Weitz Co., Inc. v. Mo-Kan Carpet, Inc.

• Decision Date: 29 December 1983
• Docket Number: 83-1157,MO-KAN,Nos. 83-1113,s. 83-1113
• Citation: 723 F.2d 1382
• Parties: 115 L.R.R.M. (BNA) 2287 The WEITZ COMPANY, INC., Appellee/Cross-Appellant, v.CARPET, INC., Western Casualty and Surety Company, and United States Fidelity and Guaranty Company, Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1382

723 F.2d 1382

115 L.R.R.M. (BNA) 2287

The WEITZ COMPANY, INC., Appellee/Cross-Appellant, v. MO-KAN CARPET, INC., Western Casualty and Surety Company, and United States Fidelity and Guaranty Company,

Appellants/Cross-Appellees.

Nos. 83-1113, 83-1157.

United States Court of Appeals,

Eighth Circuit.

Submitted June 16, 1983.

Decided Dec. 29, 1983.

Anna I. Shinkle, David C. Shinkle, Des Moines, Iowa, for appellants/cross-appellees.

William J. Koehn, Diane M. Stahle, Des Moines, Iowa, for The Weitz Co., Inc.

Before LAY, Chief Judge, SWYGERT, ¹ Senior Circuit Judge, and ARNOLD, Circuit Judge.

PER CURIAM.

This is a diversity-contract dispute in which plaintiff-appellee Weitz Company, Inc. filed suit against defendant-appellant Mo-Kan Carpet, Inc. to recover damages because of Mo-Kan's non-performance of a construction contract. Following a bench trial the district court ruled in favor of Weitz and ordered Mo-Kan to pay damages of approximately $63,000.

Weitz was engaged as a general contractor responsible for construction of two federally-subsidized housing projects in Des Moines, Iowa. In September 1977 Mo-Kan submitted a bid to Weitz to install carpeting and flooring in the projects. Because the bid was not in the form required by the federal government, Weitz sent Mo-Kan the appropriate documents and Mo-Kan signed the contract.

At the time the contract was signed Weitz was party to a collective bargaining agreement with the local construction union, Carpenters Local Union 106 of the United Brotherhood of Carpenters and Joiners of America, AFL-CIO ("the Union"). The agreement expressly prohibited piecework compensation. Mo-Kan's customary practice was to hire independent contractors. The contractors hired by Mo-Kan to complete the contracts in this case paid its workers on a piecework basis.

Mo-Kan workers had been on the job for two weeks when they were approached by the Union's local business agent. The agent asked to see union membership cards, which these workers did not have. The Union contacted a Weitz official who was told that the job would be shut down if Weitz did not remove the non-union workers. As a compromise, the union indicated that if the Mo-Kan workers would join the union, the job could be continued on a per piece basis. Mo-Kan refused to pay the union fees and walked off the job.

Weitz then demanded performance of the Luther Park Housing Project contract. Mo-Kan offered to complete the work, but only on a non-union piecework basis. Weitz stated that because of its contract with the union, and because the contract with Mo-Kan required Mo-Kan to conform to current labor practices, Mo-Kan was obliged to complete the work regardless of its labor problems with the Union. Weitz subsequently was forced to hire a new contractor and purchase materials on short notice (Mo-Kan refused to supply the materials for the project, as requested by Weitz).

Weitz filed suit against Mo-Kan ² alleging that Mo-Kan breached the construction project by failing to adhere to the labor "practices and procedures" and by failing to complete the work. Weitz sought damages for its costs in hiring another subcontractor to install the carpeting and flooring.

The district court held that

the provision of paragraph 13, which requires Mo-Kan to conform to Weitz's labor policies, practices and procedures, is clear and unambiguous; that such provision placed the duty on Mo-Kan to ascertain and comply with Weitz's labor policies; that Mo-Kan failed to do so; that had Mo-Kan performed this duty it would have learned that piecework payments were prohibited; that by paying by piecework it did not conform to Weitz's labor policies; that Mo-Kan left the job for its own reasons and was not ordered off the job by Weitz; that it breached the terms of the contracts covering Stone Crest and Luther Park.

In this appeal Mo-Kan argues that paragraph 13 is not unambiguous, and that extrinsic evidence should have been admitted tending to show the "real" intention of the parties. Weitz has filed a cross-appeal, arguing that the district court erred in computing interest on the damage award according to the federal standard, rather than the standard provided by Iowa statutes which allows prejudgment interest. For the reasons that follow, we affirm the district court judgment on the contract issue, but reverse in regard to prejudgment interest.

We agree with the district court that the contract entered into by Weitz and Mo-Kan is dispositive of this dispute. Paragraph 13 of that contract required Mo-Kan to "conform to Contractor's [Weitz's] labor policies, practices, and procedures." One such policy, as expressly stated in Weitz's agreement with the Union, precluded piecework payments. Although conceding that this portion of the contract placed an affirmative duty on the sub-contractor to ascertain and comply with Weitz's policies, ³ Mo-Kan argues that it nonetheless had no knowledge of the collective bargaining agreement between Weitz and the Union. This argument is without merit. A party to a contract is "bound by the document ... even though ... it has not expressly accepted all of the contract terms or is even aware of them." Wilmotte & Co. v. Rosenman Bros., Inc., 258 N.W.2d 317, 323 (1977).

Moreover, even if, as Mo-Kan argues, the bargaining agreement provision relating to piecework compensation were inapplicable in this case because the projects were residential construction, this would not excuse Mo-Kan's nonperformance. Paragraph 30 of the contract provides that Mo-Kan "agrees that no labor dispute of any kind involving Subcontractor [Mo-Kan], or his employees or agents shall be permitted to occur or be manifested on the Project ...." In our view this reflects a rather explicit intent on the part of Weitz not to become involved in the myriad potential disputes that might arise between a subcontractor and a labor union, whether it involves a union's erroneous interpretation of the collective bargaining or otherwise. This conclusion is supported by testimony at trial which established that Weitz officials told Mo-Kan to resolve its own labor problems. We find no merit in Mo-Kan's contention that not only should Weitz have mediated Mo-Kan's labor dispute, but should have borne the financial consequences of its nonperformance. In sum, the activity of the Union in this case does not mitigate Mo-Kan's obligation of performance under the contract with Weitz, and does not support Mo-Kan's impossibility of performance argument.

The final argument raised by Mo-Kan involves the Iowa Right to Work Law, Iowa Code Ann. Sec. 731.1 et seq. (West 1982). ⁴ Mo-Kan apparently argues that it was excused from performance because the Union and Weitz "conspired" to force Mo-Kan workers to join the Union, in violation of the above statute. We agree with the district court that the Right to Work Law has no application to this case. Neither the contract between Weitz and Mo-Kan nor the collective bargaining agreement between Weitz and the Union required union membership.

The final issue concerns the cross-appeal of Weitz. Weitz argues that, in this diversity suit, the district court erred in applying the federal interest statute rather than the Iowa interest statute. We hold that federal law governs the award of postjudgment interest in this case while state law governs the award of prejudgment interest. The federal judgment interest statute was amended and became effective October 1, 1982. Federal Courts Improvement Act of 1982, Pub.L. 97-164, Sec. 302(a), 96 Stat. 25, 55-56 (codified at 28 U.S.C.A. Sec. 1961(a) (Supp.1983)). Federal law now provides for interest from the date of judgment at a floating rate determined by the coupon yield of United States Treasury bills. The provision covers "any judgment in a civil case recovered in a district court." Id. No exemption is made for actions based on diversity of citizenship. This court must apply an applicable federal provision over a conflicting state provision, unless the federal provision is found unconstitutional. See Hanna v. Plumer, 380 U.S. 460, 471, 85 S.Ct. 1136, 1144, 14 L.Ed.2d 8 (1965); U.S. Const. art. VI, cl. 2. We believe that the new federal interest statute is constitutional and therefore governs the award of postjudgment interest in this case. Accord Rose Hall, Ltd. v. Chase Manhattan Overseas Banking Corp., 566 F.Supp. 1558, 1574 n. 46 (D.Del.1983); Lake Tahoe Sailboat Sales & Charter, Inc. v. Douglas County, 562 F.Supp. 523, 524 (D.Nev.1983); Interstate Fire & Casualty Co. v. Hartford Fire Insurance Co., 548 F.Supp. 1185, 1189 (E.D.Mich.1982). We affirm this portion of the district court's order.

The dissenting opinion, relying particularly on Bernhardt v. Polygraphic Co., 350 U.S. 198, 202, 76 S.Ct. 273, 275, 100 L.Ed. 199 (1956), suggests that because of the Erie doctrine the recent federal statute should not be interpreted to apply to diversity cases. In Bernhardt, the federal statute involved was the Arbitration Act, 9 U.S.C. Sec. 3, which was in conflict with state law on the question of the enforceability of an agreement to arbitrate. The Supreme Court narrowly construed the Arbitration Act in order to avoid the constitutional question whether the Act, if read to apply to diversity cases, would be invalid. In our view, this analysis is not applicable here, because the question of Congress's constitutional power to pass a law fixing a rate of interest on judgments entered by federal courts is not substantial. Congress has the power, under Article III of the Constitution, to ordain and establish inferior federal courts, including this Court and the District Court which entered the judgment below. It also has the power to pass all laws necessary and proper for the execution of powers specifically granted. The accrual of interest on judgments is an ordinary incident of judicial relief, and we think it clear that the power that creates the tribunal that enters the...