Maryland Federal Court Upholds Contractual Indemnity Clause and Awards Judgment Interest and Attorneys Fees in Masonry Suit

Skanska USA Building, Inc. v. J.D. Long Masonry, Inc., No. 1:16-cv-00933, 2019 BL 336852, (D. Md. Sept. 9, 2019)

finizioa_thumb
Anthony V. Finizio

On September 9, 2019, a Maryland federal court awarded Skanska USA Building, Inc. (“Skanska”) compensatory damages, pre- and post-judgment interest, and litigation expenses including attorney and expert fees in its suit against subcontractor J.D. Long Masonry, Inc. (“Long”) for defective masonry work at a Johns Hopkins University research facility.

According to the decision, in 2004 the National Institutes of Health hired New Jersey-based Skanska as the general contractor on a project to build a biomedical research facility on Johns Hopkins’ Maryland campus.  In turn, Skanska subcontracted with Long to construct a masonry facade for the research facility.  In April 2013, a portion of the facade collapsed as a result of Long’s deficient work prompting Skanska to retain third-party C.A. Lindman, Inc. (“Lindman”) to remediate the damage.  Skanska subsequently brought a one-count complaint against Long seeking monetary damages for breach of the subcontract.

After granting summary judgment on the issue of liability, the court turned to Skanska’s motion seeking (i) compensatory damages; (ii) pre- and post-judgment interest; and (iii) litigation costs including attorney and expert fees per the indemnification provision in the subcontract:

Article 30.1:  “[T]he Subcontractor shall indemnify, defend and hold Skanska . . . harmless from all claims, loss, costs and expenses (including attorney’s fees and disbursements), whether arising before or after completion of the Subcontractor’s Work, caused by, arising out of, resulting from, or occurring in connection with, the performance of the work by the Subcontractor. . . .”

Skanska’s requested compensatory damages consisted of two components, including fees due directly to Lindman for restoration of the facade along with more general costs incurred administering and overseeing the restoration contract.  The court upheld the broad indemnification clause in Article 30.1 of the subcontract and granted both categories of damages concluding that in light of the indemnity provision, “no reasonable factfinder could find for Long on the issue of compensatory damages.”

The court next addressed Skanska’s claims for pre- and post-judgment interest.  While post-judgment interest was summarily granted, the court rejected Skanska’s suggested pre-judgment interest award and instead applied the Maryland statutory pre-judgment rate of 6% only to those restoration fees paid directly to Lindman accruing on the date Skanska actually made the contract payments.

In rejecting Skanska’s request for pre-judgment interest on its more general administrative costs, the court noted that these costs were at no point fixed and immediately payable at any time prior to judgment and therefore not the type of liquidated costs typically entitling a party to pre-judgment interest.  Furthermore, the court observed that most of these expenses constituted employee salaries and overhead which Skanska would have incurred regardless of Long’s breach, and that Skanska therefore suffered no obvious loss of income use by paying these costs for the Lindman restoration as opposed to another project.  Finally, the court rejected Skanska’s request to accrue pre-judgment interest on the entire value of the Lindman restoration contract beginning the day the contract was executed.  Instead, the court adopted Long’s suggested “check-by-check” approach, finding that interest would accrue only for those sums already paid to Lindman beginning on the date Skanska actually made the payment.

Turning to Skanska’s claim for litigation costs, the court found that Skanska’s fees for both an expert investigation of the building facade collapse and an expert accounting of its resulting damages were proper “expenses” arising out of Long’s breach of the subcontract and awarded these expert fees under Article 30.1.  The court then addressed Skanska’s request for legal fees, and upheld the subcontract’s express provision for indemnification of attorneys’ fees.  Notably, the court declined Long’s invitation to find Skanska’s legal fees – reduced from $454,000 to $346,000 under the court’s published schedule for hourly rates – unreasonable in light of a two and a half year delay in the proceedings.  The court found that even if the lengthy delay were entirely attributable to Skanska as suggested by Long, it could find no evidence that the litigation strategy or hours worked were unreasonable.

To view the full text of the court’s decision, courtesy of Bloomberg Law, click here.