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Eagle Supply and Manufacturing, L.P. v. Bechtel Jacobs Company, LLC

United States Court of Appeals, Sixth Circuit

August 17, 2017

Eagle Supply and Manufacturing, L.P., Plaintiff-Appellee,
v.
Bechtel Jacobs Company, LLC, Defendant-Appellant.

          Argued: August 3, 2017

         Appeal from the United States District Court for the Eastern District of Tennessee at Knoxville. No. 3:10-cv-00407-Pamela Lynn Reeves, District Judge.

         ARGUED:

          Lochlin B. Samples, SMITH, CURRIE & HANCOCK, LLP, Atlanta, Georgia, for Appellant.

          Brian G. Corgan, KILPATRICK TOWNSEND & STOCKTON, LLP, Atlanta, Georgia, for Appellee.

         ON BRIEF:

          Lochlin B. Samples, Karl Frederick Dix, SMITH, CURRIE & HANCOCK, LLP, Atlanta, Georgia, for Appellant.

          Brian G. Corgan, Ian M. Goldrich, Reginald A. Williamson, KILPATRICK TOWNSEND & STOCKTON, LLP, Atlanta, Georgia, for Appellee.

          Before: SUTTON, McKEAGUE, and THAPAR, Circuit Judges.

          OPINION

          THAPAR, Circuit Judge.

          During World War II, the United States launched the Manhattan Project-the military's effort to build the world's first atomic bomb. Building the bomb was a big project. Cleaning up afterward turned out to be a big one, too. Since the mid-1980s, the Project's original uranium-enrichment facilities in Oak Ridge, Tennessee, have been inactive, and the Department of Energy ("DOE") has worked to clean up the hazardous waste left behind.

         This case arises out of that cleanup. To manage its effort, DOE hired Bechtel Jacobs Company ("Bechtel"), a global engineering and construction firm. Bechtel, in turn, hired Eagle Supply & Manufacturing ("Eagle") to help decontaminate the complex. Circumstances changed, and litigation ensued. Now, years after the work finished, Eagle and Bechtel continue to fight over the payment owed for Eagle's work, over the meaning of certain contractual provisions, and even over what happened at the site. The district court found for Eagle, and Bechtel appealed. We now affirm the district court's award of damages and attorney's fees to Eagle, but remand so that the court can recalculate the interest to which Eagle is entitled under the Tennessee Prompt Pay Act.

         I.

         DOE hired Bechtel to clean up the uranium-enrichment site at Oak Ridge, with plans to convert the area into a commercial industrial park. That required not only the demolition of buildings and equipment across the 2, 200-acre complex but also the careful removal of radioactive nuclear waste. After removing the waste, the team would need to decontaminate the soil and groundwater to ensure that the site would be safe for redevelopment. In short, the Oak Ridge project was a massive undertaking. Accordingly, Bechtel sought additional manpower and requested bids from potential subcontractors.

         Eagle submitted one of those bids. Eagle relied on Bechtel's forecasts for the project but also factored in administrative costs and profit. As it turned out, one of Eagle's competitors submitted a cheaper bid, and another received a higher technical rating. But Bechtel determined that Eagle promised the right balance of merit and price. Bechtel also considered it "advantageous" that Eagle was a federally certified small business and a Historically Underutilized Business Zone contractor. Still Bechtel haggled after deciding that it would likely award the subcontract to Eagle. Bechtel convinced Eagle to accept a price reduction of over $444, 000, implying that Eagle would otherwise lose the bid. The two companies eventually agreed to a fixed-price subcontract for the full cost of performing the demolition and decontamination work.

         Unfortunately, things did not go as planned. Soon after the work began, the parties realized that the project would be much more challenging and costly than they had anticipated. At the first set of facilities, Eagle discovered that it would need to remove a lot more sediment than expected. More sediment meant more employees. And to get more employees, Eagle had to reallocate employees from another area of the project. This staffing adjustment forced Eagle to abandon its original plan to tackle multiple areas simultaneously and resulted in delays and increased costs.

         Shortly after the sediment setback, Bechtel announced a change to the security clearance requirements for the main facility at issue in this case-the K-1004-L facility. Workers at K-1004-L would now have to carry a higher security clearance and contend with an additional security perimeter. This caused two problems: (1) increased congestion meant the work took longer, and (2) increased security meant that Eagle had to hire new workers and subcontractors with the requisite security clearance. Not surprisingly, Eagle soon exceeded its projected costs.

         The problems were not over. When Eagle began work on K-1004-L, it discovered substantial amounts of asbestos and fluorine gas. These unanticipated hazards sidelined Eagle's crews while the company hired remediation experts. And the new dangers meant more protective gear, which in turn slowed down Eagle's work.

         Meanwhile, over an eight-month period, Bechtel made over sixty modifications to the subcontract's mandatory contractor procedures. These modifications affected nearly every aspect of Eagle's work-from environmental-health-and-safety requirements to personnel-change procedures. Apart from Bechtel's modifications, Eagle catalogued thirty-nine separate incidents of site conditions that differed from the initial forecast. All in all, Eagle's work proved significantly more challenging and expensive than either party had anticipated.

         Changes happen-especially in long-term construction projects. Bechtel and Eagle planned for that eventuality by including a "Changes" provision in their contract (GC-18). GC-18 allowed Bechtel to make changes. But if those changes caused Eagle's costs to increase, GC-18 required Bechtel to make appropriate "equitable adjustment[s]" in price and time for performance.

         So when the changes occurred, Eagle requested equitable adjustments. Bechtel, however, dragged its feet on compensating Eagle for the overruns. When the financial burden became too great, Eagle objected to continuing the project. Bechtel, in turn, threatened to terminate Eagle, but ultimately agreed to pay Eagle's immediate labor and materials costs for the duration of the project. This preliminary payment only covered Eagle's labor and materials-not overhead, administrative expenses, or profit. So Eagle submitted another two requests for adjustment to its bid price to cover these outstanding expenses. Eight years after completing its work at K-1004-L-and still waiting to be paid for its requested price adjustments-Eagle filed this suit.

         Eagle alleges breach of contract and seeks compensation for its extra work on the Oak Ridge project. Specifically, Eagle seeks damages for the two "Requests for Equitable Adjustment" that it submitted to Bechtel. The first addressed the additional costs that Eagle incurred at the K-1004-L site (the parties call this the "Combined Changes REA"). Bechtel conceded some equitable adjustment for these additional costs, but the parties were unable to settle upon an appropriate figure. The second request sought a price adjustment for excess waste that Eagle removed across the project (the parties call this "Waste Generation REA"). Bechtel contests liability for this excess waste.

         The district court awarded Eagle the full amount of each request, plus interest and attorney's fees. Bechtel now appeals.

         II.

...


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