505 B.R. 388
Bankr. D.P.R.2014Background
- Remand from the First Circuit required recalculation of Eichleay-based extended overhead damages using the percentage-of-direct-costs method where applicable and a determination of whether pre-judgment interest is appropriate, including its rate and accrual periods.
- The District Court remanded to the Bankruptcy Court for proceedings consistent with the First Circuit’s mandate.
- Redondo originally sought pre-judgment interest and extended overhead damages against PRHTA for three projects under Puerto Rico law.
- The First Circuit vacated Eichleay-based overhead damages and directed recalculation, and returned the pre-judgment interest issue to determine rate and periods.
- On remand, the parties filed stipulations; Redondo urged 6% pre-judgment interest under Article 1061 and extended overhead under Eichleay, while PRHTA argued waiver and a different approach/rate under Puerto Rico law.
- The court ultimately held Redondo is entitled to 6% pre-judgment interest from substantial completion dates, and ordered further stipulations on how to compute extended overhead damages (percent-of-direct-costs vs Eichleay) per the First Circuit mandate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Pre-judgment interest under Article 1061 | Redondo seeks 6% pre-judgment interest from substantial completion dates | PRHTA argues no pre-judgment interest or a different basis/rate | Yes; 6% pre-judgment interest from substantial completion dates |
| Method for extended overhead damages | Extent damages should be calculated using percentage-of-direct-costs for extra work | Eichleay should apply where delays are not due to extra work | Remand for calculation; either percentage-of-direct-costs (where applicable) or Eichleay for stand-by periods, per evidence |
| Standby requirement for Eichleay formula | Standby applicable to partial/total suspensions | Delay must be due to a stand-by condition; project never fully suspended | Standby can be met via partial stoppages; need evidence of delay patterns |
| Scope of stipulations on extra work | Extra work was “necessary but unanticipated” or compensated | Record unclear; need stipulations to classify delays | Remand to file stipulations briefs addressing whether extra work was necessary and unanticipated and the applicable method |
Key Cases Cited
- In re Redondo Construction Corp. v. Puerto Rico Highway and Transportation Authority (In re Redondo), 678 F.3d 115 (1st Cir. 2012) (vacated Eichleay damages and remanded for recalculation; pre-judgment interest to be determined)
- P.J. Dick Inc. v. Principi, 324 F.3d 1364 (Fed. Cir. 2003) (three-prong test for Eichleay applicability; burden-shifting framework)
- Republic Sec. Corp. v. Puerto Rico Aqueduct and Sewer Authority, 674 F.2d 952 (1st Cir. 1982) ( Puerto Rico civil-law interest matters; basis for Article 1061 recognizable in federal courts)