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Wärtsilä Nsd North America, Inc. v. Hill International

June 28, 2006


The opinion of the court was delivered by: Rodriguez, Senior District Judge.



This matter comes before the Court on Defendant Hill International, Inc.'s ("Hill") Motion to Mold the Verdict and Enter Judgment Consistent with the Parties' Written Contract [Docket No. 258]. This case presents the Court with a unique factual scenario wherein if it accepts Defendant's arguments, Defendant would have no obligations under the very contract it seeks to enforce. For the reasons expressed herein, the motion will be denied.


The background facts of this case are well known to this Court and the parties and are set forth at length at Wärtsilä NSD N. Am. v. Hill Int'l, Inc., 269 F. Supp. 2d 547, 549-51 (D.N.J. 2003). They will only be repeated here to the extent relevant to the disposition of this motion:

In July 1994, Wärtsilä Diesel, Inc., an engineering and construction company and the predecessor to Plaintiff Wärtsilä NSD North America, Inc. ("Wärtsilä"), entered into a contract with Coastal Salvadorian Ltd. ("Coastal"), wherein Wärtsilä agreed to design, engineer, procure, construct, start up and test a diesel engine power plant in Nejapa, El Salvador ("the Project"). (Pl.'s First Supplemental & Amended Complaint at ¶ 6). Wärtsilä, whose business had up to that point focused primarily on the sale and maintenance of diesel engines, in turn subcontracted much of the plant's construction to a variety of other entities, including Black & Veatch International ("BVI"). (Id. at ¶¶ 7-8). The Project quickly fell behind schedule, resulting in numerous contractual disputes between Wärtsilä, BVI, and Coastal. (Id. at ¶ 9). In an effort to get the project back on track, Wärtsilä sought the services of a construction consulting firm that could provide expert advice and management for the Project. (Id. at ¶ 10).

On January 18, 1995, Hill International, Inc. [("Hill")] submitted a proposal for the consulting position. (Id. at ¶ 31). In its proposal, Hill recommended that Richard LeFebvre, one of the firm's senior consultants, be assigned to the Project to "collect, organize and evaluate . . . factual information and report . . . his findings as to the best way to proceed with the completion of the project." (Id. at ¶ 33). LeFebvre's responsibilities were to include gathering information and materials related to the construction project, visiting the project site "to evaluate the adequacy of the plans and specifications," and comparing the actual performance of the construction work to Wärtsilä's obligations under its contract with Coastal. (Id.) Attached to the proposal was a copy of LeFebvre's professional resume which represented that he: (a) had received a B.S. in electrical engineering from Penn State in 1966; (b) had earned a B.A. in business administration from Duquesne University in 1969; (c) had taken courses in business law at the University of North Florida in 1983; and (d) was registered and licensed as a professional engineer in Pennsylvania, New York, and Massachusetts. (Id. at ¶ 32).

On January 24, 1995, Wärtsilä and Hill entered into a written consulting agreement that incorporated by reference the January 18 proposal. (Id. at ¶ 34). Pursuant to the terms of the agreement, Hill assigned LeFebvre to work as a senior consultant on the Project. (Id. at ¶ 35). LeFebvre was quickly promoted by Wärtsilä to the position of Project Manager and continued to work on the Project as a Hill employee until May 25, 1995. (Id. at ¶¶ 37, 40). Among his responsibilities was the task of analyzing issues bearing on potential claims and defenses in contractual disputes between Wärtsilä and BVI. (Id. at ¶¶ 38-39).

On June 1, 1995, with Hill's approval, Wärtsilä hired LeFebvre "as an independent contractor to provide assistance with construction and claims management on the Project." (Id. at ¶ 41). Based in part on LeFebvre's analysis and recommendations, Wärtsilä in May 1996 decided to pursue claims against BVI before the American Arbitration Association and retained the Louisiana law firm of Chaffe, McCall, Phillips, Toler & Sarpy, L.L.P., and two of its attorneys, John H. Clegg, Esq., and Daphne McNutt, Esq., to initiate arbitration proceedings against BVI in Charlotte, North Carolina. (Id. at ¶ 43; Third Party Complaint at ¶ 11). LeFebvre became a "key witness" in the proceedings due to his intimate and extensive knowledge of the facts underlying the points of contention between the two parties and his participation in the drafting of various "claim support" documents. (Pl.'s First Amended Compl. at ¶¶ 43-44).

At the arbitration proceedings in September 1997, LeFebvre offered testimony regarding the academic and professional credentials listed on his resume. (Id. at ¶ 47). On September 8, 1997, toward the end of his direct testimony, Wärtsilä became aware, "for the first time," that there were questions concerning LeFebvre's educational and professional credentials when counsel for BVI requested that LeFebvre execute a release for background academic information. (Id. at ¶ 48). Later that day, after the proceedings had been adjourned, LeFebvre admitted to Wärtsilä's attorneys that the statements on his resume concerning a business degree from Duquesne University were not accurate. (Id. at ¶ 49). He allegedly told Wärtsilä that Hill had asked him to overstate the extent of his training at Duquesne. (Id.).

The next morning, LeFebvre requested and received from Hill a revised resume which omitted any reference to a business degree from Duquesne or business law courses at North Florida and modified the date on which he claimed to have received an electrical engineering degree from Penn State. (Id. at ¶ 50). When the proceedings resumed later that day, BVI's attorneys subjected LeFebvre to a vigorous cross-examination, forcing him to acknowledge the obvious inconsistencies between the two resumes. LeFebvre nevertheless insisted that the revised resume was entirely accurate and truthful. (Id. at ¶ 50(b)). However, by the conclusion of the day's proceedings, Wärtsilä's attorneys were forced to concede that a hasty investigation into LeFebvre's academic credentials had uncovered no evidence that he had ever received an engineering degree from Penn State or attended any of the other schools listed on his resume. (Id. at ¶ 51). Wärtsilä also found no evidence that LeFebvre had ever been licensed as a professional engineer in either New York, Pennsylvania, or Massachusetts. (Id.).

In light of LeFebvre's perjury, Wärtsilä's counsel withdrew his testimony, and the arbitration panel granted Wärtsilä a short recess to restructure its case based on new witnesses. (Id. at ¶ 53). During that time, the company re-examined materials prepared by LeFebvre and discovered that he had improperly altered original "claim support" documents. (Id. at ¶ 53). Consequently, Wärtsilä was forced to withdraw certain claims. (Id.) On March 5, 1998, the arbitration panel issued a judgment of $4.65 million in favor of BVI. (Id. at ¶ 57). Wärtsilä attributes the arbitration award to the complete loss of credibility it allegedly suffered as a result of LeFebvre's blatant misrepresentations, both on his resume and in his testimony before the arbitration panel. (Id. at ¶ 52).

Wärtsilä, 269 F. Supp. 2d at 549-51.

On February 14, 2006, a jury trial commenced before this Court. During the pendency of the trial, the applicability of the exculpatory clause*fn1 contained in the Consulting Agreement was brought before the Court.*fn2 The Court reserved judgment on the issue so that it could be considered in light of the jury's findings. At trial, Wärtsilä advanced claims of negligence, breach of contract and fraud. On March 6, 2006, the jury found in favor of Wärtsilä with respect to the negligence and breach of contract claims. As to the fraud claim, the jury found in favor of Hill. The jury awarded Wärtsilä $2,047,952.00.

Hill argues that the exculpatory clause is valid and enforceable in the absence of a jury finding of fraud. Wärtsilä argues that the clause is unenforceable and violative of public policy. Wärtsilä also argues that, in any event, the exculpatory clause does not operate here because its damages are direct. These arguments will be taken in turn.


A. Validity and Enforceability of the Exculpatory Clause as to Wärtsilä's Claim for Breach of Contract

The Court of Appeals of Maryland, the state's highest court, has held that "[i]t is well settled in this State, consistent with 'the public policy of freedom of contract,' that exculpatory contractual clauses generally are valid."*fn3 Adloo v. H.T. Brown, 686 A.2d 298, 301 (Md. 1996) (quoting Wolf v. Ford, 644 A.2d 522, 525 (Md. 1994) (emphasis added)). Hill urges this Court to interpret this language as a far-reaching approval of all exculpatory clauses, including those that preclude liability for breach of ...

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