Bernhard-Thomas Bldg. Sys. LLC v. Weitz Co.

• Decision Date: 31 October 2011
• Docket Number: 3:04-cv-1317 (CFD)
• Court: U.S. District Court — District of Connecticut
• Parties: BERNHARD-THOMAS BLDG. SYS., LLC, Plaintiff, v. WEITZ CO., LLC and FEDERAL INS. CO. Defendants.

BERNHARD-THOMAS BLDG. SYS., LLC, Plaintiff,

v.WEITZ CO., LLC and FEDERAL INS. CO. Defendants.

3:04-cv-1317 (CFD)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

Dated: October 31, 2011

RULING ON MOTION FOR ATTORNEY'S FEES, INTEREST, AND COSTS

I. Introduction

This case arises out of a breach of contract dispute between the plaintiff, Bernhard-Thomas Building Systems, LLC ("BT"), and the defendants The Weitz Company, LLC d/b/a The Weitz Company-National ("Weitz") and Federal Insurance Company. After a bench trial, this Court awarded Weitz $1,287,604 in damages, plus interest. Weitz has filed a motion for interest, attorney's fees, and costs pursuant to its Subcontract Agreement ("Subcontract") with BT.

II. Background

BT brought a five-count complaint against the defendants for judgment on a bond (which was substituted for a mechanic's lien) pursuant to Conn. Gen. Stat. § 49-33 (Count One); breach of contract (Counts Two and Three); breach of the covenant of good faith and fair dealing (Count Four); and unjust enrichment (Count Five). In response, Weitz brought a counterclaim alleging that BT breached the Subcontract.

After a bench trial, this Court filed its Memorandum of Decision on August 16, 2011, holding that Weitz terminated BT for cause and therefore BT was not entitled to recover damages under the Subcontract. The Court awarded damages to Weitz to the extent of its completioncosts, in the amount of $1,287,604, plus prejudgment interest, attorney's fees, and costs. Those supplemental amounts were subject to a post memorandum of decision motion by Weitz.

Weitz now moves for interest, attorney's fees, and costs. Weitz seeks $832,184.43 in interest, $427,924.25 in attorney's fees, and $123,049.75 in costs.

III. Applicable Law and Discussion

A. Recovery of Interest

Section 11.4 of the Subcontract between Weitz and BT provides, in relevant part:

11.4 Consequences of Termination for Cause

The Contractor shall apply any unpaid balance of the Subcontract Sum to pay for such completion costs; provided, that the Contractor may first require the Subcontractor or its surety, if any, to fund any anticipated excess completion costs. In all such events, if the unpaid balance of the Subcontract Sum exceeds the costs of completing the Subcontractor's Work together with interest on such costs and together with any offsets and deductions available to the Contractor, such excess shall be paid to the Subcontractor. However, if such costs, interest, deductions and offsets exceed such unpaid balance, the Subcontractor or Subcontractor's surety shall pay the difference to the Contractor upon demand.

Although the Subcontract does not specify a rate of interest, it expressly entitles the Contractor, i.e., Weitz, to interest on the unpaid completion costs. In the Standard Form Agreement between Owner and Construction Manager between LCS-Westminister Partnership I LLP and Weitz (the "Prime Contract"), Section 13.6.1 specifies that "[p]ayments due and unpaid under the Contract Documents shall bear interest from the date payment is due at such rate as the parties may agree upon in writing or, in the absence thereof, at the at the legal rate prevailing from time to time at the place where the Project is located." BT argues that it is not bound by this language in the Prime Contract because it was not a party to this contract. The Court disagrees.

The Subcontract between BT and Weitz contains several provisions incorporating the Prime Contract. Under Section 1.2 of the Subcontract, the parties agreed that "the Contractor [Weitz] shall have the benefit of all rights, remedies and redress against the Subcontractor [BT] that the Owner, under the Prime Contract, would have against the Contractor [Weitz]." Further, this section provides, "[t]he provisions of the Subcontract Documents shall be in addition to and not in substitution of any of the provisions of the Prime Contract. The Prime Contract is available for review by the Subcontractor at the Contractor's office." Section 1.7 of the Subcontract provides, "[a]ll defined terms not otherwise defined in the Subcontract Documents are used as defined in the Prime Contract." Section 1.8 defines "Subcontract Documents" to include "the Prime Contract" and includes the following integration language: "The Subcontract Documents together form the contract between the parties thereto, and are as fully a part of the Agreement as if attached thereto or repeated therein. . . . The Subcontract Documents are available for review by the Subcontractor at the Contractor's office."

"Generally, incorporation by reference of existing documents produces a single contract which includes the contents of the incorporated papers. Where . . . the signatories execute a contract which refers to another instrument in such a manner as to establish that they intended to make the terms and conditions of that other instrument a part of their understanding, the two may be interpreted together as the agreement of the parties." 566 New Park Assocs., LLC v. Blardo, 97 Conn. App. 803, 810-11 (citing Randolph Constr. Co. v. Kings East Corp., 165 Conn. 269, 275-76 (1973)). "The documents incorporated need not be attached to the contract nor signed or initialed unless the contract so requires." Id.

Here, the language of the Subcontract clearly and unambiguously refers to the PrimeContract as part of the contract between Weitz and BT. As stated above, Section 1.8, expressly states that "[t]he 'Subcontract Documents' consist of . . . the Prime Contract" and "[t]he Subcontract Documents together form the contract between the parties." Accordingly, the Court finds that the interest provision in the Prime Contract binds BT, and that provision provides interest at the "legal rate prevailing" in Connecticut.

Conn. Gen. Stat. § 37-3a provides the prevailing legal rate of prejudgment interest under Connecticut law.¹ See Milazzo v. Schwartz, 44 Conn. App. 402, 408 (1997). "[I]nterest at the rate of ten per cent a year, and no more, may be recovered and allowed in civil actions . . . as damages for the detention of money after it becomes payable." Conn. Gen. Stat. § 37-3a. The statute sets the maximum rate of interest a court can award, no more than ten percent, but "the trial court will have to decide what the appropriate rate of interest for any such award should be." Sears, Roebuck and Co. v. Bd. of Tax Review, 241 Conn. 749, 763-66 (1997).

Weitz seeks prejudgment interest at a rate of ten percent (10%) per year. "Simply to chose 10.0% as the interest rate because that is the only number referenced in Gen. Stat. § 37-3a is not the proper exercise of judicial discretion." City of Norwalk v. Barton, No. FSTCV020187554S, 2009 WL 323785, at *11 (Conn. Super. Ct. Jan. 27, 2009). Based on recent Connecticut decisions, one in this District and the others in Connecticut Superior Court, this Court exercises its discretion and awards an interest rate of four percent (4%). See also Hartford Steam Boiler Grp., Inc. v. SVB Underwriting, Ltd., No. 3:04cv2127 SRU, 2011 WL 1899392, at *11 (D. Conn. May 19, 2011) (awarding an interest rate of four percent); DiLustro v. Pascarella,No. CV106015451S, 2011 WL 4424756, at *4 (Conn. Super. Ct. Sept. 7, 2011) (applying an interest rate of five percent); Ulbrich v. Groth, No. X06CV84016022S, 2011 WL 3672032, at *5 (Conn. Super. Ct. July 26, 2011) (applying an interest rate of seven and one-half percent).

The Court agrees with Weitz that it should use the last date upon which Weitz requested payment for its completion costs—the date of the last change order, March 9, 2005—to begin the interest calculation. The amount owed on this date was $1,287,604. Interest of four percent (4%) per year on this amount, accruing from March 9, 2005 to October 31, 2011 (the day the judgment enters), totals $342,332.86.²

B. Recovery of Attorney's Fees

It is a well-established principle that "[i]n diversity cases, attorney's fees are considered substantive and are controlled by state law." Bristol Tech., Inc. v. Microsoft Corp., 127 F. Supp. 2d 64, 66 (D. Conn. 2000) (quoting United States v. One Parcel of Prop. Located at 414 Kings Highway, No. 5:91-CV-158 EBB, 1999 WL 301704, at *4 (D. Conn. May 11, 1999)); see also Kaplan v. Rand, 192 F.3d 60, 70 (2d Cir. 1999). Connecticut follows the common law "American" rule in assessing the award of attorney fees. Under the "American" rule, "attorney's fees and ordinary expenses and burdens of litigation are not allowed to the successful party absent a contractual or statutory exception." Ames v. Comm'r. of Motor Vehicles, 267 Conn. 524, 532 (2004). "A successful litigant is entitled to an award of attorney's fees if they areprovided by contract." Jones v. Ippoliti, 52 Conn. App. 199, 209 (1999); see also MD Drilling and Blasting, Inc. v. MLS Constr., LLC, 93 Conn. App. 451, 457-58 (2006).

Here, Section 12.1 of the Subcontract provides:

12.1 Attorney's Fees

In the event it shall become necessary for either party to institute legal proceedings against the other party for recovery of any amounts due and owing under the Agreement, it is expressly agreed that the prevailing party in any such action shall be entitled to recover from the non-prevailing party all costs, including reasonable attorney's fees, of pre-suit collection attempts, suit, and post judgment or settlement collection including those incurred on appeal.

Likewise, Section 13.4.3 of the Prime Contract, which the Court has found was integrated into the Subcontract, provides: "In the event of any litigation between the parties, the prevailing party shall be entitled to reimbursement for all reasonable attorneys' fees, expert fees, court costs, and all other third-party costs of the litigation incurred by the prevailing party."

Connecticut courts determine the reasonableness of fees by reviewing the twelve factors cited in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974). See, e.g., Ernst v. Deere & Co., 92 Conn....