Nebraska Public Power Dist. v. Austin Power, Inc., s. 84-2420
| Decision Date | 16 September 1985 |
| Docket Number | 84-2473 and 85-1065,Nos. 84-2420,s. 84-2420 |
| Citation | 773 F.2d 960 |
| Parties | NEBRASKA PUBLIC POWER DISTRICT, a Nebraska Corporation and Political Subdivision of the State of Nebraska, Appellant, v. AUSTIN POWER, INC., a Texas Corporation, d/b/a National Industrial Constructors, Appellee. Austin Industries, Inc., a Delaware Corporation, Federal Insurance Company, a New Jersey Corporation. NEBRASKA PUBLIC POWER DISTRICT, a Nebraska Corporation and Political Subdivision of the State of Nebraska, Appellee, v. AUSTIN POWER, INC., a Texas Corporation, d/b/a National Industrial Constructors; Austin Industries, Inc., a Delaware Corporation; and Federal Insurance Company, a New Jersey Corporation, Appellants. NEBRASKA PUBLIC POWER DISTRICT, a Nebraska Corporation and Political Subdivision of the State of Nebraska, Appellant, v. AUSTIN POWER, INC., a Texas Corporation, d/b/a National Industrial Constructors; Austin Industries, Inc., a Delaware Corporation; Federal Insurance Company, a New Jersey Corporation, Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Charles W. Surasky, Atlanta, Ga., James J. DeMars, Lincoln, Neb., Thomas E. Abernathy and Philip L. Fortune, Atlanta, Ga., for appellants.
Gilbert G. Lundstrom, Lincoln, Neb., for appellee.
Before HEANEY and BOWMAN, Circuit Judges, and WANGELIN, * Senior District Judge.
Nebraska Public Power District (Nebraska Power), a public corporation and political subdivision of the State of Nebraska, operates an electrical utility system with facilities to generate and transmit electricity. In 1972, Nebraska Power decided to build the Gerald Gentlemen Station (Station), a 650-megawatt coal-fired electric generating plant, near Sutherland, Nebraska. Nebraska Power decided to purchase directly from suppliers all the permanent equipment and materials necessary to construct the Station, and to contract only for the labor and construction equipment to erect the facility. Five companies submitted bids, including Austin Power, Inc. (Austin). 1
Austin was awarded the contract, bidding a total contract target price of approximately $67.8 million, based on an estimated 4.5 million man-hours. The major components of Austin's bid were divided as follows:
1. Total Recoverable Costs $47.8 million
2. Fixed Costs $13.2 million
3. Fixed Fee $ 6.8 million
$67.8 million
Austin Industries, Inc. (Austin Industries), Austin's parent company, furnished Nebraska Power with a guarantee agreement to assure Austin's performance. Federal Insurance Company (FIC) issued a performance bond to Nebraska Power to secure Austin's performance.
The contract contained an incentive provision which provided that if Austin completed the project for less than ninety-six percent of its target price, it would receive a bonus of fifty percent of the increment below this ninety-six percent figure. The contract also provided that if Austin completed the project for more than 104 percent of its target price, it would be responsible for fifty percent of the overrun above this 104 percent figure.
The construction of the Station (projected to take thirty-seven months and 4.5 million man-hours) eventually required forty-eight months and nearly nine million man-hours to complete, resulting in substantial cost overruns. During the course of the project, Nebraska Power paid Austin approximately $17.4 million as its share of the cost overruns pursuant to the overrun sharing provision of the contract. Nebraska Power then filed an action against Austin and Austin Industries sounding in breach of contract, negligence, and misrepresentation. Nebraska Power initially sought in excess of $50 million in damages from Austin, including a refund of the money paid to Austin pursuant to the overrun sharing provision, contending that Austin was primarily responsible for the cost overruns and thus it had been improperly forced to bear fifty percent of the overrun costs. It further contended that it had incurred other substantial consequential costs and damages, including the additional cost of purchasing electricity to meet customer demands during the delay period.
Before the case was submitted to the jury, Nebraska Power reduced its claim to $35.6 million. Specifically, it claimed that Austin failed to (1) provide sufficient organization, planning, management and direction of its work force on the project; (2) properly receive and unload materials and equipment furnished by Nebraska Power; (3) store, protect and maintain an accurate inventory of these materials; and (4) establish and maintain a quality control program. 2 Nebraska Power asserted that it was damaged in the following particulars: 3
Austin filed a counterclaim against Nebraska Power, alleging breach of contract and quantum meruit. It sought $55 million in damages, 4 contending that its total cost for performing the contract had increased from $67.8 million to $132.8 million, and that Nebraska Power was responsible for all of the cost overruns. Before the case was submitted to the jury, Austin reduced its damage claim to $31 million. Specifically, Austin claimed that it had incurred the additional costs in erecting the Station due to the following Nebraska Power contract breaches: (1) late and inaccurate construction and installation drawings; (2) lack of construction management services; (3) untimely delivery of material and equipment furnished by Nebraska Power; (4) misfabrication of material and equipment furnished by Nebraska Power; (5) failure to administer the change work provisions of the contract properly; (6) requiring Austin to provide labor not required in the contract without issuing change work orders; (7) failure to coordinate the furnishing of grout for the pulverizers; (8) requiring Austin to erect the steam generator building to conform to a stricter tolerance than required in the contract; (9) failure to pay its share of Craft 68 labor; and (10) failure to unload and properly store materials and equipment delivered before Austin arrived at the construction site. 5 Austin presented its damages for these claims in the following manner: 6
Thus, after a trial that consumed 117 days over a seven-month period, in which ninety-nine witnesses testified, resulting in over 20,000 pages of trial transcript, and in which 6,862 exhibits were received into evidence, the matter went to the jury with Nebraska Power contending it was entitled to a verdict of $35.6 million, and Austin contending it was entitled to a verdict of $31 million.
The district court judge submitted Nebraska Power's claims against Austin to the jury on the individual claim theory of recovery. The jury was instructed to determine on which of its nine claims Nebraska Power was entitled to recover damages from Austin, and then to determine from the evidence the total actual damages attributable to these claims. The jury was also instructed to determine whether Nebraska Power was entitled to any consequential damages, and if so, the amount thereof.
The court, on the other hand, submitted Austin's claims to the jury on three alternative theories of recovery: the individual claim theory; the total cost theory; and the modified total cost theory. Although the court stated that the individual claim theory was the preferred method, it told the jury that if Austin had established more than one contract breach by Nebraska Power, and no feasible method existed to allocate a specific amount of damage to each breach, the jury could use the total cost method to calculate Austin's damages. If the jury used the total cost method, it was to award Austin the difference between the actual cost incurred in constructing the Station, including reasonable profit, and the amount Nebraska Power had already paid to Austin under the contract. The district court told the jury, however, that it could use the total cost method only if:
a. The nature of the particular losses claimed by Austin Power makes it impossible or highly impracticable to determine them with a reasonable degree of accuracy; b. The bid or estimate of Austin Power was realistic;
c. The actual cost incurred by Austin Power was reasonable;
d. Austin Power was not responsible for the amount sought to be recovered above the amount previously paid under the contract; and
e. The costs which make up the amount sought to be recovered were proximately caused by [Nebraska Power's] breaches of contract.
Finally, the jury was instructed that if Austin had established elements a, b, c, and e of the total cost theory, but had not established that it was not responsible for any of the amount sought to be recovered, the jury could award damages under the total cost theory, less the amount for which Austin was responsible. This theory was referred to as the modified total cost. 7
In an interrogatory accompanying the verdict forms, the district court required the jury to indicate on which claims it was awarding damages to Nebraska Power and Austin, and which theory it chose to calculate the damages. Because Austin introduced specific evidence with respect to its claims 7 and 11, the district court required the jury to state what amount, if any, it had awarded to Austin on these two claims. Nebraska Power moved for a directed verdict at the close of Austin's case on the grounds that Austin failed to introduce sufficient evidence to enable the jury to determine the precise damages Austin had incurred with respect to each of its thirteen claims. The district court denied the motion and submitted the case to the jury.
The jury awarded Nebraska Power damages on four of its nine claims, and returned a general verdict in its favor in the amount of $12 million. The jury awarded Austin damages on ten of its thirteen claims, and, using the individual claim theory of calculating damages, returned a general...
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