Pierce Associates, Inc. v. Nemours Foundation
| Decision Date | 03 February 1989 |
| Docket Number | Nos. 88-3053,88-3260 and 88-3263,s. 88-3053 |
| Citation | 865 F.2d 530 |
| Parties | PIERCE ASSOCIATES, INC. and Federal Insurance Co., Appellants and Cross- Appellees, v. The NEMOURS FOUNDATION, Gilbane Building Company, and the Aetna Casualty & Surety Company, Appellees and Cross-Appellants. |
| Court | U.S. Court of Appeals — Third Circuit |
Henry W. Sawyer, III (argued), Drinker, Biddle & Reath, Burt M. Rublin, Wolf, Block, Schorr and Solis-Cohen, Philadelphia, Pa., for appellant and cross-appellee Pierce Associates, Inc.
Heron, Burchette, Ruckert & Rothwell, Washington, D.C., for appellant and cross-appellee Federal Ins. Co.
George Anthony Smith (argued), Smith, Currie & Hancock, Atlanta, Ga., Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for appellee and cross-appellant The Nemours Foundation.
John Anthony Wolf (argued), Ober, Kaler, Grimes & Shriver, Baltimore, Md., Prickett, Jones, Elliott, Kristol & Schnee, Wilmington, Del., for appellees and cross-appellants Gilbane Building Co. and The Aetna Cas. & Sur. Co.
Before SLOVITER and HUTCHINSON, Circuit Judges, and DEBEVOISE, District Judge *.
The Nemours Foundation ("Nemours") owns the Alfred I. duPont Institute Children's Hospital in Wilmington, Delaware. In January 1980 Nemours entered into a general contract with Gilbane Building Company ("Gilbane") for completion of the interior of the Hospital. The Aetna Casualty & Surety Company ("Aetna") became surety on a performance bond which named Gilbane as principal and Nemours as obligee.
Gilbane entered into a number of subcontracts, including a $35.9 million fixed-price subcontract with Pierce Associates, Inc. ("Pierce") pursuant to which Pierce agreed to perform the mechanical work on the project (the heating, ventilation, air-conditioning, plumbing and fire-protection systems). Federal Insurance Company ("Federal") became surety on a performance bond which named Pierce as principal and Gilbane as obligee.
Disputes arose about performance under the general contract and under the subcontracts, and complex multi-party litigation ensued. During pretrial proceedings there were various changes in the parties' positions and realignments of adversaries which resulted in a trial at which Nemours and its general contractor Gilbane (joined by its surety Aetna) were plaintiffs seeking damages against Gilbane's subcontractor Pierce and Pierce's surety Federal.
After a 79 day trial the jury found in favor of Nemours and Gilbane on all their claims against Pierce and Federal and found against Pierce on its counterclaims. On September 15, 1986 final judgment was entered awarding $26,017,411 in damages and pre-judgment interest to Nemours and $3,018,372 in damages and pre-judgment interest to Gilbane. The total judgment amount of $29,035,783 was on account of the following items:
Against Pierce and Federal
For Nemours on account of Pierce's breach of its subcontract with $19,045,982
Gilbane and Pierce's negligence and on account of Federal's
obligation on its performance bond (plus pre-judgment interest)
For Gilbane on account of Pierce's breach of the subcontract with 2,066,699
it and on account of Federal's obligation on its performance
bond
For Gilbane on account of interest on the award of $2,066,699 at 951,673
the rate of 13 1/2 % from April 18, 1983 to the date of judgment
-----------
$22,064,354
For Nemours Against Pierce Only
On certain indemnity claims $ 3,375,000
Pre-judgment interest on indemnity claims 1,554,118
Punitive damages 1,000,000
Attorney's fees and consultant's costs 1,042,311
-----------
$ 6,971,429
After resolution of their post-trial motions for judgment n.o.v. or for a new trial Pierce and Federal filed a notice of appeal from the final judgment on January 26, 1988. Subsequently this Court remanded the case for adjudication of a Rule 60(b) motion which Pierce and Federal had filed challenging the rate of post-judgment interest in the final judgment. The district court granted the motion on April 4, 1988 and reduced the post-judgment interest rate from 10.5% to 5.63%. On April 15, 1988, the district court denied a second Rule 60(b) motion filed by Pierce and Federal which challenged the imposition of post-judgment interest on pre-judgment interest. Nemours, Gilbane and Aetna appeal from the order granting the reduction of post-judgment interest. Pierce and Federal appeal from the order denying the motion for relief from the award of post-judgment interest on pre-judgment interest. 1
We conclude as follows: (i) The award of $19,045,982 in favor of Nemours against Pierce must be reversed for the reason that Nemours has neither a contract claim nor a negligence claim against Pierce. (ii) The award of $19,045,982 in favor of Nemours against Federal must be reversed for the reason that Federal's liability is dependent upon and derivative of Pierce's liability. (iii) The award of $2,066,699 for contract damages in favor of Gilbane and against Pierce and Federal will be reversed to the extent it represents delay liquidated damages and affirmed to the extent it represents recovery of $269,699 in back charges. (iv) The award of pre-judgment interest on $269,699 in favor of Gilbane and against Pierce will be reversed and remanded for recomputation of interest in accordance with applicable Delaware law. (v) The awards in favor of Nemours and against Pierce on the indemnity claims and interest thereon and for punitive damages, attorneys' fees and consultants' costs will be reversed. (vi) To the extent that they are still applicable, the district court's orders granting Pierce's and Federal's motion to reduce post-judgment interest and denying Pierce's and Federal's motion for relief from the award of post-judgment interest on pre-judgment interest will be affirmed.
The court has jurisdiction under 28 U.S.C. Sec. 1291.
These appeals do not challenge the sufficiency of the evidence. Rather, they challenge the legal sufficiency of the claims submitted to the jury and concern legal rulings of the trial court. The facts upon which these rulings were based are not in dispute.
As recited above, in January 1980 Nemours entered into a general contract with Gilbane to complete the interior of its Children's Hospital. This contract includes the American Institute of Architects' "General Conditions of the Contract of Construction" (1976 ed.) (the "AIA General Conditions"). Article 1.1.2 of the AIA General conditions states:
Nothing contained in the Contract Documents shall create any contractual relationship between the Owner [Nemours] or the Architect and any Subcontractor or Sub-subcontractor.
Gilbane in turn entered into a number of subcontracts. The largest was its $35.9 million fixed-price subcontract with Pierce, executed in June 1980 which called for Pierce to perform the mechanical work on the project. Gilbane entered into other subcontracts including a $19.7 million subcontract with Dynalectric Company ("Dynalectric) for electrical work and an $8.6 million subcontract with Honeywell, Inc. ("Honeywell") for installation of the building management systems.
Section 1 of the Gilbane-Pierce subcontract provided that Pierce would "furnish all materials and perform all work as described in Section 2 hereof for Phase 5B: A.I. duPont Institute for the Nemours Foundation Hospital Building ... all in accordance with the Drawings and Specifications ... and subject in every detail to the supervision and satisfaction of [Gilbane] and of [Nemours] or his duly authorized representative."
The subcontract provided in Section 6 that "[Pierce] agrees to be bound to [Gilbane] by the terms and conditions of this Agreement, the Drawings and Specifications, the General Contract and the General Conditions for construction ..., and to assume toward [Gilbane] all the obligations and responsibilities that [Gilbane], by these documents, assumes toward [Nemours]." The General Conditions, of course, contained the provision that nothing contained in the "Contract Documents" shall create any contractual relationship between Nemours and any subcontractor.
A number of provisions in the subcontract, particularly those found in Section 7, imposed upon Pierce specific obligations vis-a-vis Nemours. For example: Section 7(a) requires Pierce to "furnish Shop Drawings, Erection Drawings, Details, Samples, etc.," for Nemours' approval. Section 7(b) bestowed upon Nemours the right to agree on lump sum pricing of changes to Pierce's work. Section 7(c) gave Nemours the right to inspect and condemn Pierce's work and required Pierce to "make good" the condemned work at its own expense. Section 7(e) required Pierce to "indemnify and save harmless" Nemours from any expenses, liability or loss arising from patent, copyright or trademark infringement.
After the terms of the Gilbane-Pierce subcontract were agreed upon, Gilbane sent it to Nemours for approval. By letter dated September 9, 1980 Nemours approved the subcontract and also stated, "[b]y this approval, The Nemours Foundation does not waive, and expressly reserves all of its rights and remedies under said contract and nothing herein shall be deemed or construed to create any contractual relationship between The Nemours Foundation and said subcontractor." At the foot of...
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