A “Verdict” is not a “Judgment" for Purposes of Nebraska's Post Judgment Interest Statute, and it is Error to Grant Post Judgment Interest Until Certifying the Final Judgment

The recent Nebraska Supreme Court case of VKGS v. Planet Bingo, et.al., 309 Neb. 950, ___ N.W.2d ___ (2021) addressed proper application of Nebraska’s post judgment interest statute and the propriety of bifurcating issues at trial.   

Planet Bingo, LLC, (Planet Bingo) owns an electronic gaming software called EPIC.  EPIC was developed in the late 1990’s by Planet Bingo’s wholly owned subsidiary, Melange Computer Services, Inc. (Melange).  VKGS, LLC, (VKGS) and Planet Bingo, competitors in the bingo hall gaming industry, sued each other for breach of contract.  Although they were competitors, Planet Bingo and VKGS maintained a contractual business relationship from approximately 2003 through 2012, which as of 2005 was protected by an extensive confidentiality provision drafted by VKGS.   

In 2011, Planet Bingo sued VKGS for breach of contract for VKGS’s misuse of Planet Bingo’s confidential information -- by taking confidential EPIC information to develop its own competing software program called OMNI. VKGS in turn alleged that Planet Bingo breached contractual obligations and tortiously interfered with business relations by using pricing information and disparagement to influence customers. Two separate jury trials ensued. 

A jury trial commenced in August 2018 on both parties’ claims.  About halfway through the trial VKGS attempted to offer a Canadian Patent application that contained some description of EPIC’s source code.  VKGS claimed that this public discourse of confidential information precluded Planet Bingo’s misuse of confidential information as a matter of law.   But VKGS did not have a certified copy of the patent application and failed to otherwise authenticate it at trial.  VKGS did not disclose the patent application as a trial exhibit.  The district court sustained Planet Bingo’s objections and did not receive the exhibit into evidence. 

Furthermore, the existence of the patent application raised issues about whether Planet Bingo could proceed with its case in chief.  Thus, VKGS moved to dismiss Planet Bingo’s misuse claim.  Because VKGS had not yet rested its case in chief, and because Planet Bingo had not yet presented evidence on its claims, the court instead bifurcated VKGS’s and Planet Bingo’s claims and proceeded on the VKGS claims only.  About a year later, in June 2019, Planet Bingo’s claims were tried to a separate jury.   

In the trial on VKGS’ claims, the jury found Planet Bingo liable for $558,405. In the second trial on Planet Bingo’s claims, the jury found VKGS liable for $2,990,000.  After the second trial, the court offset the verdicts and entered one judgment in Planet Bingo’s favor, but also awarded VKGS post judgment interest on its 2019 verdict while still offsetting VKGS’ award.   

VKGS appealed the court’s order bifurcating VKGS’ and Planet Bingo’s claims and also appealed the court’s decision to exclude the patent application from evidence in the first trial (the patent application was eventually received into evidence during the second trial of Planet Bingo’s claims).  Planet Bingo cross appealed claiming that the court erred in awarding VKGS post-judgment interest on its verdict because the “verdict” was not a judgment for purposes of the post-judgment intertest statute.  

As to the patent application, the Nebraska Supreme Court held that VKGS failed to authenticate the exhibit.  Also, in noting that authentication is a condition precedent to a document’s admission into evidence the court said  “Neb. Rev. Stat. § 27-901(1) (Reissue 2016) does not impose a high hurdle for authentication or identification of proffered evidence as a condition precedent to admissibility. ”  Instead, authentication “may be satisfied by testimony that a matter is what it is claimed to be, and proper authentication may also be attained by evidence of appearance, contents, substance, internal patterns, or other distinctive characteristics, taken in conjunction with circumstances, sufficient to support a finding that the matter in question is what it is claimed to be. ”  In fact, the Court noted that certified public records are self-authenticating under Neb. Rev. Stat. § 27-902(4) (Reissue 2016) but VKGS failed to even offer a certified copy of the application. 

As to the bifurcation issue, the Court held bifurcation of a trial may be appropriate where “separate proceedings will do justice, avoid prejudice, and further the convenience of the parties and the court.”   Additionally, the Court reaffirmed that trial courts have the inherent power over the general conduct of a trial and a decision to bifurcate will not be overturned absent an abuse of discretion.  The Court held that no abuse of discretion occurred because the unauthenticated patent application was not properly offered in VKGS’ case in chief because its contents were irrelevant to VKGS’ tortious interference claim.  Also, the potential effect of the application on Planet Bingo’s claims was a sufficient reason to bifurcate the trial. Thus, the Court dismissed VKGS’ appeal.  

As to post judgment interest, Court agreed with Planet Bingo that VKGS’ trial verdict was not a “judgment’ for purposes of post judgment interest and that the lower court erred in awarding VKGS post judgment interest.  Instead, the Court held that the two competing verdicts were required to be offset and interest could only accrue on the final judgement entered after the verdicts were offset.  Thus, the Court reversed the trial court’s award of post judgment interest on VKGS’ verdict and held “Final judgment in this case occurred after all of the parties’ claims were adjudicated and both jury verdicts were accepted by the district court. As post judgment interest accrues only on judgments, and [Neb. Rev. Stat.] § 25-1316 contemplates only one ‘judgment,’ the district court erred in awarding VKGS post judgment interest when interest had not begun to accrue on VKGS’ claim and Planet Bingo’s claim exceeded VKGS’ claim.”

E|S Attorney Pat Guinan Does it Again.

Congrats to our attorney Patrick Guinan on another appeal win, this time in front of the United States Court of Appeals for the Eighth Circuit. The court upheld the lower court’s entry of summary judgment completely in favor of certain defendants, including one represented by Erickson & Sedestrom. The opinion can be found here: https://www.ca8.uscourts.gov/todays-opinions (Pals v. Weekly et al).

The Acquired Immunity Doctrine – Will the Nebraska Supreme Court Take the Next Step and Adopt the Entire Doctrine?

The acquired immunity doctrine is an affirmative defense that may be available to state construction contractors that are sued by a third party for alleged construction plan design defects.  Here is the scenario: The Nebraska Department of Transportation (“Department”) contracts with a road contractor to remove and replace part of a state highway.  The Department designs the construction plans and requires the contractor to follow the plans as designed.  Part of the construction plans include a traffic control plan.  The traffic control plan complies with the Manual on Uniform Traffic Control Devices (“MUTCD”).  Traffic control is subcontracted to a traffic control manager.  The traffic control subcontractor has no discretion to deviate from the traffic control plan and must set up all traffic devices at the required locations as the Department orders. The subcontractor sets up the traffic devices as the traffic control plan requires.  

Subsequently, a third party is injured in the construction zone and alleges that additional or different traffic devices should have been used on the project.  The Department retains its sovereign immunity because: 1) the Department’s choice of devices was discretionary, and a matter of engineering judgment; and, 2) under Nebraska’s State Tort Claim Act, the Department retains its sovereign immunity for “Plans for Construction of or improvement to highways.” See Neb. Rev. Stat. §§ 81-8,219 (9) & (11) (Reissue 2014). Yet, the subcontractor is sued for the traffic plans’ alleged design defects even though the Department designed the plan and is immune from liability. Can the subcontractor raise the Department’s sovereign immunity as an affirmative defense?  The answer is “yes,” and the defense is called the “acquired immunity doctrine.”  

The acquired immunity doctrine “provides that a contractor who performs its work according to the terms of its contract with a governmental agency, and under the governmental agency’s direct supervision, is not liable for damages resulting from its performance.” Lopez v. Mendez, 432 F.3d 829, 833 (8th Cir. 2005) (citing Smith v. Rogers Group, Inc., 348 Ark. 241, 72 S.W.3d 450, 455 (2002)) (emphasis added). “Thus, if damages result from the contractor’s performance of a construction contract with the state, ‘and the damages result from something inherent in the design and specifications required by the public agency, the contractor is not liable unless he is negligent or guilty of a wrongful tort.’” Lopez, 432 F.3d at 833 (quoting Guerin Contractors, Inc. v. Reaves, 270 Ark. 710, 606 S.W.2d 143, 144 (1980)). “The purpose of the doctrine is to protect an ‘innocent contractor who has completely performed the work to the government’s plans and specifications.’” Lopez, (quoting Smith, 72 S.W.3d at 456).

The Nebraska Supreme Court has not yet adopted the acquired immunity doctrine.  But the Supreme Court has adopted the immunity’s fundamental concept. That is, the Supreme Court has said “where a construction contractor follows plans and specifications supplied by the owner which later prove to be defective or insufficient, [the contractor] is not responsible to the owner for loss or damage resulting therefrom as a consequence of the defectiveness or insufficiency of such plans and specifications.” Lindsay Mfg. Co. v. Universal Sur. Co., 246 Neb. 495, 506-07, 519 N.W.2d 530, 539-40 (1994); see also Langel Chevrolet-Cadillac, Inc. v. Midwest Bridge & Constr. Co., 213 Neb. 283, 287, 329 N.W.2d 97, 100-01 (1983) (citations omitted); Central Neb. Pub. Power & Irr. Dist. v. Tobin Quarries, Inc., 157 F.2d 482, 485-86 (8th Cir. 1946) (applying Nebraska law); State v. Commercial Cas. Ins. Co., 125 Neb. 43, 50, 248 N.W. 807, 808-09 (1933).

This is the acquired immunity doctrine. Furthermore, although the Nebraska’s State Tort Claims Act excludes independent contractors from the term “state agency,” “the acquired-immunity doctrine creates an exception to this rule.” See Neb. Rev. Stat. § 81-8,210(1); see also Lopez, 432 F.3d at 833. The reason for the exception “is to protect an ‘innocent contractor who has completely performed the work to the government’s plans and specifications.’” Lopez, 432 F.3d at 833 (quoting Smith, 72 S.W.3d at 456).  In fact, other jurisdictions with tort claims acts like Nebraska’s Act and that have the same “state agency” exclusion for contractors as Nebraska’s Act, still have adopted the acquired immunity doctrine to protect innocent contractors that follow the state’s construction plans. See id. at 833-34 (discussing the acquired immunity doctrine under Arkansas law); see also McLain v. State, 563 N.W.2d 600, 605 (Iowa 1997); Fraker v. C.W. Matthews Contracting Co., Inc., 272 Ga. App. 807, 614 S.E.2d 94 (2005); Garrett Freightlines v. Bannock Paving Co., 112 Idaho 722, 731, 735 P.2d 1033, 1042 (1987).

For example, the Iowa State Tort Claims Act also excludes independent contractors from the term “state agency.” I.C.A § 669.2(5). But the Iowa Supreme Court nevertheless adopted the acquired immunity doctrine to protect its independent contractors from liability. Specifically, in McLain v. State, supra, the plaintiffs sued the State of Iowa, its general contractors, and a subcontractor working in an interstate construction zone. The plaintiffs claimed that the construction zone was unreasonably dangerous because the traffic warning signs failed to warn motorists of traffic congestion. McLain, 563 N.W.2d at 601. The district court granted the general contractor and subcontractor summary judgment under the acquired immunity doctrine and in affirming summary judgment, the Iowa Supreme Court held:

The rule is well established that a contractor for the State is not liable to a third party for damages if the contractor complies with the State’s plans and specifications and is not negligent in performing its work . . . . In other words, in those situations the contractor shares the same immunity as the State.

* * *

Here, the evidence in the record reflects that [the general contractors and subcontractor] complied with all State plans and specifications and did not perform their work in a negligent manner. Throughout the project, the State controlled all decisions regarding the placement and installation of the traffic control devices. [The subcontractor] installed the warning signs as it contracted to, and on the day of the accident, the signs were in their proper locations and in complete working order.

Id. at 605 (citations omitted).

The Iowa court also noted that monitoring the effectiveness of the signs was “part of the decision-making process of whether to install additional signs,” which was a decision retained by the State and immunized by statute. Id. The Iowa Supreme Court then held that “[b]ecause [the general contractors and the subcontractor] complied with the State’s contract specifications, we conclude as a matter of law that they may share immunity with the State . . . .” Id.

            Here, like McLain, the subcontractor in our scenario followed the traffic control plan and the traffic plan complied with the MUTCD.  Also, the third-party’s claim that the traffic control plan should have included different or additional traffic devices is a claim against the Department because the Department designed the Traffic Plan —not the subcontractor. The Department, however, is immune from liability because: 1) the traffic plan’s design was a matter of engineering judgment; and, 2) the traffic plan was part of the Project’s “Plans for Construction” for a highway improvement. Neb. Rev. Stat. §§ 81-8,219 (9) & (11). Thus, the subcontractor is cloaked in the Department’s sovereign immunity because it “complied with all State plans and specifications and did not perform their work in a negligent manner. [And] [t]hroughout the project, the Department controlled all decisions regarding the placement and installation of the traffic control devices.” McLain, 563 N.W.2d at 605.

            Now, we need the right case to be taken to the Nebraska Supreme Court.  And remember, in Nebraska you can now file an interlocutory appeal on an order denying summary judgment based on the assertion of sovereign immunity.  Neb. Rev. Stat. § 25-1902.