2300 Pennsylvania Avenue, LLC v. Harkins Builders, Inc.

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 12-1346

2300 PENNSYLVANIA AVENUE, LLC,

Plaintiff - Appellee,

v.

HARKINS BUILDERS, INC.,

Defendant - Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Liam O’Grady, District
Judge. (1:10-cv-01321-LO-IDD)

Argued: January 31, 2013 Decided: March 4, 2013

Before MOTZ, KING, and AGEE, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: William Rutherford Mauck, Jr., SPOTTS FAIN, PC,
Richmond, Virginia, for Appellant. Patricia Ann Millett, AKIN,
GUMP, STRAUSS, HAUER & FELD, LLP, Washington, D.C., for
Appellee. ON BRIEF: Mark S. Dachille, HUDDLES JONES SORTEBERG &
DACHILLE, PC, Columbia, Maryland, for Appellant. Hyland Hunt,
AKIN, GUMP, STRAUSS, HAUER & FELD, LLP, Washington, D.C., for
Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

2300 Pennsylvania Avenue, LLC, brought this action

against Harkins Builders, Inc., alleging breach of contract,

fraud, and negligence arising out of a contract for the

construction of a building project in Washington, D.C. The

district court granted summary judgment to 2300 as to Harkins’

liability for liquidated damages. Following a bench trial, the

court entered judgment for 2300, in the total amount of

$3,922,189 in damages. Harkins appeals, raising several

arguments. We affirm.

I.

In August 2008, 2300, as owner and developer, and

Harkins, as general contractor, entered into a written contract

for the construction of a mixed-use apartment and retail

building project in Washington, D.C. The contract consisted of

several documents, including AIA Document A101-1997, the

“Standard Form of Agreement Between Owner and Contractor,” AIA

Document A201-1997, the “General Conditions of the Contract for

Construction,” and “Modifications issued after execution of” the

A101-1997, which include the various numbered Change Orders.

A.

Relevant to this appeal, the contract requires windows

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meeting the performance requirements of an “HC-70 window,” a

high-performance window. In December 2009, Harkins discovered

some of the windows leaked. After initial remediation efforts

failed, Harkins learned that a manufacturing defect caused the

leaks. Between December 2009 and October 2010, Harkins and its

subcontractors undertook at least five remediation efforts on

the windows, testing after each remediation. These efforts

involved drilling holes, injecting foam compound and seam

sealer, applying new sealant and caulking, and installing

redesigned sashes. On August 2, 2010, 2300 retained a testing

agency that tested 24 window openings. Two openings failed but

were remediated and tested with successful results that same

day. At least as late as December 2010, the project architect

observed some window leaks.

Also in December 2009, Harkins observed approximately

twenty leaks in the garage walls. The leaks appeared at

approximately the same height and in “pretty consistent

intervals.” Harkins’ sub-contractor, Prospect Waterproofing

Co., said that “capillary action” caused the uniform leaks in

the walls and denied responsibility. Harkins accepted

responsibility for the leaks; Prospect conducted the repairs.

Despite several rounds of repairs, which included injecting

cement and chemical grout in the leaking areas, the project

architect continued to observe leaks in late 2010 and spring

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2011. The architect noted that the leak heights correlated to

the approximate horizontal boundary between the two

waterproofing systems. In light of the “pattern created by the

water penetration,” the architect also determined that “the

waterproofing in the garage was either damaged or not installed

properly,” due to “poor quality waterproofing, improper

installation, or postinstallation damage.”

The contract requires Harkins to achieve “Substantial

Completion” of the entire building by April 25, 2010. Under the

contract, the architect’s “Certificate of Substantial Completion

shall establish the date of Substantial Completion.”

The architect’s certification must be made “in

accordance with Section 9.8,” which provides that the architect

will determine that the building is substantially complete when

it “is sufficiently complete in accordance with the Contract

Documents so that [2300] can occupy or utilize the [building]

for its intended use.” Substantial completion is to be

determined building-wide, rather than on a unit-by-unit basis.

Under the contract, Harkins is liable for liquidated damages if

it did not achieve substantial completion by April 25, 2010.

The D.C. Department of Consumer and Regulatory Affairs

issued a Certificate of Occupancy on February 25, 2010, and

tenants began moving into units two days later. A month later,

on March 30, Harkins requested payment of a $150,000

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“Substantial Completion Incentive Bonus” established by Change

Order 9, which modified the liquidated damages and bonus

provisions of the contract. In Change Order 91 dated April 23,

2010, the architect approved and 2300 agreed to pay Harkins a

$150,000 bonus, which was called a “Certificate of Occupancy

Bonus.”

By letter dated July 13, 2010, Harkins requested that

the architect issue the Certificate of Substantial Completion.

On September 23, 2010, the architect issued the certificate,

which set August 2, 2010 as the Date of Substantial Completion.

The architect attached to the certificate a “punch list” of

tasks that Harkins was to complete before final payment would

issue. On October 5, 2010, Harkins advised 2300 that it would

not execute the Certificate unless the Date of Substantial

Completion was changed to April 25, 2010, and the punch list

removed. 2300 did not do this but did execute the certificate

on October 7, 2010.

B.

On November 19, 2010, 2300 filed a five-count

complaint against Harkins in the United States District Court

for the Eastern District of Virginia. In its complaint, 2300

alleged that Harkins breached its express and implied

obligations to 2300 by furnishing deficient windows and damaged

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garage waterproofing, and by failing to properly construct and

install the roof, adhere to specified building dimensions

required by federal law, timely complete the work, and submit

required documentation to 2300. 2300 further alleged that

Harkins failed to act in good faith and deal fairly with 2300,

and breached its express and implied warranties under the

contract. Finally, 2300 alleged that Harkins negligently

“breached its duty to exercise reasonable care and competence by

performing substandard and defective work.”

Harkins answered the complaint and asserted a

counterclaim for breach of contract, alleging that 2300 had

withheld the $510,000 contract balance even though Harkins

“fully and properly fulfilled all of its obligations under the

contract.” In March 2011, after being granted leave to do so,

2300 filed an amended complaint, adding a fraud count, which

Harkins answered.

Shortly thereafter, upon the close of discovery, each

party moved for partial summary judgment. The court granted

summary judgment to 2300 as to liability on its liquidated

damages claim, finding Harkins had failed to achieve substantial

completion under the contract prior to August 2, 2010. The

court denied the parties’ remaining motions for summary

judgment. After a bench trial, the court issued a memorandum

opinion and order for judgment to 2300, finding that Harkins had

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breached the contract with respect to the windows and

waterproofing. The court further found that 2300 failed to

demonstrate by a preponderance of the evidence that the roof did

not meet contract specifications, but in light of the parties’

agreement, found 2300 entitled to compensation to relocate the

roof condenser. The court awarded 2300 damages in the amount of

$3,922,189, which included $2,683,962 for window replacement,

$210,000 for waterproofing repair and maintenance, $3,500 to

relocate the roof condenser, $637,200 in liquidated damages, and

$387,527 in associated fees and costs. As to 2300’s fraud and

negligence claims, the court awarded judgment to Harkins. The

court rejected Harkins’ counterclaim for recovery of the

$510,000.00 contract balance and refused to credit the amount to

Harkins.

Harkins timely noted this appeal.

II.

After carefully considering the record, the briefs,

and the applicable law, and having the benefit of oral argument

from the parties, we affirm the judgment in favor of 2300 for

the reasons well-stated in the district court's memorandum

opinion. We engage in further discussion only to address two

issues: the district court’s ruling on summary judgment, which

was entered orally from the bench; and the calculation of

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damages, which Harkins asserts must be remanded to address

mathematical errors.

A.

Under Change Order 9 of the contract, Harkins was

“liable for and shall pay to the Owner . . . Liquidated Damages

. . . if substantial completion has not been reached as per” the

contract by a certain date. The parties’ cross-motions for

summary judgment on liability for liquidated damages focused on

the definition of “substantial completion” under the contract.

We review de novo the district court’s award of

partial summary judgment on liquidated damages to

2300. See Wash. Metro. Area Transit Auth. v. Potomac Inv.

Props., Inc., 476 F.3d 231, 234 (4th Cir. 2007). Because this

appeal invokes our diversity jurisdiction, we apply state

substantive law and federal procedural law. See Gaspirini v.

Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996).

The parties agree that District of Columbia law

governs the contract at issue in this case. Under District law,

“summary judgment is appropriate where a contract is

unambiguous” on its face. Holland v. Hannan, 456 A.2d 807, 815

(D.C. 1983). When interpreting a contract under District law,

we must determine “what a reasonable person in the position of

the parties would have thought the [contract] meant.” 1010

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Potomac Assocs. v. Grocery Mfrs. of Am., Inc., 485 A.2d 199, 205

(D.C. 1984). To do so, we interpret the contract “as a whole,

giving a reasonable, lawful, and effective meaning to all its

terms, and ascertaining the meaning in light of all the

circumstances surrounding the parties at the time [it] was

made.” Nest & Totah Venture, LLC v. Deutsch, 31 A.3d 1211, 1219

(D.C. 2011).

Properly applying District law, the court determined

that the contract unambiguously defines substantial completion.

Pursuant to the contract, “[w]hen the Work or designated portion

thereof is substantially complete, the Architect will prepare a

Certificate of Substantial Completion which shall establish the

date of Substantial Completion.” Further, Harkins’ submission

of certain documents to the architect is a prerequisite to

achieving substantial completion. If the architect notifies

Harkins that an item “is not sufficiently complete in accordance

with the Contract Documents,” Harkins’ completion or correction

of that item is a prerequisite to issuance of the Certificate of

Substantial Completion.

As Harkins correctly notes, the contract does provide

that at the time of substantial completion, “the Work or

designated portion thereof is sufficiently complete in

accordance with the Contract Documents so that the Owner can

occupy or utilize the Work for its intended use.” However, the

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contract also expressly provides that substantial completion is

not a prerequisite to occupancy or use. Moreover, the argument

Harkins advances reads the requirement of the architect’s

certification out of the definition of substantial completion

and, thus, fails to give “effective meaning to all its terms” as

District law requires. Nest & Totah Venture, 31 A.3d at 1219.

Given the clarity of the contract when viewed as a

whole, the district court did not err in granting partial

summary judgment to 2300, finding Harkins liable for liquidated

damages. Id.

B.

The remaining issue we address here concerns the

district court’s calculation of damages following the eight-day

bench trial. Harkins argues that the court miscalculated total

damages due to mathematical errors. Specifically, Harkins

claims that the district court miscalculated bond costs, permit

fees, and the General Contractor fee.

Under District law, the damages amount need be only a

“just and reasonable estimate based on relevant data,” and need

not be “proven with mathematical precision.” Affordable

Elegance Travel, Inc. v. Worldspan, L.P., 774 A.2d 320, 329

(D.C. 2001). Moreover, we have recognized that “[t]he trial

court, as a fact-finder, possesses considerable discretion in

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fixing damages, and its decision will be upheld absent clear

error.” Little Beaver Enters. v. Humphreys Rys., 719 F.2d 75,

79 (4th Cir. 1983). We find that the court’s damages award,

even if it did not precisely calculate total damages,

nonetheless was “just and reasonable.” Further, we reject

Harkins’ challenges to the district court’s evidentiary rulings,

finding no abuse of discretion in the court’s admission of lay

opinion testimony. See Fed. R. Evid. 701; Noel v. Artson, 641

F.3d 580, 591 (4th Cir. 2011). Finally, we note that, upon

review of the record, we agree with 2300 that Harkins waived its

claim that the court neglected to remove $82,600 in costs

related to roof repair. Accordingly, we affirm the amount of

the award.

III.

For these reasons, and for the reasons stated by the

district court, judgment in favor of 2300 in the amount of

$3,922,189 is

AFFIRMED.

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