Lafarge Conseils Et Etudes, S.A. v. Kaiser Cement & Gypsum Corp.

• Decision Date: 11 June 1986
• Docket Number: Nos. 84-2764,85-1789 and 85-1790,84-2765,s. 84-2764
• Citation: 791 F.2d 1334
• Parties: LAFARGE CONSEILS ET ETUDES, S.A., Plaintiff, v. KAISER CEMENT & GYPSUM CORP., Defendant-Counterclaimant/Appellant, v. The HOWARD P. FOLEY COMPANY, Counterdefendant/Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1334

791 F.2d 1334

LAFARGE CONSEILS ET ETUDES, S.A., Plaintiff, v. KAISER CEMENT & GYPSUM CORP., Defendant-Counterclaimant/Appellant, v. The HOWARD P. FOLEY COMPANY, Counterdefendant/Appellee.

Nos. 84-2764, 84-2765, 85-1789 and 85-1790.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Jan. 15, 1986.

Decided June 11, 1986.

Blecher, Collins & Weinstein, Maxwell M. Blecher, Les J. Weinstein, Christopher Layne, Los Angeles, Cal., for Kaiser Cement & Gypsum Corp.

Joe Sims, Robert F. McDermott, Jr., Kathryn M. Fenton, Jones, Day, Reavis & Pogue, Washington, D.C., for counterdefendant/appellee.

On Appeal From the United States District Court for the Northern District of California.

Before: POOLE, BEEZER and KOZINSKI, Circuit Judges

BEEZER, Circuit Judge:

Kaiser Cement Corporation appeals from the district court's denial of its motions to vacate the arbitration award and to set aside a judgment confirming that award. Foley's claims against Kaiser for breach of contract were arbitrated under a contract provision. The panel awarded Foley $3,786,194. ¹ Kaiser's first motion to vacate the award was denied, and Kaiser now seeks to vacate the award and set aside the judgment confirming it, arguing that fraud in the arbitration proceedings tainted the award and judgment. Kaiser further argues that Foley is not entitled to attorney fees and that the existence and amount of the fees was inadequately documented.

We affirm.

FACTS

In 1979, Kaiser invited bids from electrical contractors in preparation for remodeling its cement plant at Permanente, California. ² The Howard P. Foley Company Fischbach & Moore, Inc., and Roy M. Butcher Electric were the only companies to submit bids on the project. Erwin, formerly a Foley Company employee, did not testify at the arbitration but gave Kaiser a lengthy account of the bidding agreement between Foley, Fischbach and Butcher after receiving immunity in connection with his grand jury testimony. ³

Erwin stated that shortly after Kaiser invited bidding on the project, Foley received a phone call from Fred Byrum of Fischbach in which Byrum said he could "control" everyone on that job. Erwin stated that he understood Byrum's statement to mean that "the other bidders would not submit their bids without first checking with Fred Byrum so that he could control the prices submitted by them." Erwin further stated that Byrum asked Lench, another Foley employee, what Foley would do and Lench replied that Foley intended to bid the job competitively. Lench wanted to keep his options, to submit either a competitive or a fixed bid, and "extract a chip" from Fred Byrum for some future job in return for "laying off" or submitting a "complementary" bid. ⁴

Foley bid the project at $5,216,000. According to Erwin, Lench received a bid amount from Byrum of Fischbach on May 29, and submitted it along with the fabricated breakdown. On June 6, 1979, Erwin and Lench attended a pre-award meeting with Kaiser representatives. At the meeting it was apparent that Kaiser wanted to give the contract to Foley if Foley would reduce its costs. According to Erwin, he and Lench decided to underbid Fischbach. The next day Foley submitted a bid of $4,794,000. Kaiser did not respond to that bid. It instead issued revised blueprints and invited revised bids. To prevent Fischbach's learning of the underbidding, Lench and Erwin prepared two documents. First, they composed a revised proposal letter to Kaiser that contained a bid of $5,221,000, $5,000 over the initial bid, that could be read to Byrum. Second, they prepared an attachment to the letter, on plain white paper and unsigned, listing various deductions. By exercising the options in the attached letter, Kaiser could reduce the bid by $450,000. Kaiser chose to exercise options worth $420,000 and reduced the total cost to $4,801,000. Kaiser awarded the contract to Foley.

Erwin stated that he participated in the destruction of documents requested by subpoena from the federal grand jury sitting in Washington, D.C., which was investigating illegal price-fixing in the electrical construction industry. Erwin testified that Lench told him to destroy whatever documents would incriminate Foley. He destroyed telephone statements, supplier invoices, and estimates on all projects bid by the Martinez office. Erwin created a fictitious document retention policy which would explain the nonexistence of the destroyed documents.

Erwin also created false documents. Erwin said he was asked to provide Foley's arbitration counsel, Mr. Bryan, with a copy of the original endsheet for the Kaiser bid. ⁵ Erwin created a document entitled "Recap of Final Prices" and told Bryan that it had been created two days after Foley received Notice to Proceed from Kaiser. ⁶ It reflected manipulations of the figures for payroll, insurance, taxes, equipment depreciation, equipment rental, gas, oil, supplies, and overhead.

Kaiser contracted with Foley to perform electrical construction services over a ten-month period for a contract price of about $4.8 million. ⁷ The contract work took 24 months to complete. Foley originally planned to expend 67,000 manhours, but actually expended 216,000 manhours. Foley argues that Kaiser caused disruptions and delays which required extra work and resulted in increased costs to Foley. It was a multiple prime project, indicating that the owner, Kaiser Cement, had to coordinate the work of the prime contract. Because Kaiser was responsible for coordination of the work, Foley claims that the disruptions and delays constitute breach of the contract by Kaiser. Kaiser agreed to pay Foley $3.25 million above contract price in partial compensation for Foley's increased costs. When Kaiser refused to pay additional claims, Foley petitioned the Superior Court for Santa Clara County, for an order compelling arbitration and to foreclose a mechanics lien. ⁸

On November 23, 1981, District Judge William W. Schwarzer, ordered serial arbitration, under the provisions of the United States Arbitration Act, 9 U.S.C. Secs. 1-14 (1982). ⁹ The arbitration hearings covered fourteen nonconsecutive days of testimony and produced over 1,800 pages of transcript and about 400 exhibits. In the arbitration Foley argued that Kaiser had breached the construction contract and claimed $1.3 million in damages. To support this claim, Foley introduced evidence on how the bids were prepared, how project negotiations took place, and how the original bid amount was calculated. Foley introduced testimony on the relationship between damage and wage escalation, expert testimony on accounting, and 80 accounting schedules, based on source documentation.

The arbitrators requested an independent audit of Foley's actual costs "in order to verify the actual cost to Foley to perform the work on this project." ¹⁰ An audit was performed by Coopers & Lybrand and on May 31, 1983, the arbitrators awarded Foley $3,786,194. The district court found that Foley's action was based on breach of contract and confirmed the award on August 5, 1983.

I Judgment

Kaiser appeals the district court's denial of its Rule 60(b) motion to set aside the judgment confirming the arbitration award. An order denying relief under Rule 60(b) is appealable, but the appeal brings up the correctness of the order only. It does not permit appellant to attack the arbitration award for error that could have been complained of on direct appeal. ¹¹ Rule 60(b)(2) allows relief from a judgment or order because of newly discovered evidence which by due diligence could not have been discovered sooner. Under Fed.R.Civ.P. 60(b)(3), fraud or other misconduct of an adverse party also justifies setting aside a judgment. The court may also grant relief under Rule 60(b)(6) for any other reason justifying relief. This court reviews denial of a Rule 60(b) motion for abuse of discretion. In re Burley, 738 F.2d 981, 988 (9th Cir.1984); Plotkin v. Pacific Telephone & Telegraph Co., 688 F.2d 1291, 1292 (9th Cir.1982); United States v. Russell, 578 F.2d 806, 807 (9th Cir.1978). The appellate court's function in reviewing denial of a Rule 60(b) motion is not to determine whether the court was substantially correct in entering the judgment from which relief is sought, but is limited to deciding whether the court abused its discretion in ruling that sufficient grounds for disturbing the finality of the judgment were not shown. Russell, 578 F.2d at 807.

A motion brought under 60(b)(6) must be based on grounds other than those listed in the preceding clauses. Corex Corp. v. United States, 638 F.2d 119, 121 (9th Cir.1981). Clause 60(b)(6) is residual and "must be read as being exclusive of the preceding clauses." In addition, the clause is reserved for "extraordinary circumstances." Id.; Martella v. Marine Cooks & Stewards Union, 448 F.2d 729, 730 (9th Cir.1971), cert. denied, 405 U.S. 974, 92 S.Ct. 1191, 31 L.Ed.2d 248 (1972). Because Kaiser failed to allege "extraordinary circumstances" and relied exclusively upon its fraud and newly discovered evidence arguments, the district court held that Rule 60(b)(6) was not applicable.

Under Rule 60(b)(3), the moving party must establish by clear and convincing evidence that a judgment was obtained by fraud, misrepresentation, or misconduct, and that the conduct complained of prevented the moving party from fully and fairly presenting the case. Bunch v. United States, 680 F.2d 1271, 1283 (9th Cir.1982); Rozier v. Ford Motor Co., 573 F.2d 1332, 1339 (5th Cir.1978). Kaiser failed to identify any fraud, misrepresentation or misconduct in the court proceedings. Fraud alleged in the arbitration does not render the judgment fraudulently obtained.

Kaiser also argues that the court made five errors which prevented it from fully and fairly presenting its case. The five alleged errors are (1) its ruling that Foley's alleged fraud and bid-rigging were not material, (2) its conclusion that Kaiser did not use due...