UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-1591
DRC, INCORPORATED,
Plaintiff - Appellee,
and
DRC INTERNATIONAL, LLC; ROBERT J. ISAKSON;
ALBERT J. ISAKSON; ROBERT J. ISAKSON, II,
Plaintiffs,
versus
CUSTER BATTLES, LLC,
Defendant - Appellant,
and
SCOTT CUSTER; JOSEPH T. MORRIS; MICHAEL J.
BATTLES; MURTAZA LAKHANI; MOHAMMED ISSAM ABU
DARWISH; SECURE GLOBAL DISTRIBUTION; MID EAST
LEASING, INCORPORATED; CUSTER BATTLES LAVANT;
JOHN & JANE DOE A-Z; AMERICAN-IRAQI
CONSTRUCTION SOLUTIONS, LLC; WILLIAM “PETE”
BALDWIN; SOLUTIONS GROUP INTERNATIONAL, LLC;
LARU, LIMITED,
Defendants.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. T. S. Ellis, III, District
Judge. (1:04-cv-01499-TSE)
Argued: March 14, 2007 Decided: May 16, 2007
Before WILKINSON, GREGORY, and DUNCAN, Circuit Judges.
Affirmed in part and remanded by unpublished opinion. Judge
Gregory wrote the opinion, in which Judge Wilkinson and Judge
Duncan joined.
ARGUED: Rochelle B. Raposo, Fall River, Massachusetts, for
Appellant. Michael Earl Barnsback, DIMUROGINSBERG, P.C.,
Alexandria, Virginia, for Appellee. Bernard J. DiMuro,
DIMUROGINSBERG, P.C., Alexandria, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
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GREGORY, Circuit Judge:
Custer Battles, LLC, appeals the award a jury granted to DRC,
Inc., in its dispute with Custer over a broken business
arrangement. Custer claims that the jury lacked sufficient
evidence to award DRC $968,892 in quantum meruit and $370,761 for
tortious interference with contract. At oral argument, DRC
conceded that the jury awarded a double recovery in the amount of
$130,000. Because sufficient evidence supports the jury’s
findings, we affirm the district court’s denial of Custer’s post-
judgment motions but remand so that the district court may adjust
the judgment to reflect a remittitur in the amount of $130,000.
I.
In June 2003, Custer was in the process of securing a contract
from the Coalition Provisional Authority (“CPA”) in Iraq to provide
security for the Baghdad International Airport (“BIA”), which was
to re-open in July. To make their successful bid, Custer arranged
with DRC near the end of June to construct a permanent camp at the
airport and to recruit former British Army Gurkhas to constitute
the security force. Although both Custer and DRC considered their
relationship a contractual one, there was no written document
memorializing their agreement.
Because the BIA was scheduled to open around July 10 or 17,
2003, Custer needed to have the Gurkhas at the airport and to
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provide housing for them before then. DRC arrived in Iraq on June
30 and began constructing a permanent camp where the Custer
personnel and the Gurkhas were to live for the year of Custer’s
contract with the CPA. DRC realized that Custer’s personnel were
living in a local hotel and acknowledged that it could not finish
the permanent camp before the Gurkhas arrived, so it transformed
the empty Terminal C of the BIA into a temporary camp. To
accomplish this transformation, DRC cleaned the terminal, converted
rooms into bunkrooms, renovated the bathrooms to include showers,
installed air conditioning units, re-established the electricity
and water supplies, and improved the kitchen and dining facilities.
DRC assigned one of its managers to maintain the temporary camp
while it was inhabited. During this time, DRC hired local laborers
and subcontractors to work on the permanent camp.
In the beginning of July, DRC completed its obligation to hire
a security force for the BIA. DRC hired Albert Isakson, the
brother of DRC’s founder, Robert Isakson, to travel to Nepal to
recruit Gurkhas. Albert arrived in Nepal on July 4, interviewed
candidates, had fifty-four of them sign contracts with DRC, and
paid for their flights to Iraq, where they all arrived by July 10.
DRC understood the Gurkhas to be employed by DRC and leased to
Custer. Custer trained and supervised the Gurkhas in their role as
the security force for the BIA.
4
DRC claimed that it completed construction of the permanent
camp on July 29. Custer expressed dissatisfaction with the timing
of the completion, the quality of the work done, and the quality of
the living conditions at the temporary camp, among other things,
and fired DRC as its subcontractor on July 30. Custer then took
complete charge of the Gurkha security force and required them to
sign new contracts. DRC subsequently filed a complaint against
Custer in the Eastern District of Virginia.
During the October 2005 trial, DRC claimed that Custer
breached its contract with DRC to lease the temporary and permanent
camps from DRC. Custer argued that its contract with DRC was
instead a “turnkey” contract for DRC to provide life support for
Custer’s personnel for one year at a fixed price. DRC also argued
that Custer had tortiously interfered with its contracts with the
Gurkhas. In its complaint, DRC asserted claims against Custer for
breach of contract, open account, quantum meruit, conversion, false
imprisonment, battery, tortious interference with contract,
statutory conspiracy to interfere with business relations, and
several other actions at common law. Custer counter-claimed that
DRC had breached its contract with Custer, misappropriated trade
secrets, tortiously interfered with contracts and business
expectancies, breached its covenant of good faith and fair dealing,
and committed fraud.
5
After several days of testimony, the district court allowed
the jury to return verdicts on only six claims. The jury found
that Custer had breached a contract but awarded DRC no damages. It
found that DRC had not breached a contract with Custer and awarded
DRC $130,430 for its claim of open account. It found an implied
contract between DRC and Custer and awarded DRC $969,892 in quantum
meruit damages for the value of the work it did on the camps.
Finally, it found that Custer had tortiously interfered with DRC’s
contracts with the Gurkhas and awarded DRC $370,761.
After the jury returned its verdict, Custer filed a motion
under Federal Rule of Civil Procedure 50 for a judgment as a matter
of law and, in the alternative, for a new trial under Rule 59. In
its motion, Custer claimed that the jury had no legally sufficient
basis to award damages for the quantum meruit and tortious
interference claims. The district court denied the motion, finding
that sufficient evidence existed to support both awards and that
the awards were not against the weight of the evidence. Custer
appeals the district court’s denial of its motion but does not
appeal the open account verdict.
II.
We review a district court’s denial of a motion for judgment
as a matter of law de novo. Bryte v. Am. Household, Inc., 429 F.2d
469, 475 (4th Cir. 2005). We consider the evidence in the light
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most favorable to the non-moving party. Id. A trial court may
only grant a motion under Rule 50 if after a full hearing by a
jury, “the court finds that a reasonable jury would not have a
legally evidentiary basis to find for the party on that issue.”
Fed. R. Civ. P. 50; Price v. City of Charlotte, 93 F.3d 1241, 1250
(4th Cir. 1996). The district court should “accord the utmost
respect to jury verdicts and tread gingerly in reviewing them.”
Price, 93 F.3d at 1250.
III.
A.
Under Virginia law, which governs this diversity action,
plaintiffs may recover in quantum meruit reasonable compensation
for the value of services they provide under a contract implied in
law. Po River Water & Sewer Co. v. Indian Acres Club of Thornburg,
Inc., 495 S.E.2d 478, 482 (Va. 1998). Plaintiffs bear the “burden
of proving with reasonable certainty the amount of damages and the
cause from which they resulted.” Carr v. Citizens Bank & Trust
Co., 325 S.E.2d 86, 90 (Va. 1985). The Supreme Court of Virginia
warns that “speculation and conjecture cannot form the basis of
recovery.” Id.
Custer claims that the district court erred in upholding the
jury’s award of $969,892 for the reasonable value of the services
DRC provided under its implied contract to build and maintain the
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temporary and permanent camps for Custer. According to Custer, DRC
did not prove with reasonable certainty the amount of money it
expended or the value of the services it provided in constructing
and maintaining the temporary camp. Custer also points out that
the life-support services DRC provided were not worth the
“occupancy” and catering charges of $100 and $35 per day per
person, respectively, DRC claimed to the jury. Custer states:
“The conditions of the camp were inhumane, described as
‘substandard’ and posed threats to the physical and mental health
of the guards that had to endure its conditions and actually caused
the men to be physically sick.” Appellants’ Br. 16. Custer
finally argues that DRC should not be able to recover damages in
quantum meruit for the services it provided in constructing the
permanent camp because the jury found that a contract to construct
the camp existed, and a quantum meruit verdict can only stand if
the jury finds no extant contract.1
Despite Custer’s claims, the district court did not err in
upholding the jury’s award of damages in quantum meruit. Although
the jury found that Custer breached an actual contract that it had
with DRC, the general verdict form did not specify which contract
the jury found breached. In its order dismissing Custer’s post-
1
See S. Biscuit Co. v. Lloyd, 6 S.E.2d 601, 606 (Va. 1940)
(“An express contract defining the rights of the parties
necessarily precludes the existence of an implied contract of a
different nature containing the same subject matter.”)
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judgment motions, the district court noted that it is likely that
the jury understood the breached contract as a contract between DRC
and Custer concerning the Gurkhas and not the construction of the
two camps. The district court stated that by finding for DRC on
its quantum meruit claim, the jury must have concluded that no
contract concerning the construction and maintenance of the camps
existed. We agree with the district court’s conclusion. The
evidence presented at trial would have allowed a reasonable jury to
conclude that DRC and Custer did not come to a meeting of the minds
on the terms of the construction and maintenance contract but that
DRC deserved to be compensated for the work it did pursuant to its
understanding that it had contracted with Custer. Without detailed
findings from the jury, we will not overturn the verdict on the
basis of Custer’s speculation that the jury determined that a
specific contract existed.
We further find that a reasonable jury could have concluded
that DRC proved the reasonable value of its services under this
implied contract with reasonable certainty. Both sides presented
a great deal of evidence about the amount of money each paid in the
camp construction process. DRC offered invoices and spreadsheets
detailing its expenditures. Custer offered the testimony of an
accounting expert who studied the documents and opined that DRC did
not expend as much money as it claimed. On cross-examination,
however, Custer’s expert admitted that he only counted the payments
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that had sufficient documentation and conceded that DRC might have
paid more money. DRC also presented evidence that it provided
services at both camps that Custer’s expert did not take into
account.
Both sides presented evidence about the conditions at the
camp. Custer’s witnesses said that the work DRC did and the
services DRC provided were sub-par. They complained about the
quality of the food, they pointed out that the bathrooms had
standing water, and they stated that the camp was not clean. DRC’s
witnesses praised the cleanliness and ingenuity of the camp. They
admitted that the bathrooms had a drainage problem, but they
claimed to have provided a proper solution. They stated that they
served only four or five days worth of pre-prepared food and that
the remaining meals they cooked at the camp. The overhead and
labor charges DRC presented during testimony might have been more
than Custer thought they were worth, but a reasonable jury could
have credited DRC’s estimates over the protestations of Custer’s
witnesses. This Court will not overturn the credibility
determinations of the jury.
DRC also presented considerable evidence of the expenses it
incurred in constructing both camps. Custer did little to rebut
DRC’s claims of payments to its own subcontractors and Iraqi labor
force. DRC even admitted where the jury’s verdict overshot the
evidence. Because it could find no evidence to support the entire
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amount that the jury awarded, DRC at oral argument conceded that
the jury must have counted $130,000 twice in its calculation of the
award. Excluding that $130,000, we find sufficiently specific
evidence to support the jury’s award of damages for DRC’s quantum
meruit claim.
B.
Custer gives three reasons why the district court should not
have upheld the jury’s tortious interference with contract verdict.
First, Custer claims that DRC’s contract with the Gurkhas was void
because it violated the statute of frauds. Custer next argues that
it could not have tortiously interfered with DRC’s Gurkha contract
because DRC was acting as Custer’s agent in procuring the Gurkhas.
Finally, Custer states that the evidence was insufficient to prove
that Custer tortiously interfered with DRC’s relationship with the
Gurkhas. We reject these arguments.
Custer claims that DRC’s contracts with the Gurkhas were for
a term longer than a year and were not in writing. Virginia’s
statute of frauds requires a contract “that is not to be performed
within a year” to be in writing and signed by the parties. Va.
Code Ann. § 11-2(8) (West 2006). DRC responds that the employment
contracts were indeed in writing and that Custer has waived its
statute of frauds defense by presenting it for the first time on
appeal.
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We will not consider an issue raised for the first time on
appeal “unless the refusal to consider it would result in a
fundamental miscarriage of justice.” U.S. Dep’t of Labor v. Wolf
Run Mining Co., 452 F.3d 275, 283 (4th Cir. 2006). Custer should
have raised a defense based on the statute of frauds in its
original answer and counter-claim, but it did not. It could have
raised this defense in its post-judgment Rule 50 motion, but it did
not. According to the docket sheet, both sides participated in
extensive post-trial briefing of issues, and Custer never raised
this defense. Because it does not result in a fundamental
miscarriage of justice, we refuse to consider this defense raised
at such a late stage in the proceedings.2
Custer next claims that the district court should have
disregarded the jury’s verdict in favor of DRC on the tortious
interference claim because DRC acted as an agent for Custer in
securing the services of the Gurkhas. DRC replies that it was an
independent contractor that formed its own contracts with the
Gurkhas, whom it then leased to Custer. By finding for DRC on the
tortious interference claim, the jury necessarily found that Custer
2
Assuming, arguendo, that Custer has not waived its statue of
frauds defense, the defense still fails. DRC presented evidence,
both documentary and testimonial, that it had executed written and
signed employment contracts with the Gurkhas. DRC witnesses
testified that they lost those contracts when Custer forced them to
leave the BIA. Custer presented no evidence that supports their
current claim that DRC’s employment contracts with the Gurkhas were
never in writing. Given this evidence, were we to consider the
statute of frauds defense, we would reject it.
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was neither a party to the contract nor DRC’s principal in an
agency relationship.
The district court instructed the jury that it could not find
that Custer tortiously interfered with DRC’s contracts with the
Gurkhas if it found that DRC was acting as an agent for Custer when
it recruited them. Following the law established by this Court,
the district court further instructed:
Where a party is part of a business
relationship and therefore acting within the
scope of its own financial interests, it’s not
an intermeddler and there is no claim for
tortious interference. Where the party is not
a competitor seeking an advantage, but rather
a party to the relationship acting in its own
economic interests to limit liability, there
is no claim for tortious interference.
J.A. 616; see Zoby v. Am. Fid. Co., 242 F.2d 76, 79-80 (4th Cir.
1957). Neither party objected to these instructions. The
touchstone for the difference between agents and independent
contractors in Virginia law is the concept of control. An
independent contractor is “one who undertakes to produce a given
result without being in any way controlled as to the method by
which he attains the result.” Craig v. Doyle, 19 S.E.2d 675, 677
(Va. 1942).
The evidence presented at trial showed that Custer asked DRC
to recruit the Gurkhas who would provide security for the BIA. DRC
had complete control over this process. It hired its own
recruiter, paid for the agency and travel expenses, interviewed and
13
signed contracts with the Gurkhas, and supervised the Gurkhas when
they were not working security details for Custer. DRC also
presented evidence that it agreed with Custer to lease the Gurkhas
to Custer at cost plus a thirty percent fee. Also in evidence was
an email from Scott Custer, the co-owner of Custer Battles, that
shows that DRC was indeed in control of recruitment and hiring of
the Gurkhas:
I am not sure how you want to handle the
Gurkhas, as I know we had originally talked
about you providing them at cost. However,
the best way to run the Gurkhas is likely as a
true subcontract, either with a firm fixed
price or cost+ arrangement. I will let you
decide, however as a subcontractor you will be
expected to invoice use for costs.
J.A. 150. This evidence tends to show that DRC was not acting as
an agent under Custer’s control but as an independent contractor.
It also supports a reasonable jury’s finding that DRC had executed
individual employment contracts with the Gurkhas to which Custer
was not a party.
Custer finally claims that the evidence presented at trial was
insufficient to prove that Custer interfered with DRC’s contracts
with the Gurkhas. DRC, however, presented unrebutted evidence that
after Custer fired DRC and forced its personnel to leave the BIA,
DRC had no opportunity for further contact with the Gurkhas, and
Custer made the Gurkhas sign employment contracts with Custer so
that they could continue to provide security. Because Custer thus
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prevented DRC from maintaining its employment relationship with the
Gurkhas, we affirm the jury’s award of $370,761 for lost profits.
IV.
We hold that sufficient evidence supports the jury verdicts in
favor of DRC on its quantum meruit and tortious interference with
contract claims. We therefore affirm the district court’s denial
of Custer’s post-judgment motion. Because, however, the jury
appears to have awarded DRC $130,000 in double recovery for the
quantum meruit claim, we grant a remittitur in that amount and
remand to the district court to modify the judgment accordingly.
AFFIRMED IN PART AND REMANDED
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