UPPER OCCOQUAN SEWAGE v. BLAKE CONST.

• Citation: 266 Va. 582,587 S.E.2d 721
• Decision Date: 31 October 2003
• Docket Number: Record No. 022528.
• Court: Supreme Court of Virginia
• Parties: UPPER OCCOQUAN SEWAGE AUTHORITY v. BLAKE CONSTRUCTION CO., INC./POOLE & KENT.

587 S.E.2d 721

266 Va. 582

UPPER OCCOQUAN SEWAGE AUTHORITY v. BLAKE CONSTRUCTION CO., INC./POOLE & KENT.

Record No. 022528.

Supreme Court of Virginia.

October 31, 2003.

Robert K. Richardson (Dexter S. Odin; Sally Ann Hostetler; Jane A. Allen; Odin, Feldman & Pittleman, on briefs), Fairfax, for appellant. S. Miles Dumville (Joseph F. Luchini; Michael L. Zupan; Robert F. Moorman; ReedSmith, on brief), Richmond, for appellee.

Present: HASSELL, Chief Justice, and KEENAN, KOONTZ, KINSER, LEMONS, and AGEE, JJ., and CARRICO, Senior Judge.

OPINION BY Justice G. STEVEN AGEE.

Upper Occoquan Sewage Authority ("UOSA") appeals rulings of the Circuit Court of Fairfax County in proceedings which arose out of a construction contract between UOSA and Blake Construction Company/Poole & Kent ("the Joint Venture"). On appeal, UOSA's multiple assignments of error essentially assert the trial court erred by: (1) denying UOSA's application for costs under Code § 2.2-4335(A); (2) denying UOSA's motion to strike certain Joint Venture claims on the basis of filing appeals more than six months after UOSA's final written decisions denying the claims; and (3) denying UOSA's motion to strike and motion for judgment notwithstanding the verdict on the basis that certain Joint Venture notices of claim or time impact analyses either were not filed or were filed late.

For the following reasons, we will affirm in part and reverse in part the judgment of the trial court.

I. BACKGROUND

This litigation involves multiple disputes arising out of a contract for construction of a waste water treatment facility located in Fairfax County (the "Project"). UOSA, the owner of the facility, is a public authority created pursuant to the Virginia Waste and Water Authorities Act, Code § 15.2-5100 through -5158, to provide waste water reclamation for its member jurisdictions, the counties of Fairfax and Prince William and the cities of Manassas and Manassas Park. As a public authority, UOSA is subject to the Virginia Public Procurement Act, Code § 2.2-4300 through -4377¹ (the "VPPA").

Blake Construction Co., Inc. and Poole & Kent Corporation formed the Joint Venture in order to submit a bid for the Project. The Joint Venture's bid was successful, and the Joint Venture agreed to furnish all labor, materials, and equipment for the Project in a contract dated December 10, 1996 (the "Contract"). The Contract allows the Joint Venture to obtain an increase in the contract price and/or an extension of time to complete certain work upon written application to UOSA pursuant to procedures set forth in the Contract.

The Joint Venture began work on the Project in January 1997 which is ongoing at the time of this appeal. During the course of the work, numerous changes were made to the original contract, some of which are in dispute and resulted in the proceedings now at bar.

Procedures set forth in the Contract allow the Joint Venture to obtain an increase in the contract price and/or an extension of time to complete certain work upon written application to UOSA. If UOSA issues an adverse final decision on the claim (i.e. denies the claim), the VPPA allows the Joint Venture to appeal that final decision to the circuit court "within six months of the date of the final decision on the claim by the public body" for a de novo determination of its claim. See Code § 2.2-4363(D).² As the Project remains ongoing, this has engendered litigation by the parties while their contractual relationship continues.

The Joint Venture filed six lawsuits appealing adverse claim decisions by UOSA which were eventually consolidated by order of the trial court (collectively, the "consolidated cases"). UOSA filed a plea in bar to approximately sixty of the claims pled by the Joint Venture in the consolidated cases. The plea in bar alleged that the Joint Venture failed to comply in a timely manner with various contractual and statutory procedural requirements.

On September 28, 2001, the jury returned a verdict in the plea in bar proceeding on a special verdict form noting separate adjudications for each claim.³ Pursuant to that verdict, the trial judge, Judge Roush, entered an order on October 24, 2001 ("the October 24th order"), denying UOSA's plea in bar on twenty-nine of the Joint Venture's claims. The October 24th order also included this stipulation: "The parties also stipulate that the Amended Motion for Judgment and Declaratory Judgment filed in Law 193766 contains no claim for unspecified delays or manipulation of schedule other than as may be included in any specific claim itemized therein."⁴

Both parties made post-trial motions to set aside portions of the verdict, which the trial court denied. The remaining issues in the consolidated cases were set for a trial on the merits to begin June 17, 2002.

While the plea in bar trial primarily dealt with the notice and timely filing procedural requirements of certain claims, separate issues were raised by the Joint Venture through the amended motion for judgment and declaratory judgment in Law #193766. The Joint Venture asserted, in part, a violation of the VPPA regarding a bar on damages for unreasonable delay, which is the subject of the companion appeal, Blake Construction Co., Inc./Poole & Kent v. Upper Occoquan Sewage Authority, 266 Va. 564, 587 S.E.2d 711 (2003) (today decided). The declaratory judgment action also requested a declaration that UOSA materially breached the Contract and the Joint Venture was thus entitled to "[r]ecover the reasonable value of its services performed to the date of termination, plus a reasonable allowance for overhead and profit."

In supplemental responses to interrogatories prior to the scheduled trial date, the Joint Venture calculated its damages "[b]ecause UOSA is in material breach of the Contract." The Joint Venture's measure of damages was "its reasonable costs incurred in prosecuting the work plus the Joint Venture's [General & Administrative] overhead less that which has already been paid." As of February 28, 2002, the Joint Venture represented its material breach damages to be $63,258,497.

UOSA filed a motion to strike damages for material breach on January 25, 2002. After a hearing on February 8, 2002, Judge Roush denied the motion. Ruling from the bench, she said the Joint Venture's declaratory judgment pleading "is a classic use of a declaratory judgment action, I think it's appropriate." That same day, Judge Roush entered an order ("the February 8th order"), memorializing the bench ruling which provides in pertinent part: "[i]t appearing that the motion to strike the Joint Venture's damages for material breach should be denied, it is therefore ORDERED that UOSA's motion to strike the Joint Venture's damages for material breach be and hereby is denied."

Judge Finch, substituting for Judge Roush, opined from the bench during a May 23, 2002, pretrial hearing that "material breach is no longer an issue ... therefore, the effect is that all damages regarding material breach are to be excluded from the trial of these consolidated cases." No order appears in the record to implement or explain Judge Finch's remarks from the bench. The Joint Venture non-suited the material breach claim and all remaining claims in the consolidated cases on May 29, 2002.

UOSA subsequently filed an application for costs pursuant to Code § 2.2-4335(C) seeking $2,962,715.13. The trial court held an evidentiary hearing on UOSA's application for costs and subsequently granted the Joint Venture's motion to strike.

We granted UOSA this appeal.

II. ANALYSIS

A. UOSA's Application for Costs

Code § 2.2-4335(C) provides protection to a public body for delay claims made by contractors which are false or without factual or legal basis. The mechanism chosen by the General Assembly is the in terrorem effect of recovering litigation costs from the contractor which are attributable to a frivolous delay claim. The statute provides in pertinent part:

A contractor making a claim against a public body for costs or damages due to the alleged delaying of the contractor in the performance of its work under any public construction contract shall be liable to the public body and shall pay it for a percentage of all costs incurred by the public body in investigating, analyzing, negotiating, litigating and arbitrating the claim, which percentage shall be equal to the percentage of the contractor's total delay claim that is determined through litigation or arbitration to be false or to have no basis in law or in fact.

Code § 2.2-4335(C) (emphasis added).

The trial court denied UOSA's application for costs under the statute finding insufficient evidence of "a determination within the meaning of the statute or to show that the delay claims had no basis in law or fact." For the following reasons, we will affirm the judgment of the trial court.

UOSA contends that the Joint Venture's claim for material breach damages of $63,000,000 was, in actuality, a claim for delay damages. The Joint Venture responds that its damages lay in quantum meruit and thus its claim was not one for delay damages.

UOSA argues the material breach claim was really a delay damages claim that was effectively stipulated out of the case through the October 24th order and verified by Judge Finch's later bench ruling. UOSA reasons that the continued litigation of the material breach claim by the Joint Venture thereafter was essentially a de facto "determination" under the statute that the material breach claim was a false act not based on law or fact. UOSA thus concludes it is entitled to a percentage of its litigation costs incurred in opposing the material breach claim.⁵ However, UOSA's argument runs into an immediate roadblock.

Nothing in the October 24th order addresses the material breach claim as set out in Law #193766. More importantly, UOSA cannot avoid the unmistakable clarity of the record which contains the uncontradicted, succeeding and specific...