Morrison Knudsen v. Ground Improvement

Decision Date08 July 2008
Docket NumberNo. 06-1463.,No. 06-1434.,No. 06-1435.,06-1434.,06-1435.,06-1463.
Citation532 F.3d 1063
PartiesMORRISON KNUDSEN CORPORATION, doing business as MK-Ferguson Company, now known as Washington Group International, Inc., an Ohio corporation, Plaintiff/Counter-Defendant-Appellant/Cross-Appellee, v. GROUND IMPROVEMENT TECHNIQUES, INC., a Florida corporation, Defendant/Counter-Claimant-Appellee/Cross-Appellant, Federal Insurance Company, Interested Party-Appellant/Cross-Appellee.
CourtU.S. Court of Appeals — Tenth Circuit

Daniel R. Frost, Holland & Hart LLP, Denver, CO, and Jeffrey S. Price, Manier & Herod, PC, Nashville, TN (Joseph W. Halpern, Timothy W. Gordon, and Anthony J. Navarro, Holland & Hart LLP, Denver, CO; L. Jay Labe, Pendleton, Friedberg, Wilson & Hennessey, P.C., Denver, CO; and Sam H. Poteet, Jr., Manier & Herod, PC, Nashville, TN, with them on the briefs), for Plaintiff/Counter-Defendant-Appellant/Cross-Appellee and Interested Party-Appellant/Cross-Appellee.

Steven R. Schooley, Holland & Knight, Orlando, FL (Frederick Huff, Law Offices of Frederick Huff, Denver, CO, with him on the briefs), for Defendant/Counter-Claimant-Appellee/Cross-Appellant.

Before BRISCOE, EBEL, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.


Morrison Knudsen Corporation ("MK"), a federal contractor, terminated its subcontractor, Ground Improvement Techniques, Inc. ("GIT") for an alleged default and sued GIT for damages. GIT counterclaimed for wrongful termination. The case initially went to trial in November of 1996. Concluding the termination was wrongful, the jury awarded GIT $5.6 million. The case was appealed to this court in Morrison Knudsen Corporation v. Fireman's Fund Insurance Company (Morrison Knudsen I), 175 F.3d 1221 (10th Cir. 1999). In connection with the appeal, MK and its surety, Federal Insurance Company ("Federal") posted a supersedeas bond. In Morrison Knudsen I, we affirmed liability, but reversed and remanded to the district court on the issue of damages.

Following a retrial on damages, GIT was awarded over fifteen million dollars. The district court held Federal and MK jointly and severally liable for the amount of the supersedeas bond. MK and Federal appeal from that judgment, arguing the supersedeas bond was discharged and is now void. MK also challenges the district court's award of prejudgment interest; alleges that the damages award contains duplication; and claims, as a matter of law, the district court should have entered judgment for MK on claims relating to R.N. Robinson & Son, Inc. ("Robinson"), Fireman's Fund, and an equitable adjustment claim on a performance bond. GIT cross-appeals, arguing the district court applied incorrect interest rates in its calculation of prejudgment and post-judgment interest. It also contends MK and Federal should be jointly and severally liable for the entire judgment. Our appellate jurisdiction arises under 28 U.S.C. § 1291. We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.


This appeal arises out of a long-standing contract dispute between MK1 and GIT. In 1983, the United States Department of Energy hired MK to manage its Uranium Mill Tailing Remedial Action project, a cleanup of radioactive mill tailings at sites around the country. MK subcontracted with GIT (the "contract") in March 1995 to clean up the Slick Rock, Colorado site. GIT hired several lower-tier subcontractors ("subs"), including Robinson, for excavation; Bogue Construction, for trucks; Keers Environmental, Inc., for asbestos abatement; and G.A. Western Construction Co., for bridge work.

The project did not go well. GIT and its subs encountered delays, difficulties, and increased costs. GIT attributed these to MK's defective specifications, failure to timely secure permits, rigid interpretation of specifications and safety requirements, and propensity to reject work plans. In September 1995, MK terminated GIT for default and simultaneously sued GIT for damages. GIT counterclaimed for wrongful termination, seeking damages in the form of payment for completed work under the contract and compensation for additional costs occasioned by MK and not contemplated under the contract.

The case went to trial in November of 1996. The jury concluded MK's termination of GIT was wrongful and awarded GIT $5.6 million. MK unsuccessfully moved for judgment as a matter of law, claiming deficiencies in GIT's evidence of damages and of MK's liability. The case was then appealed to this court in Morrison Knudsen I, 175 F.3d at 1221. In connection with the appeal, MK posted a supersedeas bond for $7,075,000 through its surety, Federal. Although this court affirmed the ruling on liability, we reversed the damage award because GIT failed, in several categories of damages, to present sufficient evidence. Id. at 1243-48, 1260-61. Further, because the jury returned a general verdict, this court was unable to determine whether any parts of the jury award were allowable categories of damages supported by sufficient evidence. Id. at 1254-55. We thus vacated the judgment and remanded for a new trial limited to the issue of damages. Id. at 1255.

The issue of damages was retried in May 2006. The jury awarded GIT over fifteen million dollars in costs and equitable adjustments.2 Following post-verdict motions culminating in an August 16, 2006 hearing, the district court entered judgment in favor of GIT in the amount of $15,644,582. The district court ruled MK and Federal were jointly and severally liable for the judgment, up to the amount of the bond. Prejudgment interest was awarded at the federal rate of 5.09% accruing from the date of termination. The district court also awarded post-judgment interest to accrue at a rate of five percent per annum. These appeals followed.


Following the first trial, a judgment of $5.6 million was awarded to GIT. This judgment was ultimately amended to $6,132,837.70 to include prejudgment interest and costs. On December 11, 1996, MK filed a motion to stay the execution of the judgment pending appeal. The district court granted the motion, conditioned on MK tendering a supersedeas bond with a penal sum of seven million dollars. Thereafter, MK as principal and Federal as surety tendered Supersedeas Bond No. 8131-18-24 ("Supersedeas Bond") to the court for the purpose of ensuring the judgment would be collectible during the stay. On May 13, 1999, the court ordered the bond to be increased by $75,000.

The Supersedeas Bond states:

[T]he condition of this obligation is that if the appellant shall prosecute this appeal to effect and shall satisfy the judgment in full, together with costs, interest, and damages for delay if the appeal is finally dismissed or if the judgment is affirmed or shall satisfy in full such judgment as modified together with such costs, interest, and damages as the Court of Appeals may adjudge and award, this obligation shall be void; otherwise it shall remain in full force and effect.

Following the second trial, GIT submitted its suggested "Modified Amended Judgment" requesting judgment against Federal and MK jointly and severally for the amount of the bond. Federal filed a brief in opposition to the entry of a modified judgment and a motion for an order discharging the Supersedeas Bond, arguing the bond became void when Morrison Knudsen I was issued on May 11, 1999. MK joined Federal's motion. The district court concluded Federal's obligations had not been discharged, characterizing Morrison Knudsen I as remanding for a quantification of amounts due to GIT. On appeal, MK and Federal ask this court to hold the bond was discharged. Cross-appealing, GIT seeks a ruling that Federal is jointly and severally liable for the entire judgment, an amount far in excess of the $7,075,000 penal sum of the bond. We hold Morrison Knudsen I did not discharge the Supersedeas Bond and it is still in effect. Federal's liability, however, is limited to the penal sum of the bond.

A. Effect of Morrison Knudsen I on Supersedeas Bond

The question we must answer is whether Morrison Knudsen I, affirming MK's liability, but vacating the judgment and remanding for a new damages trial, resulted in MK prosecuting the appeal "to effect." If so, Federal cannot be held liable for the judgment against MK and its obligations are void. The proper standard of review of the district court's interpretation of a bond depends on whether the bond is unambiguous. Where, as here, the contract is unambiguous, "a trial court's interpretation of a contract presents an issue of law which is reviewed de novo on appeal." Milk `N' More, Inc. v. Beavert, 963 F.2d 1342, 1345 (10th Cir.1992) (quotation and alteration omitted); see also Grubb v. Fed. Deposit Ins. Corp., 833 F.2d 222, 224 (10th Cir.1987) (explaining question of whether supersedeas bond should be exonerated is a question of law).3

This court has not had occasion to interpret the "prosecute this appeal to effect" language contained in the Supersedeas Bond. The Supreme Court, interpreting similar language in 1879, explained "[i]f, on the final disposition of a writ of error on appeal, the judgment or decree . . . is not substantially reversed . . . [the] appeal has not been prosecuted with effect." Gay v. Parpart, 101 U.S. 391, 392, 25 L.Ed. 841 (1879); see also Crane v. Buckley, 203 U.S. 441, 447, 27 S.Ct. 56, 51 L.Ed. 260 (1906) (explaining "prosecuting to effect" means "prosecuting his appeal with success; to make substantial and prevailing his attempt to reverse the decree or judgment awarded against him").

Thus, our task is to determine if MK "substantially prevailed" in Morrison Knudsen I. In Beatrice Foods v. New England Printing, the Federal Circuit explained:

when an appellee has proven that damages are due, and the remand is merely to determine the proper quantum of injury, then it is not unreasonable that the bond remain effective during this...

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