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Paige International, Inc. v. XL Specialty Insurance Co.

United States District Court, District of Columbia

July 28, 2017

XL SPECIALTY INSURANCE CO., et al., Defendants.


          JAMES E. BOASBERG, United States District Judge

         The law of construction suretyships is a subject that aspiring lawyers might happen across in studying for the bar exam but then quickly forget. This case against three surety companies has been more enduring. It involves Plaintiff Paige International, Inc.'s suit against Defendants XL Specialty Insurance Company and its related entities for unpaid sums incurred in completing construction work at Washington's Marriott Marquis Hotel. After longstanding litigation and a multi-day bench trial, the Court held that Defendants were liable pursuant to a Payment Bond and awarded Plaintiff $463, 092.50 in proven damages.

         Not satisfied with this recovery, Paige now seeks to revisit the damages calculation, tack on pre-judgment interest, and add an award of attorney fees. It finds success on only the middle request.

         I. Background

         Before addressing the substance of Paige's Motions, the Court offers an overview of its suit against the three surety companies. In doing so, the Court primarily relies on its own oral findings of fact, supplemented where necessary with the parties' post-trial briefing and trial exhibits. See April 27, 2017, Hearing Transcript; ECF Nos. 57 (Plaintiff's Post-Trial Memorandum), 58 (Defendants' Post-Trial Memorandum). This section first synopsizes the overarching contracting scheme before discussing the outcome of the recent bench trial.

         The present lawsuit involves a Russian-nesting-doll setup of construction contractors. Occupying the outermost layer is HQ Hotel, LLC, which owns the Marriott Marquis Hotel connected to the D.C. Convention Center. See Pl. Mem. at 1; Def. Mem. at 3. In October 2010, HQ Hotel and Hensel Phelps Construction Company entered into a Prime Contract worth around $400 million to build that hotel. See Tr. at 3:4-8; Pl. Exh. 1.1 (Hensel Phelps Prime Contract). Hensel Phelps then divvied up individual components of that task among various entities and, as relevant here, entered into a Subcontract with Truland Systems Corporation to set up different electrical systems. See Tr. at 3:12-14; Pl. Exh. 1.2 (Truland Subcontract). Truland, in turn, further split up its portion of the project by executing additional contracts, including a Sub-subcontract with Plaintiff for telecommunications and security-systems work. See Tr. at 3:19-4:10; Pl. Mem. at 1; Def. Mem. at 5; Pl. Exh. 1.7 (Paige Sub-subcontract).

         Now this setup involved some risk for Hensel Phelps. Its Prime Contract with HQ Hotel provided that the Marriott was to open on May 1, 2014, and that it would incur substantial monetary penalties for delay. See Tr. at 4:11-13; Pl. Mem. at 3. More specifically, if any of Hensel Phelps's various subordinate companies faltered and if construction halted, then it would be on the hook for upward of $100, 000 per day and $13 million in total liquidated delay damages. See Pl. Mem. at 3; Prime Contract, arts. 6.15(i), 6.16(c), 6.17(c). Mishap might come in many forms, but relevant here was the possibility that subcontractors might fail to pay their own laborers and suppliers, thus throwing a wrench into the project. To insulate itself from this risk, Hensel Phelps required that Truland guarantee its downstream payment obligations by furnishing a payment bond, executed by a surety company. See Truland Subcontract, § D, art. 34(a). As Hensel Phelps was the protected party, the Subcontract specified that that the Bond “shall be drawn in favor of the [Prime] Contractor” “for the full amount of this Subcontract, ” roughly $40 million. Id., § C.

         Truland indeed obtained such a Payment Bond from Defendants XL and two related surety companies (Greenwich Insurance Company and XL Reinsurance America, Inc.). See Pl. Exh. 1.4 (Payment Bond). The Court will need to delve into the details of this Bond later. For now, it suffices to say that the instrument came into effect if Truland did not “promptly make payment” to its sub-subcontractors (e.g., Paige), in which case those lower-tier companies could file claims with XL to be paid “amounts due for labor, material or equipment used or reasonably required for use in the performance of the [Truland] Subcontract.” Id., pmbl. & ¶ 5. As a result, Hensel Phelps could rest assured that the project would continue apace and that it would not itself need make further payments to Truland's sub-subcontractors.

         As any pessimist would anticipate, all did not proceed as planned. To begin, in June 2013, Tropical Storm Andrea hit Washington, requiring Paige to rack up expenditures associated with remediating water damage from the squall. See Tr. at 4:14-20. If that were not enough, the hotel project also suffered other delays, and so Plaintiff bore costs from accelerating its work to fit a tighter timetable. Id. at 4:21-24. To top it off, Truland went bankrupt, leaving Paige (and others) in the lurch, as several of Paige's proposed change orders for additional work to the defunct Subcontractor were left pending, unsigned and unpaid. Id. at 5:1-4, 7:20-21.

         With Truland out of the picture, Paige filed a claim under the Payment Bond and then immediately brought the present lawsuit against XL to recover those amounts left due and owing. XL, conversely, believed that Paige's claims were insufficiently documented and not necessarily in excess of the already-paid contract price. The case thus proceeded to a bench trial, after which the Court ruled that Defendants were indeed liable for sums related to Plaintiff's storm remediation, acceleration of work, and pending change orders. Id. at 8:12-15. Paige claimed around $1.3 million in damages, but because it could not adequately show that all those dollars went to performing duties over and above the base Sub-subcontract and because its recordkeeping was so shoddy, the Court discounted the award by 50% and also deducted other amounts that XL had already paid Paige or its own subcontractors. Id. at 15:3-14. In total, the Court determined that Defendants owed Plaintiff $463, 092.50 in damages. Id.

         Plaintiff now raises three separate issues with the award. It first seeks to amend two aspects of the damages calculation, and it also demands pre-judgment interest as well as attorney fees. See ECF Nos. 59 (Motion for Attorney Fees & Motion for Pre-judgment Interest), 60 (Motion to Amend Damages). The Court analyzes each question in turn.

         II. Analysis

         A. Calculation of Damages

         In its initial effort to increase its recovery, Paige takes issue with two features of the Court's $463, 092.50 award. First, it assails the Court's 50% reduction of certain claimed charges. While “Paige accepts [the 50%] discount as reasonable as to its breach of duty claim, ” it contends that such discount “was erroneously applied . . . to the pending PCOs and Storm Andrea damage claim.” Damages Mot. at 3. Second, Plaintiff believes that the Court improperly credited XL with money saved from the insurance company's direct settlement with SPL, a Paige subcontractor. Id. at 9-12.

         The Court held a six-day bench trial, heard from multiple witnesses, and considered hundreds of exhibits. It also reviewed lengthy post-trial submissions from each side on both factual and legal questions in dispute. As explained in its ultimate oral verdict, determining the appropriate measure of damages was no easy feat. Paige's lack of records was the principal culprit in the Court's struggle to fashion a just award. In settling on the 50% discount figure, the Court, as the finder of fact, selected what it considered the fairest figure. In seeking to limit that percentage reduction, Paige raises no new issues not already contemplated by the Court and incorporated in the verdict. For example, Plaintiff has not demonstrated that more than 50% of its additional PCO and storm-remediation work was performed over and above what would have been required under the base contract. Similarly, the Court sees no basis to revisit its determination on the SPL credit and believes that its prior damages finding on that issue remains valid.

         Other factfinders could well have come to different conclusions on these and myriad other disagreements between the parties, but this Court's determination on the final sum represents its best effort under the facts and law presented.

         B. Pre-judgment Interest

         The Court turns next to the issue of pre-judgment interest, to which Plaintiff claims it is entitled. As a general matter, there are two forms of interest to compensate a plaintiff for losses from a breach of contract: pre-judgment and post-judgment. The former runs “from the time the claim accrues until judgment is entered, ” West Virginia v. United States, 479 U.S. 305, 310-11 n.2 (1987), while the latter “runs from the date of the entry of judgment” until payment by the defendant. Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 835-36 (1990). Only pre-judgment interest is at issue here. While Paige believes that it is owed such interest on the Court's full damages award, XL retorts that pre-judgment interest ...

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