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James G. Davis Construction Corp. v. HRGM Corp.

Court of Appeals of Columbia District

October 6, 2016

James G. Davis Construction Corporation, Appellant,
v.
HRGM Corporation, Appellee.

          Argued March 15, 2016

         Appeal from the Superior Court of the District of Columbia CAB-3645-08 Hon. Judith N. Macaluso, Trial Judge

          Stephen M. Seeger for appellant.

          Craig A. Holman, with whom William C. Perdue was on the brief, for appellee.

          BEFORE: Washington, Chief Judge; and Beckwith and Easterly, Associate Judges.

         JUDGMENT

         This case came to be heard on the transcript of record and the briefs filed, and was argued by counsel. On consideration whereof, and as set forth in the opinion filed this date, it is now hereby

         ORDERED and ADJUDGED that the judgment of the Superior Court is affirmed.

          Beckwith, Associate Judge

         This case involves a dispute over attorney's fees. Appellant James G. Davis Construction Corporation and appellee HRGM Corporation entered into a Joint Venture Agreement for the purpose of performing renovation work on McKinley Technical High School in the District. After completing the project, the parties became engaged in a series of disagreements concerning the management of the Joint Venture and the parties' respective obligations under the Joint Venture Agreement. HRGM eventually sued Davis, and Davis counterclaimed. After a two-week trial, the jury returned a verdict in favor of HRGM, awarding the company $5, 056 in compensatory damages and $70, 500 in punitive damages. The jury also rejected Davis's counterclaim. HRGM then filed a post-trial motion for attorney's fees and costs under Super. Ct. Civ. R. 54 (d)(2), arguing that such a fee award was authorized by the terms of the Joint Venture Agreement. The trial court granted the motion over Davis's opposition and awarded HRGM $736, 152.76 in attorney's fees and $39, 344.67 in costs.

         Davis now challenges this award on several grounds, arguing primarily that the trial court erred in awarding HRGM attorney's fees under the Joint Venture Agreement. Davis also contends that even if such an award were proper, the trial court abused its discretion by awarding HRGM an unreasonable amount of fees. Unpersuaded by Davis's arguments, we affirm the judgment of the trial court.

         I. Facts

         Appellant James G. Davis Construction Corporation and appellee HRGM Corporation are commercial construction companies that entered into a Joint Venture Agreement in August 2002 for the purpose of serving as general contractor on a project to renovate McKinley Technical High School in Northeast D.C. Under the Agreement, Davis was the managing venturer with responsibility for supervising the project and maintaining the accounting records. Davis was accordingly assigned 80 percent of the project's profits (or losses), and HRGM was assigned 20 percent. The Joint Venture Agreement required that "an independent firm of accountants" conduct "[p]eriodic audits of the books" as well as a "final audit . . . upon completion of the project." The parties completed the project in 2006 at a value of more than $53 million.

         During and after the project, HRGM had raised concerns about Davis's management of the Joint Venture, including improper charges to the entity, self-dealing, and a failure to comply with its accounting duties as well as the periodic and final audits required under the Joint Venture Agreement. In March 2007, Davis sent HRGM a letter explaining that HRGM owed the Joint Venture $111, 223 for unpaid capital contributions. Believing that this demand was improper under the Agreement, HRGM responded by filing suit against Davis on May 14, 2008, alleging claims for breach of contract, breach of fiduciary duty, and a full and complete accounting. HRGM claimed in particular that Davis breached the Joint Venture Agreement by among other things improperly charging personnel, equipment, supplies, and other costs to the Joint Venture; "[f]ailing to comply with its accounting obligations" through maintaining accurate records; "[i]mproperly appropriating . . . opportunities belonging to the Joint Venture"; "[e]ngaging in improper self-dealing"; "[d]emanding payment of amounts to the Joint Venture from HRGM without the required final audit"; and generally "[m]ismanaging the Joint Venture such that Davis alleges that the Joint Venture lost money" on the project. In support of its breach of fiduciary duty claim, HRGM alleged that Davis "willfully and maliciously" engaged in the conduct underlying its contract claim. HRGM requested $2.5 million in compensatory damages and $3 million in punitive damages.[1] Davis filed a verified Answer and Counterclaim in which it alleged a breach of contract and sought to recover from HRGM the $111, 223 in unpaid capital contributions.

         A two-week trial began on January 24, 2011. Before jury deliberations commenced, the trial court provided a standard punitive damages instruction- which both parties had agreed on in their Joint Pretrial Statement-that told the jury to consider "any attorney's fees that [HRGM] has incurred in this case" as one factor in its calculation of punitive damages.[2] See Standardized Civil Jury Instructions for the District of Columbia, No. 16-3 (2007 ed. rev.). On February 9, the jury returned a verdict for HRGM on its breach of contract and fiduciary duty claims while rejecting Davis's breach of contract counterclaim.[3] The jury awarded HRGM $5, 056 in compensatory damages and $70, 500 in punitive damages for the fiduciary duty breach, but no additional damages for the contractual breach. HRGM filed a motion for a new trial on damages, which the trial court denied on August 11, 2011. HRGM did not appeal this decision.

         After the jury rendered its verdict, HRGM also filed a post-trial motion for attorney's fees under Super. Ct. Civ. R. 54 (d)(2). HRGM requested $808, 692.50 in attorney's fees and $75, 530.29 in costs based on Article XXI of the Joint Venture Agreement, which in HRGM's view entitled it to recover from Davis fees based on the litigation. Article XXI provides:

XXI. SCOPE OF VENTURER'S AUTHORITY; INDEMNIFICATION
No Venturer shall take any action on behalf of or in the name of the Joint Venture, or enter into any commitment or obligation binding upon the Joint Venture, except for actions expressly provided for in this Agreement or authorized by the Venturers in the manner set forth herein.
It is understood and agreed that none of the parties hereto nor any of the designees shall have the power to borrow monies for, in the name of, or to pledge the credit of the other party to this Agreement or on their joint credit, or to otherwise obligate the other party to this Joint Venture Agreement to third party creditors.
Each Venturer shall indemnify and save harmless the other Venturer and its affiliates, directors, employees and officers from and against any and all claims, demands, losses, damages, liabilities, lawsuits and other proceedings, judgments and awards, and costs and expenses (including but not limited to reasonable attorneys' fees) arising directly or indirectly, in whole or in part, out of any breach of the foregoing provisions by the Venturer or its affiliates, officers, agents or employees.

(Emphases added).

         Davis opposed the motion, arguing that HRGM failed to satisfy the conditions for the recovery of fees under Article XXI and that HRGM could not in any event pursue post-trial attorney's fees because the jury had already considered and awarded such fees as part of its punitive damages calculation. On March 26, 2012, the trial court issued an order permitting HRGM's post-trial motion for attorney's fees to proceed. The court determined that "on its face [Article] XXI authorizes HRGM's request for fees and costs" and that "the jury awarded damages to HRGM as a result of actions taken by Davis 'on behalf of or in the name of the Joint Venture, ' or as a result of 'commitment[s] or obligation[s] binding upon the Joint Venture, ' which were a 'breach of the foregoing provisions'" of Article XXI. The court also held that the award of attorney's fees and costs in this case was an issue for the court to resolve rather than an issue that HRGM should have submitted to the jury as an element of damages. Because the jury was instructed to consider attorney's fees as part of its punitive damages award, moreover, the court concluded that the jury did factor these fees into its damages calculation. The court therefore made clear that the punitive damages award "may [be] adjusted (by remittitur or set off) in light of the attorneys' fee award, as necessary to avoid double recovery."

         On August 7, 2014, after extensive discovery, the court granted HRGM's motion and awarded the company $736, 152.76 in attorney's fees. The court made a separate award of $39, 344.67 in costs on July 24, 2015. This appeal followed.

         II. ...


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