Opinion
No. 98 Civ. 3099 (THK).
March 29, 2005
MEMORANDUM OPINION AND ORDER
Plaintiffs, United States Fidelity and Guaranty Company ("USFG") and American Home Assurance Company ("AHAC") (collectively, the "Sureties"), have moved under Federal Rule of Civil Procedure 59 (e), to alter or amend the Judgment entered on February 8, 2005 (the "Judgment"), upon the Opinion of February 4, 2005. See U.S. Fidelity Guar. Co. v. Petroleo Brasileiro S.A.-Petrobas, No. 98 Civ. 3099 (THK), 2005 WL 289575 (S.D.N.Y. Feb. 4, 2005) (the "Opinion"). Defendants have not opposed the motion and, for the reasons set forth below, the motion is granted.
Federal Rule of Civil Procedure 59 (e) provides "courts with an opportunity to correct manifest errors of law or fact, hear newly discovered evidence, consider a change in the applicable law or prevent manifest injustice." See Word v. Croce, No. 01 Civ. 9614 (LTS), 2004 WL 434038, at *2 (S.D.N.Y. Mar. 9, 2004) (quoting U.S. Titan, Inc. v. Guangzhou Zhen Hua Shipping Co., Ltd., 182 F.R.D. 97, 100 (S.D.N.Y. 1998). It is not an appropriate vehicle for presenting "new facts, issues or arguments not previously presented to the court." Id. (quoting Wechsler v. Hunt Health Sys., Ltd., 186 F. Supp. 2d 402, 410 (S.D.N.Y. 2002); see also Parrish v. Sollecito, 253 F. Supp. 2d 713, 715 (S.D.N.Y. 2003) (noting that a Rule 59 (e) motion is not an avenue for a "party dissatisfied with the [c]ourt's ruling to advance new theories that the movant failed to advance in connection with the underlying motion, nor to secure a rehearing on the merits with regard to issues already decided").
The standards governing Rule 59 (e) motions, and motions for reconsideration or reargument, pursuant to Local Rule 6.3 of the Southern District of New York, are the same. See Word, 2004 WL 434038, at *2; 4200 Ave. K LLC v. Fishman, No. 00 Civ. 8814 (RLC), 2001 WL 498402, at *1 (S.D.N.Y. May 10, 2001). To succeed on such a motion, the moving party must demonstrate controlling law or factual matters put before the court on the underlying motion that the movant believes the court "overlooked and that might reasonably be expected to alter the court's decision."See Parrish, 253 F. Supp. 2d at 715. Alternatively, amendments or reconsideration may be granted to "correct clear error, prevent manifest injustice or review the court's decision in light of the availability of new evidence." Id. (citingVirgin Atlantic Airways, Ltd. v. Nat'l Mediation Bd., 965 F.2d 1245, 1255 (2d Cir. 1992)).
The facts which led to the Judgment are set forth in the Opinion and will not be reiterated. The Judgment granted the Plaintiff Sureties the right to indemnification against Defendants Inepar Administracao e Participacoes, S.A. ("Inepar AP"), Inepar Industria e Construcoes, S.A. ("Inepar IC"), Sade Vigesa Corporation of America ("Sade America"), Sade Vigesa Industrial e Servicos, S.A. ("SVIS"), Internacional de Engenharia, S.A. ("IESA"), and Sade Vigesa (Chile), S.A. ("Sade Chile") (collectively, "Defendants"), for liability and losses sustained in connection with the Port of New Orleans Bond. Plaintiffs seek to amend the Judgment in three respects: 1) to make clear that USFG alone, not both Sureties, is entitled to indemnification under the Port of New Orleans Bond; 2) to add prejudgment interest to the underlying Judgment in the amount of $3,751,898.72; and 3) to award the Sureties $7,729,592.00, together with prejudgment interest, against Defendants, for indemnification for losses and expenses incurred under the P-31 Bond.
I. The Port of New Orleans Bond
As discussed in the Opinion, USFG was the sole surety which issued, and sustained losses and expenses under, the Port of New Orleans Bond in favor of Sade America, and the related Release of Lien Bond in favor of Boh Brothers. See U.S. Fidelity Guar. Co., 2005 WL 289575, at **3-4. Defendants were found liable to indemnify USFG for its losses and expenses in the amount of $3,751,898.72. See id. at *26. The Judgment indicates that "plaintiffs" are entitled to indemnification, and it shall be amended to make clear that indemnification under the Port of New Orleans Bond is owed only to USFG.
II. Prejudgment Interest
Plaintiffs also seek to amend the Judgment to include prejudgment interest. Although Plaintiffs did not make this request in their submissions to the Court, the Second Circuit has concluded that the prevailing party's failure to request interest in its pleadings does not constitute waiver of the right to prejudgment interest. See Mallis v. Bankers Trust Co., 717 F.2d 683, 692-94 (2d Cir. 1983); see also Stanford Square v. Nomura Asset Capital, 232 F. Supp. 2d 289, 290-91 (S.D.N.Y. 2002). In a diversity action in federal court, as is this action, state law determines the propriety of an award of prejudgment interest. See, e.g., Baker v. Dorfman, 239 F.3d 415, 425 (2d Cir. 2000); Schwimmer v. Allstate Ins. Co., 176 F.3d 648, 650 (2d Cir. 1999). The Court (Koeltl, J.) held that the obligations under the 1994 and 1995 Indemnity Agreements associated with the P-31 Bond, should be interpreted under New York law because New York is the jurisdiction with the most significant contacts with those Agreements. See United States Fid. Guar. Co. v. Braspetro Oil Servs. Co., 219 F. Supp. 2d 403, 475-76 (S.D.N.Y. 2002), aff'd in relevant part, vacated in part and remanded, 369 F.3d 34 (2d Cir. 2004). Prejudgment interest is awarded under New York law as a matter of right for contract damages.
Interest shall be recovered upon a sum awarded because of a breach of performance of a contract, or because of an omission depriving or otherwise interfering with title to, or possession or enjoyment of, property, except that in an action of an equitable nature, interest and the rate and date from which it shall be computed shall be in the court's discretion.
N.Y.C.P.L.R. § 5001(a).
Since this is an action in law in which USFG was awarded damages pursuant to an indemnification agreement, New York law requires that prejudgment interest be awarded to USFG.
Prejudgment interest is to be "computed from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred." N.Y.C.P.L.R. § 5001(b). Under the 1994 and 1995 Indemnity Agreements, the Principals were bound to reimburse the Sureties for all losses and expenses under the Bond "as soon as liability exists or is asserted against the Surety, whether or not the Surety shall have made any payment therefor." (See Pl.'s Trial Exs. S-6, line 28; S-39, lines 30-31.) However, USFG's losses and expenses under the Port of New Orleans Bond were incurred through a number of payments over time. "Where damages are incurred at various times after the cause of action accrues, section 5001 grants courts wide discretion in determining a reasonable date from which to award pre-judgment interest." Conway v. Icahn Co., 16 F.3d 504, 512 (2d Cir. 1994) (citing Cotazino v. Basil Dev. Corp., 167 A.D.2d 632, 562 N.Y.S.2d 988, 991 (3d Dep't 1990)); see also N.Y.C.P.L.R. 5001(b) (where damages were incurred at various times, "interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date"). Here, Plaintiffs' incurred losses and expenses at various points between September 4, 1996 and January 8, 2003. (See Letter from Plaintiffs' counsel, Anthony R. Twardowski, dated Mar. 25, 2005 ("Pls.' Ltr.) at 1.); Declaration of Christine T. Alexander, executed Feb. 5, 2003 ("Alexander Decl."), Ex. I.) The Court finds that the midway point between these two dates, November 6, 1999, is a reasonable intermediate date from which to compute prejudgment interest on the losses Plaintiffs incurred under the Port of New Orleans Bond, for which Defendants are obligated to indemnify them. Prejudgment interest will be calculated at the rate of 9% per annum as provided for in New York law. See N.Y. C.P.L.R § 5004.
III. The P-31 Bond
Plaintiffs argued that IESA was jointly and severally liable for $163,000,000 in losses and expenses incurred under the P-31 Bond because of its membership in the P-31 Consortium, which was the Principal on the P-31 Contract. The other two members of the Consortium, IVI and Sade, signed the Bond, but IESA did not. Although the Court found IESA was not jointly and severally liable for the losses under the Bond, see U.S. Fidelity Guar. Co., 2005 WL 289575, at *23, Plaintiffs now argue that the Court's findings demonstrate that IESA agreed to indemnify Plaintiffs for at least its share of the services provided in the P-31 Project, in the amount of $7,729,592, and request that the Judgment be amended accordingly.
The Court found that IESA was not jointly and severally liable on the P-31 Bond because 1) Brazilian law does not presume joint and several liability for a Consortium, 2) IESA had not signed the Bond, as did the other two members of the Consortium, and 3) IESA did not express an intention to be held as a full Principal on the Bond. See id. at **20-23. However, the evidence submitted at trial included a letter written by IESA representatives on February 27, 1996, to the Sureties' bond broker, Marsh McLennan, stating: "We hereby expressly acknowledge and confirm that we will complete, sign and present to be approved and consequently registered at the Central Bank of Brazil an Agreement of Indemnity . . . We also hereby declare that said Indemnity Agreement covers an amount of $7,729,592.00 U.S. Dollars." (See Declaration of Kristen Bancroft in Support of Inepar IC and IESA's Motion for Summary Judgment Dismissing all Claims Against IESA, executed May 18, 2001 ("Bancroft Decl. II"), Ex. 10.) IESA's contract manager and project coordinator, Jose Miguel Simão, conceded that IESA's letter reflected IESA's agreement to serve as a Principal under the Bond, although it sought to limit its liability. (See Transcript of Deposition of Jose Miguel Simão, dated Oct. 11, 2000, at 78-82.) Shortly thereafter, on February 29, 1996, the Sureties sent IESA a copy of an indemnity agreement to sign, with the requested limit of $7,729,592, along with a sample rider adding IESA as a principal on the Performance Bond. (See Bancroft Decl. II, Ex. 11.) USFG attached the rider to the P-31 Bond, even though the Sureties did not receive IESA's signature on the rider or the indemnity agreement.
The decision to grant a motion for reconsideration is within "the sound discretion of the trial court, whose disposition of the motion will not be disturbed on appeal absent an abuse of that discretion." Malasky v. IAC/InteractiveCorp, No. 04 Civ. 7447 (RJH), 2005 WL 549548, at *1 (S.D.N.Y. Mar. 7, 2005) (quoting National Petrochemical Co. v. M/T Stolt Sheaf, 930 F.2d 240, 244 (2d Cir. 1991). Although a decision to grant a motion for reconsideration should "not be granted where the moving party seeks solely to relitigate an issue already decided," id. at *1, that is not precisely the case here, because the Court did not decide the issue of whether IESA should be liable for the lesser amount of $7,729,592, since Plaintiffs did not explicitly argue, in the alternative, or otherwise, that the Court should enforce its unsigned indemnity agreement limiting liability in that amount. See U.S. Fidelity Guar. Co., 2005 WL 289575, at *22, n. 26. Plaintiffs assert that they sought to hold Defendants liable for all of the losses and expenses incurred in connection with the P-31 Bond, but, in view of the Court's conclusions, now seek to hold Defendants liable for at least the amount of liability IESA acknowledged. (See Pls.' Mem. at 3, n. 1.) Clearly, it would have been more appropriate for Plaintiffs to have explicitly pursued this claim as an alternative argument at trial. However, viewed expansively, a claim for IESA's more limited liability can be viewed as having been subsumed in the claim for full liability. Plaintiffs' motion can therefore be viewed as seeking a reconsideration of matters which were "overlooked" by the Court, which is a permissible ground for a Rule 59(e) motion, rather than attempting to present new facts or arguments to the Court.
Under Federal Rule of Civil Procedure 54(c), the Court may "grant the relief to which the party in whose favor [a judgment] is rendered is entitled, even if the party has not demanded such relief in pleadings." See Stanford, 232 F. Supp. 2d at 290-91 (applying Rule 54(c) to prejudgment interest not previously requested); McGrath v. Krieger, 502 F. Supp. 103, 104 (S.D.N.Y. 1980) (granting motion to amend judgment since Rule 54(c) "clearly entitles a court to grant a party relief based on the pleaded and proven facts regardless of whether such relief has been demanded in the pleadings"). In this case, Defendants would be hard pressed to express surprise or claim prejudice because of the Court's reconsideration of this claim for liability, inasmuch as they themselves submitted into evidence the letters reflecting IESA's acknowledgment of its limited liability, in order to demonstrate that IESA did not intend to be jointly and severally liable on the entire Bond. (See Defs.' Trial Exs. HH II.) Moreover, Defendants have not opposed Plaintiffs' motion. The Court will therefore address the substance of the relief sought.
The Opinion found that Brazilian law controlled issues of IESA's liability under the Bond, because the place of formation of the Consortium and related agreements outlining the Consortium's obligations under the P-31 Contract all took place in Brazil, between Brazilian corporations. See U.S. Fidelity Guar. Co., 2005 WL 289575, at *16. The Opinion found that under Brazilian law, obligations of the parties to a contract are determined, in the first instance, by the parties' intent, which prevails over the literal language of the contract. See id. at *21. In determining intent, courts consider the good faith of the parties, principles of equity, common sense, and the reasonableness of various interpretations. Id. Similarly, Article 130 of the Commercial Code of Brazil requires agreements to be construed in accordance with the totality of the circumstances. Id. Still, a party cannot be deemed obligated under a bond unless it expressly agrees to be bound thereunder.Id.
Here, it is clear that IESA expressly agreed, as conceded by Mr. Simão, to be bound to a $7,729,592 indemnity limit, which was commensurate with its share of the work under the P-31 Contract. This amount also corresponds to IESA's share of liability agreed to with the other Consortium members in the Private Instrument of Commitment, dated August 19, 1995, and the Internal Operational Agreement, dated October 6, 1995, in which the Consortium members "formally agree[d] that the ultimate liability of each [of the Parties] regarding the implementation of the services to be provided to BRASOIL, for all legal purposes and effects, shall be quantified and/or limited to the respective area of action for each party . . ." (Pls.' Trial Ex. S-1155 ¶ 2; Bancroft Decl. II, Ex. 2, ¶ 1.1.) The respective area of action for IESA was "performing the Engineering services for the Process Plant," (Pls.' Trial Ex. S-1155 ¶ 1), for which IESA was to be paid a projected $7.7 million. See U.S. Fidelity Guar. Co., 2005 WL 289575, at *17.
Having found that the evidence clearly demonstrates an intent by IESA to be bound under the Bond up to a limit of $7,729,592, the Court finds that Defendants are liable for the Sureties' losses and expenses in that amount. The Sureties are also entitled to prejudgment interest, for the reasons stated above, as the P-31 Bond is also covered by the 1994 and 1995 Indemnity Agreements. The Sureties made payments in connection with the P-31 Bond in excess of $7,729,592, during the period from March 18, 1997 until June 30, 2000. (See Pls.' Ltr. at 2; Alexander Decl., Ex. C D.) The Court finds that the midway point, November 8, 1998, is a reasonable intermediate date from which to calculate prejudgment interest for the Sureties' indemnification award under the P-31 Bond.
CONCLUSION
The Clerk shall enter an Amended Judgment against Defendants, jointly and severally, as follows:
1. In favor of the Sureties in the amount of $7,729,592, for losses and expenses in connection with the P-31 Bond, plus prejudgment interest at the rate of 9% per annum, from November 6, 1999 until the date of entry of judgment.
2. In favor of USFG alone, in the amount of $3,751,898.72, for losses and expenses in connection with the Port of New Orleans Bond, plus prejudgment interest at the rate of 9% per annum, from November 8, 1998 until the date of entry of judgment.
SO ORDERED.