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MORSE/DIESEL, INC. v. TRINITY INDUS.

December 21, 1994

MORSE/DIESEL, INC., Plaintiff, against TRINITY INDUSTRIES, INC., MOSHER STEEL COMPANY and AETNA INSURANCE COMPANY, Defendants.

LORETTA A. PRESKA, U.S.D.J.


The opinion of the court was delivered by: LORETTA A. PRESKA

LORETTA A. PRESKA, District Judge:

 This is an action in which the plaintiff general contractor seeks to recover costs associated with the untimely completion of one of its subcontractor's work from the subcontractor and the subcontractor's surety company. After a six-week trial held earlier this year, a jury found defendants liable to plaintiff for approximately $ 25.8 million in compensatory damages.

 Presently before me are three motions. Defendant Aetna Insurance Company ("Aetna") seeks relief from the jury's verdict through a motion for a new trial pursuant to Fed. R. Civ. P. 59. Plaintiff Morse/Diesel, Inc. ("Morse/Diesel") moves for an order entering judgment against both defendants in the amount of the jury's verdict, with interest, fees, and costs added on. Finally, in the event judgment is entered, both defendants have moved for a 30 day stay of execution.

 My rulings, set forth in more detail below, are as follows. Aetna's motion for a new trial is denied on the basis of my finding that the trial errors alleged by Aetna were not properly preserved by Aetna's prior counsel (who was simultaneously counsel for Trinity Industries, Inc. ("Trinity")) as grounds for post-trial relief. Morse/Diesel's motion for entry of judgment is granted to the extent indicated below, and defendants' motion for a stay of execution is denied.

 Background

 The subject of this ten year old litigation is the construction of the Mariott Marquis Hotel in the heart of Manhattan. Plaintiff, Morse/Diesel, was the general contractor for the project. Defendant Mosher Steel Company ("Mosher") was the subcontractor in charge of erecting the project's structural steel. Defendant Trinity is the corporate successor to Mosher. *fn1" Defendant Aetna issued a performance bond on behalf of Trinity with respect to the structural steel subcontract.

 As the trial drew to a close, I convened a conference to discuss the jury charge. Prior to the conference, I had examined the parties' earlier-submitted requests to charge, formulated a draft jury charge, and distributed my draft to the parties for their initial review. At the conference, held on May 17, 1994, counsel for the parties and I went through the jury charge page by page, and I heard counsel's objections, discussion and argument where either or both sides disagreed with the draft. The conference lasted some five hours; there was no court reporter present.

 The following day, having provided the parties with a revised proposed jury charge incorporating some of their objections to my initial draft, I afforded counsel the opportunity to state on the record their objections to the charge. I thereafter made changes to the charge in response to some of the objections voiced by counsel on the record at this juncture. E.g., Trial Transcript, Vol. 29, 5/18/94, at 5794 1.1-1.10. Aetna and Trinity's common trial counsel then voiced none of the objections which Aetna, by new and separate counsel, now advances as error. After counsel had completed stating their objections for the record, counsel immediately proceeded to deliver their closing arguments. I then instructed the jurors on the law of the case and discharged them to deliberate. The following day, the jury returned a verdict for Morse/Diesel, against both defendants, for approximately $ 26 million.

 DISCUSSION

 I. The Rule 59 Motion

 In the instant Rule 59 motion, Aetna's new counsel attacks my instructions to the jury concerning plaintiff's performance bond claim against it. The relevant language, in its entirety, as read to the jury, is as follows:

 
With regard to Morse/Diesel's claims against Aetna, you have heard evidence that Aetna Insurance Company posted a performance [bond] as surety for Mosher/Helena.
 
The primary purpose of a performance bond is to guarantee that the principal, in this case, Mosher/Helena, will perform its entire contract. It is a form of insurance.
 
The bond indemnifies an owner against breach by the contractor. The liability of a surety on a performance bond follows the liability of the principal on the bond. In other words, the surety will be held liable if the principal is held liable, so if you choose to render a verdict against Mosher/Helena, such verdict should also be rendered against Aetna.

 Aetna's new counsel now contends this charge was incorrect in three respects. First, Aetna now maintains, my characterization of the performance bond as "a form of insurance" was a misstatement of the law and a conceptual error. Second, Aetna now asserts that I erred in neglecting to instruct the jury that its liability under the performance bond was contingent upon its receipt from Morse/Diesel of a formal declaration of default by Trinity (Aetna's contention is that such notice was never received). Finally, Aetna now argues that I erred in instructing the jury that Aetna's liability to Morse/Diesel was co-extensive with Trinity's; on the contrary, Aetna now claims, its exposure was narrower. The relevant law and the terms of the performance bond, Aetna now says, rendered it liable only for the excess costs of completing Trinity's subcontract work in the event Trinity failed to do so; consequential damages stemming from Trinity's delay in performing its subcontract (i.e., the type of damages awarded Morse/Diesel by the jury) were not within the range of its exposure.

 Aetna contends that as a result of these errors, the jury was permitted to render a verdict against it that was contrary both to law and to the performance bond. Plaintiff counters that Aetna's points of error were not properly preserved and that, even considering the merits, my instructions to the jury regarding Aetna were correct.

 A. Preservation of Errors

 In pertinent part, Rule 59 provides that:

 
A new trial may be granted to all or any of the parties and on all or part of the issues (1) in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States. . . .

 A motion under Rule 59 may be predicated on a court's error in giving, or refusing to give, instructions to the jury. Anderson v. Branen, 17 F.3d 552, 555 (2d Cir. 1994); Hygh v. Jacobs, 961 F.2d 359, 365 (2d Cir. 1992). However, under Rule 51,

 
no party may assign as error the giving or the failure to give an instruction unless that party objects thereto before the jury retires to consider its verdict, stating distinctly the matter objected to and the grounds of the objection.

 Rule 51 does not require a party to make its exceptions upon a formal record. One must, however, object in a manner which satisfies the rule's purpose of alerting the trial judge to the alleged error and allowing the court an opportunity to correct it. See Niehus v. Liberio, 973 F.2d 526, 529 (7th Cir. 1992); Kakavas v. Flota Oceanica Brasileira, S.A., 789 F.2d 112, 120 (2d Cir.) (holding point of error preserved where counsel's actions had been "enough to alert the judge to the question whether his charge properly reflected the law"), cert. denied, 479 U.S. 853, 93 L. Ed. 2d 120, 107 S. Ct. 186 (1986); Cohen v. Franchard Corporation, 478 F.2d 115, 122 (2d Cir.), cert. denied, 414 U.S. 897 (1973).

 With respect to its first two points of error, it is apparent that Aetna did not comply with the dictates of Rule 51. Prior to the filing of this motion, counsel for Aetna did not so much as mention, much less object to, the charge's reference to the performance bond as "a form of insurance" *fn2" or the charge's failure to note that a declaration of default was a precursor to Aetna's liability. As to the latter point, Aetna's new counsel now argues that it was raised "implicitly" in one of his predecessor's proffered instructions, titled "Performance Bond Only Ensures Performance." However, even if that were true--and it is not *fn3" -- Rule 51 expressly requires that objections concerning jury instructions be raised "distinctly." Thus, a point buried "implicitly" in the text of a requested charge is not properly preserved for post-trial review. Palmer v. Hoffman, 318 U.S. 109, 119, 87 L. Ed. 645, 63 S. Ct. 477 (1943) (noting that an objection to a charge "must . . . bring into focus the precise nature of the alleged error").

 As to the third error alleged, Aetna argues that the instruction on the scope of its liability was erroneous in failing to provide that Aetna's liability on the performance bond was limited to completion costs and, conversely, excluded delay damages. Aetna maintains it preserved the point for appeal by incorporating it into a requested instruction titled "Performance Bond Only Ensures Performance;" raising it during the off-the-record charge conference; and marking the "Performance Bond Only Ensures Performance" requested instruction into the record as part of an exhibit of rejected charges.

 Had all of that indeed taken place, the point assuredly would have been called to my attention and, consequently, would be viable for post-trial consideration. The facts, however, are not as Aetna's new counsel now states.

 Counsel is correct that an instruction titled "Performance Bond Only Ensures Performance" was among defendants' requested charges. The text of that instruction read:

 Counsel now argues with the benefit of the extensive papers on this motion that this instruction can be read as asserting the argument that Aetna's liability did not extend beyond completion costs. Counsel is incorrect, however, in his assertion that the instruction is unambiguous in this regard. *fn4" Moreover, passing the question of the instruction's ambiguity, the mere submission of a written instruction prior to trial is not, without more, sufficient to satisfy Rule 51. See Salzmann v. Sciccitano, 782 F. Supp. 195, 198 (E.D.N.Y. 1991) (citing cases). See also Western Transmission Corp. v. Colorado Mainline, Inc., 376 F.2d 470 (10th Cir. 1967). This is particularly true in the context of a protracted and complicated construction litigation where, over years, numerous factual and legal issues were advanced and abandoned.

 Aetna, of course, does not rest on its mere submission of the instruction but claims also that it raised the issue of the scope of its liability during the unrecorded charge conference. According to the sworn affidavit of Robert Cox, counsel to both Aetna and Trinity at the time of that conference, during that conference his co-counsel, Daniel Cohen, objected to my refusal to include the "Performance Bond Only Ensures Performance" instruction, arguing that "because Trinity had fully performed its bonded work, the provisions of the performance bond could not provide the basis for Morse/Diesel's lawsuit against Aetna." Cox 9/29/94 Aff. at P 7. At best, this is an indirect way of stating that Aetna was liable only for completion costs. Cox, however, avers that counsel and I engaged in a "prolonged and serious debate" over Cohen's position, id., and, presumably, he would contend that during the course of that debate, Aetna's position was fleshed out more completely.

 Cox's affidavit is contradicted by that of Peter Wang, who attended the conference as counsel for Morse/Diesel. Wang states that the only objection concerning Aetna raised by Trinity and Aetna's joint defense counsel at the unrecorded conference was to the charge's failure to instruct that Aetna could not be liable for more than the $ 31.8 million penal amount of the performance bond. Wang 10/18/94 Aff. at P 6. He further states that he is "certain that defendants did not raise at the conference any of the issues contained in Aetna's motion," id. (emphasis in original), and notes specifically that defense counsel "never stated or implied that the basis for [the 'Performance Bond Only Ensures Performance' instruction] was . . . that . . . Aetna could not be held liable under the performance bond for all types of damages." Id. at P 5.

 The fact is that the only argument raised by defense counsel in connection with Aetna was that the instructions should be modified to make clear that the maximum extent of Aetna's liability was $ 31.8 million. That was the sole basis upon which counsel argued for the inclusion of the "Performance Bond Only Ensures Performance" instruction. There was no debate over the possibility that Aetna's liability was limited to certain types of damages, only a concern expressed by defense counsel that the charge reflect a $ 31.8 million cap on the amount. My response to this latter point was that an instruction imposing a cap on damages applicable to one defendant only would be unduly confusing and that a verdict against Aetna in excess of the penal amount of the performance bond could be remedied as a matter of law after trial. Mr. Cox and Mr. Cohen accepted this solution, and no further discussion concerning Aetna took place; so far as I was aware, based on their statements and their conduct in not pursuing the matter further, they were satisfied.

 Defense counsel for Trinity and Aetna did not state at the unrecorded conference, either directly or indirectly, Aetna's current position that its liability was limited to completion costs and did not include delay damages. Had counsel done so, it would certainly have been an event worth remembering, because it would have been the first time in the ten-year history of the case that such an argument was put forth. Neither in its pleadings, nor in a summary judgment motion, nor in any of the many motions in limine, nor during the trial itself did their common counsel suggest that Aetna's liability might diverge from Trinity's based on the type of damages claimed by Morse/Diesel. Indeed, an examination of the trial transcript demonstrates that the parties tried the case as if it were a dispute solely between the principal parties, with Aetna merely an interested but uninvolved spectator. Common counsel for the defendants offered no evidence concerning Aetna or the performance bond, did not cross-examine any of ...


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