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BRIEF FOR APPELLANT :MASSACHUSETTS BAY
L_'ITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
us co._ _'7L60
'_F_'..-__ s_ ..
.XLASSACH USETTS BAY TRANSPORTATION AUTHOR
Defendant - Appellee
,APPEAL FROM TFtE L_'ITED STATES COURT OF
FEDERAL CLAI3IS IN 89-C%'-283,
JUDGE DIANE G. SYPOLT
Rudolph F. Pierce
GOL!I.STON & STORRS
A Professional Corporation
400 Atlantic Avenue
Boston, MA 02110-3333
Attorneys for Plaintiff-Appellant
3L_.SSACH USETTS BAY
March 16, 2005
FORM 9. Certificate of Interest
UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
Transportation Authority United States
CERTIFICATE OF INTEREST
Counsel for the (.petitioner) (appellant) (respondent) (appellee) (amicus) (name of party)
Rudolph F. Pierce certifies the following (use "None" if applicable; use extra sheets
I. The full name of every party or amicus represented by me is:
Massachusetts Bay Transportation Authority
2. The name of the real party in interest (if the party named in the caption is not the real
party in interest) represented by me is:
3. All parent corporations and any publicly held companies that own 10 percent or more
of the stock of the party or amicus curiae represented by me are:
4. [_] There is no such corporation as listed in paragraph 3.
5. The names of all law firms and the partners or associates that appeared for the party
or amicus now represented by me in the trial court or agency or are expected to appear in this
Goulston & Storrs, P.C., Joseph C. Lyons
TABLE OF CONTENTS
TABLE OF AUTHORITIES ............................................................... iv
STATEMENT OF RELATED CASES ................................................ v
STATEMENT OF JURISDICTION .................................................... I
STATEMENT OF ISSUES .................................................................. 2
STATEMENT OF THE CASE ............................................................. 4
STATEMENT OF FACTS ................................................................... 6
A. The Project ................................................................................ 6
B. The Legal Structure ................................................................... 7
C. FRA Fails to Protect MBTA from Designer Errors .................. 9
D. Design Error Causes Delays in the Construction
of South Station ......................................................................... 9
E. Settlement of the White Litigation .......................................... 13
F. Expert Testimony and the Insurance Endorsements ............... i5
SUMMARY OF ARGUMENT .......................................................... 16
ARGUMENT ...................................................................................... 20
I. INTRODUCTION .................................................................... 20
II. MBTA IS ENTITLED TO RECOVER THE $1.9 MILLION IT
PAID TO SETTLE THE WHITE LITIGATION .................... 23
A. The Trial Court Erred in Failing to Follow this Court's
Instructions in MBTA I and MBTA II .................................... 24
B. A Reasonable Insurer would have Paid MBTA the
$1.9 Million ............................................................................. 26
C. The Trial Court Abused its Discretion in Permitting FRA's
Expert to Testify on this Issue, or, at the very Least, its Reliance
on his Testimony was Clearly Erroneous ........................ : ........ 29
!. Carter should not have been Allowed to Testify on the
Reasonableness of the $1.9 Million ................................... 30
2. The Trial Court Erred in Crediting Carter's Testimony over
Hermes'. ............................................................................. 32
(a) Neither Caner nor the Trial Court Understood the
Risk Facing MBTA ......................................................... 33
Ill. THE TRIAL COURT ERRED AS A MATTER OF LAW IN
LIMITING MBTA'S DEFENSE COSTS ................................ 40
A.The Dub' to Defend in Massachusetts is Absolute ................... 41
B. The Trial Court's Reduction of MBTA's Legal Fees was in
Error and in Contravention of Massachusetts Law .................. 43
IV. THE INSURANCE POLICIES WERE SUFFICIENT TO
COVER THE $1.9 MILLION PLUS DEFENSE COSTS ....... 48
V. MBTA IS ENTITLED TO INTEREST AS A MATTER OF
LAW ......................................................................................... 52
VI. THE TRIAL COURT ABUSED ITS DISCRETION IN
SUSTAINING FRA'S OBJECTION TO HERMES'
TESTIFYING AS A REBUTTAL WITNESS ......................... 53
Vll. JUDGMENT SHOULD HAVE ENTERED FOR MBTA
PRIOR TO THE 2003 HEARING ........................................... 56
VIII. THE RULINGS SUBJECT TO THIS APPEAL MUST BE
REVERSED DUE TO THE TRIAL JUDGE'S BIAS AND
PREJUDICE AGAINST MBTA .............................................. 58
A. Standard for Disqualification .................................................. 59
B. History of Rulings Adverse to MBTA Demonstrate the Trial
Judge's Bias and Prejudice against MBTA .............................. 60
CONCLUSION ................................................................................... 76
Order and Opinion (October 8, 2004)
Order (August i 5, 2002)
Order (March 10, 2003)
Information Regarding Interest Due
CERTIFICATE OF SERVICE
CERTIFICATE OF COMPLIANCE WITH FRAP 32(a)(7)
TABLE OF AUTHORITIES
Aetna Cas. & Sure_ Co. v. Continental Cas. Co., 604 N.E.2d 30
(Mass. ! 992) ..................................................................................... 41
Bay State-Spray & Provincetown S.S.. Inc. v. Caterpillar Tractor Co.,
533 N.E.2d ! 350 (Mass. 1989) ........................................................ 36
Boston Symphony Orchestra, Inc. v. Commercial Union Ins. Co.,
545 N.E.2d i 156 (Mass. 1989) ........................................................... 42
Boucher v. U.S. Suzuki Motor Corp., 73 F.3d ! 8 (2d Cir. 1996) ....... 31
Charron v. United States, 200 F.3d 785(Fed. Cir. 1999) .............. 59, 60
Dept. of Natural Resources & Conservation v. United States, 1 CI. Ct.
727 (1983) ........................................................................................ 21
GNE Ins. Group v. Metro. Boston Housing, 61 F.3d 79 (1 _t Cir. 1995)
Gumbs v. International Harvester, Inc., 718 F.2d 88 (3d. Cir 1983). 31
H.B. Mac. Inc. v. United States, 153 F.3d 1338 (Fed. Cir. 1998) ...... 20
Horace Mann Ins. Co. v. Doe, 1994 WL 879836 (Mass. Super. 1994)
Massachusetts Bay Transportation Authority v. United States, 129
F.3d i 226 (Fed. Cir. i 997) ........................................................ passim
Massachusetts Bay Transportation Authority v. United States, 254
F.3d 1367 (Fed. Cir. 2001) ........................................................ passim
MBTA v. United States, 40 Fed.Cl. 580 (1996) ................................. 63
Pac-Tec. Inc. v. Amerace Corp., 903 F.2d 796 (Fed. Cir. 1990) ....... 76
Rubenstein v. Royal Ins. Co. of America, 694 N.E.2d 381 (Mass.
App. Ct. ! 998) .................................................................................. 42
Samafil, Inc. v. Peerless Ins. Co., 609 N.E.2d 1234 (Mass. App. Ct.
1993) ................................................................................................ 44
Shapiro v. Public Service Mut. Ins. Co., 477 N.E.2d 146 (Mass. App.
Ct. 1985) ........................................................................................... 44
Sterilite Corp. v. Continental Cas. Co., 458 N.E.2d 338 (Mass. App.
Ct. 1983) ..................................................................................... 45, 48
United States v. Barry, 938 F.2d 1327 (D.C. Cir. 1991) .................... 60
28 U.S.C. § 455 ................................................................................... 59
31 U.S.C. §1341 .................................................................................. 20
Mass. Gen. Law c. 260, § 2B .............................................................. 35
STATEMENT OF RELATED CASES
PURSUANT TO FED. CIR. R. 47.5(a)
In this same civil action, this Court decided two earlier appeals:
I. Title and Number - Massachusetts Bay Transportation
Authority, Plaintiff- Appellant v. United States,
Defendant- Appellee, 96-5128.
2. Date of Decision - November 3, 1997
3. Composition of Panel - Rich, Newman and Clevenger,
4. Citation - 129 F.3d 1226.
I. Title and Number - Massachusetts Bay Transportation
Authority, Plaintiff- Appellant v. United States,
Defendant- Appellee, 00-5071.
. Date of Decision - July 3, 2001
3. Composition of Panel - Newman, Michel and Gajarsa,
STATEMENT OF JURISDICTION
This case is based on a contract with the United States. Subject
matter jurisdiction ['or the action o f the Court of Federal Claims is
proper pursuant to 28 U.S.C. §1491. This Court's appellate
jurisdiction is founded on 28 U.S.C. §1295. The Court of Federal
Claims entered final judgment disposing of all claims of all parties on
October 13, 2004. On November 10, 2004 Massachusetts Bay
Transportation Authority filed its Notice of Appeal. This appeal was
docketed on November 15, 2004.
STATEMENT OF ISSUES
I. Whether the trial court's ruling that a reasonable insurer would
have paid none of the $1.9 million that MBTA contributed to the
settlement of the White litigation must be reversed.
II. Whether the trial court abused its discretion in allowing FRA's
expert, Thomas L. Carter, to opine as to whether a reasonable insurer
seeking to settle the White litigation would have paid $1.9 million, or
some portion thereof, to settle MBTA's liability for the design error of
III. Whether the evidence in the record established that a reasonable
insurer seeking to settle the White litigation would have paid the $1.9
million to settle MBTA's liability for the design error of the A/Es.
IV. Whether the trial court correctly concluded that MBTA was
entitled to less than halfofthe $2,064,567.21 in defense costs that
MBTA incurred in the White litigation.
V. Whether the evidence in the record established that MBTA was
entitled to reimbursement of the $2,064,567.21 in defense costs that it
incurred in the White litigation.
VI. VChether the trial court erred in failing to award MBTA any
interest on the damages that it awarded to MBTA.
VII. Whether the trial court abused its discretion in sustaining
FRA's objection to the testimony of MBTA's expert, Peter Hermes, as
a rebuttal witness at the hearing on March ! I, 2003.
VIII. Whether the trial court properly allowed a hearing in 2003 to
permit FRA to submit expert evidence to rebut expert testimony that it
chose not to rebut during the trial in 1998.
IX. Whether the trial court had a personal bias or prejudice against
MBTA that requires its March 10, 2003 and October 8, 2004 rulings
to be reversed.
STATEMENT OF THE CASE
Course Of Proceedings
This 16-year-old case has a long and tortured history. It is set
forth, along with the procedural history of the underlying state court
action (the "White litigation"), in Massachusetts Bay Transportation
Authority v. United States, 129 F.3d 1226 (Fed. Cir. 1997) ("MBTA
/") and Massachusetts Bay Transportation Authority v. United States,
254 F.3d 1367 (Fed. Cir. 2001) ("MBTA II") as well as in the briefs
that the Massachusetts Bay Transportation Authority ("MBTA")
submitted as part of those appeals.
Since this Court's decision in MBTA 11, MBTA filed a Motion
to Disqualify Trial Judge for Bias and Prejudice on March 5, 2002.
The trial judge denied that motion on August 16, 2002, and MBTA
filed Petition for Writ of Mandamus to this Court on October 9, 2002.
A single judge ofthis Court denied that Petition on November 1,
On February 19, 2003, MBTA filed a motion objecting to the
trial court's decision to hold additional hearings, which were
scheduled for March I l and 12, 2003. MBTA filed this motion
because the hearing:s only purpose was to allow the Federal Railway
Administration ("FRA"') to put forth expert testimony to rebut
testimony presented at the 1998 trial it deliberately chose not to rebut
during that trial. The trial court denied this motion on March 10,
At the March l l, 2003 hearing, MBTA's objected to the
testimony of FRA's expert, Thomas L. Carter, on a key issue relating
to MBTA's damages because he conducted no analysis of the issue.
(A0973-A0975) The Court denied that objection in its October 8,
2004 Order and Opinion. _ (A0029) On the other hand, the Court
sustained FRA's objection to MBTA's effort to use Peter Hermes as a
rebuttal witness at the 2003 hearing. (A0986-A0987)
In its October 8, 2004 Order and Opinion, the trial court
awarded MBTA $ 1:075:242.03, approximately a quarter of its actual
damages. It reasoned that a reasonable insurer (a) would have paid
none of the $1.9 million that MBTA paid to settle the White litigation,
(b) would have paid only $775,242.03 in attorneys and experts' fees
Although it appears that the trial court did not understand the
nature of MBTA's objection. (Compare A0973-A0975 with A0029)
out of the .$2,064,567 that MBTA actually paid in defense costs, and
(c) would have paid an additional $300,000 ($100,000 from each
insurer of the architect/engineers) to ensure MBTA's "cooperation" in
the settlement. (A0060-A0062) Further, the trial court awarded no
interest on the amount it deternained that MBTA should receive.
STATEMENT OF FACTS
Many of the facts relevant to this appeal are set forth in both
MBTA I and MBTA II. as well as in the briefs that MBTA has
submitted to this Court as part of those appeals. Therefore, MBTA
provides only a summary of those facts here.
A. The Project
In 1976, FRA contracted with DeLeuw, Cather/Parsons
("DCP:') to be the chief architect-engineer for inaplementing the
Northeast Corridor Improvement Project ("NECIP"), a program
intended to rehabilitate and improve the facilities and passenger
stations from Washington, D.C., to Boston, Massachusetts, including
MBTA's South Station in Boston. (A 1007-A 1078; A6670-A6677)
DCP in turn subcontracted with other architects/engineers, Skidmore,
Owings & Merrill ("SOM")in 1976, and Hugh Stubbins &
Associates_ Inc./Castro-Blanco Piscioneri & Feder Architects
(collectively, "Stubbins:')in 1979. (AI079-A1156; A1157-A1280)
In sum, these architects/engineers ("A/Es') were responsible for
analyzing the existing conditions at South Station and ultimately
designing the renovation. (A0478-A0479; A ! 016; A 1087-A 1088,
A1091-A1092, A1146-AI 148; A1198-A1199) The services provided
by these A/Es included all of the design work on the improvements
that are the subject of the claims in this litigation.
B. The Legal Structure
In 1980 FRA and MBTA entered into the Boston South Station
Improvement Project Design Agreement, (A 1281 -A 1317), and in
November, 1983, FRA and MBTA entered into the Boston South
Station Transportation Center Project Cooperative Construction
Agreement (the "Cooperative Construction Agreement," "CCA" or
"Agreement"). (AI330-AI448) The CCA required MBTA to
implement the construction at the Station in strict accordance with the
plans and specifications prepared by FRA's AlEs. (A1344) MBTA
was not permitted to issue any change orders, or to make or permit
any modification or deviation from the approved design documents
provided by FRA, without FRA's prior written approval. (A 1354-
A ! 356)
The contract between FRA and DCP, and the contracts between
DCP and the subcontractors, each contained "sole benefit" clauses
that precluded MBTA from being a third-party beneficiary. (A 1033;
A1123; A1183) The CCA also contained a provision stating that the
FRA made no warranties concerning the design documents. (AI361)
Therefore, to resolve MBTA's insistence that it be protected from
design error, FRA inserted § 222(c) in the CCA, its "a standard
paragraph" for its contracts with station owners throughout the
NEICP. (A0493-A0494; A2984; A3021-A3022; A3097) Section
FRA shall secure from each of its consultant architect-
engineers C_A/E's '') an endorsement to the benefit of
MBTA on the professional liability insurance policy or
policies carried by such A/E's with respect to any A/E
errors, omissions: or acts of negligence in the design of
the Facility. FRA shall furnish MBTA evidence of such
(Ai362) (emphasis supplied). At trial, Mongini agreed that "the point
of this provision was to provide a local station, in this case, MBTA,
some protection if it was needed, against design errors and
C. FRA Fails to Protect MBTA from Designer Errors
Despite agreeing in 1983 to protect MBTA from errors
committed by its design team, FRA neither secured the endorsements
nor notified MBTA of this failure until it was far too late for MBTA
to do anything to protect itself. (A5014-A5014.1; A4913-A4918;
A0494, A0502) This was not for lack of effort on MBTA's part to
ascertain evidence of FRA's perfomlance of § 222(c). (Id.).
D. Design Error Causes Delays in the Construction of
In February 1984, White won the prime construction contract
for the Project, bidding $48,775,062.10. (A3766.4) On April 30,
1984, White commenced construction using the design documents
prepared by FRA:s design team. Significant design errors were
discovered within the first weeks of lhe Project and, as a result of
many of those errors, the Project was delayed and completed 956 days
Among the early design errors: in what became known as "the
dimensional steel problem," FRA's design documents mislocated the
South Station Headhouse relative to the rail yard requiring redesign of
the Project, including the structural steel. (A0676-A0677) FRA's Mr.
Cogswell testified at trial that, <<[c]ertainly from my vantage point, it
is a designer's error" and <<asignificant problem" resulting in major
portions of the structural steel needed for the Project being misaligned
by 1 ½ to 2 feet in areas where the permissible tolerance of variation
is "a small fraction of an inch." (A0676) Mr. Cogswell testified at
the 1998 trial this problem caused months ofdelay and took the
Project offthe critical path while FRA's designers modified the plans
and then new steel was fabricated. (A0676-A0678) White gave
notice of its intent to file a claim regarding this problem in a May 22
telephone conversation with MBTA and by letter dated May 29, 1984.
On May 25, 1984, White reported a second major design error
and delay involving construction of the temporary station and the new
East Wing to be added to the existing Headhouse. 2 (A0677-A0678)
The design documents originally called for pile driving to occur for
2 It was-necessary to construct a temporary station in order to
provide passengers a place to congregate while demolition and
construction of the Headhouse occurred. (A5480)
construction of the new East Wing at the same time as a walkway
would be constructed to the temporary train station and then used by
passengers during construction on the existing Headhouse. (A0678)
However, within days ofconlmencing construction, White determined
that they could not proceed concurrently as had been represented in
FR.A's design document. (Id.) As FRA's witness, Mr. Cogswell,
succinctly surnmarized the problem at trial, ='It gets difficult to drive
piles in the same place you expect pedestrians to walk." (A0678)
Thus, instead of occurring at tile same time, there was a delay while
the problem was resolved. White filed a claim against MBTA for the
resulting delay and asserted that design error caused this problem.
(A6507-6513) At the 1998 trial in this action, Mr. Cogswell testified,
'q'll admit it=s a design error." (A0678)
In December 1977 and January 1978. DCP and SOM, as part of
their survey to determine existing conditions, examined the structural
integrity of floors 3, 4 and 5 of the Headhouse at South Station.
(A5245-A5247) Relying only on a visual inspection of the portions of
the floors they could observe without removing the existing floor
coverings, they concluded that "[i]nspection of the visible areas on
each floor did not reveal any structural deficiencies." (A5245)
Because of this conclusion, no design documents were prepared for
the "improvement:' of the floors. Once the upper floors in the
Headhouse were stripped of their finishes and the wooden structural
floors exposed, they were found to be (i) in poor condition; (it)
dangerous to walk on; and (iii) so unsafe that all of the subcontractors
who were expected to work on them refused to allow their employees
to do so until the hazardous conditions were corrected. (A3683.42-
A3683.58; A4996-A4997; A6679; A6508) The discovery of the
hazardous condition of the floors caused substantial delay. It took
almost one complete year to remedy this problem. (A0665-A0694)
Other design errors that White claimed further delayed and
disrupted the South Station Project included insufficient estimates of
contaminated material to be removed, defective pile driving criteria,
omission of sprinkler system plans, building code violations,
ambiguities relating to removal of below-grade granite and masonry,
and failing to provide for removal of a power vault. (A3131-A3141;
E. Settlement of the White Litigation
As a result of the construction delay that began within the first
month and virtually doubled tile length of the South Station Project,
White claimed $23,680,228 from MBTA for increased costs it
asserted were caused by numerous design errors and omissions in the
Project:s design documents. (A313 ! -A314 I; A3683; A5067-A5068)
In 1987: White submitted its $23 million Delay Claim to
MBTA (the :'Delay Claim"). (A5067-A5068) In 1988, MBTA
brought a declaratory judgment action against the A/Es and White in
Massachusetts Superior Court to resolve liability and responsibility
issues arising from the Delay Claim; White counterclaimed against
MBTA for its delay damages. (ld.) MBTA also filed this action in
May 1989, which was stayed pending resolution of the White
On November 22, 1994, the panics in the White litigation --
MBTA, White, the A-Es, Amtrak, and Boston Edison- agreed, with
FRA's encouragement, to settle White's $23,680,228 Delay Claim for
a total of$3,810,000 -- with MBTA paying $ 1,900,000 and the
design professionals paying $1,800,000. (A5069)
MBTA's counsel got an outstanding result in the state action.
They won summary judgment against the sub-contractors by
maintaining that White's contract with the MBTA did not permit
subcontractors to recover from the MBTA, thereby eliminating
$9,000,000 in subcontractor claims. (A0119-A0131) They defeated
the A/Es' efforts to obtain summary judgment on the basis that the
"sole source" provision in their contracts with FRA prevented the
A/Es from being liable to third parties, including MBTA. (A5069;
A0116-A0118) As a result, MBTA enhanced the A/Es' risk of
liability at trial such that the AlEs contributed $1.8 million to the
ultimate settlement of the White litigation. (Id.)
FRA acknowledges that this was an advantageous settlement.
(A5070-A5071) In fact, FRA stipulated that the settlement was so
"advantageous" to it that FRA participated in the settlement by having
its top official, 3 FRA Administrator, execute releases to the A/Es
3 Indeed, MBTA continuously kept the FRA abreast ofthe
settlement negotiations and solicited FRA's opinion out of MBTA's
concern that it "not agree to a settlement proposal which the FRA later
claims is too generous." (A5077)
when the AlEs demands (which MBTA refused to meet) for such
releases threatened to kill the settlement. (A5210-5215)
MBTA incurred $1,392,413.21 in legal fees and $672,154 in
expert fees in the White litigation. 4 (A0915-A0918)
F. Expert Testimony and the Insurance Endorsements
In light of FRA's breach of Section 222(c) of the CCA, each
party presented an expert on the issue of what portion of the $1.9
million a reasonable insurer would have paid on behalf of MBTA to
settle its liability for the design errors. MBTA presented its expert,
Peter Hermes ("Hermes"), at the 1998 trial, and he testified that a
reasonable insurer seeking to settle the White litigation would have
paid both the $1.9 million to settle MBTA's liability for the design
errors of the A/Es and MBTA's actual defense costs. (A0518-A0519;
A0526-A0527) Mr. Hermes' testimony on this point was
uncontroverted at trial in 1998.
It was not until the 2003 hearing that FRA addressed this issue
by offering the testimony of Thomas L. Carter ("Carter"), an
insurance adjuster from California. He testified that he did no
4 The amount of the expert fees has not been disputed. (A0059)
analysis to determine whether a reasonable insurer would have paid
the $1.9 million, but he nonetheless opined that a reasonable insurer
would have paid none of the $1.9 million based solely on tile amounts
the parties paid to settle the case. (A0973) He also opined that a
reasonable insurer would have paid less than half of M BTA's defense
costs. (A0968) The trial court credited Mr. Carter's testimony and
Additional testimony from Hermes and Carter, as well as
additional facts, are cited where relevant in the argument section
SUMMARY OF ARGUMENT
I. The trial court's ruling that a reasonable insurer would have
paid none of the $1.9 million that MBTA contributed to the settlement
of the White litigation must be reversed because the trial court
(a) erred as a matter of law in failing to consider, as instructed
by this Court in MBTA II, "all relevant factors:' that a
reasonable insurer would consider in negotiating the
settlement, including tile risk that a jury would find MBTA
liable for delay arising out of design error;
(b) made an erroneous finding of fact when it concluded that a
reasonable insurer would contribute none of the $1.9
(c) abused its discretion in permitting FRA's expert to testify on
this issue in light of his admission that he did no liability
analysis of the White litigation; at the very least, it erred in
crediting his testimony over that of MBTA's expert.
II. The trial court erred as a matter of law in awarding MBTA less
than half of the defense costs it incurred in the White litigation. Had
the FRA not breached § 222(c), MBTA would have had insurance for
design error. Massachusetts law governing the duty to defend
requires insurers to provide a complete defense to insured, even if the
lawsuit involves only one claim (out of many claims) that triggers
coverage under the policy. Therefore, MBTA's defense would have
been provided in full. Additionally, the trial court erred in further
reducing MBTA's legal fees because it relied on FRA's expert, who
was not familiar with Massachusetts law and practice governing the
reasonableness of attorneys fees in cases like the White litigation.
I11. The insurance policies were sufficient to cover the $1.9 million
that MBTA contributed to the settlement of the White litigation, as
well as MBTA's associated defense costs. Furthermore, the trial court
erred.in holding that "Exclusion R" prohibited FRA from securing an
endorsement on DCP's policy.
IV. This Court's rulings in MBTA 1 and MBTA II provided that
MBTA is entitled to interest, and as a result the trial court erred in
failing to provide MBTA with interest on the damages that it did
V. The trial court abused its discretion in sustaining FRA's
objection to Hermes testifying as a rebuttal wimess. Hermes provided
direct testimony at the 1998 trial on the same issue as that was before
the trial court in 2003. Therefore, his value to MBTA at the 2003 was
as a rebuttal witness. Moreover, MBTA notified opposing counsel
prior to the 2003 hearing that Hemles would offer no additional direct
testimony, but that he would be available for cross-examination and
rebuttal testimony, if necessary.
VI. Judgment should have entered for MBTA prior to the 2003
hearing. The 2003 hearing should have never taken place if its only
purpose was to allow FRA to retain an expert and rebut evidence that
it chose not to rebut at the 1998 trial.
VII. The trial court's rulings that are the subject of this appeal,
including its October 8, 2004 Order and Opinion, must be reversed
due to the trial judge's bias and prejudice against MBTA. This case
represents those unusual circumstances in which judicial rulings
provide a valid basis for disqualification because the trial judge's
deep-seeded favoritism and antagonism has made fair judgment
impossible. The 16-year-old history of this case demonstrates that the
trial judge has ignored the facts and law, and sided with FRA no
matter what the issue.
STANDARD OF REVIEW
In reviewing the decisions of the Court of Federal Claims,
findings of fact may not be set aside unless they are clearly erroneous.
Conclusions of law are reviewed de novo. H.B. Mac, Inc. v. United
States, 153 F.3d 1338, 1343 (Fed. Cir. 1998); see RCFC 52(a).
This appeal is the third to this Court on the same core of
undisputed facts. Because of the length of this record and the
repeated number of appeals, it is important to recall that the genesis of
this case was the failure of FRA to provide the insurance
endorsements that it compelled the MBTA to accept.
The record reflects that the MBTA sought, not insurance
endorsements, but rather indemnification protection from FRA against
errors, omissions or other acts of negligence of the A/Es that FRA
retained to design improvements at Boston's South Station. (A0492-
A0493; A4995) Mr. Mongini did not provide the indemnification
because he was advised that he could not because of the Anti-
Deficiency Act, 31 U.S.C. § 1341, (id.). a position which this Court
confirmed was incorrect in MBTA I. See 129 F.3d. at 1232; see also
Dept. of Natural Resources & Conservation v. United States, I CI. Ct.
727, 734 (1983).
FRA's failure to secure the endorsements was made worse by
its failure to inform MBTA about its breach so that MBTA might have
sought insurance protection elsewhere. As this Court said in MBTA
I!, "[t]hat [FRA] did not [inform MBTA of its failure to secure the
insurance endorsements] is not only an unfortunate breach of the
contract, but an unseemly act for a government agency." 254 F.3d at
1375. Hence, when the first major construction problems occurred
shortly after White began construction at South Station in May 1984,
MBTA, unbeknownst to it, was without insurance protection against
the A/Es' errors and omissions.
More importantly for purposes of this appeal, had FRA
provided the endorsements, the A/Es' insurers would have provided
counsel for the MBTA and otherwise defended its interests in the
White litigation. MBTA would not have had to retain counsel and to
bear the enormous litigation costs and expenses.
This case was filed in the Court of Claims to enable MBTA to
recover both the costs it incurred as a result of FRA's failure to secure
the insurance endorsements and damages resulting front other
breaches of the contract documents. The case has been active since
1991. During this period, FRA has never conceded liability for
anything, not even for the failure to provide the insurance
endorsements or for any of the costs resulting from that failure.
FRA has maintained this posture even though M BTA achieved
a terrific resolution of the White litigation, thereby substantially
lowering FRA's potential exposure in this case. The record
demonstrates that FRA's positions have been misguided, inconsistent,
and at times absurd. 5 However, FRA's determination to pursue this
strategy has been aided by the trial judge who for inexplicable reasons
5 FRA had no principled defense. For example, in 1998, it
argued through its expert that it was "impossible" to get insurance
endorsements at the time the parties signed the CCA. (A0735-A0738)
At the trial in 1998, FRA challenged Hermes only on tile impossibility
issue and in response Hermes testi fled that such insurance was
available at a premium. (A0529-A0531) FRA never challenged any
of his other conclusions. Carter, its expert at the 2003 hearing,
testified that not only were such endorsements available at that time,
but his employer made "more money" selling endorsements at that
has never been open to being educated about the facts and law
pertinent to this case by counsel for both parties. She has rejected
virtually every position advanced by the MBTA. The lengthy record
in this case is testament to this fact. All the MBTA has ever sought in
this action is a fair and expeditious hearing. The facts have always
been on its side; FRA, not MBTA, is the wrongdoer in this action.
Yet: this case has taken 12 years, not including the four for which it
was stayed, and this appeal is the MBTA's third visit as :'Appellant"
to this Court. The consequence ofall of this to MBTA has been
tremendous. It has incurred thousands and thousands of dollars of
unnecessary expenses for lawyers and experts. Respectfully, this case
represents litigation at its worse.
I!. MBTA IS ENTITLED TO RECOVER THE $1.9
_'IILLION IT PAID TO SETTLE THE WHITE
The trial court detennined that a reasonable insurer would have
paid none of the $1.9 million that MBTA paid to settle the White
litigation. (A005 I) The trial court reasoned that MBTA had provided
"_no basis for treating any ... delays ... as attributable ... to the A/Es."
(Id.) This ruling must be overturned for three reasons:
(1) It is based on an error of law. The trial court's
determination that the A/Es were not responsible for the
delay is not the relevant inquiry, as this Court recognized
in MBTA II. The state court case was settled, not tried.
The question is whether a reasonable insurer, considering
the evidence that would have been placed before a jury in
the White litigation, would have paid the $1.9 million.
(2) It is clearly erroneous. A reasonable insurer would have
concluded that MBTA faced a risk of substantial liability
for design error given the facts and testimony that a jury
would have heard in the White litigation.
(3) The trial court abused her discretion in permitting FRA's
expert to testify on this issue, or, at the very least, her
reliance on his testimony was clearly erroneous.
A° The Trial Court Erred in Failing to Follow this
Court's Instructions in MBTA I and MBTA Ii
This Court has twice instructed the trial court on remand to
determine MBTA's damages flowing fiom FRA's failure to secure the
insurance endorsements. In MBTA I, this Court asked the trial court
to determine "the extent to which tile Massachusetts litigation
settlement ... would have been covered by the insurance
endorsements." 129 F.3d at 1232. In MBTA II. this Court again
ruled that the trial court must determine "what a reasonable insurer
would have paid to settle the White litigation on behalf of both the
A/Es and MBTA, i.e., what MBTA would have been 'relieved
thereof' with regard to the $1.9 million." 254 F.3d at 1377 (quoting
MBTA I. 129 F.3d at 1232). This Court in MBTA 1I further
[T]he Court of Federal Claims must take into account
all relevant factors, including, but not limited to,
causation by the parties, what would have been a
reasonable or financially advantageous settlement in
light of the original claim for $23.6 million, as well as
the potentially high cost, large amount of time, and
nuisance invok, ed in going to trial.
The trial court, however, failed to consider "all relevant
factors," including MBTA's risk of liability for design error at trial in
the White litigation. There is no doubt that a reasonable insurer
would consider such a risk, but the trial court rejected that factor as
against its mandate:
The foregoing stance is consistent with the MBTA's
repeated contention that this court must re-determine
its share of liability, based, not on the allocation in the
settlement agreement, as ordered by the Federal
Circuit, but on its likely liability, at trial.
(A0038-A0039) (emphasis in original). This passage demonstrates
that the trial court did not understand the instructions from this Court.
Similarly, despite this Court's mandate in MBTA II requiring the trial
court to consider the cost of trial and appeal in the White litigation,
254 F.3d at 1377, the trial court never addressed such costs.
B. A Reasonable Insurer would have Paid MBTA the
The trial court's conclusion that a reasonable insurer would
have paid no portion of the $1.9 million is clearly erroneous. It is
important to remember that a jury in the White litigation would have
heard undisputed evidence that the AlEs were negligent. FRA
admitted glaring design errors. (See pp. 9-12 above)
Therefore, the question that a jury would have faced is whether
this negligence contributed to delay. White claimed that all but 20 of
the 956 days ofdelay resulted from designer/MBTA delay. (A6717;
A0517-A0518) During the White litigation, MBTA's delay claim
expert's analysis concluded that, of the 956 days of delay, 515 days
(or 53.9%) were from causes for which MBTA was responsible to
White. (A5091) (Under this analysis, White was responsible for the
remaining 441 days.) Of the 515 days of delay, MBTA's expert
determined that the A/Es caused 73% of that delay. (A6717) In
addition, MBTA's counsel provided FRA's counsel with its risk
analysis of the White Delay Claim. In theirjudgrnent, the minimum
risk of loss was $2,500,464, while they foresaw a reasonable
likelihood of a White recover 3, of $8,794,753. (A4900-A4902)
Indeed only one of the A/E's expert, one whose firm was hired
by FRA for this case, (A0706), claimed that they were not responsible
for any delay. (A0518) Given that a jury would have heard
undisputed testimony of significant design errors and the fact that the
Project was delayed by 956 days, it is unlikely that a jury in the White
litigation would have agreed with this expert. Indeed, during the
settlement, the A/Es did not stand firm on its expert's analysis -- they
contributed $1.8 million to the settlement.
While the trial court, not surprisingly, did side with FRA's
position that the A/Es did not "cause" the delay, and this Court in
MBTA I1 found itself"constrained by a highly deferential standard of
review:' in siding with the trial court's causation conclusion, 254 F.3d
at 1376, it is important to remember that there was no trial in the
White litigation - the case settled. As this Court pointed out in
MBTA II. the question is what a reasonable insurer, faced with the
knowledge of the evidence that would be presented before the state
court jury, would pay on behalf of M BTA considering the risk of its
liability resulting from designer error. Given the nature of the design
errors and the experts of both MBTA and White stating that design
error accounted for a substantial portion of the delay, a reasonable
insurer, as MBTA's expert concluded (A05 ! 8-A0519), would have
been delighted to pay the $1.9 million to limit its exposure. To
conclude, as did the trial court, that MBTA faced no risk of liability is
At a minimum, a reasonable insurer would have paid some
portion of the $1.9 million based on the cost of taking the case
through trial and appeal. Defense costs of continued litigation would
have been astronomical. Hermes, MBTA's insurance expert at the
1998 trial, testified that such a defense, given that it would have been
"a lengthy construction case" and that "expert upon expert would have
tesii fled," would have cost "middle six figures, even as high as seven
figures.': (A0518) FRA never contested Hennes' testimony on this
point. Given that an insurer's duly to defend in Massachusetts is
absolute, (see pp. 41-42 below), the A/Es' insurers would have been
responsible for 100% of MBTA's defense costs.
C. The Trial Court Abused its Discretion in Permitting
FRA's Expert to Testify on this Issue, or, at the very
Least, its Reliance on his Testimony was Clearly
In deciding whether a reasonable insurer would have paid the
S1.9 million, or a portion thereof, the trial court had a choice. It could
credit the testimony of Carter, who opined that a reasonable insurer
would have paid none of the $1.9 million, or Hemles, who opined that
a reasonable insurer would have paid the $1.9 million. The trial court
credited the testimony of Carter over Hemles even though Carter (a)
performed no risk assessment of the MBTA's potential liability in the
White litigation and (b) did not understand the facts or law involved in
that case. Because of Carter's failure to perform a liability analysis,
the trial court should have sustained MBTA's objection to his
testimony on the $1.9 million. In any event, the trial court clearly
erred in crediting his testimony, and in the process demonstrated that
it too did not understand the evidence and legal issues in the White
I. Carter should not have been Allowed to Testify on
the Reasonableness of the $1.9 Million
Caner, the only witness the FRA offered on this issue, testified
that he did no independent analysis to determine whether a reasonable
insurer would have paid the $1.9 million. (A980-A0981, A0984) On
cross-examination at the 2003 hearing, he acknowledged that had the
endorsements been secured, and had he been the insurer, he would
have conducted a liability analysis to determine risk to MBTA and
would have set a reserve based on that analysis. (Id.) He further
admitted that had he done that, he would have been able to determine
whether the settlement was reasonable. (Id.) Yet he admitted that he
did no such analysis in this case, but merely accepted the settlement
numbers as somehow reflective of MBTA and the A/Es' respective
liability for their own respective negligence:
Q..Part of [your] assignment required you
to determine what amount of money of
the $1.9 million the MBTA would have
been relieved of, is that correct?
Q. And it is fair to say, sir, that at least as ...
to the potential liability of the MBTA,
based on ... its vicarious liability, you
did not view any economic analysis ... of
damages to determine what the MBTA
may have been relieved of.
A. Not beyond what I've testified to today,
in my deposition, and in my report.
Q. And that means you accepted the
numbers that were in the settlement
without any analysis.
(A0984) Based on the settlement figure alone, Carter simply opined
that a reasonable insurer would have paid none of the $1.9 million to
settle MBTA's liability for A/E design error. The trial court credited
this testimony. (A0033, A0047, A0051)
In light of this Court's mandate to consider "all relevant
factors" in MBTA II, and as shown in the paragraphs that follow, the
settlement figure provides Carter with no foundation for his opinion.
See Gumbs v. International Harvester, Inc., 718 F.2d 88, 98-99 (3d.
Cir 1983) (finding trial court erred "in permitting plaintiff's expert to
testify.., without first requiring plaintiffto establish a factual basis for
this testimony"); Boucher v. U.S. Suzuki Motor Corp., 73 F.3d 18, 22-
23 (2d Cir. 1996) (finding some of expert's testimony should not have
been admitted where there was no factual foundation, noting that,
"admission of expert testimony based on speculative assumptions is
an abuse of discretion.").
2. The Trial Court Erred in Crediting Carter's
Testimony over Hen-nes'
While Carter did no liability analysis, Hermes reviewed the
following: the claims materials submitted by White; the critical path
analyses done by White, the MBTA and the AlEs; the White litigation
pleadings in which the claims and counterclaims were asserted; the
insurance policies of DCP, SOM and Stubbins; and contractual
documents. (A5014) He described the process a prudent insurer
would have followed to retain counsel and appropriate experts to
evaluate the complexities of the White Delay Claim. (A5017) He
also visited South Station. (A5014) He then described how a
"reserve:' would have been established for this case. (A5017)
Hermes then offered his opinion "that taking into account all of the
circumstances, it [the settlement of the White litigation] was a very
good settlement from the point of view of M BTA." (A5017) Hermes
opined that "insurers would have reimbursed [MBTA] or have paid
[the settlement amovnt] in the first instance ifgiven an opportunity to
terminate its insured's involvement in this litigation for $1,900,000."
(A0518-A0519) FRA did not contest this evidence at the 1998 trial,
nor were FRA's insurance experts asked questions relating to these
issues by government counsel.
(a) Neither Carter nor the Trial Court
Understood the Risk Facing MBTA
On the other hand, Carter and the trial court did not understand
the evidence and legal issues in the White litigation. For example,
neither Carter nor the trial court fully grasped that MBTA could be
liable to White for ME design error. Both the trial court and Carter
spent a lot of time discussing MBTA's liability for its own conduct in
causing delay, referred to as its direct liability, as opposed to its
derivative liability arising out of A/E design error. There has never
been a dispute in this case, however, that, had the insurance
endorsements been provided as promised, MBTA would have had
coverage for liability arising out of A/E design error. See MBTA I1,
254 F.3d at 1375 ("[S]ection 222(c) expressly states that "FRA shall
secure.., an endorsement.., with respect to any A/E errors,
omissions, or acts of negligence in the design.") (emphasis supplied
by this Court). Nonetheless, both Carter and the trial court never
understood where to draw the boundary between MBTA's direct and
vicarious liability in this case, even though the boundary is clearly
between liability arising from design error and liability arising from
MBTA:s negligence other than design error.
For example, in 1998, Hermes testified that MBTA was liable
to White under Massachusetts law for breach of what Hermes called
the "warranty of buildability." (A0517-A0518) In other words,
MBTA promised to White that it could build the Project according to
the A/Es' design plans. (Id.) FRA's expert, Carter, testified that the
MBTA"s violation of the "warranty of buildability" created direct
liability for MBTA, and as such would not have been covered under
the insurance endorsements. (A0967-A0968) The trial court credited
this testimony. (A0049-A0050) While it no doubt created liability for
MBTA, it was liability that plainly arose out of A/E error and thus
would have been covered under the endorsements. If the
endorsements would not have protected iVIBTA from error in design,
they would have been meaningless. Even Carter acknowledged that
the endorsements protected MBTA against vicarious liability for
design error. (A0967)
Indeed, a reasonable insurer would have understood that MBTA
faced a significantly greater risk of liability for the AlEs' design error
than did the AlEs themselves. Whereas MBTA was liable to White
for any damages stemming from design error, (A0518), the AlEs had
multiple legal defenses available at them that MBTA did not. 6
Neither Carter nor the trial court understood this critical point.
First, MBTA had no contractual privity with the AlEs because
it was not a party to the contracts between FRA and the AlEs, and,
therefore, the AlEs owed no duty to M BTA for the design plans.
(A6333-A6491; A0919-A0955) Second, MBTA's claims against the
A/F_,s were arguably barred by the 3-year statute of limitation on tort
claims for "damages arising out of any deficiency or neglect in design
... of... real property." Mass. Gen. Law c. 260, § 2B. For example,
MBTA discovered the "the dimension problem" or the structural steel
problem and the problem with the location of the temporary station in
May of 1984, but did not file a claim against the AlEs until 1988, after
White submitted its $23 million delay claim in 1987. (Id.) Third, the
6 Although MBTA was able to defeat the AlEs' summary judgment
motions in the White litigation, these defenses had value on appeal.
MEs argued that because no privity of contract existed between
MBTA and the A/Es, and because MBTA suffered purely economic
losses, not physical injury or property damage, the economic loss
doctrine barred MBTA from recovering its damages against the A/Es.
(ld.) In Massachusetts, "when economic loss is the only damage
claimed, recover), is not allowed in tort-based strict liability ... or in
negligence." Bay State-Spray & Provincetown S.S., Inc. v.
Caterpillar Tractor Co., 533 N.E.2d 1350, ! 353 (Mass. 1989)
As the following passage demonstrates, the trial court simply
did not understand this evidence:
...MBTA now chants a different, but recurrent theme
- that the endorsement of a policy to add an additional
insured gives the additional insured a right to sue the
named insured (i.e., the AlEs) ....
This argument appears to assume that its opponent at
trial would be the AlEs. not White, as evidenced by its
protests that the #dEs were entitled to legal defenses
unavailable to the MBTA ....
(A0038-A0039) (emphasis in original). While the above passage is
indicative of many positions that tile trial court attributed to MBTA
that it simply did not take, it shows clearly that the trial court never
understood the evidence showing that MBTA had liability to White
for design error and that the AlEs had defenses that shielded them
from liability for those same errors.
Carter also failed to comprehend that the AlEs had defenses
available to them in the White litigation that MBTA did not. He
erroneously testified that MBTA faced the same liability risk for the
AlEs' design error that the AlEs themselves faced for those same
errors, and therefore he opined that the liability for design error was
extinguished when the AlEs settled for $1.8 million. (A0975, A0973,
Because Carter believed, erroneously, that MBTA and FRA had
the same defenses to the design errors, he testified that MBTA and the
AlEs could have had the same defense counsel in the White litigation
defend the risk of liabilit3, stemming from the design errors of the
AlEs. (A0981) Any attorney who represented both MBTA and AlEs
on the issues relating to the AlEs' design errors would have
represented two parties with conflicting interests. Even Carter had to
acknowledge that the A/Es disclaimed liability on the ground that
their design errors did not account for any delay, whereas M BTA
claimed that the A/Es accounted for approximately 373 days of delay
and sued the A/Es on that basis in the White litigation. (A0978,
A0980-A0982) As a result of this obvious conflict between the A/Es
and MBTA, such dual representation would not have been possible.
See Mass. Rules of Prof. Conduct Rule 1.7(a) & crnt. ("prohibiting
representation of opposing parties in litigation.")
Carter's inability to understand the White litigation underscores
the need for an insurer to retain and consult an attorney familiar with
the relevant law. Carter did not consult with anyone, despite
admitting that he was not conversant in or familiar with Massachusetts
law. (A0985-A0986) Caner further acknowledged that if he had been
the insurer in a case similar to the White litigation, he would have
hired a law),er in order to advise him on how to proceed. (ld.) Unlike
Carter, Henries, MBTA's expert, is a lawyer who has practiced in the
areas of insurance and construction in Massachusetts for over 30
Even though Carter testified that he would need to hire a lawyer
to assess liability, the trial court discredited Hermes because he did
not work in the insurance industry. And despite this Court's mandate
that the trial court determine what a reasonable insurer would have
paid to settle the White litigation, the trial court discredited Hermes
because "virtually all of [his] representation of insurers in
construction liability cases appears to have consisted of evaluating the
strength of construction claims brought against their insured, and
7 Mr. Hermes has been a member of the Bar of the Commonwealth of
Massachusetts since 1972. During the many years of his practice 50
to 80 percent of his time has been devoted to insurance and
insurance-related matters. Mr. Hermes has represented insurance
companies in all types of cases - product liability, construction
accidents, toxic torts including asbestos, latex and volatile organic
compounds. He has handled all types of litigation involving the
construction industry. Hermes has represented numerous surety
companies and in this capacity, has been involved in over 100
construction matters. Additionally, he has been retained by numerous
insurers to represent them in coverage disputes and has provided
hundreds of coverage opinions. He has provided advice to insurance
companies on 500 to 1000 settlements. (A0507-A0510, A0517)
FRA's counsel challenged Hennes: expertise essentially on the basis
that an insurance company never directly employed him. (A0511 -
A0512) This position resonated with the trial judge in 1999 and again
in her most recent Order. (A0812-A0813; A0026-A0029.. A0050)
generally did not involve construing insurance industry policies or
practices regarding professional liability endorsernents." (A0027,
A0049-A0050) The trial court had the issue backwards. The issue is
not what kind of insurance MBTA would have secured - there is no
dispute on that point. The issue is what a reasonable insurer providing
coverage to MBTA for A/E design error would have done. The
answer- is simple - hire a Massachusetts lawyer experienced in the
area to help guide it through a liability analysis to determine an
appropriate value for settling MBTA's risk arising from design error.
Providing such guidance is Hermes specialty, as the trial court
In sum, Hermes, not Carter, offered the only reliable testimony
on whether a reasonable insurer would have paid the $ !.9 million.
I!I. THE TRIAL COURT ERRED AS A MATTER OF LAW
IN LIMITING MBTA'S DEFENSE COSTS.
The trial court's ruling that a reasonable insurer would have
paid less than halfofMBTA's defense costs incurred in the White
litigation is incorrect as a mauer of law and must be reversed. In
making this ruling, the trial court relied on Carter, an insurance claims
manager from California with no knowledge of Massachusetts law or
its practice, and ignored the law governing the duty to defend in
Massachusetts. The trial court reasoned that because MBTA's expert
concluded that MBTA was liable to White for 53.9% of the total
delay, MBTA would have to pay 53.9% of the total defense costs.
(A0061) This reasoning not only demonstrates, once again, a lack of
understanding of MBTA's risk of liability for the A/Es' design error,
but it is also contrary to Massachusetts law.
A. The Duty to Defend in Massachusetts is Absolute
In Massachusetts, an insurer has the duty to defend its insured
on all counts in an action against the insured if one of the counts is
possibly covered under the policy at issue. See, e.g., Aema Cas. &
Surety Co. v. Continental Cas. Co., 604 N.E.2d 30, 32 n.l (Mass.
1992) ("[T]he weight of authority places the duty to defend all counts
on an insurer which has the duty to defend at least one count of a
complaint"); GNE Ins. Group v. Metro. Boston Housing, 61 F.3d 79,
85 (! _ Cir. 1995) (holding, under Massachusetts law, that an insurer is
'_obligated to defend the underlying suits notwithstanding the
possibility that certain other claims might be found to be excluded");
Horace Mann Ins. Co. v. Doe, 1994 WL 879836, at *4-5 (Mass.
Super. 1994) (holding that the insurer had to defend against all claims,
even though the court concluded that the policy excluded certain
claims); see also Boston Symphony Orchestra. Inc. v. Commercial
Union Ins. Co., 545 N.E.2d 1156, 1158 (Mass. 1989) ("It is axiomatic
that an insurance company's duty to defend is broader than its duty to
indemnify."), s In addition, under Massachusetts law, a defendant
insured by multiple insurers is "entitled to a full and complete defense
from every insurer having a duty to defend." Rubenstein v. Royal Ins.
Co. of America, 694 N.E.2d 381,386 (Mass. App. Ct. 1998). The
trial court never addressed this law.
Given that the insurer's duty in Massachusetts arises even if
only one count of a complaint triggers a defense under the policy, the
s Hermes testified consistent with this law in 1998. (A0536-A0537)
In addition, had the Court not granted FRA's objection to Hermes'
testimony as a rebuttal witness s(E_ pp. 53-55 below), he would have
testified that in his experience in Massachusetts insurers paid 100% of
defense costs even if the lawsuit involved covered and uncovered
trial court's claim that MBTA is liable for 53.9% of its own defense is
incorrect as a matter of law and must be reversed. `)
B. The Trial Court's Reduction of MBTA's Legal Fees
was in Error and in Contravention of Massachusetts
The trial court ened in crediting Carter's after-the-fact nit-
picking of MBTA's legal fees in the White litigation. As a result, the
trial court reduced MBTA's legal fees by 27.5% before reducing them
by an additional 53.9% as described above. (A0058-A0059, A0061)
The trial court's crediting of Carter's testimony on legal fees was both
in error and in contravention of Massachusetts law.
Because FRA's failure to provide the promised insurance
endorsements forced MBTA to hire its own counsel to defend White's
claims against it, FRA must pay MBTA's legal costs without
requiring, after the fact, that MBTA's counsel strictly adhere to all of
9 The trial court's division of defense costs also makes no sense under
the trial court's own logic. If the conclusion of MBTA's expert that
MBTA was 53.9% liable for the White Delay Claim meant that
MBTA had to pay 53.9% of the defense costs, as the trial court
reasoned, then it is illogical to conclude that, had the endorsements
been secured, the A/Es' insurer would have been liable for the
remaining 46. I% of defense costs given that d_e 46. I% figure
represented White's liability under the same expert's analysis.
the so-called do's and don'ts of some insurer's billing guidelines. Cf.
Samafil. Inc. v. Peerless Ins. Co., 609 N.E.2d 1234, 1239 (Mass. App.
Ct. 1993) ("An unjustified disclaimer of coverage or of the obligation
to defend a lawsuit (or the functional equivalent of a lawsuit), ...
prevents an insurer from holding the insured thereafter to strict
performance of the policy requirements, and the insured may later
recover from the insurer not only defense costs but also, in some
instances, the cost of any settlement entered into by the insured in
good faith.") (citations omitted), aff'd in part and rev'd in part on
other ._ounds. 636 N.E.2d 247 (1994). In such circumstances, the
insurer must pay the insured reasonable attorneys' fees among those
defense costs. Shapiro v. Public Service Mut. Ins. Co., 477 N.E.2d
146, 151 (Mass. App. Ct. 1985).
Under Massachusetts law, courts look to the follov,,ing factors
to determine whether an attorney's fees are reasonable:
(I) the time and labor required, the novelty and difficulty of
the questions involved, and the skill required to perform
the legal sen, ices properly;
(2) the likelihood, if apparent to the client, that the acceptance
of the particular employment will preclude other
employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the
(6) the nature and length of the professional relationship with
(7) the experience, reputation, and ability of the lawyer or
lawyers performing the sen, ices; and
(8) whether the fee is fixed or contingent.
Mass. Rules of Prof. Conduct Rule 1.5; see also Sterilite Corp. v.
Continental Cas. Co., 458 N.E.2d 338, 344 n.19 (Mass. App. Ct.
1983) (holding ihat this ethical rule, cited as DL2-106 at the time, was
the "proper" standard by which to judge the reasonableness of the
attorneys: fees incurred by the insured in litigation in which the
insurer breached its dub' to defend).
Both the rate ($145/hr) charged and the aggregate number of
hours worked by MBTA's counsel, Goulston & Storrs, were
reasonable. Hermes testified that he reviewed the reasonableness of
attorneys' fees Ibr insurers at least 50 and possibly 100 times in
circumstances where insurers have provided a defense under a
reservation of rights. (A0525) He concluded that both the rate and
the aggregate number of hours worked by MBTA's counsel were
reasonable. (A0526-A0527) The rate ors 145/hr was well below the
normal billing rates for both Mr. Home and Mr. Pierce, the two lead
attorneys for Goulston & Storrs. (A0526; A6678.I-A6678.4) In
addition, counsel possessed the case for a considerable period of time;
there were numerous documents to review and analyze; and there
were several experts with whom they had to work. (A0526) FRA did
not challenge Mr. Hermes' testimony at the trial in 1998. Ultimately,
as demonstrated above and as recognized by FRA, (see 14-15 above),
counsel got an outstanding result in the White litigation.
Yet the trial court credited Carter's testimony on the issue of
the fees, (A0057-A0060), even though he admitted both that (a) local
law and practice would provide the standard by which to deternaine
the reasonableness of rates charged by Massachusetts lawyers in this
kind ofcase and (b) he was not familiar with or conversant in
Massachusetts law or the standards by which Massachusetts Courts
judge the reasonableness of attorneys' fees. (A0982-A0983, A0986,
A0962: A6932-A6953) Carter also testified that his only knowledge
as to the hourly rates of attorneys performing construction law work
in the Boston area ("the cotnmunity rates") came from Hermes,
MBTA's expert. (A0984) Hermes testified that the rates charged by
MBTA's attorneys were reasonable. (A0526) Other than what he
learned from Hermes, Carter admitted for all intents and purposes that
he had no idea what tile community rates were at the time period
relative to the White litigation, and could only testify from his
anecdotal experience as to fees charged by firms in Los Angeles.
Nonetheless, Carter opined that an insurer would have reviewed
MBTA's legal bills and refused to pay for various work and
disbursements in part because he claimed that the description of that
work and disbursements on the bills was deficient or inappropriate.
(A0970, A0972) IfMBTA had insurance, however, an insurer would
have asked for a more detailed explanation of the bill, and would not
have simply denied payment, a point Mr. Carter partly conceded.
Not surprisingly, Massachusetts courts are not sympathetic to
insurers - and the FRA, because it failed to get the endorsements, is
for all practical purposes MBTA's insurer in this matter - who breach
their duty to defend and then, after the fact, nit-pick the insured's legal
fees. For example, under Massachusetts law, courts give little weight
to claims by insurers that it could have provided counsel to its insured
for a lower rate of compensation than the insured, having been forced
to hire counsel of its own as a result of the insurer's breach of its duty
to defend, ultimately paid for counsel. Sterilite Corp., 458 N.E.2d at
344 (deeming such claims as "not impressive"). Yet that is exactly
what the FRA has done in this case, and despite the disfavor for such
an approach in Massachusetts, the trial court allowed it.
IV. THE INSUI_,_NCE POLICIES WERE SUFFICIENT TO
COVER THE $1.9 3'IILLION PLUS DEFENSE COSTS
The coverage limits in the policies of the A/Es, had
endorsements been obtained, is more than sufficient to satisfy the $1.9
million plus MBTA's associated litigation costs. For example, DCP's
policy provides for SI.5 million in coverage for each claim. (A4927)
It also provides for payment of unlimited defense costs- i.e., without
subtracting these costs from the coverage limits of the policy.
(A4931-4932) Thus, this policy could satisfy all of MBTA's defense
costs and expert fees and provide $1.5 million toward indemnity
The trial court, however, credited Carter's testimony that an
endorsement on DCP's policy would have not provided any protection
to MBTA because of"Exclusion R," which excluded coverage for the
NECIP. (A0046-A0047; A0964-A0966) This ruling must be
reversed. First and foremost, as this Court has twice held, FRA had
an obligation under Section 222(c) to "secure [an endorsement] from
each of its consultant architect-engineers ("A/E's")." MBTA If, 254
F.3d at 1372; MBTA I, 129 F.3d at 1232
Rather thin1 breach its obligations, FRA could have secured an
additional endorsement or amendment that excepted the South Station
project from the scope of Exclusion R. Indeed, Carter himself
ac_lowledged that "theoretically" nothing prevented FRA from living
up to its obligation to secure an endorsement on the DCP policy for
the benefit of MBTA, and that the parties could have drafted a
provision to make it possible for MBTA to have coverage under
_°DCP also had available excess policy coverage, i f needed. (A4903-
DCP's policy. (A0984) Nonetheless, tile trial court credited Carter"s
testimony that DCP would have been un-villing to remove "Exclusion
R" because it would incur "greatly increased prerniulns." (A0047)
FRA could have simply paid for the increase. Nothing in Section
222(c) provides that FRA could escape its obligation because of cost.
The policy of"Stubbins" provides for $4 million in aggregate
coverage per year. (A4960) It also provides for defense costs;
however, these costs are subtracted from the aggregate annual
coverage limits. Additionally, the policy provides for retention
(deductible) of $75,000 per claim. (ld.) In the White litigation,
Stubbins' insurer contributed $830,000 toward the $1.8 million the
AlEs paid in the settlement. (A5098. I) Therefore, since the coverage
was accessed, it appears that all of the deductible for that policy has
been paid. The aggregate coverage limits of Stubbins' policy have
been reduced by the $830,000 that its insurer contributed toward the
51.8 million settlement. Thus, $3,170,000 is available under
Stubbins' policy if needed.
The policy of SOM provides $3 million in aggregate coverage
limits per year with a $500,000 retention (deductible). (A6195,
The policy does no__!t for any mandatory defense costs
coverage; therefore, MBTA assumed the policy did not provide
coverage for any defense costs. SOM paid $425,000 toward the
settlement of the White litigation. (A5098. I) Therefore, that payment
reduced the retention (deductible) in its policy to $75,000. Thus,
$3,000,000 is available under SOM's policy in this case, if needed,
after payment by MBTA of the $75,000 retention.
Accordingly, DCP's policy provides sufficient coverage to (i)
pay for all of i'v_TA's defense costs (attorneys fees and costs and
experts fees) incurred in the state action, which total $2,064,567.21,
and to (ii) contribute .$1.5 million toward the resolution of any award.
Stubbins' policy provides $3,170,000 toward the resolution of any
award and, if needed, payment of MBTA's defense costs. If it were
necessary to reach SOM's policy, it provides $3,000,000 toward any
award of the Court relating to the § 222(c) claim after payment of the
Based on the forgoing, (a) the aggregate coverage amounts of
the policies make $7,670,000 available to reimburse MBTA for the
$1.9 million it contributed to the settlement of the White litigation
(with SOM:s coverage accessed after payment of the remaining
$75,000 retention); (b) DCP's policy provides complete coverage for
MBTA:s defense costs incurred in the state action; and (c) if DCP's
policy were not available, a portion of Stubbins' $3,170,000 of
coverage could be used to pay for MBTA's defense costs (totaling
V. _'IBTA 1S ENTITLED TO INTEREST AS A MATTER OF
The trial court's failure to award MBTA interest on the
damages that it did award is inexplicable. This Court has twice ruled
that ,x,,i TA is entitled to interest on damages awarded for breach of
the Section 222(c) ofthe CCA. See MBTA il, 254 F.3d at 1377;
MBTA I. 129 F.3d at 1237. MBTA requests that this Court award it
the interest to which it is entitled.
VI. THE TRIAL COURT ABUSED ITS DISCRETION IN
SUSTAINING FRA'S OBJECTION TO HERMES'
TESTIFYING AS A REBUTTAL WITNESS
The trial court would not allow Hermes to testify at the March
I I, 2003 hearing as a rebuttal witness. The trial court reasoned that
MBTA"s goal in having Hermes testify as a rebuttal witness was to
"surprise" FRA, which the trial court found to be an "unfair" tactic.
(A0025-A0026) The facts demonstrate otherwise.
On the day before the March I 1, 2003 hearing, MBTA's
counsel decided there was no point in having Hermes repeat his
testimony fiom the 1998 trial at the 2003 hearing. Therefore, counsel
submitted Hermes entire trial testimony (direct and cross) as an
exhibit at the hearing. (A0958-A0959) Indeed, following this Court's
mandate in MBTA I, Hemaes addressed in 1998 the exact issue -
wheiher the endorsement would have covered the $1.9 million plus
defense costs - that this Cou_ was forced to place before the trial
court again in MBTA II. (See pp. 24-25 above). Since Hermes had
already addressed that isstle.. MBTA's counsel decided that Hermes
only value at the 2003 hearing was to rebut if necessary the testimony
of Carter, FRA's first witness to address the issue.
As a courtesy to the FRA and its counsel, MBTA's counsel
notified FRA's counsel on March 10, 2003 that he would not call Mr.
Hermes for direct testimony, but would (a) make him available for
cross-examination and (b) would call Hermes as a rebuttal witness.
(A0958-A0959) At the hearing, MBTA did make Hermes available
for cross-examination, (id.), but FRA chose not to conduct such an
It is hard to imagine a situation more favorable to FRA and its
counsel. Rather than listen to Hermes' testimony at the hearing and
prepare to cross-examine at the same time, FRA's counsel learned the
day before the hearing that MBTA would rely solely on the 1998
testimony. In essence, FRA had five years to prepare another cross-
examination of Hermes. _ Yet when MBTA called Hermes to rebut
some of the opinions of Carter, FRA objected to the testimony of
Hermes as a rebuttal witness. (A0986-A0987) Not surprisingly, the
trial court sustained that objection. (ld.)
_ In addition, FRA deposed Hermes twice.
Hermes' rebuttal testimony, as explained in MBTA's offer of
proof, was classic rebuttal testimony and should have been allowed:
(t) Contrao' to Carter's testimony, (A0981), he would have
testi fled that a reasonable insurer would have provided
separate counsel to the A/Es and MBTA because one
lawyer could obviously not represent conflicting
positions in the same case;
(2) Contrary to Carter's testimony, (A0968), he would have
testi fled that a reasonable insurer would have provided a
complete defense of MBTA based on the law and
practice in Massachusetts; and
(3) Contrary to Carter's testimony, (A0969, A0972), he
would have testified that each insurer whose policy
provided for defense had an obligation to provide a
complete defense for the insured.
(A0987) The trial court reasoned that because Carter's opinions had
previously been disclosed to MBTA before trial, MBTA could have
addressed Carter's opinions in Hemaes' own direct testimony. Those
previously disclosed opinions, however, whether in a report or in
deposition testimony, are inadmissible hearsay in court. It is only
once Carter testifies in court that MBTA knows Carter's testimony for
certain and thus the need arises to rebut that testimony. Without an
opportunity to rebut this evidence, MBTA was prejudiced.
VII. JUDGMENT SHOULD HAVE ENTERED FORMBTA
PRIOR TO THE 2003 HEARING
The 2003 hearing should have never taken place if its only
purpose was to allow FRA to retain an expert and rebut evidence that
it chose not to rebut at the 1998 trial.
Addressing the issue fiamed by the this Court in MBTA I,
MBTA offered evidence at the 1998 trial that addressed the question
of whether the insurance endorsements would have relieved the
MBTA of the 51.9 million plus associated litigation costs.
Specifically, MBTA put forth Hermes and, among other things, asked
him for his :'opinion as to whether an insurance company in this
situation would have reimbursed the MBTA for the $1.9 million that it
contributed to the settlement of the J.F. White claim." (A0518) As
outlined above. Hermes testified that a reasonable insurer would have
paid the 51.9 million.
In light of FRA's conduct urging settlement and its admission
as to its advantageous terms, (A0570-A5071), it chose at trial not to
challenge whether a reasonable insurer would have paid the $1.9
million that the MBTA paid to White as part of the settlement of the
White litigation. Instead, FRA made the desperate argument that the
doctrine of impossibility excused its failure to provide the promised
insurance endorsements. Alternatively, it argued (i) that the MBTA
was not covered by the endorsements because the MBTA was not
acting in the capacity of an architect/engineer ("ME"), a claim that
had been previously rejected by this Court as "not rnak[ing] sense,"
MBTA I, 129 F.3d at 1231 ; and (2) that the A/Es were ultimately not
liable for any delay, despite the fact that the issue was not whether the
A/Es were in fact liable (there was no trial), but rather what was the
risk to an insurer that a jury might find them liable.
Hermes also testified in 1998 that the rates and fees paid by the
MBTA to its lawyers and experts were fair and reasonable given the
complexities of the case and the amount of work required. (A0525-
A0528) This testimony was virtually unchallenged. (ld.)
While this Court in MBTA II offered the trial court the option
of ruling based on the existing record or supplementing that record
with new evidence, 254 F.3d at 1377, this Court could not have meant
that the FRA should be given the opportunity to retain an expert to
rebut evidence that it chose not to rebut at trial. Such a ruling would
be an invitation to FRA to challenge testimony that it chose not to
challenge at trial. That is precisely what happened at tile 2003
The prejudice to MBTA of the trial court's decision to allow for
additional evidence in 2003 has been tremendous. It has not only
incurred substantial and unnecessary litigation costs, but more
importantly it has had to appear before the trial court again. Given the
trial court's bias against MBTA, any candid observer understood that
FRA would prevail if it had another opportunity to appear before the
VIII. THE RULINGS SUBJECT TO THIS APPEAL MUST BE
REVERSED DUE TO THE TRIAL JUDGE'S BIAS AND
PREJUDICE AGAINST MBTA
The record of the proceedings in this court demonstrate (a) that
the trial judge has not been open to being educated on the law and
facts in this case by counsel for both parties and (b) that the trial judge
is unmistakably biased in favor of the government and against M BTA.
Despite two favorable decisions from this Court, MBTA has lost
every substantive ruling made by the trial judge in this 16-year-old
case. The trial judge's rulings have repeatedly ignored the
uncontrovened facts and basic principles of law. Accordingly,
MBTA is compelled to appeal the trial court's denial of its Motion to
Disqualify Trial Judge for Personal Bias and Prejudice against MBTA
pursuant to 28 U.S.C. § 455, and seek reversal of the rulings that are
the subject of this appeal.
A. Standard for Disqualification
The United States Code, 28 U.S.C. § 455, specifies the
standards for disqualification of a judge. Section 455 provides in
(a) Any ... judge ... of the United States shall disqualify
himself in any proceeding in which his impartiality
might reasonable be questioned.
(b) He shall also disqualify himself ...[w]here he has a
personal bias or prejudice concerning a party ....
This Court set forth the standard for disqualification for bias or
prejudice in Charron v. United States:
[J]udicial rulings alone almost never constitute a
valid basis for a bias or partiality motion ...
Opinions formed by the judge on the basis of facts
introduced or events occt, rring in the course of the
current proceedings...do not constitute a basis for a
bias or partiality motion unless they display a deep-
seated favoritism or antaoonism that would make
fair judgment impossible.
200 F.3d 785, 789 (Fed. Cir. 1999) (quoting Litek¥ v. United States.
510 U.S. 540, 555-56 (1994)) (emphasis added). "A particular
judicial ruling 'can be evidence of an extrajudicial bias or prejudice."
United States v. BarrT, 938 F.2d 1327, 1340 (D.C. Cir. 1991))
The decision to disqualify a judge for bias is not lightly
reached, and this Court has accordingly adopted a high standard for
establishing partiality based on judicial rulings. See Charron. This
case, however, manifests those unusual circumstances in which a
decade of judicial rulings demonstrate that the trial judge's deep-
seated favoritism and antagonism have made fair judgment
B. History of Rulings Adverse to MBTA
Demonstrate the Trial Judge's Bias and
Prejudice against MBTA
To understand MBTA's despair about the rulings of the trial
judge, it is important to explain in detail the history of some of her
rulings in this case. It is also important to appreciate that it was
undisputed at the beginning of the case that FRA breached section
222(c) and failed to inform MBTA of its breach, leaving MBTA
exposed to significant liability for design errors.
For these reasons, on June 13, 1996, MBTA filed a motion for
partial summary judgment on the liability issues in the case. On the
following day, FRA filed a cross-motion for summary judgment. A
cursor5' reading of the transcript of the July 17, 1996 hearing on these
motions evinces that the trial judge was not open to being educated on
the issues by counsel for MBTA:
COUNSEL: I am not arguing that 222(c) nullifies
THE COURT: Well, but in effect it does. Under your
COUNSEL: No, it doesn't. Your Honor. What I'm
saying is by 222(a) the government is saying that they
cannot be sued for allegedly warranting the plans.
What 222(c) provides is a protection so that should
there become a problem from the contractor relating
to design that we have basically insurance protection
because we can't sue the government.
THE COURT: But basically what you're saying is that the -
COUNSEL: ... The question is if there was a claim against
us as occurred by the contractor based on design - what
protection would we have? That's what 222(c) provides. It
provides a means by which under the insurance policy, we
would have protection against litigation and tile insurer
THE COURT: Well, essentially what you're saying is that if
there was, if these policies were not or these endorsements
were not obtained, then the government has to step into the
shoes of these insurers, of these ANEs.
COUNSEL: Your Honor, ! think we would say it a little
differently. We would say if the government promised to
provide this provision in the contract and what we have here
is a specific admission ... that they breached that contract
and ... the consequence of the breach is that we should get
front the government what we lost as a consequence of this.
THE COURT: That is exactly what I was saying .... And
when you have a provision that specifically disclaims any
warranties, express or implied, it seems somewhat anomalous
that the breach of a paragraph two paragraphs down would
essentially nullify the warranty to that extent.
COUNSEL: Well, Your Honor, it's always difficult for a
lawyer to be arguing with the Court. In the end, you're going
to decide this ...
Following the hearing, on July 19, 1996, the trial judge
entered summary judgment for FRA. The judge ruled, among
other things, as follows:
Section 222(a) "expressly put plaintiffon notice that FRA
would not be responsible for design errors" and overrode all of
the provisions of the contract under which FRA could be liable
for damages resulting from design errors, omissions or
negligence. See MBTA v. United States. 40 Fed.CI. 580, 585
• Even if FRA breached Section 222(c), FRA incurred no
liability because it contracted in Section 222(c) to provide
insurance endorsements to MBTA not for the purpose of
insuring MBTA against design errors by the A/Es, but to cover
any design errors of IglBTA in MBTA's own capacity as an
A/E. See id. at 582.
• Any damages for breach of Section 222(c), including delay
costs and other damages associated with design errors, were too
remote and speculative to be compensable. See id. at 585.
MBTA appealed and this Court subsequently reversed the trial
judge on each of these rulings. In view of the this Court's
determination that "FRA breached its obligation under § 222(c), and
is liable for damages," (MBTA I, 129 F.3d at 1232), and that "MBTA
is entitled to damages for FRA's breach of§ 220(c)" regarding the
terrazzo floors, (id. at 1234), MBTA again moved for partial summary
judgment on liability on July 27, 1998. (A0089) Rather than address
the merits of the motion, which would have compelled a finding for
MBTA on the liability issues and reduced the trial to the issue of
damages, the trial judge scheduled the uial, reasoning that "judicial
efficiency is best served at this stage in this litigation by fully airing
the factual issues:' - there were no factual issues on liability in dispute.
During the trial in 1998, F RA did not rebut any of facts relating
to its failure to secure the endorsements, or its failure to inform
MBTA of that failure, or M]3TA's testimony that a reasonable insurer
would have paid the $1.9 million plus associated litigation costs to
settle the White litigation. Rather, FRA asserted the affirmative
defense of impossibility of performance. Further, despite this Court's
clear statement that "it does not make sense to read this provision [§
222(c)] contrary to its plain statement securing for MBTA insurance
for design defects, the insurers of those responsible for the design,"
MBTA I. 129 F.3d at 1231, FRA continued to press that position.
Ultimately, and incredibly, both of these arguments prevailed.
The trial judge agreed that it was impossible for FRA to secure the
insurance and again ruled, despite the statement of this Court in
MBTA I. that:
Since MBTA did not provide professional A/E
services to others, the endorsement to the A/Es'
policies would not have provided MBTA with
coverage for any of its losses in connection with the
White delay claim (alleging negligent provision of
professional services by the AJEs, not by MBTA.
The trial judge completely i_nored the extensive testimony
provided by Hermes to support his opinions that (i) a reasonable
insurer would have settled the state court case and either paid $ 1.9
million to do so or gladly reimbursed MBTA the $1.9 million that it
paid (A0518); (ii) the rates and fees charged by MBTA's lawyers and
experts were fair and reasonable (A0526); and (iii) the insurers had
policies with aggregate coverage and liability limits sufficient to cover
the amount of the settlement and defense costs paid by M BTA.
The term "ignored" is used advisedly. At a 2002 hearing held
by the trial judge to determine the need, if any, for further proceedings
in this case following MBTA II, the judge made it clear by her
statements that she had paid no attention to Hermes' testimony during
COUNSEL: Well, Your Honor, we had a trial and the
Government elected not to present any evidence. So !
_"This Court reversed this ruling once again. See MI3TA I!, 254 F.3d
don't agree that they need additional evidence because
they chose not to present any, but obviously you will
THE COURT: Well, but the Federal Circuit made it clear
that I had the [option] -
COUNSEL: Well, I said -
THE COURT:- of asking for additional testimony
because, after all, the Federal Circuit came up with a
different way of analyzing the damages than had been - as
you say - than had been presented a[t] trial. So obviously
there wasn't evidence on all of these points.
COUNSEL: Well ... there was certainly evidence and an
opportunity to present evidence on the whole approach to
settlement, and ... they had an insurance expert, and they
... never asked him any questions about that. That was
their choice. We certainly couldn't stop them from doing
(A0878) The trial judge's statement that "after all, the Federal Circuit
came up with a different way of analyzing the damages than had been
•.. presented a[t] trial" reveals that she paid no attention to MBTA's
expert's testimony on this issue during the trial.
Two additional rulings by the trial judge, following the trial,
revealed her bias and prejudice against MBTA. The first concerns the
judge's ruling that MBTAs claim regarding damage to the terrazzo
floors was time-barred. As explained in the paragraphs that follow,
this ruling was the ultimate "gotcha." The second ruling concerns the
trial judge's determination of damages on MBTA's clairn regarding
the Headhouse floors.
MBTA first noticed cracking in the terrazzo floors in April
1989 and, as a result, commissioned the engineering fi_xn of Stone &
Webster to prepare a report on the cause of the cracking and on how
best to repair and prevent further cracking. In June 1990, Stone &
Webster presented its report attributing 84% of the cracking to design
error and the remaining 16% to a combination of contractor and
design error. (A3788-A3864)
MBTA bad filed its original complaint one year earlier, in May
1989. That complaint did not include the specific terrazzo floor claim
because it had not yet been determined that the cracking was the result
of design error. Once MBTA received the 1990 Stone & Webster
report, it immediately sent the report to FRA's project engineer, Roger
Cogswell, who read it and agreed with its conclusions. (A0675)
After the stay in this case was lifted on August 16, 1995, MBTA on
August 25, 1995 filed its amended complaint, including specific
allegations that FRA had failed to pursue its AlEs with respect to the
cracking in the terrazzo floor. (A0132-A0148; A 1360)
As indicated above, Cogswell received notice of the problem in
1990, obviously before the expiration of the six-year statute of
limitations. In 1994, counsel for MBTA sent a letter regarding this
claim to counsel for FRA, Gareth Rosenau. That letter also was
received before the expiration of the statute of limitations. At trial,
FRA took the position that the claim was time-barred because the
notice of the claim had not been sent to the appropriate person at FRA
before the expiration of the statute of limitations. Mr. Cogswell was
cross-examined on this point:
Q. Had you seen the letter [of December 8, 1994 from
A. I had seen the letter.
Q. Of course, we know you had seen the report.
A. I'd seen the report when it came out.
Q. So, was there any question in your mind at that
time that MBTA was looking for relief because of
the damage to the terrazzo floors?
A. It was undoubted that you were after relief, but
Mr. Rosenau is not the individual that should have
been approached with that request for relief,
because the Cooperative Construction Agreement
does not mention our legal staffat all. _
In other words, FRA's position, reductio ad absurdum, is "yes,"
our principal administrator and counsel had notice within the
applicable statute of limitations of MBTA's intention to seek
substantial damages from FRA for the "Replacement of Terrazzo
Floors" after "MBTA resolve[d] the Massachusetts Superior Court
case" (A3766. I-A3766.6), but "no" FRA is not responsible, despite
this knowledge, because notice was not sent to the right administrator.
In yet another display of her bias and prejudice against MBTA, the
trial judge agreed:
It is undisputed that MBTA never provided FRA with
written notice, in accordance with the procedures § 106
of the Cooperative Agreement for notices made under
the Agreement ....
_ The trial judge obviously overlooked this testimony of Mr.
Cogswell when she wrote "Mr. Cogswell testified that he was not
aware that MBTA wanted FRA to pursue the A/Es in connection with
terrazzo floor problem until MBTA filed its amended complaint in
this court in August 1995 .... " (A0838)
This Court reversed the trial judge:s ruling on the terrazzo
floors, finding that "the claim did not accrue until June 1990, when
MBTA first became certain that the cracking was due to design error
by the AlEs." MBTA II, 254 F.3d at 1380. Therefore, MBTA
complied with the statute of limitations, ld. This Court also found
that Mr. Cogswell's receipt of the Stone & Webster report in 1990
satisfied the written notice requirement under section 106 of the CCA.
See id. at 1380-8 I.
Regarding MBTA's Headhouse floors claim, despite the
unequivocal language in the contract documents and the
uncontroverted facts as to the poor condition of the Headhouse floors,
FRA maintained throughout all of the proceedings in this case that it
was not responsible for repair of the floors. Following MBTA's first
motion for partial summary judgment, the trial judge ruled that
MBTA's claim was barred because it signed a change order in which
it agreed to pay the cost. See MBTA_, 40 Fed. CI. at 584-85. This
Court reversed, indicating that there was no evidence that the change
order constituted an accord and satisfaction of MBTA's claims. See
MBTA I, 129 F.3d at 1235-36.
Following the trial, the trial judge agreed that "the
improvements on the upper three Headhouse floors are to be 100%
FRA funded if necessary to correct code deficiencies and safety
hazards" (A0823) and that FRA neither contradicted the evidence
regarding the failure of the floors to meet code requirements nor
regarding their unsafe condition. (A0827)
However, for FRA all was not lost, because the trial judge
severely limited MBTA's damages by ruling that it was entitled to
recover only the cost of replacing the deteriorated and unsafe wooden
floors with new wooden floors rather than with concrete, the material
actually used to repair the floors. During the trial, FRA presented
little, ifany, evidence on this point. Indeed, its post-trial proposed
findings of fact and rulings of law made no reference to a requirement
for a less expensive alternative to repair the floors. (A076 I-A0795)
Following the decision, iMBTA moved to modify the trial judge's
ruling on this issue, asserting that FRA had agreed to replace the
wooden floors with concrete ones and that MBTA could not estimate
the cost of replacing the old floors with new wooden floors because
wooden floors would not have been permitted by the building code.
FRA, in response to the trial judge's order, filed a motion for
summary judgment on this issue arguing that the building code
allowed replacement of the original floors with new wooden floors.
Both parties' positions were supported by affidavits from expert
Without holding an evidentiary hearing to resolve this conflict
between the parties, the trial judge entered a finding in favor of FRA
and limited MBTA's damages to $275,189. Specifically, the trial
judge ruled that "[p]laintiff failed to introduce any evidence [during
the trial] to indicate that replacement of the floors with wooden floors
would not have been sufficient to meet the building code requirements
for office space." (A083 I) Of course, MBTA offered no evidence on
this point during the trial. Its trial position was logically premised on
evidence establishing (a) that the contract documents, as indicated
above; require FRA to pay for repair costs of damage resulting from
code deficiencies or unsafe conditions and (b) that FRA approved the
scope of repairs that MBTA intended to make. As this Court
acknowledged in its decision following the first appeal:
Change Order Request 47 proposed replacing the
wooden floors with concrete...Mr. Middlebrook wrote
'Scope - OK. Funding - Pending further justification by
MBTA + review by FR/-\. 14
MBTA I. 129 F.3d at 1234.
Significantly, the trial judge concluded at the hearing on
MBTA's first motion for partial surnlnary judgment that "Scope -
OK." did not amount to approval of the work described in the change
order. (A0335-A0336) Therefore, at the trial, MBTA introduced
additional evidence on the point. A letter from Robert Myers,
Director of the NECIP. reiterated that FRA approved "the scope of the
work." (A5004-A5009) In addition, Mr. Cogswell testified that Mr.
Middlebrook's note indicated to him that Mr. Middlebrook had no
problem with the scope of the work. (A0652) No evidence was
offered by FRA to rebut this evidence and no evidence was offered by
FRA on a less expensive approach to repair the Headhouse floors, for
which MBTA paid $1,759,560. The trial judge made no reference to
this evidence in her decision. Indeed, the judge stated "[w]ithout
14The reference to "Funding - Pending further justification by
MBTA" was Mr. Middlebrook's way of saying, as FRA contended
throughout the proceedings, lhat FRA was not responsible for paying
the cost of damage resulting from code violations and unsafe
receiving, or soliciting, FRA approval, MBTA proceeded to replace
the entire floor system with concrete floors[.]..." (A0820) In other
words, the trial judge ignored Change Order Request 47.
Remarkably, this is the one ruling made by the trial judge that was
sustained on appeal.
The trial judge's bias can also be seen throughout her October
8, 2004 ruling. For example, the trial judge accused MBTA's counsel
ofengaging in a "unfair" tactic by informing the trial court that
Hermes would provide no more direct testimony at the 2003 hearing
given his testimony in 1998. (A0026) As explained in Section VI
above, the evidence demonstrates otherwise.
Additionally, the trial court credited the testimony of FRA's
expert, Carter, even though (a) he conceded that had FRA secured the
insurance endorsemenis, he would had done the same liability analysis
that Hermes described; (b) he had no familiarity with Massachusetts
law; and (c) he posited opinions that were in contravention of
Massachusetts law and in violation of basic Massachusetts Rules of
Professional Responsibility. _ pp. 37-38 above)
MBTA has spent an enormous sum of money for two appeals to
this Court to seek reversal of the trial judge on basic principles of law
such as (i) a party is obligated to do that which it promised; (ii)
provisions in the contract should be interpreted to give each provision
meaning; and (iii) a non-breaching party is entitled to the benefit of its
bargain. Indeed, in the second appeal MBTA was compelled to seek
reversal of decisions that had been reversed in the first appeal.
MBTA is now forced to appeal for a third time to seek the reversal of
rulings resulting from the trial judge's failure to follow this Court's
instructions (a) to consider "all relevant factors" relating to what a
reasonable insurer would have done in the White litigation and (b) to
award MBTA interest.
The trial judge's bias and prejudice against MBTA is
manifested in her failure to find anything appealing or persuasive in
its positions. Conversely, whatever argument FRA makes seems to
resonate with the trial judge. Indeed, the trial judge has been FRA's
greatest asset in this case. For these reasons, M BTA concluded long
ago that it cannot receive a fair heating before the trial judge.
This Court has observed that "bias kills the very soul of judging
- fairness." Pac-Tec, Inc. v. Amerace Corp., 903 F.2d 796, 802 (Fed.
Cir. 1990). lfthe extraordinary 16-year record of this case is not
enough to convince the Court of the trial judge's bias and prejudice, it
is clear that no litigant who cannot point to specific grossly
inappropriate remarks by a trial judge or to evidence of a clear conflict
of interest should waste its time in seeking disqualification.
All the reliable evidence at trial establishes that MBTA is
entitled to recover the following amounts with interest. As March 10,
2005, the interest was calculated using the weekly Treasury Bill
Auction Rate (A5462-A5479) and summarized as follows:_S
_5For convenience, MBTA attaches calct, lation of interest, as well as
updated Treasury Bill Auction Rates, to the addendum of this brief.
ITEM DAMAGE INTEREST
Settlement Payment - $1,900,000.00 $668,304.00
Defense Costs- $2,064,567.21 $1,168.561.00
TOTAL $3,964,567.21 $1,836,865.00
For all the reasons set forth above, MBTA requests that this
Court enter an order reversing the trial court's rulings, in their
entirety, and order that Judgment shall enter for MBTA and against
FRA as follows:
On Count III of the Amended Complaint, the claim under
§ 222(c) of the CCA concerning the insurance endorsements, damages
in the amount of $3,964,567.21 (consisting of the $1.9 million
settlement payment and $2,064,567.21 in legal and expert consulting
fees and costs) plus interest in the amounts of(a) $1,836,865.00,
representing the interest due through March 10, 2005 and (b) interest
to be calculated by the clerk from March 10, 2005 through the date
final judgment enters on the docket.
C2_LSTON & STORRS, P.C.
400 Atlantic Avenue
Boston, MA 02110-3333
Joseph C. Lyons
GOULSTON & STORRS, P.C.
400 Atlantic Avenue
Boston, MA 02110-3333
• ! )
3Jn t_e i_lniteb _tate+ Court ofSebera[ Ctaim_
No. 283-89 C
I_IASSACHUSETTS BAY TRANSPORTATION
THE UNITED STATES
Pursuant to the Order and Opinion, filed October 8, 2004,
IT IS ORDERED AND ADJUDGED this date, pursuant to Rule 58, that the
plaintiff recover of and from the United States the sum of $1,075,242.03.
Clerk of Court
October 13, 2004 By:
NOTE: As to appeal, 60 days from this date, see RCFC 58.1, re number of copies and
listing of all plaintiffs. Filing fee is $255.00.
_ln t_e _lniteb States Court of 5eberal Claim_
(Filed October 8, 2004)
MASSACHUSETTS BAY *
TRANSPORTATION AUTHORITY, *
THE UNITED STATES,
Rudolph F. Pierce, Boston, Massachusetts, for plaintiff.
Gregory T. Jaeger, Commercial Litigation Branch, Civil
Division, Department of Justice, Washington, D.C., with whom was
.Gareth W. Rosenau, Office of Chief Counsel, Department of
Transportation, for defendant.
Order and Opinion
This case has been remanded by the United States Court of
Appeals for the Federal Circuit for a determination of the damages
owed to plaintiff, the Massachusetts Bay Transportation Authority
("MBTA"), _-' as a result of the Federal Railroad Administration's
("FRA's") admitted failure to obtain an "endorsement to the benefit
of the MBTA" on the professional liability insurance policies carried
by each of the FRA's three consultant architects and engineers
("A/Es" or "designers"). See MBTA v. United States, 254 F.3d 1367
(Fed. Cir. 2001) 0VIBTA III). See also MBTA v. United States, 129
1/Plaintiff's counsel has addressed correspondence regarding
this case directly to chambers, in contravention of the court's rules
requiring that any communication in a case before the court must be
submitted in the form of a motion and filed with the clerk's office.
See Rules of the United States Court of Federal Claims ("RCFC")
7("o). Accordingly, these communications have neither been acted
upon nor acknowledged by the court.
Counsel's effort would have been better expended in providing
the court with a clear exposition of its theory of damages, together
with the evidence and Massachusetts legal authorities supporting it,
as befits the party bearing the burden of proving damages. See
discussion infra at 28. Defendant's response to such briefing also
might have assisted the court.
F.3d 1226 (Fed. Cir. 1997) (MBTA I); MBTA v. United States, 40
Fed. Cl. 580 (1998)(MBTA II).
The background and certain operative facts not previously
decided definitively, or assumed to be true for purposes of deciding
defendant's summary judgment motions, are recited at some length
The Railroad Revitalization and Regulatory Reform Act of 1976
(the "Act") authorized the FRA to implement the Northeast Corridor
Improvement Project, for the purpose of renovating eighteen rail
passenger facilities between Boston, Massachusetts and Washington,
Se.__gub. L. No. 94-210 §3 701 - 706Y
2/The Railroad Revitalization and Regulatory Reform Act of
1976, Pub. L. No. 94-210, 90 Stat. 31, was originally codified at 45
U.S.C. 33 801 - 856. The portions entitled "Northeast Corridor
Project Implementation," 33 851 - 856, were repealed in 1994 in Pub.
L. No. 103-272, 108 Stat. 1379, and re-codified at49 U.S.C. 33 24901
The requirement for A/E insurance policy endorsements in the
MBTA's favor appears in Section 222(c) of the September 8, 1983
Boston South Station Transportation Center Project Cooperative
Construction Agreement ("CCA"), between the FRA and the MBTA,
as the owner of South Station. Joint Trial Exhibit ("Ex.") 100.33.
Three A/Es were involved in the South Station project. Deleuw,
Cather/Parsons ("DCP"), the prime design engineer for all rail facility
renovations undertaken pursuant to the Act, was a joint venture
engaged pursuant to an Architect-Engineer contract dated October 26,
1976 ("DCP A/E Contract"). See Am. Compl., Exhibit A. DCP in
turn subcontracted the lead architectural support services to Skidmore,
Owings & Merrill ("Skidmore") the following month. The next day,
DCP subcontracted the South Station A/E services to the joint venture
of designers Hugh Stubbins/Castro-Blanco Piscioneri & Feder
Architects ("Stubbins"). (DCP retained several other A/Es to perform
discrete functions.) Thus, all three A/E agreements were signed soon
after passage of the Act, and six years before the MBTA and the FRA
executed the CCA.
The FRA and the MBTA entered into a "Design Agreement" on
November 5, 1980, for the purpose of, among other things,
establishing the scope of improvements to be designed and the
respective funding obligations of the parties. Ex.
Se_..ee 526.2 (Undated
The Design Agreement contains extensive evidence of the
MBTA's significant role in all aspects of the design process,
particularly with respect to the many improvements that were to be
100%-funded by MBTA. Although barred from directing the A/E,
the FRA agreed to "instruct the lead A/E to accommodate MBTA's
wishes to the maximum possible extent," on MBTA improvements,
so long as they did not conflict or interfere with FRA-funded
improvements. See Ex. 4.8 - 4.9, § 3(b).
MBTA also was responsible for design coordination with third
parties (other than Amtrak), see Ex. 4.8, § 3(c), and its design
comments were required to be incorporated in the plans, provided that
they did not increase costs and were consistent with prior agreed-upon
plans and criteria. See Ex. 4.12, §§ 3(i), 3(j). MBTA's approval was
required for any FRA change that FRA did not fund 100%. Ex. 4.9,
In addition, the MBTA was directed to hire a "Coordinating
Consultant" to coordinate all elements of design and construction, to
whose comments the FRA was required to respond within 15 days.
Ex. 4.15-4.16, §§ 4(a)-(c). Appeals of decisions by a special
coordinating committee went to both the FRA's Northeast Corridor
Project director and the Chairman of the MBTA. Ex. 4.17, § 5(c).
Finally, the MBTA approved and signed the final design documents.
Ex. 4.14 - 4.15, § 3(n).
In the CCA, the MBTA covenanted to "manage, carry out and
complete construction of the Operational, Cost-Shared, and Local
Improvements to the South Station in strict accordance with the
Project Design Documents provided by the FRA and accepted and
approved by the MBTA." Ex. 100.15, § 201 (emphasis added)Y
Section 222(c) of the CCA, promising the A/E endorsements,
FRA shall secure from each of its consultant
architect-engineers . . . an endorsement to the
benefit of MBTA on the professional liability
insurance policy or policies carried by such A/Es
with respect to any A/E errors, omissions, or acts of
negligence in the designing of the Facility. FRA
shall furnish the MBTA with evidence of such
3/ MBTA agreed to bear 100% of the costs of "Local"
improvements and 50% of the costs for"Cost-Shared" improvements.
See Ex. 100.10 - 100.12. The FRA agreed to fund the remaining 50%
of the "Cost-Shared" improvements, and all of the "Operational"
improvements. See id.
4/MBTA's amended complaint, filed on August 25, 1995,
describes the FRA's responsibilities under CCA § 220(c) to include
"requir[ing] the FRA (for the benefit of the MBTA) to pursue with its
design-phase [A/Es] all contractual rights concerning correcting
In the autumn of 1983, the MBTA solicited bids for the South
Station project, which included renovation and rehabilitation of the
station headhouse, as well as, inter alia, construction of a new West
wing, an addition to the East wing, a new concourse, and eleven new
platforms. All construction was based on design documents prepared
by the A/Es for the FRA.
On February 10, 1984, the MBTA awarded the prime South
Station construction contract ("Construction Contract") to the J. F.
errors, omissions and deficiencies." Am. Compl. ¶ 18. The
parenthetical phrase does not appear in the quoted section of the CCA,
§ 220(c). See Ex. 100.31. Nevertheless, the Federal Circuit
subsequently so interpreted it. See MBTA !, 129 F.3d at 1234.
5_/CCA § 222(b) imposes on the MBTA a parallel requirement
to "secure from each of its contractors an endorsement to the benefit
of the FRA on the liability insurance policy or policies carried by
contractors with respect to any contractor errors, omissions, or acts of
negligence in the construction of the Facility [and to] furnish the FRA
evidence of such endorsements." Ex. 100.33 (Emphasis added.) The
MBTA does not contend that it complied with this requirement, or
explain why not.
White Contracting Co. ("White"), which submitted the low bid of
almost $49 million. The performance period was for three years, and
called for an April 30, 1987 completion date. The MBTA issued the
notice to proceed on April 30, 1984.
On April 6, 1984, seven months after signing the White contract,
and before construction started, the MBTA requested evidence that the
FRA had obtained the endorsements required by CCA § 222(c). They
had not. In mid-May, the FRA asked DCP to obtain endorsements
from SOM and Stubbins.
On June 22, 1984, DCP informed the FRA that, due to its
policy's "Exclusion R '-'e it would be unable to add the MBTA to the
A/Es' policies, and that Stubbins' insurer also would not agree to the
endorsement because Stubbins did not have, and refused to negotiate
6/Exclusion R is based on FRA-DCP Agreement §§ 14.01 and
14.08, which provided that the Government would hold harmless and
indemnify DCP, pursuant to Pub. L. 85-804, 72 Stat. 972 (codified as
50 U.S.C. §§ 1431 - 1435) and E.O. 10789, against a third-party claim
for personal injury or damage to property "arising from professional
services [performed]... under [its contract with the FRA]," defined
as "services for systems engineering, program management, design,
construction management, inspection, and administration and all
related services." Ex.
Se___ee 1.20, 1.23; see also 2003 Tr. at 30.
for, an indemnification or hold harmless agreement with DCP. Se._.__ge
Ex. 524.75, 169.1. Stubbins' insurer suggested that the MBTA
instead acquire special project insurance, at a cost of $250,000 to
$300,000. Ex. 169.1 - 169.2.
The first of many construction problems on the project came to
light in late May 1984, one month after performance began, when
White informed the MBTA that it intended to file a damage claim.
Contract pi._rformance was not substantially complete until December
12, 1989, 956 days after the scheduled completion date. 176 change
orders were approved during the course of the project.
On September 30, 1987, when the bulk of the work was
complete, White, pursuant to § 8.10(A) of the Construction Contract,
submitted a delay damages claim of over $23 million. See Ex. 258.3 -
258.4• This provision allowed the award of delay damages for actual
increased costs, not only profit and overhead, "if the [general manager
of the MBTA] in his judgment shall determine that.., performance
• .. is suspended, delayed, or interrupted for an unreasonable time [by
the MBTA]." Ex. 101.56.
On April 25, 1988, the MBTA filed a petition for a declaratory
judgment in the Suffolk County, Massachusetts, Superior Court, to
resolve White's delay claims against the A/Es, White, Amtrak, the
Northeast Railroad Construction Co., Inc., and the Boston Edison
Company. See MBTA v. Deleuw, Ca ther & Co,, et ah, Mass. Super.
Ct. No. 882438 (1988). See Ex. 258.3(Undated FRA/MBTA
On February 12, 1993, White filed a counterclaim for damages
of $23,680,228 allegedly resulting from the 956-day delay. See Ex.
364. 21 White alleged that the MBTA's delays in obtaining approvals
or change orders requested by White interfered with activities on the
"critical path." Id. -_
Under Massachusetts law, "interpretations of specifications,
approval of equipment, or any other approval, or progress of the
7/ During settlement negotiations on the White delay claim, the
MBTA's May 18, 1989 suit in this court was stayed, at plaintiff's
8/"IT]he critical path method [("CPM")] is an efficient way of
organizing and scheduling a complex project which consists of
numerous interrelated separate small projects. Each sub-project is
identified and classified as to the duration and precedence of the work
• . . The data is then analyzed, usually by computer, to determine the
most efficient schedule for the entire project. Many sub-projects may
be performed at any time . . . without [ affecting] the completionof
the entire project. However, some items of work are given no leeway,
and must be performed on schedule; otherwise, the entire project will
be delayed. These . . . items . . are on the "critical path." A
delay, or acceleration, of work along the critical path will affect the
entire project." Haney v. United States, 676 F.2d 584, 595 (Ct. C1.
work" must be made "promptly and, in any event, no later than thirty
days after the [contractor's] written submission for decision," unless
the owner within thirty days provides written notice of why it cannot
meet this deadline, and notifies the contractor of the date by which it
will. See MASS. GEN. LAWS ch. 30 § 39P (1982).
The White Construction Contract contemplates a fifteen-day
period for review and written approval of the contractor's submission
and thirty days to provide a "written confirmatory certificate" of any
deviations it approved in response to a request for guidance or a
change order. See Ex. 103.43, White Executive Summary. Also, the
Specifications, at § 8, ¶ 8.10(2)(a)(2), mandate that if the delay
exceeds fifteen days, MBTA "shall" make an adjustment in the
contract price to compensate for any increased performance costs.
White's counterclaim identified twelve "discrete impacts" that
allegedly adversely and materially delayed the progress of
construction, and for which it was entitled to delay damages. See Ex.
103.35 et_L.t_t_t_t_t_t_t__. are the twelve "impacts," as described
by White: _91
9/The MBTA also added extra work for its sole benefit, such as
installing bronze balance doors for the head-house, although it was
1. Building Dimensional and Alignment Problems. On May 22, 1984,
White notified MBTA of inconsistencies, not visible by site
inspection, between the contract layouts for (1) the station, (2) the
tracks, and (3) the foundation for a structure to be erected later. The
MBTA admitted that the project could not be built without major
dimensional revisions and redesign of the structural steel, but did not
approve revisions until April 30, 1985. Resolving these problems
delayed the temporary station by seventy-five contract days and the
total project by 336 contract days.
2. East Wing Logic Change. The designers failed to allow enough
room to remove East Wing piles ±°_(step five of a six-step plan). On
May 25, 1984, White notified MBTA of this problem. MBTA
determined that the plan was impractical as designed, but did not issue
Change Order 17, which granted an 84-day extension of time, until
September 13, 1985. Ex. 422.
warned that this would significantly delay the work on the head-house
entrance and exit areas.
I_.Q/"A heavy beam of timber, concrete, or steel, driven into the
earth as a foundation or support for a structure." THE AMERICAN
HER_rTAGED]c'r]ONARY 993 (New College Ed. 1976).
3. Boston Edison Co. Vaults. Two sub-surface concrete utility vaults
impeded construction of the West Wing foundation. Although the
MBTA apparently knew of their existence, it did not inform White
because it assumed that the vaults would not be operated during the
period in question, but apparently never confirmed this as construction
neared. White notified MBTA of the vault problem on July 10, 1984,
but the MBTA did not furnish revised plans until April 30, 1985, nine
and one-half months later. As a result, White could not resume work
until it had underpinned the vaults, so work on the West Wing
foundation walls did not resume until June 18, 1985. Ex. 103.56.
According to trial testimony, this problem resulted in 186 days of
delay. See 1998 Tr. at 888-89.
4. Excavation and Removal of Contaminated Material. Excavation
and removal of excess contaminated material cost significantly more
than expected because the designers mis-identified and underestimated
the excavation amounts. The contract provided a per-unit removal
price of $5/yard for non-contaminated material, and $20/yard for
contaminated material and assumed most of the material would be
uncontaminated. After work began, all the material was classified as
The MBTA requested White to develop a reduced-cost removal
proposal, which White completed on October 4, 1984, in time to
proceed without delay. On February 22, 1985, since MBTA had failed
to respond and since the excavation deadline was imminent, White
proceeded without MBTA approval. MBTA did not adopt the
proposal until October 25, 1985 and paid White for its actual costs,
but not for delay damages.
5. Pile-Driving Specifications. The contract required White to
develop "pile driving criteria" to show that the piles would support
particular weight loads. However, the criteria tests produced widely
varied results, the inconsistencies of which could not be explained,
and which prevented the MBTA from verifying the criteria. After four
months of study, the MBTA realized that the specifications themselves
were faulty and corrected them.
6. Headhouse Floor Removal and Replaceme.nt. Rotted floors, not
disclosed by MBTA or taken into account in the design documents,
had to be replaced before further work on the head-house could begin,
the subcontractors refusing to work there due to safety concerns.
MBTA directed White to replace the floors, and paid for time and
materials to do so, but apparently not for delay, even though MBTA
acknowledged that White was due an extension of time.
7. Amtrak Track Removal (Phase I). Amtrak was supposed to remove
its rails and equipment on MBTA's behalf. White notified MBTA on
May 8, 1984 that the removal was-needed. Amtrak's failure to do
comply caused White to stop work on train-yard construction on
September 21, 1984. This failure delayed the entire project. On
October 18, 1984, MBTA directed White to resume work on a limited
basis, white protested this direction. MBTA agreed that white was
not responsible for the resulting delay. Although White notified the
MBTA that it was capable of performing the task itself, immediately,
the MBTA did not authorize White to do so until nine months later, on
June 24, 1985.
8. Change Orders. The MBTA issued 176 change orders to correct
design errors, causing cumulative impact on the critical path and
inhibiting productivity. Most change orders did not grant contract
extensions or compensate White for lost efficiency.
9. Sprinkler System Re-Design. The fire protection system sprinkler
system originally planned for the third floor of the head-house
violated state building codes. White notified MBTA on April 25,
1985, but MBTA delayed authorizing a change order until September
22, 1986, seventeen months later, and then allowed no extension of
10. Headhouse Coordination. The MBTA failed adequately to
co,-'-a;nate White's work in the same work location in the headhouse
with another contractor, not disclosed in the contract, who was
developing tenant pace for MBTA's sole benefit. The other contractor
erected interior block walls in the basement that impeded White's
access to its work location and cut into the HVAC system in the main
building to connect HVAC ducts to the tenant space. This further
delayed White's work.
11. Amtrak Track Removal (Phase II). After Phase-I, Amtrak was
supposed to remove certain tracks to permit excavation. The tracks
were ready for removal in April 1987. Excavation was scheduled for
July 1, 1987, but only 30% of the tracks had been removed by then, so
White removed the tracks on its own, apparently with MBTA's
approval, and requested costs and a time extension until July 22, 1987,
the date when the tracks actually were removed. These were denied.
12. Service Area Re-design. MBTA redesigned the service area over
eleven months, from October 1988 until September 1989, delaying
White's concurrent work there.
After White filed the counterclaim, extensive mediation and
settlement efforts ensued. According to the mediator, Judge Lynch of
the Massachusetts court initially recommended that the MBTA pay
$3.5 million and that the A/Es pay $1.5 million (and be given full
releases). See Ex. 526.15 (November 9, 1994 letter from J.A.M.S.
Endispute, a private mediation service, to MBTA counsel). The
J.A.M.S. Endispute mediator later recommended a reduction of the
MBTA's share, to $3.05 million. Id. The MBTA rejected this
settlement, in favor of a $2.7 million share, based on an estimate of
"damages attributable to the MBTA of $1,400,000 exclusive of
interest" and "the vagaries of trial."
The MBTA informed the FRA on December 8, 1994, that the
proposed $1.9 million settlement "would be highly favorable to the
MBTA. On a best case analysis, we estimate that the MBTA would
have been required to pay J.F. White no less than $2,500,464 and the
potential exposure is much larger.". Ex. 258.5, 258.15 (Undated
Ultimately, the parties agreed to the following payments:
MBTA - $1.9 million;
The three A/Es - An aggregate of $1.8 million (Stubbins
- $950,000; SOM - $425,000; DCP - $425,000);
Amtrak - $100,000; and
• Boston Edison - $I0,000.
Notwithstanding the MBTA's repeated entreaties, plainly aimed
at obtaining the FRA's concession of liability for the settlement
amount, it is clear from the record that the FRA refused to participate
in the settlement, and took no role in the negotiation of its principal
terms. After the final settlement was agreed upon in principle, the
A/Es insisted on indemnification by the MBTA of potential FRA
,-l'_irns. To avert a breakdown in the settlement, which was highly
zavorable to the MBTA, the FRA agreed to reciprocal releases with
the A/Es. See Ex. 258.4 - 258.8 (Undated FRA/MBTA Stipulation).
Before agreeing to the settlement, the MBTA engaged the
Sverdrup Corporation to work with present counsel, Goulston &
Storrs, to prepare a CPM analysis of White's claimed delays on the
project ("MBTA Settlement Analysis"). See Ex. 525, 161.4.
Sverdrup concluded that: "515 days, 53.9% of the total [956-day]
o_,,,,,, "¢ult from causes for which the MBTA is responsible." Id.___.
This is sligt,.: •more *_'-- " ..... • $1.9 million share (approximately
50%) of the to..-' ...... _, _nd A/_ settlement amount.
The MBTA subsequently has claimed that it was responsible for
only 134 of those 515 delay days, the remainder allegedly being
"caused" by the A/Es. See Plaintiff's 2003 Proposed Findings ("P's
2003 Findings") at 8 (citing Ex. 525 at Tab 2 (FRA's CPM analysis,
prepared by Booth, Bell & Robb Report for the FRA)); Plaintiff's
1998 Proposed Findings ("P's 1998 Findings") at 25.
The MBTA's briefs in this court have offered no rationale for
differentiating 381 delay days from the remainder of the 515 delay
days for which it clearly admitted responsibility.
Issues on Remand
The Federal Circuit in MBTA I reversed this court's pre-trial
grant of partial summary judgment that the disclaimer of any warranty
for design work in CCA § 222(a) barred the MBTA's reliance on CCA
§ 222(c) as a warranty for design work. MBTA I, 129 F.3d at 1231.
Based on the "surrounding circumstances," the appellate court also
rejected the legal theory that the professional A/E design policy
endorsements called for in § 222(c) were intended to cover only
MBTA's errors as a professional A/E designer. Id at 1235-36.
The question (presumptively factual) of what benefits would
have been available to MBTA as an additional insured at the time of
the White claim settlement, had the FRA complied with its obligation
to provide endorsements to the A/E policies, was remanded for
decision by this court, in accordance with the axiom that damages
"shall place the wronged party in as good a position as it would have
been in, had the breaching party fully performed its obligation."
MBTA I, 129 F.3d at 1232 (citing, inter alia, Wells Fargo Bank,
N.A.v. United States, 88 F.3d 1012, 1021-22 (Fed. Cir. 1996)).
After trial, this court concluded that the FRA was excused from
providing the endorsements on grounds of mutual impossibility,
because such endorsements, as a practical matter, were not obtainable
due to the economics of the insurance industry at that time. The
Federal Circuit held that this doctrine was inapplicable because it was
not mutual in that "the FRA had reason to know, even if it did not
actually know, that the endorsements were impossible to obtain."
MBTA III, 254 F.3d at 1375. Based solely on the finding in MBTA
I, the Federal Circuit rejected the notion that the MBTA was not
covered by the A/E policies because it had not provided A/E services.
In remanding for a decision on the amount of damages that a
'reasonable insurer,' "insur[ing] the A/Es directly, and the MBTA via
the insurance endorsements, would have paid beyond the $1.8
million" on behalf of the A/Es, the court in MBTA III affirmed this
court's findings regarding "d_sjgn error and. causation of the delay,"
based on "the thoroughness of [FRA expert] Mr. Hepworth's
testimony and his own critical path analysis, as well as MBTA's
failure to rebut any alleged errors in [its own analysis by Sverdrup]."
Id. at 1376 (emphasis added).
It also affirmed that this court did not err in concluding that the
insurance endorsements "would not have 'covered' errors, omissions,
or acts of negligence by MBTA." Id. at 1377.
The appellate court ordered this court, on remand, to take into
account "relevant factors, including, but not limited to, causation by
the parties, what would have been a reasonable or financially
advantageous settlement in light of the original claim for $23.6
million, as well as the potentially high cost, large amount of time, and
nuisance involved in going to trial." Id.
To comply with the Federal Circuit's remand opinion, the court
necessarily must consider factual circumstances relevant to a
"reasonable insurer's" decision on how much it would pay to
indemnify MBTA for settlement and/or defense costs. Therefore, over
plaintiff's objection, the court held a one-day evidentiary hearing to
determine whether, according to standard insurance industry policies
and practices governing the use of endorsements to add additional
parties on A/E policies, and as interpreted under the governing law,
any additional sum would have been paid to MBTA had it obtained
the endorsements it was promised.
Over plaintiff's objections, see Pl.'s Mot. Objecting to Trial
(Feb. 19, 2003), and as authorized by the Federal Circuit, see MBTA
!II, 254 F.3d at 1377, the court decided to reopen the record for a
one-day evidentiary hearing, on March 11, 2003, of expert testimony
on damages issues that were identified in the appellate court's remand
order and not reached or fully addressed at the 1998 trial. _/See Enzo
IJ.l/The court rejects the MBTA's contention that defendant's
expert's report should be stricken in its entirety because defendant
allegedly made inconsistent arguments in 1998. P's Proposed
Biochem, Inc. v. Calgene. Inc., 188 F.3d 1362, 1379-80 (Fed. Cir.
1999) (trial court has discretion to reopen the record to hear additional
At the start of the hearing, the MBTA unexpectedly announced
that its noticed expert, Mr. Hermes, although present in the courtroom,
would testify solely as a rebuttal witness, and that it would rely instead
on Mr. Hermes' testimony at the 1998 trial. No MBTA expert report
was admitted into evidence at either the 1998 or 2003 proceedings.
1998 Tr. at 168-78.
Findings at 4-7. First, the arguments regard a different issue --
damages, not liability. Second, the appellate court's remand order
necessitated obtaining information relevant to damages. Lastly, the
MBTA has provided no legal grounds for precluding reliance, after
remand, on new and even inconsistent arguments regarding damages.
A party in a civil case is not judicially estopped by legal arguments
unsuccessfully invoked in a previous proceeding. See RF Delaware,
Inc. v. Pac. Keystone Techs., Inc., 326 F.3d 1255, 1262 (Fed.Cir.
2003) ("[J]udicial estoppel [applies] where a party successfully urges
a particular position in a legal proceeding.., where its interests have
changed.") (emphasis added) (citing Data Gen, Corp. v. Johnson, 78
F.3d 1556, 1565 (Fed.Cir. 1996). A court's decision on the existence
of judicial estoppel is reviewed for abuse of discretion. Id.
Based on the court's inherent authority to regulate the mode and
order of interrogation and presentation of evidence, FED. R. Cry. P.
611 (a), the court declined to permit Mr. Hermes to testify on rebuttal
only. The issues plaintiff proffered were previously disclosed
(including in Mr. Carter's report) and could have been addressed fully
in Mr. Hermes' direct testimony (and re-direct as well, as defendant
was likely to decide to cross-examine that witness), and were or could
have been covered in its cross-examination of Mr. Carter.
Previously-prepared demonstrative evidence, and Mr. Carter's report
established to the court's satisfaction that the direct examination of
Mr. Carter did not raise any point not previously raised in Mr. Carter's
report or in the examination of Mr. Hermes in 1998. In short, the most
likely purpose of this tactic appears to have been the creations of
surprise, which the court deemed unfair.
Each party has presented a single expert allegedly
knowledgeable about the policies and practices of the industry
considered by a "reasonable insurer" issuing a professional liability
insurance policy (also known as an "errors and omissions" policy) to
decide whether and, if so, how much, to pay to defend and settle a
claim such as White's against a party endorsed on the policy as an
"additional insured." Plaintiff's expert, Mr. Peter Hermes, testified
only at the 1998 trial; defendant's expert, Mr. Carter, testified only at
the 2003 hearing.
Plaintiff's witness list presented Mr. Hermes as an expert on
insurance coverage and on the propriety of plaintiff's legal fees and
costs. Mr. Hermes, then in practice for twenty-six years, identified
three principal areas of concentration: construction litigation,
environmental pollution litigation, and insurance matters.
Although Mr. Hermes qualified as an expert in the 1998 trial,
defendant initially objected to the use of his testimony at the 2003
trial, because he had never before testified as an insurance expert, and
had no professional accreditation as an expert on insurance matters,
that is, no formal training or experience in the industry, either as an
agent, broker, underwriter, manager, or agent (except, as he said, "in
a very broad sense"). Nor did he have any experience with
intemre_ing endorsements to professional liability policies (as opposed
.iability policies). Defendant subsequently, at the court's
instance, withdrew its objection. See 1998 Tr. at 55.
"Virtually all" of Mr. Hermes' representation of insurers in
construction liability cases appears to have consisted of evaluating the
strength of construction claims brought against their insured, and
generally did not involve construing insurance industry policies or
practices regarding professional liability endorsements. 1998 Tr. at
154. Mr. Hermes' specialty of analyzing policies to determine
whether they covered environmental pollution claims, see 1998 Tr. at
140-41, does not appear to be directly relevant to the issues in this
Mr. Hermes testified that, during his entire career, he had
prosecuted only ten to twelve lawsuits against A/Es in construction
projects, represented only ten insurers in coverage matters, and
litigated only twenty-five coverage disputes of all kinds. 1998 Tr. at
145. He does not appear to have had any significant experience or
expertise regarding insurance industry interpretations of additional
insured endorsements to A/E professional liability policies, or
regarding A/E policies generally.
Mr. Hermes' familiarity with the defense fees and costs allowed
by insurers, and charged by attorneys, in the geographical and practice
areas at issue here, appeared to be largely anecdotal, and based
primarily on information about and from local attorneys specializing
in cons!r__'ct;'_n !itigation.
.,_.,e_enc_ant's ,"', ,,.,-',, ,,',:pess, Mr. Thomas L. Carter, has been
awarded the insurance industry's professional designation of
Se____ee Tr. at 24-25. This underwriting credential is
awarded on the basis of experience and performance on specialized
.... ".... "..... "_d is comparable to the "CPA" designation in the
,,,.,....,.,,, .... = ,..._,:rice. 2003
Se.___.ge Tr. at 25; see also 1998 Tr. at 1018.
Mr. Carter has over forty-two years of experience in the insurance
industry, including as Aetna Casualty and Surety Company's claims
manager for Southern California, where he reviewed tens of thousands
of insurance policies, hundreds of A/E policies, and many hundreds
of endorsements to such policies. See 2003 Tr. at 24-26. He also
directed the award ofup to $200 million per year in defense fees and
costs incurred in nationwide class action asbestos litigation. at 26-
As on forty-four previous occasions, Mr. Carter was qualified
as an expert. His area of expertise here comprised "insurance
coverage, [and] the evaluation of insurance claims and their associated
defense costs, with particular emphasis on the construction industry."
2003 Tr. at 28. L_
.Choice of Law
If statutory directives on choice of law are lacking, a court may
consider the following factors: (a) the needs of the interstate and
international systems, (b) the relevant policies of the forum, (c) the
relevant policies of other interested states and the relative interests of
those states in the determination of the particular issue, (d) the
protection of justified expectations, (e) the basic policies underlying
the particular field of law, (t) certainty, predictability and uniformity
of result, and (g) ease in the determination and application of the law
to be applied. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6
Under the Restatement, absent agreement, "the rights of the
parties 'are determined by the local law of the state which, with
respect to that issue, has the most significant relationship to the
12/The MBTA claims that Mr. Carter's testimony must be
stricken because he is not admitted to practice law in Massachusetts,
and thus had no proper basis to form an opinion regarding liability
issues. The court declines to do so.
transaction and the parties...'" City of Haverhill v. George Brox,
Inc., 716 N.E.2d 138, 144 (Mass. App. Ct. 1999) (citing
RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188(1) (1971). The
courts particularly look to the factors enumerated in Section 188(2).
"The contacts to be taken into account... [in determining] the
law applicable to an issue include:
(a) the place of contracting,
(b) the place of negotiation of the contract,
:'c) the place of performance,
-d) the location of the subject matter of the
: ....... -.;tile, residence, nationality, place
_.. _orpo,:',,.,.. -4 placeofbusiness of the
RES'I,--,. .,..,'_r (SECOND) OF CONFLICT OF LA,;,'S _. ........ q71).
These contacts are to be evaluated according to their relative
importance with respect to the particular issue. Id.
In the specific case of the validity of a contract of casualty
insurance and a party's rights under such a contract, the "local law of
the state which the parties understood was to be the principal location
of the insured risk during the term of the policy" governs unless
"some other state has a more significant relationship . . . to the
transaction and the parties, in which event the local law of the other
state will be applied." RESTATEMENT (SECOND) OF CONFLICT OF
LAWS § 193 (1971).
Massachusetts courts follow the Restatement rules. Se__._g
Clarendon Nat'l Ins. Co. v. Arabella Mutual Ins. Co., 60 Mass.
App. Ct. 492, 803 N.E.2d 750, 752 (2004) (Massachusetts functional
approach "explicitly guided by the Restatement (Second) of Conflict
of Laws (1971)").
"[Where... the parties have failed to agree upon a choice of
law] Massachusetts [courts] ha[ve] adopted a 'functional
choice-of-law approach that responds to the interests of the parties, the
- '.es involved, and the interstate system as a whole.'" Ci_
Haverhill v. George.Brox, Inc., 716 N.E.2d 138, 144 (Mass. App. Ct.
1999) (quoting Bushkin Assoes., Inc. v. Raytheon Co., 393 Mass.
622, 631 (1985)).
Under any of these tests, Massachusetts clearly is the forum
having the closest, and the largest number of, contacts with the parties
and events in this case. MBTA is a Massachusetts state entity created
under Massachusetts state law. Am. Compl. ¶ 1; see also MBTA I,
129 F.3d 1236-37. White and Stubbins are both incorporated in
Massachusetts and maintained their principal places of business there.
Ex. 364.1 - 364.2. Deleuw's and Castro-Blanco's principal places of
business are in Massachusetts. Ex. 364.2 - 364.3. Skidmore did
business in Massachusetts. Ex. 364.3. Lastly, Massachusetts is where
the most relevant MBTA contracts (the CCA and the White
Construction Contract) were signed and performed, where the White
litigation was filed and settled, and where the insurers maintained
(Plaintiff's argues that the proper measure of its damages was
the amount it would have been required to pay at trial, under
Massachusetts law, and sought to impeach Mr. Carter's testimony
precisely because he was no__!t
expert on Massacr,- .s law. This
waives plaintiff's objections to uti'.i ";,',g tb, • ' :: ,:.at forum. No
other party to this dispute h.'..:'- _. •emed by
Ali i-" "" --, ':_es bears the
r,urden z._ ,_, with "acceptable. •. ._t the damages
^_,. .... from and were caused'tb- t.,t.i. " See Boyajian
v. i...,..... tales, 423 F.2d 1231, 1235 (Ct. CI. "; .see al_;o J.D.
Hedin Constr. Co. v. United States, 347 F.2d 235, 239 (Ct. CI.
Once liability is established, the claimant bears the burden of
"proving the fact of loss with certainty, as well as proving the amount
of loss with sufficient certainty so that the determination of the
amount of damages will be more than mere speculation..." Lisbon
Contractors, Inc. v. United States, 828 F.2d 759, 763 (Fed. Cir.
1987) (quoting.W. iilems Indus., Inc., v. United Sta.tes, 295 F.2d 822,
831 (Ct. CI. 1961), cert. denied, 370 U.S. 903 (1962). See generally
22 AM. JUR. 2D Damages § 703 (2004) ("... the burden of proof is
upon the plaintiff.., to show the fact and extent of an injury and to
show the amount and value of his or her damages... [which] must be
proved with reasonable certainty or by a preponderance of the
The burden of proving that an A/E, rather than the MBTA, was
responsible for any of the delay days designated as MBTA's in the
settlement allocation ul also falls squarely upon the MBTA, as the
party seeking relief.. Cf. Wunderlich Contracting Co., .et al. v.
T1,1ited States, 351 F.2d 956, 969 (Ct. CI. 1965) ("It is incumbent on
.-.... -ow the nature and extent of various delays for which
dam, .......... o'_.ed and to r..---*c, them to some act of commission
"" '- nder Ma:,ec?" e:t._ _w, an insured claiming
payment o "?n_,.. an inst, e.; -') beats ',_r._. ' .... " --"_hl_ch;,no'.
that it is covered by ", ....... Timpson v. :1_,.isameric- t,.____
13/ The court has assumed, as did Mr. Carter, that the
settlement, being the product of arms' length bargaining by
knowledgeable, sophisticated parties; represented by legal counsel
fully familiar with local law; and minutely knowledgeable about the
facts underlying the dispute, is the best approximation of the outcome
at trial. Reconstructing what might have happened at trial, as the
MBTA urges, would be entirely speculative.
Co., 669 N.E.2d 1092, 1096 (Mass. App. Ct. 1996) ("It is additional
insured's burden to prove .... that he is an insured as defined by the
policy"), see also Mt. Air), Ins. Co. v. Greenbaum, 127 F.3d 15, 19
(lst Cir. 1997) (citations omitted), Kilgore v. Resumix, 1998 Mass.
Super. LEXIS 170, 184, Markline Co., Inc. v. Travelers, Ins, Co.,
424 N.E.2d 464, 465 (Mass. 1981) (citation omitted).
The ultimate question before the court on remand is "what a
reasonable insurer would have paid to settle the White litigation on
behalf of both the A/Es and MBTA, i.e., what MBTA would have
been 'relieved thereof' with regard to the $1.9 million." See MBTA
III, 254 F.3d at 1382. In addition, the court must determine whether,
and in what amount, the MBTA is entitled to defense costs.
To perform this task, the court must stand in the shoes of the
A/Es' insurers, to determine what they would have done under the
circumstances of the settlement. As discussed below, this depends
both on the facts and circumstances of the case and on principles of
insurance law in Massachusetts and under policies and practices in the
insurance industry generally.
No definition of the term "endorsement" promised by the FRA
in Section 222(c) appears in the CCA or any other agreement or
written communication between the parties.
Nor is there any contemporaneous evidence of the parties' intent
at the time the CCA was executed. Even the MBTA, which is the
beneficiary of the promise (but not the party requesting its inclusion,
as Section 222(c) appears to have been standard in the FRA's similar
contracts), never inquired about either the scope of the provision or
its implementation(as might be expected of an organization of its size
and import that claims to have foregone other insurance in reliance on
this provision), until seven months after the White contract was
signed, three weeks before construction commenced, and just six
weeks before receiving the first White notice of a possible claim.
Specifically, there is no evidence that the MBTA ever:
(1) asked the FRA about its understanding of Section 222(c)
(including about the meaning of an "endorsement," or the coverage it
(2) sought the FRA's assurance regarding the scope of the protection
offered by the provision;
(3) consulted an insurance professional or risk manager about the
meaning of Section 222(c);
(4) inquired about the contents of the existing A/E professional
liability policies on which it would be endorsed, or whether the terms
of such policies might conflict with or prohibit the endorsements in
(5) disclosed to the FRA its understanding about the level or type of
coverage that it expected the endorsements to provide; or;
(6) notified the FRA that it would not obtain general liability
insurance (project insurance) in reliance on the promised A/E
Under general principles of insurance law, as explained by Mr.
Leonard Silver, another qualified defense expert testifying in the 1998
trial, and expounded upon in the many treatises and Massachusetts
cases on the subject, an endorsement is simply an amendment to an
insurance policy, which usually appears in the form of a separate
addendum page, which may vary the terms of the policy in one of a
multitude of ways (e.g., to add or delete exclusions, projects, parties,
or insureds). See 1998 Tr. at 1037. With respect to an A/E
professional liability (or "claims and omissions") policy, it generally
is understood to mean an endorsement to add an "additional insured."
See DONALD S. MALECKI & JACK P. GIBSON, THE ,ADDITIONAL
INSURED BOOK 243-46 (3d ed. 1997). The MBTA has cited no
authority holding otherwise.
In fact, the parties have agreed that the term "endorsement," as
used in the CCA, refers to an endorsement on the A/Es' policies to add
the MBTA as an additional insured, as evidenced at the 1998 trial,
when plaintiff's expert, Mr. Hermes, recited and agreed with the
following description of the coverage afforded by an additional
insured endorsement for the benefit of an owner or client:
While most professional liability insurers
refuse to add clients as additional insureds on
the policies of professionals they insure, it is
sometimes possible to persuade them to do so
on a limited basis. When such coverage is
afforded, the endorsement is usually very
restrictive. Coverage generally applies only
to the vicarious liability of the additional
insured, i.e., liability imputed to the
additional insured, solely resulting from acts
of professional negligence of the named
insured. Any liability resulting from the
negligence, professional or otherwise, of the
additional insured is typically excluded.
1998 Tr. at 248-49
Se.___g (quoting DONALD S. MALECrd & JACK P.
GIBSON, THE ADDmONAL INSURED BOOK 245 (3d ed. 1997))
This concession is consistent with the Federal Circuit's holding
that "the insurance endorsements would not have 'covered' errors,
omissions or acts of negligence by MBTA." MBTA, 129 F.3d at
Similarly, plaintiff"s counsel expressly agreed with testimony
at the 2003 hearing, by defendant's expert, Mr. Carter, that the MBTA
would be protected "for its vicarious liability only, not for its direct
liability." 2003 Tr. at 44.
The case law in Massachusetts, as elsewhere, holds that the
purpose of an additional insured provision is to extend the policy
coverage of the named insured to others, "not to change the nature of
the coverage [of the named insured] nor to change declarations nor to
remove exclusions." Wyner v. North Am. Specialty Ins. Co., 78
F.3d 752, 756 (lst Cir. 1996) (applying Massachusetts law) (citing
Marathon Ashland P_ipeLine LLCy. Md. Cas, Co., 243 F.3d 1232,
1241 (10th Cir. 2001)). See also Great West Cas. Co. v. Mayonga,
342 F.3d 816, 818 (7th Cir. 2003) (Posner, J.) (for purposes of
coverage, additional insured is "liable for the conduct of an insured..
• and only to the extent of that liability"); SFH, Inc. v. Millard
Refrigerated Servs., Inc., 339 F.3d 738, 744 (8th Cir. 2003).
Piaintiffhas offered various conflicting descriptions of the effect
of an additional insured endorsement. For example, in its amended
complaint, MBTA claims that, had it received the endorsements, the
insurers would have been compelled to pay its portion of the White
settlement "whether proved or not." Also, notwithstanding Mr.
Hermes' agreement with the Malecki statement that additional
insureds' rights are purely derivative, and his concession that only
vicarious liability is covered by an additional insured endorsement on
a professional liability policy, MBTA now chants a different, but
recurrent theme -- that the endorsement of a policy to add an
additional insured gives the .addifiona.l insured a right to sue the
named insured (i.e., the A/Es), even when neither DCP, the prime
A/E, in its contract with the FRA (signed seven years before the CCA),
nor DCP's subcontractor A/Es, in their agreements with DCP, ever so
The foregoing stance is consistent with the MBTA's repeated
contention that this court must re-determine its share of liability,
based, not on the allocation in the settlement agreement, as ordered by
the Federal Circuit, but on its likely liability, at trial. This argument
appears to assume that its opponent at trial would be the A/Es, not
White, as evidenced by its protests that the A/Es were entitled to legal
defenses unavailable to the MBTA (e._g_., a longer statute of
iimitations,_lprivity with the MBTA, and entitlement to an "economic
loss"). P's 2003 Findings at 11, 12.-_51
Rather than address directly the question of its legal entitlement
to full indemnification under the A/E policies, MBTA has chosen to
focus on the alleged inequities of the situation in which it found (or,
more accurately, placed) itself in this transaction. However,
contractual relationships among the participants in a project that are
deemed unfavorable by one do not justify treating its endorsements on
the policies of other participants as indemnity agreements.
An additional insured endorsement to a professional liability
policy, alone, cannot grant the endorsee indemnification rights. These
rights arise only by contract, between the indemnitor and the
indemnitee, shifting the indemnitee's "financial consequences of
14___/MBTAcontends that its claim against the A/Es might have
been barred by the 3-year statute of limitation on tort claims under
MASS. GEN. LAWS CH. 260, § 2B.
15/Economic loss has been defined by Massachusetts courts as
damages for inadequate value, costs ofrepair and replacement, or loss
of profits, but not for claims of personal injury or damage to other
property. Mareil v. John Deere Indus. Equip. Co., 403 N.E.2d
430, 434 n.3 (Mass. App. Ct. 1980).
potential legal liability to a third party." See Ex. 524.38 (INT'L RISK
MGMT. INST., INC., THE RISK REPORT, VOL. 12, NO. 6, ADDITIONAL
INSUREDS IN LIABILITY INSURANCE 1 (Feb. 1990)).
Massachusetts jurisprudence clearly confirms that an additional
insured endorsement "raise[s] no logical inference that an indemnity
agreement between the parties was intended." Cosiea v. Constrs.
Collaborative, Inc., 2003 WL 22285312, at *3 (Mass. Super.)
(quoting Johnson v. Modern Cont'! Constr. Co., Inc., 49 Mass.
App. Ct. 545,548 (2000)). See also Franklin y. Edward G, Sawyer
Co., Inc., 1997 WL 401560, at *4, *7, Mass. L. Rptr. 116 (Mass.
Superior) (citing Croall v. MBTA, 26 Mass. App. Ct. 957, 958, 526
N. E. 2d 1320 (1998)).
The FRA's express undertaking to indemnify DCP, pursuant to
statutory authorization, in their October 25, 1979 A/E agreement
(which is the basis for Exclusion R), provides an example of a true
indemnification agreement in this case. Se__gAm. Compl., Exhibit A
§ 14.01" "the Government shall hold harmless and indemnify the A/E
Contractor [DCP] against ... claims (including reasonable expenses
of litigation or settlement) by third persons.., for.., loss of, damage
to, or loss of use of property..."_
Massachusetts law also distinguishes the professional liability
policies at issue here from general comprehensive liability policies:
"'[T]he insurer who issues a policy for errors and omissions insures
against a far different risk than that insured against' under a
comprehensive general liability policy." See Medical Records
Assocs., Inc. v, American Empire Surplus Lines Ins. Co., 142 F.3d
512, 514 (lst Cir. 1998) (applying Massachusetts law) (quoting
American lnt'l Bank v. Fidelity & Deposit Co., 49 Cal. App. 4th
1558, 1574, 57 Cal. Rptr. 2d 567 (1996)).
16/Section 14.04 of the DCP A/E Agreement allows the CO to
approve"similar indemnification of subcontractors at any tier upon the
same terms and conditions."
The FRA or DCP apparently sought to obtain indemnification
for one or more of the A/Es but, apparently, nothing ever came of this.
Had the other A/Es been granted indemnification protection,
endorsements in favor of MBTA might have proved unnecessary,
because the MBTA could have demanded payment from the FRA
directly under the DCP/AE agreement, as a "party to whom [DCP]
may [have been].., liable," under Section 14.03.
Medical Records, uLu.p__, emphasizes the "widely accepted
description of the coverage provided by a professional E & O ["errors
and omissions"] policy.., endorsed repeatedly by the Massachusetts
courts, [that] limits the scope of such policies to activity involving
'specialized' knowledge or skill." Id. at 514. The court explains that
the "'term 'professional' in the context used in the [E & O] policy
provision means something more than mere proficiency in the
performance of a task... In determining whether a particular act is of
a professional nature or a 'professional service' we must look.., to
the act itself.'" Id. (quoting Marx v. Hartford Acc. & Indem. Co:,
157 N.W.2d 870, 872 (Neb. 1968)).
In sum, "the bottom line.., is that 'professional services' as
covered by an E & O policy in Massachusetts embrace those activities
that distinguish one occupation from other occupations -- as
evidenced by the need for specialized learning or training -- and from
the ordinary activities of life or business." at
Id_____.515. See also
Jefferson Ins. CO. of N.Y.v. Nat'! Union Fire Ins. Co. of
Pittsburgh, Pa, 42 Mass. App. Ct. 94, 99,677 N.E.2d 225,229 (1997)
((distinguishing covered "professional services" from non-covered
Mr. Carter's testimony, mirroring these principles of
Massachusetts law, described the insurance industry's custom and
practice, throughout his career, of limiting the scope of an additional
insured endorsement on an A/E professional liability policy to the
additional insured's liability arising out of the acts of the A/E, subject
to every limitation on liability and coverage that applied to the A/E
under the policy. See 2003 Tr. at 39 (emphasis added).
Mr. Carter also testified that additional insured coverage protects
the additional insured only for its vicarious liability resulting from the
A/E policyholder's negligent acts, not for its own negligent acts. 2003
Tr. at 39, 44. This principle is consistent with the Federal Circuit's
holding that liability for the direct negligent acts of the additional
insured would not be covered under its additional insured
endorsement. See MBTA II!, 254 F.3d at 1377.
Another feature distinguishing vicarious coverage under an
additional insured endorsement from direct coverage as a policyholder,
is the question of agency. Applying Massachusetts law, the federal
district court in Massachusetts held that "the guiding principle used in
deciding cases involving an assertion of vicarious liability [is] the right
to control the physical conduct of the other in the performance of the
service." See Hohenleitner v. Quorum Health Resources, Inc., 758
N.E. 2d 616 (D.C. Mass. 2001).
Coverage of White Claims against the MBTA
It is "well-settled in Massachusetts, and generally elsewhere, that
the duty of a liability insurer to investigate and defend third-party
actions against the insured [which duty is uniformly held to be broader
than its duty to indemnify _] is decided by matching the third-party
complaint with the policy provisions: if the allegations of the
complaint are 'reasonably susceptible' of an interpretation that they
state or adumbrate a claim covered by the policy terms, the insurer
must undertake the defense." Se__.gAetna Cas. & Ins. Co. v.
McKennedy Bros., 6 Mass. Ins. Rep., 1996 Mass. Super, LEXIS 285,
291 (citing Continental Cas, Co. v. Gilbane Bldg. Co., 461 N.E.2d
209, 212 (Mass. c
1984) and se__£ases cited therein); State Mut. Life
Assurance Co. ofAm. v. Lumbermens Mut. Cas. Co., 874 F. Supp.
451,455 (D.C. Mass. 1995).
Both the allegations in the complaint and other facts "known or
readily knowable by the insurer" must be considered. See id., quoting
Terrio v. McDonogh, 16 Mass. App. Ct. 163, 167; 450 N.E.2d 190,
Where a complaint is so general as to encompass a wide range
of possible scenarios, the 'possibility that the liability claim falls
within the insurance coverage' is enough to trigger the duty to
defend." Cmty. TV Corp. v. Twin City Fire .Ins. Co., 15 Mass. L.
17/Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co., 788
N.E.2d 522, 531 (Mass. 2003); Ruggerio Ambulance Serv., Inc. v.
Nat'l Grange Mut. Ins. Co., 724 N.E.2d 295,298 (Mass. 2000).
Rep. 435 (Mass. 2002) (quoting Sterilite Corp. v. Cont'! Cas. Co.,
17 Mass. App. Ct., 316, 319; 458 N.E.2d 338 (1983)).
In deciding the scope of the duty to defend (and, by extension,
to pay a claim), the First Circuit, faced with a policy limiting coverage
to claims, as here, "arising out of" the named insured (or
policyholder's) actions, held that "'the relevant causation issue with
respect to insurance coverage is not whether the injury could have
taken place without the [action by the insured] (but-for causation), but
whether it did in fact contribute materially to the injury." See _Open
Software Found., Inc. v. United States Fid. & Guar. Co., 307 F.3d
11, 14 (lst Cir. 2002) (applying Massachusetts law) ( quoting R.C.
Bigelow v. Lib. Mut. Ins. Co., 287 F.3d 242,248 (2d Cir. 2002)).
The court assumes, for purposes of this reconstruction of what
portion of the MBTA's settlement payment and costs the A/E insurers
would have paid, had MBTA actually been endorsed as an additional
party on their policies, that: (1) the basic terms of the A/E policies
would have been unaffected by the endorsement; (2) the endorsement
would not have exceeded the scope of the terms promised in Section
222(c) of the CCA; (3) the endorsement on each A/E policy would
follow the form of endorsements on that policy or on other A/E
policies; and (4) each A/E insurer would have agreed to make each
endorsement, subject to the foregoing provisos.
So read, the MBTA endorsement to the Skidmore policy would
have recited (following the same format as another endorsement to that
policy): "In consideration of the premium charged, it is hereby
understood that [the MBTA] is included as an [Additional] Insured
under this policy but only with respect to claims and expenses
out of professional architect/engineering services performed.., in
connection with 'the design of the Facility.'" Ex.
(Endorsement 4 to Skidmore policy) (emphasis added). "The Facility"
presumably refers to the South Station improvements to be constructed
The Stubbins policy does not contain a form of endorsement that
appears directly adaptable to an additional insured such as the MBTA
in these circumstances. Thus, the court must assume, for these
purposes, that the Skidmore policy endorsement is common in the
industry (the MBTA does not argue otherwise) and thus that the
Stubbins endorsement for the benefit of the MBTA would be similar,
which is likely since they share the same insurer, Continental Casualty
Co. Ex. 507A, 507B.
DCP's insurer agreed to pay for damages for personal injury and
property damage that DCP was obligated to pay "because of'an act,
error, omission, or negligent act "arising out of" the insured's
performance ofprofessionai services as an A/E (including construction
management). See Exhibit 173. However, see supra at 5-6, n.5,
Exclusion R to the DCP policy excludes "any claim arising from
professional services performed by [DCP] under [the 1976 DCP A/E
Agreement with the FRA]." Because the White claims against the
MBTA, particularly under the MBTA's best argument, relate to A/E
delay, it "arises from" professional services performed by DCP under
the DCP-FRA A/E agreement to renovate South Station.
Mr. Carter convincingly opined that DCP's insurer would not
have provided an endorsement for the MBTA's benefit unless
Exclusion R were removed, which was unlikely given DCP's greatly
increased premiums should it forego such immunity. 2003 Tr. at
36-37. Mr. Carter also pointed out that endorsing MBTA on the DCP
policy while such exclusion remained in effect would be of no risk-
prevention value to the MBTA. 2003 Tr. at 38. supra, n. 13.
The best indication of the actions and liability-causing events,
and the amount thereof, that are encompassed by the White claim
against the MBTA appears in the MBTA's own settlement analysis,
which concedes that "the minimum recovery to which J. F. White
[would be] entitled (the MBTA's best case) [at trial]" was $2,500,464.
Se__.g 258.5,258.15 (MBTA Settlement Analysis). This amount, of
course, significantly exceeds the MBTA's ultimate $1.9 million
settlement payment. at
Id._._. 258.15,258.16. (Mr. Peter Hermes, the
MBTA's expert, himself conceded that, in his opinion, the settlement
amount was, "taking into account all of the circumstances, a very good
settlement from the point of view of MBTA." 1998 Tr. at 183). The
MBTA's final settlement offer of $2.75 million also significantly
exceeds the final settlement amount.
Some of MBTA'ts arguments appear to suggest that an
endorsement may confer even greater coverage on the endorsee than
that enjoyed by the policy-holder or principal insured party. L_ P's
2003 Findings at 11.
Such a contention conflicts with the testimony of its expert, Mr.
Hermes, as well as with the conclusions of the MBTA's own analysis.
See Ex. 258.24 (stating that 53.9% of the delay was "from causes for
which the MBTA is responsible"). Moreover, this line of argument
necessarily presumes that a but/for standard of causation applies,
which is inconsistent with Massachusetts law, see Open Software,
307 F.3d at 14.
The MBTA now appears to contend, see P's 2003 Findings at 8,
that not 53.9%, but potentially only 14.5% of claims were its
responsibility, notwithstanding previous assertions to the contrary.
However, it has not supported this claim in its briefing of this case,
e.__., by identifying and quantifying such claims.
Mr. Carter, unsurprisingly, testified that if the claim involved
MBTA's independent conduct (be it breach of contract or negligence),
unrelated to an A/E's design responsibility, then the A/E policy would
not respond at all. Mr. Carter stated, somewhat pointedly, that liability
18__/Plaintiff cites no Massachusetts, or other, authorities
supporting this position.
in that event "would fall back to the MBTA or its insurer, if it had an
insurer that covered its own direct liability. Ex.
Se____ge 258.24. See .also
Mr. Carter also explained that, because the additional insured's
status under the A/E policy is exclusively vicarious, the MBTA is
bound by the same policy restrictions applicable to the A/E
policyholder itself, including, but not limited to, policy limits, and the
existence and scope of the insurer's obligation to defend. 2003 Tr. at
Mr. Carter flatly rejected the MBTA's accusation that, because
it was effectively forced to provide a "warranty of buildability," the
MBTA was entitled to greater or different protection than that
reflected in the settlement agreement. Mr. Carter stated that a claim
based upon such a warranty would not be a design negligence claim,
i.e., subject to additional insured coverage on an A/E policy, but,
rather, an independent claim arising from the MBTA's direct liability
for delays on the critical path. See 2003 Tr. at 44-45. Moreover, it
appears, from plaintiff's own Settlement Analysis, that the White
Delay Claim settlement, as it relates to the MBTA, is not in fact based
on a "warranty ofbuildability" theory but, rather, on a CPM analysis
of each A/E design error and MBTA's act of delay or other
The court finds that Mr. Carter's testimony is both credible and
compelling as to the how members of the insurance industry would
have interpreted endorsements to add additional insureds to
professional A/E policies, and that it is consistent with Massachusetts
law and the insurance treatises cited by defendant. The court was not
persuaded by Mr. Hermes' testimony due to his lack of experience
with such policies and for the reasons discussed The
at 30, su__u.p__.
plaintiff provides no citations to cases or treatises supporting a
It is clear from the foregoing authorities that endorsement as an
additional party cannot compensate for, or overcome, the
disadvantageous contractual arrangement(s) to which the MBTA
subscribed. Nor is such an endorsement an efficacious substitute for
project insurance or an indemnification agreement, because the
designation gives the MBTA no right of action against the A/Es, and
could not insulate it from liability to White for .the MBTA's own
independent, direct, superseding acts of negligence or breaches of
contract. 2003 Tr. at 41.
In short, the issue is not, as plaintiff contends, whether the
design professionals have valid defenses to the MBTA's claims. See
Ex. 258.11 (Goulston & Storrs letter to the FRA, stating: "The design
professionals have steadfastly maintained that they have defenses to
the MBTA's claims against [the A/Es]."). The issue is whether
White's claims against the MBTA concern acts arising under the A/E
policies, to wit, professional errors and omissions.
Although the MBTA alleges that it is being unfairly held liable
for the A/Es' design errors and omissions, it nevertheless has provided
no evidence of this, or even alleged which, if any, of the White claims
against the MBTA that were conceded by its Settlement Analysis were
due instead to negligent actions or breaches by the A/Es.
As the Federal Circuit agreed, even if the MBTA had been
endorsed on the A/Es' policies, as required by Section 222(c), it would
not be entitled to compensation from the A/Es' insurers for delays
caused by the MBTA's own negligent acts, contract breaches, or
The MBTA has conceded that 53.9% of the compensable delays
were caused by its own breaches of contract or negligence. It has
identified no basis for treating any specific delays within this category
as attributable, instead, to the A/Es. Therefore, the A/Es' insurers
would have reimbursed or paid the MBTA no part of the MBTA's
approximately 53.9% share, amounting to $1.9 million, of the total
settlement in the White litigation.
Duty to Defend and Pay Defense Costs
The following A/E policy provisions address the extent of
coverage for payment of claims and defense costs by the insurer:
DCP. The DCP policy includes a per-occurrence limit of $1.5
million; a $3 million aggregate limit per project per year; and a "duty
to defend." Defense costs must be paid even ifthey exceed the policy
Skidmore. The Skidmore policy provides a per-claim and an
aggregate limit of $3 million, excludes any duty to defend, and
imposes a $500,000 "self-insured retention" deduction from the
benefits payable on each claim. See Ex. 507A; 2003 Tr. at 36.
Stubbins. The Stubbins policy provides a $75,000-per-claim
deductible, which is applicable to defense costs; a $4 million aggregate
liability limit; and a duty to defend. Defense costs are applied against
(deducted from) the $4 million cap..See Ex. 507B.1-2; 2003 Tr. at 35.
The policy also contains an "other insurance" provision specifying that
any other policy providing coverage of the same claim shall be
required to pay the defense costs before the Stubbins policy may be
charged. Ex. 507B.13.
The question before the court is what portion, if any, of MBTA's
requested $2,064,567 in defense costs -- consisting of Goulston &
Storrs' legal fees (in the amount of $1,392,413) and the MBTA's
disbursements for payment of experts costs (amounting to $672,154)
would have been paid on the MBTA's behalf by the A/Es' insurers.
Mr. Carter's analysis properly recognized that the DCP insurer
could not be charged, because Exclusion R to the policy explicitly
excludes claims arising out of the FRA project. 2003 Tr. at 49. He
opined that only the other rwo A/E insurers, Skidmore's and Stubbins'
would provide coverage for the claims at issue and that defense costs
would have been divided between the two.
Defendant's expert then concluded that, because Skidmore's
policy specifically excluded the duties and costs of defense, only
Stubbins should be required to pay, but that it should be required to
pay only 50% of the total covered amount.
Mr. Carter explained that the only method he has known during
forty-five years in the insurance industry is to share costs equally,
rather than apportioning costs according to the exact risks facing each
insurer. 2003 Tr. at 47.
Plaintiff, on the other hand, relying, it appears, on a legal "duty
to defend," under Massachusetts law, contends that defense and
liability costs may not be split between two insurers, such as
Stubbins'and Skidmore's, and that a defendant insured by multiple
insurers is entitled to a full and complete defense from every insurer
having a duty to defend. P's 2003 Findings at 25.
The First Circuit has firmly rejected that Massachusetts law,
unlike that in many other jurisdictions, imposes the doctrine of
equitable distribution. Lexington Ins. Co. v. General Ace. Ins. Co.
of America, 338 F.3d 42, 49 (lst Cir. 2003). The appeals court,
applying Massachusetts law, held that an insurer may not rely on the
doctrine of equitable distribution,U t to impose a duty on an insurer,
19.__/TheFirst Circuit defined equitable contribution as "the right
to recover.., from a co-obligor who shares such liability with the
party seeking contribution," explaining that, "[i]n the insurance
context, the right to contribution arises when several insurers are
obligated to indemnify or defend the same loss or claim, and one
insurer has paid more than its share of the loss or defended the action
without any participation by the others... Equitable contribution
including indemnification, that it has not subscribed to in the policy,
explaining that Massachusetts has not "definitively adopted this
doctrine in the insurance context" and noting that "principles of equity
did not allow [the court] to ignore the plain language of[a] policy in
order to impose a reimbursement obligation that [the insurer] had
never committed itself to undertake." Id,
The principle underlying the holding of this and every other
Massachusetts insurance case this court has found, is that an insurer's
duty to defend is dependent, not on equitable principles, but on the
clear and unambiguous language of the policy. Massachusetts
Port Aulh. v. Ace Prop, & Cas. Ins. Co., 2004 Mass. Super. LEXIS
166 (2004); B & D Apprais.als v. Gaudette Mach. Movers, Inc.,
752 F.Supp. 554, 556 (D. R.I. 1990)).
Nevertheless, the MBTA is correct as to the result, if not the
theory, in this case. The terms of the two chargeable policies, which,
unlike in most cases addressing equitable distribution, are not
permits reimbursement to the insurer that paid on the loss for the
excess it paid over its proportionate share of the obligation, on the
theory that the debt it paid was equally and concurrently owed by the
other insurers." Lexington Ins. Co,, 338 F.3d at 49.
ambiguous or inconsistent with one another in this respect. One
excludes _ duty to defend (Skidmore), and the other (Stubbins)
agrees to defend only if there is no other policy providing coverage of
the same claim.
Although one might quibble that "coverage of a claim" may
have a different meaning than "coverage of defense costs," the court
cannot conclude that an interpretation imposing on Skidmore a defense
cost obligation directly contrary to its policy's clear exclusion would
pass muster under Massachusetts law, given its preference for plain
language interpretation of policies, its reluctance to impose obligations
that squarely conflict with the terms of a policy, and its rejection of the
doctrine of equitable contribution. Thus, it appears that Stubbins
would be required to pay all of the defense costs allocable to claims
covered by the policy.
Mr. Canner testified that, "based on [his] history in dealing with
hundreds of [such] claims," splitting defense costs for direct liability
or professional responsibility is common in construction defect
litigation. 2003 Tr. at 50-51. The court finds this testimony, based on
Mr. Carter's extensive insurance industry experience, to be credible,
and also concurs with defendant's argument that the A/E insurers'
share of defense costs should be halved to reflect the fact that only
approximately half of the J. F. White claims were derivative claims
against the A/Es q for which the A/E insurers would be liable
while the other half consisted of claims arising from MBTA's
independent negligent acts -- for which the MBTA alone is liable.
The 50% allocation to claims based on derivative acts reflects the
MBTA's proportion of the settlement amount paid ($1.9 million out
of $3.81 million). Ex. 258.5, 258.31. Principles of equitable
distribution cannot assist plaintiff in this context.
The MBTA also appears to dispute that insurance industry
practice permits insurers' liability costs to be split between two
defendants, such as the MBTA and the A/Es, according to their
proportionate liability. Again, plaintiff provides no analysis or
authority to support its assertion. Even if true, however, the split
proposed here is very different than one relating to defense costs,
being based, not on an equitable distribution with respect to the same
claims, covered by two or more policies, but, rather, on the distinction
between two different categories of claims, one of which is not
covered at all by one of the policies (or defendants) sought to be
The issue here, now that only one insurer is left standing, is what
proportion of defense costs, as distinct from liability costs, must be
paid by an insurer such as Stubbins with respect to claims that are not
covered by the policy, such as the claims based on the MBTA's direct
acts of negligence and unrelated to its derivative liability.
Mr. Carter viewed this question from an insurer's perspective,
and the court credits his testimony that the claims against MBTA
based on its own negligence would be treated as claims that it must
defend itself, as it might, presumably, if it were self-insuring its risk,
as appears to have been the case, de fa.cto, here.
The court concludes that the latter measure, the percentage of
settlement costs, or of the judgment, agreed to by the MBTA is
particularly apt here, for the reasons to which Mr. Carter alluded and
others: the amounts were decided, at arms' length, by the parties
themselves, who were well-represented by counsel knowledgeable
about local law, after protracted bargaining, following extensive
factual and legal analysis, and with input from two mediators.
Allowable De.lense Costs
Whether the particular legal defense expenses, both fees and
costs, claimed by plaintiff's counsel would have been considered
reasonable and allowed by an insurer paying the MBTA's defense
costs is addressed in Attachment No. 1 to Mr. Carter's report, which
analyzes the MBTA's defense costs as Mr. Carter and his staffdid on
a daily basis to large numbers of legal bills, based on "defense fee
billing guidelines" first developed by the insurance industry in the
eighties. 2003 Tr. at 51-52.
Mr. Carter directly reviewed approximately 55% of the
individual items detailed in the voluminous bills submitted by the
MBTA's counsel, Goulston & Storrs. 2003 Tr. at 53. Mr. Hermes
reviewed none of the bills in this manner. 1998 Tr. at 212.
Mr. Carter considered counsel's blended rate of $145 an hour,
which included paralegal time ordinarily billed at $60-65 per hour, to
be "really high," when Los Angeles firms like Gibson, Dunn billed for
attorneys alone at $100-$110 per hour during the same time periods.
2003 Tr. at 55-56, 61. Mr. Carter therefore opined that a reasonable
insurer would have reduced attorneys' hourly fees by 15%, to arrive
at a "fair" rate of $125 per hour. 2003 Tr. at 55-56. He testified that
he would have approved a paralegal rate of $60-65 per hour. 2003 Tr.
However, he believed that a reasonable insurer would have
disallowed the MBTA's expenses attributable to work on issues not
raised by the complaint, such as the MBTA's affirmative claims
against third parties (such as the FRA, presumably). 2003 Tr. at 57.
Mr. Carter testified that multiple billing, for each participant in
an interoffice conference, also would not have been paid under Aetna's
guidelines, and that low-level clerical work would have been treated
as firm overhead and not billed directly. 2003 Tr. at 57-58. Mr. Carter
considered payments for computer instruction, setting up computer
classes, reviewing a warranty on a computer and practicing on a
computer, as overhead items that a reasonable insurer would not have
paid. 2003 Tr. at 59. He viewed the 15C-per-page copy fees as
excessive, when commercial copy centers at that time charged between
2 and 3_ perpage. 2003 Tr. at 60. Disbursements for law study costs,
meals charges, and unclear purposes also would have been questioned
and possibly disallowed. /d. L0_
20/Plaintiff's counsel complained about Mr. Carter's analysis
of his firm's legal fees, "I am not sympathetic to FRA's nit-picking,
Mr. Carter concluded that, under widely-accepted industry
guidelines during the period in question, a reasonable insurer would
have agreed to the Goulston & Storrs legal fees if reduced by 15%, to
make them consistent with the going rate. Mr.Carter decreased the
legal fees by an additional 12.5% to take into account the many other
attorneys fees issues raised by his review, as described generally
The resulting 27.5% reduction to the attorneys' fees, lowered
the demanded fee amount of $1,392,000 to $1,009,499. Mr. Carter did
not criticize the cost claims, for expert witnesses and consultants, in
the amount of $672,154. Thus, of the total claimed defense costs of
$2,064,567, Mr. Carter would have allowed $1,681,653. 2003 Tr. at
62, Carter Report at 6. (This assumes, of course, that the $75,000
deductible under the Stubbins policy had been paid previously.)
after the fact, of the MBTA attorneys' fees." See P's 2003 Findings
at 18. Plaintiffhad ample opportunity to present a clear explanation of
its fees, and made no attempt to present a witness to explain them at
the hearing, or to amend or supplement its fee statement following the
hearing. Under these circumstances, the court has no choice but to
"nit pick," and appreciates defendant's expert's analysis in assisting
it to do so.
In addition, Mr. Carter estimated that each insurer would have
contributed an additional payment of $100,000 apiece, to ensure that
the MBTA signed off on the settlement and executed releases. 2003
Tr. at 73-74.
The court finds Mr. Carter's testimony regarding the common
practices in the insurance industry regarding the payment of defense
costs during the period when Goulston and Storrs' fees and costs were
incurred to be credible. The opinion of MBTA's expert, who did not
directl',-',-_,ie,'-.' z._¥ of the bills, is given no weight. As to the fees
...... ' ....... for this type of representation, the court
,_,.....,:_-; ,:..: _,,:r,. ,,l ........ his extensive experience, including
regarding Massachusetts iaw firms' practices, with which he was
knowledgeable as a result of his nationwide defense claims review in
-'.-...:."ction with asbestos litigation, see 2003 Tr. at 22-23, 26-27, 112,
5re than Mr. Hermes on the question of how much an
insurer would have paid during the period in question.
Had the MBTA been added to the A/Es' policies by endorsement
as an additional insured, the MBTA would have acquired only
derivative or vicarious coverage and only for design errors and
omissions or professional services as designers. It would not have
been covered for its separate acts causing delay damages to White, as
it effectively conceded in its liability analysis and in agreeing to its
settlement share. Having conceded that it caused 53% of the White
delays remaining under consideration during the settlement
discussions, the MBTA is responsible for the $1.9 million payment,
slightly more than half of the total, that it contributed to the settlement
of the White litigation. Therefore, a "reasonable insurer" issuing the
A/E policies here would have made no liability payment above what
actually was paid on behalf of the A/Es in the settlement on behalf of
the MBTA, had the MBTA been named an additional insured on their
The court finds that if plaintiff had been endorsed as an
additional insured on all three of the architect/engineer policies,
Srubbins' insurer would have assumed 100% of the total defense costs
in the White case, of which 46.1% would have been allocable to
defense costs that would have been paid by the A/E insurers as a
result ofthe MBTA's designation as an additional insured on the A/E
policies pursuant to CCA §222(c). MBTA would have been
responsible for 53.9% of the total settlement, to discharge its separate
liability resulting from its non-A/E-related direct acts of negligence or
The court also finds that MBTA's attorney's fees and costs in
the amount of $1,681,653 would have been allowed by a reasonable
insurer. Because 53.9% of the delay admittedly was caused by the
MBTA, and not by the A/Es, only 46.1% of that amount, or
$775,242.03, would have been paid towards the MBTA's defense
costs by a reasonable insurer. In addition, the court finds, in
accordance with Mr. Carter's opinion, that each insurer would have
paid $100,000 to the MBTA to ensure its full cooperation in the
Accordingly, the Clerk shall enter judgment in favor of plaintiff
in the amount of $1,075,242.03.
Judge, U.S. Court of Federal Claims
*n t Inite Caurt of J¢l era[ CIaim
(Filed August 16, 2002)
MASSACHUSETTS BAY *
TRANSPORTATION AUTHORITY, *
THE UNITED STATES,
Plaintiff, the Massachusetts Bay Transportation Authority
(MBTA), has moved to disqualify the trial judge for bias and
prejudice pursuant to 28 U.S.C. §455(a) and (b)(1) and Rule 63(e)(1)
of the Rules of the United States Court of Federal Claims (RCFC)._
Oral argument is deemed unnecessary.
\I The motion is accompanied by an affidavit from plaintiff's
counsel. Such an affidavit is no longer required by RCFC 63, which
was revised as of May 1,2002, after plaintifffiled its motion, to track
Federal Rule of Civil Procedure 63 by eliminating, not only
subdivision (c), the source for the affidavit and mandatory recusal
requirement, but also subdivision Co), governing voluntary
disqualifications, because the substance of subdivisions Co) and (c)
is covered in 28 U.S.C. § 455, and the Judicial Codes of Conduct.
Plaintiff's general allegations supporting recusal, purportedly
bolstered by Charron v. United States, 200 F.3d 785,789 (Fed. Cir.
1999) (denying writ of mandamus), are that "the trial judge has not
been open to being educated on the law pertaining to this case and the
facts giving rise to it;" "plaintiff has lost every substantive motion
and ruling made by the trial judge;" and the judge's statements and
adverse rulings "display a deep-seated favoritism or antagonism that
would make fair judgment impossible."_
Plaintiff points to the following incidents purportedly
evidencing the trial judge's bias and prejudice: (1) the United States
Court of Appeals for the Federal Circuit November 3, 1997 reversal,
see Massachusetts Bay Transp. Auth. v. United States, 129 F.3d
1226 (Ted. Cir. 1997) (MBTA J), of the trial court's August 12, 1996
unpublished decision, reissued for publication on March 9, 1998,
and the July 3, 2001 reversal in part, see Massachusetts B#y
Transp, Auth. v, United States, 254 F.3d 1367 fled. Cir. 2001)
(MBTA II), of the trial court's unpublished February 11, and
March 2, 2000 decisions; (2) judicial remarks during a hearing on
July 17, 1996; (3) the denial of plaintiff's motion for partial summary
judgment; (4) the trial court's May 14, 1999 decision; and (5)judicial
remarks made during a status conference on October 3, 2001.
Relying on Liteky v. United States, 510 U.S. 540 (1994),
• defendant contends that plaintiff's allegations that the court
While 28 U.S.C. §144 and 28 U.S.C. §47 also address
occasions for recusal, they are inapplicable here, the former being
limited to federal district court judges and the latter to judges
determining "an appeal from the decision of a case or issue tried by
him." However, since the Federal Circuit has looked to 28 U.S.C.
§144 in interpreting the pre-2002 version of RCFC 63, it should be
equally applicable to cases arising under 28 U.S.C. §455, which
cover the same matter. Charron, 200 F.3d at 788.
consistently ruled adversely to plaintiff, even if true, do not establish
the level of prejudice or bias requisite for disqualification. Defendant
also maintains that the comments cited by plaintiff demonstrate
neither reliance on "extra-judicial sources," nor a deep-seated
favoritism or antagonism that would render fair judgment impossible.
On May 18, 1989, MBTA filed a complaint against the United
States alleging seven counts of breach of contract arising from the
construction of several improvements to Boston South Station
pursuant to a September 8, 1983 Cooperative Construction
Agreement (Agreement) for construction of the Boston South Station
Transportation Center Project. The case was stayed pending
resolution of related litigation brought against MBTA by a
subcontractor, J. F. White Contracting Co., in Massachusetts.
Following settlement of the Massachusetts case, the stay here was
lifted, and MBTA filed an amended complaint in 1995.
By orders dated July 19, 1996, and August 7, 1996, this court
granted summary judgment for defendant, concluding that plaintiff's
waiver in the Agreement of any government warranties for design
defects shielded defendant from liability for damages, that
defendant's failure to secure certain insurance endorsements called
for by §222(c) of the Agreement did not make the government liable
for delay costs, and that defendant was not liable for any amounts
plaintiff paid to defend and settle the delay claims in the
The court also held that the waiver provision barred plaintiff's
claim for damages caused by Federal Railroad Administration's
alleged breach of its obligation to pursue its contractual remedies
against its architects and engineers (A/Es) for errors in the design of
the terrazz6 floors on the first floor of the South Station, and that,
because plaintiff had agreed by change order to a cost-sharing
formula for replacement of the headhouse floors, it was prohibited
from seeking additional reimbursement for this repair under the
Cooperative Agreement. at
On November 3, 1997, the United States Court of Appeals for
the Federal Circuit, reversing the summary judgment and remanding,
ordered the trial court to develop facts relevant, to the extent to which
the insurance endorsements would have covered the Massachusetts
litigation and settlement expenditures, to the consequences of the
breach of §222(c), and an assessment of appropriate damages, see
MBTA I, including whether they were design-related or
construction-related, id. at 1232-33; to what damage amounts were
reasonable, id, at 1233-34; and to the merits of MBTA's claim that
defendant should pay more than 14% of the cost of replacing the
headhouse floors, id. at 1235-36.
Trial was held between September 14 and 28, 1998. After trial,
on May 14, 1999, the court issued a decision concluding that
(1) plaintiff was not entitled to any damages for defendant's failure
to secure insurance endorsements because, even if plaintiff had
obtained effective insurance coverage for claims brought against it
based on design error, such insurance, at most, would have covered
plaintiff's defense costs, and would not have indemnified plaintifffor
the amount it paid to settle the Massachusetts litigation; (2) plaintiff
was entitled to recover 100% of the cost of replacing the original
wooden headhouse floors, but not the cost of replacing them with
concrete floors, because plaintiff failed to introduce any evidence of
its contention that replacement of the floors with wooden floors,
instead of concrete floors, would not have met building code
requirements; and (3) plaintiff was not entitled to recover any
damages due to defendant's failure to pursue its contractual fights
against the A/Es for repairing or replacing the terrazzo floors, which
were cracked as a result of defective design, because plaintiffdid not
timely assert this claim.
On July 3,2001 (mandate issued August 24, 2001), the Federal
Circuit affirmed this court's conclusion that plaintiffwas entitled to
recover only the cost to replace the headhouse floors with new
wooden floors meeting the minimum building requirements, and not
with new concrete floors, but reversed this court's conclusions that
the doctrine of impossibility excused defendant's obligation to
provide insurance under §222(c) of the Agreement, and that
plaintiff's terrazzo floor claim was barred by the applicable statute of
limitations. The case was remanded to "address the question of what
'would have been covered or MBTA relieved thereof under the
insurance endorsements,' assuming those endorsements had been
properly obtained." MBTA II, 254 F.3d at 1377 (quoting MBTA I,
129 F.3d at 1232). In doing so, the Federal Circuit expressly gave
the trial court discretion to hear additional evidence:
[T]he Court of Federal Claims has discretion, as it deems
necessary, to reopen and supplement the record to allow
for admission of new evidence fi'om both parties on this
issue. Alternatively, the Court of Federal Claims may
make its determination based on the existing record.
On October 3,2001, the trial court held a status conference and
decided that trial would be necessary, as the Federal Circuit
permitted, in order to address the factual question of "what a
reasonable insurer would have paid to settle the .1.F. White litigation
on behalf of both the A/Es and MBTA'" under the insurance
endorsements. Id. at 1376. Settlement discussions ensued, with the
next status report due March 1, 2002.
On March 5, 2002, plaintiffmoved to disqualify the trial judge
for bias and prejudice pursuant to 28 U.S.C. §455(a) and (b)(1).
28 U.S.C. §455 provides, in relevant part:
(a) Any justice, judge, or magistrate judge of the United
States shall disqualify himself in any proceeding in
which his impartiality might reasonably be questioned.
(b) He shall also disqualify himself in the following
(1) Where he has a personal bias or prejudice concerning
Canon 3C(1) of the Codes of Conduct for the Judiciary
(1) A judge shall disqualify himself or herself in a
proceeding in which the judge's impartiality might
reasonably be questioned, including but not limited to
instances in which:
(a) the judge has a personal bias or prejudice
concerning a party, or personal knowledge of
disputed evidentiary facts concerning the
Section 445, first ena.cted on June 25, 1948, was revised
extensively in 1974, based on the 1972 American Bar Association
Code of Judicial Conduct, to reduce or eliminate the vagueness and
subjectiveness of the standards in the prior statute. See Pub.L. 93-
512, § 88, Stat. 1609 (Dec. 5, 1974). The Judicial Conference of the
\3_ Tlae remaining paragraphs of subsections (b)(¶¶(2)-(5)) are
inapplicable to this situation, and were not cited by plaintiff.
United States adopted the 1972 ABA provision with minor
modifications in 1973 (Canon 3C of the Code).
In deciding whether recusal is required under §455(a), one
looks to the views of an objective observer. See Microsoft Corp. v.
United States, 530 U.S. 1301 (2000) ("This inquiry is an objective
one, made from the perspective of a reasonable observer who is
informed of all the surrounding facts and circumstances."). The Fifth
and Seventh Circuits specify the standard as "how things appear to
the well-informed, thoughtful observer rather than to a hypersensitive
or unduly suspicious person.'14
The Supreme Court in Liteky v. United States. 510 U.S. 540,
555 (1994), adopting the long-standing rule, see United States v.
Grinell Corp., 384 U.S. 563,583 (1966), held that "judicial rulings
alone almost never constitute a valid basis for a bias or partiality
ruling." See also In re Boston's Children First, 244 F.3d 164, 168
(1 st Cir. 2001) (judicial rulings almost never constitute a valid basis
for recusal even when the rulings in questions are erroneous);
Phillips v. Joint Legislative Committee on Performance and
\4 Most United States Courts of Appeals have opined that
there is as much of an obligation not to recuse when not required as
there is to do so when it is. See also ttinman v. Rogers, 831 F.2d
937, 939 (10th Cir. 1987); Brody v. President & Fellows. of
l:larv, ard College, 664 F.2d 10, 12 (lst Cir.1981); Suson v. Zenith
Radio Corp., 763 F.2d 304, 308 (7th Cir. 1985); Easley v. Univ, of
Mich. Bd. of Regents, 853 F.2d 1351, 1356 (6th Cir. 1988); Nakell
v. Attorney Gen'l of North 17a.rolina, 15 F.3d 319, 325 (4th Cir
1994); In re Drexel Burnham Lambert Group, Inc., 861 F.2d
1307, 1312 (2nd Cir. 1988). See generally Recusal; An Analysis of
,Case Law Under 28 U.S.C. §§455, 144, Federal Judicial Center,
Expenditure Review of State of Mississippi, 637 F.2d 1014, 1020
(5th Cir. 1981) ("[A] motion for disqualification ordinarily may not
be predicated on the judge's rulings in the instant case or in related
cases, nor on a demonstrated tendency to rule any particular way, nor
on a particular judicial leaning or attitude derived from his experience
on the bench.).
The standard the Supreme Court set in _ for establishing
bias or partiality or deep-seated favoritism or antagonism has been
adopted verbatim by the Federal Circuit in (Thar.ron, 200 F.3d at 789
(quoting _ 510 U.S. at 555):\5 ..
[O]pinions formed by the judge on the basis of facts
introduced or events occurring in the course of the
current proceedings, or of prior proceedings, do not
constitute a basis for a bias or partiality motion unless
they display a deep-seated favoritism or antagonism that
would make fair judgment impossible. Thus, judicial
remarks during the course of a trial that are critical or
disapproving of, or even hostile to, counsel, the parties,
or their cases, ordinarily do not support a bias or
partiality challenge. They may do so if they reveal an
opinion that derives from an extrajudicial source; and
they will do so if they reveal such a high degree of
favoritism or antagonism as to make fair judgment
\5 Under the "extrajudicial source" doctrine, (developed in
Grinell, 384 U.S. at 583), knowledge acquired or opinions derived
by the judge from information outside the proceedings may support
a motion for recusal. See _ 510 U.S. at 554-55; Code of
Judicial Conduct. Plaintiff does not allege that the trial court was
influenced by any extrajudicial source.
Moderate displays of human emotion do not warrant recusal:\6
Not establishing bias or partiality, however, are
expressions of impatience, dissatisfaction, annoyance,
and even anger, that are within the bounds of what
imperfect men and women, even after having been
confirmed as federal judges, sometimes display. A
judge's ordinary efforts at courtroom
administration--even a stem and short-tempered judge's
ordinary efforts at courtroom administration--remain
Along the same lines, the Tenth Circuit, in identifying seven
types of actions not justifying recusal, included:
(2) the mere fact that a judge has previously expressed an
opinion on a point of law or has expressed a dedication
to upholding the law...; [and] (3) prior rulings in the
proceeding, or another proceeding, solely because they
Nichols v. Alley, 71 F.3d 347, 351 (10th Cir. 1995); accord
v. Nezhat, 261 F.3d 1075, 1101-02 (1 lth Cir. 2001).
Even when the trial judge in _?harr0n accused plaintiffs'
attorney of malpractice, defrauding the court, filing a fi'ivolous
action, and doctoring the record, and when she prevented plaintiffs'
attorney from conferring with his clients, the Federal Circuit found
\6 Plaintiff, in any event, provides no instance of even a
moderate display of intemperate behavior, discourtesy, or personal
antagonism towards either party.
no deep-seated antagonism or favoritism warranting recusal. The
Federal Circuit held that these comments constituted merely the trial
court's evaluation and criticism of plaintiffs' attorney's handling of
the case, that her perception of his performance derived from his
conduct during the litigation, and that the judge's comments and
actions"[did] not establish either personal bias and prejudice or the
appearance of partiality." Charron, 200 F.3d at 789.
Other judicial acts that the courts of appeals have found not to
justify recusal for bias and prejudice include: Bieber v. Department
of the Army, 287 F.3d 1358, 1361 fled. Cir. 2002) (judge's
comments that plaintiff's behavior "defies civility to me"); Logue v.
103 F.3d 1040, 1045 (Ist Cir. 1997) (judge's commentsthat "I
totally disbelieve plaintiff in this ease" and "I think he's an absolute
and incorrigible liar"); Yagman v. Republic Ins., 987 F2d 622, 626
(gth Cir. 1993) (heated exchanges between attorney and judge who
also imposed a $250,000 sanction against the attorney in an earlier
action); United States v. Monaco, 852 F.2d 1143, 1147 (9th Cir.
1988) (judge's comments reflecting outrage at crime and at parties'
failure to accept responsibility); In re M. lbrahim Khan, P.S.C.,
751 F.2d 162 (6th Cir. 1984) (judge's statement that debtor's abuse
of the legal system was "reprehensible"); Nicodemus v. Chrys!¢r
596 F.2d 152, 155 (6th Cir. 1979) (judge's comment that
"[defendants] are a bunch of villains and they are interested only in
feathering their own nests at the expense of everybody they can,
including their own employees, and I don't intend to put up with it.").
• _ -)._--
The occasions plaintiffsaysjustify recusal are discussed below,
in chronological order:
The following exchange, contained in the transcript from the
July 17, 1996 hearing on the parties' cross-motions for summary
judgment at 16-17:
COUNSEL: I am not arguing that 222(c) nullifies 222(a).
THE COURT: Well, but in effect it does. Under your
COUNSEL: No, it doesn't, Your Honor. What I'm
saying is by 222(a) the government is saying that they
cannot be sued for allegedly warranting the plans. What
222(e) provides is a protection so that should there
become a problem from the contractor relating to design
that we have basically insurance protection because we
can't sue the government.
THE COURT: But basically what you're saying is that
the - I'm sorry?
COUNSEL: We could not sue the government for a
breach of warranty. The question is if there was a claim
against us as occurred by the contractor based on design
- what protection would we have? That's what 222(c)
provides. It provides a means by which under the
insurance policy, we would have protection against
litigation and the insurer would be -
THE COURT: Well, essentially what you're saying is
that if there was, if these policies were not or these
endorsements were not obtained, then the government
has to step into the shoes of these insurers, of the ANEs.
COUNSEL: Your Honor, I think we would say it a little
differently. We would say if the government promised
to provide this provision in the contract and what we
have here is a specific admission that they didn't do it,
that they breached the contract and the consequence of
that, the consequence of the breach is that we should get
from the government what we lost.as a consequence of
THE COURT: That is exactly what I was saying. You
may prefer to restate everything in your own words, but
I don't think that we were stating anything different and
the effect is certainly clear and that is that the
government ends up becoming the insurer under your
reading of the consequence of the breach of 222(c).
THE COURT: And when you have a provision that
specifically disclaims any warranties, express or implied,
it seems somewhat anomalous that the breach of a
paragraph two paragraphs down would essentially nullify
the warranty to that extent.
COUNSEL: Well, Your Honor, it's always difficult for
a lawyer to be arguing with the Court. In the end, you're
going to decide this...
This exchange contains no ad ho.rninem references, no threats
or antagonistic remarks, no insults or disparagement of counsel, and
no other comments by the judge that might even remotely be
considered evidence of bias or privilege under the standards
discussed above. Rather, it clearly displays only a legal disagreement
between the judge and plaintiff's counsel as to the interpretation of
a contract term.
The judge's statement, in the September 9, 1998 order denying
plaintiff's motion for partial summary judgment, that "judicial
efficiency [is] best served at this stage in the litigation by fully airing
the factual issues [at trial]."
This is alleged to display antagonism towards plaintiff, because
"no factual issues on liability [were] in dispute." However, again,
this remark demonstrates merely a legal disagreement over the
court's legal decision that, as the Federal Circuit suggested might be
the case, see MBTA/I, 245 F.3d at 1377, trial was warranted.
The rulings, in the May 14, 1999 decision, that the terrazzo
floor claim was time-barred, that damages were limited to the cost of
replacing the headhouse floors with wood floors, and that the
testimony of plaintiff's expert on insurance endorsements was
These statements do not by any means evidence bias or
prejudice. Again, these rulings are routine legal decisions, which,
although unfavorable to plaintiff, do not justify recusal under Litek_
or other authority.
Judicial remarks during a status conference on October 3,2001,
Transcript at 17-18, regarding revisiting the insurance endorsement
issue in accordance with the July 3, 2001 Federal Circuit opinion:
_-_._-_ ._ _,..-4-.--I . •
-_-__ , .. -. . _-..-,_
COUNSEL: Well, Your Honor, we had a trial and the
Government elected not to present any evidence. So I
don't agree that they need additional evidence because
they chose not to present any, but obviously you will
COURT: Well, but the Federal Circuit made it clear that
I had the [option] -
COUNSEL: Well, I said -
COURT: - of asking for additional testimony because,
after all, the Federal Circuit came up with a different way
of analyzing the damages than had been - as you say -
than had been present at trial. So obviously there wasn't
evidence on all of these points.
COUNSEL: Well, "my point is that on - there was
certainly evidence and an opportunity to present
evidence on the whole approach to settlement and much
of what counsel just said, particularly an expert, they had
an insurance expert, and they were never asked him any
questions about that. That was their choice. We
certainly couldn't stop them from doing it.
COURT: Well, again, I'm not sure they could have
anticipated that the Federal Circuit would have taken this
tack in analyzing. I mean, getting into the heads of the
people who were conducting settlement. I don't think
anybody could have anticipated that.
COUNSEL: I don't think that the way it's done. I think
in the end, if the Government will conclude this, they
will have to put on an expert who will testify under the
circumstances what would a reasonable insurer have
done. There is no way to get into the head, so you have
to put on an expert. That's the way they will - the
Government will conclude that's the only way they can
These remarks too do not evidence bias, but only a
disagreement over an issue of law, to wit, the court's decision
regarding what efforts were required, and permitted, in complying
with the remand decision by the Federal Circuit. See MBTA II, 254
F.3d at 1377 ("IT]he Court of Federal Claims has discretion, as it
deems necessary, to reopen and supplement the record to allow for
admission of new evidence from both parties on this issue.
Alternatively, the Court of Federal Claims may make its
determination based on the existing record.").
In sum, plaintiffprovides no examples of specific statements,
either in court or in the court's opinions, that demonstrate anything
even approaching bias or prejudice, but only adverse rulings, or
statements of legal disagreement with plaintiff's arguments, neither
of which may be the basis for recusal.
Essentially, plaintiffappears intent on securing reconsideration
of these adverse legal decisions under the implicit threat of petition
for an order of mandamus on an interlocutory basis. This may be
inferred from plaintiff's detained and detailed recapitulation and
refutation of each of the court's legal decisions. In short, plaintiff's
true complaint regards the court's legal decisions, not its conduct.
If legal decisions and disagreements such as these provide a
sufficient basis for mandatory disqualification, it would be the rare
judge who would not be disqualified. Requiring recusal on such
grounds would unjustifiably encourage forum-shopping, delay
decision-making, and intimidate fair administration of justice. It
should not, and will not, be permitted under the circumstances
Therefore, the court's substantive rulings in this case, however
unschooled or erroneous, must be challenged by appeal, not by means
of complaints of judicial bias.
Because plaintiff's grounds for disqualifying the trial judge
consist exclusively of objections to the trial court's adverse legal
rulings, under the standards provided in _ Bieber and
Charron, the motion to disqualify is denied.
S t_ dOe_l Claims
Sn t_e _lniteb _,tate_ Court o(Sebera[ Claim_
(Filed March I0, 2003)
MASSACHUSETTS BAY *
TRANSPORTATION AUTHORITY, *
THE UNITED STATES,
Plaintiff's motion objecting to trial and for entry of judgment in
plaintiff's favor, filed February 19, 2003, is denied. Costs to the
J.F. White Settlement Payment 668,304
Fees and Costs 1,168,561
311412005 Auction Bills-update 3-12-05.xls Interesl Due
INTEREST ON SETTLEMENT PAID TO J.F. WHITE
SETTLEM ENT YEA RLY
YEAR AMOUNT DAYS RATE) INTEREST
1995 1,900,000 61 0.00016 $18,544
1996 1,900..000 (Full Year) 0.05158 98.003
1997 1.900.000 (Full Year) 0.05205 98.903
1998 1.900.000 (Full Year) 0.04938 93.817
1999 1:900,000 (Full Year) 0.0479'4 91.083
2000 1:900,000 (Full Year) 0.06019 114.364
2001 i,900,000 (Full Year) 0.03527 67.005
2002 1.900,000 (Full Year) 0.01645 31.250
2003 1,900,000 (Full Year) 0.01033 19.630
2004 1,900.000 (Full Year) 0.01400 26,609
2005 1.900,000 69 0.00007 $9,096
311412005 Auction Bills-update 3-12-05 xls
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YEAR AVERAGE DAILY RATE
1985(Nov. Dec) 7.37 0.00020
1986 6.17 0.00017
1987 6.02 0.00016
1988 6.90 0.00019
1989 8.40 0.00023
1990 7.76 0.00021
1991 5.59 0.00015
1992 3.54 0.00010
1993 3.08 0.00008
1994 4.40 0.00012
1995 5.68 0.00016
1996 5.16 0.00014
1997 5.21 0.00014
1998 4.94 0.00014
1999 4.79 0.00013
2000 6.02 0.00016
2001 3.53 0.00010
2002 1.64 0.00005
2003 1.03 0.00003
2004 1.40 0.00004
2005to 3/10/05-69 days 2.53 0.00007
*Derived from the Bond Equivalent Rates in Exhibit 302, as
specified in the lntergovernmental Cooperation Act, 31 U.S.C.
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CERTIFICATE OF SERVICE
The undersigned hereby certifies that two copies of the foregoing
Brief for Appellant Massachusetts Bay Transportation Authority were
served by United States mail, first class, postage prepaid, on the 16 'h day of
March, 2005 on Gregory J. Jaeger, Esq., United States Department of
Justice, 1100 L Street, N.W., Rm. 4048, Washington, DC 20530.
CERTIFICATE OF COMPLIANCE WITH FRAP 32(a)(7)(C)
This brief complies with the type-volume limitation on the number of
words in the brief as specified in Rule 32(a)(7)(B). The number of words in
the brief is 13,843.
Joseph C. Lyons