U.S. for Use and Benefit of Evergreen Pipeline Const. Co., Inc. v. Merritt Meridian Const. Corp., s. 1228

• Citation: 95 F.3d 153
• Decision Date: 06 September 1996
• Docket Number: 1655-1657,D,Nos. 1228,s. 1228
• Parties: 41 Cont.Cas.Fed. (CCH) P 76,981, 45 Fed. R. Evid. Serv. 745 UNITED STATES of America, for the use and benefit of EVERGREEN PIPELINE CONSTRUCTION CO., INC., Plaintiff, Evergreen Pipeline Construction Co., Inc., Plaintiff-Appellant/Cross-Appellee, v. MERRITT MERIDIAN CONSTRUCTION CORP. and General Insurance Company of America, Defendants-Appellees/Cross-Appellants. MERRITT MERIDIAN CONSTRUCTION CORP., Third Party Plaintiff-Appellant/Cross-Appellee, v. TRANSAMERICA PREMIER INSURANCE COMPANY, INC., Third Party Defendant-Appellee/Cross-Appellant. ockets 95-7791, 95-7830, 95-7841 and 95-7850.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 153

95 F.3d 153

41 Cont.Cas.Fed. (CCH) P 76,981, 45 Fed. R.

Evid. Serv. 745

UNITED STATES of America, for the use and benefit of

EVERGREEN PIPELINE CONSTRUCTION CO., INC., Plaintiff, Evergreen Pipeline Construction Co., Inc., Plaintiff-Appellant/Cross-Appellee, v. MERRITT MERIDIAN CONSTRUCTION CORP. and General Insurance

Company of America, Defendants-Appellees/Cross-Appellants.

MERRITT MERIDIAN CONSTRUCTION CORP., Third Party Plaintiff-Appellant/Cross-Appellee, v. TRANSAMERICA PREMIER INSURANCE COMPANY, INC., Third Party

Defendant-Appellee/Cross-Appellant.

Nos. 1228, 1655-1657, Dockets 95-7791, 95-7830, 95-7841 and 95-7850.

United States Court of Appeals, Second Circuit.

Argued April 12, 1996.

Decided Sept. 6, 1996.

James N. Cahill, Endicott, NY (Cahill & Beehm, Endicott, NY, on the brief), for Plaintiff-Appellant/Cross-Appellee Evergreen Pipeline Construction Co., Inc.

Daniel L. Saxe, New York City, for Defendant-Appellee/Cross-Appellant/Third Party Plaintiff-Appellant/Cross-Appellee Merritt Meridian Construction Corp.

Cecil Holland, Jr., New York City (Benjamin D. Lentz, Hart & Hume, New York City, on the brief), for Defendant-Appellee/Cross-Appellant General Insurance Company of America.

James M. Mulvaney, Morristown, NJ (McElroy, Deutsch & Mulvaney, Morristown, NJ, on the brief), for Third Party Defendant-Appellee/Cross-Appellant Transamerica Premier Insurance Company, Inc.

Before KEARSE and ALTIMARI, Circuit Judges, and MORAN, Senior District Judge. ^*

MORAN, Senior District Judge:

"Major construction projects generate major construction litigation. Management of either is perilous."¹

This is an appeal from the final judgment of the United States District Court for the Southern District of New York (Denny Chin, J.) entered on July 12, 1995, following a jury verdict in favor of plaintiff Evergreen Pipeline Construction Co., Inc. (EPC or Evergreen) and against defendant Merritt Meridian Construction Corp. (MMCC or Merritt), and its surety, General Insurance Company of America (GICA or General). The district court's opinion is reported at United States ex rel. Evergreen Pipeline Constr. Co. v. Merritt-Meridian Constr. Corp., 890 F.Supp. 1213 (S.D.N.Y.1995). Merritt is challenging certain of the district court's evidentiary and post-trial rulings and the sufficiency of the evidence to support the jury's verdict in favor of Evergreen. Evergreen is challenging the dismissal of two of its claims and is seeking greater sanctions and reimbursement for its costs. We conclude that a new trial is required as to one issue, further consideration (and possibly a new trial) as to another, and in other respects we affirm.

BACKGROUND

Merritt entered into a general contract with the United States Department of Army Corps of Engineers (Corps) for the modernization and expansion of academic facilities, Phase 1B, at the United States Military Academy, West Point, New York. The contract amount was $12,500,000.

Jack DeLello (DeLello) and Dennis Capolino (MMCC's corporate secretary) entered into the subcontract at issue in this case on August 13, 1987. DeLello's company, Evergreen The following recitation of the facts (which are in accord with the jury's findings) is taken from Judge Gerard L. Goettel's ² Memorandum Decision of October 1, 1991:

specializes in pipeline installation and was to perform the pipe-trenching and installation work for $400,000, trench rock-blasting and removal for $90 per cubic yard, and mass rock-blasting and removal for $35 per cubic yard, beginning August 17, 1987.

When [EPC] arrived on the site, there was no subcontract work to do. Instead, Evergreen began unloading pipe shipments from trucks and over the next three weeks, dug test holes, hauled trash, did miscellaneous demolition and unloaded pipes. None of this work was within the scope of the contract with Merritt-Meridian. The actual contract work did not begin until November 2, 1987--one reason was that the required materials did not arrive until that time. Evergreen claims that other interferences such as the failure by Merritt-Meridian to provide necessary surveying further delayed its performance. [Footnote: Merritt-Meridian backcharged Evergreen for delays. It should be noted, however, that the Army Corps gave extensions to and compensated Merritt-Meridian for damages caused by the delays, although these were not then passed on to Evergreen.]

Evergreen continued to work through the winter. It was not, however, receiving payments for the full value of its services because allegedly Merritt-Meridian would not pay for part of the work, claiming that it would not be paid by the Corps for the mass rock drilling and blasting until the mass rock quantities were determined by survey. (Information obtained during discovery indicates that Merritt-Meridian was in reality being paid for the work.) Any bills submitted by Evergreen were reduced in amount by Merritt-Meridian and then not honored. Because Evergreen was not receiving enough cash to meet its own expenses, it was running out of money. When it needed funds to meet its payroll, Merritt-Meridian advanced Evergreen the money on the condition that Evergreen and DeLello execute a promissory note and confession of judgment for $80,000.

Cash flow problems continued for Evergreen. By the end of 1987, Evergreen claims that it had only received total payments of roughly $179,000 but had in reality performed over $500,000 worth of work. By April 1988, payments of $355,000 had been made to Evergreen although, as Merritt-Meridian acknowledges, work valued at $670,000 had been performed. These discrepancies were justified by Merritt-Meridian by backcharges for equipment rental and other items.

With one day of blasting left, Merritt-Meridian terminated Evergreen. The reason offered was Evergreen's failure to pay its insurance premiums for liability coverage. In the past, Merritt-Meridian had either advanced money to Evergreen for the premium payment or paid the premium itself.

On January 24, 1989, Evergreen filed a complaint pursuant to the Miller Act, 40 U.S.C. §§ 270a-270dd (1994), against Merritt and its performance and payment surety, General. EPC sought $860,628.32 in compensatory damages for MMCC's alleged breach of the subcontract; EPC also alleged a prima facie business tort, seeking $860,628.32 in withheld payments, $500,000 in lost profits and lost business opportunities and $3,000,000 in punitive damages. (Id.) In the spring of 1991 EPC added a third claim in quantum meruit to its complaint.

Judge Goettel consolidated the action with MMCC's action initially filed in state court for payment of the $80,000 on the promissory note. On April 3, 1991, defendants filed an answer and counterclaim. In its counterclaim MMCC sought $500,000 for EPC's alleged breach of contract and negligence, and $100,000,000 for an alleged RICO conspiracy by EPC and Transamerica Premier Insurance Co., Inc. (TPI or Transamerica), EPC's performance and payment bond surety, to Sometime later, defendant moved for partial summary judgment which, on October 1, 1991, Judge Goettel granted in part and denied in part. He dismissed EPC's prima facie business tort claim for failure to allege "special damages" with sufficient particularity; however, he gave EPC leave to pursue its claim for punitive damages "through the cause of action in contract". In addition, the court refused to dismiss either the quantum meruit claim or the part of the breach of contract claim which was based on delay damages.

defraud Merritt. On June 29, 1989, MMCC filed a third party complaint against TPI, alleging a breach of the performance bond and seeking $400,000. This was amended on April 3, 1991, by increasing the damages sought to $500,000 and adding a second cause of action and demand for damages similar to the RICO claim alleged in MMCC's amended counterclaim.

On April 6, 1992, TPI moved for partial summary judgment on all of the third party claims except count I. Magistrate Judge Mark D. Fox issued a Report and Recommendation on June 22, 1992, which Judge Goettel adopted on July 17, 1992, granting summary judgment on all but count I of the third party complaint. The court also granted TPI's motion for Rule 11 sanctions against MMCC's counsel (Stephen O'Hare) in the amount of $1,000 for bringing the RICO claim.

To encourage a settlement the court held a summary jury trial on February 10 and 11, 1993. The summary jury awarded EPC $672,324 for MMCC's breach of contract and $1,000,000 in punitive damages.

On June 15, 1993, MMCC and GICA, pursuant to Federal Rule of Civil Procedure 41, moved to voluntarily dismiss the remainder of the second amended third party complaint (count I) and to dismiss the second counterclaim. EPC opposed the motion, arguing that "it [would] be unduly prejudiced should [the court] grant defendants' motion to dismiss at this late stage of the litigation". TPI did not oppose the motion but sought sanctions as a condition of the dismissal pursuant to Rule 11. On July 2, 1993, Judge Goettel granted the motion to voluntarily dismiss and awarded both EPC and TPI attorneys' fees and costs, but held the determination of the amount until the final disposition.

Before the 1994 trial defendants filed a variety of motions in limine. At oral argument on October 6, 1994, Judge Chin granted defendant's motion to bar evidence regarding "previously dismissed parties or causes of action and [evidence of] prior or contemporaneous discussions and agreements offered as parole [sic] evidence," and he denied the request to dismiss the punitive damages claim. In an October 18, 1994 order, Judge Chin denied the motion to bar evidence regarding MMCC's profits on the West Point project and granted the motion to bar evidence of MMCC's relationships with other subcontractors. See United States ex rel. Evergreen Pipeline Constr. Co. v. Merritt-Meridian Constr. Corp., No. 90-5106, 1994 WL 577637 (S.D.N.Y. Oct. 19, 1994).

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