Carnell Construction Corporation v. Danville Redevelopment & Housing Authority, et al

Filing 844

MEMORANDUM OPINION. Signed by District Judge Elizabeth K. Dillon on 5/22/2015. (mlh)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
DANVILLE DIVISION
CARNELL CONSTRUCTION
CORPORATION,
Plaintiff,
v.
DANVILLE REDEVELOPMENT &
HOUSING AUTHORITY,
and BLAINE SQUARE, LLC,
Defendants.

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Civil Action No. 4:10-cv-00007
By: Hon. Elizabeth K. Dillon
United States District Judge

MEMORANDUM OPINION
Pending before the court is a motion by defendant Danville Redevelopment & Housing
Authority (DRHA)1 in which it seeks leave to conduct additional limited discovery prior to the
retrial of this matter. (Dkt. No. 836.) For the reasons discussed below, the court will grant the
motion in part and deny it in part.
I. BACKGROUND
Briefly summarized, this case was appealed after a third jury trial.2 On appeal, the United
States Court of Appeals for the Fourth Circuit affirmed the judgment in part, vacated in part, and
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DRHA was also previously also identified in the style of the case as “counterclaimant” because it had
asserted a breach of contract counterclaim against Carnell Construction Corporation. The jury at the third trial
found against DRHA on this claim, see Dkt. No. 716 at 3, and that finding was not disturbed on appeal. See also
supra n.2. Thus, no counterclaim remains in the case, although the style still contains the counterclaim designations
for these two parties. In the attached order, the court will direct the clerk to correct the style to omit these
designations so that the corrected style appears as set forth above.
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At the first trial of this case in February 2011, the jury returned a verdict in Carnell’s favor on its Title VI
claim of race discrimination against DRHA and awarded more than $3 million to Carnell. The jury also found that
Carnell, DRHA, and Blaine Square all breached the contract, but did not award any damages on those claims. (Dkt.
No. 219 at 2.) United States District Judge Jackson L. Kiser granted defendants’ motion for a new trial and
subsequently transferred the case to Chief United States District Judge Glen E. Conrad. (Dkt. Nos. 218–220.) The
second trial was held before Judge Conrad in February 2012, and after a hung jury, he declared a mistrial. (Dkt. No.
490.) The third trial was held in August 2012. The jury returned a verdict in favor of Carnell on its contract claims
against DRHA, awarding almost $1 million total, but against Carnell on its race and retaliation claims against
DRHA. (See Dkt. Nos. 716, 724 (jury verdict forms as to liability and damages).) After trial, Judge Conrad reduced

remanded the case to this court for a fourth trial on limited issues. (Dkt. No. 800.) Specifically,
the Fourth Circuit’s opinion and mandate required a new trial on Carnell Construction
Corporation’s (Carnell) race discrimination and retaliation claims against DRHA, and also
required a new trial on damages as to two of Carnell’s contract claims for unpaid work against
both DRHA and Blaine Square. (See Dkt. No. 799 at 44–45 (Fourth Circuit opinion
summarizing its holding).) Nothing in the Fourth Circuit’s opinion suggested or required that
this court allow additional discovery prior to trial, but the opinion also did not foreclose any such
discovery.
In its motion, DRHA requests additional discovery on three main topics: “(1) the website
danvillejusticedelayed.com; (2) the financial condition and business of Carnell Construction
Corporation and its sole shareholder Michael Scales; and (3) Carnell Construction Corporation’s
claimed damages for loss of bonding capacity, to include any claims made against bonds issued
on behalf of Carnell Construction Corporation to secure payment or performance on other
projects.” (Dkt. No. 836 at 1.) Each of these topics will be discussed separately below.
II. DISCUSSION
As noted, the Fourth Circuit’s opinion and mandate did neither required nor prohibited
additional discovery. Accordingly, the “well-established” rule applies here that the trial court
decides whether to reopen the evidence after remand by an appellate court. United States v.
Virginia, 88 F.R.D. 656, 662 (E.D. Va. 1980) (hereinafter Virginia); Kennedy v. Joy Techs., Inc.,
2008 WL 1985231, at *2 (W.D. Va. May 7, 2008) (citing Virginia for the proposition that
“whether to allow reopening of the evidence after remand by an appellate court is within the
discretion of the trial court”). This court’s discretion must be guided, however, by the “strong

a portion of the damages (Dkt. Nos. 761–63), and all three parties appealed. (See Dkt. Nos. 764, 767, 769.) The
case subsequently was transferred to the undersigned. (Dkt. No. 817.)

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institutional grounds for precluding the reopening of litigation.” Kennedy, 2008 WL 1985231, at
*2 (citing E.I. DuPont de Nemours & Co. v. Phillips Petroleum Co., 711 F. Supp. 1205, 1212
n.24 (D. Del. 1989)). Those grounds include that “a case is not remanded by an appellate court
to give a party an opportunity to supplement the evidence presented at trial” and that, while a
party upon remand “naturally would like to bolster its position . . . with its hindsight benefited
by” the appellate opinion, “free permission of this practice would result in endless litigation.”
E.I. DuPont de Nemours & Co., 711 F. Supp. at 1212 n.24 (quoted in Kennedy, 2008 WL
1985231, at *2).
In deciding whether to allow additional discovery after an appeal and remand, other
courts have looked to a number of factors, including the relevance and importance of the
information sought through the discovery, whether the parties were precluded from developing
evidence based on an erroneous legal ruling, whether the discovery relates to ongoing events
relevant to the claims, and whether such discovery could have been conducted earlier. See
Kennedy, 2008 WL 1985231, at *2; see also Virginia, 88 F.R.D. at 658–59 (allowing postremand discovery as to certain topics, including an area of inquiry that the court’s prior legal
ruling erroneously foreclosed, but not on other topics).
In Virginia, for example, the court declined to allow discovery of one subject area where
the plaintiff had “an adequate opportunity” to conduct discovery on that topic prior to the earlier
trial. 88 F.R.D. at 658–59; see also Kennedy, 2008 WL 1985231, at *2 (denying requested
discovery after remand where party seeking it had not shown why it could not have been
obtained earlier). Conversely, where the relief sought on remand requires a consideration of
facts as they exist at the time of remand and not as they existed several years in the past, then
discovery to update and determine facts as of the relevant date may be appropriate. See

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MercExchange, L.L.C. v. eBay, Inc., 467 F. Supp. 2d 608, 611–12 (E.D. Va. 2006) (permitting
limited discovery after remand so that the parties could update the court on factual developments
occurring after the first trial, where those facts were necessary to the court’s determination as to
whether to grant prospective injunctive relief).
DRHA contends that none of the discovery it seeks now was available to it prior to the
third trial. It also argues that all of the information it seeks is highly relevant to the claims and
defenses at trial.
Carnell opposes allowing any additional discovery prior to the retrial on a number of
grounds. First, Carnell points out that DRHA’s prior counsel, in communicating with the former
trial judge’s courtroom deputy regarding the setting of the fourth trial, stated in an email message
that no new discovery would be needed prior to the trial. (Dkt. Nos. 838 at 1–2 & 838-1 (Dec.
18, 2014 email from DRHA counsel Glenn Pulley to Judge Conrad’s courtroom deputy clerk).)
Carnell argues that DRHA is bound by that representation.3 (Dkt. No. 838 at 1–2.) Second,
Carnell points out that the parties had previously engaged in extensive discovery, including some
discovery that occurred after the first trial and related to damages. (Id. at 2.) Third, Carnell
contends that DRHA has failed to establish any viable reason for what it deems “another bite at
the apple” as to any of the three topics. (Id. at 5.)

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The court is not persuaded by Carnell’s argument that DRHA is precluded from conducting any
additional discovery based solely on prior counsel’s statement in an informal email to a court clerk. The court
acknowledges the general proposition that “[t]here is no principle that each new attorney for a litigant must have an
independent opportunity to conduct discovery.” Carson v. Bethlehem Steel Corp., 82 F.3d 157, 159 (7th Cir. 1996)
(quoted in Dkt. No. 838 at 4). The court also recognizes the general rule that a party is bound by the actions of its
counsel, see Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 396-97 (1993), and obtaining
new counsel does not relieve a party of its prior counsel’s agreements. Cf., e.g., Alston v. Becton, Dickinson & Co.,
12-cv-452, 2014 WL 338804, at *2 (M.D.N.C. Jan. 30, 2014) (“a delay [in the conduct of discovery] attributed to a
change in counsel does not constitute good cause [for an extension of the discovery period] because new counsel is
bound by the actions of their predecessor.”) (citation omitted). Nonetheless, the court has discretion to consider all
factors in a case when determining whether the reopening of discovery should be permitted after remand. For the
reasons discussed herein, the court concludes that the limited discovery it permits—which is directly relevant to the
damages claimed by Carnell and further limited to a time period since discovery last occurred—is appropriate
regardless of prior counsel’s emailed statement.

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A.

The website danvillejusticedelayed.com
DRHA first seeks discovery concerning the website danvillejusticedelayed.com, which

appears to be primarily a vehicle for setting forth Carnell’s perspective of this litigation and
asking for donations to fund Carnell’s litigation expenses. DRHA has attached a number of
screen shots from the site. The site describes itself as “the informational website” for this
lawsuit, and contains a large heading on the home page stating, “JUSTICE DELAYED IS
JUSTICE DENIED!” (Dkt. No. 837-1 at 1.) DRHA states that, upon information and belief, the
website did not become active until sometime in 2013 and that information has been added to it
as recently as March 2014. (Dkt. No. 837 at 3–4.) Thus, according to DRHA, it could not have
obtained discovery about the site prior to the most recent trial, which concluded in August 2012.
(Id.)
DRHA contends that it should be allowed to discover information about the website
“including, without limitation, the identification of those who hired the company to design the
Website and provided content, who is responsible for maintaining the Website, and who is
receiving the money donated through the Website,” all topics which it claims are “highly
relevant to DRHA’s defenses.” (Id. at 4.) In particular, it contends that information about the
website supports its defense that Carnell and Michael and Vincent Scales sought to shape a story
of racial discrimination by DRHA when the parties’ disagreement was really “a pure contract
dispute.” (Id. at 5.)
Carnell counters that the discovery sought is not relevant to the claims before the court
and that it certainly is not relevant as to whether Carnell engaged in protected activity five years
prior. It also accuses DRHA of misstating the record concerning the issue of “shaping the story”

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and of trying to do an “end run around the Fourth Circuit’s decision.” (Dkt. No. 838 at 8; see
also id. at 8–10.)
If DRHA were seeking this information in the normal course of discovery, inquiring
about the website might well be appropriate, given that discovery is permitted as to “any
nonprivileged matter that is relevant to any party’s claim or defense” and that “[r]elevant
information need not be admissible at the trial if the discovery appears reasonably calculated to
lead to the discovery of admissible evidence.” Fed. R. Civ. P. 26(b)(1). In this case, however,
which is back for a retrial after an appeal, there are strong policy reasons against the reopening of
discovery. See E.I. DuPont de Nemours & Co., 711 F. Supp. at 1212 n.24.
It certainly seems probable, based on DRHA’s allegations, that discovery as to the
website could not have occurred prior to the last trial because the website did not exist then.
Nonetheless, the court has carefully considered the arguments of the parties on this issue and
concludes that this area of inquiry is not sufficiently central to the claims or defenses in the case
to warrant allowing discovery on it given the case’s procedural posture. Even if the website is
being run directly by Carnell (or Michael Scales) and even if it is Carnell or Scales who is
receiving any funds sent through the website, DRHA has not shown that such evidence would be
admissible or that such evidence is so central to any claim or defense in this case that it warrants
allowing discovery outside the normal time-frame. Accordingly, the motion for discovery as to
the website will be denied.4

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In its reply, DRHA suggests, based on “the probable involvement of Carnell and Michael Scales with the
Website” that information about the site should have been disclosed by Carnell in response to DRHA’s discovery
requests and that Carnell failed to supplement its discovery responses with this information under Fed. R. Civ. P.
26(e). According to DRHA, this failure to disclose “weighs in favor of permitting discovery related to this matter.”
(Dkt. No. 840 at 8–9.) Carnell has not responded to this argument; thus, the court cannot be certain, as a factual
matter, that information about the website is responsive to discovery previously propounded. Moreover, DRHA has
not yet filed any motion that would require a finding by the court as to whether or not there was a failure to
disclosure such information, and that issue has not been fully briefed. Thus, the issue of whether Carnell has failed
to comply with its discovery obligations is not properly before the court at this time.

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B.

Carnell’s (and Michael Scales’s) financial and business operations
as it relates to damages
As to the evidence concerning damages allegedly resulting from the claims of

discrimination and retaliation, DRHA contends that the last time evidence was introduced related
to such damages was more than four years ago, at the first trial. (Dkt. No. 837 at 8.) Likewise,
the last discovery responses from Carnell addressing damages were served in November of 2011.
(Id. at 8–9.) Based on this, DRHA contends that “there is good cause to permit DRHA to
conduct discovery into the condition of Carnell, including its financial status and its business
operations since 2011, [and] including whether it or its management has sought to obtain
business from VDOT or others.” (Id. at 9.) DRHA also seeks permission “to explore the current
business activities and employment status of [Carnell’s] sole shareholder Michael Scales.” (Id.)
Carnell responds that DRHA has already taken and received substantial discovery on the
topics of both Carnell’s financial status and its business operations, describing it as “an extensive
and detailed discovery campaign about Carnell’s damages.” (Dkt. No. 838 at 7.) Notably,
though, Carnell does not make the contention that the discovery sought is irrelevant. It posits
instead that “DRHA’s argument is premised upon the mistaken belief that Carnell’s business
status has changed[, when it] has not.” That may well be true, but the court concludes that it is
appropriate to allow DRHA some limited discovery to ascertain that fact for itself, rather than
simply requiring DRHA to credit the argument of Carnell’s counsel in a brief.
In particular, issues regarding Carnell’s continued damages, and especially its efforts to
mitigate (or Scales’ efforts devoted to other projects in lieu of obtaining work for Carnell), are
highly relevant and necessary for a full presentation and vigorous testing of Carnell’s claims for
damages. Cf. MercExchange, L.L.C., 467 F. Supp. 2d at 611–12 (allowing discovery after
remand for purpose of determining appropriate remedy). Particularly since Carnell is claiming,
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as part of its damages, “the loss of its bonding capacity, lost pay, lost profits, extra effort, [and]
damages to its banking relationships,” (Dkt. No. 837-8 at 6), and presumably intends to offer
evidence that these damages continue through the present, (see id. at 8–9 (Carnell’s discovery
responses served in November 2011 stating that its damages “continue”)), the information sought
is highly relevant to an element of Carnell’s claims.
Accordingly, the motion will be granted insofar as it seeks limited discovery as to the
financial condition of Carnell and Michael Scales and their efforts, if any, to limit damages. The
time-frame for such discovery shall be further limited from November 2011, when discovery
responses on damages were last received by DRHA, through the present.
C.

Carnell’s Bonding Capacity
Third and finally, DRHA seeks leave to conduct discovery regarding claims against

bonds, including claims against Carnell by the Western Virginia Water Authority (WVWA) and
Ferguson Enterprises (Ferguson). Carnell complains that discovery about these claims has
already been provided, and that, contrary to DRHA’s current representations, significant
discovery related to these claims has already been conducted. (Dkt. No. 838 at 5.) In support of
its contentions, Carnell has attached a number of documents reflecting that DRHA was aware of
the claims of WVWA and Ferguson prior to the third trial and thus had the opportunity to
conduct discovery on those two claims. (See, e.g., Dkt. No. 838 at 5–6 (discussing attached
exhibits); see also Dkt. Nos. 838-2 through 838-7.) Based on these documents, Carnell argues—
and the court agrees—that DRHA has failed to show that it did not have the opportunity to
obtain discovery on this topic previously, at least as to claims by Ferguson and WVWA.
In general terms, though, Carnell’s bonding capacity is directly tied to its claim for
damages and identified as one of its elements of damages. (See Dkt. No. 837-8 at 6.) Because of

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this—and for the same basic reasons that the court concludes DRHA should be permitted to
conduct additional limited discovery regarding Carnell’s damages—the court concludes that
DRHA should also be permitted to conduct discovery as to Carnell’s bonding capacity since
November 2011. Specifically, DRHA may conduct limited discovery as to Carnell’s bonding
capacity from November 2011 through the present, including information as to any bonds sought
or issued on behalf of Carnell and any litigation related to those bonds.
The court will impose additional restrictions on the discovery concerning the bonding
capacity, however. Specifically, because the court is convinced that DRHA had actual
knowledge of the claims by Ferguson and WVWA prior to the last trial and, in fact, did conduct
some discovery and gather information as to those claims, the court will not allow additional
discovery as to those two specific claims. To summarize then, the court will grant the motion
insofar as it relates to Carnell’s bonding capacity since November 2011, with the exception of
any claims against bonds or related litigation brought by WVWA and Ferguson.
III. CONCLUSION
For the reasons set forth in this opinion, DRHA’s motion for discovery will be granted in
part and denied in part. DRHA will be permitted to conduct limited discovery related to
Carnell’s purported damages for the time period of November 2011 through the present. The
scope of the discovery shall be limited to Carnell’s claimed damages as to its race discrimination
and retaliation claims, its current financial status and status of operations, the current financial
status of Michael Scales, and any attempts or efforts by Carnell or by Michael Scales to mitigate
any of Carnell’s damages. The scope of such discovery may also include, for the same timeframe, information about Carnell’s bonding capacity, including any bonds sought or issued on
behalf of Carnell and any claims made against any of Carnell’s bonds, with the exception of

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claims by Ferguson or WVWA, which DRHA has already had the opportunity to discover. The
additional discovery shall be completed no later than 30 days prior to the trial date.
No other discovery will be permitted and DRHA’s motion will be specifically denied
insofar as it seeks discovery related to the website danvillejusticedelayed.com.
Entered: May 22, 2015.

Elizabeth K. Dillon
United States District Judge

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