District of Columbia v. Savoy Const. Co.

• Decision Date: 26 September 1986
• Docket Number: No. 82-1350.,82-1350.
• Citation: 515 A.2d 698
• Parties: DISTRICT OF COLUMBIA, Appellant, v. SAVOY CONSTRUCTION COMPANY, INC., Appellee.
• Court: D.C. Court of Appeals

Page 698

515 A.2d 698

DISTRICT OF COLUMBIA, Appellant, v. SAVOY CONSTRUCTION COMPANY, INC., Appellee.

No. 82-1350.

District of Columbia Court of Appeals.

Argued September 26, 1984.

Decided September 26, 1986.

Edward E. Schwab, Asst. Corp. Counsel, with whom Inez Smith Reid, Corp. Counsel, at the time briefs were filed, John H. Suda, Principal Deputy Corp. Counsel, at the time briefs were filed, and Charles L. Reischel, Deputy Corp. Counsel, Washington, D.C. were on briefs, for appellant.

Jack Rephan, with whom John R. Heisse, II, Washington, D.C. was on brief, for appellee.

Before MACK, NEWMAN and BELSON, Associate Judges.

BELSON, Associate Judge:

This is an appeal from a substantial jury verdict rendered to appellee Savoy Construction Co., Inc. in its action alleging that appellant District of Columbia breached a construction contract. The District assigns as error the trial court's refusal to stay its proceedings or to dismiss the action pending Savoy's exhaustion of administrative remedies, and the court's denial of the District's motion for directed verdict. We affirm.

I

The circumstances giving rise to this case began in 1973. On March 5 of that year, the District of Columbia awarded Savoy Construction Co., Inc. (Savoy) a contract for construction of the Shaw Junior High School replacement. The contract called for the erection of five buildings and for preparation of the site through landscaping and other related work. According to the terms of the contract, Savoy was to perform the work in three phases with a completion date of November 15, 1975. The contract price was $8,314,500, adjusted by numerous change orders to $8,756,261.12.

Delays ensued in completing all three phases of the contract. The completion date of Phase I and Phase II was extended from June 1, 1975, to December 29, 1975. Savoy did not substantially complete those phases until August 16, 1976. Although Phase III was substantially completed by the adjusted date of August 26, 1976, Savoy never fully executed its work under the contract. On April 12, 1979, the Contracting Officer from the D.C. Department of General Services terminated the contract on the ground that Savoy had defaulted by failing to correct numerous deficiencies in its work noted on a series of "punch lists."¹ The Contracting Officer eventually assessed $179,092 against Savoy as the amount it cost the District of Columbia to complete the work under the terminated contract.

Savoy submitted to the Contracting Officer a request for an equitable adjustment of $4,564,761 in the contract price necessitated by delays allegedly caused by the District. The Contracting Officer denied the claim. He determined that Savoy, rather than the District, was responsible for the delays Savoy experienced in excess of the time extensions granted for completion of Phase I and Phase II. The Contracting Officer assessed liquidated damages against Savoy in the sum of $270,200 for the delays he adjudged the contractor had caused.

Pursuant to the disputes clause of the contract² Savoy appealed the decisions of the Contracting Officer to the District of Columbia Contract Appeals Board. The appeals challenged the termination of the contract for default, the assessment of the $179,092 that the District spent to complete the work under the contract, and the assessment of $270,200 in liquidated damages for the delays in Phase I and Phase II.

While those appeals were pending, Savoy also filed this action in Superior Court seeking damages of $4,564,761.23 for delays allegedly caused by the District. In its complaint, Savoy asserted that the District breached the contract in five ways: (1) the plans and specifications furnished by the District contained numerous material errors, omissions and defects in design; (2) the District failed to resolve these problems within a reasonable time after the inadequacies became evident; (3) the District failed to maintain and update the construction schedule; (4) the District denied Savoy access to certain work areas on the dates the parties had agreed access was to be provided; and (5) the District failed to issue a comprehensive final punch list in a timely manner. A sixth breach claim — failure to make timely progress payments — was added in Savoy's pretrial statement.

The District of Columbia filed a pretrial motion for summary judgment or, alternatively, for a stay of the proceedings on the ground that Savoy had not exhausted its contractually established administrative remedies. After a hearing, Judge Bacon denied the motion. The District appealed the order to this court and soon thereafter moved the Superior Court for a stay of proceedings pending our resolution of its appeal. Judge Bacon denied the motion for a stay. The District filed another such motion with this court and it too was denied.

The case proceeded to a jury trial before Judge Braman. Savoy required nearly eight full days to present its case. Following the testimony of Savoy's several witnesses, the trial court denied the District's renewed motion for judgment on the issue of exhaustion of administrative remedies, but granted the District a directed verdict on four of the six breach claims asserted by Savoy. The two that remained related to the alleged defects in the contract drawings and specifications and the District's alleged tardiness in correcting the defects. The jury rendered a verdict of $977,635.42 to Savoy and its subcontractors.

The trial judge denied the District's motion for judgment notwithstanding the verdict or, alternatively, for a new trial. This appeal followed.

II

The District of Columbia contends that the trial court erred in refusing to dismiss or stay this action pending Savoy's exhaustion of its contractually-established administrative remedy. Proper analysis of the District's argument requires an examination of the legal context in which it is made.

The particular construction contract between the government and a private contractor is always "the constitution governing the mode of resolving the parties' disputes." Len Co. v. United States, 385 F.2d 438, 441, 181 Ct.Cl. 29 (1967). There is a fundamental distinction between claims which, by virtue of an agreement by the parties — as embodied in their contract — are subject to resolution by an administrative agency, and those claims which, because they have not been made determinable under the contract, remain "pure" breach of contract claims that may be tried de novo in court. Jefferson Construction Co. v. United States, 392 F.2d 1006, 1010, 183 Ct.Cl. 720, cert. denied, 393 U.S. 842, 89 S.Ct. 122, 21 L.Ed.2d 113 (1968). The disputes clause of the contract operates to distinguish claims that are to be disposed of administratively from those that may be adjudicated judicially. See United States v. Utah Construction & Mining Co., 384 U.S. 394, 404, 86 S.Ct. 1545, 1551, 16 L.Ed.2d 642 (1966).

The disputes clause in the instant contract requires that "all disputes concerning questions arising under this contract" must be decided by the Contracting Officer, with the right of appeal within thirty days to the Contract Appeals Board, the decision of which shall be final "subject to such limitations and review as may be provided by law." Quoted in full supra note 2. The disputes clause is interpreted narrowly. Utah, 384 U.S. at 417, 86 S.Ct. 1557 (construing the substantially similar language used in the standard federal government construction contract). It applies not to all claims "relating to" the contract, id. at 418, 86 S.Ct. at 1558, but rather only to claims "arising under" the contract.³ The "arising under" claims subject to administrative determination are those claims asserted under other clauses of the contract calling for equitable adjustment of the contract price or an appropriate extension of time, or both, if the government orders permitted changes in the work or if the contractor encounters changed conditions differing materially from those ordinarily anticipated. Crown Coat Front Co. v. United States, 386 U.S. 503, 505-06, 87 S.Ct. 1177, 1178-79, 18 L.Ed.2d 256 (1967); Utah, supra, 384 U.S. at 403-18, 86 S.Ct. at 1550-58. "When the contract makes provision for equitable adjustment of particular claims, such claims may be regarded as converted from breach of contract claims to claims for relief under the contract." Utah, supra, 384 U.S. at 404 n. 6, 86 S.Ct. at 1551 n. 6.⁴

Thus, the test to be employed in distinguishing claims "arising under" the contract, and therefore within the disputes clause procedure, from breach of contract claims outside that procedure is whether the controversy is fully redressable under a specific contract adjustment provision other than the disputes clause itself. Bethlehem Steel Corp. v. Grace Line, Inc., 135 U.S.App.D.C. 81, 86, 416 F.2d 1096, 1101 (1969) (citing Utah, supra, 384 U.S. at 412-18, 86 S.Ct. at 1555-58; see Edward R. Marden Corp. v. United States, 442 F.2d 364, 366-67, 194 Ct.Cl 799 (1971). "In consequence, claims which are adjustable under contractual provisions must be submitted for the administrative determination prescribed by the contract, while claims for breach of contract — those not adjustable in that fashion — may be litigated in a court of competent jurisdiction without previous resort to that procedure." Bethlehem, supra, 135 U.S.App.D.C. at 86, 416 F.2d at 1101.

It is also well established that where the government orders a structure to be built, and in so doing prepares the project's plans and specifications prescribing the character, dimension, and location of the construction work, the government impliedly warrants the adequacy of its plans and specifications to the extent that compliance with them will result in satisfactory performance. E.g., Chaney & James Construction Co. v. United States, 421 F.2d 728, 731, 190 Ct.Cl. 699 (1970); Jefferson, 372 F.2d at 1011; J.D. Hedin Construction Co. v. United States, 347 F.2d 235, 241, 171...