Mergentime Corp. v. Washington Metropolitan Area Transit Authority

• Decision Date: 16 February 1999
• Docket Number: Nos. 97-7138,s. 97-7138
• Parties: MERGENTIME CORPORATION, et al., Appellants/Cross-Appellees, v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, et al., Appellees/Cross-Appellants. to 97-7140.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1257

166 F.3d 1257

334 U.S.App.D.C. 294

MERGENTIME CORPORATION, et al., Appellants/Cross-Appellees, v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, et al.,

Appellees/Cross-Appellants.

Nos. 97-7138 to 97-7140.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 6, 1998.

Decided Feb. 16, 1999.

Philip Allen Lacovara argued the cause for appellant/cross-appellee Mergentime Corporation. With him on the briefs were Gary A. Orseck and Mark S. Davies.

Richard K. Willard argued the cause for appellant/cross-appellee Perini Corporation. With him on the briefs were Stephen A. Fennell, Brian J. Leske and John R. Keys, Jr. Robert S. Fischler entered an appearance.

W. Stanfield Johnson argued the cause for appellees/cross-appellants. With him on the briefs were George D. Ruttinger, Gerard J. Stief, Robert J. Kniaz and Robert L. Polk.

Before: HENDERSON, RANDOLPH and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

This case requires us to interpret Federal Rule of Civil Procedure 63, which applies when a district judge becomes unable to proceed and is replaced by a successor judge. The original judge in this case presided over a 45-day bench trial, during which the parties presented more than 50 witnesses and introduced more than 4,000 exhibits. Because the original judge became terminally ill after the close of evidence and could make only partial findings of fact and conclusions of law before he died, the successor judge faced two discrete tasks: adjudicating posttrial motions challenging the original judge's findings and conclusions, and making findings and conclusions of his own regarding the unresolved issues. Stating that he would not "second guess" the original judge's findings and conclusions, the successor judge refused to consider the parties' post-trial motions. Then, without allowing the parties to recall witnesses, the successor judge made further findings and conclusions from the record. Because we hold that the successor judge's refusal to adjudicate post-trial motions and to consider recalling witnesses violated Rule 63, we reverse.

I

In 1985, the Washington Metropolitan Area Transit Authority awarded a $50.9 million contract to build the Shaw Street station and associated tunnels on Metro's Green Line to a joint venture consisting of two construction companies, Mergentime Corporation and Perini Corporation, appellants in this case. WMATA soon awarded the joint venture a second contract to build the Green Line's U Street station and associated tunnels for $44.3 million. The contracts, which contained standard provisions governing contract modification, default termination, and dispute resolution, called for the completion of the Shaw Street work by March 1989 and the U Street work by August 1989.

From the outset, both projects experienced unexpected difficulties that caused substantial delays and cost overruns. For example, the Department of Public Works rejected the contractors' request to close Rhode Island Avenue (as WMATA's bid invitation had specified). This required significant changes in utility relocation plans that were important to the early stages of construction of the Shaw Street station. The contractors also encountered unanticipated soil conditions as they tunneled north from the Shaw Street station, requiring the use of time-consuming and expensive grouting techniques to stabilize the soil.

Invoking the "changes" clause of the contracts, the contractors submitted claims for equitable adjustments to the contract price seeking compensation for expenses resulting from these unforeseen problems. WMATA paid some of these claims, but slowly. By early 1988, the contractors were running a deficit of over $8.6 million on the Shaw Street project alone. To make matters worse, the contractors dissolved their joint venture at the end of 1987, though they did not immediately inform WMATA. Mergentime bought out Perini's interest for $1.5 million. This capital outlay, coupled with the fact that Perini was no longer making capital contributions to the project, worsened Mergentime's financial straits.

In April 1989, the contractors sued WMATA in the United States District Court for the District of Columbia, alleging that WMATA's failure to pay their claims for additional work constituted a breach of the Shaw Street contract. They sought $18.5 million in damages and a declaration that they had no obligation to continue working. In the meantime, work on the two projects slowed significantly. By the following summer, Mergentime had drastically reduced its workforce, falling weeks if not months behind schedule.

In an effort to rejuvenate the projects, the contractors and WMATA entered into a written agreement in August 1989, which, recognizing that most of the completion dates in the original contracts had passed, established revised "milestone" completion dates of September 1 and December 15, 1990 for Shaw Street and U Street, respectively. The contractors promised to use their "best efforts" to complete the projects by those dates in exchange for WMATA's promise to pay the contractors $4.4 million against their outstanding reimbursement claims and to use its "best efforts" to settle the remainder of those claims as promptly as possible. WMATA also agreed to relinquish any right to terminate the contract for default based on events that had occurred prior to the agreement. In return, the contractors agreed not to stop working based on prior events, including WMATA's failure to process their reimbursement claims. Apart from the reciprocal waivers of the right to terminate, the agreement expressly disclaimed any intent by the parties to relinquish their claims in the pending lawsuit, which the parties asked the district court to hold in abeyance.

Mergentime resumed work in September. It progressed satisfactorily for a few months, but by December work had once again slowed substantially. Mergentime complained to WMATA that because of its cash flow problems it would be unable to complete the work unless WMATA processed its outstanding reimbursement claims. In response, WMATA gave Mergentime an advance of $1 million in December 1989, and another advance of $1.6 million in February 1990. Although these advances briefly revitalized Mergentime's progress, each burst of energy was short-lived. By the spring of 1990, Mergentime had all but ceased working at both sites.

Asserting that the September and December 1990 milestone dates were no longer attainable, WMATA issued "show cause" letters to the contractors. (By then WMATA knew that the contractors had dissolved their joint venture, but it was not entirely clear whether Perini, which remains a party to this litigation, retained its obligations under the original contracts.) Responding to the show cause letters and continuing to insist that further progress hinged on the settlement of outstanding claims, Mergentime demanded an additional $7.9 million as a condition of returning to work. WMATA terminated the contracts for default on May 11, 1990.

Reviving their dormant lawsuit, the contractors added claims for breach of the U Street contract, breach of the August 1989 agreement, and wrongful termination. WMATA counterclaimed to recover so-called "excess reprocurement costs"--expenses incurred in hiring other contractors to complete the work covered by the contracts. During a 45-day bench trial, the parties presented over 50 witnesses and submitted over 4,000 exhibits.

Following the close of evidence, the district judge developed a terminal illness. As the illness worsened, he continued to work heroically, issuing a 251-page opinion containing partial findings of fact and conclusions of law in July 1993. Observing that "[t]his case is about how not to build a subway system," the judge held that WMATA justifiably terminated the contracts for default and was entitled to $16.5 million in excess reprocurement costs, that the contractors' Shaw Street reimbursement claims had "substantial, if not complete, merit," and that the contractors had failed to establish their entitlement to prove those claims with the beneficial "total cost" accounting method. Mergentime Corp. v. WMATA, No. 89-1055, at 1, 242, 247, 249 (D.D.C. July 30, 1993) ("July 1993 Order"). The judge said that he was unable to quantify the contractors' entitlement to reimbursement for its Shaw Street claims or to draw any conclusions regarding the merits of the contractors' U Street claims. See id. at 248-49. The judge died two days later.

After the case was reassigned to a successor judge, the contractors filed motions to amend the original judge's findings under Federal Rule of Civil Procedure 52 and for a new trial under Rule 59. WMATA filed a motion to correct "inadvertent omissions" in the original judge's damages calculations. The parties also filed briefs suggesting procedures for resolving the issues left open by the original judge.

Following more than a year of inaction, the parties asked the successor judge to schedule a status conference to discuss the court's plan for proceeding. Instead of holding a status conference, the successor judge issued an order summarily denying all pending motions, explaining that he would not reconsider any issues already decided by the original judge because he was only "attempting to finish the case as [the original judge] would have had he survived long enough." Mergentime Corp. v. WMATA, No. 89-1055, at 4 (D.D.C. Apr. 7, 1995) ("April 1995 Order"). The order also established a two-round briefing schedule with respect to the open issues, directing the parties to support their arguments by citing to the existing record. See id. at 12-13. Briefing occurred throughout the summer and fall of 1995. Two years later, in July 1997, the successor judge issued his findings and conclusions with respect to the remaining issues, awarding the contractors $4.25 million on their...