Mergentime Corp. v. Washington Met. Area Transp.

• Decision Date: 28 November 2005
• Docket Number: No. CIV. 89-1055(TFH).,CIV. 89-1055(TFH).
• Citation: 400 F.Supp.2d 145
• Parties: MERGENTIME CORPORATION, et al., Plaintiffs, v. WASHINGTON METROPOLITAN AREA TRANSPORTATION AUTHORITY, Defendant, Counter-Plaintiff, v. Insurance Company of North America, Counter-Defendant.
• Court: U.S. District Court — District of Columbia

Page 145

400 F.Supp.2d 145

MERGENTIME CORPORATION, et al., Plaintiffs, v. WASHINGTON METROPOLITAN AREA TRANSPORTATION AUTHORITY, Defendant, Counter-Plaintiff, v. Insurance Company of North America, Counter-Defendant.

No. CIV. 89-1055(TFH).

United States District Court, District of Columbia.

November 28, 2005.

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Douglas L. Hilleboe, Steptoe & Johnson, LLP, Washington, DC, for Plaintiffs.

Peter M. Kutil, King & King, LLP, New York City, David Davis Smyth, Steptoe & Johnson, LLP, Washington, DC, for Plaintiffs and Counter Defendants.

George David Ruttinger, William Stanfield Johnson, Crowell & Moring, L.L.P., Washington, DC, for Defendants.

Gerard Joseph Stief, WMATA Office of the General Counsel, Washington, DC, for Defendants and Counter Claimants.

Michael A. Bishop, David Davis Smyth, Steptoe & Johnson, L.L.P., Washington, DC, for Counter Defendant.

Bruce P. Heppen, Washington Metropolitan Area Transit Authority, Washington, DC, for Counter Claimant.

MEMORANDUM OPINION

THOMAS F. HOGAN, Chief Judge.

In Herman Melville's Moby-Dick, the first mate is the ironically named Starbuck, a star-crossed sailor who cannot "buck the stars" and avoid his fatal destiny. Just so this protracted litigation. This star-crossed case has been in the hands of two prior judges in this Court, who both died shortly after rendering opinions in this litigation. Indeed, due to no fault of any court or counsel, this litigation has begun to assume the dimensions of Jarndyce v. Jarndyce, the protracted litigation in Charles Dickens's Bleak House. Charles Dickens, Bleak House (J.M. Dent & Sons 1972) (1953).

Most recently, this star-crossed judicial journey comes before the Court after a 25-day bench trial to determine whether defendant and counter-plaintiff Washington Metropolitan Area Transit Authority ("WMATA") justifiably terminated for default the joint venture contractor responsible for construction of the Shaw Street and U Street Stations and connecting tunnels for the Washington, D.C. metropolitan area's subway system, called the Metrorail System ("Metro"), on May 11, 1990. The joint venture and plaintiffs in the case — two construction companies, Mergentime Corporation ("Mergentime") and Perini Corporation ("Perini") (collectively, "M/P" or "the Joint Venture") — allege wrongful termination and claims for breach of contract under the terminated Shaw Street Station ("Shaw Station") and U Street Station contracts. WMATA counterclaimed to recover reprocurement costs, liquidated damages, and other credits and damages. Counter-defendant Insurance Company of North America ("INA") was the surety for the performance bonds on both contracts and also asserts claims against WMATA.

After carefully reviewing all the evidence presented, the representations made at trial, the record in this case, and applicable law, the Court concludes that WMATA's termination for default of the Joint Venture was justified and that the Joint Venture is liable to WMATA for damages as detailed below. The Court also concludes that WMATA is responsible to the Joint Venture for the outstanding claims detailed below.

Historical Overview of the Dispute and Litigation

To determine the disputed issues, including whether WMATA lawfully terminated M/P for default, this Court must decipher a complex factual history that began in 1984 with WMATA's bid invitation for construction of the Shaw Station. In addition, the litigation history has involved years of discovery, separate proceedings before three trial court judges and the Court of Appeals, and multiple opinions from both this Court and the appellate court. To decide this dispute, the Court conducted a trial — which included oral testimony from numerous live witnesses and thousands of exhibits — and carefully reviewed the entire record in this case, including the many Opinions issued by the two predecessor judges and the Court of Appeals.

While the procedural history and facts were extensively described by the D.C. Circuit in Mergentime Corp. v. WMATA, 166 F.3d 1257, 1260-61 (D.C.Cir.1999), the Court will detail the most relevant aspects for the sake of context. As Judge Revercomb succinctly stated, "[t]his case is about how not to build a subway system" — the Shaw and U Street stops on Metro's Green Line. Mergentime Corp. v. WMATA, No. 89-1055, 1993 WL 328083, at *1 (D.D.C. July 30, 1993) ("Revercomb Op."). In 1985 and 1986, WMATA awarded two separate contracts totaling $94 million to M/P to build the stops and associated tunnels. During the course of the construction, this Joint Venture encountered various circumstances that caused delay. For example, M/P was faced with differing site conditions, including unanticipated boulders and the need for grouting. In addition, the District of Columbia Department of Public Works ("DPW") rejected M/P's traffic maintenance plan, which resulted in prolonged negotiations and reworking of the plans to handle street closings and traffic during the projects.

Among other things, M/P claimed it was owed reimbursement for additional costs incurred during construction as a result of these delays. Accordingly, M/P filed suit in this case on April 14, 1989 for breach of contract due to WMATA's alleged failure to process claims submitted by M/P in a timely fashion. Mergentime Corp. v. McElhenny, Civ. No. 89-1055 (D.D.C. Apr. 14, 1989). Negotiations and subsequent agreements aimed at salvaging the projects followed; however, WMATA eventually terminated M/P for default on May 11, 1990. As a result, M/P amended its complaint and the litigation resumed.

M/P now seeks to collect on its reimbursement claims and subsequently added claims for breach of contract and wrongful termination, while WMATA has counterclaimed to recover the costs it paid to other contractors to complete the work, credits owed to it by M/P, and other damages.¹ Following a 45-day bench trial, Judge Revercomb issued a 251-page opinion in July 1993 that found, among other things, that WMATA justifiably terminated M/P for default and was entitled to reprocurement costs, and that M/P established the merit of Shaw Street reimbursements but not an entitlement to the claims. Judge Revercomb was unable to quantify the claims and did not make any conclusions with respect to U Street claims before he passed away two days later. Judge Green, serving as the successor judge pursuant to Federal Rule of Civil Procedure 63, handled the post trial motions.

Upon both parties' appeals, the Court of Appeals reversed the successor judge's rulings for failing to comply with Federal Rule of Civil Procedure 63, and remanded the case back to this Court.² After additional briefing by parties regarding the remand procedures, this Court ruled that a new trial would be necessary in this case because it could not certify adequate familiarity with the record pursuant to Rule 63. Specifically, the Court determined that this case could not be completed in the absence of a new trial without prejudice to the parties. Thus, the Court conducted a 25-day bench trial, which was followed by closing arguments by counsel.

This opinion provides the Court's findings of facts and conclusions of law, pursuant to Federal Rule of Civil Procedure 52(a). These findings of fact are based on a thorough evaluation of all the evidence and the parties' proposed findings, and replies thereto. In making these findings, the Court relies in large part upon its determination of the credibility of those witnesses based on, among other things, its observation of their demeanor and the inherent probability of their testimony in light of the documentary evidence and other known facts.³

FINDINGS OF FACT

Mergentime and Perini — the plaintiffs and counter-defendants in this case — are two construction companies that entered into a joint venture agreement to bid on and perform two construction contracts: the Shaw Station and Tunnels contract and, subsequently, the U Street Station contract. These contracts were awarded by defendant and counter-plaintiff WMATA, an instrumentality and common agency created by the Interstate Compact by and between Maryland, Virginia, and the District of Columbia that, among other things, oversees and manages the construction and operation of the Metro. Counter-defendant INA was the surety for the performance bonds on both the Shaw and U Street Station contracts. After evaluating the record compiled by the parties in this case — including the testimony of many witnesses and thousands of pages of exhibits — and the arguments made by their counsel, the Court now makes the following findings of fact.

I. The Invitations

A. Shaw Station Invitation

To initiate bidding on the Shaw Station and Tunnels construction project, WMATA issued Invitation for Bid No. IFB-C-663 for Contract 1E0012 ("Shaw Station Invitation") on December 10, 1984. WMATA described the project as follows:

This is a two-part multi-year funded Contract for Construction of the Greenbelt Route segment from Seventh and Q Streets, N.W. to Vermont Avenue and U Street, N.W., consisting of Section E-1/b and E-1/c, and as follows:

Part I: Cut-and-cover construction of Shaw Station

Part II: Soft ground tunneling as follows:

South of Shaw Station — 445 linear feet

North of Shaw Station — 1450 linear feet

SAF No. 106. The Shaw Station Invitation called for competitive bidding with a public opening of bids on March 27, 1985, and WMATA's estimate for the contract price was $53,338,512, with $16,798,502 allocated to Part I of the contract and $36,540,010 allocated to Part II. Id.

In response to this bid invitation, Mergentime and Perini entered into a Joint Venture Agreement on March 23, 1985. SAF No. 107. Pursuant to this agreement, the two corporations "agreed to enter into a Joint Venture for the purpose of submitting a joint bid" for the Shaw Station construction project. Def....