Cutaia v. Radius Engineering International, Inc. et al
Filing
339
MEMORANDUM OPINION. Signed by District Judge Michael F. Urbanski on 7/9/14. (kld)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
HARRISONBURG DIVISION
RORY J. CUTAIA,
Plaintiff,
v.
RADIUS ENGINEERING,
INTERNATIONAL, INC., et al.,
Defendants.
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Civil Action No. 5:11cv00077
By:
Michael F. Urbanski
United States District Judge
MEMORANDUM OPINION
This matter is before the court on defendant Radius Engineering International, Inc.’s
(“Radius”) Motion for Judgment as a Matter of Law pursuant to Rule 50(b) of the Federal Rules of
Civil Procedure (Dkt. # 314). In this motion, Radius asserts that the jury’s liability verdict on
plaintiff Rory J. Cutaia’s (“Cutaia”) breach of warranty, fraud and Virginia Consumer Protection Act
claims was undermined by the lack of any damages awarded by the jury on those claims, and that the
jury’s award of $1,762,087.40 in damages on the breach of contract claim was grossly excessive and
unsupported by the evidence. For the reasons that follow, Radius’ motion is DENIED.
I.
Cutaia entered into an oral contract with Radius for the manufacture of a custom built
underground survival shelter to be installed on his property in Augusta County, Virginia. Cutaia
testified that he paid “over $2 million in connection with the shelter.”1 Cutaia Trial Testimony, Dkt.
One of the many peculiar aspects of this case is that, although it involved vast sums, there was no executed written
contract. Cutaia testified that “[t]here were many proposed contracts that he gave me that I never executed. Each one
had a problem in it. Just kept having more problems and things I couldn’t live with. So we ended up moving forward
without a written contract.” Cutaia Trial Testimony, Dkt. # 319, at 57. Radius’ principal, Walton McCarthy, testified
that he believed the parties performed consistent with an unsigned document entitled “Sale of Goods Agreement Phase
1 Rev. 1 ETHOS WMD Underground Community,” introduced into evidence as Defendant’s Ex. 54. McCarthy Trial
1
# 319, at 212. Radius manufactured the components of the survival shelter in Texas and shipped
them to Cutaia’s property. Those components included a living pod, a generator pod and the main
structure, an Earthcom Dome 60. The Earthcom Dome 60 was a fiberglass dome manufactured by
Radius in pie-shaped sections which were shipped to the construction site, where they were
assembled and buried by Green Eye Technology, LLC (“Green Eye”), Radius’ exclusive installer. 2
Witnesses associated with Green Eye testified that they had difficulty assembling the pieces of the
dome to assure a water-tight fit and bemoaned the lack of adequate assembly instructions3 and
quality of the Radius components. For its part, Radius blamed the problems with the dome on
Green Eye’s faulty installation. The evidence adduced at trial indicated there were gaps between the
pie-shaped sections of the dome and cracks around the circular foundation of the dome. At Radius’
instruction, Green Eye attempted to seal the gaps between the dome sections with a non-waterproof
filler material akin to that used in auto body repairs.4 At the end of the day, the evidence established
that the dome leaked water through the seams of the vertical dome sections and between the dome
and the foundation. Without completing the installation, Green Eye abruptly quit the project.5
Testimony, Dkt. # 320, at 22-23; Dkt. # 283-11. In any event, Radius submitted invoices to Cutaia, which he paid. See
Dkt. # 273-5.
2
When installed, the Earthcom Dome 60 measured 60 feet across and stood 22 feet high at its center.
There was a conflict in the evidence at trial as to the sufficiency of the written installation instructions provided
by Radius to Green Eye. Green Eye’s George Welhaf, III dismissed the Radius assembly instructions as follows:
“Walton’s written instructions? They’re not instructions. You build a bird house with those instructions.” Welhaf Trial
Testimony, Dkt. # 321, at 74.
3
The engineering experts on each side agreed that the auto body filler (referred to alternatively at trial as Bondo or
Valspar) was not a waterproofing agent and could degrade when exposed to water. Holland Trial Testimony, Dkt.
# 311 at 37; Mroszczy Trial Testimony, Dkt. # 312, at 101-03, 127-28.
4
5 The circumstances surrounding Green Eye’s hasty retreat from the Cutaia project are less than favorable to Green Eye.
Although not the principal subject of the trial, it was contended that a Green Eye employee drove a large piece of
construction equipment over the buried living pod, crushing it, and left the hatch to the generator pod open, causing it
to fill with rain water. On the eve of trial, Green Eye’s insurer withdrew its defense, causing Green Eye to consent to a
default judgment as to Cutaia’s breach of contract claim. Consent to Entry of Default on Count II, Dkt. # 262. Cutaia
thereupon dismissed its fraud in the inducement and Virginia Consumer Protection Act claims against Green Eye.
Stipulation of Dismissal, Dkt. # 263. At trial, Green Eye’s principal, George Welhaf, III, testified as a rebuttal witness
for Cutaia.
2
Cutaia engaged a local contractor to cover the dome with a membrane and take steps to divert water
away from the dome. Cutaia’s evidence was that the dome continued to leak water, became moldy
and could not be repaired. As such, Cutaia argued that it was utterly unsuitable as a survival shelter.
A bifurcated jury trial was conducted over eight days in October, 2013. On liability, the jury
returned a verdict for Cutaia against Radius on all six counts.6 At the damages phase, Cutaia sought
recovery for the value of the dome, as reflected in the monies he paid to have it manufactured and
installed.7 Cutaia presented evidence at the damages phase as to the amounts he paid to have the
Earthcom Dome 60 manufactured and installed, and asked the jury to award a total of
$1,807,087.50. For its part, Radius asserted that the dome could be made watertight by the interior
application of fiberglass and water-activated urethane foam at a cost of $30,000 to $35,000. The jury
awarded Cutaia damages for breach of contract in the amount of $1,762,087.40,8 but penned in
“$Ø” for the five remaining counts. See Damages Verdict Form, Dkt. # 297.
In its Rule 50(b) motion, Radius argues that the jury’s award of $1,762,087.40 is factually
unsupported and contrary to law, and asserts that the proper measure of damages is $100,980.9
Radius also asserts that the jury’s award of this vast sum for breach of contract is inconsistent with
The jury found that Cutaia proved his breach of contract, breach of express warranty, breach of implied warranty of
merchantability, breach of implied warranty of fitness for particular purpose, fraud in the inducement and breach of the
Virginia Consumer Protection Act (“VCPA”) claims by a preponderance of the evidence.
6
7 Although the generator and living pods were of no use to Cutaia without a functional main dome structure, Cutaia did
not seek recovery of damages for the cost of those pods from Radius, ostensibly because the damage to those units lay at
the hands of Green Eye.
8 The jury verdict of $1,762,087.40 was $45,000 less than Cutaia requested. Cutaia argues that the $45,000 difference
between what he sought and what the jury awarded strongly suggests that the jury chose not to award Cutaia the $45,000
he sought for core drilling. As the cost of the core drilling is the only element of claimed damages in this precise amount,
Cutaia’s supposition makes some sense. Regardless of the precise amount awarded, it is clear that the jury based its
damages award on the amount of money Cutaia paid for the Earthcom Dome 60, rather than the much smaller amount
Radius contended it would take to repair the leaks in the dome.
9 This sum consists of $35,000 to seal the inside of the dome with fiberglass and urethane foam, $38,400 for the cost of
the Multi-Chamber Air Sterilization system Cutaia asserts was never delivered, and $27,580 for a periscope Cutaia
likewise asserts he did not receive.
3
the award of $Ø for the breach of warranty counts, and that the award of $Ø on the fraud and
VCPA counts negates the liability finding on those claims.
II.
Rule 50(b) of the Federal Rules of Civil Procedure allows the parties to renew a motion for
judgment as a matter of law made under Rule 50(a) following a jury verdict and judgment. A district
court should grant a Rule 50(b) motion only if the court “determines, without weighing the evidence
or considering the credibility of the witnesses, that substantial evidence does not support the jury’s
findings.” S. Atl. Ltd. P’ship of Tenn., L.P. v. Riese, 284 F.3d 518, 532 (4th Cir. 2002) (quoting
Konkel v. Bob Evans Farms, Inc., 165 F.3d 275, 279 (4th Cir. 1999)). In ruling on the motion, the
court must view the evidence and draw all reasonable inferences in the light most favorable to the
nonmoving party. Lack v. Wal-Mart Stores, Inc., 240 F.3d 255, 259 (4th Cir. 2001). The court may
not substitute its judgment for that of the jury and must uphold the verdict if there is evidence upon
which a reasonable jury could return a verdict in favor of the nonmoving party. Price v. City of
Charlotte, 93 F.3d 1241, 1249-50 (4th Cir. 1996). At the same time, while a court is “compelled to
accord the utmost respect to jury verdicts and tread gingerly in reviewing them, [it is] not a rubber
stamp convened merely to endorse the conclusions of the jury, but rather [has] a duty to reverse the
jury verdicts if the evidence cannot support it.” Id. at 1250 (internal citations omitted). With regard
to damages, the power and the duty of the district court to set aside an excessive verdict is “wellestablished, the exercise of the power being regarded not in derogation of the right of trial by jury
but one of the historic safeguards of that right.” Cline v. Wal-Mart Stores, Inc., 144 F.3d 294, 304
(4th Cir. 1998) (quoting Virginian Ry. Co. v. Armentrout, 166 F.2d 400, 408 (4th Cir. 1948)). “The
determination of damages is left to the discretion of the jury, to be reviewed by the district court in
accordance with federal standards of review under Rule 50(b) and Rule 59. The award shall stand
unless no substantial evidence is presented to support it, it is against the clear weight of the
4
evidence, it is based upon evidence that is false, or it will result in a miscarriage of justice.” Barber v.
Whirlpool Corp., 34 F.3d 1268, 1279 (4th Cir. 1994). “‘[A]n award of substantial compensatory
damages . . . must be proportional to the actual injury incurred . . . . The award must focus on the
real injury sustained . . . .’” Hetzel v. County of Prince William, 89 F.3d 169, 173 (4th Cir. 1996)
(quoting Piver v. Pender County Bd. of Educ., 835 F.2d 1076, 1082 (4th Cir. 1987)).
III.
Radius argues that the jury’s finding of no damages on the fraud in the inducement and
VCPA claims requires entry of judgment as a matter of law in Radius’ favor on those claims. Radius
also argues that the jury’s finding of no damages on the warranty claims undermines the breach of
contract damages award. In considering this issue, it is the duty of the court “to determine whether a
jury verdict can be sustained, on any reasonable theory.” Atlas Food Sys. & Servs. Inc. v. Crane
Nat’l Vendors, Inc., 99 F.3d 587, 599 (4th Cir. 1996) (quoting Richardson v. Suzuki Motor Co., 868
F.2d 1226, 1246 (Fed. Cir. 1989)). “And it must, therefore, harmonize seemingly inconsistent
verdicts if there is any reasonable way to do so.” Id. (citing Gallick v. Baltimore & Ohio R.R. Co.,
372 U.S. 108, 119 (1963)).
In this case, the jury’s answers to special interrogatories at the liability and damages phases
can be reasonably harmonized. Finding against Radius on all of Cutaia’s liability theories, the jury
next proceeded to follow the court’s damages instruction to “determine an amount of money that
you find to be justified by a preponderance of the evidence as full, just and reasonable compensation
for all of the plaintiff’s damages, no more and no less.” Damages Jury Instructions, Dkt. # 306-1,
at 3. Having awarded Cutaia his full measure of damages on the breach of contract count, the jury
may well have reasonably concluded that to award additional amounts on the other counts would
result in a duplicative recovery. In other words, it is reasonable to read the jury’s damages award on
the breach of contract claim not so much as undermining its liability verdict on the other claims as
5
reflecting its decision that the $1,762,087.40 awarded on the breach of contract claim represents the
full measure of compensatory damages for all six claims.10
Other courts, faced with similar issues, have likewise reconciled the jury’s responses to
liability and damages interrogatories in multi-count cases. For example, in Allstate Ins. Co. v.
Plambeck, No. 3:08CV388M, 2014 WL 1303000 (N.D. Tex. Mar. 31, 2014), the court rejected
defendants’ argument that a new trial was warranted because the jury’s verdict was inconsistent and
irreconcilable. In Plambeck, the jury found defendant liable on fraud, unjust enrichment and RICO
claims, but only awarded damages for the RICO claim. The court rejected defendants’ post-trial
claim that the verdict could not be reconciled, citing the Fifth Circuit’s decision in Holt Oil & Gas
Corp. v. Harvey, 801 F.2d 773, 781 (5th Cir. 1986), as follows: “[W]e have no difficulty reconciling
the jury’s verdict in the instant case. The jury might well have concluded that Holt would
unjustifiably receive a double recovery if damages were awarded under both theories of recovery.”
2014 WL 130300, at *7. That reasoning applies equally to the jury’s decision in this case. 11 As such,
the court will harmonize the jury’s verdict by entering judgment for $1,762,087.40 on the breach of
contract claim only. As will be explained in detail below, this damages award will fully compensate
Cutaia for the damages he sustained.
10 Prior to the submission of the damages verdict form to the jury, the court discussed the issue of the format of the
damages verdict form with the parties. Damages Phase Transcript, Dkt. # 313, at 60-63. Counsel for Radius indicated
his preference for having the verdict form contain six blanks for damages, one for each count. Id. at 62. The court,
while expressing some concern over the possibility of a duplicative verdict, indicated that it would provide the jury with
a damages verdict form containing a blank for each count. If it turned out that the verdict appeared duplicative, the
court indicated that it would sort that out following the verdict. Id. at 62-63.
11 See also Zwerin v. Maccabees Mut. Life Ins. Co., 111 F.3d 140, 1997 WL 191490, at *5 (10th Cir. 1997) (unpublished)
(affirming district court’s rejection of theory that jury’s verdict was inconsistent “because the jury awarded no damages
for fraud although it found Zwerin had committed fraud,” finding instead that “jury had simply followed its admonition
not to duplicate damages”). But see AIG Aviation, Inc. v. Boorom Aviation, Inc., Nos. 96-1503, 96-1563, 96-1582,
1998 WL 69013, at *4-6 (6th Cir. Feb. 11, 1998) (awarding plaintiff a new trial on RICO damages where the jury’s
answers to special interrogatories found RICO liability, but no damages). Here, plaintiff has not moved for a new trial
on these grounds, and, as the court is able to reconcile the liability and damages verdicts, no new trial will be ordered.
6
IV.
In Virginia,12 a successful plaintiff in a breach of contract case is entitled to recover those
damages which are “the natural and direct result of the breach of the contract.” Manss-Owens Co.
v. H.S. Owens & Son, 129 Va. 183, 201, 105 S.E. 543, 549 (1921). 13 “The object of the law in
awarding damages is to make amends or reparations by putting the party injured in the same
position, as far as money can do it, as he would have been if the contract had been performed.”
Lehigh Portland Cement Co. v. Va. S.S. Co., 132 Va. 257, 270, 111 S.E. 104, 109 (1922). “Direct
damages are those which arise naturally or ordinarily from a breach of contract and which, in the
ordinary course of human experience, can be expected to result from the breach.” Transdulles Ctr.,
Inc. v. USX Corp., 976 F.2d 219, 226 (4th Cir. 1992) (citing Roanoke Hosp. Ass’n v. Doyle &
12
In this diversity case, Virginia law governs.
13 While the oral contract between Radius and Cutaia breached in this case principally involved the sale of goods, and is
thus subject to Virginia’s Commercial Code, Radius also provided services related to the installation of the dome. Cutaia
testified that Radius’ Walton McCarthy “was intimately involved in the installation.” Cutaia Trial Testimony, Dkt. #
319, at 160. McCarthy testified consistently that Radius and Green Eye talked almost daily on the project, and that “a lot
of the instruction was just verbal.” McCarthy Trial Testimony, Dkt. # 324, at 15, 21. Moreover, Cutaia testified that
Radius played a role in identifying an appropriate parcel of property necessary for the dome. Cutaia Trial Testimony,
Dkt. # 319, at 101-03. Radius personnel fiberglassed the joints on the fiberglass foundation pan for the principal
structure of the survival shelter, the underground dome, on site in Augusta County. McCarthy Trial Testimony, Dkt.
# 324, at 11. Further, when the pie-shaped pieces of the dome shell did not fit together snugly, Radius’ McCarthy flew
to the site from Texas and instructed the installer, Green Eye, to fill the gaps with an auto body filler. Id. at 27-35.
Concerning the fiberglassing of the inside vertical seams of the dome, McCarthy admitted that certain of the sales
documentation indicated that the “external seams will be glassed on site by Radius.” Id. at 17-18. On this same issue,
McCarthy testified that if Green Eye “couldn’t do it, we would help them with it or we would do it ourself. But one way
or another, it would get done.” Id. at 17. Finally, there was evidence that Green Eye was Radius’ exclusive installer, and
that Cutaia had no choice but to contract with Green Eye for the installation. McCarthy Trial Testimony, Dkt. # 324, at
64. In short, Radius’ role in the construction of this survival shelter transcended that of a mere supplier of goods. Thus,
the contract at issue here was mixed, involving both goods and services. See, e.g., Princess Cruises, Inc. v. Gen. Elec.
Co., 143 F.3d 828, 832-33 (4th Cir. 1998). In such circumstances, whether the Uniform Commercial Code applies
“hinges on the predominant purpose of the transaction, that is, whether the contract primarily concerns the furnishing
of goods or the rendering of services.” Id. at 833. Applying that test, it is clear that the U.C.C. is applicable to this case
as it predominantly concerned a sale of goods by Radius to Cutaia, and the court instructed the jury consistent therewith.
Virginia Code § 8.2-714(1) provides that a buyer of nonconforming goods may recover “the loss resulting in the ordinary
course of events from the seller’s breach as determined in any manner which is reasonable.” In cases involving the
U.C.C., “the Supreme Court of Virginia continues to use the common law definition of direct and consequential
damages.” Kraft Foods N. Am., Inc. v. Banner Eng. Sales, Inc., 446 F. Supp. 2d 551, 572 (E.D. Va. 2006). Consistent
with Virginia law, the jury was instructed as follows: “With respect to Radius’ liability for breach of contract, plaintiff is
entitled to recover as damages all of the losses he sustained that are a natural and ordinary result of the breach and that
he has proved by the greater weight of the evidence.” Damages Jury Instructions, Dkt. # 306-1, at 4. The principal
issue raised by Radius in its Rule 50(b) motion is whether Cutaia’s evidence of direct damages was sufficient to meet this
standard.
7
Russell, Inc., 215 Va. 796, 801, 214 S.E.2d 155, 160 (1975)). “The measure of direct damages is the
cost to complete the contract according to its terms, or . . . the cost of repair to meet the contract
terms.” Id. (citing Lochaven Co. v. Master Pools By Shertle, Inc., 233 Va. 537, 544, 357 S.E.2d 534,
538 (1987)). “Damages need not be established with mathematical certainty. Rather, a plaintiff is
required only to furnish evidence of sufficient facts to permit the trier of fact to make an intelligent
and probable estimate of the damages sustained.” Taylor v. Flair Prop. Assoc., 248 Va. 410, 414,
448 S.E.2d 413, 416 (1994).
Radius does not take issue with these well-established tenets of Virginia law, nor does it take
issue with the court’s damages jury instructions.14 Rather, Radius asserts that the $1.7 million verdict
amounted to recoupment of Cutaia’s out-of-pocket costs and, as such, was inconsistent with both
Virginia law and the court’s instructions.15 Radius argues that under the court’s instructions, and
consistent with Virginia law, the jury should have awarded damages limited to the cost of repairing
the leaky Earthcom Dome 60, which it posited could be done for $30,000-35,000.16
A.
Likening this to a “leaky basement” case, Radius contends that the cost of repair is the
appropriate measure of damages, as those damages are the natural and direct result of the breach of
contract. In so arguing, Radius focuses on a number of Virginia decisions concerning the proper
Radius raised no objection at trial to the court’s damages instructions; nor does it do so now. “Defendant does not
challenge the Court’s instructions to the jury, but rather the manner in which the jury calculated damages.” Radius’ Rule
50(b) Br., Dkt. # 315, at 6.
14
15 In fact, in closing argument on damages, Cutaia’s counsel stated as follows: “Now, Mr. Cutaia’s just seeking basically
to get his costs back related to this dome. He’s basically looking for a refund, a refund of the costs that he paid to
Radius, a refund of the costs that he paid to Green Eye, a refund of the costs he paid directly related to the dome.”
Damages Phase Trial Transcript, Dkt. # 313, at 68.
16 Cutaia argues that Radius waived his Rule 50(b) motion as to the amount of damages awarded by not raising this issue
at trial pursuant to Rule 50(a). Cutaia is wrong. Radius argued at the close of the evidence on damages that the proper
measure of damages was the cost of repairing the dome and that there was no basis for Cutaia’s position that the dome
was worthless. Damages Phase Transcript, Dkt. # 313, at 54.
8
measure of damages for a breach of contract claim arising in a construction setting. Even under this
line of cases, however, the evidence adduced at trial supports the jury’s damages verdict.
1.
Virginia law provides two methods for determining direct damages in a breach of
construction contract case.
These have come to be commonly designated as the “cost rule”
which is “the cost of correcting the defects in the [construction] and
making it conform to the terms of the contract” and the “value rule”
which is “the difference between the value of the [structure] properly
completed according to the contract and the value of the defective
structure.”
Nichols Constr. Corp. v. Va. Mach. Tool Co., LLC, 276 Va. 81, 89, 661 S.E.2d 467, 472 (2008).
Nichols Construction concerned a dispute between the owner of an industrial building and a roofing
contractor over the installation of a new roof on the building. Nichols Construction installed a new
roof on Virginia Machine Tool’s building for $140,000. The trial court concluded that the roof was
defective and could only be fixed by removing and replacing it, at a cost of $450,842. Nichols
Construction argued that the award of damages to replace the roof was excessive and that the
damages should be limited to the amount of the contract price. Noting that the repair of the
defective roof was not a reasonable option, the Virginia Supreme Court affirmed the trial court’s
award of the cost to remove the defective roof and install a new one, concluding that this “was the
object of the original contract.” Id. at 91, 661 S.E.2d at 473.
In addressing the proper measure of damages, Nichols Construction relied on the 1950
Virginia case of Mann v. Clowser, 190 Va. 887, 903, 59 S.E.2d 78, 85-86 (1950). In Mann, the
Virginia Supreme Court cited Williston on Contracts, the Restatement of the Law of Contracts and
Judge Cardozo in Jacobs & Young, Inc. v. Kent, 230 N.Y. 239, 129 N.E. 889 (1921), for the
proposition that if the structure constructed could not be repaired in accordance with the contract, if
the repairs would involve unreasonable economic waste, or if the cost of completion is grossly and
9
unfairly out of proportion to the good to be attained, the proper measure of damages is the
difference in value of the defective structure and that of the structure properly completed. See also
Lochaven Co. v. Master Pools by Shertle, Inc., 233 Va. 537, 543, 357 S.E.2d 534, 538 (1987); Green
v. Burkholder, 208 Va. 768, 771, 160 S.E.2d 765, 767 (1968); Kirk Reid Co. v. Fine, 205 Va. 778,
786-88, 139 S.E.2d 829, 835-36 (1965). These cases teach that “the rule to be followed in a
particular case depends upon the character and extent of the defective construction.” Mann, 190
Va. at 904, 59 S.E.2d at 86. “Accordingly, the determination of damages for a breach of contract
will always be fact specific, and no single method exists for calculating the amount necessary to place
the plaintiff in the position he would have occupied had the breach not occurred.” Nichols Constr.,
276 Va. at 89, 661 S.E.2d at 472 (citing Appalachian Power Co. v. John Stewart Walker, Inc., 214
Va. 524, 535, 201 S.E.2d 758, 767 (1974)). In an appropriate case, where the facts suggest that “the
defect was not remediable from a practical standpoint, . . . the difference in value was the proper
rule.” Barcroft Woods, Inc. v. Francis, 201 Va. 405, 410, 111 S.E.2d 512, 517 (1959); see also
Lochaven Co., 233 Va. at 544, 357 S.E.2d at 538 (“[T]he cost measure of damages will not be
awarded in cases where the property must be substantially demolished before it can be brought into
compliance with the contract provision or in cases where the cost of compliance is grossly
disproportionate to the benefit to be achieved.”).
2.
The jury was squarely faced with the factual question of whether the Earthcom Dome 60
could be repaired, and if so, at what cost. Radius’ McCarthy testified that the Earthcom Dome 60
could be repaired for the relatively modest sum of $30,000 to $35,000 by fiberglassing the vertical
seams where the pie-shaped dome segments met, and sealing the base of the dome with wateractivated urethane foam used in nautical applications. Radius’ Engineering expert, John Mroszczy,
Ph.D., concurred. On the other hand, Cutaia presented evidence that the Earthcom Dome 60 was
10
defective beyond all practical repair. In particular, Cutaia relies on the testimony of David Stott, a
general contractor hired by Cutaia who unsuccessfully attempted to rectify the problem of water
infiltrating the dome; Dano Holland, an engineering expert who testified that the dome could not be
made watertight to any degree of confidence without removing it from the ground and reassembling
it; and Cutaia’s own testimony that the Earthcom Dome 60 was not usable as a survival shelter as it
was constantly leaking water, moldy and beyond repair. In addition to the problem of water
infiltration, Cutaia testified that he contracted with Radius for a survival shelter that was protected
from electromagnetic pulses emitted from high altitude nuclear denotation (“EMP”), when, in fact,
the evidence showed that the dome Radius sold him could not even shield local radio broadcasts.
Cutaia’s contractor, David Stott, testified at trial as to the work he performed at Cutaia’s
request to attempt to salvage the survival shelter after the installer, Green Eye, abruptly quit the
project. Stott testified that he observed water and mud on the floor of the dome and a circular crack
in the concrete floor that travelled almost all the way around the perimeter of the dome. Stott Trial
Testimony, Dkt. # 334, at 6-9. Stott described for the jury photographs he took showing water
infiltration and mold in the dome. Id. at 12, 20-21, 43.17 Stott testified and showed the jury pictures
of water leaking into the dome from the vertical seams of the dome sections and the bolt holes
where the pie-shaped vertical sections were bolted together. Id. at 22-26. Stott testified that he took
various steps to try to alleviate the water infiltration into the dome by rerouting drains, regrading the
area around the dome and covering the dome with a rubber membrane left on site by Green Eye.
Id. at 28-29. These efforts were not successful in stopping the water infiltration into the dome. Id.
at 29.
17 Stott testified that during his last visit to the dome in the spring of 2013, he noticed more mold than water and noted
that “[t]he mold was really kind of creeping me out.” Id. at 43.
11
Cutaia’s expert, Dano Holland, a forensic structural engineer, testified as to the circular crack
in the foundation of the dome and also as to water infiltration into the Earthcom Dome 60.
Holland testified that he observed water weeping out from the interface between the concrete floor
slab and the fiberglass shell of the dome. Holland Trial Testimony, Dkt # 311, at 34. Holland also
testified to water infiltration in the areas where the dome shell sections were bolted together. Id. at
35. Holland testified that the dome was constructed by bolting together flanges located on the pieshaped shell sections. The evidence demonstrated that the flanges did not meet tightly, resulting in
gaps of varying widths between the shell sections.18 At Radius’ instruction, Green Eye filled the
gaps with the auto body filler and coated the surface with roofing cement. Holland testified that this
system was not an effective method of waterproofing an underground structure to protect it from
hydrostatic pressure and water infiltration. Id. at 39. Holland testified that water was entering the
dome both through its vertical joints and underneath the dome where it met at the foundation. Id.
at 40-41. Holland testified as to the great lengths that would be required to make the Earthcom
Dome 60 waterproof, id. at 45-47, and at the end of the day concluded that the entire structure
would have to be unearthed, disassembled and reassembled in an appropriately watertight manner.
Id. at 48.
Cutaia testified both during the liability and damages phases of the trial. Cutaia testified
about his experience working in Manhattan on September 11, 2001 and his resulting interest in
acquiring a facility in which he could protect his family from a natural or man-made calamity. Cutaia
testified that in his discussions with Radius, McCarthy emphasized the importance of a structure
being watertight so as to protect against radiation and biological hazards. Cutaia Trial Testimony,
Holland noted that the bolts emanating from the inside of the dome where the sections met were of varying lengths.
Holland testified that the fact that some bolts protruded into the dome further than others indicated that the shell flange
sections were not joined to a uniform degree, causing him to conclude that the flanges of the dome shell sections had
gaps between them of varying lengths that were filled with the bonding compound. Id. at 41-45.
18
12
Dkt. # 319, at 38, 48-49. In contrast to what he had been promised and for which he contracted,
Cutaia testified that the Earthcom Dome 60 was “not useable. You can’t even go in it. Forget
about using it. . . . It’s covered with mold. It’s constant water coming in. The pieces didn’t fit
together. There’s no way to repair it.” Id. at 93. Cutaia testified that he:
[S]pent a fortune with Stott trying to figure out where is this water
coming from, what could we do? We diverted whatever water
sources we could find, much further away from the dome. The
$5,000 rubber liner that they made me buy that they never even
installed, I had Stott put that on top and cover it with soil. I really
did everything I could possibly do and it cost me a fortune. . . . It still
was never able to stop the water coming in and, you know, the pieces
didn’t fit together. There’s nothing you can do about it. They didn’t
fit together.
Id. at 94. When asked whether the dome could serve any alternate use, Cutaia responded:
You can’t go in it. You can’t store anything in it. There’s nothing
you can do, you know. I had some suggestions. Fill it up with sand,
collapse it, pull it out. The cost to do any of these things, to extract it
and take that thing apart, it cost way more than I even paid these
guys. I’m kind of stuck.
Id. at 95. Cutaia further testified:
I think I actually paid Stott more than $100,000 and I did that
because I was trying to salvage it. I was trying to figure out if there
was a way I could stop the water from coming into this thing. For
the millions of dollars I spent on it, I was hoping it could somehow
be salvaged and used and I spent a lot of money to try to fix that
because they abandoned and never came back. After all of that time
and money, it still leaks, still not habitable for the purpose that I
bought it for protection – protection. It’s a joke.
Id. at 119. Cutaia testified that he has not been able to use the dome as a survival shelter or for any
other purpose, and sought as damages from Radius “everything that I’ve gone out of pocket on as a
result of what he put me through.” Cutaia Damages Phase Testimony, Dkt. # 313, at 15. Cutaia
further testified that he had another survival shelter manufacturer, Utah Shelters, visit his property
and inspect the Radius shelter. Cutaia testified that their view was that the Radius shelter “wasn’t
13
repairable.”19 Cutaia testified on cross-examination that he wished he could repair the dome, but
that “[n]o one is able to guarantee me it can be fixed.” Cutaia Damages Phase Testimony, Dkt. #
313, at 39. Cutaia testified that he asked Stott what it would cost to remove the dome, to which he
responded that “it would be a ridiculous amount of money and I should maybe think about
collapsing it or filling it with sand.”20 Id. at 41.
In addition to the water infiltration of the Earthcom Dome 60, Cutaia presented evidence
that he was assured by Radius that the structure would protect his family from EMP, when, in fact,
it provided minimal EMP protection. Davidson Scott, testifying for Cutaia as an expert in the field
of electromagnetics, stated that the Earthcom Dome 60 did not meet military specifications for
EMP protection and that the ability to receive radio signals inside the dome meant that there was no
significant EMP protection. Radius’ McCarthy offered little disagreement on this point, noting that
reception of radio signals inside the dome “suggest[s] there’s little EMP protection.” McCarthy Trial
Testimony, Dkt. # 320, at 60.
In contrast to Cutaia’s evidence, Radius presented evidence from an engineering expert,
John Mroszczy, Ph.D., about the condition of the dome and associated structures during his
inspection on February 12, 2012. Mroszczy testified that while the ground was very wet outside the
Earthcom Dome 60, inside it was “bone dry” and had “no odor such as you might find in a damp or
a musty basement.” Mroszczy Trial Testimony, Dkt. # 312, at 26. Mroszczy also testified that the
circular hairline cracks in the foundation of the dome were “benign” and “not structurally
compromising.” Id. Mroszczy denied observing any mold inside the dome. Id. at 108. Mroszczy
further testified that Radius’ installation instructions called for placing hydraulic cement around the
Although this statement made by a representative of Utah Shelters to Cutaia plainly is hearsay, the testimony was
elicited on cross-examination by counsel for Radius, waiving any hearsay objection. Cutaia Damages Phase Testimony,
Dkt. # 313, at 38-39.
19
20
Again, this hearsay statement was elicited on cross-examination by Radius’ counsel.
14
base of the dome, and that had that instruction been followed, no water could have infiltrated the
joint between the dome and the concrete foundation. Id. at 41-42. Likewise, Mroszczy testified as
to an instruction given to Green Eye indicating that silicone caulk be placed around the bolt heads
on the flanges joining the dome section pieces. He stated that had that instruction been followed,
no water could have infiltrated the dome through the bolt holes. Id. at 47-48. Mroszczy also
testified concerning the proper procedure for tightening the flange bolts, and indicated that any gaps
between the flanges were the result of an improper sequence of bolting the flanges together. Id. at
60-62, 128-29. Mroszczy concluded that the dome was properly designed and manufactured and that
any water infiltration problems were the result of improper installation. Id. at 67-69. Mroszczy
concluded:
The dome is structurally sound. It was assembled. It has been there
for two years. There apparently at some points, there was some
water infiltration for a lot of different reasons that could have
occurred before the entire structure was put in place. The easy
solution is to glass the inside flange and seal the flange at the bottom.
Id. at 88. While Mroszczy did see evidence of prior water infiltration of the dome, he attributed it to
“an installation issue, not a design or manufacturing issue.” Id. at 111, 113-14. He termed any
historic water infiltration to be “very minor . . . that can be repaired,” id. at 113, “by glassing the
inside of the dome.” Id. at 137.
Walton McCarthy of Radius testified that the Earthcom Dome 60 was structurally sound,
but that Green Eye “didn’t seal it right.” McCarthy Trial Testimony, Dkt. # 320, at 91-93, 99.
McCarthy denied that the Earthcom Dome 60 needed to be dug up and testified that the dome
could be sealed from the inside like any basement or boat using water-activated urethane and
fiberglass. Id. at 93. McCarthy acknowledged that the Earthcom Dome 60 leaked. In his view, the
water leaked into the dome from the bolt heads and under the foundation flange, both of which he
attributed to Green Eye’s installation failures. McCarthy Trial Testimony, Dkt. # 324, at 20. During
15
the damages phase, McCarthy testified that the dome could be repaired by fiberglassing over the
vertical seams and bolts and sealing the base seams with water-activated urethane foam. McCarthy
Damages Phase Testimony, Dkt. # 313, at 43. McCarthy testified that any extant mold could be
remediated with Clorox. Id. at 46. The total cost of the repairs to the dome according to McCarthy
would be $30,000 to $35,000. Id.
On rebuttal, the installer, George Welhaf, III, of Green Eye, testified that Radius complied
with all of Radius instructions concerning the installation of the Earthcom Dome 60, including
applying silicone to the bolt heads and hydraulic cement around the base of the dome. Welhaf
testified that Radius was fully apprised of their efforts to seal the seams of the dome sections and the
bottom of the dome. Welhaf Trial Testimony, Dkt. # 321, at 39, 43, 44-45. Welhaf testified that
despite Green Eye’s best efforts and compliance with Radius’ instructions, water leaked through the
bolts and around the bottom seams. Id. at 47. Welhaf attributed the water leakage to the paint
flaking off of the fiberglass dome shell sections, providing a path for water to run underneath the
waterproofing he applied to the dome section joints. Id. at 61-64, 91.
3.
Faced with this evidence, the jury awarded damages based on the difference between the
value of the contracted-for functional survival shelter and the worthless structure that was installed,
rather than on the cost of repair. Plainly, the jury rejected Radius’ argument that the Earthcom
Dome 60 could be repaired and serve its purpose as a survival shelter.
Virginia law has long allowed a plaintiff in a breach of construction contract case to recover
either under the cost or value rule. To be sure, the cost rule is the more frequently employed
method of calculating damages,21 and the one for which Radius advocated. However, this case, in
See Nichols Constr., 276 Va. at 89-90, 661 S.E.2d at 472 (“We have observed that ‘cost of correction or completion
rather than loss in property value ordinarily affords the proper basis for measuring the damages which result to the
21
16
which the construction defect cannot practically be remedied, presents an exception to application
of the cost rule. The jury properly used the value rule to calculate damages in these circumstances.
See Barcroft Woods, 201 Va. at 410, 111 S.E.2d at 517; see also Lochaven Co., 233 Va. at 544, 357
S.E.2d at 538.
Radius argues this case presents facts analogous to the construction of a home with a leaky
basement, and that the proper measure of damages is not the cost of constructing a new home, but
rather the cost to fix the leak. But this analogy is inapposite. This case involved the purchase of a
structure designed to protect Cutaia and his family from all manner of calamities, including those
resulting from a natural disaster, nuclear strike or bioterrorism. Given the evidence that the
Earthcom Dome 60 could not even keep water out, it was consistent with the evidence and
reasonable for the jury to conclude that it could not serve its purpose—i.e., to protect Cutaia’s
family from EMP, radiation or other biohazards associated with a natural or man-made disaster.22
In awarding damages, the jury plainly focused on the peculiar nature of the product at issue. See
Nichols Constr., 276 Va. at 89, 661 S.E.2d at 472 (determination of damages in breach of contract
case will always be fact-specific; “no single method exists for calculating the amount necessary to
owner from the breach of a building or construction contract, or other contract to change the condition of real
property.’” (quoting Green v. Burkholder, 208 Va. 768, 773, 160 S.E.2d 765, 768 (1968))).
22 Thus, the myriad cases cited by Radius concerning the proper measure of damages to remedy water damage to the
basement of a home do not carry the day. See, e.g., 2300 Pa. Ave., LLC v. Harkins Builders, No. 1:10-cv-1321-LOGIDD, 2012 U.S. Dist. LEXIS 28137 (E.D. Va. Mar. 2, 2012). In those cases, the basement leaks could be repaired and
the entire structure was not rendered worthless by the intrusion of water. Two things make this case different. First, the
jury heard evidence that Cutaia undertook efforts to stem the flow of water into the Earthcom Dome 60 to no avail, that
it continued to leak water and was moldy, and that there was no practical way to stop the flow of water without
removing the massive structure from the ground and starting over. Accordingly, Cutaia was considering filling it with
sand. Second, unlike in the case of a house with a leaky basement, the entire function of the Earthcom Dome 60 was
undone by the intrusion of water. The Earthcom Dome 60 was not a house with a leaky basement. Its whole function
was to keep Cutaia and his family safe from exposure to environmental toxins and other perils associated with a terrorist
attack or natural disaster. In other words, unlike a house with a leaky basement, which retained some value as a house
notwithstanding the water infiltration into the basement, Cutaia presented evidence and argued that a leaky survival
shelter has no value, a conclusion which the jury obviously reached.
17
place the plaintiff in the position he would have occupied had the breach not occurred”).
Substantial evidence supports the jury’s decision in this regard.
In sum, Cutaia presented evidence from which the jury could reasonably conclude that the
Earthcom Dome 60 structure constructed on his property could not be repaired and had no value as
a survival shelter. Radius disagreed with this evidence and argued strenuously that the Earthcom
Dome 60 could be repaired at a relatively modest cost. The parties’ differing positions on this issue
were squarely presented to the jury during both the liability and damages phase of the trial, and the
jury’s verdict reflects its disagreement with Radius’ contention that the dome could be repaired and
function as a survival shelter.23 At this stage, the court cannot reweigh the evidence or substitute its
judgment for that of the jury. The jury’s ultimate conclusion that Cutaia was entitled to recover the
difference between the value of the structure properly completed ($1,762,087.40) and the value of
the defective structure in its current state ($0) is supported by the evidence and consistent with
Virginia law— specifically, the construction cases relied on by Radius.
B.
Radius also takes issue with the fact that the jury awarded Cutaia his “out-of-pocket costs
[which] are neither direct nor consequential damages. These damages do not constitute a ‘natural
and ordinary result of the breach,’ but rather consist of ‘out-of-pocket’ costs incurred prior to
and/or independent of the breach – not as a result of the breach.” Radius’ Rule 50(b) Br., Dkt.
# 315, at 8. Radius notes that “many of these costs were incurred before the product was even
delivered to the site (dome, foundation pan, composite rebar, shipping costs, core drilling), and
many have no relationship to any alleged wrongdoing or breach by Radius (core drilling, tunnels,
Thus, the case differs from the Loveland Distributing Co., Inc. v. Nelson-White Construction Management Corp.,
No. LH-792, 1987 WL 488753 (Richmond Cir. Ct. Oct. 30, 1987), case relied upon by Radius at oral argument involving
a defective warehouse roof. There the court, sitting as the trier of fact, found overwhelming evidence that the roof
could be repaired. Id. at *4. Here, in contrast, the jury’s damage verdict reflects a rejection of Radius’ argument that the
Earthcom Dome 60 could be repaired.
23
18
septic tanks, diesel tank and barrier hatch).” Id. (citation omitted). Radius argues that this out-ofpocket damages award amounts to a windfall to Cutaia rather than reasonable compensation.
This is simply not the case. “The object of the law in awarding damages is to make amends
or reparations by putting the party injured in the same position, as far as money can do it, as he
would have been if the contract had been performed.” Lehigh Portland Cement Co. v. Va. S.S. Co.,
132 Va. 257, 270, 111 S.E. 104, 109 (1922). Putting Cutaia in the position he would have been in
had the contract been performed according to its terms would require removal of the existing
structure and replacement with a functional survival shelter. No evidence was adduced as to the
cost to remove the existing structure, so there was no basis for the jury to award anything for the
cost of removal. Thus, the jury reasonably awarded the cost of a functional survival shelter.
Nor is there any merit to Radius’ argument that the damages awarded by the jury were not
the result of the breach of contract in this case. In paying upwards of two million dollars, Cutaia
contracted for a functional survival shelter for his family in the case of a catastrophe. In exchange
for the expenditure of this vast sum, Cutaia’s evidence was that he got a structure that was wholly
unsuitable for this purpose and could not be salvaged. Considering the evidence in the light most
favorable to him at this stage, it was reasonable for the jury to award him damages amounting to the
value of the survival shelter for which he contracted and paid, but did not receive.24
Likewise, Radius’ argument that recovery of Cutaia’s costs to have the survival shelter
manufactured and installed are not direct damages misses the point of Virginia law authorizing
damages “which arise naturally or ordinarily from a breach of contract and which, in the ordinary
Radius’ citation of McDevitt & Street Co. v. Marriott Corp., 713 F. Supp. 906, 935 (E.D.Va. 1989), for the
proposition that “[d]amages which arise from problems or issues that are independent of the breach itself are not
recoverable as damages resulting from the breach,” Radius’ Rule 50(b) Br., Dkt. # 315, at 9, is unavailing. In that case,
the court concluded that Marriott did not prove that certain expenses were attributable to its breach. Here, in contrast,
Cutaia presented evidence of Radius’ failure to fulfill its contractual obligations and provide a functional and habitable
survival shelter. Cutaia presented evidence that he was left with a sodden and moldy fiberglass and concrete structure of
no use whatsoever, for which he paid nearly two million dollars. Unlike in McDevitt, there was substantial evidence
from which the jury could conclude that Cutaia was damaged in the amount reflected in its award.
24
19
course of human experience, can be expected to result from the breach.” Transdulles Ctr., Inc. v.
USX Corp., 976 F.2d 219, 226 (4th Cir. 1992) (citing Roanoke Hosp. Ass’n v. Doyle & Russell, Inc.,
215 Va. 796, 801, 214 S.E.2d 155, 160 (1975)); see also Va. Code Ann. § 8.2-714(1) (authorizing as
damages “the loss resulting in the ordinary course of events from the seller’s breach as determined
in any manner which is reasonable”). Plainly, Cutaia’s payments represent the only evidence in this
case of the value of the Earthcom Dome 60 had it been constructed in accordance with the contract.
The difference between the out-of-pocket expenses Cutaia incurred for the survival shelter and its
present value – zero – constitutes Cutaia’s direct damages. The jury’s determination of the amount
of the loss is reasonable and puts Cutaia “in the same position, as far as money can do it, as he
would have been if the contract had been performed.” Lehigh Portland Cement Co., 132 Va. at 270,
111 S.E. at 109. As such, the jury’s award is consistent with Virginia law.
Finally, Radius’ argument that the jury’s award was excessive and out of proportion to the
actual injury sustained is founded on the assumption that the Earthcom Dome 60 could be repaired
as Radius’ McCarthy testified. A district court may set aside a verdict as being excessive when it is
“against the weight of the evidence or based on evidence which is false.” Sloane v. Equifax Info.
Servs., LLC, 510 F.3d 495, 502 (4th Cir. 2007). Again, the argument that the dome could be
repaired was squarely presented to and rejected by the jury in its damages award, and the court
cannot revisit the jury’s obvious rejection of Radius’ argument. As noted above, Cutaia presented
evidence that the Earthcom Dome 60 was beyond use as a survival shelter and could not be
repaired. As there was evidence presented supporting the jury’s verdict, the court may not set it
aside.
In sum, substantial evidence supports the jury’s determination that Radius breached its
contract with Cutaia and that the Earthcom Dome 60 was consequently rendered useless, resulting
in monetary damages in the amount of $1,762,087.40.
20
V.
For these reasons, Radius’ Motion for Judgment as a Matter of Law (Dkt. # 315) is
DENIED. By accompanying Order, a Judgment Order will be entered for Cutaia in the amount of
$1,762,087.40 as damages for breach of contract.25
Entered: July 9, 2014
/s/ Michael F. Urbanski
Michael F. Urbanski
United States District Judge
25 The breach of contract claim against Radius was asserted in Count I of Second Amended Complaint. Dkt. # 128.
Because judgment will be entered only on the breach of contract count, Radius may not recover from Green Eye on a
contribution claim under Virginia law. See Va. Code Ann. § 8.01-34. As such, Radius’ cross-claim against Green Eye
for contribution, Dkt. # 13, will be dismissed.
21
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