Murphy v. A.A. Beiro Construction Co.

679 A.2d 1039, 1996 D.C. App. LEXIS 125, 1996 WL 351208

• Court: District of Columbia Court of Appeals
• Decided: June 27, 1996
• Docket: 93-AA-132
• Status: Published

Opinions

PER CURIAM.

The District of Columbia seeks review of a decision of the Contract Appeals Board (the Board) awarding respondents, A.A. Beiro Construction Co., Inc. (Beiro) and its insurer, Fidelity and Deposit Insurance Company of Maryland (Fidelity), damages of $6,570,278 plus interest from April 17,1992. The award followed the Board’s entry of default against the District and an ex parte proof hearing at which the District was not permitted to call witnesses. The District argues that the Board abused its discretion in denying its request for a continuance of the hearing and entering a default judgment against it when its lead counsel resigned unexpectedly on the last working day before the hearing. We agree and reverse and remand for a new hearing.

I.

A. The Contract

In 1984, the District and Beiro entered into a contract for Beiro to construct an educational facility in the District. The total contract price was $8,098,000. The District issued Beiro a notice to proceed with the work on July 6, 1984, and the completion date was set for June 9, 1986. The contract had a standard provision for Terminations for Default and Terminations for Convenience. The District terminated the contract on July 31, 1989 for Beiro’s alleged default, ie., Beiro’s claimed failure to accept responsibility for defective workmanship and materials which resulted in major structural damage to the project. According to Beiro, there were serious design problems in plans for the project which ultimately necessitated a major redesign, and Beiro informed the District about them as early as February, 1985. The building was almost completed, and Beiro had been paid $5.3 million, according to the District.

Beiro contended that the District obtained the report of a consulting engineer, Carson Mok, who investigated and issued a report on January 14, 1986 (the Mok report) criticizing the design and construction of the project. The District then issued a “rejection notice” to Beiro on February 28, 1986, rejecting the majority of the project’s concrete because of cracking. The District also issued an order directing Beiro to stop work on the project. On March 17,1986, Beiro sent a letter to the District pointing out design deficiencies, explaining that the concrete work had been performed pursuant to the plans and specifications, and requesting that the Stop Work Order be converted to a Suspension of Work for the Convenience of the District. As requested, the District issued a formal Suspension of Work Order pursuant to Article 26 of the contract on April 23,1986.

On July 14,1986, the District hired Meyer Associates (Meyer) to conduct a further investigation. Meyer submitted a final report on October 29,1986, concluding that the project had design deficiencies but no substantial contractor errors. The Meyer report further concluded that fifteen new columns were required because of design error and that the only work needed to correct the contractor’s error in the concrete slab was epoxy injection into concrete cracks. On December 5, 1986, the District instructed Beiro to submit a proposal for change-order work based on the Meyer report. Beiro submitted proposals on January 6, February 6, and February 26,1987.

On December 9, 1986, the District of Columbia School Board reevaluated the project and determined that an additional $3-4 million would be needed to complete the building. The District took the position that it would not complete the building unless the School Board provided the additional funds, and the School Board voted to relinquish the project to the District on May 20,1987.

On May 22, 1987, the District informed Beiro that work on the project would be suspended indefinitely and that it would discuss with Beiro its liability. On June 26, 1987, Beiro wrote to the District requesting payment and offering to inject epoxy into the concrete cracks at no cost to the District. Beiro again wrote the District on July 23, 1987 requesting payment and resumption of the work. Without responding, the District terminated Beiro’s contract for default, citing, among other reasons, the poor quality of the concrete construction and Beiro’s failure to apportion liability between itself and the project’s architect.

B. The Appeal Proceedings

On August 16, 1987, Beiro appealed the default termination to the District’s Department of Administrative Services (DAS), pursuant to the District of Columbia Procurement Practices Act of 1986 (DCPPA), D.C.Code § 1-1181.1, et seq. (1987). Beiro requested that the termination for default be changed to a termination for convenience. After a hearing, DAS issued a decision upholding the termination for default and awarding damages to the District in the amount of $89,427.23. Beiro and its insurer appealed to the Board. The District filed an answer and counter-claim seeking $8,089,000 in damages for breach of contract and negligence.

On July 14, 1990, the Board held a pre-hearing conference and set November 26, 1990 as the date for the hearing. The District filed motions for continuances on September 28 and December 17, 1990, for thirty days and sixty days respectively, both on the ground that counsel had resigned. The motions were granted and a new hearing date was set for September 18, 1991. On August 6,1991, the Board, sua sponte, continued the hearing date for ninety days because two Board members’ terms had expired. After a pre-hearing conference on November 18, 1991, the chief administrative judge (judge) issued an order the following day setting the following schedule: February 14, 1992, close of discovery; March 6, 1992, supplemental pre-hearing statements due; March 23-April 17, 1992, hearings. Beiro and Fidelity then filed motions on February 27, March 5, March 13, and March 17,1992. On March 6, 1992 they filed a supplemental pre-hearing statement. According to the District, Beiro’s motion for summary judgment was 587 pages, including exhibits. The motion filed on March 5, 1992 was to exclude from evidence testimony and test results of concrete cores which the District had discovered on January 31,1992.

On March 12, 1992, the District filed a motion to extend to March 16 the time within which to respond to Beiro’s motion for summary judgment, which the judge granted. However, an order was entered shortening the time for the District to respond to motions filed on March 13 and 19. By an order entered on March 11, the District was ordered to file three copies of its exhibits, instead of multiple copies only of exhibits used for cross-examination. The District filed its opposition to the motion for summary judgment on March 19, its opposition to the motion to exclude or limit the testimony of its expert on March 19, and its opposition to the motion for default judgment or to limit or preclude evidence relating to the termination of the contract on March 20. The District filed a supplemental pre-hearing statement on March 19. On March 17,1992, the District moved for a two-week continuance of the hearing date, from March 23 to April 6, on the ground that it did not have sufficient time to prepare for the hearing, particularly given the numerous and lengthy motions to which it had to respond. This motion was denied on March 18,1992.

On March 20, 1992, the District’s lead counsel, an Assistant Corporation Counsel, (ACC) Eugene Austin, unexpectedly resigned. He informed his supervisor, Maria Holleran-Rivera, Chief of the Public Works Division of the Office of the Corporation Counsel, of his decision at about 1:00 p.m. that day. After confirmation by the Corporation Counsel, Austin’s supervisor informed opposing counsel and prepared a motion for continuance. On March 23,1992, Ms. Holler-an-Rivera and Jeffrey B. Robinson appeared before the Board to argue the motion. They represented that Austin had been lead counsel of record since February 28, 1991, and that neither of two co-counsel were prepared to proceed with the hearing. Ms. Holleran-Rivera explained further that one of the attorneys, Karen Krueger, a former ACC, was a part-time consultant hired to assist the lead counsel and that Warren Nash, an ACC, had only acted in a support capacity in preparing the case. The Board denied the motion. The District could not proceed under the circumstances; therefore, the judge entered a default in favor of Beiro and Fidelity.

On March 30, 1992, the Board issued an Opinion and Order on Default. The District filed a motion to vacate the default and for reconsideration of the denial of its continuance request on the ground that no attorney was prepared to go forward on the ease on a two-day notice and that denial of a continuance was an abuse of discretion. In support of the motion, the District offered the affidavits of Ms. Holleran-Rivera, Ms. Krueger, and Mr. Nash. The Board denied the motion, and some weeks later, issued an opinion setting forth its reasons. Essentially, the Board was not persuaded that the District’s attorneys were not prepared to proceed. It noted that at the ex parte proof hearing, Ms. Krueger made an opening statement outlining the District’s theory of the case and some of the evidence, that the District called rebuttal witnesses on damages, and that the consultant attorney and two assistants had cross-examined witnesses. The Board pointed out that the District had caused delays by obtaining continuances in the past and that a delay would prejudice the opposing parties.

II.

The District argues that the Board abused its discretion in denying the motions for continuance and in entering a default judgment in favor of Beiro and Fidelity. Specifically, it contends that the Board should not have compelled it to proceed to trial only two days after the lead counsel in the ease resigned without prior notice and that Beiro’s claim of prejudice is without merit. Further, the District argues that a continuance was warranted because of the disruption in the trial preparation time caused by Beiro’s massive pre-hearing filings. Beiro contends that the entry of default was a proper sanction for the District’s refusal to present its case and that the Board acted within its discretion in denying the motion. Beiro also claims that the motion was unsupported and that it would have been prejudiced by any delay.

The Board has the authority to grant a continuance of a hearing “for good cause shown.” 27 DCMR § 124.2 (1989).¹ A request for a continuance is addressed to the sound discretion of an agency or trial court, and will be set aside only for an abuse of discretion. Hairston v. Gennet, 501 A.2d 1265, 1268 (D.C.1985); Harris v. Akindulu-reni, 342 A.2d 684, 686 (D.C.1975); Cornwell v. Cornwell, 73 App.D.C. 233, 235, 118 F.2d 396, 398 (1941). The discretion of the trial court “must be exercised in the interest of justice,” Cornwell, 73 App.D.C. at 235, 118 F.2d at 398, and “with a view to promoting substantial justice.” Etty v. Middleton, 62 A.2d 371, 373 (D.C.Mun.App.1948). The denial of a continuance will be reversed when a continuance is needed “to avoid ‘material hardship and injustice.’ ” Feaster v. Feaster, 359 A.2d 272, 273 (D.C.1976) (quoting Etty, 62 A.2d at 373).

Factors relevant to determining whether the trial court or agency abused its discretion include the reasons for the request for continuance, the prejudice that would result from its denial, the parties diligence in seeking relief, any lack of good faith, and any prejudice to the opposing party. Joyner v. Jonathan Woodner Co., 479 A.2d 308, 312 (D.C.1984); Hairston, swpra, 501 A.2d at 1268; Harris, supra, 342 A.2d at 686. Considering the facts and circumstances of this case, we conclude that the agency erred in denying the District’s motion for continuance. Here, the District had a most compelling reason to seek the brief continuance which it sought when its lead counsel resigned. We are not persuaded that the Board’s observations at the ex parte hearing formed an adequate basis to assess the impact of the sudden departure of lead counsel in a complex case which had been scheduled to proceed to a full hearing or the level of preparedness of the other assistants on the liability issues. No one refuted the limited involvement of the consultant and the other assistants in the case. Moreover, given the voluminous record and the discovery involved, it was extremely unlikely that counsel, who had not expected to step into the position of lead counsel, could do so on two days notice.² The government had no way of forcing lead counsel to remain employed by the government. The Board observed that the attorney’s sudden resignation without regard to an imminent trial might violate various Rules of Professional Conduct. Yet, even in the face of such consequences, the attorney was undeterred in resigning.

We have recognized that the Corporation Counsel’s practice of having one lead counsel in a complex case is a “rational use of the government’s limited legal resources.” Harris, supra, 342 A.2d at 687. A consultant and another ACC had assisted lead counsel intermittently with preparation for trial. However, one of the attorneys was on a limited part-time contract with the Office of Corporation Counsel, and the other had limited participation in the ease.

Second, it does not appear that Beiro would have been prejudiced by a reasonable delay of the hearing. Beiro argues that it suffered prejudice as a result of the numerous delays, that it had been driven out of business and into bankruptcy, and that it was a hardship to assemble former employees and refresh their recollection regarding the events. It appears that Beiro’s bankruptcy occurred prior to the District’s unanticipated need to request a continuance, and therefore, is not a fair consideration in this context. On the other hand, the District was prejudiced by denial of a continuance where it had no attorney who could handle this complicated trial, involving millions of dollars, on such short notice. This is an important factor for consideration in the analysis. See Hairston, supra, 501 A.2d at 1268.

The entry of a default judgment is an extreme sanction, and it should be imposed only upon a showing of severe circumstances. See, e.g., Greene v. District of Columbia, 539 A.2d 1082, 1083-84 (D.C.1988) (citations omitted); Hinkle v. Sam Blanken & Co., 507 A.2d 1046, 1049 (D.C.1986). “ ‘[Sjevere circumstances’ arise from the nonmovant’s deliberate or willful non-compliance with court rules and orders, resulting prejudice to the movant’s ability to successfully pursue the litigation, and the conclusion that alternative, less severe sanctions will not suffice, ‘notwithstanding the societal preference for a decision on the merits.’ ” Iannucci v. Pearlstein, 629 A.2d 555, 559 (D.C.1993) (quoting Lyons v. Jordan, 524 A.2d 1199, 1201 (D.C.1987)) (other citations omitted). Willfulness includes a “ ‘conscious or intentional failure to act.’ ” District of Columbia v. Greene, 539 A.2d 1082, 1084 (D.C.1988) (quoting U.S. Merchandise Mart, Inc. v. D & H Distributing Co., 279 A.2d 511, 513 (D.C.1971)) (other citations omitted). There was no showing of willfulness associated with the District’s emergency request. The record reflects that prior delays were attributed to a number of factors, including circumstances concerning the Board.

The District moved speedily to seek a continuance in this case, in good faith. Given the circumstances, the significant prejudice to the District from denial of the request, and the lack of significant prejudice to Beiro by a short continuance, the Board abused its discretion in denying the continuance and entering a default judgment. See Joyner, supra, 479 A.2d at 312. Decisions on the merits are preferred whenever possible, and where there is any doubt, it should be resolved in favor of trial. Etty, supra, 62 A.2d at 373.

III.

Finally, Beiro and Fidelity argue that the Board’s decision should be affirmed on the basis that the Board erred in denying their motion for summary judgment. They contend that they should have been granted summary judgment on the following grounds: (1) the District terminated Beiro for its own eonvenienee; (2) the District failed to lift the suspension precluding a termination for default; (3) the District failed to perform its contract obligations, precluding a default termination; (4) the District waived any grounds for default by agreeing to go forward with the project; and (5) the District refused to allocate responsibility for alleged errors, suspension precluding a default termination. The Board denied the motion for summary judgment, stating that there were material issues of fact in dispute. The record supports the Board’s determination, and we will not disturb it.

For the foregoing reasons, the Board’s order is reversed and the case is remanded for a hearing on the merits.

Reversed and remanded.

1 . The relevant portions of 27 DCMR § 124 provide:

124 CONTINUANCES

124.1Any party may move in writing to request a continuance of any scheduled hearing, or to extend the time to file a pleading, or for leave to amend a pleading if the motion is served on opposing parties and the Board at least five (5) days before the hearing or the time limit. 124.2 Continuances shall be approved only for good cause shown.

124.3 Conflicting engagements of counsel, absence of counsel, or the employment of new counsel shall not be regarded as good cause for continuance unless set forth promptly.

2 . The record in the case, excluding transcripts, is over 5,000 pages.