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July 6, 1995


The opinion of the court was delivered by: DENNY CHIN


 On November 22, 1994, after nearly five years of litigation and following a four-week trial, the jury returned a verdict in this action in favor of plaintiff in the amount of $ 619,434.51. The jury found that defendant general contractor Merritt-Meridian Construction Corporation ("MMCC") materially breached its agreement (the "Subcontract") with plaintiff subcontractor Evergreen Pipeline Construction Co., Inc. ("Evergreen"). The jury invalidated several provisions in the Subcontract that would have limited plaintiff's recovery, and found that MMCC was liable to Evergreen for $ 22,350.51 for written change orders, $ 157,302 for delay damages, and $ 175,632 for other extra work.

 The jury reached a final award by taking the $ 355,284.51 it found plaintiff suffered in damages, and adding to that: $ 400,000 as the agreed base contract amount; $ 204,570 for undisputed mass rock work; and $ 158,095 for undisputed trench rock work. The jury then subtracted $ 440,464 in payments from MMCC to Evergreen and $ 58,051 in credits for the backcharges and change order no. 2. Based on the above findings and calculations, the jury awarded plaintiff a total of $ 619,434.51.

 Before the Court are several post-trial motions. Defendants move for judgment as a matter of law on the issues of plaintiff's claims for delay damages and orally requested extra work, and the question of whether plaintiff's alleged breach of the Subcontract precludes any recovery by plaintiff on that agreement. Defendants also move for a new trial on the independent grounds that the issue of punitive damages was improperly submitted to the jury, and that the verdict was against the weight of the evidence.

 Plaintiff cross-moves for prejudgment interest and attorneys' fees and costs. Plaintiff also moves for the equitable remedy of a court order granting Evergreen judgment on its promissory note with MMCC and further compelling MMCC to enter a satisfaction of MMCC'S state court judgment against Evergreen.

 Lastly, third-party defendant Transamerica Premier Insurance Company ("TPI") cross-moves for attorneys' fees and costs.

 Summary of the Facts

 Evergreen was founded by its president Jack DeLello in Colorado. Evergreen specialized in installing pipeline, particularly for utilities in the Rocky Mountain states. When that work became sparse, DeLello came to New York State seeking work for Evergreen. DeLello learned that a contract had been awarded to MMCC for work at the United States Military Academy at West Point, and he made inquiries as to the availability of subcontract work.

 MMCC, the general contractor, is a general construction company based in Beacon, New York. In 1987, the corporate secretary of MMCC was Dennis Capolino, and other members of the Capolino family served as senior officers of MMCC and affiliated companies. Prior to 1987, MMCC had performed various construction assignments at West Point on behalf of the United States Army Corps of Engineers. In 1987 MMCC and the Department of the Army, New York District, Corps of Engineers entered into a general contract entitled "Modernization & Expansion of Academic Facilities, Phase 1B" (the "Project"). The Project price was $ 12.5 million and an additional expenditure of $ 1.25 million was approved for alternate bid and unit price items, including the removal of trench and mass rock. The Project called for substantial interior and exterior work on existing buildings, as well as substantial site work, including drilling and blasting rock, laying utility lines and a drainage system, constructing new roads and parking lots, and extensive landscaping.

 Much of the Project had already been subcontracted when DeLello contacted MMCC, but DeLello secured for Evergreen the drilling, blasting and excavation work. On behalf of their respective companies, Dennis Capolino and Jack DeLello entered into the Subcontract, dated August 13, 1987.

 There were difficulties from the moment that Evergreen arrived on the site. DeLello testified at trial that Evergreen was mobilized too early, i.e., when he arrived at the site there was insufficient work and his personnel and equipment were idle. There were unanticipated difficulties with natural conditions, e.g., flooding in the trenches alongside West Point Highway. When the work did proceed there was more subsurface mass rock than anticipated, requiring extra drilling and blasting. The Subcontract was amended to cover some of this unforeseen work with written extra-work orders.

 Evergreen delayed its performance while it waited for MMCC to provide surveyors. DeLello testified that after MMCC failed to deliver on its repeated promises to provide surveyors, he and Dennis Capolino agreed at meeting on January 7, 1988, that Evergreen would hire and pay the surveyors and MMCC would reimburse this expense. According to DeLello this method worked well at first with MMCC honoring the weekly bills for surveying. MMCC later began refusing the bills. Evergreen then fired the surveyors, only to see MMCC hire them back and place them on its payroll.

 As the project advanced, the relationship between MMCC and Evergreen deteriorated, and there were ongoing disagreements on interpreting and allocating responsibilities under the Subcontract. Capolino testified that pervasive problems stemmed from Evergreen's lack of experience with this type of work. DeLello testified that MMCC withheld payments and was trying to destroy Evergreen after extracting substantial services.

 In March 1988 MMCC told Evergreen that it was not performing quickly enough. MMCC began to supplement Evergreen's work with MMCC'S personnel and equipment. MMCC then "backcharged" for these services. In April, MMCC presented Evergreen with a bill for approximately $ 200,000 in backcharges. DeLello protested that the backcharges were grossly inflated.

 Evergreen did not have enough cash on hand to pay its bills as they came due. MMCC twice paid Evergreen's quarterly insurance payments. At a negotiating session about which the parties provided sharply differing testimony, DeLello executed a promissory note in the amount of $ 80,000 and a confession of judgment stating that Evergreen had breached the Subcontract and was liable for $ 80,000 in liquidated damages.

 MMCC stopped paying for Evergreen's insurance. Dennis Capolino met with DeLello and told him that he wanted Evergreen off the job, because the failure to maintain insurance was a breach of the Subcontract. The next day, after speaking with his brother Richard, Dennis Capolino met with DeLello to discuss the backcharges. DeLello testified that it was a confrontational meeting, with both sides contesting what was owed to whom. That night, Evergreen moved its equipment off the site. The next day, Evergreen took steps to ensure the integrity of its work, and it then left the Project, before its work was completed.

 The record contains substantial evidence to support the jury's determination that MMCC breached its contractual obligations to Evergreen. For example, the record contains substantial evidence that MMCC breached its obligation to deal with Evergreen in good faith.

 Don Scaglione, a former employee of MMCC who was MMCC's Project Manager on the Project from approximately May or June 1987 until May 1988, testified that MMCC's payments to Evergreen for work performed were "slow and controlled." *fn1" Scaglione testified that "Dennis [Capolino] wanted to spoon-feed Jack," and thus Scaglione did so, although he did not agree with the approach. He testified that although MMCC received payment for the removal of unexpectedly large quantities of mass rock, and although "we were paid for it before the change order was approved, . . . we didn't pay Evergreen for it," because "we were trying to keep him [DeLello] on the job without paying him everything." He also testified that when DeLello complained to Dennis Capolino about not getting paid, Capolino responded by saying "sue me."

 Scaglione's testimony was corroborated by DeLello, who testified that during the meeting the night before Evergreen left the site, Capolino put his feet up on the table to show that he had written on the soles of his shoes the words "JACK SUCKS." Later that day, DeLello testified that Capolino said to him: "We're not going to give you a dime, we don't have to. It would take you a hundred thousand dollars to retain an attorney. I'll tie you up for six years. Go fuck yourself."

 Dennis Capolino's attitude toward DeLello was also demonstrated by his sarcastic use of the phrase "Dearest Jack" in a letter that he sent to DeLello on March 21, 1988 complaining of purported deficiencies in Evergreen's work. (DX 1731). In terms of backcharges that MMCC assessed against Evergreen, Scaglione testified that when he prepared the backcharges, Dennis Capolino told them "it wasn't enough." Capolino told him to "build it up," to "triple it." Scaglione testified that, although he told Capolino that "it wasn't right," he nevertheless did as Capolino instructed him. He testified, however, that "the backcharges are not correct; they're inflated."

 MMCC's own invoices show that Evergreen was backcharged for equipment that was idle because of inclement weather or worker holidays. Moreover, although Scaglione proposed to backcharge Evergreen $ 300 per day for the use of a John Deere 792, for example, on April 8, 1988 (PX Q), Evergreen was shown being charged $ 450 per day on April 22, 1988 for the same piece of equipment (PX 58), and at trial the rate increased further to $ 600 per day ($ 75 per hour, 8 hours per day). (DX 6025A). These varying prices were for the same piece of equipment used during approximately the same time period, and hence the jury reasonably could have found that MMCC grossly inflated the backcharges.

 Procedural History

 On January 25, 1989, plaintiff filed a complaint pursuant to 40 U.S.C. ยง 270 et seq. (the "Miller Act") against MMCC and its surety, General Insurance Company of America ("General"). Defendants counterclaimed and Judge Goettel consolidated this action with a removed state court action brought by MMCC against DeLello.

 On June 29, 1989, MMCC, then represented by Stephen O'Hare, Esq., filed a third-party complaint against Evergreen's performance bond surety, TPI. The third-party complaint included claims of civil RICO and fraud. In March and April of 1991 the parties were granted leave to amend their pleadings. Plaintiff asserted an additional cause of action in quantum meruit. Mr. O'Hare, as counsel for both defendants, filed an answer to the amended complaint, and raised two counterclaims: (i) against Evergreen for breach of contract and negligence and seeking $ 500,000 in damages in favor of MMCC; and (ii) against Evergreen, TPI, and others for fraud and civil RICO and claiming that MMCC "has suffered great loss and damaged [sic] in its business in the sum of one hundred million ($ 100,000,000.00) dollars."

 On April 2, 1992, TPI moved for partial summary judgment seeking dismissal of all claims against it, except the breach of contract claim under the bond. In a memorandum decision dated July 17, 1992, Judge Goettel fully adopted a Report and Recommendation issued by Magistrate Judge Fox and granted TPI's motion. Judge Goettel also imposed a $ 1,000 sanction against attorney O'Hare based on Magistrate Fox's conclusion that "Merritt's counsel did not read the law prior to asserting the RICO claim and failed to read it again after receiving Transamerica's motion papers." Report and Recommendation dated June 22, 1992 at 20.

 After a summary jury trial, *fn2" and pursuant to a stipulation filed in April 1993, MMCC and General substituted Daniel Saxe, Esq. as their counsel of record, replacing Stephen O'Hare, Esq. *fn3" On June 15, 1993, MMCC and General moved to dismiss the only surviving claim (for breach of contract), in MMCC's second amended third-party complaint against TPI. Defendants also moved to dismiss MMCC's second counterclaim against Evergreen, a claim that was similar to the conspiracy claim previously dismissed as to TPI.

 Evergreen objected to the dismissal of the malicious conspiracy counterclaim, and argued that any dismissal should include an award of Rule 11 sanctions against MMCC. TPI did not oppose dismissal of the remaining breach of contract claim against it, but similarly argued that any dismissal be conditioned on MMCC paying TPI's litigation fees. It further argued that if the dismissal were "with prejudice," then TPI should be awarded Rule 11 sanctions against MMCC.

 On July 2, 1993, ruling from the bench, Judge Goettel dismissed MMCC's second counterclaim against Evergreen, adding "because it appears there is merit to plaintiff's contention that the defendants brought the counterclaim solely for purposes of harassing plaintiff, the plaintiff's request for attorney's fees with costs and expenses are granted but the actual amount to be set will be held in abeyance till the final disposition of this litigation." (7/2/93 Tr. at 9). Judge Goettel also dismissed the remaining cause of action of the third-party complaint against TPI with prejudice, stating "we will grant fees and costs but we will not determine their amount until after trial." (Id. at 10).

 On September 27, 1994, defendants filed a motion in limine and, after hearing oral argument from counsel, I denied the motion in part and granted it in part. I permitted testimony concerning (i) subsequent oral modifications of the Subcontract; (ii) interpretations of plaintiff's exhibit number 72, "Addition to Contract Amount for Drilling and Blasting General Rock" and (iii) the claim for punitive damages. I prohibited evidence regarding (i) discussions prior to, or contemporaneous with, the Subcontract offered to interpret unambiguous terms; (ii) previously dismissed parties and claims and (iii) the alleged reputation of MMCC for unfair bargaining with subcontractors.

 In October and November 1994 this action was tried to a jury. At the close of plaintiff's direct case, defendants moved for judgment as a matter of law pursuant to Fed. R. Civ. P. 50 (a) with respect to (i) punitive damages; (ii) plaintiff's quantum meruit claim; (iii) certain of plaintiff's extra work claims; (iv) plaintiff's delay claim; and (v) plaintiff's alleged breaches of the Subcontract. I reserved decision. At the close of all the evidence, the motion was renewed, and I dismissed plaintiff's claim for punitive damages and denied the remainder of defendants' motion.

 These motions followed the verdict.


 A. The Defendants' Motion

 Defendants renew their motion for judgment pursuant to Fed. R. Civ. P. 50(b) with respect to plaintiff's claims for orally requested extra work and delay damages, and defendants further contend that the jury could only have reasonably concluded that Evergreen -- and not MMCC -- breached the - Subcontract. Alternatively, defendants move for a new trial pursuant to Fed. R. Civ. P. 59(a) on the grounds (i) that the jury was improperly permitted to hear evidence offered in support of the punitive damages claim, which was dismissed at the close of the evidence and (ii) that the verdict was against the weight of the evidence.

 1. The Motion to Set Aside the Verdict

 A jury verdict is not to be set aside and judgment entered as a matter of law pursuant to Fed. R. Civ. P. 50(b) unless "'the evidence is such that, without weighing the credibility of the witnesses or otherwise considering the weight of the evidence, there can be but one conclusion as to the verdict that reasonable [jurors] could have reached.'" Samuels v. Air Trans. Local 504, 992 F.2d 12, 14 (2d Cir. 1993) (quoting Simblest v. Maynard, 427 F.2d 1, 4 (2d Cir. 1970)). In considering a Rule 50(b) motion, a trial court "must view the evidence in a light most favorable to the non-movant and grant that party every reasonable inference that the jury might have drawn in its favor." Samuels, 992 F.2d at 16. Judgment notwithstanding the verdict is to be entered only where there is such a "complete absence of evidence supporting the verdict that the jury's findings could only have been the result of sheer surmise and conjecture." Mattivi v. South African Marine Corp., 618 F.2d 163, 168 (2d Cir. 1980); accord Cruz v. Local Union No. 3 of the Int'l Bhd. of Elec. Workers, 34 F.3d 1148, 1154 (2d Cir. 1994).

 a. Orally Requested Extra Work

 The jury found that MMCC materially breached the Subcontract, and that paragraphs 11 and 25 of the Subcontract were either waived by MMCC or eliminated by the parties. *fn4" Based on these ...

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