Court: Court of Appeals for the Sixth Circuit; August 17, 2004; Federal Appellate Court
Defendant-appellant Blalock Lumber Co. appeals a district court’s denial of its motion for a new trial or to amend a jury verdict favoring plaintiff-appellee Suitt Construction Co. The case stems from a contract between Ripley’s Aquarium, LLC and Suitt for constructing Ripley’s Aquarium in Gatlinburg, Tennessee, with significant details including a 110,000 square foot facility featuring themed display tanks. Suitt contracted Blalock to supply concrete, while also engaging other subcontractors. Originally set for substantial completion on July 10, 2000, the date was extended to July 31, 2000, due to delays attributed to Ripley’s, with liquidated damages stipulated at $15,000 per day post-deadline, capped at $705,000. The contract specified concrete requirements including a compressive strength of 5,000 psi and a water/cement ratio no higher than .40. Blalock acknowledged these specifications. However, on August 5, 1999, Suitt reported that the concrete for the Dangerous Reef tank failed to meet the strength requirement, which was critical due to the tank's size and structural importance. Blalock contended that the concrete quality was adequate and attributed the low strength measurements to testing inconsistencies. However, batch tickets indicated that the water/cement ratios for many concrete batches exceeded the stipulated limit. The appellate court affirmed the district court's judgment.
Suitt claims it lacked access to critical information regarding the concrete's quality at the time of delivery, asserting that Blalock representatives only provided the top portion of the batch tickets, concealing defects. Kevin Blalock confirmed at trial that Suitt was unaware of the concrete's defects until September 9, 1999, when batch tickets indicating high water content were faxed to them, prompting concerns from Ripley’s structural engineer, Miklos Peller, about the concrete's durability and permeability. Due to these defects, Ripley’s required Suitt to either coat the Dangerous Reef tank walls with a 'Polibrid' liner or replace the concrete. The installation of the liner was delayed by necessary compatibility tests with the acrylic tunnel, subsequently postponing related theming work from October 15, 1999, to February 16, 2000. Suitt claims Blalock's defective concrete caused a substantial completion delay of ninety-two days, later reduced to seventy-nine days through project rescheduling. Suitt revised the completion date to October 18, 2000, which was not met, as further delays by Ripley’s and Manwarren pushed the actual completion to December 15, 2000. On March 30, 2001, Suitt filed a complaint against multiple parties, seeking over $3 million from Ripley’s and over $1 million from Blalock for breach of contract and warranties. After settling with Ripley’s, Worley, and Schaefer, Suitt amended its complaint to focus solely on claims against Blalock, which went to trial from July 15-18, 2002.
Suitt sought damages totaling $921,572.78, which encompassed multiple components: $98,848.39 for Polibrid repairs (with $22,462.59 in interest), $400,000.00 in liquidated damages (plus $71,555.74 in interest), $261,535.03 for extended general conditions (plus $15,446.88 in interest), $14,368.00 for acrylic storage (plus $2,204.73 in interest), and $30,512.10 for expert advice on repairs (plus $4,684.35 in interest). The jury awarded Suitt $806,000, likely reflecting actual damages without significant interest. Blalock filed motions to alter the verdict, for judgment notwithstanding the verdict, and for a new trial, later withdrawing the motion for judgment due to procedural failure. The district court denied the remaining motions on December 19, 2002, and Blalock appealed on January 9, 2003, challenging the jury’s verdict regarding the $400,000 liquidated damages and the general conditions costs linked to delays from defective concrete supplied by Blalock. Blalock accepted liability for Polibrid repairs, acrylic storage, and expert costs. In this diversity case, the district court's decisions regarding new trials or judgment amendments are governed by federal law, reviewed for abuse of discretion, requiring a clear error in judgment to overturn. Blalock argued that the evidence did not support the jury’s findings related to liquidated damages and general conditions costs; however, Tennessee law allows recovery of damages that are foreseeable results of a breach of contract. The sale of concrete was governed by Tennessee's Uniform Commercial Code, allowing for consequential damages if they were foreseeable and unavoidable, affirming that direct expenses incurred due to a breach are recoverable as consequential damages.
A delayed party in a construction contract may recover various damages, including increased labor and material costs, loss of equipment efficiency, extended bonding and insurance costs, and other overheads directly linked to the delay. Adequate proof of these damages is required for recovery. The buyer must establish consequential damages by a preponderance of the evidence, and uncertain or speculative damages are only disallowed when the existence of damages is uncertain, not their amount. Courts accept damages for breach of contract with reasonable certainty.
Blalock contests responsibility for $400,000 in liquidated damages paid by Suitt to Ripley’s, acknowledging its defective concrete caused a seventy-nine day delay but arguing that other delays contributed to the settlement. The project timeline indicates Blalock alone was responsible for the delay from July 31 to October 18, 2000, during which liquidated damages accrued at $15,000 per day, reaching a maximum of $705,000 by September 30. Suitt provided sufficient evidence for the jury to conclude that Blalock's delay caused the entire liquidated damages incurred, despite Blalock's claims regarding the allocation of responsibility.
Blalock further argues that Suitt should be barred from collecting liquidated damages due to its own contribution to delays. However, since Blalock admitted to causing the entire seventy-nine day delay responsible for the assessed liquidated damages, Suitt is not precluded from recovery under Tennessee law, which states that liquidated damages are not awarded when a party has mutually caused the delay.
Under Tennessee law, a contractor can recover damages for increased overhead costs due to delays. Suitt calculated its average daily overhead cost during the delay caused by Blalock to be $3,310.56 and multiplied this by seventy-nine days of delay, totaling $261,535.03 in damages. Blalock contests the full amount, arguing that Suitt did not demonstrate that the delay caused significant idle time for its workers and that Suitt benefited from work performed during the delay. Blalock claims Suitt worked on non-critical path tasks and utilized the time created by the delay to complete changes that would have otherwise delayed the project. Blalock asserts that Suitt failed to prove how many days of delay were directly attributable to Blalock's actions. However, the court found that Suitt met its burden to prove damages, as Blalock did not present evidence showing that the delay provided any benefit to Suitt. Consequently, the district court's denial of Blalock's motions was upheld. The concept of a "critical path" refers to the sequence of tasks that directly impacts the project's completion timeline, while non-critical tasks have "float," allowing flexibility in scheduling without affecting overall completion.
