Towerridge, Inc. v. T.A.O., Inc.

United States Court of Appeals for the Tenth Circuit · 1997 · Evidence

111 F.3d 758 (10th Cir. 1997)

Updated August 22, 2026

EvidenceMiller Actattorneys' feesbad faithAmerican Ruleprelitigation conductinherent powersprejudgment interest

Facts

Towerridge performed concrete and asphalt paving work under a subcontract that entitled it to monthly progress payments based on the percentage of each line-item task completed, less retainage. T.A.O. and Towerridge disagreed throughout the project about how much work Towerridge had completed and about whether delays and defects were Towerridge's fault or were caused by government and project-management problems. At trial, Towerridge supported its claimed completion percentages with its own pay applications and testimony from its project manager, and also with T.A.O.'s monthly pay applications to the government showing conflicting completion percentages. The district court also admitted evidence that T.A.O. had asserted delay-and-disruption claims against the government and had settled those claims.

Issue

Whether the evidence was sufficient to support the jury's damages award under the Miller Act; whether prejudgment interest was properly awarded under federal rather than Oklahoma law; whether attorneys' fees could be awarded under the bad-faith exception based solely on T.A.O.'s prelitigation conduct; and whether evidence of T.A.O.'s separate claim and settlement with the government was admissible.

Rule

In a Miller Act case, prejudgment interest is governed by federal law, and the district court may award it if it serves a compensatory function and the equities do not preclude it. The bad-faith exception to the American Rule, derived from the court's inherent power to police abuse of the judicial process, does not authorize an award of attorneys' fees based solely on bad-faith conduct occurring before litigation and giving rise to the substantive claim. Evidence of settlement of a different claim is not excluded by Rule 408 when offered for a purpose other than proving liability or amount of the claim being litigated.

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Red Mesa Masonry sued High Plains BuildCo in federal court in Denver for unpaid amounts under a bonded federal construction subcontract. At trial, High Plains claimed Red Mesa caused months of delay, and Red Mesa offered evidence that High Plains had separately submitted a delay claim against a federal owner blaming site-access restrictions and later settled that separate claim for money.

High Plains objects under Rule 408. How should the court rule?

Explanation. Rule 408 bars compromise evidence only when offered to prove liability for, invalidity of, or amount of the claim being litigated. Here the settlement concerned a different claim and was offered for another purpose: to show delays were caused by site restrictions rather than the subcontractor. Under the majority's reasoning, Rule 408 is therefore not an automatic bar, though Rule 403 still applies.