Carnell Constr. Corp. v. Redevelopment

• Decision Date: 06 March 2014
• Docket Number: 13–1229,13–1239.,Nos. 13–1143,s. 13–1143
• Citation: 745 F.3d 703
• Court: U.S. Court of Appeals — Fourth Circuit
• Parties: CARNELL CONSTRUCTION CORPORATION, Plaintiff–Appellant, v. DANVILLE REDEVELOPMENT & HOUSING AUTHORITY; Blaine Square, LLC, Defendants–Appellees. Carnell Construction Corporation, Plaintiff–Appellee, v. Danville Redevelopment & Housing Authority, Defendant–Appellant, and Blaine Square, LLC, Defendant. Carnell Construction Corporation, Plaintiff–Appellee, v. Blaine Square, LLC, Defendant–Appellant, and Danville Redevelopment & Housing Authority, Defendant.

745 F.3d 703

CARNELL CONSTRUCTION CORPORATION, Plaintiff–Appellant,

v.DANVILLE REDEVELOPMENT & HOUSING AUTHORITY; Blaine Square, LLC, Defendants–Appellees.

Carnell Construction Corporation, Plaintiff–Appellee,

v.Danville Redevelopment & Housing Authority, Defendant–Appellant,andBlaine Square, LLC, Defendant.

Carnell Construction Corporation, Plaintiff–Appellee,

v.Blaine Square, LLC, Defendant–Appellant,andDanville Redevelopment & Housing Authority, Defendant.

Nos. 13–1143, 13–1229, 13–1239.

United States Court of Appeals,Fourth Circuit.

Argued: Dec. 11, 2013.

Decided: March 6, 2014.

ARGUED:Rhonda M. Harmon, The Harmon Firm LLC, Manakin–Sabot, Virginia, for Appellant/Cross–Appellee. John Dickens Eure, Johnson, Ayers & Matthews, PLC, Roanoke, Virginia; Joseph Ray Pope, Williams Mullen, Richmond, Virginia, for Appellees/Cross–Appellants. ON BRIEF:Lori J. Bentley, Joshua D. Goad, Johnson, Ayers & Matthews, PLC, Roanoke, Virginia, for Blaine Square, LLC. J. Nelson Wilkinson, James V. Meath, Williams Mullen, Richmond, Virginia, for Danville Redevelopment & Housing Authority.

Before AGEE, KEENAN, and FLOYD, Circuit Judges.

Affirmed in part, vacated in part and remanded, vacated in part and final judgment by published opinion. Judge KEENAN wrote the opinion, in which Judge AGEE joined. Judge FLOYD wrote a separate opinion concurring in part and dissenting in part.

BARBARA MILANO KEENAN, Circuit Judge:

In this appeal, we review a judgment entered after a jury trial on certain claims of race discrimination, retaliation, and breach of contract brought by a “minority-owned” corporation. We primarily consider: (1) whether a minority-owned corporation has standing to sue for race discrimination under Title VI of the Civil Rights Act of 1964 (Title VI); (2) whether the district court erred in holding at the summary judgment stage that one of the defendants could not be held liable on the alleged race discrimination and retaliation (collectively, race discrimination) claims; (3) whether the court abused its discretion by permitting the use of certain impeachment evidence at trial; (4) whether the court erred in deciding certain contract issues arising under the Virginia Public Procurement Act, Virginia Code §§ 2.2–4300 through 4377; and (5) whether the court erred in modifying the jury's award of contract damages.

Upon our review, we hold that a corporation can acquire a racial identity and establish standing to seek a remedy for alleged race discrimination under Title VI, but that the district court properly dismissed one of the defendants from liability on the plaintiff's race discrimination claims. We further conclude that the district court abused its discretion in permitting the use of particular impeachment evidence, which should have been excluded as unfairly prejudicial under Federal Rule of Evidence 403. Finally, we agree that the district court properly reduced certain damages awarded to the plaintiff on its contract claims, but decide that the strict notice requirements of the Virginia Public Procurement Act required the court to narrow further the scope of recoverable contract damages. Accordingly, we affirm the district court's judgment in part. We also vacate the court's judgment on both the race discrimination claims and certain contract damages awarded, and remand those aspects of the case for further proceedings.

I.

A.

This appeal involves work performed by a contractor in Danville, Virginia, on the Blaine Square Project (the project), a large public housing venture intended to provide subsidized rental units to low-income residents of Danville. The project was funded in part by a $20 million grant to the Danville Redevelopment and Housing Authority (the Housing Authority) from the Hope VI Program, an initiative of the United States Department of Housing and Urban Development (HUD), which allows private investors to contribute capital to public housing projects in exchange for tax credits.

In March 2008, the Housing Authority solicited bids for site preparation work (site preparation work, or the work), which included clearing the construction site for the project, grading the land, and installing proper drainage and erosion controls. Carnell Construction Corporation (Carnell) submitted a bid for the work, proposing a price of $793,541 and representing that Carnell was certified as a minority business enterprise because its owner is African–American.

After determining that Carnell was the lowest bidder, the Housing Authority entered into a contract with Carnell to complete the site preparation work (the contract). The contract specified a June 2009 completion date, stipulated a total price of $793,541, and included a set of enumerated contract documents.

Shortly after executing the contract with Carnell, the Housing Authority leased the project site and assigned its interest in the contract to Blaine Square, LLC (Blaine) based on tax considerations. Blaine is a limited liability company managed by a non-profit instrumentality of the Housing Authority. Blaine was created to obtain and distribute tax credits to private investors. The Housing Authority agreed to provide funds from the Hope VI Program to Blaine and, under a Development Services Agreement (DSA), Blaine agreed that the Housing Authority would continue to provide actual supervision of the construction, including the site preparation work.

Carnell began the work on the project in June 2008. However, the relationship between Carnell and the Housing Authority steadily deteriorated as each party became dissatisfied with the other's performance. The Housing Authority attributed expensive delays to Carnell's allegedly unacceptable work, particularly regarding the grading of the project site and Carnell's failure to conduct due diligence concerning the contract's requirements. Carnell, however, maintained that its work was satisfactory and that delays chiefly were attributable to poor planning by the Housing Authority, especially with respect to a strategy for completing grading work and controlling erosion at the project site.

Additionally, in December 2008, Carnell's president, Michael Scales, complained about race discrimination to the Housing Authority's Executive Director, Gary Wasson. Scales explained his perception that Carnell was “being singled out as a minority contractor,” and was “expected ... to work for free” on “excessive” project modifications. At Carnell's request, the parties attempted to mediate their grievances, but were unsuccessful in their efforts.

In May 2009, the Housing Authority advised Carnell that it would not extend Carnell's contract beyond the stipulated completion date, and that Carnell would be required to remove its equipment and personnel from the project site the following month regardless whether the work had been completed. Carnell left the project site more than two weeks before the June 2009 completion date, and requested reimbursement for numerous instances of unpaid work. The Housing Authority rejected Carnell's request and declared a default under Carnell's performance bond.

Carnell filed a lawsuit against the Housing Authority and Blaine (the defendants) based on claims of race discrimination and breach of contract. ¹ The race discrimination claims were based on the defendants' alleged violations of Title VI and 42 U.S.C. § 1981. As ultimately developed in the litigation, Carnell's race discrimination claims centered on certain statements made by the Housing Authority's Hope VI Program Director and Contracting Officer, Cedric Ulbing, as well as alleged disparate treatment with respect to contracting practices such as “prepayment” for materials, “retainage” of progress payments, and approval of change order requests. Carnell's contract claims focused on allegations that Carnell was directed to perform work for which it was never paid, and that Carnell improperly was removed from the project and declared in default of its contract obligations. The Housing Authority and Blaine filed a counterclaim for breach of contract and, at trial, framed Carnell's lawsuit as an example of “occasions when false claims of race discrimination are made in order to cover up poor performance, [to] excuse poor performance, or to gain an advantage in a contractual situation.”

After a two-week trial, a jury awarded Carnell more than $3.1 million in damages on the race discrimination claims. The jury found in favor of both Carnell and the defendants on their respective breach of contract claims, but did not award damages on any of the contract claims. However, based on a post-trial ruling that certain testimony admitted on behalf of Carnell was false, the district court ordered a new trial.²

Before the second trial began, the district court awarded summary judgment to Blaine on Carnell's race discrimination claims, holding that Blaine could not be held liable for the allegedly discriminatory conduct because there was no evidence that Blaine directly participated in the conduct alleged or controlled the activities of a discriminating party. Following the trial, after the jury was unable to agree on a verdict on either the remaining race discrimination claims or the contract claims, the district court declared a mistrial and scheduled the case for a third trial.

A recurring issue in the litigation that resurfaced during the third trial involved certain impeachment evidence regarding the fact that Scales had hired McGuireWoods Consulting LLC (McGuireWoods) to “assist Carnell in reputation management and media outreach” with respect to Carnell's race discrimination claims against the Housing Authority. The controversy centered on an unsigned McGuireWoods document entitled “Assessment and Proposal” (the proposal, or the McGuireWoods proposal), which set forth goals to “[s]hape the initial story so that it is sympathetic to Carnell and critical of [the Housing Authority]” and to “[e]xpand on the initial story in Danville to...