US FOR USE AND BEN. EVERGREEN PIPELINE v. Merritt-Meridian Construction Corporation

• Decision Date: 07 July 1995
• Docket Number: No. 90 Civ. 5106 (DC).,90 Civ. 5106 (DC).
• Citation: 890 F. Supp. 1213
• Parties: UNITED STATES of America, for the Use and Benefit of EVERGREEN PIPELINE CONSTRUCTION CO., INC., and Evergreen Pipeline Construction Co., Inc., Plaintiffs, v. MERRITT-MERIDIAN CONSTRUCTION CORPORATION and General Insurance Company of America, Defendants. MERRITT-MERIDIAN CONSTRUCTION CORPORATION, Third-Party Plaintiff, v. TRANSAMERICA PREMIER INSURANCE COMPANY, INC., Third-Party Defendant.
• Court: U.S. District Court — Southern District of New York

890 F. Supp. 1213

UNITED STATES of America, for the Use and Benefit of EVERGREEN PIPELINE CONSTRUCTION CO., INC., and Evergreen Pipeline Construction Co., Inc., Plaintiffs, v. MERRITT-MERIDIAN CONSTRUCTION CORPORATION and General Insurance Company of America, Defendants.

MERRITT-MERIDIAN CONSTRUCTION CORPORATION, Third-Party Plaintiff, v. TRANSAMERICA PREMIER INSURANCE COMPANY, INC., Third-Party Defendant.

No. 90 Civ. 5106 (DC).

United States District Court, S.D. New York.

July 7, 1995.

COPYRIGHT MATERIAL OMITTED

Law Offices of James N. Cahill by James N. Cahill, Robert S. Beehm, Endicott, NY, for plaintiff.

Daniel L. Saxe, New York City, for defendants Merritt-Meridian Const. Corp. and General Ins. Co. of America.

Hart & Hume by Benjamin D. Lentz, New York City, for defendant General Ins. Co. of America.

McElroy, Deutsch & Mulvaney by James M. Mulvaney, Morristown, NJ, for third-party defendant Transamerica Premier Ins. Co., Inc.

OPINION

CHIN, District Judge.

On November 22, 1994, after nearly five years of litigation and following a four-week trial, the jury returned a verdict in this action in favor of plaintiff in the amount of $619,434.51. The jury found that defendant general contractor Merritt-Meridian Construction Corporation ("MMCC") materially breached its agreement (the "Subcontract") with plaintiff subcontractor Evergreen Pipeline Construction Co., Inc. ("Evergreen"). The jury invalidated several provisions in the Subcontract that would have limited plaintiff's recovery, and found that MMCC was liable to Evergreen for $22,350.51 for written change orders, $157,302 for delay damages, and $175,632 for other extra work.

On MMCC's counterclaims, the jury found that plaintiff did not materially breach the Subcontract, but it awarded MMCC $47,651 in "backcharges" for the period that plaintiff was working at the site and $10,400 for "change order no. 2." MMCC also sought to enforce two instruments that had been executed by Jack DeLello, Evergreen's president. The jury found the promissory note to be unenforceable as not supported by consideration, and it voided the confession of judgment as having been signed under duress and due to fraud.

The jury reached a final award by taking the $355,284.51 it found plaintiff suffered in damages, and adding to that: $400,000 as the agreed base contract amount; $204,570 for undisputed mass rock work; and $158,095 for undisputed trench rock work. The jury then subtracted $440,464 in payments from MMCC to Evergreen and $58,051 in credits for the backcharges and change order no. 2. Based on the above findings and calculations, the jury awarded plaintiff a total of $619,434.51.

Before the Court are several post-trial motions. Defendants move for judgment as a matter of law on the issues of plaintiff's claims for delay damages and orally requested extra work, and the question of whether plaintiff's alleged breach of the Subcontract precludes any recovery by plaintiff on that agreement. Defendants also move for a new trial on the independent grounds that the issue of punitive damages was improperly submitted to the jury, and that the verdict was against the weight of the evidence.

Plaintiff cross-moves for prejudgment interest and attorneys' fees and costs. Plaintiff also moves for the equitable remedy of a court order granting Evergreen judgment on its promissory note with MMCC and further compelling MMCC to enter a satisfaction of MMCC's state court judgment against Evergreen.

Lastly, third-party defendant Transamerica Premier Insurance Company ("TPI") cross-moves for attorneys' fees and costs.

Summary of the Facts

Evergreen was founded by its president Jack DeLello in Colorado. Evergreen specialized in installing pipeline, particularly for utilities in the Rocky Mountain states. When that work became sparse, DeLello came to New York State seeking work for Evergreen. DeLello learned that a contract had been awarded to MMCC for work at the United States Military Academy at West Point, and he made inquiries as to the availability of subcontract work.

MMCC, the general contractor, is a general construction company based in Beacon, New York. In 1987, the corporate secretary of MMCC was Dennis Capolino, and other members of the Capolino family served as senior officers of MMCC and affiliated companies. Prior to 1987, MMCC had performed various construction assignments at West Point on behalf of the United States Army Corps of Engineers. In 1987 MMCC and the Department of the Army, New York District, Corps of Engineers entered into a general contract entitled "Modernization & Expansion of Academic Facilities, Phase 1B" (the "Project"). The Project price was $12.5 million and an additional expenditure of $1.25 million was approved for alternate bid and unit price items, including the removal of trench and mass rock. The Project called for substantial interior and exterior work on existing buildings, as well as substantial site work, including drilling and blasting rock, laying utility lines and a drainage system, constructing new roads and parking lots, and extensive landscaping.

Much of the Project had already been subcontracted when DeLello contacted MMCC, but DeLello secured for Evergreen the drilling, blasting and excavation work. On behalf of their respective companies, Dennis Capolino and Jack DeLello entered into the Subcontract, dated August 13, 1987.

There were difficulties from the moment that Evergreen arrived on the site. DeLello testified at trial that Evergreen was mobilized too early, i.e., when he arrived at the site there was insufficient work and his personnel and equipment were idle. There were unanticipated difficulties with natural conditions, e.g., flooding in the trenches alongside West Point Highway. When the work did proceed there was more subsurface mass rock than anticipated, requiring extra drilling and blasting. The Subcontract was amended to cover some of this unforeseen work with written extra-work orders.

Evergreen delayed its performance while it waited for MMCC to provide surveyors. DeLello testified that after MMCC failed to deliver on its repeated promises to provide surveyors, he and Dennis Capolino agreed at meeting on January 7, 1988, that Evergreen would hire and pay the surveyors and MMCC would reimburse this expense. According to DeLello this method worked well at first with MMCC honoring the weekly bills for surveying. MMCC later began refusing the bills. Evergreen then fired the surveyors, only to see MMCC hire them back and place them on its payroll.

As the project advanced, the relationship between MMCC and Evergreen deteriorated, and there were ongoing disagreements on interpreting and allocating responsibilities under the Subcontract. Capolino testified that pervasive problems stemmed from Evergreen's lack of experience with this type of work. DeLello testified that MMCC withheld payments and was trying to destroy Evergreen after extracting substantial services.

In March 1988 MMCC told Evergreen that it was not performing quickly enough. MMCC began to supplement Evergreen's work with MMCC's personnel and equipment. MMCC then "backcharged" for these services. In April, MMCC presented Evergreen with a bill for approximately $200,000 in backcharges. DeLello protested that the backcharges were grossly inflated.

Evergreen did not have enough cash on hand to pay its bills as they came due. MMCC twice paid Evergreen's quarterly insurance payments. At a negotiating session about which the parties provided sharply differing testimony, DeLello executed a promissory note in the amount of $80,000 and a confession of judgment stating that Evergreen had breached the Subcontract and was liable for $80,000 in liquidated damages.

MMCC stopped paying for Evergreen's insurance. Dennis Capolino met with DeLello and told him that he wanted Evergreen off the job, because the failure to maintain insurance was a breach of the Subcontract. The next day, after speaking with his brother Richard, Dennis Capolino met with DeLello to discuss the backcharges. DeLello testified that it was a confrontational meeting, with both sides contesting what was owed to whom. That night, Evergreen moved its equipment off the site. The next day, Evergreen took steps to ensure the integrity of its work, and it then left the Project, before its work was completed.

The record contains substantial evidence to support the jury's determination that MMCC breached its contractual obligations to Evergreen. For example, the record contains substantial evidence that MMCC breached its obligation to deal with Evergreen in good faith.

Don Scaglione, a former employee of MMCC who was MMCC's Project Manager on the Project from approximately May or June 1987 until May 1988, testified that MMCC's payments to Evergreen for work performed were "slow and controlled."¹ Scaglione testified that "Dennis Capolino wanted to spoon-feed Jack," and thus Scaglione did so, although he did not agree with the approach. He testified that although MMCC received payment for the removal of unexpectedly large quantities of mass rock, and although "we were paid for it before the change order was approved, ... we didn't pay Evergreen for it," because "we were trying to keep him DeLello on the job without paying him everything." He also testified that when DeLello complained to Dennis Capolino about not getting paid, Capolino responded by saying "sue me."

Scaglione's testimony was corroborated by DeLello, who testified that during the meeting the night before Evergreen left the site, Capolino put his feet up on the table to show that he had written on the soles of his shoes the words "JACK SUCKS." Later that day, DeLello testified that Capolino said to him: "We're not going to give you a dime, we don't have to. It would take you a hundred thousand dollars to retain an attorney. I'll tie you up for six years. Go fuck yourself."

Dennis Capolino's attitude toward DeLello was also...