E-Alert Case Updates

D.C. Construction Firm Gets another Shot at Recovering Damages after Gov’t Agency Terminated Contract

TRG Constr., Inc. v. D.C. Water & Sewer Auth.
No. 11-CV-896 (D.C. Court of Appeals)
by Joel M. Celso, Summer Associate
Semmes, Bowen & Semmes (www.semmes.com)

In this recently issued opinion from the D.C. Court of Appeals, the Defendant/Appellant TRG Construction, Inc. (“TRG”) appealed a grant of summary judgment against it by a trial judge in D.C. Superior Court as to claims arising out of a contract with D.C. Water and Sewer Authority (“D.C. Water”). The D.C. Court of Appeals affirmed the Superior Court as to three (3) claims, but remanded the matter for a new trial on TRG’s claims damages claims relating to convenience and delay.

This case arose out of a contractual dispute between D.C. Water and its contractor, TRG. D.C. Water contracted with TRG to renovate the bathrooms at its central facility, which was to be completed by June 13, 2004 under the terms of the contract. Because of delays, the deadline was pushed back to July 31, 2005. Prior to that deadline, TRG requested another extension which D.C. Water denied. At the same time, D.C. Water alerted TRG to deficiencies in the work it had already completed and requested that the deficiencies be cured. When TRG refused to fix the problems, D.C. Water terminated the contract “for convenience,” under D.C. MUN. REGS. tit. 21, § 5350.1. TRG sued for damages in D.C. Superior Court where the trial judge granted D.C. Water’s motion for summary judgment on all claims.

TRG appealed the matter to the Court of Appeals arguing that the Superior Court erred in disposing of multiple claims. First, TRG contended that it was entitled to “termination for convenience” damages, including the cost of work it had already performed under the contract, in addition to a fair amount of profit. D.C. Water countered that it was entitled to withhold payment because TRG failed to cure the problems with its work after notification. The appellate court held that the trial court did not adequately explain its basis for denying relief to TRG, or for determining that TRG had an obligation to cure. Therefore, the Court decided to remand the case for further proceedings.

In recognizing a dearth of D.C. law on the topic, however, the Court offered dicta. Because D.C. contracting law parallels federal contract law, federal law can be used as persuasive authority. The Court acknowledged twin goals of allowing the government to terminate a contract freely, and the right of contractors to recover their costs after termination. Ultimately, the Court concluded that the Superior Court would need to determine if D.C. Water’s permissible claims were greater than the amount TRG was entitled to recover under contract. If so, then summary judgment was appropriate.

Next, TRG argued that it was improper for the Court to dispose of its claim for damages based on delays caused by D.C. Water. Although a contract provision required all such claims to be brought within thirty (30) days, TRG did not submit the claim until over a year after it was terminated. Despite its tardiness, TRG argued that D.C. Water waived the time limit defense by denying TRG’s claim on the merits and waiting to raise the defense until well into litigation. The Court disagreed with the Superior Court’s determination that TRG’s recovery for “delay” damages was necessarily barred by the thirty (30) day limit. The Court then decided to remand the case for further determination of whether D.C. Water’s actions constituted a waiver of the time limit.