Square Const. Co. v. Washington Metropolitan Area Transit Authority

Decision Date17 August 1981
Docket NumberNo. 80-1447,80-1447
Citation657 F.2d 68
Parties29 Cont.Cas.Fed. (CCH) 81,782 SQUARE CONSTRUCTION COMPANY and La Fera Contracting Company, Appellants, v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Appellee.
CourtU.S. Court of Appeals — Fourth Circuit

Robert H. Hunt, Washington, D.C. (John B. Tacke, Michael E. Lundy, Washington, D.C., on brief), for appellants.

Leonard Petkoff, Washington, D.C. (Tod Gold, Washington, D.C., on brief), for appellee.

Before RUSSELL, WIDENER and PHILLIPS, Circuit Judges.

WIDENER, Circuit Judge:

This case is before us on the appeal of Square Construction Company and La Fera Contracting Company (Square/La Fera) from the order of the United States District Court for the Eastern District of Virginia denying Square/La Fera's motion pursuant to Federal Rules of Civil Procedure 60(b)(2) and (3) to vacate its judgment previously entered in favor of the Washington Metropolitan Area Transit Authority (WMATA or the Authority). We hold that the district court's denial of that motion was an abuse of discretion, and remand the case for further proceedings with instructions.

On February 3, 1972, WMATA awarded Square/La Fera a contract for the construction of the C-7 section of the Washington metropolitan area subway system at a total contract price in excess of $23,000,000.00. In early January of 1974, following expressions of concern by WMATA over the lack of progress under that contract, the Authority terminated Square/La Fera's contract for alleged default, with some $14,895,910.75 in work remaining to be performed. WMATA subsequently agreed to pay another contractor $19,717,576.13 to complete the C-7 contract, and charged the approximately $4.8 million in excess reprocurement costs to Square/La Fera.

Square/La Fera contested its termination for default and the Authority's assessment of excess costs against it in separate appeals to the Corps of Engineers Board of Contract Appeals. 1 At the August 1977 hearing on the issue of excess costs, Square/La Fera claimed that the assessment of such costs was improper because they were not minimized by WMATA's method of reprocurement. See Marley v. United States, 423 F.2d 324, 191 Ct.Cl. 205 (1970). As proof, it compared the $19.7 million paid by WMATA for completion of the C-7 contract with La Fera's estimate of $12 million and an independent expert's estimate of $13 million.

To bolster its position on this issue in its case before the BCA, Square/La Fera sought information concerning WMATA's reprocurement process. On March 29, 1977, it formally requested in writing that WMATA make the following documents available to it for inspection and copying:

The requested documents are:

1. All documents relating to the reprocurement contract, including but not limited to the following:

When WMATA failed to include any estimate of the reprocurement costs in its response to this request, Square/La Fera specifically requested to be " ... furnished with a copy of the Authority's Estimate (together with the breakdown of items and back-up materials) for completion of C-7 after termination." This prompted WMATA to provide a copy of an estimate originally prepared by DeLeuw Cather, WMATA's General Engineering Consultant, and adopted without alteration by the Authority. This estimate was in the amount of $19,146,463.23, and, as the official Authority estimate, was used for the purpose of assessing the reasonableness of the bids received by WMATA during reprocurement. As this estimate was within a small percentage of the amount paid upon reprocurement and because the Board discounted Square/La Fera's estimate of $12 million as self serving and unreliable, the Board found that WMATA's method of reprocurement was reasonable and that the excess costs were properly assessed against Square/La Fera. The Board's decisions in favor of WMATA on both default and reprocurement and damages were adopted by the Authority through its General Manager. 2

Pursuant to D.C. Code § 1-1434 (1973) and Article 1.6 of the contract, 3 Square/La Fera sought judicial review of those administrative decisions in the United States District Court for the Eastern District of Virginia. The district court affirmed the decision of the Authority on both issues, from which Square/La Fera appealed to this court in No. 79-1510. That case is also today decided.

In late July of 1979, following entry of the district court's judgment affirming the Board's order, Square/La Fera became aware that WMATA had withheld an estimate of the cost of completion of the C-7 section that was substantially lower than the DeLeuw Cather estimate it had adopted. While this estimate, prepared by Bechtel Associates, an engineering firm of national reputation and WMATA's Construction Consultant, has never been produced in court or for Square/La Fera's examination, WMATA has admitted its existence and variously represents its amount to be either $16,296,097.99 or $16,347,977.99, 4 depending on various options therein which are yet unexplained.

On September 27, 1979, Square/La Fera filed a notice to take the deposition of a certain William Hall, the Bechtel employee responsible for the preparation of the Bechtel estimate. The district court quashed that notice on the grounds of undue delay and that the Bechtel estimate was merely corroborative of La Fera's testimony. Square/La Fera then moved this court for leave to depose Hall. While that motion was denied, our order noted that appellants might seek relief from the district court pursuant to Rule 60(b), and, if such relief were there denied, might appeal from that order. Square/La Fera filed such a motion to vacate in the district court on June 13, 1980, claiming that WMATA's failure to disclose the Bechtel estimate constituted fraud, misrepresentation or misconduct under FRCP 60(b)(3), and that the estimate was newly discovered evidence under FRCP 60(b)(2). The district court denied the motion on the grounds that no evidence had been withheld, that the Bechtel estimate would not dictate a different decision by that court, and that, assuming the existence of the estimate in the amount of $13 million, it was merely cumulative of other evidence. The propriety of that decision is now before us on the appeal of Square/La Fera.

A motion under Rule 60(b) is addressed to the sound discretion of the district court and will not be disturbed on appeal save for a showing of abuse. Central Operating Co. v. Utility Workers of America, 491 F.2d 245, 252 (4th Cir. 1974); Consolidated Masonry & Fireproofing v. Wagman Construction Corp., 383 F.2d 249, 251 (4th Cir. 1967). As a threshold matter, the movant must demonstrate the existence of a meritorious claim or defense. Compton v. Alton Steamship Co., 608 F.2d 96, 102 (4th Cir. 1979); Universal Film Exchanges, Inc. v. Lust, 479 F.2d 573, 576 (4th Cir. 1973). A party seeking relief under subsection (3) of the rule must also prove the misconduct complained of by clear and convincing evidence and demonstrate that such misconduct prevented him from fully and fairly presenting his claim or defense. Keys v. Dunbar, 405 F.2d 955, 957-58 (9th Cir. 1969); Nederlandsche Handel-Maatschappij, N.V. v. Jay EMM, Inc., 301 F.2d 114 (2d Cir. 1962); see Toledo Scales Co. v. Computing Scale Co., 261 U.S. 399, 421, 43 S.Ct. 458, 463, 67 L.Ed. 719 (1923). In consideration of these proofs, the court must balance the competing policies favoring the finality of judgments and justice being done in view of all the facts, to determine, within its discretion, whether relief is appropriate in each case. Compton, p. 102.

Application of these standards to the case at hand presents no difficulty. It is clear beyond doubt that Square/La Fera's assertion, that the method of reprocurement was not designed to minimize reprocurement costs, raised a meritorious defense. In Marley, supra, the Court of Claims held that such action was a bar to recovery of excess costs, and we agree.

Square/La Fera has also met its burden of showing the fact of misconduct on the part of an adverse party in the form of WMATA's failure to produce the Bechtel estimate pursuant to a proper request. The existence of the Bechtel estimate is established by numerous affidavits and is undisputed. While the date of the Bechtel estimate, along with its other specific contents, remains unknown to all save WMATA, the fact that it was considered contemporaneously with the DeLeuw Cather estimate in arriving at an official Authority estimate is evidence that it was in WMATA's possession during the reprocurement, well before Square/La Fera's March 29, 1977 discovery request. Furthermore, the production of the Bechtel estimate was plainly called for by Square/La Fera's request for "... all documents relating to the reprocurement contract...." The Authority's argument that the Bechtel estimate was not one of the documents relating to the reprocurement is frivolous. Indeed, it is difficult to imagine what the Bechtel estimate might have related to if not to the reprocurement contract. Thus, Square/La Fera has substantiated its claim of misconduct by WMATA's deliberate withholding of this most relevant documentary evidence.

It is also evident that this misconduct prevented Square/La Fera from fully and fairly presenting its defense to the assessment of reprocurement costs. As previously noted, Square/La Fera defended this issue on the ground that WMATA's method of reprocurement was not designed to minimize excess costs. Evidence that Bechtel, which was in the employ of WMATA, had prepared an estimate at substantial variance with that used by WMATA was most relevant to Square/La Fera's defense, and the deliberate withholding of this estimate may cast doubt on WMATA's entire claim for damages and...

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