U.S. Industries, Inc. v. Blake Const. Co., Inc.

• Decision Date: 21 June 1985
• Docket Number: No. 83-2277,83-2277
• Citation: 765 F.2d 195
• Parties: U.S. INDUSTRIES, INC., Appellant, v. BLAKE CONSTRUCTION CO., INC., et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 195

765 F.2d 195

246 U.S.App.D.C. 326

U.S. INDUSTRIES, INC., Appellant, v. BLAKE CONSTRUCTION CO., INC., et al.

No. 83-2277.

United States Court of Appeals District of Columbia Circuit.

Argued Dec. 7, 1984.

Decided June 21, 1985.

Appeal from the United States District Court for the District of Columbia (Civil Action No. 80-01367).

Marx Leva, Washington, D.C., with whom Helen I. Bendix, Loyd Symington and Anthony C. Epstein, Washington, D.C., were on the brief, for appellant.

David M. Dorsen, Washington, D.C., with whom Leonard C. Greenebaum and Sonia R. Jarvis, Washington, D.C., were on the brief, for appellee.

Before ROBINSON, Chief Judge, WRIGHT and STARR, Circuit Judges.

Opinion for the Court filed by Circuit Judge STARR.

STARR, Circuit Judge:

This case arises out of the construction of the new Walter Reed General Hospital, a project which began almost a decade ago. The parties, joint venturers in the project, were frequently in disagreement and brought their differences before this court on no less than five separate occasions. The action now before us represents the end of a long and tortuous litigation trial.

The genesis of this action was a complaint filed by U.S. Industries, Inc. ("USI") to recover from Blake Construction Company ("Blake"), pursuant to a Contract of Indemnity between the parties, attorneys' fees and litigation expenses incurred in connection with six of the various lawsuits, including the present indemnity action. Blake successfully moved for summary judgment claiming, among other things, that the doctrine of res judicata barred USI from raising the claims asserted in this suit. USI seeks reversal, arguing that the District Court erred in finding that USI could have and should have raised its claims for indemnification in a prior proceeding. For reasons to be set forth, we agree with the District Court's determination that principles of res judicata barred this action. Accordingly, we affirm.

I

The underlying transaction in this case has been described in an earlier decision of this court, U.S. Indus., Inc. v. Blake Constr. Co., 671 F.2d 539 (D.C.Cir.1982), and need not be rehearsed in detail here. Briefly stated, over a decade ago, Blake, a closely-held, Washington, D.C.-based construction company, entered into a joint venture partnership with USI, a large, publicly-held company, to equip Blake with the financial wherewithal to enable Blake successfully to compete for a large hospital construction contract awarded by the U.S. Army Corps of Engineers. Pursuant to the joint venture agreement, Blake agreed to pay USI one percent of the contract price. In addition, Blake agreed to award the mechanical subcontract on the project to a subsidiary of USI, Federal Sheet Metal ("FSM").

In exchange for USI's agreeing to subject itself to substantial potential liability, Blake and its three principals, Howard, Morton and Stanley Bender, agreed to indemnify USI against "any and all damages, loss, costs, charges and expenses of whatsoever kind or nature." Record, Vol. 4, Exhibit 1 (emphasis added). This separate and admittedly sweeping indemnity agreement ("Contract of Indemnity"), under which the instant action was brought, also provided that "such payment is to be made to USI as soon as it shall have become liable therefor, whether it shall have paid out such sum or any part thereof or not." Id. ¹ In addition, the Contract of Indemnity authorized USI "to prove such expenses, costs and attorneys' fees in any action or proceeding and to include the same in any judgment." Id. (emphasis added). The breadth of this contract, as will become apparent, is critical in our consideration of this case.

A

The present action under the Contract of Indemnity is, as previously indicated, the last in a lengthy line of suits that began long ago. USI first initiated an action in 1977. ² In a suit filed in federal district court against Blake in November 1977, USI sought to recover a one percent bonding fee that Blake had failed to pay in full (the "Bonding Fee case"). In contrast to what it was destined to do in every lawsuit it initiated or defended thereafter, USI did not assert in the Bonding Fee complaint a claim under the Contract of Indemnity. Furthermore, USI did not seek to join as parties the Messrs. Bender, co-signers with Blake on the indemnity agreement, as it did in both the Subcontract and Indemnity cases.

Only nine months later, in August 1978, while the Bonding Fee case was still pending, USI brought a separate suit in federal district court seeking to recover against Blake under both the Blake-USI mechanical subcontract (for damages resulting from Blake's delay of the project and its failure to pay USI for FSM's work) and the Contract of Indemnity. The complaint in this 1978 "Subcontract case" also expressly sought recovery from the Benders under the Contract of Indemnity. ³ In every count set forth in the complaint, USI sought attorneys' fees incurred in connection with the Subcontract case itself. In addition, in Count IV of the complaint, USI asserted its right to recover, pursuant to the Contract of Indemnity, attorneys' fees incurred in connection with any action by a subcontractor that USI was either subjected to or threatened with as a result of USI's relationship with Blake. Once again, in Count VI, USI made a general claim under the Contract of Indemnity, specifically including within that claim its right to reasonable attorneys' fees and litigation expenses. ⁴ The Subcontract case, initially assigned to the District Judge before whom the Bonding Fee case was pending, was reassigned randomly on the ground that the case was unrelated to the Bonding Fee case. See Record, Vol. I, Clerk's Reassignment Order. ⁵

In January 1979, five months after the Subcontract action was filed, the District Judge held a status conference at which the parties were ordered to narrow the issues in preparation for trial. No specific order, however, was entered as to the indemnity claims--including those for litigation expenses--asserted by USI throughout the complaint. Of especial relevance to our case, USI's Preliminary Statement of Contentions, submitted on May 1, 1979, made no reference whatever to any claims for attorneys' fees. There was no attempted reservation of any such claim; there was only silence in this respect.

While the Subcontract case was being prepared for trial, the Bonding Fee case was disposed of, in part, by a grant of summary judgment in favor of USI. The remainder of the case, the portion relevant here, terminated with a November 1979 entry of Final Consent Judgment; only those claims actually asserted in the Bonding Fee case were dismissed with prejudice. See Record, Vol. V, Docket Entry No. 57, Exhibit A, Plaintiff's Combined Response to Defendants' Statement of Material Facts as to Which There is No Genuine Dispute (filed June 1, 1982). The Bonding Fee case was thus brought to a conclusion.

The Subcontract case, in the meantime, was readied for trial. Prior to the commencement of trial, USI and Blake filed cross-motions for partial summary judgment. Blake's motion sought, inter alia, dismissal of USI's claims asserted on behalf of USI's subcontractors. USI's motion, on the other hand, sought summary disposition of its claim against Blake for the cost of builder's risk insurance. The District Court did not rule on the motions until the conclusion of the trial. At that time, the cross-motions for partial summary judgment were consolidated with two motions for directed verdict, filed by Blake at the close of the evidence, which sought, in part, dismissal of USI's claim under Count VI. In its March 31, 1980 order, the District Court granted Blake's motion for directed verdict as to USI's "right to recover under the Contract of Indemnity as alleged in Count VI of the Complaint" on the ground that the claim had not matured, dismissing it without prejudice. Focusing on the substantive liability for breach of contract, as opposed to any claim for attorneys' fees, the District Court held that USI's claim against the Bender brothers as cosigners with Blake on the Indemnity Contract was premature because it was not clear that Blake would fail to satisfy any judgment that might be rendered in the Subcontract case. The claim was "dismissed without prejudice to the plaintiff's right to seek recovery pursuant to the Contract of Indemnity if Blake fails, refuses, or is unable to pay all or any part of a final judgment." ⁶ If that occurred, then USI would, in the court's view, be able to proceed against the Bender brothers.

In addition, the District Court granted Blake's motion for summary judgment as to USI's claim, asserted on behalf of its subcontractors (Intercounty and Powers) on the ground that these claims were not properly before the District Court. Also, as part of the March 31, 1980 Order, the District Court granted Blake's motion for directed verdict on USI's "claim for recovery of payment and attorneys' fees associated with the settlement of [the 1975 case]," a claim specifically asserted for the first time as part of USI's proposed jury instructions. ⁷ Finally, the District Court granted USI's motion for summary judgment as to the cost of builder's risk insurance. The District Court then submitted the case to the jury with detailed instructions. Subsequently, the jury returned a multimillion dollar verdict in favor of USI for Blake's disruption of USI's work. Both USI and Blake appealed.

B

The precise events on appeal to this court in the Subcontract case are important in understanding the Indemnity case now before us. Blake lost outright in its challenge to the jury verdict; on the other hand, USI succeeded in its challenge to the dismissal of the two claims asserted on behalf of Intercounty and Powers. USI also prevailed on its challenge to the dismissal of its claim alleging that the Bender brothers were obligated under the Contract of Indemnity to satisfy...