction cases") and a dispute between FRB, ART, CACI, Inc., and IFIC regarding the project's Automated Storage and Retrieval System ("the retrieval cases"). The parties agreed to be bound by the special master's findings of fact, and that the district court would make all conclusions of law.

During the construction hearings, Gilbane moved the special master to add an unfair or deceptive trade practices claim. After the hearings ended, the district court ruled that the UTPA claim was supported by the special master's findings of fact, and it trebled the damages awarded to Gilbane. FRB moved the court to amend the judgment as unfairly prejudicial and abusive of the court's discretion, arguing that the court should either vacate the treble damages award or submit the issue to the special master to determine whether it was properly tried during the hearings. The court did the latter, and the special master responded that Gilbane had raised the issue properly and that FRB had consented impliedly to trial of the issue by failing to show how it would be prejudiced by amendment of Gilbane's cross-claim. The court denied FRB's motion to amend the judgment, and FRB appeals.

The retrieval cases arose from ART's installation of an automated vault storage and retrieval system. Relying on the special master's report, the district court awarded ART $102,000 from Gilbane, "representing the balance due to ART under its contract." But it held ART liable to FRB, through Gilbane, for a total of $359,842.21: $325,000 for the difference between the actual value of the completed retrieval system and its reasonably expected value under the contract, $6,000 for wiring that failed to meet specifications, and $28,842.21 for "maintenance labor costs" above those normally expected for such a system.

ART appeals the award to FRB, protesting (1) that FRB waived any damages by accepting ART's substantial performance, (2) that the special master violated Fed.R.Civ.P. 53(e)(1) by failing to file with the district court the exhibits introduced at the hearing, (3) that the special master's findings regarding the system's useful life were not supported by the evidence, and (4) that it was not given an opportunity to cross-examine the expert consulted by the special master. Additionally, ART contests the district court's refusal to treble the damages awarded to ART through Gilbane. Like Gilbane, and based on the same acts by FRB, ART moved the district court for leave to amend its pleadings to include a claim for treble damages. Unlike Gilbane, however, ART had not raised its UTPA claim before the special master, and the district court denied its motion. ART contends on appeal that the justification for its claim is not materially different from that for Gilbane's.

III.
A.
1.

FRB contends that the district court abused its discretion by allowing a post-trial amendment of Gilbane's pleadings to include an unfair or deceptive trade practices claim. FRB acknowledges that Fed.R.Civ.P. 15(b) allows such an amendment when the issue actually has been tried by the consent of the parties. It argues, however, that the special master's findings do not support the conclusion that FRB impliedly consented to trial of the UTPA issue. Gilbane responds that FRB had sufficient notice of the UTPA claim and the opportunity to present evidence to rebut the claim, and that FRB neither claimed nor proved that it would be prejudiced by the amendment until after the district court entered its judgment.

FRB and Gilbane agree that whether the district court could consider the UTPA issue is controlled by Rule 15(b), which provides:

(b) Amendments to Conform to the Evidence. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice the party in maintaining the party's action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence.

Despite the parties' agreement, this is not a Rule 15(b) situation. It is governed instead by Rule 54(c), which authorizes recovery under any theory supported by the facts proven at trial: "[E]very final judgment shall grant the relief to which the...

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