Tyger Const. Co. Inc. v. Pensacola Const. Co.

• Decision Date: 08 July 1994
• Docket Number: Nos. 92-2502,92-2503,s. 92-2502
• Citation: 29 F.3d 137
• Parties: 40 Fed. R. Evid. Serv. 1376 TYGER CONSTRUCTION COMPANY INCORPORATED, a South Carolina Corporation, individually and for the use and benefit of Tyger-Pensacola Joint Venture, Plaintiff-Appellant, v. PENSACOLA CONSTRUCTION COMPANY, a Delaware Corporation, Defendant-Appellee. TYGER CONSTRUCTION COMPANY INCORPORATED, a South Carolina Corporation, individually and for the use and benefit of Tyger-Pensacola Joint Venture, Plaintiff-Appellee, v. PENSACOLA CONSTRUCTION COMPANY, a Delaware Corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 137

29 F.3d 137

40 Fed. R. Evid. Serv. 1376

TYGER CONSTRUCTION COMPANY INCORPORATED, a South Carolina

Corporation, individually and for the use and

benefit of Tyger-Pensacola Joint

Venture, Plaintiff-Appellant, v. PENSACOLA CONSTRUCTION COMPANY, a Delaware Corporation,

Defendant-Appellee.

TYGER CONSTRUCTION COMPANY INCORPORATED, a South Carolina

Corporation, individually and for the use and

benefit of Tyger-Pensacola Joint

Venture, Plaintiff-Appellee, v. PENSACOLA CONSTRUCTION COMPANY, a Delaware Corporation,

Defendant-Appellant.

Nos. 92-2502, 92-2503.

United States Court of Appeals Fourth Circuit.

Argued May 11, 1994.

Decided July 8, 1994.

ARGUED: Samuel W. Hixon, III, Williams, Mullen, Christian & Dobbins, Richmond, VA, for appellant. Richard W. Miller, Miller Law Firm, P.C., Kansas, MO, for appellee. ON BRIEF: William R. Mauck, Jr., Williams, Mullen, Christian & Dobbins, Richmond, VA, for appellant. Weston A. Sechtem, Miller Law Firm, P.C., Kansas City, MO, for appellee.

Before WILKINS, Circuit Judge, and SPROUSE and CHAPMAN, Senior Circuit Judges.

Reversed and remanded with instructions by published opinion. Senior Circuit Judge CHAPMAN wrote the opinion, in which Judge WILKINS and Senior Circuit Judge SPROUSE joined.

OPINION

CHAPMAN, Senior Circuit Judge:

The parties to this action formed a joint venture in 1985, its primary purpose being the construction of bridge supports in the James River. When the cost of the project grossly exceeded initial estimates, Tyger Construction Co., Inc. ("Tyger") filed suit against Pensacola Construction Co. ("Pensacola") alleging breach of contract by Pensacola's failure to make capital contributions to the venture as required by their joint venture agreement. Pensacola filed a counterclaim, alleging, inter alia, that Tyger misrepresented to Pensacola that a source of sand for the project was available and the required permits had been obtained to mine the sand. A jury awarded Pensacola $5.6 million on its misrepresentation claim, but the district court granted Tyger's motion for a new trial. After a second trial, the jury again returned a verdict for Pensacola in the amount of $1,578,250. We address Tyger's argument that Pensacola's expert witness's testimony had no factual basis and was too speculative to support a portion of the jury's verdict. We agree and vacate that portion of the verdict based upon this testimony.

I.

Tyger and Pensacola formed a joint venture known as Tyger-Pensacola and entered into a written joint venture agreement on August 15, 1985. The joint venture was awarded a contract by the Virginia Department of Highways and Transportation (VDOT) to construct, among other things, two sand islands in the James River at Newport News, Virginia as part of a bridge tunnel for Interstate 664. Under the agreement, Tyger assumed a 60% interest in the venture and was responsible for the day to day activities. Pensacola assumed the remaining 40% interest, and each party was to contribute its pro rata share of capital to the venture.

Meetings were held by the parties during the summer of 1985 to estimate the costs of performing the project and submitting a bid. The parties had differing opinions as to the source of sand; Pensacola felt that Great Lakes Dredging Company ("Great Lakes") should be used, but Tyger believed a cheaper source could be found.

On July 21, 1985, Paul Silvestri, the vice-president of engineering for Tyger, received several quotations from Lone Star Cement Company ("Lone Star"), a local sand supplier. These quotes were provided by Dick Lynch, a Lone Star representative, and were for allotments of sand from four pieces of property, one of which was the Waitman tract.

On July 22, Lynch met with Silvestri and provided a revised quotation on the Waitman tract, offering sand from that property at 50 cents per ton. Lynch told Silvestri that he could obtain the necessary permits, but he warned that the Waitman source was not yet finalized.

The final bid to the VDOT was due July 23, 1985. In anticipation of this date, the parties met on July 22, and discussed, among other things, the source of sand. Silvestri was the sole Tyger representative at the meeting, and he relayed the information provided to him by Lone Star. Silvestri testified that he told Pensacola that there was not a problem with obtaining permits, which was confirmed by two of Pensacola's witnesses. However, Ronald J. Capoccia, a Pensacola representative present at the meeting, testified that Silvestri stated that the Waitman tract was secure and all necessary permits had been obtained. J.A., Vol. V, 1540-41. Tyger claims that Silvestri never told Pensacola that the permits were in hand.

The Lone Star figure was used in the final bid, and the joint venture was awarded the contract. Subsequently, Lone Star could not deliver the Waitman tract as the source of sand, and the joint venture was required to seek other sand, which proved more expensive. Until a source of sand could be secured for mining, approximately 500,000 cubic yards of sand were provided by Great Lakes between February 27 and March 27, 1986. The joint venture began mining sand at Eppes Island in April 1986 and continued until late summer 1987. ¹ Eppes Island provided the project with 1.25 million cubic yards of sand but could not satisfy the project's entire demand. Another source was located at "Hula/Chisman," approximately 25 miles downstream from Eppes Island, from which the venture removed the final 267,000 cubic yards necessary for completion of the project.

Tyger filed suit against Pensacola in December of 1988, alleging breach of contract and seeking capital contributions that Pensacola allegedly failed to make as required by the parties' agreement. Pensacola filed a counterclaim and Tyger moved for summary judgment. The court granted Tyger's summary judgment motion in the amount of $2,790,000, which judgment was affirmed on appeal by an unpublished opinion of February 22, 1991, 925 F.2d 1457 (Table). The court also dismissed 48 of 51 allegations in the counterclaim alleging misrepresentation and breach of fiduciary duty. Eventually, only one allegation was tried: whether Paul Silvestri misrepresented to Pensacola that Tyger had secured a source of sand and had obtained all necessary permits. The jury returned a verdict of $5.6 million on this claim.

Tyger moved for a new trial, which the court granted, on the ground that the verdict was not supported by the evidence. The district court noted that Pensacola had the burden of establishing a causal connection between any damages claimed and the misrepresentation. The court concluded that Pensacola had not met its burden because the failure to secure the Waitman tract never resulted in a lack of sand, and other problems, particularly with the barges, which carried the sand, and other equipment failure, were the cause for delays in the sand operation. Specifically the court found:

The [time delay] expenses were never casually (sic) related to the failure of the Waitman tract and, therefore, should not have been considered by the jury in assessing damages. The costs associated with the barges and the two month extension of the project relate to the delay in completing the sand operation. The Court refused to instruct the jury on the subject of delay related damages because it was unchallenged that the Joint Venture was never without a sufficient source of sand. Therefore, the failure to secure the Waitman tract could not be the proximate cause of any expenses incurred as a result of delay in the project. In fact, the issue of delay was never presented to the jury.

J.A., Vol. IV, 1235.

At the second trial, Pensacola attempted to prove that the joint venture incurred additional costs of $9,799,474 as a result of the unavailability of the Waitman tract. Pensacola sought to recover 40% of this amount or $3,919,790, representing its 40% interest in the joint venture. At trial, Pensacola used the testimony of its President, Henry B. McCoy, Jr., as an expert in the areas of construction methods and assessment of cost overruns. ² At his deposition prior to trial, McCoy gave his opinion as to the amount of damages caused by the failure to secure the Waitman tract. Shortly after this deposition and prior to trial, Tyger filed a motion in limine, arguing that McCoy's calculations and damages assessment had no basis in fact. The district court made the following comments in denying the motion:

In terms of the fact basis, as a general matter, I'm of the opinion that Rule 705 will allow an expert, once they are qualified--and I think that is a threshold area for any expert--once an expert qualifies in a particular field, I think that the Court and the jury can consider any opinion that the expert renders. I believe that if an expert doesn't have an adequate fact basis for that opinion, that is a matter to be brought out on cross-examination.

That is your role as an advocate, and then it is your role as an advocate to argue to a jury that this opinion is not properly based in fact, it should not be given much weight by the jury, if any at all. And I think that basically where you say that there are fallacies in the analysis and fallacies in the reasoning process and in the bases, that those are matters for cross-examination and argument. I make that a general ruling in regard to what you said.

J.A., Vol. IV, 1372.

McCoy testified about damages in several categories, four of which are relevant to this appeal: (1) increased costs of mining an uneconomical sand pit, (2) increased costs due to excessive time, (3) excess supervisor salaries at the pits and (4) excess DBE (Disadvantaged Business Enterprise) fee paid for the move to the Hula/Chisman pit. Counsel for Pensacola explained to the trial judge the relationship of the first two categories:

The number that you are talking about, ... [uneconomical sand pit calculation], is inefficiency of mining,...