Curtis T. Bedwell & Sons, Inc. v. International Fidelity Insurance

843 F.2d 683
CourtCourt of Appeals for the Third Circuit
DecidedMarch 31, 1988
DocketNos. 86-1598, 86-1624 and 86-1630
StatusPublished
Cited by3 cases

This text of 843 F.2d 683 (Curtis T. Bedwell & Sons, Inc. v. International Fidelity Insurance) is published on Counsel Stack Legal Research, covering Court of Appeals for the Third Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Curtis T. Bedwell & Sons, Inc. v. International Fidelity Insurance, 843 F.2d 683 (3d Cir. 1988).

Opinion

OPINION OF THE COURT

BECKER, Circuit Judge.

This is an appeal by Curtis T. Bedwell & Sons, Inc. (“Bedwell”), plaintiff and counterclaim defendant in a district court action arising out of a construction contract dispute, from the district court’s Fed.R.Civ.P. 37(b) and (d) discovery sanctions orders which: (1) dismissed Bedwell’s complaint; (2) decreed liability by default against it on a claim and counterclaim; and (3) awarded damages of $616,505 plus interest on the claim without a hearing on the damage amount. The prevailing parties in these claims were Intérnational Fidelity Insurance Company (“International”), the surety on the performance bond issued to cover John J. Hennelly, Inc. (“Hennelly”), Bed-well’s masonry subcontractor, and Fred Zimmerman (“Trustee”), the trustee in bankruptcy for Hennelly in its subsequently filed bankruptcy proceeding. The principal issues before us are: (1) whether the district court, in dismissing the complaint, properly applied the governing Poulis factors1 or abused its discretion; and (2) whether the district court’s refusal to hold an adversary hearing to determine damages was improper.

We are persuaded by the district court’s numerous findings concerning Bedwell’s discovery abuses, including the personal discovery misconduct of Bedwell’s principal officers, Curtis and Thomas Bedwell, and by the district court’s careful weighing of the Poulis factors, that it did not abuse its discretion by entering judgment on the merits against Bedwell on both Bedwell’s complaint and the claim and counterclaim against Bedwell. We also conclude that the district court’s refusal to hold an adversary hearing to determine damages was not improper. On the basis of Bedwell’s discovery abuses, the district court had entered an order precluding Bedwell from producing evidence as to damages. Because that order was plainly justified on this record, and because giving effect to it would render any hearing on damages meaningless, the district court’s assessment of damages will also be affirmed. We note in this regard that the excluded evidence pertained to cost of completion which was the major area of the discovery abuse; that cost of completion comprised 97% of the damages; that the district court had ample evidence to calculate damages; and that pursuant to leave of court, Bed-well filed an extensive brief countering the Trustee’s damage submissions.

We begin with a description of the facts and procedural history of the case; unfortunately they are complicated and, because their full recitation is necessary to an understandable discussion, our description must be extensive.

I. FACTS AND PROCEDURAL HISTORY

Bedwell was the general contractor on a project to construct a Preliminary Treatment Building and New Sludge Digestion and Gas Facility at the City of Philadelphia’s Northeast Water Pollution Control Plant. In December, 1981 Bedwell entered into two subcontracts for masonry work [685]*685with Hennelly. The subcontracts provided that Bedwell would make monthly progress payments to Hennelly under a cost breakdown schedule as the masonry work was performed.

The parties contracted for two types of bonds regarding the masonry work. First, the subcontracts between Bedwell and Hennelly provided that completion of the masonry work would be guaranteed by performance and payment bonds (“the subcontract bonds”), which were written for Hen-nelly by appellee International.2 Second, because the project was financed by the City of Philadelphia, Bedwell, as general subcontractor, was required to enter into payment bonds to insure the payment of claims by Hennelly’s suppliers and employees (“the Philadelphia payment bonds”). See Pennsylvania Public Works Contractors’ Bonds Law, 8 Pa. Cons. Stat. Ann. §§ 191-202 (Purdon Supp.1987).

These interrelated commitments came to the fore in November, 1982 when Hennelly, asserting that Bedwell had failed to make timely progress payments as required by the subcontract, walked off the job. Bed-well contended, however, that the failure to make payments occurred because Hennelly had failed to construct certain portions of the project and had failed to make timely payments to its employees and suppliers, rendering Bedwell obligated to make payments under the Philadelphia payment bonds. Bedwell therefore treated Hennelly’s abandonment of the projects as a breach of contract and sought payment from International under the subcontract bonds.

Bedwell then hired as counsel Matthew S. Donaldson, Jr. (“Donaldson”), who filed a complaint on its behalf in November, 1988, alleging that International had refused to perform its obligations under the subcontract bonds. A complicated exchange of pleadings followed, only part of which relates to this appeal. International filed a third party complaint against Hen-nelly and John and Margaret Hennelly (“the individual Hennellys”), asserting contractual and common law indemnification claims. See supra note 2. Hennelly and the individual Hennellys counterclaimed against International and claimed against Bedwell; (1) for outstanding payments due under the subcontract agreement; and (2) for the destruction of Hennelly as a going concern, which allegedly resulted from Bedwell’s failure to make payments. Bed-well, in turn, filed a counterclaim against Hennelly. Subsequently, Hennelly filed a petition for protection under Chapter 11 of the federal Bankruptcy Code and is now represented by the Trustee.

The pleadings raised two major questions for exploration by discovery. First, which party, Bedwell or Hennelly, first materially breached the terms of the subcontract?3 Second, what was the cost of completing the masonry work begun by Hennelly and completed by Bedwell?4

Discovery began in January, 1984 with a broad request by International to Bedwell for, inter alia, production of all documents relating to the cost of completion of the masonry work. International served the requests upon Bedwell’s attorney, Donald[686]*686son, who forwarded them to Bedwell in February, 1984. Thomas Bedwell, president of Bedwell, then compiled the documents that constituted Bedwell’s response and submitted them to International in April, 1984. The next significant discovery occurred on October 3, 1984 when International deposed Thomas Bedwell. As a result of the deposition, International determined that more documents existed regarding the cost of completion than had been produced in response to the January, 1984 request. Specifically, International determined that certain documents relating to communications with the City of Philadelphia, the notes of Bedwell’s project manager Shashi Mody regarding Hennelly’s masonry work, and other cost of completion documents should have been produced.

On October 15, 1984 International served its first set of interrogatories on Bedwell, requesting identification of every person with knowledge of the allegations in the complaint and seeking expert witness information. Answers to the interrogatories were due within 30 days, on November 15, 1984. See Fed.R.Civ.P. 33(a).

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843 F.2d 683, Counsel Stack Legal Research, https://law.counselstack.com/opinion/curtis-t-bedwell-sons-inc-v-international-fidelity-insurance-ca3-1988.