*1 narrowly Company, tailored ... Moore ing] regulation Brothers seeking Plaintiff-Appellee, tie the hands of States would operated equita- that elections are assure v. Indeed, efficiently.” Id. the Bur- bly and purport- chided the dissent for dick Court Highlands Company, Insurance apply scrutiny a minimal level ing to Defendant-Appellant, applying scrutiny in effect strict as while and invocation of [the dissent’s] “evident from tailoring quite rigid requirements.” narrow Root, Incorporated, Brown & 10, 112 analy- Id. at 440 n. S.Ct. 2059. The Defendant, im- majority sis that the Burdick found proper precisely analysis is Wood asks and here, i.e., require us to undertake “adopt Commonwealth to a less drastic Partnership II, Toll Road Investors reasonable, than the nondiscrimi- means” L.P., Party Third Defendant. natory question. statute in Id. The Commonwealth has articulated le- Company, Moore Brothers reasonable, gitimate justifying interests its Plaintiff-Appellant, nondiseriminatory require- ballot access v. circumstances, ments. such federal finding court has no basis for a state statu- Root, Incorporated; High- Brown & tory scheme unconstitutional. Company, lands Insurance De-
fendants-Appellees, V. and reasons, all of judgment For these district II, Partnership Toll Road Investors L.P., AFFIRMED. Party Third Defendant. Corporation, Lane Construction Plaintiff-Appellee, v. Root, Incorporated, COMPANY,
MOORE BROTHERS Defendant-Appellant, Plaintiff-Appellee, and ROOT, INCORPORATED, BROWN & Highlands Company, Insurance Defendant-Appellant, Defendant,
and
Highlands Company, Insurance
Defendant, II, L.P.; Partnership Toll Road Investors Company State Street Bank & Trust Connecticut, NA; Banque Natio II, Partnership Paris, Branch, Toll Road Investors nale De New York L.P., Party Party Third Defendant. Third Defendants. *2 Corporation, Lane Construction
Plaintiff-Appellee,
v.
Highlands Company, Insurance
Defendant-Appellant,
and Root, Incorporated,
Brown &
Defendant, Partnership II, L.P.;
Toll Road Investors Company
State Street Bank & Trust Connecticut, NA; Banque Natio- Paris, Branch, De York
nal New Party
Third Defendants. Corporation,
Lane Construction
Plaintiff-Appellant, Root, Incorporated; High Company, De
lands Insurance
fendants-Appellees, Partnership II, L.P.;
Toll Road Investors Company Bank Trust
State Street Connecticut, NA; Banque Natio Paris, Branch,
nale De York New Party
Third Defendants.
Nos. 99-1232 to 99-1237. Appeals,
United States Court
Fourth Circuit.
Argued Dec. March
Decided *3 operat- It was built and is
burg, Virginia. Partnership Road Investors ed the Toll (the (“TRIP”). In TRIP II “Own- ers”) general construction awarded Kraftson, Shu- Daniel J. ARGUED: Root, to Brown & Inc. addi- contract P.C., Reston, mate, Sparrow, Kraftson & contractor, general tion to its role as Emmett Virginia, Appellants. Robert equity partner an Brown & Root was also P.C., Rees, Diaz, Jr., Broome & Scully, in TRIP. Vienna, Appellees. ON Virginia, Shumate, Shumate, BRIEF: Charles L. in turn entered into sub- Reston, P.C., Virgi- Sparrow, Kraftson Co., Moore Brothers Inc. contracts with Brownell, Holland & nia; M. Thomas Corp., Construction Lane *4 Church, L.L.P., Virginia, Falls Knight, parts of the road. plaintiffs, High- to build Diaz, Joseph F. Raymond J. Appellants. pay- Co. issued a contract lands Insurance P.C., Rees, Diaz, Jackson, Broome & Vien- surety. bond ment as na, Appellees. Virginia, for Brown & between The subcontracts WILKINS, and MURNAGHAN Before general “pay a plaintiffs Root and contain HAMILTON, and Senior Judges, Circuit paid” when clause: Judge. Circuit any provision other Notwithstanding hereof, to by Owner General payment part, in and in reversed part, Affirmed to precedent is a condition Contractor opinion. Judge by published remanded to Contractor any obligation General in opinion, wrote the MURNAGHAN hereunder; General payment make Con- joined. Judge HAMILTON which Senior to obligation have no make tractor shall opinion an wrote WILKINS Judge any por- Subcontractor for payment to dissenting in concurring part part. and for which Gen- tion of the Sublet Work OPINION pay- has not received eral Contractor from the Owner. ment MURNAGHAN, Judge: Circuit bond issued payment The contract out of the construction case arises This part: Extension, Highlands states pri- a Toll Road of the Dulles road con- vately operated and toll owned Principal [Brown named The above Leesburg, and Vir- necting Airport Dulles hereby Surety [Highlands] and Root] appeal: are raised on ginia. Two issues agree with the severally and Obli- jointly first, surety may rely “pay a on a whether every claimant herein defined gees a clause in a as paid” subcontract when been in full before the who has not bond; on a liability payment to defense days of a of 90 after expiration period second, contractor general a and whether which the last of such claim- the date on of a valid the non-occurrence may rely on per- was done or or labor ant’s work precedent in the paid” condition “pay when formed, materials were furnished or liability a where as defense subcontract claimant, may sue on the bond for such responsi- partly contractor was the general claimant, prosecute the the use of such prece- failure of the condition ble for the sum or judgment for such suit final questions Because we answer both dent. claimant, and justly due may be sums as of the we affirm the orders negative, thereon. have execution part, part, reverse in district court contract con- prime The construction proceedings. for further remand if for additional provisions tains I. design order substantial the Owners “change constitute changes that Road Extension Dulles Toll The including provision project, scope” (“DTRE”) long private mile a fourteen early drafts binding arbitration. Airport and Lees- between Dulles toll road spe- for additional work also contained several were of the contract from, clarify design change adequately illustrations hidden and therefore not cific in which Brown & type by, of situation funded the lenders. pay- to additional Root would be entitled pavement When the need for a thicker ment from the Owners. apparent, subbase became Brown & Root pavement thickness of the Changing the to proceed ordered subcontractors material was included in the ex- subbase with the additional work. Under design changes that would war- amples “pay terms of the payment. Changing rant additional subcontract, pavement thickness of the subbase is if payment knew that for the addi- costly design change high- common and forthcoming tional work were not construction, throughout the de- way TRIP, it was the subcontractors who project the DTRE there was velopment of would assume the bulk of the loss. uncertainty adequacy about the some complet- After the additional work was pavement design the initial and the thick- ed, both Brown & Root and the subcon- ness of the subbase material that would be sought tractors arbitration their claim required by Virginia Department for additional from the Owners. Transportation. As as 1991 the The arbitrator concluded that the addition- *5 Brown & that project manager knew “change al work did in scope” constitute a design the initial for the DTRE pavement and therefore ordered the Owners to make “marginal was on the end.” payments beyond price. the base contract financing The lenders who were the pay The arbitrator ordered TRIP to however, highway project, wanted to con- Root, Brown & subsequently who was re- project tain the costs of the and insisted on quired pay to the subcontractors. certainty” in “high degree assessing of Because the lenders were not made They project the total costs. were hesi- significant likelihood that aware of the ad- agree to that tant to a contract contained necessary, ditional work would be financ- design of that specific changes illustrations ing arranged was never to cover payment. would warrant additional The “change scope” for additional work. Root, therefore, Owners TRIP, therefore, did not have the funds to agreed July specif- of 1993 to delete the pay Brown & Root the amount of the design ic changes illustrations of the Root, arbitration award. Brown & as a prime placate contract to the lenders. At result, obligated pay claims that it is not to time, the same the Owners and Brown & the for the additional work subcontractors Root assured the lenders that no substan- paid” because of the when clause “pay work, changes tial as defined the contained in the subcontracts. contract, anticipated. base were project completed The DTRE was ahead deleting design change After the illus- of schedule in of 1995. The September contract, prime trations from the the Own- early completion matter of a bonus for of incorporated ers and Brown & Root the subject project was the of extensive “Policy and illustrations into a Procedures” Root, negotiations between Brown letter, the which re- existence of was not TRIP, prime and the lenders before the essence, vealed to the lenders. In signed was and the construction contract Owners and Brown & Root reached side financing agreements were reached. agreement concerning “change additional the fi- Agreement, governed Note which scope” illustrations and then concealed nancing project, contained restric- that agreement by plac- from the lenders essence, bonus. tions on contractor letter, ing it in a while it out of leaving side to payment of the bonus was subordinated prime contract. Brown & Root did not debts, virtually project all other and could design that tell subcontractors outstanding until balance potential illustrations and the need not be made zero, summary judgment for loan was tiffs’ motion revolving credit of rejected to take five to seven The court anticipated against Highlands. was which knew, therefore, & Root years. Brown that it was entitled Highlands’ argument early completion bo- of “pay assert when defense to to delayed for at least five nus would be High- Because available to Brown & Root. not, however, They re- years. seven did incorporate not expressly lands did to the subcontractors veal that information into its bond “pay paid” provision when during negotiations over distribution contract, very purpose and because the the bonus. surety provide payment is to bond provision bonus The final version of the principal pay, is unable to the court contract was left somewhat primary Highlands plaintiffs was hable to held subcontracts, however, a In the vague. additional work that and must for the read: change order was added that plaintiffs performed. days receipt General Within 30 30, 1998, the December district On Contractor, will receive Subcontractor findings of fact and con- issued extensive (or $13,500.00 equivalent per 31.5% law after a bench trial on the clusions of day great- bonus whichever is earned claims Brown & Root. plaintiffs’ against er) monies of all Incentive Bonus held that Brown & Root is hable The court Owner for General Contractor (1) plus prejudg- milhon to Lane $1.4 of the General Contractor’s completion “change additional ment interest Except as amended Scope.... Work (2) work, Lane for milhon scope” $2.4 herein, and condi- all Subcontract terms (3) bonus, early completion in full unchanged, tions shall remain for the additional Moore for milhon $2.1 force and effect. (4) work, to Moore bonus, the district court
Regarding the *6 early completion for the milhon $2.4 concluded: bonus. they know nego- Plaintiffs did not when summary judg- appeal Defendants the into the relevant tiated and entered against Highlands ment order and change orders that the earliest reason- against Brown & Root. Plaintiffs ably judgment out in five to anticipated pay was financial' ar- in- years, cross-appeal prejudgment seven or the denial of a risk that the bonus rangement created completion terest on the bonus paid by would not the Owners at all. on Moore’s additional rejected Brown & Root’s sec- Plaintiffs work. which proposal,
ond contractor bonus the risk designed was to reduce of sub- II. delay nonpayment by or stantial We first consider whether district owner, information and docu- because granted plaintiffs’ motion properly had ments material to these risks been summary judgment against Highlands. from plain- either concealed or withheld granting an order sum- This court reviews tiffs Brown & Root. by mary judgment de novo. United States Brown & Root has not been (4th Cir.1993). 185, Ringley, 985 F.2d 186 bonus, nor has it in turn early completion paid portion of that bonus to the subcon- in the district court Jurisdiction tractors. See diversity citizenship. was based on ap § 1332. must therefore 28 U.S.C. We separate complaints filed Plaintiffs controversy. ply law to resolve the Virginia against Brown & Root and its 64, 58 Tompkins, Erie R.R. v. 304 U.S. surety, Highlands, in the Dis- bond U.S. (1938). 817, Virginia 1188 S.Ct. 82 L.Ed. District of trict Court for the Eastern vahdity “pay when recognize courts April of 1996. On Virginia December 22, 1997, in construction subcontracts. granted plain- paid” the district court clauses
723 First, Galloway Corp. v. S.B. Ballard Constr. there is no indication that 349, Co., 493, 354 parties phrase justly 250 Va. 464 S.E.2d intended the “sums (1995). here, presented incorporate how- due” to question contingency ever, surety payment by is whether a can assert contrary, Owners. On the “pay when principal’s very purpose securing defense based on a surety bond subcontract, where paid” language contract is to insure that claimants who surety expressly incorporate perform did not are paid work for their work in into the “pay paid” language principal when the event that the pay. does not Virginia suggest contract bond. The that non-payment by To the Own- courts have not addressed the use of the ers the surety obligation absolves of its is paid” by surety. nonsensical, when “pay defense it very purpose defeats the Co., 242 Federal Ins. v. Starr Elec. Va. of a payment Co. bond. (1991). 684, 459, 410 S.E.2d 689 n. 3 We Second, our Virginia conclusion therefore what
must determine rule Supreme surety Court would not allow Virginia apply Court of would Supreme invoke the when “pay paid” defense avail these circumstances. principal able to a supported by is deci Highlands compensated surety. jurisdictions. is a As sions other At least three stated, Supreme Virgihia rejected Court of other attempts by courts have a “pay sureties to invoke de ... by sureties for hire must abide their principal. fense that is available to a See which pay everything contracts v. Pace Corp., OBS Co. Constr. 558 So.2d charged against fair intendment can be (Fla.1990); Kerr, Inc. v. St. act, They them. not to accommodate Co., Paul Fire and Marine others, Ins. promote but to their own inter- (N.D.Ill.1996); F.Supp. 1245 ests, Shearman judged accordingly. and are to be Assoc., Co., Inc. v. Continental Cas. Supervisors Board v. Southern Cross (D.Vi.1995). F.Supp. 199 In Brown & 636, Corp., Coal 238 Va. 380 S.E.2d the court Kerr stated: (1989) Builders, (quoting Southwood Inc. suing under the [The subcontractor] Ins., v. Peerless 235 Va. 366 S.E.2d Bond and not the subcontract. The two (1988)). 104, 107 separate agreements. surety] are [The Highlands The contract which must cited, neither nor have we discover- has an promise abide includes unconditional *7 ed, any authority for the proposition in pay any paid claimant who has not been inability proceed against that the to days full completed within after work is general “pay contractor of a because may justly for “sums as be due.” There is in paid” when clause the subcontract plaintiffs claimants who dispute no are recovery necessarily prevents against completed days ago work more than 90 surety payment under the Bond. paid and who have not for that work. been Indeed, an argument such runs counter whether, in question light The is of the underlying pay- purpose to “pay paid” precedent when condition con- Bond, pay- ment i.e. the assurance of in tained the subcontract with Brown & ment to subcontractors. Root, “justly money is nonetheless plaintiffs. F.Supp. due” the at 1249. conclude that the district We therefore only think the
We sensible answer granted motion properly plaintiffs’ question yes. Highlands, is unlike this summary judgment against Highlands. for Root, did an express Brown & not include surety express who did not include an As “pay paid” precedent when condition in its in the “pay paid” precedent when condition surety attempt contract. Highlands’ bond bond, Highlands may contract bootstrap “pay its own defense to the “pay paid” not when clause con- paid” princi- when defense asserted assert not in the subcontract between the pal persuasive is two reasons. tained assured the as a defense to Brown & Root nonetheless principal and the claimants on the bond. lenders that no additional work would be liability pay its necessary.2 Brown & Root then ac-
III. to remove the quiesced decision from the “change scope” in illustrations dis consider whether the next We in1 to accommodate the lenders’ contract that Brown & properly trict court found costs, while at the same capping terest plaintiffs liable to the Policy with the “change scope” protecting work. time themselves for the additional First, will determine whether the rec Letter which memorialized we and Procedures findings of ord the district court’s supports agree- illustrations as “side Root’s conduct. regarding fact ment.”3 findings of fact under This court reviews short, In the district court found “clearly erroneous” stan the deferential to remove the agreed that Brown & Root 52(a). Second, we will dard. Fed.R.Civ.P. design change prime illustrations whether, given findings those determine placate construction contract to the lend fact, correctly applied the the district court ers, illustrations in a side placed those Brown “prevention doctrine” to hold that (the agreement existence of which was not plaintiffs hable to for the addi Root is lenders), to the and assured the revealed claims, notwithstanding the
tional work design that no additional work or lenders non-occurrence of the condition changes necessary. finding would be contained the subcontracts. Conclu facts, weighed these the district court are reviewed de novo. Bowers sions of law witnesses, testimony of credibility of Inc., Speedway, Motor 99 F.3d v. Atlanta arbitration, during the and var prior fered Cir.1996). (4th 151, 154 documents entered into evidence dur ious ing the trial. Because the district court’s Findings A. of fact findings of fact are consistent with the court found that Brown & district evidence contained the record before Root’s own actions connection with court, findings clearly this those are not arrangements and the prime contract erroneous.4 financing “change scope” additional work contributed to the non-occurrence of B. law Conclusions of precedent. the condition The court found The subcontracts between Brown that Brown & Root knew additional plaintiffs & Root and the contain valid pro- work the DTRE on “pay precedent. See ject likely necessary to accommo- would at Galloway, thick- 464 S.E.2d 354. Because the design changes regarding date have not & Root for pavement ness of the subbase material.1 Owners testimony Harvey, ey 1. See the of James as a result of the Owner’s failure to *8 project manager, Brown & Root DTRE of- just as the subcontractors did. Brown & during prior fered arbitration of the Root claims that there was no reason for "change scope” claim. J.A. at 1330. proper funding thwart of the them to additional work. But Brown & Root as- representations 2. See made in a Consent only of the additional sumed risk for 20% Agreement signed by Brown & Root. J.A. at work, TRIP, equity partner and as 13% 710, 1330. Brown & Root would have had to contribute payment. substantially to own We find (in- its 3. See internal Brown & Root documents & that it had no prepared by Harvey Brown Root's bare assertion cluding a memo James 11, 1993) August testimony engage by dated and the trial reason to in the action described Cowen, court, therefore, James Brown & Root's in-house of the district to be an inade- 693, counsel. J.A. at 695. quate finding basis for clear error in the findings. court’s challenges 4. Brown & Root the district because, findings fact "absurd” court's of as they argue, Brown & Root stood to lose mon- ed., § judgment regarding Jaeger, ad- 3d 677A for propo- the arbitration the same sition). work, scope” “change ditional can, matter, as an initial assert the The district court found that Brown & condition precedent
non-occurrence of the
Root misled the lenders regarding its ex-
plaintiffs’
defense to
claims.
as valid
pectations that potentially costly design
Having
changes
By misleading
found that
its own actions
would occur.
way,
to the non-
lenders in
Brown & Root contributed
this
Brown & Root made it
the condition precedent,
likely
occurrence of
less
that the lenders would arrange
however,
applied
financing
the district court
additional
to cover the cost of
“prevention
anticipated design changes.
doctrine” to waive
condi-
therefore
We
agree
that Brown &
tion
held
with
district court’s conclusion
plaintiffs
Root is liable to the
that Brown & Root’s conduct “hindered”
for the additional
work the fulfillment
precedent.
of the condition
“pay when
notwithstanding
Brown Root
an
&
offers
alternative ex-
clause in the subcontract.
planation for the failure of the condition
failure,
contend,
precedent.
they
The
was
gener
doctrine is a
prevention
The
insolvency
caused
the financial
ally recognized principle of contract
law
project,
DTRE
which was a result of lower
according
promisor prevents
to which if a
than projected traffic flow on the DTRE.
or hinders fulfillment of a condition to his
According to TRIP’S
Financial
Chief
Offi-
performance,
may
the condition
be waived
cer, because of the project’s financial dis-
(Second)
or excused. See Restatement
tress, sometime in December of 1995 the
(1981);
§ 245
18 Williston on
Contracts
lenders halted all payments to Brown &
Contracts,
ed., Lord,
39:4;
§
4th
17A Am.
it
partner
Root since was a
the DTRE
Jur.2d, Contracts,
703;
C.J.S.,
§
17B
Con
concludes,
project. Brown & Root
there-
tracts, §
The
Supreme
Court Vir
fore,
May
that the
1996 arbitration award
ginia recognized
prevention
doctrine
paid regardless
would not have been
Wightman,
184 Va.
Parrish
contingency funding
whether additional
(1945).
S.E.2d
arranged by
had been
the lenders.
prevention
The
doctrine does not
persuaded by
are not
We
require proof that
the condition would
fact
argument.
Root’s
The
that the lend-
wrongful
have occurred “but for” the
con
payments
ers halted
to Brown & Root
only
duct of
instead it
re
promisor;
they
under the circumstances as
existed in
quires that the conduct have “contributed
not
that
proof
December
1995 is
materially” to the non-occurrence of the
TRIP
lenders would have forbidden
(Second)
condition. See Restatement
on some other
of funds to
draw
source
(1981) (“but
§
Contracts
245 cmt. b
for”
Brown & Root for the additional work
necessary).
is not
But see 17A
causation
May
after the arbitration award
of 1996
(“but
Am.Jur.2d, Contracts, § 703
for”
under different circumstances. Had
necessary).
Supreme
causation is
apprised
lenders been
on of
Virginia
require
Court of
does not
that
de-
strong possibility
pavement
prove
for” causation.
plaintiff
“but
change, it is
to infer
sign would
reasonable
Rather,
noted,
specifically
as that court
appropriate funding
would have been
perfor
is as effective an excuse of
“[i]t
arranged
and made available for
mance of a
that the
has
promisor
to Brown & Root.
performance
hindered
as
he has actu
*9
Parrish,
factual in-
ally prevented
question
essentially
it.”
34 S.E.2d at
The
is
a
TRIP
(quoting
Wesnofske,
quiry: why
232
Amies v.
255 N.Y.
did
fail
Brown &
156,
(1931)
2
in
(quoting
“change
scope”
district court’s (1) clause in the erroneous, “pay paid” cause the when given specula- and the clearly apply not to the alternative base subcontracts did Brown & Root’s tive nature of orders, change and early completion bonus find reversible er- we do explanation, not (2) alternatively precedent as to the condition reached below ror in the conclusions doctrine. prevention waived under the agree claims. We was additional work misrepresentations “con- & Root’s plain- with agreed The district court failure to materially” to TRIP’S tributed contention. The court examined tiffs’ first “change scope” in. the additional pay for change in the orders without language work. in “pay paid” to the when clause reference and found that base subcontracts concluded, hold that the we Having so were “infected with latent change orders invoked properly prevention doctrine was that there was ambiguity.” finding After pre- condition of the performance and the meeting meaning of the minds as to the no as to the addi- correctly cedent was waived days language 30 of receipt” of the “within work. scope” in tional Without orders, the district court change defense, a as precedent the condition language concluded that such could not be plaintiffs to the Brown & Root is liable precedent. a condition Re- interpreted as work. payment for the additional Galloway, court construed the lying on days receipt” language IV. as “within 30 payment provision, a time of rather merely whether the district next consider We shifting provision. than risk Brown & Root is properly found that of the plaintiffs hable to the ambigu a contract Whether early completion bonus. question which we review de ous is law Inc., Questech, 80 F.3d novo. Denzler at change orders issue The subcontract (4th Craw, 97, Cir.1996); Ross v. state: (1986). Va. 343 S.E.2d While THE AND CONDITIONS TERMS orders, alone, change standing are THE SUB- FORMING ORIGINAL arguably ambiguous under the district A PART ARE MADE OF CONTRACT analysis, in instant case the court’s THIS CHANGE ORDER EXCEPT TO not, fact, change relevant do orders THE THE EXTENT ON MODIFIED They very clearly incorpo alone. stand days FACE HEREOF.... Within rate the terms of the base subcontract to Contractor, receipt of the General terms not modi the extent that those are thirty-one will receive and Subcontractor by provisions change orders. fied (81.5%) (or the percent equiva- one-half days receipt” language in The “within 30 $13,500.00 per day of earned lent with orders is consistent and greater) of all Incen- bonus whichever is modify “pay paid” when con does not monies to General Con- paid tive Bonus Payment dition the base subcontracts. early completion tractor Owner for early completion of the bonus for Scope. the General Contractor’s Work was, therefore, subject project “pay to the trial, “pay At relied on the paid” precedent when condition base contained paid” when condition subcontracts. that it argued in the base subcontracts whether, regard- early question for the The remains plaintiffs was not liable to claims, “pay when ing TRIP never the bonus completion bonus because monies. should any Brown & Root bonus subcontract under doctrine.5 argued prevention that Brown & Root waived plaintiffs work, pre- application of doctrine to waive the Although part III that the we held in completion in- correctly applied condition for the bonus doctrine vention was inquiry. separate distinct Our "pay paid” condition as to volves waive the "change holding part III the district affirmed for the additional *10 regarding issue. to a order the bonus did not reach this The district court a fair prevention degree doctrine which contained of uncertain- properly apply To “pay paid” ty timing when of payment. and waive over the Be- claims, the dis- as to the bonus plaintiffs expressly accepted some cause active, whether must determine trict court uncertainty timing as to the of the bonus “pre- Brown & Root wrongful conduct payment, the district court did not abuse payment TRIP’S or hindered” vented by denying plaintiffs pre- its discretion bonus to Brown early completion judgment portion interest on that of the on the Judgment plaintiffs’ in favor Root. award. only if proper plaintiffs claims is bonus within The district court was also that Brown & Root’s demonstrated have in denying prejudg its discretion Moore materially to TRIP’S conduct contributed “change ment interest as to the additional & Root the bonus. failure to Brown scope” in work. Whereas the Lane sub con- properly are questions factual Since contract, 6.5, in provision Article contains a in the first by the district court sidered payment pay of interest on requiring instance, proceed- further remand for we delayed beyond forty-five days, ments “pay when to consider whether ings provi contains no such Moore subcontract as to the condition should waived paid” decision, there sion. The district court’s prevention under the doc- bonus claims fore, grant prejudgment Lane interest trine. work, “change scope” in while as to the Moore, V. same to was reasonable. denying Finally, plaintiffs’ we consider the VI. cross-appeal contention on the above, For the reasons discussed we prejudg denied improperly district court affirm the orders of the district court for the payment ment interest as part, reverse in and remand for fur- part, and Moore’s additional completion bonus proceedings opin- ther consistent with this work.6 “change scope” ion. in prejudgment The award of PART, IN AFFIRMED REVERSED the dis terest is within the discretion of PART, IN AND REMANDED Frank, Maksymchuk v. trict court. (4th Cir.1993). 1072, 1077 District F.2d WILKINS, concurring in Judge, Circuit weigh equities partic courts must dissenting part: part ular case to determine whether an award prejudgment appropriate. interest majority grant affirms the opinion Corp., v. Marriott McDevitt & Street Co. summary judgment against Highlands (E.D.Va.1991). F.Supp. (Highlands), Insurance affirms the Co. Co., judgments favor of Moore Brothers Here, court concluded that a the district (Moore) Inc. and The Lane Construction controversy between legitimate existed (collectively, “the Corporation Subcontrac- plaintiffs regarding & Root and the tors”) respect with of the of the precise timing claims, ruling of and reverses the early completion agreed scope” bonus. Plaintiffs prejudgment bonus finding interest on the that Brown & Root's active Denial court’s conduct hindered TRIP’S to Brown may a moot issue on remand. claims become "change & Root for the additional the district court makes In the event findings of fact are unrelated to work. Those the support judgment findings fact to in favor Although only claim. there is one bonus claims, however, plaintiffs the bonus on subcontract, "pay in each clause regarding the decision below we will review separate prece- the clause creates conditions prejudgmenl interest. regarding payment for the various ele- dent performance plaintiffs’ under the ments of subcontract. *11 728 fense, pay-when-paid Highlands that the can do so as well. With-
the district court early comple- mentioning dispositive principle to the out this apply clauses do not bonus, law, remanding early comple- Virginia majority High- tion holds that bonus claims to the district court for lands assert tion cannot Brown & Root’s de- majority opinion The proceedings. pay-when-paid further fense because the clause incorporated also affirms the denial Subcontrac- was not into the bond. See ante, However, prejudgment tors’ for interest on at 722-23. request assuming even and early completion Virginia provided surety bonus claims that law that a. interest request prejudgment principal only Moore’s for can assert a defense of its agree in claim. I that change scope language providing on its when the contract awarding judg- erred in incorporated the district court basis for the defense is into bond, on the Highlands ment to the Subcontractors its can the pay- assert claims and that the dis- completion when-paid pay-when- bonus defense because the in denying paid incorporated trict court did not err the re- clause here was into the Howev- quests prejudgment provided interest. The bond part bond. relevant er, Virginia surety Root, law and the principal, because that Brown & as Highlands itself allowed to assert Highlands, surety: bond as (Brown Root) Root, pay- Inc.’s & jointly severally agree with the Obli- defense, when-paid I would conclude that gees Partnership Road Investors [Toll that holding the district erred II, (“TRIP”), lenders, L.P. and the Highlands could not assert that defense. I Virginia Department Transportation that would also conclude the district court (“VDOT”) that every ] claimant as here- holding prevention erred in that the doc- defined, who has not been in full pay- trine excused the nonfulfillment of the expiration of a period before of nine- when-paid respect condition with to the (90) ty days after the date on which the scope claims. of such claimant’s work last or labor was performed, done or or materials were
I. claimant, may furnished such sue on I Highlands’ argument first address that claimant, this bond for the use such in granting the district court erred sum- prosecute the final judgment suit to mary judgment against Although it. some may justly such sum or sums as due jurisdictions prohibit general contractor claimant, and have execution thereon. shifting from the risk of an owner’s insol- added). (emphasis phrase J.A. 1818 subcontractors, see, vency e.g., to its N.C. “justly only due” this context can mean (1999), § Virginia Gen.Stat. 22C-2 law is “justly due” the contractor under the clear that when a unambigu- subcontract subcontracts, provide as the subcontracts ously that payment by states owner only being basis the Subcontractors the contractor is a condition any payment Taylor “due” at all. Cf. payment by the contractor to the subcon- Constr. Inc. v. ABT 163 Corp., Serv. F.3d tractor, such term will be enforced. See 1119, (9th Cir.1998) (stating, 1122 in apply Galloway Corp. v. S.B. Ballard Constr. Act, ing the Miller see 40 U.S.C.A. Co., 493, 349, 250 Va. 464 S.E.2d 354 (West §§ Supp.1999), 270a-270d 1986 & (1995). Virginia law is also clear that be- “[l]ong-standing precedent confirms surety principal cause a and its are in justly that ‘sums due’ means the sums due privity, surety principal’s “stands in the contract”); party under the bonded may shoes and assert ... those defenses Supply United States ex rel. Maddux Co. principal.” available Board Su- Co., v. St. Paul Fire & Marine Ins. pervisors Corp., v. Southern Cross Coal (4th Cir.1996) curiam) 332, F.3d (per (1989). 238 Va. 380 S.E.2d (relying on terms of contract between Highlands Because supplier stands the shoes the subcontractor and materials Root, of Brown determining attorneys’ to the extent that Brown interest and pay-when-paid justly & Root can assert the de- fees were included in the “sums Act); merely parties to assume that in- under the Miller supplier due” *12 Highlands’ liability that would not Woodington Elec. Co. tended ex rel. States United Co., 1381, be coextensive with Brown & Root’s—an 545 F.2d Pac. Ins. v. United (4th Cir.1976) assumption Virginia surety that both law (stating that “sums 1383 suggest completely the is unwar- under the Mil- bond justly a subcontractor due” by ranted.3 “must be determined reference ler Act subcontract”). Here, the because
to the
Moreover, in
that
proclaiming
allowing
paid
entitled to be
were
Subcontractors
pay-
to
Brown &
Highlands
assert
Root’s
only if Brown &
under the subcontracts
pur-
defense
defeat the
when-paid
would
from TRIP and
payment
received
bond,
majority
the
pose of the
overlooks
occur,
did not
the Subcon-
that condition
agreed
the fact that Brown & Root
to
un-
payment
not entitled to
tractors were
indemnify Highlands for amounts that
der the bond.
under
Highlands
pay
would have to
“justly
that
rejecting
the notion
sums
simple
bond. The
fact here is that some-
justly
under the
to sums
due
Root,
due” refers
one—either Brown &
the Subcon-
subcontracts,
majority
terms of the
tractors,
Highlands
or
to
bear
—had
what
it believes the
explain
fails to
pay
risk that TRIP would not
Brown &
Rather,
refers.1
phrase
justly
“sums
due”
Virginia
specifically
Root.
law
allows sub-
allow-
majority simply
concludes that
risk,
contractors to bear that
and the Sub-
pay-when-paid
to assert the
ing Highlands
agreed
contractors here
to do so. The
the Subcontractors “is
against
defense
majority essentially
agree-
rewrites the
nonsensical,
very purpose
it
for defeats
sophisticated parties
that
ne-
ments
these
bond,”
majority
a
which the
and shifts the risk
gotiated
length
at arms
analysis to be “to insure
by
asserts without
TRIP back to Brown &
nonpayment
work are
at
perform
completely
that claimants who
Root. This result
odds
that
princi-
principles
for their work in the event
the freedom of contract
with
Ante,
Galloway
at 723. Of
and is most as-
pal
pay.”2
does not
embraced
course,
baldly
“pur-
suredly
Supreme
characterize the
not the result
that
Virginia
a
fashion Court of
would reach.4 Accord-
pose” of the bond
such
broad
existing Virginia
Assuming arguendo
"justly
4.Even
if
law did not make
that
due” refers
clear,
fairness,
perfectly
general
rather
the correct result in this case
to some
notion of
subcontracts,
upon
jurisdictions
I
understand
the cases from other
relied
than to the
cannot
agreed
they
provide
support
by
majority
who
would
little
how subcontractors
Associates,
payment only
&
Inc.
would be entitled to
if the own-
for its result.
In Shearman
Co.,
Casualty
F.Supp.
pays
can be said to be
v. Continental
901
199
er
the contractor
(D.V.I.1995),
does
v. Pace
"justly due”
when the owner
and OBS Co.
Construc-
Here,
(Fla.1990), the
pay
Corp.,
Brown & Root
tion
It is that disclosure sum, grant I would reverse lenders would have Root’s concern to the re- summary judgment against Highlands; lenders’ assessment had some effect on the judgments against Brown & ultimately TRIP verse the probability by & dition was excused Brown Root’s also found that had the 5. The district court failure terms, sign to another contract with different that the lenders had Subcontractors known conduct, obviously not active such a failure concerning scope pro- of the been misled excuse the fulfillment and therefore cannot ject, the "could have refused Subcontractors Parrish, pay-when-paid condition. See agree pay-when-paid condition.” to to at S.E.2d 232. However, Constr., F.Supp.2d at Lane court next found that fulfillment The district apply only if prevention would doctrine pay-when-paid condition was excused of the materi- Brown & Root’s conduct contributed & “did not disclose to Brown because ally of the condition. to the nonfulfillment provisions relevant Subcontractors] the [the to which Brown & Root's conduct The extent including financing agreements, pay-when-paid to may have cabsed the clause relating right to provisions to the lenders[’] come into existence is irrelevant. changes scope.” Lane payment for refuse Constr., & Root that The other three acts Brown Again, F.Supp.2d howev- at 724. justified excusing the the district court found er, in the record that this there is no evidence pay-when-paid condition nonfulfillment of the materially to contributed nondisclosure application preven- do warrant of the also not pay & to Brown Root. TRIP'S failure The second basis identified tion doctrine. finally that the non- The district court found & Root district court was that Brown pay-when-paid condition fulfillment contract, "signed from the construction & Root "ordered excused because Brown was changes scope had been deleted which the perform the work Subcontractors] [the Id. Clearly, changes scope at insistence.” stemming lenders[’] with knowl- however, Subcontractors], & said that Brown edge, it cannot be to [the not available mate- signing funding contract contributed Root’s that no sources realistically to ex- rially pay to TRIP’S Brown & Root. be said failure extra work could Id. Yet again, it the case that existence of the contract was Brown is not ist.” ordering contribut- only payment. the work basis of entitlement Brown & Root's Root's materially failure to district court ed to TRIP’S To the extent that what pay-when-paid really was that the con- & Root. meant change in Root on the Subcontractors’ claims; early completion remand the
scope claims; and affirm the denial of the
bonus
requests prejudgment interest. MERSCH, Plaintiff-Appellee,
Glenda DALLAS, TEXAS;
CITY OF al., Defendants,
et Klein; Raymond Dethloff,
Andrew
Defendants-Appellants.
No. 98-11115. Appeals,
United States Court of
Fifth Circuit.
March