United States v. Hirani Engineering & Land Surveying, PC ( 2020 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Submitted March 27, 2020 Decided June 19, 2020
No. 19-7010
UNITED STATES OF AMERICA, FOR THE USE AND BENEFIT OF
AMERICAN CIVIL CONSTRUCTION, LLC,
APPELLEE
v.
HIRANI ENGINEERING & LAND SURVEYING, PC,
APPELLEE
COLONIAL SURETY COMPANY,
APPELLANT
Consolidated with 19-7011, 19-7015
Appeals from the United States District Court
for the District of Columbia
(No. 1:14-cv-00745)
Michael C. Delaney and Laurence Schor were on the joint
briefs for appellants/cross-appellees.
Herman M. Braude was on the briefs for appellee/cross
appellant.
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Before: HENDERSON, ROGERS and GARLAND, Circuit
Judges.
Opinion for the Court by Circuit Judge ROGERS.
ROGERS, Circuit Judge: American Civil Construction,
LLC, (“ACC”) the subcontractor on a U.S. Army Corps of
Engineers (“Corps”) flood protection project, sued the prime
contractor, Hirani Engineering & Land Surveying, P.C.,
(“Hirani”) for breach of contract and the providers of Hirani’s
payment bond, Colonial Surety Company (“Colonial”), under
the Miller Act, 40 U.S.C. § 3133, for unpaid labor and
materials. Following a bench trial, the district court entered
judgment in favor of ACC and awarded damages against both
defendants. Hirani and Colonial appeal, and ACC cross
appeals. Among the challenges to the judgment, Colonial
contends that ACC’s lawsuit was untimely under the Miller
Act’s one-year statute of limitations, pointing to the Corps’
April 26 letter terminating Hirani. But the Federal Acquisition
Regulations may render the effective date of Hirani’s
termination to be later. Because the district court expressly
declined to make some relevant findings, the court will remand
the case without deciding whether the accrual of the Miller Act
cause of action stems from the termination of the Prime
Contract or the Subcontract. Otherwise, the court affirms the
award of restitution against Hirani and defers ruling on other
issues raised by the parties.
I.
In 2010, the Corps awarded Hirani a $3,833,097 contract
(the “Prime Contract”) to build the “Washington, D.C. and
Vicinity, Local Flood Protection Project, 17th Street Closure
Structure” (the “Project”). See U.S. ex rel. Am. Civil Constr.,
LLC v. Hirani Eng’g & Land Surveying, P.C., 345 F. Supp. 3d
3
11, 22 (D.D.C. 2018) (“Hirani II”), ⁋⁋ 4–9. Under the Prime
Contract, Hirani was to build a levee flood wall designed to
prevent the Potomac River from flooding across the National
Mall into downtown Washington, D.C. Id. ⁋ 4. The contract
anticipated that the Project would be completed within one
year, by October 12, 2011. Id. ⁋ 10. The contract also required
Hirani to obtain a surety bond and it did so from Colonial in
the amount of $3,833,097. Id. ⁋⁋ 11–12. A few months later,
the Corps issued Option 1, which required Hirani to install
stone cladding on the levee wall and increased the contract
price by $641,369. Id. ⁋ 57.
On April 4, 2011, Hirani and ACC entered into a written
Subcontract for $2,845,600, pursuant to which ACC would
perform the “entire scope of work” of the Project, except for
management, quality control, and the installation of some
specified metal structures and panels. Id. ⁋⁋ 13, 16–19. The
Subcontract provided that if a “dispute, controversy, or
question” arose about its interpretation, ACC would not stop
working until the dispute or controversy was resolved. Id. ⁋ 21
(alteration omitted).
The Project was beset by delays. Briefly, delays were
attributable to Hirani’s procrastination, change orders by the
Corps, bad weather, a misalignment between structural and
architectural drawings, and work stoppages due to the National
Cherry Blossom Festival. Id. ⁋⁋ 50–78.
By letter of April 26, 2013, the Corps terminated Hirani
for default. Id. ⁋ 92. The district court found that Hirani was
at fault for the termination. Id. ⁋⁋ 95–96. The Corps explained
that it had “little confidence” that Hirani would finish the
Project because Hirani had not taken the steps needed to
improve its progress, work had stalled since March 22 “due to
subcontractor management and nonpayment issues,” Hirani
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“had not submitted periodic progress schedules” and Hirani
had failed to “fulfill commitments to meet milestone deadlines
necessary for completing the remainder of the Prime Contract.”
Id. ⁋ 93 (alterations omitted). Hirani responded by letter of
April 30, 2013, rejecting the termination and requesting a
meeting. Id. ⁋ 99. That same day, Ed Hollander, ACC’s field
superintendent for the Project, learned that the Corps had
terminated Hirani. Id. ⁋⁋ 67, 98. The following day, May 1,
Hirani told Hollander that ACC must continue working on the
Project because it (Hirani) was fighting the termination. Id.
⁋ 100. In accordance with Hirani’s direction, ACC backfilled
an excavated grass area on May 1. Id. ⁋ 102. The following
day, May 2, Hirani directed ACC to immediately stop working
on the Project. Id. ⁋ 104.
The district court expressly declined to find when Hirani
received the Corps’ termination letter. Id. ⁋ 92 n.5. It did find
that the ACC crew did not work on the Project site on Saturday,
April 27 or Sunday, April 28, and heavy rains prevented work
on Monday, April 29 and Tuesday, April 30. Id. ⁋ 97. But the
district court did not make a finding of fact whether ACC
supplied materials during this time, and it declined to decide if
work performed by Ed Hollander or fencing and cleanup work
performed by ACC between April 29 and May 1 were
compensable under the Subcontract. (Having found that ACC
last performed compensable work on May 1, the district court
noted it “therefore need not consider [ACC’s] alternative
arguments that work performed by Ed Hollander on the Project
site between April 29, 2013, through May 1, 2013, as well as
fencing work and cleanup performed by ACC during that time
period are compensable tasks under the Subcontract and thus
occurred within the one-year limitations period.”) Id. at 40 n.8.
ACC filed suit against Hirani and Colonial on April 29,
2014. In a second amended complaint, ACC requested $2.07
5
million in damages from each defendant. Colonial
counterclaimed, alleging among other things that ACC had
breached the Subcontract by failing to perform and caused
Colonial to incur substantial costs.
The district court denied Hirani and Colonial’s motion for
summary judgment. See U.S. ex rel. Am. Civil Constr., LLC v.
Hirani Eng’g & Land Surveying, P.C., 263 F. Supp. 3d 99, 101
(D.D.C. 2017) (“Hirani I”). Following a five-day bench trial,
the district court concluded that Colonial’s counterclaims
failed because it had not shown that ACC breached the
Subcontract. See Hirani II, 345 F. Supp. 3d at 39. On ACC’s
Miller Act claim against Colonial, the district court found that
ACC’s lawsuit was timely because it was filed within one year
of the last compensable work ACC had performed under the
Subcontract. Id. at 43. And the court found that “Hirani
breached the Subcontract by refusing to pay ACC for the work
that it performed.” Id. The court therefore entered judgment
on the breach of contract claim in favor of ACC, id., and
directed the parties to brief how damages should be calculated,
id. at 56.
The district court awarded $1,544,957.29 in quantum
meruit damages on ACC’s Miller Act claim against Colonial,
plus more than half a million dollars in prejudgment interest.
U.S. ex rel. Am. Civil Constr., LLC v. Hirani Eng’g & Land
Surveying, P.C., No. 14-CV-00745 (APM), 2019 WL 162019,
at *3 (D.D.C. Jan. 10, 2019) (“Hirani III”). On ACC’s contract
claim against Hirani, the district court construed ACC’s request
for quantum meruit damages as seeking restitution because
Hirani had breached a written contract. Id. Citing the
RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST
ENRICHMENT to conclude that performance-based restitution
must be limited by expectancy under the contract, the district
court awarded $425,319.50 in restitution damages, plus nearly
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$150,000 in prejudgment interest, inasmuch as ACC had
already been paid over $2.5 million for its work. Id. at *4–5.
II.
Hirani and Colonial appeal. In their joint brief, they
contend that the district court erred in interpreting the Miller
Act, arguing that ACC was not entitled to recover any damages
because ACC failed to bring its Miller Act claim within one
year after the last day ACC performed compensable work on
the Project. They also contend that the district court erred by
awarding quantum meruit damages because breach of contract
damages could be calculated, by inadequately explaining the
damages award, by allowing double recovery to ACC, and by
admitting documents containing hearsay.
ACC cross appeals, contending that it was entitled to
Miller Act damages for the services performed by Ed
Hollander, its field superintendent, and to quantum meruit
damages against Hirani.
A.
The court reviews de novo the district court’s denial of
summary judgment and its statutory interpretation. See Validus
Reinsurance, Ltd. v. United States, 786 F.3d 1039, 1042 (D.C.
Cir. 2015); Draim v. Virtual Geosatellite Holdings, Inc., 522
F.3d 452, 455 n.3 (D.C. Cir. 2008). “Findings of fact, whether
based on oral or other evidence, must not be set aside unless
clearly erroneous, and the reviewing court must give due regard
to the trial court’s opportunity to judge the witnesses’
credibility.” Fed. R. Civ. P. 52(a)(6); see also United States v.
AT&T, Inc., 916 F.3d 1029, 1033 (D.C. Cir. 2019).
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In enacting the Miller Act, Congress sought to “place[]
subcontractors to government contractors on substantially
equal footing with subcontractors to private contractors” by
providing them with a security interest. See U.S. ex rel. Heller
Elec. Co. v. William F. Klingensmith, Inc., 670 F.2d 1227, 1232
(D.C. Cir. 1982). “The Miller Act, like [its predecessor,] the
Heard Act, is highly remedial in nature” and therefore “is
entitled to a liberal construction and application in order
properly to effectuate the Congressional intent to protect those
whose labor and materials go into public projects.” Clifford F.
MacEvoy Co. v. U.S. ex rel. Calvin Tomkins Co., 322 U.S. 102,
107 (1944). The Miller Act requires government contractors
to obtain both a performance bond to protect the government
and a payment bond to protect “all persons supplying labor and
material in carrying out the work provided for in the contract.”
40 U.S.C. § 3131(b). The Act also provides that a
subcontractor who is not paid by the contractor may file an
action on the Payment Bond:
Every person that has furnished labor or material in
carrying out work provided for in a contract for which
a payment bond is furnished under section 3131 of
this title and that has not been paid in full within 90
days after the day on which the person did or
performed the last of the labor or furnished or
supplied the material for which the claim is made may
bring a civil action on the payment bond for the
amount unpaid at the time the civil action is brought
and may prosecute the action to final execution and
judgment for the amount due.
Id. § 3133(b)(1). But Miller Act claims must be brought within
a one-year statute of limitations: “An action brought under this
subsection must be brought no later than one year after the day
on which the last of the labor was performed or material was
8
supplied by the person bringing the action.” Id. § 3133(b)(4)
(emphasis added).
Neither the Supreme Court nor this court have addressed
when a Miller Act cause of action accrues. Upon canvassing
federal district and appellate court cases, the district court
observed that the “courts have taken three approaches in
determining when the statute of limitations begins to run on a
claim under the Miller Act.” Hirani I, 263 F. Supp. 3d at 109.
The majority of courts had held that only labor and materials
furnished for the original contract (as opposed to corrective or
repair work performed after final inspection) were “labor” or
“materials” for purposes of the statute of limitations. Id. at
109–10. Other courts had held that the statute of limitations
began to run when the contract was substantially completed.
Id. at 110. And a third group of courts had “applied a multi-
factor analysis” to determine when the statute of limitations
began to run. Id. This court need not resolve the Miller Act
issue at this time.
The district court, considering the approaches in light of
the text of the Miller Act and its broad remedial purpose,
concluded that in order to avoid engaging in a “subjective line-
drawing exercise,” it would “simply look to the contract to
determine” the tasks for which “the parties agreed the
subcontractor would be compensated, then determine the last
date on which the subcontractor supplied materials or labor for
one of those tasks.” Id. at 110–11 (citing U.S. ex rel. GE
Supply v. C & G Enters., Inc., 212 F.3d 14, 17–18 (1st Cir.
2000)). The district court rejected Colonial’s proposed
interpretation, under which the last labor performed or
materials supplied before the April 26 date of the Corps’
termination letter triggered the statute of limitations. Id. at
111–12. The court reasoned that the “relevant contract” under
§ 3133(b)(1) was “the subcontract — the contract that
9
obligated the prime contractor to secure a bond under Section
3131.” Id. at 111. Upon reviewing conflicting evidence and
making credibility determinations, the court found that ACC
last worked on the Project on May 1, 2013. Hirani II, 345 F.
Supp. 3d at 31, ⁋⁋ 101–02. Therefore, ACC’s Miller Act claim
was timely because it was filed on April 29, 2014, which was
within a year of when ACC last furnished labor and materials
for the Project. Id. at 43.
B.
On appeal, Colonial renews its position, contending that
the district court misinterpreted when the Miller Act’s statute
of limitations is triggered. Because the one year limitations
period begins to run on the last day that the subcontractor
carried out work provided for in the bonded contract, Colonial
maintains that cannot be after the bonded contract (here, the
Prime Contract) has been terminated and so ACC’s suit was
untimely. In Colonial’s view, ACC’s last day of work was
April 26, 2013, the day Colonial asserts that the Corps
terminated the Prime Contract. For its part, ACC
acknowledges, but offers nothing to defend, the district court’s
interpretation of the Miller Act. Rather than explaining how it
thinks the statute should be interpreted, ACC contends only
that Colonial’s position is unsupported, relying primarily on
the factual argument that the Prime Contract was not
terminated on April 26.
“The statute of limitations is an affirmative defense that
[a] defendant must prove.” Firestone v. Firestone, 76 F.3d
1205, 1210 (D.C. Cir. 1996). Here, even assuming for the sake
of argument that Colonial’s interpretation of when the Miller
Act claim accrues is correct, Colonial has not carried its burden
to prove that the last day ACC performed labor or supplied
materials under the Prime Contract was prior to April 29, 2013.
10
Contrary to Colonial’s assertion, it is far from “undisputed that
. . . the Government terminated the Prime Contract on April 26,
2013.” See Appellants’ Br. at 26. Although the Corps’
termination letter was indeed dated April 26, that is not the end
of the inquiry.
The Federal Acquisition Regulations require that the
government’s notice of termination include the “effective date
of termination.” 48 C.F.R. § 49.102(a)(2). The Corps’
termination purported to be “effective immediately.” See
Hirani I, 263 F. Supp. 3d at 106. The applicable regulations
provide, however, that “[i]f the contractor receives the
termination notice after the date fixed for termination, then the
effective date of termination means the date the contractor
receives the notice.” 48 C.F.R. § 2.101. The district court
expressly declined to find when Hirani received the Corps’
termination letter. See Hirani II, 345 F. Supp. 3d at 30, ⁋ 92
n.5. Not until April 30 did Hirani attempt to reject the Corps’
termination by letter or ACC learn through its field
superintendent Hollander that Hirani been terminated. Thus,
the record is consistent with Hirani having received the
termination letter — and hence the Prime Contract being
terminated — on any of the five days spanning April 26 to 30.
The court need not resolve the disagreement over when
ACC’s Miller Act claim accrued because, depending on further
factual findings by the district court upon remand, “[i]f we do
not decide it now, we may never need to.” Nat’l Treasury
Emps. Union v. United States, 101 F.3d 1423, 1431 (D.C. Cir.
1996); cf. VanderKam v. VanderKam, 776 F.3d 883, 888–89
(D.C. Cir. 2015). For instance, if Hirani received the Corps’
termination letter of Friday, April 26, 2013, on Monday or
Tuesday, April 29 or 30, and ACC furnished labor or materials
on those days, then ACC’s lawsuit (which was filed on April
29 of the following year) is timely regardless whether the
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Miller Act’s statute of limitations is tied to the Prime Contract
or the Subcontract. On the other hand, if Hirani received the
termination letter on April 26, 27, or 28, then the interpretation
of the Miller Act will determine whether ACC’s suit was
timely. Given that timeliness may turn on the unresolved
factual questions of when the Prime Contract was terminated
and whether ACC performed labor or supplied materials on
that day, the court need not reach a novel issue of statutory
interpretation. Rather, it suffices to remand the case to the
district court for additional fact-finding, where Hirani and
Colonial, as proponents of the statute of limitations defense,
will bear the burden of showing that Hirani received the
termination letter before Monday, April 29 or that ACC
performed no labor and supplied no materials on April 29 and
30.
Deferring a decision on the statutory question is
particularly appropriate given the lack of helpful authority cited
by the parties. Colonial argues that United States ex rel. T.M.S.
Mechanical Contractors, Inc. v. Millers Mutual Fire Insurance
Co. of Texas, 942 F.2d 946, 953 (5th Cir. 1991), establishes
that a subcontractor cannot recover on the payment bond for
work performed after the government terminates the prime
contract. But the statute of limitations was not at issue in that
case; instead, that case concerned whether the subcontractor
could recover on the payment bond for costs it incurred due to
the termination. See id. In addition, Colonial relies upon
United States ex rel. American Bank v. C.I.T. Construction Inc.
of Texas, 944 F.2d 253, 256 (5th Cir. 1991), for the proposition
that the Miller Act cause of action accrued when the prime
contract was terminated. But in that case, unlike here, the
government had not terminated the prime contract, and thus the
discussion of the statute of limitations is dictum having little
persuasive value. See id. Furthermore, in a case not cited by
any party, the Ninth Circuit held that the statute of limitations
12
was not triggered until the prime contractor terminated the
agreement with its subcontractor. See U.S. ex rel. Pippin v. J.R.
Youngdale Constr. Co., 923 F.2d 146, 150 (9th Cir. 1991). In
sum, the authority that the parties have presented to the court
is of little aid in resolving a novel statutory question.
Therefore, the court remands the case to the district court
to make findings of fact as to when the Prime Contract was
terminated and whether ACC performed labor or supplied
material on April 29 and/or April 30. In the event that Colonial
and Hirani cannot meet their burden to show that ACC’s Miller
Act claim was untimely, then this court can resolve the parties’
other Miller Act contentions: those by Hirani and Colonial that
quantum meruit damages were improper, that ACC obtained
double recovery, and that admitting documents containing
hearsay was an abuse of discretion, and that by ACC that Ed
Hollander’s services were compensable. To the contrary, if
Hirani and Colonial show that termination occurred before
April 29 or that ACC performed no labor or supplied no
material on April 29 or 30, the court can then address the Miller
Act statute of limitations issue.
III.
On cross appeal, ACC contends that it was entitled to
quantum meruit relief totaling more than $2 million against
Hirani, instead of the restitution damages that the district court
awarded. The court affirms the award of restitution damages
to compensate ACC for the services it provided to Hirani.
Damage awards are “findings of fact governed by Federal
Rule of Civil Procedure 52(a), which will not be disturbed
unless clearly erroneous.” Bucheit v. Palestine Liberation
Org., 388 F.3d 346, 350 (D.C. Cir. 2004) (internal quotations
omitted). That said, “an appellate court has the ‘power to
13
correct errors of law, including those that may infect a so-called
mixed finding of law and fact, or a finding of fact that is
predicated on a misunderstanding of the governing rule of
law.’” United States v. Castle, 825 F.3d 625, 635 (D.C. Cir.
2016) (quoting Bose Corp. v. Consumers Union of
U.S., Inc., 466 U.S. 485, 501 (1984)).
The parties and the district court assumed that District of
Columbia law applies to ACC’s breach of contract cause of
action against Hirani, as will this court. Hirani III, 2019 WL
162019, at *3 n.3; see also Ideal Elec. Sec. Co. v. Int’l Fid. Ins.
Co., 129 F.3d 143, 147 (D.C. Cir. 1997). Three terms, as
defined by D.C. law, are pertinent: quantum meruit, unjust
enrichment, and restitution. First, “[q]uantum meruit may refer
to either an implied contractual or a quasi-contractual duty
requiring compensation for services rendered.” TVL Assocs. v.
A & M Constr. Corp., 474 A.2d 156, 159 (D.C. 1984). A
plaintiff’s “request for quantum meruit . . . is a measure of
damages and not a legal theory of recovery.” Fred Ezra Co. v.
Pedas, 682 A.2d 173, 176 (D.C. 1996) (internal quotation
omitted). Second, “[u]njust enrichment occurs when a person
retains a benefit . . . which in justice and equity belongs to
another.” Harrington v. Trotman, 983 A.2d 342, 346 (D.C.
2009) (quoting Jordan Keys & Jessamy, LLP v. St. Paul Fire
& Marine Ins. Co., 870 A.2d 58, 63–64 (D.C. 2005)). Unjust
enrichment is an equitable claim that typically lies when there
is not a valid contract between the parties. See Falconi-Sachs
v. LPF Senate Square, LLC, 142 A.3d 550, 556 (D.C. 2016);
see also In re APA Assessment Fee Litig., 766 F.3d 39, 45–46
(D.C. Cir. 2014). Third, “[a]lthough the phrases restitution
and quantum meruit are sometimes used interchangeably in
regard to the measure of recovery, since both refer to unjust
enrichment, restitution is properly limited to recovery where
there is an express contract.” Lee v. Foote, 481 A.2d 484, 486
n.4 (D.C. 1984). “[A]n action for restitution is an alternative
14
remedy to an action for damages when there has been a
repudiation or material breach of the contract.” Ingber v. Ross,
479 A.2d 1256, 1263 (D.C. 1984). Thus, “[r]estitution is
available [under D.C. law] for partial performance by a
plaintiff of services under an express contract which has been
breached by a defendant.” Lee, 481 A.2d at 486; see also
Harrington, 983 A.2d at 347–48.
ACC contends that the district court “ignored the election
made by ACC to seek restitution (quantum meruit) based on
the reasonable value of the performance without regard to the
limitations of the contract.” Appellee’s Br. at 67. It relies on
W.F. Magann Corp. v. Diamond Manufacturing Co., 775 F.2d
1202 (4th Cir. 1985), several articles written by its own
counsel, and, in reply, Blake Construction Co. v. C.J. Coakley
Co., 431 A.2d 569 (D.C. 1981). ACC does not explain why the
ability of the subcontractor in W.F. Magann Corp. to recover
in quantum meruit on its Miller Act claim provides a basis to
displace the district court’s conclusion that D.C. law does not
allow ACC to recover in quantum meruit on its contract claim.
And in Blake, the D.C. Court of Appeals allowed the
subcontractor to recover damages for delay despite a
contractual clause prohibiting such damages because the delays
were due to the contractor’s “active interference” with the
contract, although the court declined to distinguish between
contract and quantum meruit theories of recovery because the
result was the same. Blake Constr. Co., 431 A.2d at 578–79,
579 n.8. Here, by contrast, ACC points to no finding of active
interference and, more fundamentally, the theories lead to
different amounts of damages. In short, ACC has not provided
the court with any basis to deviate from the principle of D.C.
law that restitution, not quantum meruit, is the proper remedy
where there is an express contract between the parties. See Lee,
481 A.2d at 486. The court therefore affirms the district court’s
award of contract damages against Hirani.
15
Accordingly, the court remands the case to the district
court for additional fact-finding on ACC’s Miller Act claim
against Colonial, affirms the restitution damages award against
Hirani on ACC’s contract claim, and defers addressing other
issues raised by the parties.