U.S. for Use and Benefit of Reed v. Callahan, s. 86-5965

• Decision Date: 06 September 1989
• Docket Number: 86-5968,Nos. 86-5965,s. 86-5965
• Citation: 884 F.2d 1180
• Parties: UNITED STATES For Use and Benefit of Dennie REED, dba Dennie Reed & Sons, Inc., Plaintiff-Appellee, v. C.E. CALLAHAN, dba C.E. Callahan Co., Defendant-Cross-claimant-Appellee, v. ESTO, INC., formerly known as H.A. Ekelin & Assoc.; United Pacific Insurance Company; Reliance Insurance Co., Defendants-Cross-claimants-Appellants. UNITED STATES for Use and Benefit of Dennie REED, dba Dennie Reed & Sons, Inc., Plaintiff-Appellee, v. C.E. CALLAHAN, dba C.E. Callahan Co., Defendant-Cross-claimant-Appellant, v. ESTO, INC., formerly known as H.A. Ekelin & Assoc.; United Pacific Insurance Company; Reliance Insurance Co., Defendants-Cross-claimants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1180

884 F.2d 1180

UNITED STATES For Use and Benefit of Dennie REED, dba Dennie

Reed & Sons, Inc., Plaintiff-Appellee, v. C.E. CALLAHAN, dba C.E. Callahan Co., Defendant-Cross-claimant-Appellee, v. ESTO, INC., formerly known as H.A. Ekelin & Assoc.; United

Pacific Insurance Company; Reliance Insurance

Co., Defendants-Cross-claimants-Appellants.

UNITED STATES for Use and Benefit of Dennie REED, dba Dennie

Reed & Sons, Inc., Plaintiff-Appellee, v. C.E. CALLAHAN, dba C.E. Callahan Co., Defendant-Cross-claimant-Appellant, v. ESTO, INC., formerly known as H.A. Ekelin & Assoc.; United

Pacific Insurance Company; Reliance Insurance

Co., Defendants-Cross-claimants-Appellees.

Nos. 86-5965, 86-5968.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 5, 1989.

Decided Sept. 6, 1989.

Donald B. Devirian, Brown & Brown, Los Angeles, Cal., for H.A. Ekelin & Associates, United Pacific Ins. Co., and Reliance Ins. Co., defendants-cross-claimants-appellants.

Herbert F. Blanck, Blanck & Blanck, Camarillo, Cal., for C.E. Callahan, defendant-cross-claimant-appellee.

Appeal from the United States District Court for the Central District of California.

Before HUG, HALL and WIGGINS, Circuit Judges.

HUG, Circuit Judge:

This case presents two appeals arising out of a district court action brought under the Miller Act, 40 U.S.C. Secs. 270a-270d (1982), in which Callahan recovered a judgment for damages and attorneys' fees against H.A. Ekelin and Associates ("Ekelin"). In No. 86-5965, Ekelin appeals the denial of its motion for judgment notwithstanding the verdict ("JNOV"). Ekelin also challenges the trial court's refusal to give certain proposed jury instructions. ¹ In No. 86-5968, Callahan appeals the district court's decision to limit attorneys' fees to the pendent state law portion of his Miller Act suit against Ekelin. We affirm the district court's rulings on the JNOV motion and jury instructions. We reverse and remand the attorneys' fees decision because we conclude that Callahan is entitled to fees for his entire case.

I.

This dispute grew out of the construction of several buildings at Ft. Irwin, California. The Department of the Army retained Ekelin as prime contractor for the project. United Pacific Insurance Company and Reliance Insurance Company issued the contractor's bond required under the Miller Act. 40 U.S.C. Sec. 270a (1982). Ekelin hired Callahan as a subcontractor to grade the building sites and place concrete aprons around each building.

Ekelin and Callahan did not enjoy the most harmonious of working relationships. Hired in March, 1982, Callahan left the job site eight months later after Ekelin terminated his services. The parties exchanged a number of accusations. Each insisted that the other failed to perform as required by the subcontract, thereby generating delays and errors, and ultimately causing a breach of the agreement. Ekelin asserted that Callahan's poor work performance forced it to complete some projects and rework others at its own expense. Callahan contended that Ekelin's mismanagement left him bankrupt, in debt, and partially uncompensated for work performed. ²

This action began when Dennie Reed, a sub-subcontractor, named Callahan along with Ekelin and the sureties in a Miller Act suit. Callahan cross-claimed under the Miller Act and various state law provisions against Ekelin and the sureties. After some pretrial activity, Reed settled his case with Ekelin and dropped out of the suit. Callahan's cross-claims then went before a jury, which found for Callahan and awarded him $266,001.50 in total damages against all the defendants. Of that award, $69,222.50 consisted of state law delay damages levied against Ekelin alone.

Following the jury verdict, Callahan applied for attorneys' fees for his cross-claims. He based his fees argument on paragraph 9.2 of the contract he signed with Ekelin. This section reads in relevant part:

[In the event of breach or default by the subcontractor] the Contractor may ... through himself or others provide labor, equipment and materials to prosecute Subcontractor's work on such terms and conditions as shall be deemed necessary, and shall deduct the cost thereof, including without restriction thereto all charges, expenses, losses, costs, damages, and attorney's fees incurred as a result of the Subcontractor's failure to perform....

Although this paragraph applies on its face only to the collection of fees by the contractor against the subcontractor, Callahan contended that California's reciprocity rule for attorneys' fees, Cal.Civil Code Sec. 1717 (West 1985 & Supp.1989), made fees available to him. ³

The trial judge agreed that fees were due, but only to the extent that the total damages award rested on state law. He reasoned that the Supreme Court's decision in F.D. Rich Co. v. United States ex rel. Indus. Lumber Co., 417 U.S. 116, 94 S.Ct. 2157, 40 L.Ed.2d 703 (1974), required application of federal common law to attorneys' fees claims in Miller Act cases. Since the contract provided fees only to the contractor and because section 1717 of the California Civil Code is not part of the federal common law, the trial court concluded that fees could not be ordered under federal law for the Miller Act portion of Callahan's case. The trial judge held, however, that fees were available under state law for Callahan's delay damages award. Since the damages for delay constituted about 26% of the total, he approved only 26% of Callahan's total fees request.

While Callahan pursued his fees claim, Ekelin sought to overturn the jury's verdict. At the close of plaintiff's case, Ekelin had moved for a directed verdict. The trial judge granted the motion with respect to several claims raised by Callahan involving negligence, bad faith, and delay damages under the Miller Act. He denied the motion for the remaining Miller Act and damages claims. After the jury rendered its decision, Ekelin moved for a JNOV or, in the alternative, for a new trial. Ekelin argued that the evidence introduced at trial was insufficient to sustain the verdict. Ekelin also asserted that the court erred by refusing to give certain jury instructions proffered by Ekelin. After consideration of the parties' arguments on these points, the district judge rejected the JNOV motion.

Ekelin challenges the denial of the JNOV motion and reasserts the jury instruction claim. Callahan appeals the decision to limit the award of attorneys' fees to only 26% of his case. Our jurisdiction comes under 28 U.S.C. Sec. 1291 (1982). We consider each argument in turn. ⁴

II.

We test the denial of a JNOV under the same standard used to review a jury verdict. Landes Const. Co. v. Royal Bank of Canada, 833 F.2d 1365, 1370-71 (9th Cir.1987). A JNOV is properly denied when the verdict is supported by substantial evidence. Id. at 1371; Venegas v. Wagner, 831 F.2d 1514, 1517 (9th Cir.1987). If reasonable minds could differ over the verdict, a JNOV is inappropriate. Venegas, 831 F.2d at 1517; Peterson v. Kennedy, 771 F.2d 1244, 1252 (9th Cir.1985), cert. denied, 475 U.S. 1122, 106 S.Ct. 1642, 90 L.Ed.2d 187 (1986). We review the evidence in the light most favorable to the non-moving party, and draw all inferences in that party's favor. Venegas, 831 F.2d at 1517; Peterson, 771 F.2d at 1252.

Ekelin raises a battery of claims challenging the verdict. It insists that the evidence it introduced in the form of progress payment records, daily reports, change orders, billing statements and other documentary materials, lead to a single inexorable conclusion: Callahan was not entitled to damages or compensation of any sort beyond the fees he actually received. Ekelin returns repeatedly to the observation that Callahan's case consisted primarily of his own testimony, supported on occasion by other witnesses, while Ekelin's defense drew heavily on written sources. It maintains that its records should trump Callahan's words.

In essence Ekelin argues that the jury believed the wrong evidence: it should have accepted Ekelin's documents rather than Callahan's oral testimony. This claim, as the Fifth Circuit remarked in another Miller Act suit, is "an all too familiar but altogether inappropriate appellate argument." United States ex rel. Micro-King Co. v. Community Science Technology, Inc., 574 F.2d 1292, 1295 (5th Cir.1978). It is the jury's function to "weigh[ ] the contradictory evidence and inferences, judge[ ] the credibility of witnesses, ... and draw[ ] the ultimate conclusion as to the facts." Tennant v. Peoria & P.U. Ry. Co., 321 U.S. 29, 35, 64 S.Ct. 409, 412, 88 L.Ed. 520 (1944). We are satisfied that the evidence was sufficient to support the verdict.

As another ground for reversing the denial of the JNOV, Ekelin contends that accord and satisfaction should have barred as a matter of law any recovery by Callahan. Ekelin bases this argument on Callahan's signing of various releases and change orders that purported to settle all claims related to work performed by Callahan up to the time of signing.

Assuming that accord and satisfaction were properly raised as an affirmative defense, a matter which Callahan contests, we conclude that the issue became a factual dispute between the parties that the jury resolved in Callahan's favor. Under California law, economic duress can serve as a basis for invalidating a release or waiver. Rich & Whillock, Inc. v. Ashton Dev., Inc., 157 Cal.App.3d 1154, 204 Cal.Rptr. 86 (1984). This doctrine applies when the releasee commits a wrongful act sufficiently coercive to compel the releasor to sign the release or face financial ruin. Id., 204 Cal.Rptr. at 89. See also Sheehan v. Atlanta Int'l Ins. Co., 812 F.2d 465, 469 (9th Cir.1987).

The parties made the issue of the releases and economic duress a prominent part of their cases. They addressed it in their opening and closing arguments, elicited witnesses' testimony in relation to it, argued it in Ekelin's directed...