804 F.3d 889
7th Cir.2015Background
- Pileco (licensor/lessee) and Bauer (parent) supplied a large trench cutter to Slurry Systems for a federal reservoir project, under a lease mediated by Pileco.
- Slurry, as prime contractor, posted a Miller Act payment bond through Fidelity & Deposit Co. of Maryland to cover subcontractors like Pileco.
- Slurry allegedly refused to pay the rent due to alleged defects; Pileco sued Slurry and Fidelity in federal court for breach of contract and Miller Act claims, with supplemental jurisdiction under 28 U.S.C. § 1367 and diversity.
- A single contract governed the dispute, with Pileco as Bauer’s agent; Slurry also asserted a third-party breach/warranty claim against Bauer.
- First trial produced a flawed verdict: damages to Pileco and Fidelity, a breach against Slurry, a large punitive award against Bauer for Illinois CFDA claim, and an unfilled equitable-adjustment question.
- Judge Keys ordered a retrial under Fed. R. Civ. P. 59(d) due to the botched verdict; the second verdict favored Pileco substantially, except for a modest equitable adjustment to Slurry.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of Miller Act claim against Fidelity | Pileco contends Fidelity is liable under the Miller Act for unpaid subcontractor claims. | Fidelity argues the Miller Act covers direct supply by the contractor, not Pileco as intermediary; only Bauer supplied the cutter. | Pileco's Miller Act claim against Fidelity is valid; Pileco provided the cutter via its lease, not merely Bauer. |
| Availability of punitive damages under Illinois CFDA claim | Slurry contends punitive damages are allowed where compensatory damages exist; Bauer violated Illinois CFDA. | No compensatory damages were awarded on the CFDA claim in the first trial; punitive damages improper. | Punitive damages cannot be awarded where there are no compensatory damages; the initial punitive award was improper. |
| Effect of equitable-adjustment provision on damages and prejudgment interest | Equitable adjustment should reduce Slurry’s liability and affect prejudgment-interest base. | Equitable adjustment was a live issue; the first verdict failed to calculate it, misaligning damages. | Remand for proper calculation; prejudgment interest and related costs improper in the first ruling but reversed on remand. |
| Remedy for the defective first verdict | A remittitur or new trial could cure defects without overturning the merits. | Retrial is necessary due to the defective verdict and confusion. | Judge properly ordered a retrial; the second verdict cured prior confusion and was more credible. |
| Scope of cost shifting and prejudgment-cost recovery | Pileco seeks costs and prejudgment interest based on the second verdict and Illinois law. | District court properly denied costs and prejudgment interest due to uncertainties and first verdict defects. | Judgment affirmed in part; reversed and remanded on prejudgment interest and costs. |
Key Cases Cited
- Avery v. State Farm Mutual Automobile Ins. Co., 216 Ill.2d 100 (2005) (requires actual damage for punitive damages under Illinois CFDA)
- Hayman v. Autohaus on Edens, Inc., 248 Ill.2d 734 (2000) (no punitive damages without compensatory damages)
- BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996) (constitutional limits on punitive/compensatory ratio)
- Keeling v. Esurance Ins. Co., 660 F.3d 273 (7th Cir.2011) (ratio considerations in punitive damages)
- Jones v. Hryn Development, Inc., 334 Ill.App.3d 413 (2002) (availability of prejudgment interest under Illinois law)
- La Grange Metal Products v. Pettibone Mulliken Corp., 106 Ill.App.3d 1046 (1982) (prejudgment interest and damages considerations)
- Ash v. Georgia-Pacific Corp., 957 F.2d 432 (7th Cir.1992) (Illinois law on familiarity with punitive damages context)