Formosa Plastics Corp. USA v. Presidio Engineers & Contractors, Inc.,

Facts

In 1989, D began a large construction 'expansion project' at its facility in Point Comfort, Texas. P received an 'Invitation to Bid' from D on that part of the project requiring the construction of 300 concrete foundations. D represented that (1) P would arrange and be responsible for the scheduling, ordering, and delivery of all materials, including those paid for by D; (2) work was to progress continually from commencement to completion; and (3) the job was scheduled to commence on July 16, 1990, and be completed 90 days later, on October 15, 1990. P’s president testified that he relied on these representations in preparing P's bid. Because the bid package provided that the contractor would be responsible for all weather and other unknown delays, he added another 30 days to his estimate of the job's scheduled completion date. Because P submitted the lowest bid, D awarded P the contract. The job was not completed in 120 days. Rather, the job took over eight months to complete, more than twice P's estimate and almost three times the scheduled time provided in the bid package. The delays caused P to incur substantial additional costs that were not anticipated when P submitted its bid. P asserted a claim under paragraph 17 of the parties' contract, which provided that D was liable for all delay damages within the 'control of the owner.' P sued D for breach of contract and breach of a duty of good faith and fair dealing. P also brought fraudulent inducement of contract and fraudulent performance of contract claims based on representations made by D that P discovered were false after commencing performance of the contract. D counterclaimed for breach of contract, in that P had not properly completed some of its work. P presented evidence that D enticed contractors to make low bids by making misrepresentations in the bid package regarding scheduling, delivery of materials, and responsibility for delay damages. D also scheduled multiple contractors, doing mutually exclusive work, to be in the same area at the same time. D admitted that it knew that contractors would be working right on top of each other, but this information was not passed on to the contractors. When the contractors requested delay damages under the contract, D would rely on its superior economic position and offer the contractors far less than the full and fair value of the delay damages. The head of D's contract administration division testified that D, in an effort to lower costs, would utilize its economic superiority to string contractors along and force them to settle. Under this scheme, D allegedly stood to save millions of dollars on its $1.5 billion expansion project. The jury found that D defrauded P and awarded P $1.5 million. The jury also found that Formosa breached a duty of good faith and fair dealing and awarded D $1.5 million as a result. Based on its findings that D's fraud and breach of a duty of good faith and fair dealing were done willfully, wantonly, intentionally, or with conscious indifference to the rights of P, the jury further awarded P $10 million as exemplary damages. The jury found that D breached its contract with P, causing $1.267 million in damages. The jury also concluded that P did not fully comply with the contract, causing D $107,000 in damages. The trial court suggested a remittitur reducing the tort damages to $700,000 and the contract damages to $467,000, which P accepted. Based on P's election to recover tort rather than contract damages, the trial court rendered a judgment in favor of P for $700,000 in actual damages, $10 million in punitive damages, prejudgment interest, attorney's fees, and costs. The damages caused by P's breach of contract were offset against the judgment. D appealed the judgment to the court of appeals, which affirmed the judgment of the trial court.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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