U.S. for Use and Benefit of Treat Bros. Co. v. Fidelity and Deposit Co. of Maryland

• Citation: 986 F.2d 1110
• Decision Date: 30 March 1993
• Docket Number: No. 91-2651,91-2651
• Parties: 38 Cont.Cas.Fed. (CCH) P 76,482, 38 Fed. R. Evid. Serv. 173 UNITED STATES of America, for the Use and Benefit of TREAT BROTHERS COMPANY, an Illinois Corporation, Plaintiff-Appellee, v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND, a Maryland Corporation and Blinderman Construction Company, Incorporated, an Illinois Corporation, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 1110

986 F.2d 1110

38 Cont.Cas.Fed. (CCH) P 76,482, 38 Fed. R.

Evid. Serv. 173

UNITED STATES of America, for the Use and Benefit of TREAT BROTHERS COMPANY, an Illinois Corporation Plaintiff-Appellee, v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND, a Maryland Corporation and Blinderman Construction Company Incorporated, an Illinois Corporation Defendants-Appellants.

No. 91-2651.

United States Court of Appeals Seventh Circuit.

Argued April 28, 1992.

Decided Feb. 23, 1993.

Rehearing and Rehearing En Banc Denied

March 30, 1993.

Ted H. Crewell, argued, Beckett & Crewell, Champaign, IL, for plaintiff-appellee.

John F. Martin, Dukes, Martin, Helm & Ryan, Danville, IL, Scott F. Turow, argued, Sonnenschein, Nath & Rosenthal, Chicago, IL, for defendants-appellants.

Before COFFEY and RIPPLE, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

RIPPLE, Circuit Judge.

Defendant-appellant, Blinderman Construction Company and its surety, Fidelity and Deposit Company of Maryland, appeal from a verdict in favor of Treat Brothers Company on a breach of contract claim arising out of a government contract for construction of a personnel dormitory at Chanute Air Force Base in Rantoul, Illinois. Federal jurisdiction was based on the Miller Act, 40 U.S.C. § 270b (1988), and on 28 U.S.C. § 1331 (1988). Treat's claim was tried to the bench; the federal district court determined that Blinderman had breached its contract with Treat and thus owed Treat $99,654.68. Moreover, the court held that Blinderman had litigated the claim in bad faith; therefore, the court assessed attorneys' fees and prejudgment interest against Blinderman. In total, Treat was entitled to $138,279.57 from Blinderman. Blinderman now appeals the judgment and the award of fees and interest. For the reasons that follow, we affirm the judgment of the district court.

I BACKGROUND

A. Facts

Blinderman Construction Company (Blinderman) was the general contractor on a dormitory construction project at Chanute Air Force Base. Treat Brothers Company (Treat) was one of numerous subcontractors on the project. Blinderman and Treat had worked together on two earlier construction projects and testimony in the record indicates that their prior working relationship had been relatively contentious. On the Chanute project, Treat was responsible for providing drywall and ceiling work, plastering, insulating, and similar interior specialty construction. The original contract price for Treat's work was $507,500. Early in the construction process, a dispute arose between Blinderman and Treat over whether Treat was responsible for fireproofing work necessary in the dining hall and bakery areas of the building. Blinderman believed that fireproofing was included in the terms of Treat's original contract, while Treat contended that it was not part of the work it had contracted to provide. Pursuant to terms in the contract, Treat fireproofed the areas while the matter was submitted to an arbitrator. The arbitrator determined that Treat was required to perform fireproofing as part of its contract. The arbitrator also awarded Treat $21,500 for brown coating and lathing. The district court noted that the payment was not connected to the disputed fireproofing and neither party disputes this point.

Additionally, during the course of the construction job, Treat agreed to provide Blinderman with additional work that was not included in the original contract. One of these additions, "Change Order AD," provided for additional room finishing and ceiling treatment. Treat and Blinderman could not agree on the value of the work performed under Change Order AD and, because of this dispute, Blinderman never paid Treat for these services.

Relations between Treat and Blinderman continued to deteriorate, and eventually Treat walked off the construction site. The record indicates that Blinderman had paid Treat on the majority of its contract and that Treat had completed almost all of its work on the project at the time that it abandoned the job. However, Blinderman did incur certain costs, known as "back charges," in completing the work that Treat had left unfinished. Blinderman's cost of completion was also disputed by the parties.

B. District Court Proceedings

Pursuant to the Miller Act, Treat brought suit in the United States District At trial, Blinderman moved to dismiss Treat's claim relating to the condition of the premises for fireproofing on the ground that further litigation of this issue was barred by the doctrine of res judicata because of the prior arbitration proceeding. The court denied this motion. It held that the arbitrator's award dealt only with the question of whether fireproofing was within Treat's original contractual obligations, and that the claim Treat made for extra labor and materials to perform the fireproofing work due to the condition of the worksite was a separate issue not precluded by the arbitration award. The district court stated that the award did not "purport to rule on any claim for breach of the contract in preparation of the working space to receive the cementitious fireproofing material." Mem. Op. at 4.

                Court for the Central District of Illinois.   It sought money that it contended Blinderman owed on the construction contract.   Treat focused its claim on three main issues.   First, Treat claimed that it was entitled to additional costs incurred by Blinderman's alleged failure to tender the bakery and dining hall premises to Treat in suitable condition for fireproofing.   Second, Treat claimed that it was due approximately $17,000 for the room finishing and ceiling work that it had agreed to perform pursuant to Change Order AD.   Blinderman, however, contended that the value of the services required in Change Order AD was approximately $4,800.   Finally, Blinderman and Treat disputed the value of the back charges that Blinderman incurred in completing the project.   Treat alleged that the reasonable value of the back charges was approximately $4,000;  Blinderman contended that the true cost was approximately $45,000.   Blinderman also counterclaimed for $21,500, contending that if the district court did not find the fireproofing issues barred by res judicata, then Treat should not have been awarded this amount in the arbitration proceedings for brown coating and lathing
                

As part of its case in chief, Treat presented the testimony of Major Thomas Ayers and Mr. James Johnson, of the Army Corps of Engineers, who had been involved with the day-to-day state of the Chanute dormitory construction project. Although neither Major Ayers nor Mr. Johnson had been listed as an expert in the pretrial order, or in Treat's discovery responses, the court nonetheless allowed them to give opinion testimony relating to, among other things, the condition of the worksite, the value of the work Treat left unfinished, and the accuracy of Blinderman's value estimates. Blinderman objected to this testimony, claiming, alternatively, that it should be barred because neither Major Ayers nor Mr. Johnson had been disclosed as experts before trial, and because Army regulations prohibited the two men from rendering this testimony. The district court rejected these arguments and allowed both men to testify. In its findings of fact rendered after the trial, the district court specifically relied on the testimony of these two witnesses when it determined the value of the work performed by both parties.

During trial, Treat also tendered a motion to assess attorneys' fees and prejudgment interest against Blinderman, based on Blinderman's alleged bad faith and vexatious conduct throughout the litigation. At the conclusion of trial, the court, finding evidence of bad faith, granted this motion. Specifically, the court found that Blinderman was using its claim for back charges in an attempt to recover monies from Treat for losses Blinderman itself incurred because of its own inadequate performance and poor workmanship under the construction contract. The court also found that Blinderman's counterclaim for a $21,500 "reverse change order" from Treat was a "disingenuous" attempt to recover the $21,500 Treat was awarded in the arbitration for its brown coat and lath work. Mem. Op. at 10.

As relief, the court found that Blinderman owed Treat $99,654.68 plus an additional $17,063.95 in prejudgment interest, yielding $116,718.63 in total damages. In calculating the damage award, the district court found that Treat was entitled to $27,135 for the extra expenses incurred due to Blinderman's failure to provide the premises in a suitable condition for fireproofing

                and to $17,342 as the reasonable value of work Treat performed pursuant to Change Order AD.   The court did find, however, that Treat was responsible for $4,424 in back charges claimed by Blinderman.   Finally, the court required Blinderman to pay Treat $21,560.94 for attorneys' fees.   Blinderman appeals from the district court's judgment and order for fees and prejudgment interest.
                

II ANALYSIS

Blinderman raises five issues in this appeal. First, it contends that the district court erred by not barring as res judicata Treat's claim regarding the site condition of the fireproofed area. Second, Blinderman contends that the court's award of approximately $17,000 to Treat for its work on Change Order AD was clearly erroneous. Third, Blinderman raises a two-pronged attack on the district court's decision to allow Major Ayers and Mr. Johnson to render opinion testimony, claiming that their testimony should have been barred both by Treat's failure to designate them as expert witnesses prior to the commencement of trial and by Army regulations. Fourth, Blinderman argues that, under the Supreme Court's recent decision in Chambers v. NASCO, Inc., --- U.S. ----, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991), the district court abused its discretion when it awarded attorneys' fees based on Blinderman's bad faith conduct. Finally, Blinderman argues...