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12/18/92 WASHINGTON METROPOLITAN AREA TRANSIT

December 18, 1992

WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, APPELLANT
v.
NELLO L. TEER COMPANY, APPELLEE



On Certification from the United States Court of Appeals for the District of Columbia Circuit.

Before Terry, Farrell, and Wagner, Associate Judges.

The opinion of the court was delivered by: Terry

TERRY, Associate Judge: This case presents three questions of District of Columbia law which have been certified to us under D.C. Code § 11-723 (1989) by the United states Court of Appeals for the District of Columbia Circuit. Among the issues raised in the appeal to the Circuit is whether there can be an implied contractual duty arising under a 1974 construction contract obligating the Washington Metropolitan Area Transit Authority (WMATA) to avoid unreasonable delays in processing "equitable adjustment" claims, the breach of which entitles an aggrieved contractor to pre-judgment interest on that adjustment. Noting that this was an unresolved issue of local law, the Circuit, following the procedures prescribed by D.C. Code § 11-723 (c), issued an opinion setting forth the facts relevant to the questions certified and the nature of the controversy. Nello L. Teer Co. v. WMATA, 287 U.S. App. D.C. 260, 921 F.2d 300 (1990). We conclude, after reviewing pertinent statutes and case law, that any award of pre-judgment interest against WMATA in a case such as this is barred by District of Columbia law.

I.

After competitive bidding, WMATA awarded a construction contract on May 7, 1974, to Nello L. Teer Company (Teer). The contract provided for the construction of the Clarendon subway station in Arlington, Virginia, at an estimated contract price of $29,664,702. The contract contained a clause providing for "equitable adjustments" whenever WMATA's modifications of the contract increased or decreased the contractor's performance cost. WMATA also agreed in the contract to obtain the required access easements before construction would begin.

Teer was advised to proceed with construction because all necessary permits and easements had been obtained, although in fact some of the easements had not been obtained by the time Teer was ready to begin work. Because of the easement problems, a design change had to be made, delaying the project by 194 days. All work under the contract was accepted as complete as of August 19, 1977.

Shortly thereafter, Teer sought equitable adjustments for seventeen claims, sixteen of which were eventually resolved. The seventeenth claim asserted that WMATA's delay in obtaining the necessary easements caused Teer to incur more than $8 million in additional costs. This claim was reviewed by a resident engineer, who recommended an adjustment of $592,814, representing costs that he found to be properly attributable to WMATA's delay. WMATA agreed with the recommendation and on November 16, 1979, adjusted the contract price by that amount. On December 4, 1979, Teer appealed this decision to the Board of Contract Appeals of the Army Corps of Engineers (the Board), which in due course held an evidentiary hearing. *fn1

On September 30, 1986, five years after the evidentiary hearing and nearly seven years after the filing of the appeal, the Board issued its advisory opinion. By this time Teer's claims had escalated to more than $12 million. The Board rejected the majority of these claims, making numerous findings of fact and concluding that the record demonstrated unmistakably that the delays were caused by events not attributable to WMATA. The Board specifically found incredible the testimony of Teer's consultant regarding the delays. The Board also found that "the Contracting Officer's unilateral adjustment here is at the lower end of the possible range" and therefore increased the equitable adjustment by $138,937. After observing that "for many reasons, none of which can be ascribed to Teer, the Disposition of this appeal has consumed an unusually long period of time," the Board awarded Teer an "additional profit" of $58,870. This amount was determined by calculating six percent of $138,937 per annum from the date the appeal was filed (December 4, 1979) until the date of the Board's decision (September 30, 1986). This "additional profit" award is the subject of the instant litigation.

The General Manager of WMATA, who had final decision-making power under the contract, substantially adopted the Board's advisory opinion, allowing the $138,937 increase in the equitable adjustment. She disallowed the "additional profit," however, after finding that the sum represented prejudgment interest and that WMATA, as "an interstate agency, formed by compact with congressional consent," was immune from such an award unless interest was specifically authorized by statute or by contract. Teer sought review of this decision in the United States District Court for the District of Columbia, challenging both the adequacy of the equitable adjustment and the General Manager's refusal to pay pre-judgment interest on the Board's increase in the adjustment.

The District Court rejected Teer's challenge to the adequacy of the Board's award, but held its ruling on the pre-judgment interest issue in abeyance pending the outcome of WMATA's petition for rehearing en banc in the United States Court of Appeals in a different case in which a Board award of pre-judgment interest had been upheld by the court. In that case, General Railway Signal Co. v. WMATA, 277 U.S. App. D.C. 287, 277 U.S. App. D.C. 287, 875 F.2d 320 (1989), cert denied, 494 U.S. 1056 (1990) (" GRS II "), the court ruled that an equitable adjustment clause "imports into the contract a doctrine mandating a make-whole remedy that will restore a contractor to the contractor's pre-change circumstances." Id. at 294, 875 F.2d at 327. Thus the GRS II court concluded that WMATA had waived its immunity from pre-judgment interest.

Five days after Cuff was decided, but before the District Court issued its decision in the instant case, this court held in yet another case that the term "equitable adjustment" in a 1968 contract to which the District of Columbia was a party was not meant to include the payment of interest for sums withheld for nearly ten years. District of Columbia v. C.J. Langenfelder & Son, Inc., 558 A.2d 1155 (D.C. 1989). The District Court, while acknowledging that the Langenfelder court had rejected the analysis of GRS II, nevertheless affirmed the General Manager's award of interest in the instant case on the ground that interest may be awarded when there is an unreasonable delay in payment.

Both parties appealed from the decision of the District Court. After briefing and argument, the United States Court of Appeals for the District of Columbia Circuit found that the appeal "raises an unresolved question of local law" and certified three questions to this court. *fn2 Nello L. Teer Co. v. WMATA, supra, 287 U.S. App. D.C. at 261, 921 F.2d at 301. The certified questions are:

1. Under the law of the District of Columbia, can there be an implied contractual duty arising under a 1974 construction contract obligating WMATA to avoid unreasonable delays in processing equitable adjustment claims, the breach of which would entitle the contractor to an award of pre-judgment interest?

2. If a delay in processing an equitable adjustment claim does not justify an award of pre-judgment interest under question (1), can D.C. Code ยง 15-109 ...


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