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Atlantic City Associates, LLC v. Carter & Burgess Consultants

March 31, 2010

ATLANTIC CITY ASSOCIATES, LLC, PLAINTIFF,
v.
CARTER & BURGESS CONSULTANTS, INC. AND KEATING BUILDING CORP., DEFENDANTS.



The opinion of the court was delivered by: Hillman, District Judge

OPINION

I. INTRODUCTION

Following a thirteen-day trial in this matter, a jury returned a verdict in favor of Plaintiff Atlantic City Associates, LLC ("ACA") on both its breach of contract and professional negligence claims, and against Defendant Carter & Burgess Consultants, Inc. ("Carter") on it breach of contract counterclaim. On the breach of contract claim, the jury awarded damages for additional construction costs to fix errors, additional payments to contractors due to delay, lost rental income, and additional administrative costs. Collectively, these damages totaled $7,608,794.30. On the professional negligence claim, the jury awarded damages in the same amount. Now before the Court is the motion of Carter for judgment as a matter of law, pursuant to Fed. R. Civ. P. 50(a), on issue of the breach of contract damages awarded for additional payments to contractors due to delay, lost rental income, and additional administrative costs. Alternatively, Carter seeks a new trial pursuant to Fed. R. Civ. P. 59. For the reasons set forth below, Carter's motion will be denied.

II. BACKGROUND

This case stems from a construction project to build mixed retail and commercial use property in Atlantic City, New Jersey. ACA is the owner/lessee of the property, which is known as "The Walk." Carter was retained by ACA to provide architectural, engineering, and other design services on the project. Ultimately, the project experienced significant delays for which ACA blames Carter. On June 27, 2005, ACA brought this action against Carter for breach of contract and professional negligence.

On March 26, 2008, Carter filed a motion for partial summary judgment, seeking the dismissal of ACA's claims for consequential damages pursuant to the terms of the contract between the parties. On April 22, 2008, ACA filed a cross-motion for partial summary judgment, arguing that Carter was liable for all of the alleged damages. These motions called upon the Court to interpret a proposal for architectural services submitted to ACA by Carter on November 15, 2000 (hereinafter "the Proposal") and a contract entered into by the parties on June 18, 2001 (hereinafter "the Contract"), which incorporated the Proposal "except where it might result in a conflict with th[e Contract]." Together these documents comprised the agreement between the parties (hereinafter "the Agreement"). After conducting oral argument on October 23, 2008, the Court issued its Opinion on November 13, 2008.

In its Opinion, this Court held that the Agreement precluded the recovery of consequential damages for any claims arising from or related to the Agreement, but did allow for the recovery of direct damages. See Atlantic City Assocs., LLC v. Carter & Burgess Consultants, Inc., No. 05-cv-3227-NLH-JS, slip op. at 11-12 (D.N.J. Nov. 13, 2008). In so holding, the Court found that the indemnification provisions contained in paragraph 2.9.2.2 of the Contract*fn1 could be harmonized with the waiver of consequential damages provision contained in paragraph 1.3.6 of the Contract.*fn2 See id. at 11. "Therefore, paragraph 2.9.2.2 requires [Carter] to indemnify ACA against all direct damages allegedly caused by [Carter's] negligence, errors[,] or omissions." Id. at 12. The Court also noted that "[t]he determination of what damages will be considered consequential and what damages will be considered direct is not presently before the Court and will not be decided in this Opinion[,] but left for another day." Id. at 11 n.2.

On April 13, 2009, Carter filed a motion in limine to bar evidence of damages relating to loss of use, loss of profit, delay, impact, or disruption. Carter argued section F of the Proposal*fn3 contained a definition of consequential damages that was controlling and dictated the preclusion of such evidence as irrelevant. In essence, Carter was requesting that the Court pick up where it left off at the summary judgment phase with its ruling that the Agreement precluded consequential damages, and define what damages were consequential. In opposition, ACA argued that Section F was not incorporated into the Agreement and that, even if it had been, all the damages at issue were direct because they flowed naturally from the alleged breach of paragraph 2.9.2.3 of the Contract.*fn4 ACA also argued that evidence of these damages was admissible with respect to its tort claim, which it alleged was not subject to any contractual limitation on damages.

The Court conducted oral argument on the motion in limine on May 29, 2009. After hearing argument from the parties, the Court converted the motion to one for summary judgment with the consent of the parties and ruled that Section F was a part of the Agreement and was an "illustrious list of the kinds of consequential damages" barred by the Agreement. (Tr. at 56:5-6.) Nonetheless, the Court held that any damages flowing from a breach of Paragraph 2.9.2.3 were not barred by Paragraph 1.3.6, even if they fell within the definition of Section F. Paragraph 2.9.2.3, the Court found, was an express promise that was fairly bargained for by the parties not to delay the project. As such, to the extent damages flowed naturally from a breach of that provision they were direct damages. As the Court explained, this provision "takes out of what is normally the realm of consequential damages, loss of rent in a retail complex, and puts it squarely within the category of direct damages, because it's an expressed promise." (Tr. at 27:3-7.) Thus, in order to recover damages of an otherwise consequential nature, ACA would have to demonstrate that they arose from a breach of that provision.

In so ruling, the Court was careful to note that ACA would be held to its proofs. Under the terms of the Agreement, Carter was only potentially liable for a narrow scope of so-called consequential damages; those flowing directly from a breach of Paragraph 2.9.2.3. Carter would not be on the hook for all categories of potential damages simply because of a breach of Paragraph 2.9.2.3. ACA would have to demonstrate to the satisfaction of the jury that the damages flowed directly from the breach, and not from the conduct of some third party.

On June 15, 2009, the jury trial commenced. After the conclusion of testimony and the parties' closing statements the Court issued the Jury Charge. With respect to the potential breach of Paragraph 2.9.2.3, the Court instructed the Jury, "[i]f you find that Carter failed to perform its services with reasonable promptness, and that such failure directly delayed the activities of ACA or ACA's contractors, you may find that Carter is in breach of the contract entitling ACA to damages." (Pl. Opp. to Mot. for Judgment as Matter of Law, Exhibit 1 at 18.) The Court further instructed the Jury, "[i]f you find that Carter's drawings and designs contained errors and omissions, you may find that Carter is in breach of the contract, entitling ACA to damages." (Id.) The Court was careful to note that "[y]ou should understand that Carter can only be held responsible for delays it caused," and that "[i]f Carter did not cause a particular delay, ACA cannot hold Carter responsible for that delay." (Id. at 18-19.)

With respect to the availability of contract damages, the Court instructed the Jury that "ACA and Carter have agreed that neither is entitled to consequential damages." (Id. at 31.) Therefore, the Court continued, "only direct damages are available in this case." (Id.) The Court also explained that "for ACA to recover for its additional construction costs for delay, lost rental income and the extended administrative costs incurred by it and its contractors, you must find that these damages arose naturally from the breach of section 2.9.2.3." (Id.)

Prior to commencing their deliberation, the Jury was also given a Jury Verdict Sheet to guide their deliberation. The Jury Verdict Sheet posed a series of questions with respect to each claim in the case, which the Jury was required to make findings on. One of the questions posed to the Jury was, "[h]as plaintiff proven, by the preponderance of the evidence, that defendant breached section 2.9.2.3 of the contract?" (Jury Verdict Sheet, Doc. No. 459, at ¶ 4.) In the event that the Jury found such a breach and that damages resulted, they were asked, "[w]hat amount of damages in the form of additional payments to contractors due to delay, if any, has plaintiff proven reasonably resulted directly from defendant's breach of section 2.9.2.3 and not the conduct of plaintiff or its contractors?" (Id. at ¶ 6.) The Jury was then asked the same question with respect to damages in the form of lost rental income and additional administrative costs. (See id. at ¶¶ 7-8.)

After its deliberation, the Jury returned a verdict in favor of ACA on all counts. Specifically, inter alia, the Jury found that Carter breached Paragraph 2.9.2.3 and that ACA suffered damages as a result. The Jury went on to find that ACA suffered damages in the form of additional payments to contractors due to delay in the amount of $1,688,048.30 as a direct result of Carter's breach. It also found that ACA suffered damages in the form of lost rental income in the amount of $3,617,442 as a direct result of Carter's breach. Finally, it ...


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