United States of America v. International Fidelity Insurance Company et al

OPPOSITION to Renewed NOTICE OF MOTION AND MOTION for Judgment on Partial Findings, pursuant to FRCP 52

C.D. Cal.December 3, 2018

SMTD LAW LLP A L IM IT ED LIA BI LI TY PA RT N ER S HI P 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -1- DEFENDANTS’ RESPONSE TO PLAINTIFF AND THIRD PARTY DEFENDANT’S JOINT RENEWED RULE 52(C) MOTION FOR PARTIAL JUDGMENT Ali Salamirad (SBN 209043) Geoffrey A. Graves (SBN 172205) SMTD LAW LLP 17901 Von Karman Avenue, Suite 500 Irvine, California 92614 (949) 537-3800 (949) 537-3822 (f) as@smtdlaw.com; gg@smtdlaw.com Attorneys for Defendants INTERNATIONAL FIDELITY INSURANCE COMPANY; INSIGHT ENVIRONMENTAL ENGINEERING & CONSTRUCTION, INC.; CESIGHT JOINT VENTURE; and EVEREST RE- INSURANCE COMPANY UNITED STATES DISTRICT COURT DISTRICT OF CALIFORNIA UNITED STATES OF AMERICA for the use and benefit of NASATKA BARRIER INCORPORATED d/b/a NASATKA SECURITY, Plaintiff, v. INTERNATIONAL FIDELITY INSURANCE COMPANY, et al. , Defendants. CASE NO. 2:16-CV-08064-DSF-AGR DEFENDANTS’ AND CROSS- CLAIMANTS’ RESPONSE TO PLAINTIFF AND THIRD PARTY DEFENDANT’S JOINT RENEWED RULE 52(C) MOTION FOR PARTIAL JUDGMENT JUDGE: Hon. Dale S. Fisher /// /// /// Case 2:16-cv-08064-DSF-AGR Document 150 Filed 12/03/18 Page 1 of 6 Page ID #:3634 SMTD LAW LLP A L IM IT ED LIA BI LI TY PA RT N ER S HI P 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 DEFENDANTS’ RESPONSE TO PLAINTIFF AND THIRD PARTY DEFENDANT’S JOINT RENEWED RULE 52(C) MOTION FOR PARTIAL JUDGMENT Defendants/Cross-Claimants INTERNATIONAL FIDELITY INSURANCE COMPANY; INSIGHT ENVIRONMENTAL ENGINEERING & CONSTRUCTION, INC.; CESIGHT JOINT VENTURE; and EVEREST RE- INSURANCE COMPANY (collectively “Defendants”) provide the following Response to Plaintiff and Third-Party Defendant’s Joint Renewed Rule 52(c) Motion for Partial Judgment as follows: I. INTRODUCTION This case is straightforward. The Government entered into a Prime Contract with CeSight JV, a public works construction project for the installation of Access Control Point (“ACP”) Infrastructure, Phase 1, at the Joint Base Lewis-McChord (“JBLM”) located in Washington State (“Project”). CeSight subcontracted with Insight, one of its joint venture partners, to provide steel decking, electrical, exterior improvements, including Active Vehicle Barrier (“AVB”) and Passive Vehicle Barrier (“PVB”) systems. In turn, Insight subcontracted with Nasatka to provide all labor, material, transportation, equipment and other facility barriers with full controls and automation and chain link fencing, including the installation of the AVB and PVB systems in compliance with the Government’s specifications. Nasatka attempted to install a different system than called out for in the Government’s specifications, and the Government ultimately rejected it. Nasatka was then required to install the system that the Government demanded from the beginning. By its lawsuit, Nasatka is seeking to recover the costs incurred relating to the non-compliant Cinch-Rampart controller that the Government rejected. In essence, Nasatka complains that the Government should have accepted its non- conforming system. The complaint is meritless. The Government, as the end-user of the ACP, was entitled to get exactly what it paid for. Had the Government accepted the initial, non-conforming system in lieu of the system that was specified, CeSight, Insight and Nasatka would have spent less time and money completing this Project. That is to say, Insight certainly would not have Case 2:16-cv-08064-DSF-AGR Document 150 Filed 12/03/18 Page 2 of 6 Page ID #:3635 SMTD LAW LLP A L IM IT ED LIA BI LI TY PA RT N ER S HI P 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 DEFENDANTS’ RESPONSE TO PLAINTIFF AND THIRD PARTY DEFENDANT’S JOINT RENEWED RULE 52(C) MOTION FOR PARTIAL JUDGMENT complained. But the Government did not accept the non-conforming system. There are no legal or logical grounds to require Insight to pay Nasatka for a system that was never accepted, installed or used on the Project. On the other hand, both logic and the law support Insight’s claim against Nasatka and its performance bond surety. There can be no doubt that “but for” Nasatka’ s failed attempt to pass its non-conforming system for the system that the Government specified, this Project would have cost Insight less time and money to complete. Insight/CeSight submitted testimony at trial regarding its damages through written narratives and documentary evidence. At the conclusion of the submission of evidence, Nasatka made the subject motion pursuant to Federal Rule of Civil Procedure 52(c) to which Insight/CeSight file this opposition. II. ARGUMENT Federal Rule of Civil Procedure 52(c) governs judgment on partial findings by the court in a non-jury trial. Fed. R. Civ. P. 52(c); Ritchie v. United States, 451 F.3d 1019, 1023 (9th Cir. 2006)(concluding that a Rule 52(c) motion can only be made during a bench trial). After a party has been fully heard on an issue, “the court may enter judgment against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue.” Fed. R. Civ. P. 52(c). A judgment on partial findings can be entered “at any time that the court can appropriately make a dispositive finding of fact on the evidence.” Fed. R. Civ. P. 52(c) (advisory committee notes on 1991 amendment). A Rule 52(c) judgment must be supported by findings of fact and conclusions of law. Fed. R. Civ. P. 52(c). The Rule 52(c) standard is different than the standards governing Rule 50 and Rule 56. Mother v. Hawaii, 283 Fed. Appx. 514, 515 (9th Cir. 2008); Ritchie, 451 F.3d at 1022. The court may make findings in accordance with its own view of the evidence. Ritchie, 451 F.3d at 1023 (concluding that “[r]ule 52(c) expressly authorizes the district judge to resolve disputed issues of fact.”)(citing Fed. R. Civ. P. 52(a)). Case 2:16-cv-08064-DSF-AGR Document 150 Filed 12/03/18 Page 3 of 6 Page ID #:3636 SMTD LAW LLP A L IM IT ED LIA BI LI TY PA RT N ER S HI P 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 DEFENDANTS’ RESPONSE TO PLAINTIFF AND THIRD PARTY DEFENDANT’S JOINT RENEWED RULE 52(C) MOTION FOR PARTIAL JUDGMENT III. DISCUSSION A. Defendants/Cross-Claimants Have Proffered Evidence of Damages Caused by Nasatka’ s Breaches of Its Subcontract As a result of Nasatka’ s breaches of the Subcontract, Insight incurred damages due to the delays associated with Nasatka’ s failure to timely provide the PLC system and failures to make warranty calls to correct deficiencies in their Work. Pursuant to Section 23.4 of Nasatka’ s Subcontract, allowing for Insight to offset costs incurred as a result of delays caused by Nasatka’ s performance of its work, Insight withheld subcontract funds given the Government’s rejection of the Cinch-Rampart controller system. Insight has incurred delay damages and costs associated with Nasatka’s failure to provide warranty work in the total amount of $1,218,066.88. At trial, Defendants/Counter-Claimants introduced Witness Narratives from Jim Martin, DonCosta Seawell and Aqeel Mohammad that included testimony regarding the issue of damages to Defendants/Counter-Claimants. Specifically, Jim Martin’s narrative addressed the monthly costs of Insight’s General Conditions incurred from the date of the Beneficial Occupancy Date (“BOD”) of October 31, 2014 through February 27, 2015, which was extended by the Government as a result of Nasatka’ s delays. Although the Government extended the BOD during this timeframe, it did not grant additional extended General Conditions to Insight/CeSight to cover these monthly costs.1 DonCosta Seawell, who was deposed at length regarding the calculation of Insight/CeSight’ s damages, included in his narrative the basis for Insight’s damages in the amount of $1,218,066.88, broken down between August 2014 ($875,953.53), May 2015 through September 2016 and between October 2016 ($346,163.88) and completion of the warranty period in February 2017 ($83,656.55).2 Lastly, Aqeel Mohammed’s testimony supports the duration of the delays caused by Nasatka from August 2014 through February 2017.3 1 Martin Narrative, paras. 15-16, pp. 6-7. 2 Seawell Narrative, para. 23, p. 11. 3 Mohammad Narrative, para. 9, pp. 3-4. Case 2:16-cv-08064-DSF-AGR Document 150 Filed 12/03/18 Page 4 of 6 Page ID #:3637 SMTD LAW LLP A L IM IT ED LIA BI LI TY PA RT N ER S HI P 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 DEFENDANTS’ RESPONSE TO PLAINTIFF AND THIRD PARTY DEFENDANT’S JOINT RENEWED RULE 52(C) MOTION FOR PARTIAL JUDGMENT As noted by Nasatka, although it made objections to portions of this testimony, the Court did not, and at this time has not ruled with respect to these objections. Because the ruling on those objections has not been made by the Court, there is no basis to refuse to consider the evidence submitted by Insight/CeSight in support of its damage claim and defense of offset until such ruling is made. If the Court will make those rulings in conjunction with issuing the final judgment, then only at that time will a determination of the issue of Insight/CeSight’ s damages be appropriate. When considering the evidence, Insight/CeSight has submitted sufficient evidence to support an award of damages. “Overhead expense allocable to the period of delay is allowed to the extent the evidence shows an increase in overhead because of the breach…” A.A. Baxter Corp. v. Colt Industries, Inc. (1970) 10 Cal.App.3d 144, 158. The testimony of the witnesses identifies the amount of damages and ties such amount to event and conduct giving rise to them. Multiple witnesses testified to the delays caused by Nasatka as a result of its use of the Cinch controller that failed to comply with the Government’s specifications for the subject project. Insight/CeSight’s witnesses provided testimony regarding damages consistent with their deposition testimony. Nastaka did not cross-examine them regarding this evidence submitted as part of the written narratives. In sum, this testimony and related evidence is sufficient to support Insight/CeSight’s claims for damages and defense of offset. B. The Parties Submitted A Joint Rule 26 Report and Discovery Plan In Which Insight/CeSight Identified Its Alleged Damages for Breach of Contract During trial, Nasatka erroneously asserted that Insight claimed no damages, referring to the Insight’s Initial Disclosure.4 However, that disclosure was filed in the United States District Court in Tacoma, Washington prior to the transfer of venue to California and prior to CeSight/Insight filing their Counterclaim against Nasatka 4 Trial Exh. #137, Defendant’s Initial Disclosure, dated May 17, 2016. Case 2:16-cv-08064-DSF-AGR Document 150 Filed 12/03/18 Page 5 of 6 Page ID #:3638 SMTD LAW LLP A L IM IT ED LIA BI LI TY PA RT N ER S HI P 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 DEFENDANTS’ RESPONSE TO PLAINTIFF AND THIRD PARTY DEFENDANT’S JOINT RENEWED RULE 52(C) MOTION FOR PARTIAL JUDGMENT or the Third-Party Claim against its surety, NAIC. Later, Insight/CeSight filed their Counterclaim and Third-Party Claim alleging damages.5 Moreover, once the matter had been transferred, the parties jointly prepared and filed their Rule 26 Joint Report and Discovery Plan, in which Insight asserted damages in excess of $600,000 in an amount to be proven at trial.6 Subsequently, Nasatka took depositions of Insight/CeSight personnel wherein Jim Martin and DonCosta Seawell testified to damages based on documents produced during discovery. Both of these Insight/CeSight representatives were produced during discovery and testified to their knowledge of the Insight/CeSight damages. IV. CONCLUSION Insight/CeSight submitted sufficient evidence of damages to meet their burden of proof on their Counterclaim against the Third-Party Defendants and their Third- Party Claim against NAIC on Nasatka’s bond. Based upon the evidence submitted at the trial conducted in this action starting on October 16, 2018, and the parties’ post- trial briefing on Plaintiff’s Rule 52(c) motion, Insight/CesSight contend Plaintiff’s motion for judgment on partial findings under Rule 52(c) should be denied. Dated: December 3, 2018 SMTD LAW LLP By: /s/ Geoffrey A. Graves Ali Salamirad Geoffrey A. Graves Attorneys for Defendants INTERNATIONAL FIDELITY INSURANCE COMPANY; INSIGHT ENVIRONMENTAL ENGINEERING & CONSTRUCTION, INC.; CESIGHT JOINT VENTURE; and EVEREST RE- INSURANCE COMPANY 5 Trial Exh. #28, CeSight/Insight Counterclaim, para. 20, p. 11; CeSight/Insight Third Party Claim, para. 23, p. 12, prayer for relief, para. 2, p. 12. 6 Joint Status Report, para. E, “Damages”, p. 4, lines 18-20, dated January 23, 2017 (Docket No. 79). Case 2:16-cv-08064-DSF-AGR Document 150 Filed 12/03/18 Page 6 of 6 Page ID #:3639