Conflicting testimony regarding effect of contract

Federal District Court Opinions

STEWARD MACHINE CO., INC. v. WHITE OAK CORP., (Conn.
11-16-2006) STEWARD MACHINE CO., INC., Plaintiff, v. WHITE
OAK CORP. and NATIONAL UNION FIRE INSURANCE CO. OF
PITTSBURGH, PA, Defendants. Civil Action No. 3:00cv834
(SRU). United States District Court, D. Connecticut.
November 16, 2006

MEMORANDUM OF DECISION

STEFAN UNDERHILL, District Judge

Steward Machine Co., Inc. (“Steward”) has sued White Oak
Corp. (“White Oak”) and White Oak’s surety, National Union
Fire Insurance Co. of Pittsburgh, PA (“National Union”).
The action arises out of the construction of the Tomlinson
Bridge in New Haven, Connecticut. In 1994, the Connecticut
Department of Transportation (“ConnDOT” or “the State”)
engaged White Oak to be the project’s general contractor.
White Oak then procured a payment bond, with National Union
as surety, and sub-contracted with Steward for the latter
to furnish certain machinery for the project.

Steward filed suit against the defendants seeking damages
for White Oak’s failure to pay Steward in full on a timely
basis, White Oak’s failure to accept delivery of the
machinery, and the lengthy, ensuing storage of the
Tomlinson Bridge machinery at Steward’s plants.

The parties tried the case to the court over six days. My
findings of fact and conclusions of law are set forth
below. See Fed.R.Civ.P. 52.

I. Background

The parties presented conflicting testimony regarding the
effect of their contracts. My findings of fact are largely
based on the written purchase order contract, documents
relating to Page 2 the contracts at issue, the parties’
written correspondence, and the testimony of Steward’s
President Whitney DeBardeleben, whom I find credible.

A. Parties’ Involvement with the Tomlinson Bridge Project

Steward is a family-owned, specialized job shop located in
Birmingham, Alabama. Among other large-scale items, Steward
manufactures mechanical equipment, including sheaves and
counterweight ropes, for moveable bridges.

During the design phase of the Tomlinson Bridge project,
the engineering firm Hardesty & Hanover, the project’s
design engineers, contacted Steward to inquire about the
feasibility of the bridge design plans. As a result of that
contact, Steward became interested in the project. Once the
engineers submitted their design to the State, ConnDOT
solicited bids from general contractors. Steward submitted
its bids to the general contractors that were bidding on
the project, including White Oak. ConnDOT eventually
awarded White Oak the contract for State Project 92-435,
the construction of the Tomlinson Bridge in New Haven,
Connecticut.

As required by Conn. Gen. Stat. § 49-41, White Oak
secured a payment bond to guarantee the public work
project. On June 6, 1994, National Union issued that
payment bond, guaranteeing the project in the amount of
$87,868,378.10. Pl. Ex. 1.

B. Purchase Order Contract

White Oak subcontracted with Steward for the latter to
furnish large-scale equipment for the Tomlinson Bridge. On
August 8, 1994, Steward and White Oak executed a written
purchase order contract setting forth the details of the
parties’ subcontract. Pl. Ex. 3. Page 3

1. ConnDOT Approval

The introductory paragraph of the purchase order specifies
that the bid items “shall be in accordance with the plans
and specifications prepared by” ConnDOT, the project owner.
Pl. Ex. 3 at 1.

2. Bid Items and Prices

The purchase order contract included four items and a
delivery allowance. Id. The four items were identified by
ConnDOT bid item numbers, corresponding to the items as
listed on White Oak’s prime contract with the State. With
their corresponding values, the items were:

Operating machinery $1,215,000

Main and auxiliary 1,465,000 counterweight ropes and
accessories

Counterweight sheaves, shafts 4,400,000 and bearings

Lock machinery 253,000 _____________

Total for bid items $7,333,000

3. Delivery

In addition to the four bid items, the purchase order
included a delivery allowance in the amount of $220,000.
Thus, the value of the purchase order contract totaled
$7,553,000.

The purchase order contract included the following
provision regarding delivery:

Delivery will commence within 12 months from approval of
drawings and be complete within 18 months from approval of
drawings. Seller shall make all deliveries in accordance
with the Buyer’s schedule.

Pl. Ex. 3 at 6. Page 4

White Oak and National Union have argued, in essence, that
the second sentence of the delivery provision (“Seller
shall make all deliveries in accordance with the Buyer’s
schedule.”) overrides the first sentence. Accordingly, the
defendants argue that Steward (the Seller) agreed to abide
by White Oak’s (the Buyer’s) delivery schedule even if that
schedule included a delay of several years after the
approval of drawings. In other words, they argue that
Steward — not White Oak — bore any risk of
delay.

Based on the language of the purchase order’s delivery
provision and the testimony of DeBardeleben, however, I find
that the parties did not agree to an indefinite delivery
date or one that could extend several years beyond the
twelve- to eighteen-month window set forth in the
contract’s delivery provision. The parties’ contract
provided that Steward would make deliveries in accordance
with White Oak’s schedule, with respect to each bid item,
but that schedule was limited to the six-month period
commencing twelve months after the approval of Steward’s
drawings.

The approval of drawings for each bid item spanned several
years. The last approval of drawings for the lock machinery
was May 15, 1998; the last approval of drawings for the
sheaves was January 29, 1996; the last approval of drawings
for the counterweight ropes and accessories was March 19,
1996; and the last approval of drawings for the operating
machinery was January 6, 2000. Def. Ex. 785.

White Oak had until eighteen months after each of those
dates to request and accept delivery of the respective bid
item. Thus, under the purchase order contract, delivery of
the lock machinery was to occur by November 16, 1999;
delivery of the sheaves was to occur by July 30, 1997;
delivery of the counterweight ropes was to occur by
September 20, 1997; and delivery of Page 5 the operating
machinery was to occur by July 7, 2001.

4. Terms and Conditions

a. Terms of Payment and Effect of Payment from ConnDOT

The purchase order contract included the following terms
of payment:

Buyer [White Oak] will cooperate with Seller [Steward] to
submit requests for payment on a timely basis to Owner
[ConnDOT] for all items of work incorporated herein or a
portion thereof. Invoices will be paid within 10 days of
receipt of payment by Buyer from Owner for said items of
work or 60 days from invoice date, which ever [sic] is
sooner. Any portion of the purchase price Buyer may be
entitled to retain shall become due and payable upon
acceptance of all goods purchased under this agreement or
within 180 days after final shipment, whichever event
occurs first in time.

Pl. Ex. 3 at 7, § 3.

At trial, there was conflicting testimony regarding White
Oak’s responsibility for payment under the contract.
Defense witnesses testified that White Oak was merely a
conduit that forwarded invoices from Steward to ConnDOT and
paid Steward only what it received from ConnDOT as payment
for Steward’s work. They testified that White Oak was not
responsible for any amounts beyond what ConnDOT paid.

Paul Mayotte, former Chief Financial Officer of White Oak,
testified that the sixty-day term, described in the
purchase order, was “academic,” and that he understood that
if ConnDOT did not pay for Steward’s work, White Oak was
not required to pay Steward.

Robert Hackling, a White Oak project manager, testified
that White Oak would pass payment to Steward from ConnDOT,
but that the State would not pay Steward for work unless
the equipment was fully fabricated. He testified that White
Oak complied with the purchase order because it made
payment in full for all the money received from ConnDOT for
Steward Page 6 equipment.

The defendants also offered many letters from White Oak to
ConnDOT, requesting payments for Steward’s work, as well as
responses from ConnDOT, in order to show White Oak’s
compliance with the contract.

DeBardeleben testified, however, that White Oak was
responsible for payment within ten days from receipt of
payment by ConnDOT or sixty days from the invoice date,
whichever occurred first. DeBardeleben disputed the claim
that White Oak was not responsible for invoiced amounts not
covered by the State. He testified that payment by ConnDOT
was not a prerequisite to White Oak’s obligation even
though Steward understood that White Oak would invoice
ConnDOT for Steward’s work and Steward cooperated with
White Oak’s billing.

I credit the testimony of DeBardeleben, which is
consistent with the language of the contractual provision
regarding terms of payment. I find that White Oak agreed to
pay properly invoiced amounts within sixty days after the
invoicing or within ten days of receiving payment by
ConnDOT, whichever occurred first. Action or inaction on
the part of ConnDOT did not affect the later, sixty-day
deadline.

Finally, I find that White Oak did, in fact, invoice
ConnDOT for Steward’s work, but that some of the funds
received from the State for the subcontractor’s work were
not passed on to Steward within ten days.

b. “Work in Progress” Payments and Percentages Complete

During contract negotiations, Steward provided White Oak
with a quotation that included provisions concerning
“progress payments.” Pl. Ex. 56. The final purchase order
did not include a specific provision regarding progress
payments. It did, however, include the following terms,
Page 7 which imply that the parties agreed to interim
payments:

Terms of payment — Buyer will cooperate with Seller
to submit requests for payment on a timely basis to Owner
for all items of work incorporated herein or a portion
thereof. Invoices will be paid. . . .

Pl. Ex. 3 at 7 § 3 (emphasis added).

Performance Of Work — No payment, final or
otherwise, made under or in connection with this contract
shall be conclusive evidence of the satisfactory
performance under this contract either in whole or in
part. . . .

Id. at 8 § 10 (emphasis added).

Steward invoiced White Oak before completion and delivery
of the items, and White Oak made partial, or progress,
payments. Certificates of title included with each invoice
transferred title of the specified percentage complete to
White Oak. E.g., Pl. Ex. 51 at 3, §§ 1-2.

The invoices and payments were based on the individual bid
item’s “percentage complete,” that is, the estimated degree
of completion of the fabrication, stated in percentage
terms. A ConnDOT representative was present at Steward’s
plants throughout the fabrication and machining of the
Tomlinson Bridge equipment. That inspector confirmed and
recorded the bid items’ percentages complete. The
percentages complete on the final invoices of three of the
bid items were: operating machinery, 68% complete, Def. Ex.
457; sheaves, 100% complete, Def. Ex. 420; and lock
machinery, 85% complete, Pl. Ex. 51.[fn1]

When Steward and White Oak’s disputes regarding delay and
non-payment had reached an impasse, ConnDOT contracted with
Cianbro Corp. to complete the fabrication of the machinery
held at Steward’s plants. After May 2000, Robert Pellerin,
then a project superintendent at Cianbro, visited Steward’s
plants on behalf of ConnDOT. The purpose of Page 8
Pellerin’s visit was to determine the amount of work
necessary for Cianbro to complete the fabrication of the
equipment. Pellerin took photos of the equipment. Def. Ex.
673. He also noted his determinations of the percentages
complete for purposes of calculating the remaining work
that Cianbro would perform. Def. Ex. 620 (Pellerin’s
notations in dark pen).

Pellerin revised the percentages complete as follows:

sheaves 70% primary speed reducers 90% secondary speed
reducers 90% main pinions 95% ring gears 85% pinion
bearings 100% couplings 100%

Pellerin did not note any percentages complete with respect
to the other items or components.

Pellerin testified at trial regarding the completion
percentages. When asked if there was any reason for Cianbro
to disagree with the percentages complete previously
determined by the State, Pellerin testified that his
notations represented what he thought it would take Cianbro
to complete the project. He also stated that manufacturers
receive higher completion percentages because of the high
cost of raw materials.

In other words, Pellerin did not testify that the
percentages complete that had been calculated by the
ConnDOT representative — and which were the basis of
Steward’s invoices — were inaccurate. Rather, he
testified that manufacturers, such as Steward, are awarded
higher completion percentages, thereby permitting the
earlier release of payment to them, because of the high cost
of raw materials that they must purchase up front for the
project. Furthermore, the Page 9 purpose of Pellerin’s
calculations was not to determine the cost to Steward or
the amount of fabrication that Steward had completed;
rather, his numbers reflected an estimation of the cost for
Cianbro to complete the project. Cianbro’s incentive to
over-estimate the work remaining on the equipment in order
to maximize its revenue suggests that Pellerin’s later
determinations are less accurate.

National Union also relies on a ConnDOT audit, dated
February 5, 1999, in which a state representative evaluated
the completion percentages of the bid items, to argue that
Steward inflated the completion percentages when billing
White Oak. Def. Ex. 620 (typed percentages). That audit was
conducted after the parties’ dispute was full blown.

I credit the percentages complete originally determined by
the state inspector. Steward’s invoices were not based on
inflated completion percentages, and the percentages
invoiced were authorized by the project owner’s
representative on site at Steward’s plants.

c. Retainage

Although the details were absent from the purchase order,
the terms of payment referred to “[a]ny portion of the
purchase price [White Oak] may be entitled to retain,” and
all parties agreed that White Oak was entitled to retain
2.5% of invoiced amounts. Pl. Ex. 3 at 7, § 3. That
retainage became payable to Steward “upon acceptance of all
goods purchased under this agreement or within 180 days
after final shipment whichever event occurs first in time.”
Id.

d. Service Charge

The purchase order included the following provision in case
of delinquent payment:

In the event Buyer fails to make payment in accordance
with the terms of this agreement, the account shall be
deemed to be delinquent and a service charge of one
percent (1%) per month will be added to the unpaid
balance. Where a Page 10 service charge of one percent
per month exceeds the maximum allowed by law, the service
charge shall be the maximum allowed.

Id. at 7, § 6.

Witnesses provided varying testimony regarding the meaning
of “one percent (1%) per month.” Mayotte, White Oak’s
former CFO, testified that he understood the one-percent
charge to be a “one-time charge,” not running interest.
Witnesses from Steward testified that the purchase order
provided for one-percent interest on unpaid balances.

Steward’s invoices reflected interest compounded monthly.
In addition, in a letter dated September 16, 1997, Mayotte
wrote to Steward’s Jerry Shivers:

To the extent that White Oak has failed to pay these
amounts in accordance with Par. 3 of the [purchase order]
agreement, we have an obligation for service charges for
the unpaid amount(s) at 1% per month as per Par. 6.

Def. Ex. 494A (emphasis added). The schedule attached to
that letter included a column that itemized the amount of
“interest” due. Id.

Based on the language of the purchase order, the testimony
of Steward witnesses, and the language of Mayotte’s letter,
I find that, in case of partial payment or non-payment, the
purchase order contract provided for one-percent interest
(dubbed “a service charge”), compounded monthly and added
to the unpaid balance.

C. Prime Contract

White Oak’s contract with ConnDOT — the prime
contract — included, among other items, the four bid
items listed in the Steward purchase order contract. The
prices set forth in the prime contract, however, did not
correspond to the prices in the purchase order. In the
prime contract, the items were priced: Page 11

Operating machinery $1,700,000 Counterweight ropes
$600,000 Sheaves $5,000,000 Lock machinery $400,000

Def. Ex. 494 (attached schedule).

The sheaves, operating machinery, and lock machinery were
priced higher in the prime contract; the counterweight ropes
were priced higher in the purchase order contract. The
differences between the two contracts’ schedules of values
were as follows:

Operating machinery $485,000 Counterweight ropes
($865,000) Sheaves $600,000 Lock machinery $147,000

D. Invoices and Percentages Complete

Steward’s first invoice, dated November 30, 1994, listed
the sheaves as 18% complete. Pl. Ex. 52. Accordingly,
Steward billed White Oak $792,000, i.e., 18% of the
sheaves’ $4.4 million purchase order value. Id. The
invoices from January 18, 1995 through June 17, 1996 did
not specify the completion percentages.

Invoices issued from August 18, 1996, through June 8, 1998,
did specify the items’ percentages complete based on the
inspectors’ reports. Those invoices followed a
“reallocation” of bid item values, discussed below.

The final invoices for the lock machinery, sheaves, and
operating machinery used the reallocation and reflected the
following percentages complete: operating machinery, 68%
Page 12 complete, Def. Ex. 457; sheaves, 100% complete,
Def. Ex. 420; and lock machinery, 85% complete, Pl. Ex.
51.[fn2]

Plaintiff’s Exhibit 53, attached to this decision as
Appendix A, summarized Steward’s invoices, amounts due,
payments, and accumulated interest. That summary did not
list the completion percentages.[fn3]

E. Certificates of Title

DeBardeleben testified that each invoice included a
certificate of title, and that those certificates
transferred title of the specified percentage complete to
the State. The certificate of title enclosed with the lock
machinery invoice dated June 8, 1998, however, transfers to
transfer title to White Oak:

The Vendor has executed this document for the purpose of
acknowledging that the Vendor has made an outright sale
and transfer of title of the above described materials
lawfully owned by the Vendor to the Contractor. . . .

Pl. Ex. 51 at 3, § 1.

The Contractor certifies and represents that he is the
lawful holder of the absolute legal title to the above
described materials and has the full legal right, power
and authority to sell and transfer title to the same. . .
.

Id. at § 2.

Defense exhibits also show that the certificates of title
transferred title from Steward to White Oak. E.g., Def.
Exs. 281, 292 & 320. Page 13

F. April 1997 Meeting

Prior to April 11, 1997, Steward learned that ConnDOT had
paid to White Oak $675,470.91 “for materials furnished by
Steward.” Pl. Ex. 34. White Oak had not, in turn, paid
Steward the sum due Steward under the purchase order due to
a “cash flow problem.” Later that month, Whitney
DeBardeleben, Charles DeBardeleben, and Shivers met in New
Haven with representatives of White Oak, including White
Oak’s former President, Jack Morrissey, to discuss White
Oak’s payments to Steward.

At that meeting, Morrissey agreed that White Oak would pay
$25,000 per week toward past due interest in order to bring
the account up to date.

G. Reallocation

As discussed above, Steward understood that White Oak
would receive payment from ConnDOT for work performed by
Steward. The language of the contract reflects the parties’
anticipation that White Oak would receive payment for
Steward machinery from ConnDOT and forward that payment to
Steward: “Buyer will cooperate with Seller to submit
requests for payment on a timely basis to Owner for all
items of work incorporated herein or a portion thereof.”
Pl. Ex. 3 at 7, § 3.

During the project, difficulties arose with respect to
payment from ConnDOT. White Oak forwarded Steward’s
invoices to ConnDOT for payment, but ConnDOT issued
payments based on the prices listed in the prime contract,
not the prices from White Oak and Steward’s purchase order.

White Oak did not have sufficient funds to pay Steward’s
invoices in full. In response, the parties sought to match
amounts payable to Steward with amounts receivable from
ConnDOT Page 14 in an effort to permit White Oak to
collect more money from the State and to facilitate White
Oak’s payments to Steward. Without amending the purchase
order, the parties adjusted the itemized prices in the
purchase order to match the prices listed in White Oak and
ConnDOT’s prime contract. For example, a post-reallocation
invoice billed for work on the sheaves based on a total
price of $5,000,000 — the prime contract’s price for
the sheaves — even though the purchase order priced
the sheaves at only $4,400,000. Def. Ex. 420. The so-called
reallocation was memorialized in a letter from Steward to
White Oak, dated January 8, 1998. Pl. Ex. 41.

The reallocation did not affect the purchase order
contract’s total price, which remained $7,333,000
(excluding the $220,000 the delivery allowance). A
discrepancy arose, however, because the total of the
adjusted purchase order prices for the bid items was
$7,700,000. Pl. Ex. 41. The plaintiff referred to this
discrepancy as an “overage.” In other words, the parties’
reallocation failed to account for the overall difference
between the total value of the items in the purchase order
and the total value in the prime contract, a difference of
$367,000.

Steward issued a credit (denoted “CM”) in an effort to
compensate for the difference between the prime contract
and purchase order values. Pl. Ex. 52; Def. Ex. 780. The
credit was in the amount of $338,529.74 and was associated
with job number 5344, the counterweight ropes. There were
no further invoices submitted with respect to the
counterweight ropes following the credit.

H. Alleged Overbilling

There was some testimony regarding alleged overbilling by
Steward. Mayotte testified that Steward was only entitled
to receive payment in the amount that ConnDOT would pay to
White Oak, and he classified invoices in amounts greater
than what ConnDOT paid as Page 15 overbilling. The
witness acknowledged, however, that Steward’s billing was
not fraudulent; it was merely higher than what ConnDOT paid
to White Oak. The defendants also introduced as evidence a
letter dated December 11, 1997, in which Morrissey disputed
the amount claimed by Steward and accused Steward of
overbilling in the amount of $580,243.30, charging interest
on the overbilling, and applying “material” payments to
interest. Def. Ex. 509.

The so-called overbilling was a result of the parties’
effort to collect more money from the State to pay
Steward’s invoices. Steward did not bill for work that was
not completed, although it did charge amounts that were
greater than the purchase order values associated with the
bid items. As a result, Steward also charged interest on
unpaid balances that were based on invoice amounts in
excess of the prices in the parties’ purchase order
contract.

I. Manufacture and Delay

Steward began manufacturing the Tomlinson Bridge equipment
in 1994. By September 1996, the sheaves — the first
items required at the job site and those that required the
most work by Steward — were principally ready for
shipment to the job site. White Oak, however, was not
prepared to receive the sheaves. Therefore, Shivers, the
White Oak project manager charged with overseeing the
project, and Morrissey, White Oak’s President, discussed
with DeBardeleben the possibility of storing the machinery
at Steward. When it became “inevitable” that Steward would
store the machinery, Morrissey told DeBardeleben that
Steward would be paid for storage costs. Page 16

J. Storage

1. Ancillary Storage Agreement

In October and November of 1996, Shivers wrote several
letters to White Oak’s George Hird addressing the options
for storage and the associated costs.

In a letter dated September 12, 1996, Shivers wrote Hird
to request any “special storage requirements” from the
State and indicated that the stored machinery, including
the eight counterweight sheaves, would be moved from inside
to outside Steward’s shop. Pl. Ex. 14. In a letter dated
October 30, 1996, Hird wrote Shivers, requesting Steward’s
“recommendations for long term storage (one year approx.).”
Def. Ex. 415. In a letter dated October 31, 1996, and in
response to a letter from ConnDOT, Shivers listed three
options for maintaining the counterweight sheaves while
they were stored outside: (1) to do nothing and sandblast
surfaces prior to painting; (2) to coat the unmachined
surfaces with petroleum-based oil and to monitor them
throughout the duration of the storage; or (3) to sandblast
and primer coat the sheaves, requiring re-painting of the
sheaves after installation. Pl. Ex. 16.

ConnDOT’s Paul H. Breen wrote to White Oak, indicated that
the State preferred the second option, and noted that costs
for the temporary storage and protection were “assumed by
the Contractor until such time that it can be clearly shown
that the associated delays resulted from the action or
inaction” of ConnDOT. Pl. Ex. 18. In a memorandum dated
November 18, 1996, Hird wrote to Shivers to instruct him to
pursue the storage with petroleum-based coating protection
(i.e., “option no. 2”) and “acknowledge[d] that the sheaves
must be stored at [Steward] beyond the original delivery
date and that there are certain additional costs associated
with the storage which could not have been anticipated by
Steward Machine.” Pl. Ex. 20. Page 17

In a letter dated November 15, 1996, Shivers described the
machinery being stored, the square footage required for
storage (6,577 square feet), and quoted a rate of $8/square
foot for indoor storage. Pl. Ex. 19. In a letter dated
December 12, 1996, a Steward representative[fn4] listed
parts associated with the counterweight ropes and
accessories and the square footage required for their
storage (302 square feet), as well as rates of $8/square
foot for indoor storage and $5/square foot for outdoor
storage. Pl. Ex. 21. The second page to that exhibit
(titled “Tomlinson Bridge Storage Charges Recap”), which
appears to have been included as an attachment to the
letter, listed the square footage required for the lock
machinery (192 square feet). Id. White Oak never negotiated
or protested the quoted prices despite receiving Steward’s
storage invoices from September 1996 through mid-2000.
White Oak forwarded the storage invoices to ConnDOT for
payment.

Steward charged White Oak interest on unpaid storage
charges at one-percent, compounded monthly, based on the
interest rate of the purchase order contract. White Oak
never paid any of Steward’s storage invoices or otherwise
compensated Steward for any storage costs.

2. Storage at Steward

Steward based the storage charges on over 7,900 square
feet, the “footprint” of the Tomlinson Bridge machinery,
which equaled approximately four to five percent of the
floor space at Steward’s facilities.

The sheaves were by far the largest items that Steward
stored for White Oak. At different points during the
storage period, the sheaves were moved outside, stored in
the parking lot, and Page 18 then returned inside
Steward’s plants. The sheaves were held inside Plant One in
September and October 1996, then moved two miles across
town and stored outside Plant Two beginning in December
1996. While outside, the sheaves were jacked off the
ground, anti-rust was applied, and wooden frames with tarps
were constructed to protect the sheaves from moisture and
debris. The sheaves were moved back inside prior to being
shipped to Connecticut.

The trunions — a component of the fully assembled
sheaves — were over eight feet in length and 34.4
inches in diameter and weighed approximately twelve tons
each. Because storage and transportation would be difficult
once the trunions were placed into the sheaves, Steward
chose not to complete their final assembly until just prior
to shipment. Prior to the final assembly, the trunions were
stored in Plant One. The reducers — a component of
the operating machinery — were also ready to be
assembled and shipped, but were stored inside. The gear
boxes — some assembled, some unassembled —
were scattered throughout the shop, awaiting final assembly
and shipment.

Eventually, Steward refused to ship the Tomlinson Bridge
machinery despite the fact that the presence of the
Tomlinson Bridge equipment, as discussed below, interfered
with Steward’s other manufacturing projects. In July 1999,
Steward refused to release certain pieces of the machinery
in response to requests for delivery. Shivers wrote that
the items would not be shipped until the storage costs and
interest were paid. Def. Ex. 612. In the summer of 2000, a
representative of National Union visited Steward, seeking
the release of the machinery. In May 2000, White Oak and
National Union filed suit against Steward, seeking
immediate possession of the Tomlinson Bridge machinery
(“the Replevin Action”). In August 2000, the parties
settled the Replevin Action and the machinery was shipped
to Connecticut. Def. Ex. 565. Page 19

Steward regularly invoiced White Oak for the cost of
storage from September 1996 through August 2000. Steward
did not invoice the maintenance and storage costs
separately; in other words, any maintenance charges were
subsumed within the $8 and $5 per square foot storage
charges. Although there was testimony that the $8 and $5
rates were used for indoor and outdoor storage
respectively, all of the invoices appear to have used the $5
rate or a blended rate. Pl. Ex. 54 (summary of storage
invoices).

3. Impact of Storage on Steward

Steward’s plants did not have space available for
long-term storage of massive machinery, and the storage of
the Tomlinson Bridge machinery caused inconvenience and
disruption at Steward’s plants, affecting its performance
on other jobs.

Discussion of the equipment and its problems occurred on a
near-weekly basis at production meetings from October 1996
through 2000. Steward was forced to maneuver other projects
around the Tomlinson Bridge equipment and “do upkeep” on
the Tomlinson Bridge equipment, including applying
anti-rust. The obstruction caused by the racks impeded the
movement of other jobs throughout the shop, and Steward
needed to keep track of the Tomlinson Bridge pieces over
several years.

In a letter dated June 14, 1999, Shivers described the
storage of the Tomlinson Bridge machinery and the
difficulty of measuring the impact of that storage on
Steward’s production. Shivers enclosed a list of jobs
completed in 1996, 1997, and 1998, on which he highlighted
“the larger jobs that were impacted” by the Tomlinson
Bridge equipment. Def. Ex. 663. The cost of each of those
jobs was greater than the selling price, and Shivers
posited that the inconvenience resulting from the presence
of Tomlinson Bridge machinery caused some portion of the
excess Page 20 cost.

The defendants presented evidence that tended to minimize
the effect of the Tomlinson Bridge equipment on Steward’s
other jobs. Steward was not prevented from bidding on other
projects due to the interference of the Tomlinson Bridge
machinery. Several letters from Steward to other customers
detailed manufacturing problems and delays that were not
attributable to the presence of the Tomlinson Bridge
machinery. E.g., Def. Exs. 3, 9, 12. One letter referred to
the “stand still” of the “entire shop” due to the
interference of machinery from another customer’s project,
Def. Ex. 31, but the whole shop was not, in fact, at a
stand still.

In an effort to quantify the cost of the Tomlinson Bridge
machinery on its bottom line, Steward created a new work
order number to which employees were instructed to charge
their time while working on maintaining the Tomlinson
Bridge equipment, moving the equipment bring stored, or
otherwise navigating around it. Claimed costs associated
with storage included $119,580.27 in labor; $13,579.49 in
materials; and $6,405.35 for a subcontract for crane
rental. Pl. Ex. 55 (job detail history report).[fn5] After
Steward calculated overhead with a burden rate of over $5,
the total claimed costs increased to over $750,000.[fn6]
Id.

Defense expert Frank Zito, a Certified Public Accountant,
testified regarding the maintenance costs charged to the
work order number assigned to the storage of the Tomlinson
Bridge machinery. Zito testified that most of the work
tracked on the job history report appeared Page 21 to be
work due under the base contract, not maintenance or
storage-related work. Zito testified that some of the
timecards associated with the work order number had
“storage” or “refurbishment” notations, while others did
not. In response, DeBardeleben testified that some
descriptions, such as “welding,” were automatically
generated when certain classes of workers punched their
timecards.[fn7]

K. Work Performed While Machinery Was in Storage

After April 1997, when it was apparent that the machinery
would not soon be shipped to Connecticut, Steward
essentially stopped work on it. There was, however, some
work completed on the lock machinery in March or April
1998. In addition, machining operations were completed on
the racks — components of the operating machinery
— through 2000, though not continuously. Machining
on the racks was never finished because, absent a shipping
date, other jobs took priority over the Tomlinson Bridge
project. Additionally, once the ring gears’ legs and teeth
were cut, the individual pieces became increasingly
delicate and difficult to store.

The defendants have acknowledged that Steward completed
piece-meal work from January 1997 through August 2000 that
was not limited to storage or maintenance, but extended
Page 22 to base contract work required by the purchase
order. National Union Trial Brief at 25.

L. Notice of Claim

On April 16, 1997, Charles DeBardeleben wrote Morrissey,
seeking payment of approximately $675,000.00 that White Oak
had received from ConnDOT for Steward’s work but that White
Oak failed to pass on to Steward. Pl. Ex. 34. Charles
DeBardelben specifically noted that the letter was “notice
of Steward’s claim for payment” pursuant to section 49-41a
of the Connecticut General Statutes, and demanded that
White Oak place the funds in an interest-bearing escrow
account if payment were not made within ten days. Steward
continued to complete work on the Tomlinson Bridge
machinery on a limited basis after April 1997. Steward also
stored the equipment at its plants — at White Oak’s
request — after April 1997.

On December 20, 1999, Steward filed a notice of claim with
National Union because of White Oak’s default under the
purchase order contract and failure to pay Steward’s
storage costs. Pl. Ex. 2. At trial, Whitney DeBardeleben
testified that it was that letter, rather than the April
1997 one, through which Steward terminated the purchase
order contract. Prior to the December 20, 1999 notice of
claim, White Oak had not paid Steward for its work under
the purchase order contract since June 1998. White Oak had
never paid any of Steward’s invoices for storage costs.

In May 2000, Steward commenced the present action, filing
suit against National Union on the payment bond and against
White Oak on the purchase order (“the Bond Action”).

M. Settlement in Replevin Action

In July 2000, White Oak and National Union commenced the
Replevin Action, seeking immediate possession of the
machinery stored at Steward’s plants. White Oak and
National Union moved for an expedited prejudgment remedy of
replevin. On August 7, 2000, Magistrate Judge William I.
Garfinkel issued an order granting the motion for replevin,
which Steward Page 23 appealed. The parties eventually
reached a settlement agreement in the Replevin Action. Def.
Ex. 565.

In that settlement agreement, National Union paid Steward
$750,000 to be “applied first in reduction of any recovery
by Steward against National in the Bond Action.” Def. Ex.
565 at 8, § 10. The parties agreed not to seek to
recover in the Bond Action any damages accruing after the
date of the agreement. Id. at 9, § 12 (dated Aug.
24, 2000).[fn8] They also agreed to approach the court
jointly to request a reasonably early trial. Id. at 9,
§ 14.

Under the settlement agreement, Steward was not required
to furnish four components of the counterweight ropes and
accessories. Def. Ex. 565 at 4-5. The settlement agreement
did not associate any particular values to the scope of
work that Steward was relieved from performing, and there
was no effort to price the previously completed work in
connection with the settlement agreement. The settlement
agreement did require National Union to pay Steward
$1,025,429 in consideration of Steward’s performance of
refurbishment of the machinery. Def. Ex. 565 at 4-7,
§§ 1-5.

II. Discussion

Steward filed its suit in federal court, and this court
has subject matter jurisdiction based on the parties’
diverse citizenship. 28 U.S.C. § 1332. Page 24

Steward has put forth several theories as bases for its
claims that White Oak and National Union owe the plaintiff
money damages.

First, Steward argues that, because White Oak breached the
purchase order contract, White Oak and its surety, National
Union, are liable for the unpaid balance of the purchase
order, including principal and interest.

Second, Steward argues that White Oak and National Union
are liable for storage fees. Steward submits that White
Oak contracted with it to store and maintain the Tomlinson
Bridge machinery when the general contractor was unable to
receive the items at the job site. Steward claims the
storage costs as damages under either a modification of the
original purchase order contract or a collateral storage
contract. Steward argues that both White Oak and National
are liable for the unpaid storage fees, whether awarded for
breach of the modified purchase order or the collateral
agreement.

Alternatively, Steward argues that White Oak and National
Union are liable for the storage fees under the Uniform
Commercial Code, Conn. Gen. Stat. §§
42a-2-708 and 42a-2-710, because the fees are incidental
damages that were caused by White Oak’s delay and refusal
to accept delivery of the Tomlinson Bridge machinery.

Third, Steward claims damages under a theory of lost
efficiency, alleging that, due to the delays on the
project, Steward lost profits on other jobs that were
disrupted because of the long-term presence of the
Tomlinson Bridge machinery at Steward’s plants.

Fourth, Steward makes claims for interest based on the
purchase order contract or for costs and interest based on
Conn. Gen. Stat. § 49-42.[fn9] Steward likewise
claims that attorneys’ Page 25 fees are due either under
the purchase order or pursuant to Conn. Gen. Stat.
§§ 49-41a and 49-42.

A. Unpaid Balance Under Purchase Order Contract

1. White Oak’s Breach of the Purchase Order Contract

The elements of a breach of contract action are the
formation of an agreement, performance by one party, breach
of the agreement by the other party, and damages. E.g.,
Rosato v. Mascardo, 82 Conn. App. 396, 411 (2004) (internal
quotation marks and citation omitted).

Steward and White Oak contracted for the construction of
the equipment described in the parties’ purchase order.
Despite the absence in the purchase order of an explicit
provision regarding progress payments, the provisions,
quoted infra, that refer to “invoices” and requests for
payment of a “portion” of the work, coupled with the
parties’ conduct, confirm that the parties’ contract called
for interim payments. See Poole v. City of Waterbury, 266
Conn. 68, 97 (2003) (“The intention of the parties
manifested by their words and acts is essential to
determine the meaning and terms of the contract and that
intention may be gathered from all such permissible,
pertinent facts and circumstances.”).

The precise language of the contract also called for
payments to be made within sixty days after the invoicing
or within ten days of White Oak’s receipt of payment by
ConnDOT, whichever occurred first. The purchase order did
not include a typical “pay-if-paid” or “pay-when-paid”
provision, see Blakeslee Arpaia Chapman, Inc. v. EI
Constructors, Inc., Page 26 239 Conn. 708, 718 (1997),
although White Oak was obligated to pay promptly after
receipt of payment from ConnDOT to avoid accrual of
interest charges. The defendants’ arguments that White Oak
was not required to pay Steward’s invoices until ConnDOT
issued payment and accepted the work are not consistent
with the language of the purchase order.[fn10]

Steward performed under the purchase order contract and
fabricated, to varying extent, the four bid items. White
Oak, however, repeatedly failed to make all of the required
payments, in breach of the parties’ contract.[fn11]
Sometimes White Oak made untimely payments; sometimes White
Oak paid only part of the amount due under the invoices;
eventually, White Oak ceased making any payments at all.
Plaintiff’s Exhibit 53, which is attached as Appendix A,
summarizes the invoices issued, payments received, and
running interest claimed by Steward.

Insofar as the defendants argue that the purchase order
required ConnDOT’s inspection and approval before payment
was due, see National Union Trial Brief at 51, the state
inspector, who was present at Steward’s plants during the
fabrication, did approve Steward’s work in advance of the
invoicing.

The calculation of Steward’s damages for White Oak’s breach
of the purchase order contract is discussed below. Page 27

2. Relief Under Payment Bond for Payments Due Under
Purchase Order

Pursuant to Conn. Gen. Stat. § 49-41, White Oak
procured a payment bond, with National Union as surety, in
the amount of its prime contract with the State:
$87,868,378.10. Pl. Ex. 1 (dated June 6, 1994).
Connecticut’s Little Miller Act requires general
contractors on public construction projects to obtain
payment bonds for the protection of those providing labor
and materials. Conn. Gen. Stat. §§ 49-41,
49-42, & 49-43. The Connecticut Supreme Court has described
the statutory bond requirement as “designed to protect and
benefit those who furnish materials and labor to the
contractor on public work, in that they may be sure of
payment of their just claims, without defeat or undue
delay.” American Masons’ Supply Co. v. F.W. Brown Co., 174
Conn. 219, 227 (1974) (internal quotations marks and
citation omitted). The “statutory provisions are to be
liberally construed.” Id.

The Connecticut Supreme Court has concluded that the
legislature intended the statute to operate in general
conformity with the Miller Act and has considered, as
precedent, decisions from federal courts based on the
“apparent kinship between our own and the federal statutes
of similar purpose.” International Harvester Co. v. L.G.
DeFelice & Son, Inc., 151 Conn. 325, 332-33 (1964). See
also, e.g., Blakeslee, 239 Conn. at 716 (“we have regularly
consulted federal precedents to determine the proper scope
of our statute”).

The provisions of Conn. Gen. Stat. § 49-42 as in
effect on June 6, 1994 govern this action. That section
provided in pertinent part:

(a) Every person who has furnished labor or material in
the prosecution of the work provided for in [a contract
for which] a payment bond is furnished under the
provisions of section 49-41 and who has not been paid in
full therefor before the expiration of a period of ninety
days after the day on which the last of the labor was done
or performed by him or material was furnished or supplied
by him for which the claim is made, may enforce his right
to payment under the bond by serving a notice of claim
within one Page 28 hundred eighty days after the date on
which he performed the last of the labor or furnished the
last of the material for which the claim is made. . . .

(b) . . . no [suit under this section] may be commenced
after the expiration of one year after the day on which
the last of the labor was performed or material was
supplied by the claimant.

Conn. Gen. Stat. § 49-42 (1994).[fn12] Thus, to
recover payment under the bond, Steward must have filed a
notice of claim within 180 days of the date when it last
performed labor or furnished material. Conn. Gen. Stat.
§ 49-42(a) (1994). To be timely, Steward’s lawsuit
under section 49-42 must have been commenced within one
year from the date when it last performed labor or supplied
material under the contract. Conn. Gen. Stat. §
49-42(b) (1994).

Steward filed its notice of claim on December 20, 1999.
That filing was timely under section 49-42(a) because
Steward continued to perform labor or furnish material
under the purchase order contract into 2000. In particular,
Steward performed intermittent machining on pieces of the
Tomlinson Bridge equipment. Steward’s lawsuit, commenced
approximately seven months later in July 2000, was timely
under section 49-42(b).

3. Calculation of Damages for Breach of Purchase Order
Contract

a. Liability of White Oak

Because it breached its contract with the subcontractor,
White Oak is liable for the unpaid balance and interest due
under the purchase order contract. To the extent properly
invoiced amounts were never paid, White Oak is liable to
Steward for the amount of the unpaid balance plus interest
at one percent per month under the terms of the purchase
order contract. See West Haven Sound Development Corp. v.
West Haven, 201 Conn. 305, 319 (1986) (noting that the
Page 29 general rule in breach of contract cases is that an
award of damages should place the injured party in the same
position it would have been absent the breach). Calculation
of that amount, however, is problematic. During the project
and after some invoices had been issued and paid, the
parties reallocated the bid item prices, and invoices were
adjusted to reflect that reallocation.

As detailed above, Steward, the subcontractor, invoiced
White Oak, the general contractor, and White Oak in turn
invoiced ConnDOT, the project owner. Initially, Steward’s
invoices reflected the bid item values listed on the
purchase order contract, including retainage of 2.5%.[fn13]
ConnDOT, however, issued payments to White Oak based on the
value of the items according to the prime contract. In
order to facilitate White Oak’s collection of payment from
ConnDOT, Steward and White Oak decided to adjust the bid
amounts — though not the overall purchase order
contract price. The adjusted contract prices mirrored the
bid item values in White Oak’s prime contract with ConnDOT.
Three of the four individual items were priced higher in
the prime contract than in the purchase order. For example,
the most costly item, the counterweight sheaves, were
initially invoiced at the purchase order value of $4.4
million, but after the reallocation, they were invoiced at
the prime contract value of $5 million. White Oak and
National Union have labeled this excess “overbilling.”

In other words, after the parties’ reallocation, Steward
billed White Oak based on the prime contract values,
eventually charging White Oak amounts in excess of the bid
items’ prices in the purchase order contract. Although the
parties agreed to the reallocation in an effort to collect
more money from ConnDOT, Steward’s invoices exceeded the
contractual amounts on certain individual items. As a
result, interest charges on the unpaid balances were also
inflated. Page 30

Plaintiff’s Exhibit 53, Appendix A to this decision,
summarizes the invoices submitted by Steward, White Oak’s
payments, and the running balance for principal and
interest. From November 1994 to June 1996, the invoices
were based on the purchase order values. During that
period, Steward properly billed White Oak, and White Oak is
liable for failing to timely pay those invoices (less
retainage) in full.

Starting on August 18, 1996, Steward began invoicing White
Oak using the prime contract values. The change in pricing
was an effort to “help White Oak get paid so [Steward
Machine] could get paid.” In addition, at some later date,
a credit was issued against the principal balance in the
amount of $338,529.74. It appears that the parties intended
that sum to be credited against the principal balance as of
November 15, 1996. Pl. Ex. 53. The credit was an attempt to
adjust the amounts due based on the difference between the
purchase order and the prime contract. It was not apparent
from the evidence why Steward issued a credit in the amount
of $338,529.74 when the difference between the two
contracts was $367,000. Moreover, the credit did not account
for interest that eventually accumulated based on the
higher, prime contract values.

Because Steward invoiced White Oak for the bid items at
the prime contract values, its post-reallocation bills were
inflated, sometimes reflecting amounts greater than the
total value of the bid item under the purchase order. With
respect to the post-reallocation invoices (i.e., those
dating from August 18, 1996), it is necessary to calculate
the amounts due by multiplying the bid item’s purchase
order value and the percentage complete.

The attached Schedule A (“Purchase Order Contract ?
Revised Amounts Due”), included in Appendix B, shows the
corrected amounts due following the reallocation. The
amounts due are calculated based on the percentages
complete and purchase order values. The schedule Page 31
indicates the revised totals, retainage, and amounts due.

The attached Schedule B (“Purchase Order Contract ?
Revised Principal and Interest”), included in Appendix B,
is styled on Plaintiff’s Exhibit 53.[fn14] The schedule
incorporates the payments, payment dates, invoice numbers,
and “days late” that were supplied by Steward.[fn15] The
revised amounts due are taken from Schedule A, and the
calculations for interest are calculated based on those
revised amounts.[fn16]

White Oak is liable to Steward for the unpaid balance and
interest, calculated based on the values for the bid items
in the parties’ purchase order contract and Steward’s
completion percentages. In accordance with the parties’
settlement agreement in the Replevin Action, contractual
interest ? a component of the plaintiff’s damages
? ceased accruing on August 24, 2000. Def. Ex. 565
at 9, ? 12. The sum of the total unpaid balance
($364,359) and contractual interest ($95,679) is: $460,038,
and White Oak is liable for that amount.

In addition, retainage is recoverable as a component of
Steward’s damages despite the parties’ settlement agreement
precluding recovery of damages “accruing” after August 24,
2000. The retainage accrued when Steward invoiced for the
work completed under the purchase order contract even
though payment for the 2.5% retainage was not due until
White Oak accepted all Page 32 goods under the purchase
order or within 180 days of their final shipment. The
machinery was shipped in 2000 and 2001, and retainage in
the amount of $159,712 was due 180 days following the final
shipment.[fn17] White Oak is liable for that amount.

b. Liability of National Union

Steward is entitled to enforce payment under the bond
pursuant to Conn. Gen. Stat. ? 49-42. National
Union, the surety that issued White Oak’s payment bond, is
liable to Steward for $619,750, the amount owed Steward
under the purchase order contract for its work on the
Tomlinson Bridge, including retainage and contractual
interest at one-percent per month, through August 24, 2000.
Conn. Gen. Stat. ? 49-42 (1994) (in proceeding to
enforce payment bond, court may allow interest at the rate
of interested specified in the subcontract).

B. Storage Fees

1. Collateral Storage Contract

a. Liability of White Oak

Steward has argued that White Oak agreed to pay storage
costs when the latter was unable to accept delivery of the
Tomlinson Bridge machinery within the contracted delivery
period. Steward has suggested that the agreement consisted
of a collateral storage contract or, in the alternative,
that the parties modified the purchase order, incorporating
storage in addition to the manufacture and delivery of the
machinery. The defendants contend that White Oak did not
execute a separate storage contract and the purchase
order’s integration clause prevented its oral Page 33
modification.

Steward’s purchase order contained an integration clause
and provided that the contract could not be modified unless
in writing and signed by authorized representatives of
Steward and White Oak. Pl. Ex. 3 at 7, ? 1. The
parties’ purchase order was not modified when Steward and
White Oak agreed that Steward would store the machinery in
exchange for additional payment. However, “nothing in the
integration clause precluded the parties from forming an
express agreement for additional services.” Positive Impact
Corp. v. Indotronix Intern. Corp., 96 Conn. App. 361, 365
(2006).

“Whether a contractual commitment has been undertaken is
ultimately a question of the intention of the parties.”
Otto Contracting Co. v. S. Schinella & Son, Inc., 179 Conn.
704, 709 (1980). The following evidence establishes that
White Oak intended to undertake a contractual commitment to
pay Steward in exchange for the subcontractor’s storage and
maintenance of the Tomlinson Bridge equipment.

First, the evidence at trial showed that Steward resisted
long-term storage of the Tomlinson Bridge machinery, and
that Morrissey, White Oak’s President, assured Steward that
it would be compensated for storage. Second, in written
correspondence, representatives of Steward, White Oak, and
ConnDOT addressed storage options and agreed that the
Tomlinson Bridge equipment would be stored and serviced at
Steward’s plants and that Steward would be compensated. See
Pl. Exs. 14, 16, 18, 20; Def. Ex. 415. Third, their
subsequent conduct was consistent with that agreement.
Steward did not object to the invoices; rather, Steward
forwarded them to ConnDOT for payment as it had forwarded
invoices under the purchase order.

Despite the absence of a formalized writing, White Oak and
Steward did form a contract. In other words, there was a
bargain between the two and a manifestation of mutual
assent to the Page 34 exchange. See Ubysz v. DiPietro, 185
Conn. 47, 51 (1981) (citing inter alia Restatement
(Second), Contracts ?? 1(c), 15, 19 (Tent.
Dr. 1964)). A party may manifest its assent to the exchange
wholly or partly by written or spoken words or by other
acts or by failure to act. Id. Here, White Oak manifested
its assent to the storage agreement through: (1)
Morrissey’s spoken words to DeBardeleben, (2) written
correspondence, in particular Hird’s November 18, 1996
memorandum, Pl. Ex. 20, (3) White Oak’s failure to object
to the storage invoices, and (4) its forwarding of those
invoices to the State.

Steward proposed rates of $8 and $5 per square foot for
indoor and outdoor storage, respectively, but the parties
did not execute a written contract that contained a term
regarding price. Pl. Exs. 19, 21. Although Steward and
White Oak discussed the rates, there was no evidence of an
explicit acceptance on the part of White Oak with respect
to the amount of the storage charges.

I find that in November 1996 Steward and White Oak agreed
that Steward would store the Tomlinson Bridge equipment
when the delays at the project site prevented delivery. The
agreement to pay for storage was a separate contract,
distinct from the purchase order contract. Def. Ex. 788
(“This storage issue is not a part of our [purchase order]
contract with White Oak and should not affect our payments
agreements [with White Oak and ConnDOT].”).[fn18] The Page
35 storage agreement contained no terms regarding payment
or interest.

Connecticut courts have held that “an agreement will not
be rejected if the missing terms can be ascertained, either
from its express terms or by fair implication.”
Presidential Capital Corp. v. Reale, 231 Conn. 500, 507-08
(1994). “[W]here the plaintiff and the defendant have
agreed that the defendant will pay for the plaintiff’s
services but the agreement is silent as to the amount of
compensation, the court may conclude that the defendant
contemplated paying a reasonable fee.” Id. at 508.

Steward and White Oak contracted for the subcontractor to
store the Tomlinson Bridge machinery when White Oak was
unable to accept delivery. Steward and White Oak agreed
that Steward’s Birmingham plant was the only site where the
machinery could be stored. DeBardeleben and Shivers
attempted to locate other facilities in Birmingham in order
to find comparable rates for storage. They were unable to
locate any facilities that could handle the equipment, but
based on their search, came up with the $8 and $5 rates as
reasonable rental figures. There is no evidence of an
alternative site at which the storage charges would have
been lower.[fn19] Steward announced and used the $8 and $5
rates in its storage invoices to White Oak. White Oak, in
turn, did not object to the quotations or invoices; rather,
the contractor forwarded the invoices to ConnDOT as it had
done with the invoices under the original purchase order
Page 36 contract.[fn20]

Under the purchase order, Steward was required to make all
deliveries in accordance with White Oak’s schedule, within
18 months of the approval of drawings. Pl. Ex. 3 at 6.
Steward’s performance under the purchase order agreement,
thus, required Steward to withhold delivery at White Oak’s
direction as long as eighteen months after approval of the
drawings. With respect to the sheaves, delivery under the
purchase order was to occur by July 30, 1997; delivery of
the lock machinery was to occur by November 16, 1999;
delivery of the counterweight ropes was to occur by
September 20, 1997; and delivery of the operating machinery
was to occur by July 7, 2001.

Although Steward invoiced for storage from as early as
September 1996, the parties’ contract for Steward to store
the machinery “beyond the original delivery date,” Pl. Ex.
20, must relate to storage subsequent to the delivery dates
required under the purchase order.[fn21] Steward Page 37
may, therefore, only recover storage fees for storage
beyond those dates.

In July 2000, White Oak and National Union requested
Steward to ship the machinery to New Haven, but Steward
refused to release the machinery until payment was made for
White Oak’s past due invoices.[fn22] The parties reached a
settlement in August, and the equipment was shipped to
Connecticut. Once the defendants sought the delivery of the
equipment and Steward refused to release it, Steward was
storing equipment for its own purposes rather than storing
it under the parties’ agreement; the storage contract was
then terminated. Steward, thus, may not recover for storage
fees for any period after July 2000.

The storage periods for which Steward may recover fees are:

Counterweight ropes September 20, 1997 ? July 1,
2000 Sheaves July 30, 1997 ? July 1, 2000 Lock
machinery November 16, 1999 ? July 1, 2000

In addition, I note that Steward and White Oak’s
collateral storage agreement did not detail when the
machinery would be stored inside and when it would be
stored outside. As a result, Steward was free to move the
machinery outside ? and charge the lower rate
? whenever it chose; in effect, Steward had the
ability to mitigate its damages by moving the machinery
outside. Because it was up to Steward to determine where to
store the machinery, reasonable fees must be based on the
lower, $5 rate.

With respect to the sheaves, storage fees at a rate of $5
per square foot, based on 6,577 square feet, and dating
from July 30, 1997 through July 1, 2000 total:
$1,545,595.[fn23] Page 38

With respect to the lock machinery, storage fees at a rate
of $5 per square foot, based on 192 square feet, and dating
from November 16, 1999 through July 1, 2000 total:
$7,200.[fn24]

With respect to the counterweight ropes, storage fees at a
rate of $5 per square foot, based on 302 square feet, and
dating from September 20, 1997 through July 1, 2000 total:
$49,981.[fn25]

No storage fees are due for storage of the operating
machinery, which was not stored beyond the applicable
delivery date, July 7, 2001.

Steward performed under its contract with White Oak to
store the Tomlinson Bridge equipment. White Oak’s failure
to pay Steward for the storage constituted a breach of the
parties’ contract. Therefore, White Oak is liable to
Steward for the total storage costs of $1,602,776.

b. Liability of National Union

National Union’s liability for the storage fees requires
further analysis.

National Union argues that its liability under the payment
bond does not extend to the costs of storing the sheaves
and other equipment even if White Oak contracted with
Steward for that storage because: storage was not part of
Steward’s purchase order contract; the items were not
available for use at the project site; Steward’s costs are
fictitious and unrealized; and the statute of limitations
on oral contracts bars Steward’s recovery.

(1) Storage Fees Outside the Scope of the Purchase Order

At trial Steward produced evidence that the prime
contract, which was not itself offered as evidence,
incorporated ConnDOT’s specification 1.09.06, which set
forth the general Page 39 contractor’s responsibility for
the “condition, protection, and replacement of materials
wherever stored.” Standard Specifications for Roads,
Bridges and Incidental Construction, Form 815, Article
1.09.06 (1988). Although the subcontract did not include a
term regarding storage, the prime contract did assign to
White Oak responsibility for the “condition, protection,
and replacement” of materials during any storage period.

The plaintiff points to a Second Circuit decision to
bolster its argument that work required under the prime
contract (here, the protection of materials wherever
stored) is covered by the payment bond, and the
subcontractor may make a claim based on such work even if
it was not work identified in its original subcontract with
the general contractor. See Cam-Ful Industries, Inc. v.
Fidelity and Deposit Co. of Maryland, 922 F.2d 156 (2d Cir.
1991). In Cam-Ful, the Second Circuit reversed a district
court that had relieved a surety from its bond obligation
because the contractor and subcontractor had effectively
modified their subcontract. Id. at 161. The Court of
Appeals noted that the general rule, discharging a surety
from its bond obligation when the contract it has
guaranteed has been materially altered, “only applies to
alterations of the prime contract.” Id. (emphasis added).

The dispute in Cam-Ful arose because a subcontractor
completed additional work ? namely, wood sheeting
? that was not detailed in its subcontract, but was
required under the prime contract. The subcontract was
“based on Adams’s [the contractor’s] assurances to Cam-Ful
[the subcontractor] . . . that if wood sheeting were to be
required for areas other than the manholes, Cam-Ful was to
be paid for that work by Adams Electric.” Id. at 161. The
Court of Appeals also noted:

As a practical matter, if Cam-Ful had refused to do any
wood sheeting or if it had refused entirely to enter into
the subcontract because of the wood sheeting problem, then
Adams Electric would have had to obtain another Page 40
subcontrator who would, of course, have required
reasonable compensation to do the wood sheeting work.

Id.

Under Cam-Ful, if storage of the Tomlinson Bridge
machinery were required under the prime contract, for which
National Union issued the payment bond, Steward is entitled
to recover “the reasonable value of the extra work.” Id. at
163. The present case, however, unlike Cam-Ful, presents a
different question: may storage be covered by the payment
bond if it is not expressly required under the prime
contract?

(2) Is Storage Covered by the Payment Bond?

There is no evidence that the prime contract expressly
required the contractor to store the Tomlinson Bridge
equipment if delays prevented its acceptance at the site.
There is evidence, however, that White Oak and the State
communicated regarding the necessity to store the equipment
and disputed ultimate responsibility for the storage
payments based on their apparent disagreement over the
cause of the delays. Pl. Ex. 18. I infer from that
communication that the prime contract between the State and
White Oak included a requirement that the contractor was
responsible for storage caused by project delays.

More importantly, the scope of the payment bond is
determined in part by the Little Miller Act whose purpose
is broad protection of subcontractors that provide labor or
materials in prosecution of a public works contract. The
payment bond statute requires general contractors on public
works projects to furnish a bond “for the protection of
persons supplying labor or materials in the prosecution of
the work provided for in the contract.” Conn. Gen. Stat.
? 49-41 (1994). Section 49-42 sets forth the process
for enforcing a right to payment under the bond. Conn. Gen.
Stat. ? 49-42(a) (1994). The statute permits a
subcontractor to enforce its right to Page 41 payment for
“labor or materials in the prosecution of the work”
provided for in the prime contract. The question is then:
is storage of machinery, constructed for the project,
“labor or materials” when the delay in delivery is not the
fault of the subcontractor?

Steward points to the Ninth Circuit’s decision in Taylor
Construction, Inc. v. ABT Service Corp., 163 F.3d 1119 (9th
Cir. 1998), to argue that the statutory language ?
“[e]very person who has furnished labor or material”
? limits who can recover under a payment bond, but
not what is recoverable. In that case, a surety refused to
pay a subcontractor pursuant the subcontract’s savings
clause, arguing that the amount due under that clause was
not “labor” or “material” covered under the Miller Act. Id.
at 1121. The Ninth Circuit rejected that argument. The
court held that the subcontractor could recover “the sums
due the party under the bonded contract.” Id. at 1122.
Those sums may include profits. Id. at 1123; see also Price
v. H.L. Coble Construction Co., 317 F.2d 312 (5th Cir.
1963).

The threshold issue presented in the present case, however,
is not how much Steward can recover for storage under the
bond, but whether storage fees are properly recoverable
under the bond at all. The reasoning in Taylor Construction
concerned the scope of the Miller Act and whether profits
were recoverable, but did not address a subcontractor
seeking to recover costs for services that were arguably
not “labor or material.” There appears to be no case law
addressing the precise question whether someone who has
“furnished labor or material in the prosecution of the
work” can recover the costs of storage of material
furnished under the Miller Act or parallel Little Miller
Acts.

The terms “material” and “labor” are both undefined, but
the statute does provide that: “[t]he word `material’ as
used in sections 49-41 to 49-43, inclusive, includes the
rental of equipment used in the prosecution of work
provided for in the contract.” Conn. Gen. Stat. ?
49-42(c). Page 42 In addition, there is case law,
suggesting that “labor and material” should be broadly
construed.

The Connecticut Supreme Court considered the scope of a
surety’s liability in light of the purpose of section 49-41
and noted that:

[T]he interpretation of the statute must be approached on
the premise that the purpose of the bond under section
49-41 is to facilitate the expeditious and uninterrupted
completion of public works by furnishing a means through
which suppliers of labor and material in the prosecution
of the work are afforded protection in extending credit
to contractors.

International Harvester Co. v. L.G. DeFelice and Son, Inc.,
151 Conn. 325, 333 (1964). The Court also noted decisions
among the federal courts that have held items such as gas,
oil, fuel, feed, food for employees, freight charges, and
the replacement value of lost equipment to be covered by
the bond. Id. at 644 n. 3.

In Blakeslee, the Connecticut Supreme Court held a surety
liable to a subcontractor for damages ? including the
rental value of idle equipment ? arising out of
construction delays. 239 Conn. at 725. The Court ruled that
the rental value of equipment that was not actually used in
the project, standby labor costs, and the rental and
liquidation values of steel sheeting and structural members
were all recoverable as items of “labor and material” under
section 49-42 and the payment bond. Id. at 724-32.

National Union has attempted to limit the applicability of
Blakeslee by emphasizing that there the equipment whose
rental value was recoverable was available at the job site.
Here, the Tomlinson Bridge machinery was being stored at
Steward’s plants in Alabama and was not available at the
site. Unlike in Blakeslee, the equipment at issue here is
machinery that Steward manufactured for the project, and
during the storage period it was, in large part, available
for use ? or more precisely, for installation
? at the job site but for White Oak’s inability to
receive the Page 43 machinery there. The liberal
definition of “labor and material” afforded by the Court in
Blakeslee is not confined to circumstances where machinery
or equipment is present at the job site.

The United States Supreme Court has considered the scope
of liability of a surety issuing a payment bond pursuant to
the Miller Act and its predecessor statute and has broadly
interpreted the statutory provisions. For example, in
Standard Accident Ins. Co. v. United States, 302 U.S. 442,
444 (1938), the Court held that a railroad carrier’s
transportation of materials for a public works project
qualified as “labor,” within the meaning of the act
requiring a bond, and the carrier was entitled to recover
against the surety.

In Brogan v. National Surety Co., 246 U.S. 257 (1918), the
United States Supreme Court held that the bond covered the
cost of food consumed by laborers when the remote location
of the work site made their boarding necessary. The Court
considered the “supplies furnished” by the subcontractor
(i.e., groceries for the laborers) when the job site was
located in a “comparative wilderness at some distance from
any settlement” to be “used in prosecution of the work.”
Id. at 260. The Court emphasized that the “special
circumstances” were decisive for establishing “the
conditions essential to liability on the bond.” Id. at 262.

As in Brogan, the special circumstances of the present
case qualify the storage of the Tomlinson Bridge equipment
as “labor or material” used in prosecution of the bonded
work. Steward was not at fault for the extended delay in
delivering the machinery. All parties agreed that Steward’s
Birmingham plants were the only location available for the
unexpected, but long-term storage of the equipment. The
sheaves were massive, and their storage impacted Steward’s
productivity. Although there is no evidence that storage
was an express requirement of White Oak’s prime contract,
the storage of the Tomlinson Bridge equipment was necessary
for the Page 44 completion of the bonded work and was
provided in prosecution of that work.

(3) Storage Fees Are Not “Delay Damages”

In an attempt to limit Steward’s recovery, National Union
has argued that it is not liable for the storage fees
because they are “delay damages” that were not incurred in
the prosecution of work on the Tomlinson Bridge and were
not out-of-pocket costs. National Union Trial Brief at
96-112, citing, e.g., United States ex rel.
Lochridge-Priest, Inc. v. Con-Real Support Group, Inc., 950
F.2d 284, 287 (5th Cir. 1992) (limiting surety’s liability
for delay damages to those costs actually expended in the
prosecution of the bonded work).

The cases that National Union cites as addressing “the type
of damages” claimed by Steward do not, however, deal with
storage fees charged by a subcontractor as a result of an
express agreement with the contractor.[fn26] Rather, those
cases address delay damages and lost profits and the
limited scope of a surety’s liability when delays on public
works projects damage a subcontractor. E.g., United States
ex rel. T.M.S. Mechanical Contractors, Inc. v. Millers
Mutual Fire Ins. Co. of Texas, 942 F.2d 946, 952 (5th Cir.
1991) (subcontractor may recover for additional or
increased costs expended in furnishing labor or material in
prosecution of the work, but not lost profits, that are
attributable to delay); Mai Steel Service, Inc. v. Blake
Construction Co., 981 F.2d 414, 418 (9th Cir. 1992)
(surety’s liability does not extend to lost profits because
they do not involve actual outlay and fall outside the
Miller Act); Consolidated Electrical & Mechanicals, Inc. v.
Biggs General Contracting, Inc., 167 F.3d 432, 436 (8th
Cir. 1999) (under the Miller Act, delay damages are limited
to out-of-pocket expenditures). Page 45

The reasonable storage costs, even if not out-of-pocket,
are not akin to lost profits based on delay that courts
have found are outside the scope of Miller Act payments
bonds. Although the need for storage was a result of delay
on the project, the storage fees claimed under the
collateral storage contract are not “delay damages” that
must be actually expended in order to be recovered from the
surety.

Moreover, under the reasoning of Millers Mutual and
similar cases, Steward could recover for storage fees, as
delay damages, if the subcontractor had used a commercial
storage facility to house the machinery. Those damages
would have then been “additional or increased costs
actually expended in furnishing the labor or material in
the prosecution of the work provided for in the [prime]
contract and attributable to the delay.” Millers Mutual,
942 F.2d at 952 (emphasis in original). Here, the parties
agree that there was no commercial facility available to
store the machinery, and White Oak contracted with Steward
to store the equipment. To require that Steward have
expended the out-of-pocket costs, rather than providing the
service itself, in order to recover from the surety would
be an unfair reading of the payment bond statute and
contrary to Steward and White Oak’s express agreement.

White Oak and National Union also argue that they are not
liable for storage costs because Steward refused to ship
the machinery to the job site even when White Oak was
prepared to receive it. Def. Ex. 612. That refusal
ultimately led to the Replevin Action. Although delivery of
certain pieces was requested in July 1999, the defendants
did not principally seek shipment of the machinery until
July 2000. That is the date after which the defendants are
not liable for continuing storage costs.

(4) Statute of Limitations

Finally, the defendants have argued that the statute of
limitations on oral contracts bars Page 46 recovery. Under
Conn. Gen. Stat. ? 52-581(a), the statute of
limitations is three years for an action “founded upon any
express contract or agreement which is not reduced to
writing, or of which some note or memorandum is not made in
writing and signed by the party to be charged therewith or
his agent.” The statute of limitations for a written
contract is six years. Conn. Gen. Stat. ? 52-576.

First, the collateral storage agreement is a written
contract. See Anthem Health Plans, Inc. v. Action Motors
Corp., 83 Conn. App. 715, 720 (2004) (discussing section
52-581(a)’s “statutory requirement of a contract in
writing” to be satisfied by two documents, each denoting
agreement of one of the parties). Steward and White Oak
exchanged written correspondence regarding the issues
surrounding storage. Hird, White Oak’s project engineer who
communicated with Steward regarding the extended delay,
storage, and associated maintenance, wrote and signed a
memorandum to Steward, giving instructions regarding
storage protection and acknowledging “certain additional
costs” to Steward. Pl. Ex. 20. As a written contract, the
six-year statute of limitations applies, and Steward’s case
is timely. Conn. Gen. Stat. ? 52-576.

Second, even if the collateral storage contract were
considered an oral contract, the three-year limitations
period does not bar Steward’s claims under that agreement.
Steward filed suit against White Oak and National Union in
May 2000, and both parties had filed an appearance by July
24, 2000.[fn27] The storage contract is limited to the time
period following Steward’s obligations under the purchase
order contract. Thus, there are no claims that pre-date
July 30, 1997, when Steward began performance under the
collateral agreement. The claims under the Page 47
collateral storage contract are timely.

(5) Amount of National Union’s Liability

Accordingly, National Union is liable for $1,602,776 for
the cost of storage during the period detailed above.

2. Maintenance of Tomlinson Bridge Machinery During
Storage Period

Steward produced evidence of the cost of maintaining the
Tomlinson Bridge machinery during a portion of the storage
period. In an effort to capture the cost of storing and
maintaining the machinery, Steward began to keep track of
the time its employees spent working on and around the
Tomlinson Bridge equipment. Steward created a new work
order number specific to “storage and interest” and
requested its employees to punch in and out of that number
when they were moving the Tomlinson Bridge machinery,
navigating around it in the shop, or tending to its
maintenance. A job history detail report shows the material
and labor charged to that job number. Pl. Ex. 55. When
quoting and later invoicing storage costs, however, Steward
did not list maintenance as a distinct category of costs
nor did it charge additional fees for maintenance in its
invoices. The only reasonable reading of the evidence
demonstrates that maintenance was included within the
monthly storage charges.

Without knowledge concerning the prospect of future
payments, Steward attempted to track the expenses it
incurred for maintenance during the storage period. Because
White Oak is liable to Steward Machine for the storage
costs, and those amounts reasonably encompass compensation
for maintenance, Steward is not entitled to additional
damages for maintenance costs. Page 48

3. Additional Costs Relating to Storage

Certain other costs associated with storage, such as crane
rentals, were not included in the $8 and $5 fees. When the
parties discussed the storage agreement, Steward specified
that the subcontractor would charge White Oak “the costs
for handling such as crane rental.” Pl. Ex. 19. Those costs
were part of the collateral storage contract and distinct
from the $8 and $5 fees.

Steward presented evidence of two invoices for such
additional costs, totaling $4,645. Pl. Ex. 57 (invoice for
crane rental) & Pl. Ex 58 (invoices for labor and equipment
to load pump and move eight sheaves). DeBardeleben
testified that the labor and equipment services detailed in
Plaintiff’s Exhibit 58 were “outside services.”

White Oak and National Union are liable for $4,645 in
additional costs relating to the storage of the Tomlinson
Bridge machinery.

4. Incidental Damages under UCC

As an alternative to the contract modification or
collateral contract theories, Steward also argued that the
storage fees were recoverable as incidental damages under
Uniform Commercial Code sections 42a-2-708 and
42a-2-710.[fn28]

Because Steward is recovering its storage fees under the
collateral storage agreement, it is unnecessary to consider
its claim for the cost of storage as incidental damages
under the UCC. Page 49

C. Lost Efficiency

In addition to storage fees, Steward seeks damages for
“lost efficiency,” i.e., higher costs of production
incurred on other projects due to the presence and
interference of the Tomlinson Bridge equipment at Steward’s
plants.

Neither White Oak nor National Union are liable for the
so-called lost efficiency damages. First, the fees charged
for storing the Tomlinson Bridge equipment at Steward’s
plant compensate Steward for the impact of the equipment’s
presence. See Def. Ex. 663 (letter from Shivers regarding
interference with other projects, storage costs at other
facilities, and Steward’s charges). Steward may not both
recover on the storage fees claim and obtain further
damages because the storage may have impacted its
efficiency.

Second, damages relating to the higher costs of production
on other projects are the type of lost profits damages that
courts have regularly found are not recoverable under the
Miller Act. E.g., Millers Mutual, 942 F.2d at 952.

D. Attorneys’ Fees and Statutory Interest

1. Liability of White Oak

Connecticut’s Little Miller Act requires that the general
contractor, upon demand of its subcontractor, “place funds
in the amount of the claim, plus interest of one per cent,
in an interest-bearing escrow account in a bank in this
state,” but permits the general contractor to “refuse to
place the funds in escrow on the grounds that the
subcontractor has not substantially performed the work
according to the terms of his or its employment.” Conn.
Gen. Stat. ? 49-41(a) (1994).

If the general contractor refuses to place the funds in
escrow, and the subcontractor “is found to have
substantially performed its work in accordance with the
terms of its employment in Page 50 any arbitration or
litigation to determine the validity of such claim,” the
general contractor is liable for the subcontractor’s
attorneys’ fees.[fn29] Id.

When Steward demanded that White Oak place the disputed
amount in an interest-bearing escrow account, White Oak
refused. Because I find that Steward substantially
performed its work in accordance with the terms of its
employment, and its claim against White Oak is valid, White
Oak is liable under section 49-41a(b) for Steward’s
attorneys’ fees.

As noted above, I interpret the parties’ August 2000
settlement agreement to bar interest accruing after the
date of that agreement. There is no evidence, however, that
suggests that the parties intended the term “damages
accruing” under the settlement agreement to refer to
statutory attorneys’ fees that might be awarded. I find
that the settlement agreement does not preclude an award of
attorneys’ fees.

2. Liability of National Union

In an action brought under section 49-42 for payment under
the bond, the court shall award costs to the prevailing
party and allow interest at the rate specified in the labor
or materials contract under which the claim arises, or, if
none, under section 37-3a. Conn. Gen. Stat. ?
49-42(a). I may require National Union to pay Steward’s
reasonable attorneys’ fees only if National Page 51
Union’s denial of liability or its defense to Steward’s
claim is “without substantial basis in fact or law.” Id.

National Union is liable under section 49-42 for both the
unpaid principal balance of the purchase order and
one-percent per month interest on that balance, as
specified in Steward’s purchase order contract.[fn30]
National Union is also liable for the unpaid storage fees
($1,602,776) based on White Oak and Steward’s collateral
storage agreement, for crane rental ($4,645) and for
interest on their total amount ($1,607,421). Because that
agreement contained no interest rate, a rate of ten percent
per year is applied pursuant to sections 49-42 and 37-3a.
Therefore, National Union is liable for statutory interest
in the amount of $99,968.[fn31]

Because National Union’s denial of Steward’s claim and the
defenses it put forth in litigating the instant action were
not without substantial basis in fact or law, I decline to
find National Union liable for Steward’s attorneys’ fees.
Page 52

E. Conclusion

The defendants are jointly and severally liable for damages
in the amount of $1,477,171, detailed below:

Unpaid balance on purchase 460,038 order, including
interest

Retainage 159,712 Storage fees 1,602,776 Crane rental,
etc. 4,645 (Settlement Agreement) (750,000) __________
Total $1,477,171

In addition, National Union is liable for statutory
interest in the amount of $99,968. Conn. Gen. Stat.
?? 49-42 and 37-3a. White Oak is liable for
attorneys’ fees. Conn. Gen. Stat. ? 49-41a(b).

The clerk shall enter judgment and close the file.[fn32]

It is so ordered.

[fn1] The final invoice for the counterweight ropes did not
specify a percentage complete.

[fn2] The last invoice for the counterweight ropes was
issued June 17, 1996, prior to the reallocation, and did
not specify a percentage complete.

[fn3] In connection with a post-trial submission, requested
by the court, Steward submitted a revised Exhibit 53. In
that revised submission, Steward made corrections to the
exhibit. All citations to Exhibit 53 refer to the revised
exhibit.

[fn4] The plaintiff introduced only a portion of the letter,
and that portion did not include the author’s name.

[fn5] The materials cost of $14,634.90 erroneously includes
an expense payment to Shivers in the amount of $1,055.41.
The correct materials costs is, therefore, $13,579.49.

[fn6] There was testimony concerning the burden rate used in
the job history report and the significantly lower burden
rate used by the parties’ accounting experts. As set forth
in the discussion below, it is unnecessary for me to
evaluate Steward’s burden rate.

[fn7] Additionally, I note that Steward sought to introduce
the testimony of Les Alexander, an accounting expert, on
the question of the effect of the Tomlinson Bridge
equipment on Steward’s productivity. In an effort to
quantify the damages suffered as a result of the impact on
Steward’s ongoing fabrication, Steward retained Alexander,
who specializes in forensic accounting.

On the defendants’ Daubert motion, I excluded Alexander’s
testimony regarding business disruption and inefficiency on
the ground that the methodology he used was not reliable.
See Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S.
579 (1993). The plaintiff was not prevented from
introducing Alexander’s testimony with respect to the
maintenance costs incurred, and I permitted Alexander to
testify about his methodology at the plaintiff’s request.
Having heard Alexander’s testimony at trial and having
considered his report on the business disruption and
inefficiency in its entirety, I concluded that the report
did not meet the necessary standard of reliability under
Daubert. Additionally, as finder of fact, I found the
report unpersuasive even if it were admitted into evidence.

[fn8] The defendants have argued that the settlement
agreement precludes the recovery of contractual and
statutory interest accruing after its execution, August 24,
2000. There was no testimony regarding that contractual
provision or whether the parties intended it to preclude
statutory interest. In their settlement agreement, the
parties did, however, agree to approach the court to
request a reasonably early trial. I infer from that
provision that the parties intended a prompt resolution to
their dispute because interest on any outstanding balance
had ceased accruing. In other words, I find that the
parties intended to cut off interest on any unpaid balances
from the execution of the settlement agreement. See Paulus
v. LaSala, 56 Conn. App. 139, 147 (1999) (“if interest is
due, it is an element of damages”).

[fn9] Steward also makes a claim for offer-of-judgment
interest pursuant to Conn. Gen. Stat. ? 52-192a.
Pursuant to the Local Rules of this District, I am not
aware of the amount of the offer of judgment. See D. Conn.
L.R. Civ. P. 68 (offer of judgment remains under seal until
after trial). After entry of judgment, I will examine the
offer of judgment to determine whether Steward is entitled
to recovery under section 52-192a. See Tureck v. George, 44
Conn. App. 154, 162 (1997) (interpreting “after trial” to
mean after a “final judgment”).

[fn10] To the contrary, the terms of the purchase order
provide that payment is not to be construed as acceptance
or as conclusive evidence of satisfactory performance. Pl.
Ex. 3 at 8, ? 10.

[fn11] National Union has argued that, by continuing to work
on the Tomlinson Bridge project after declaring White Oak
in default and threatening to discontinue manufacturing,
Steward waived any breach. National Union Trial Brief at
26. “The general rule . . . is that a party for whose
benefit a provision in a contract is intended may waive his
rights under such provision.” Loda v. H.K. Sargeant &
Associates, Inc., 188 Conn. 69, 77 (1982). Waiver, a
question for the finder of fact, “may be inferred from the
circumstances if it is reasonable so to do.” Id. at 76.
Under the circumstances of this case, Steward’s continued
performance did not constitute a waiver of its right to
enforce payment under the purchase order contract.

[fn12] Section 49-42 was revised in October 1994. Citations
to Conn. Gen. Stat. ? 49-42 (1994) refer to the
statute as of June 2004.

[fn13] Steward invoiced the entire amount due but immediate
payment was not required for the 2.5% retainage.

[fn14] Plaintiff’s Exhibit 53 is not helpfully organized,
so deriving information from that schedule can be
cumbersome. Nevertheless, I followed the format of Exhibit
53 when preparing Schedule B because Exhibit 53 accurately
set forth the invoicing and payment history for the period
prior to the reallocation.

[fn15] Three entries under the “days late” column were
incorrect, based on the listed payment dates; those entries
were corrected.

[fn16] The interest accrued was determined based on
one-percent interest compounded monthly and the following
formula: interest = P ? (P/1.01n) where P is the
principal and n is the number of months.

[fn17] Retainage of 2.5% is calculated based on the total
amount due for the counterweight ropes ($947,210) and the
revised total amounts due for the other three bid items,
listed on the attached Schedule A: sheaves ?
$4,400,000; operating machinery ? $826,200; lock
machinery ? $215,050). Those amounts total
$6,388,460. The retainage due equals $159,712, which is
2.5% of that total.

[fn18] National Union has argued that entitlement for
payment for storage was subject to ConnDOT’s approval of
Steward’s storage invoices. National Union Trial Brief
(doc. # 89) at 30. National Union cites a letter from
Shivers, Steward’s project manager, to Morrissey, in which
Shivers asks White Oak to pursue past due invoices for
storage with the State. Def. Ex. 788. National Union also
points to a memorandum from Hird, White Oak’s chief
engineer, in which he notes that White Oak will forward
Steward’s storage invoices to ConnDOT “for their
consideration.” Def. Ex. 795. That evidence does not
suggest that Steward contracted with ConnDOT to store the
machinery. Rather, as under the purchase order contract, it
suggests that Steward understood that White Oak would
collect payment from ConnDOT for Steward’s services. That
arrangement does not negate White Oak and Steward’s
agreement regarding storage. Although White Oak may have
“believed it was not responsible for the delays on the
project,” National Union Trial Brief at 30, and that the
ConnDOT was ultimately liable for the storage costs, White
Oak contracted with Steward to store the machinery when the
delays prevented Steward from delivering it.

[fn19] Moreover, a commercial storage facility would have
likely required White Oak to rent a defined area ?
either the entire facility or a fixed portion thereof
? in excess of the “footprint” of the Tomlinson
Bridge machinery. Steward charged based only on the square
footage of the equipment, lowering the effective rate below
$8 and $5 per square foot.

[fn20] Apparently, White Oak believed ConnDOT was
ultimately responsible for the storage costs and as a
result did not negotiate lower rates with Steward.
Nevertheless, it was White Oak that contracted with Steward
to store the equipment.

[fn21] Steward invoiced White Oak for storage of the sheaves
(job no. 5343-W) from September 1996 through August 21,
2000. Id. The sheaves were inside Steward’s plants in
September and October 1996, and Steward was billed for
storage at a rate of $52,616.00 per month for a surface
area of 6,577 square feet. Pl. Ex. 19. In a letter dated
November 15, 1996, Shivers indicated that the sheaves would
be moved outdoors “very soon” and that Steward would be
billed for the costs associated with moving the equipment.
Id. In December 1996, Steward invoiced White Oak $50,065.23
for the sheaves’ storage. Pl. Ex. 54. From January 1997,
Steward charged $37,616.00 per month for the storage of the
sheaves. Steward also incurred $1,725.00 in costs to move
the sheaves inside in April 1998, Pl. Ex. 57, and incurred
$2,920.35 in costs to move the sheaves in November 1999.
Pl. Ex. 58.

Steward invoiced White Oak for storage of the
counterweight ropes (job no. 5344-W) from September 1996
through August 21, 2000. Pl. Ex. 54. Steward charged
$1,762.00 per month. Id. That amount reflected 84 square
feet of indoor storage ($672.00) and 218 square feet of
outdoor storage ($1,090.00). Pl. Ex. 21.

Steward invoiced for storage of the lock machinery (job
no. 5346-W) from July 1998 through August 21, 2000, and
storage of the operating machinery (job no. 5343-W) from
April 1999 through August 21, 2000. Pl. Ex. 54. Steward
charged $1,536.00 per month for storage of the lock
machinery and $7,264.00 per month for storage of the
operating machinery. Id.

[fn22] In July 1999, Steward had the opportunity to ship
certain pieces of the machinery. Def. Ex. 612.

[fn23] 47 months at $32,885 per month equals $1,545,595.

[fn24] 7.5 months at $960 per month equals $7,200.

[fn25] 33.1 months at $1,510 per month equals $49,981.

[fn26] While attempting to address Steward’s alternative
and overlapping theories of recovery, National Union does
not distinguish been the storage fees as damages
recoverable under a collateral storage contract, incidental
damages under the Uniform Commercial Code, and damages
claimed pursuant to the lost profits or lost efficiency
claim.

[fn27] Under Connecticut state law, applicable in this
diversity action, an action is commenced for purposes of
the statute of limitations on the date of service of the
complaint upon the defendant. See, e.g., Converse v.
General Motors Corp., 893 F.2d 513, 515-16 (2d Cir. 1990).

[fn28] The statute provides:

Incidental damages to an aggrieved seller include any
commercially reasonable charges, expenses or commissions
incurred in stopping delivery, in the transportation, care
and custody of goods after the buyer’s breach, in
connection with return or resale of the goods or otherwise
resulting from the breach.

Conn. Gen. Stat. ? 42a-2-710.

[fn29] Steward also argued that it was due attorneys’ fees
under the terms of the purchase order contract. The terms
of the purchase order contract provide: “In the event that
Buyer is required to engage the services of an
attorney-at-law to enforce its rights under this contract
Prevailing Party shall be liable for reasonable attorneys’
fees and costs.” Pl. Ex. 3 at ? 16. That provision
does not permit Steward to collect attorneys’ fees from
either defendant. First, the attorneys’ fees provision does
not appear to apply to Steward’s attorneys’ fees at all. It
refers only to the Buyer’s (that is, White Oak’s) need to
engage an attorney. Second, the contract specifies that the
prevailing party is liable for attorneys’ fees, not that
the prevailing party shall be awarded attorneys’ fees. The
language of this provision may reflect a mutual mistake of
the parties. In any event, no one has claimed that the
prevailing party in the instant lawsuit should be liable
for the attorneys’ fees of another party.

[fn30] The interest calculations in Schedule B are based on
one-percent interest compounded monthly, the rate of
interest in the parties’ purchase order contract. The
interest rate is the same under the contract as under
section 49-41a(b). Thus, whether the interest is understood
to be contractual interest running until the execution of
the settlement agreement or contractual interest until the
notice of claim and, from that point, statutory interest
under section 49-42, the end result is the same.

[fn31] Interest at ten percent is calculated from January
10, 2000, the date of the notice of claim, until August 24,
2000, the date of the settlement agreement: 227 days.

[fn32] Any motion for attorneys’ fees shall be filed no
later than fourteen days after entry of judgment,
Fed.R.Civ.P. 54(d)(2)(B), and shall be supported by
affidavits and contemporaneous time records. Page 1