Williams Enterprises, Inc. v. Sherman R. Smoot Co., 90-7091

• Decision Date: 08 October 1991
• Docket Number: No. 90-7091,90-7091
• Citation: 938 F.2d 230,290 U.S.App. D.C. 411
• Parties: , 20 Fed.R.Serv.3d 490, 34 Fed. R. Evid. Serv. 56 WILLIAMS ENTERPRISES, INC., and Strait Manufacturing and Welding, Inc., Appellants, v. The SHERMAN R. SMOOT COMPANY, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 230

938 F.2d 230

290 U.S.App.D.C. 411, 20 Fed.R.Serv.3d 490,

34 Fed. R. Evid. Serv. 56

WILLIAMS ENTERPRISES, INC., and Strait Manufacturing and Welding, Inc., Appellants, v. The SHERMAN R. SMOOT COMPANY, Appellee.

No. 90-7091.

United States Court of Appeals District of Columbia Circuit.

Argued Feb. 11, 1991.

Decided July 9, 1991.

As Amended on Denial of Rehearing

and Rehearing En Banc

Oct. 8, 1991.

Appeal from the United States District Court for the District of Columbia (Civil Action No. 86-01226).

Philip Clark Jones, for appellants.

John Hardin Young, for appellee.

Before RUTH BADER GINSBURG, HENDERSON and RANDOLPH, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

HENDERSON, Circuit Judge:

On September 25, 1984, the steel frame of a building under construction collapsed, causing one death and several serious injuries. The primary contractor, The Sherman R. Smoot Company (Smoot), filed claims against both its subcontractor, Strait Manufacturing and Welding, Inc. (Strait), and Strait's subcontractor, Williams Enterprises, Inc. (Williams). The district court held both subcontractors liable for damages in excess of $493,000. Williams, after assuming sole responsibility for the legal defense, now appeals that award. We affirm the district court's decision in all aspects except its calculation of the cost of capital award and remand for a recalculation of that award. We also impose a $500 sanction on Williams's counsel due to his flagrant disregard of this court's orders and rules.

I.

Coolidge High School, located in the District of Columbia, needed a new gym. After a round of competitive bidding, Smoot was awarded the contract to build the gym. Smoot subcontracted with Strait for the fabrication and erection of the steel frame for the gym and Strait then subcontracted with Williams for the erection of the steel frame. As the frame was being erected, one of the steel towers supporting the structure began to visibly lean to one side. Williams continued to construct the frame, ignoring the warnings of both the on-site project manager and the District of Columbia building inspector. Five days after the warnings, the tower came tumbling down, taking the entire edifice with it. One worker was killed and two others were seriously injured. The Occupational Safety and Health Administration (OSHA) investigated the collapse and determined that Williams had committed several serious safety violations, including four willful violations. There is no dispute here that Williams was negligent or that its negligence was the sole cause of the collapse.

This litigation began when Williams sued Strait to recover funds retained by Strait. Strait then joined Smoot as a third-party defendant, also claiming retention. Smoot, in turn, brought claims against both Strait and Williams, alleging breach of contract and negligence as against Strait and negligence as against Williams. While the litigation was pending, Strait and Williams entered into an indemnity agreement by which Williams agreed to pay all of the damages resulting from Smoot's claim and to assume full responsibility for the legal defense. In addition, Smoot agreed to pay Strait the outstanding balance owed it, once Smoot's claim for damages was finally resolved.

The district court tried the case without a jury and found Strait and Williams liable to Smoot for the damages caused by the collapse. The court assessed damages totalling $493,030, plus a cost of capital award. Damages were awarded for (i) increased insurance premiums, (ii) unabsorbed home office overhead, (iii) construction expenses caused by the construction delay (including equipment costs, extra labor and escalated winter protection costs), (iv) loss of labor productivity and wage escalation, and (v) attorneys' fees. On appeal Williams challenges each of these items as well as the cost of capital award. It also appeals the district court's decision not to offset the damage award by the outstanding balance amount Smoot promised to pay Strait. We address each issue in turn.

II.

Williams first challenges the award of damages for increased insurance premiums. In awarding these damages, the trial judge credited the testimony of Smoot's insurance broker, who had worked on Smoot's account for over twelve years. The broker testified that the construction collapse caused Smoot's insurance premiums to increase by $45,000 per year and that this increase would continue for at least three years. Williams makes three challenges to this damage award. First, it claims the broker, who testified as a lay witness, should not have been permitted to offer his opinion as to why the premiums increased. Second, Williams argues that the broker, even if qualified as an expert, was not qualified to testify about what factors the insurance carrier considered in deciding to raise Smoot's premiums. That question, says Williams, can be answered only by the carrier's agent himself. Finally, Williams claims that the broker's testimony, if admissible, was insufficient as a matter of law to establish that Williams's negligence was the proximate cause of the insurance premium increase.

We reject Williams's contention that the district court erred by allowing Smoot's insurance broker to testify as a lay witness about what, in his opinion, caused the increase. Rule 701 of the Federal Rules of Evidence provides that a witness not testifying as an expert may offer his opinion only if it is (i) "rationally based on the perception of the witness"; and (ii) "helpful to a clear understanding of his testimony or the determination of a fact in issue." The insurance broker's testimony meets both of these requirements. His opinion was based on facts that were personally known to him (i.e., the history of Smoot's account and the circumstances surrounding the increase) and the court, acting as the trier of fact, expressly found that the testimony would be helpful.

The fact that the broker based his opinion on specialized knowledge and might have been able to offer his opinion as an expert does not mean he was required to do so. As long as he had personal knowledge of the facts, he was entitled to draw conclusions and inferences from those facts--regardless of whether he applied any specialized expertise. See Teen-Ed, Inc. v. Kimball International, Inc., 620 F.2d 399, 402-04 (3d Cir.1980) (plaintiff's accountant could under Rule 701 project lost profits based on his familiarity with records); Farner v. Paccar, Inc., 562 F.2d 518, 528-29 (8th Cir.1977) (witness familiar with truck suspension system could under Rule 701 offer opinion on its design); United States v. Pierson, 503 F.2d 173, 176 (D.C.Cir.1974) (police officer may testify as lay witness about bullet trajectory, based on personal observations of the crime scene). Moreover, Williams concedes that it anticipated the opinion testimony and was not unfairly surprised by it. See Queen v. Washington Metro. Area Transit Authority, 842 F.2d 476, 482-83 (D.C.Cir.1988).

We also reject Williams's contention that only the carrier's agent could testify about the cause of the increase. The fact that a person other than the witness may have had first-hand knowledge of what caused the premium increase does not mean that the witness could not give his own explanation of the cause. There is no evidence or even suggestion that the carrier's decision to raise the premiums was based on personal whim. Smoot's insurance broker was not confronted with the task of guessing what factors went through the carrier's agent's mind when he decided to raise Smoot's premiums (as Williams suggests) but was merely asked what factors might have contributed to that raise. Because the witness had personal knowledge of Smoot's insurance account and was familiar with factors that affected the account, he was qualified to give his opinion as to whether a certain factor (i.e., the collapse) caused the increased premiums. See Teen-Ed, 620 F.2d at 403; Fed.R.Evid. 602.

Finally, the district court's finding that the collapse was the proximate cause of the increased premiums is supported by substantial evidence. Although Williams suggests that a series of lawsuits against Smoot was the real cause of the increase, it did not present any evidence or testimony at trial to substantiate this claim. ¹ Given the evidence produced by Smoot and Williams's total failure of proof, we cannot conclude that the district court committed legal error in determining that Williams's negligence proximately caused the increased insurance premiums. ²

III.

Williams next challenges the district court's award of damages for unabsorbed home office overhead. According to the court, Williams's negligence caused the project an 83-day delay. In calculating the damages attributable to the delay, the district court employed a method of calculation known as the "Eichleay formula," first developed by the Armed Services Board of Contract Appeals in Eichleay Corp., 60-2 B.C.A. (CCH) p 2688 (1960), aff'd on reconsideration, 61-1 B.C.A. (CCH) p 2894 (1961). That formula requires the following three-step analysis:

The total home office overhead for the contract performance period is multiplied by the ratio of contract billings to total company billings; this calculation results in the amount of home office overhead allocable to the contract. That amount is then divided by the number of days of contract performance; the result is the daily home office overhead rate allocable to the contract. That rate is then multiplied by the number of days of delay; the result is the amount of recovery.

George Hyman Constr. Co. v. Washington Metro. Area Transit Authority, 816 F.2d 753, 757 (D.C.Cir.1987). Williams claims that the court erred: (i) in incorrectly assuming that the delay caused Smoot to incur uncompensated expenses, without inquiring whether these expenses could have been avoided; and (ii) in applying the Eichleay formula here because...