Opinion ID: 1198908
Heading Depth: 1
Heading Rank: 4

Heading: TH's CROSS-APPEAL

Text: We ordinarily review trial court rulings on evidentiary issues for abuse of discretion. See Landers v. Municipality of Anchorage, 915 P.2d 614, 616 n. 1 (Alaska 1996). However, when the question is whether the trial court applied the correct legal standard in its ruling, the question presented is one of law, see id., which we review de novo. See Sopcak v. Northern Mtn. Helicopter Servs., 924 P.2d 1006, 1008 (Alaska 1996).
At trial, PCI sought to recover around $660,000 in arbitration expenses. A portion of this sum represented expenses PCI incurred in preparing its own construction claims for arbitration with the City; the balance represented expenses incurred by the City in negotiating and preparing for arbitration with PCI, which PCI claimed as assignee of the City's rights. Over TH's objection, the trial court allowed PCI to pursue its claims for arbitration expenses. However, the court specified that PCI would be limited to presenting evidence of expenses that directly relate to extra costs actually caused by [A/H] or Ebasco prior to the settlement between [PCI and the City]. The jury ultimately awarded $43,634 for arbitration expenses sustained by PCI as a result of A/H's negligence and $136,271 for arbitration expenses similarly sustained by the City. TH acknowledges that PCI was entitled to recover for any proven arbitration expenses incurred by the City as a result of A/H's negligence. However, TH claims that PCI was not entitled to recover its own arbitration expenses, since they were in essence costs incurred by PCI in developing and preserving its claim against A/H. Recovery of such costs, in TH's view, is barred under Curt's Trucking Co. v. City of Anchorage, 578 P.2d 975 (Alaska 1978). PCI counters that the arbitration expenses it recovered were not incurred in asserting or protecting a direct claim against A/H, but were instead incurred in a separate proceeding forseeably resulting from A/H's negligence and misrepresentations. Such recovery, asserts PCI, is allowed under Transamerica Title Insurance v. Ramsey, 507 P.2d 492 (Alaska 1973). In Curt's Trucking, 578 P.2d at 981, we recognized that expenses incurred in protecting, developing, or asserting a claim against a party who has inflicted tortious harm are ordinarily not recoverable as damages in an action against the party who inflicted the harm. [29] By contrast, in Ramsey, 507 P.2d at 497, we recognized that when the negligent party embroils the injured party in litigation with a third party, the injured party is entitled to recover from the negligent party all costs of the third-party litigation. In the present case, the jury determined that A/H's negligence and misrepresentations caused PCI and the City to become embroiled in arbitration. A/H's negligence caused damages to PCI that it sought to recover from the City under the terms of its construction contract. That contract required PCI to submit its claim to arbitration; if the City chose to defend its rights under the contract, it was likewise contractually bound to do so through the arbitration proceeding. Though precipitated by A/H's negligence, PCI's arbitration claim was a contractual claim against the City, not an assertion of its tort claim against A/H. The contract between PCI and the City did not require or permit PCI to preserve or assert claims against A/H through arbitration. [30] Indeed, the contract expressly provided that PCI and the City were the only parties involved in the arbitration proceeding. Given these circumstances, we find little merit to TH's claim that PCI's arbitration expenses amounted to costs of asserting its cause of action against A/H. The arbitration process is more readily likened to a third-party proceeding of the kind we considered in Ramsey. To the extent that the proceeding was caused by A/H's negligence or misrepresentations and generated costs incurred by PCI, PCI was entitled to an award against A/H for its expenses. We find no error in the trial court's decision to allow PCI's arbitration expenses to be treated as damages. [31]

In reviewing the denial of a motion for a directed verdict or for a judgment notwithstanding the verdict, this court asks whether, viewing the evidence in the light most favorable to the non-moving party, reasonable jurors could differ in their assessment of the particular issue. See Gonzales v. Safeway Stores, Inc., 882 P.2d 389, 395 n. 4 (Alaska 1994).
In order to recover lost profits in a breach of contract action, the plaintiff must present to the jury evidence sufficient to calculate the amount of the loss caused by the breach. See City of Palmer v. Anderson, 603 P.2d 495, 500 (Alaska 1979). Damages must be proved with reasonable certainty. See Geolar, Inc. v. Gilbert/Commonwealth, Inc., 874 P.2d 937, 945-46 (Alaska 1994). The party seeking damages must provide a reasonable basis for computing the award. See Conam Alaska v. Bell Lavalin, Inc., 842 P.2d 148, 154 (Alaska 1992). Our cases have discussed four methods of proving damages in a construction contract case: the actual cost method, the total cost method, the modified total cost method, and the jury verdict method. See Anchorage v. Frank Coluccio Constr. Co., 826 P.2d 316, 324-27 (Alaska 1992). The preferred method is the actual cost method, in which each element of extra expense incurred because of the [alleged breach] is added up for a total claimed amount. Id. at 325. By contrast, [t]he total cost method calculates damages by determining the difference between the actual costs incurred on a project, plus a reasonable amount for profit, and the contract price. Geolar, 874 P.2d at 943. This method is disfavored because it assumes that the defendant's breach was the cause of all of the extra cost, it assumes plaintiff's bid was accurately computed, and it assumes that plaintiff was not responsible for increases in cost. Fairbanks N. Star Borough v. Kandik Constr., Inc. & Assocs., 795 P.2d 793, 798 (Alaska 1990), opinion vacated in part on reh'g, 823 P.2d 632 (Alaska 1991) (relevant parts unaffected). For these reasons, the proponent of total cost evidence must establish that no other form of proof is practicable. See Coluccio, 826 P.2d at 325. [32] Similar to the total cost method, and similarly disfavored, is the modified total cost method, which fixes amounts actually spent for various parts of a contract and compares those costs with some form of estimate-derived reasonable cost. [33] The central aspect of both the total cost and modified total cost methods is a comparison between the contractor's initial estimates and the actual cost of performing the contract. Geolar, 874 P.2d at 944. The fourth method of proof is the jury verdict method, a variant on the actual cost approach which allows the contractor to `present evidence of the cost of additional work to the finder of fact[,] including any actual cost data, accounting records, estimates by law and expert witnesses, and calculations from similar projects.' Coluccio, 826 P.2d at 325 (quoting New Pueblo Constr., Inc. v. State, 144 Ariz. 95, 696 P.2d 185, 194 (1985)). Before trial began, the trial court granted a motion by TH to prohibit PCI from relying on the total cost method to prove damages and requiring, instead, that damages be proved by the actual cost method: PCI must establish its damages, and any right to recovery, by means of the actual cost method of establishing damages. In other words, PCI must establish each element of extra expense incurred, and that each such expense was caused by defendants' negligence, before it will be entitled to an award for such expense. At the conclusion of PCI's case-in-chief, TH filed motions for a directed verdict on damages, asserting that PCI's witnesses had failed to present an actual cost case, had relied instead on total cost evidence, and had failed to present sufficient evidence to establish causation of damages or to establish its damages with sufficient specificity. The trial court declined to direct a verdict against PCI, concluding that, although PCI's evidence incorporated some total cost elements, ample evidence of causation had been presented, particularly as to A/H; the court further concluded that specificity as to the amount of damages was of secondary importance. [34] Essentially, the court embraced the jury verdict method, stating, It seems to me the way to handle this is a very carefully worded jury instruction .. . which requires the jury to find causation with precision and to let them know that that was the burden that Plaintiffs had. Accordingly, at the close of the case, the court defined the actual cost method and instructed the jury that Plaintiff must use the actual cost method to establish its damages. The court defined the total cost method, as well, and instructed that [y]ou may not use this method to determine PCI's damages, because it does not differentiate between the various entities which may have caused any damage to PCI. The court also advised the jury, you must have a reasonable basis for fixing damages in this case. The court warned that delay and damages in the performance of the powerline project could potentially have been caused by numerous contract participants other than A/H or Ebasco, and it told the jury that [f]or each item of damages claimed ... you must determine that such item of damage was legally caused by [A/H] or Ebasco Services before making an award ... for that item. On appeal, TH renews the objections it raised below. TH complains that the trial court erred in allowing PCI to present a case based entirely on total cost evidence. After undertaking an extensive review of the damages evidence, TH encapsulates its claim as follows: PCI's evidence ignored causation, and PCI witnesses simply assumed that all injuries were caused by A/H and Ebasco. That assumption duplicates the underlying premise, and the essential evidentiary weakness of the total cost approach. The jury had no evidentiary basis for distinguishing between injuries caused by A/H and those caused by PCI, Ebasco, the COS [City of Seward], CEA [Chugach Electric], the U.S.F.S [United States Forest Service] and others, therefore it could not isolate which specific injuries were caused by A/H. Since the jury could not isolate what injuries were caused by A/H, it therefore could not determine damages flowing from those injuries. Nor could the jury use the resultant percentage of fault to determine the damages relating to the arbitration expenses incurred by PCI and the COS or the COS's increased administrative costs. In short, TH maintains that PCI's reliance on a total cost case left the jury with no rational basis for a verdict: The jury's award can only be explained as a result of the averaging method, the adoption of an arbitrary percentage calculation, or the random selection of figures improperly based on speculation. We disagree. TH's view of the case is not taken, as ours must be, in the light most favorable to PCI. See Gonzales v. Safeway Stores, Inc., 882 P.2d 389, 395 (Alaska 1994). PCI's evidence cannot be dismissed as a mere total cost case. Although the evidence included a healthy dose of information concerning the total cost of the delays, the jury heard detailed testimony concerning PCI's actual construction of the powerline project. Witnesses who had worked on the project told of the delays, frustrations, and economic problems PCI experienced; they recounted details of PCI's dealings with A/H and other contract participants; they described A/H's alleged misrepresentations and acts of negligence; and they tied those acts to specific problems in PCI's performance of the contract. The jury also heard a significant amount of cost analysis and received volumes of paperwork documenting and analyzing virtually every phase of construction. Some of the analysis was based on a total cost approach, but some was in the form of expert opinion, and much consisted of specific testimony and records memorializing PCI's actual work experience. This admixture of evidence left the jury with much more to consider than the difference between the actual costs incurred on a project, plus a reasonable amount for profit, and the contract price. Geolar, 874 P.2d at 943. In addition to establishing total project costs significantly exceeding the original contract price, the evidence strongly suggested that a substantial amount of PCI's added costs resulted from delayed and out-of-sequence delivery of powerline poles. The evidence also described instances in which A/H misled PCI with regard to pole delivery, and it described the effects of A/H's misrepresentations and negligence on PCI's construction efforts. While PCI never submitted itemized proof of actual added costs attributable to A/H's misconduct, it presented enough information to support a strong inference that A/H had caused PCI a substantial amount of actual harm and to enable the jury to form a reasonable, though perhaps imprecise, estimate of the extent of that harm. This is hardly a situation in which the jury was fed, and swallowed whole, a case based solely on total cost analysis. See, e.g., Coluccio, 826 P.2d at 327 (Had the jury heard only FCCC's modified total cost theory and returned a verdict in the amount indicated by that theory ... reversal would be mandated.). As the trial court correctly recognized, the strong showing that A/H caused PCI actual harm was particularly significant in establishing the sufficiency of the damages evidence to submit to the jury, despite the relative weakness of PCI's evidence on precise damages. In a factually distinct but legally analogous situation, we recently observed: It is, of course, the law that the fact of damages must be proven by a preponderance of the evidence. To recover for future medical expenses one must prove to a reasonable probability that they will occur. Blumenshine v. Baptiste, 869 P.2d 470, 473 (Alaska 1994) (citing Maddocks v. Bennett, 456 P.2d 453, 458 (Alaska 1969)). Once the fact of damages has been proven to a reasonable probability, the amount of such damages, on the other hand, need only be proven to such a degree as to allow the finder of fact to reasonably estimate the amount to be allowed for [the] item [of damages]. Id. (citing Henderson v. Breesman, 77 Ariz. 256, 269 P.2d 1059, 1061-62 (Ariz. 1954)). Pluid v. B.K., 948 P.2d 981, 984 (Alaska 1997). [35] As the trial court also correctly recognized, the evidence in this case was suitable and sufficient to submit to the jury under the jury verdict method: [36] Courts have generally approved jury verdict awards, whether rendered by the judge or a jury, under similar circumstances  that is, where the contractor has sought to rely on a total cost approach, but the fact-finder has apparently gone beyond that method and rendered a verdict that seems fair and reasonable and is supported by substantial evidence. Coluccio, 826 P.2d at 327. The jury heard substantial evidence unrelated to the total cost method; it was carefully and specifically instructed to ignore all that was not evidence of actual cost; [37] and its modest verdict  which fell far closer to TH's position than to PCI's  bears witness to its ability to sift through the chaff and find the grain. TH's motions for directed verdicts were properly denied.
TH contends that the trial court erred in refusing to deduct from the value of PCI's judgment in the underlying case an amount reflecting the prevailing-party attorney's fees that would have been awarded to Ebasco, who was found to be faultless. This argument is disposed of by our prior discussion of PCI's claim that its own prevailing-party fees against A/H should have been added to the judgment in the underlying case. See supra Part III.D.2. As we have already indicated above, the trial court did not abuse its discretion in offsetting the attorney's fee awards and declaring them a wash.

The trial court has broad discretion in awarding attorney's fees; we will not find an abuse of that discretion absent a showing that the award was arbitrary, capricious, manifestly unreasonable, or ... stem[med] from an improper motive. Bohna, 828 P.2d at 766-67 (quoting Tobeluk v. Lind, 589 P.2d 873, 878 (Alaska 1979)); see also Van Dort v. Culliton, 797 P.2d 642, 644 (Alaska 1990).
As we have already discussed, the trial court awarded TH 30% of the attorney's fees incurred by defendants after their February 4, 1994, offer of judgment. The award adopted the percentage set out in former Civil Rule 82(b)(2) for prevailing parties who recover no money in cases that go to trial. [38] Relying on the factors listed in Rule 82(b)(3), TH requested an award exceeding the 30% guideline. The trial court denied the request, specifically finding that in light of all the facts before it no adjustment was called for. TH argues that the trial court erred in failing to award enhanced fees. According to TH, the circumstances of this case are exactly what the provisions of former Rule 82(b)(3) were designed to address. PCI refutes the assertion, and the parties engage in an intense debate over the listed factors. We have never vacated a trial court's decision refusing to enhance fees under former Rule 82(b)(3). See, e.g., Fairbanks N. Star Borough v. Lakeview Enters., Inc., 897 P.2d 47, 61-62 (Alaska 1995); Aetna Cas. & Sur. Co. v. Marion Equip. Co., 894 P.2d 664, 671-72 (Alaska 1995) (declining to find an abuse of discretion where trial court awarded 20% fees to prevailing party and refused to enhance the award where party cited no authority for enhanced fee award); cf. Municipality of Anchorage v. Gentile, 922 P.2d 248, 264 (Alaska 1996) (discussing attorney's fees in class actions, where enhanced fees are permitted under Rule 82 and favored under Rule 23). TH has not persuaded us that the circumstances here are exceptional, and our review of the record convinces us that the trial court's fee decision was not arbitrary, capricious, or manifestly unreasonable. See Bohna, 828 P.2d at 766-67. It must therefore stand.

At trial, TH moved for a directed verdict on the ground that PCI had failed to present sufficient evidence to prove that a judgment in the underlying case would have been collectible against A/H or Ebasco. The trial court denied the motion. TH contends that this was error. In so contending, TH does not argue that the evidence at trial conclusively established that the underlying judgment could not have been collected; when viewed in the light most favorable to PCI, the evidence certainly would not compel this conclusion. TH argues, instead, only that PCI offered insufficient affirmative evidence to meet its burden of proving collectibility. But we have already held in Part III.C.4 that PCI did not bear the burden of proving collectibility; rather, TH bore the burden of proving uncollectibility. This holding disposes of TH's directed verdict claim.
TH contends that the trial court erred in failing to award defendants full attorney's fees as a sanction for PCI's production of unprepared and unknowledgeable witnesses at depositions conducted under Civil Rule 30(b). The imposition of discovery sanctions is vested in the sound discretion of the trial court. See Underwriters at Lloyd's London v. The Narrows, 846 P.2d 118, 119 (Alaska 1993). Our review of the record convinces us that the court did not abuse its discretion here.
At trial, TH proposed that the trial court instruct the jury that PCI's attorneys were bound to perform only those legal services that they were hired to perform, to ensure all pleadings were well grounded in fact and warranted by existing law, and to avoid incurring unnecessary fees and costs. The court balked at the proposal, saying that it would be totally unfair to [PCI] for me to be inserting myself into the position of expert witness for [TH] as to what the proper duties of the attorneys were. TH concedes that these issues were addressed by PCI's expert witness, but argues that the trial court should have accepted the proposed instruction since the evidence showed that PCI's president told its attorneys to stand still. When read as a whole, however, the instructions actually given adequately informed the jury of the relevant law. See Kavorkian v. Tommy's Elbow Room, 694 P.2d 160, 166 (Alaska 1985). We find no error.
TH lastly challenges the trial court's order affirming the Clerk's Taxation of Costs. The award of costs is committed to the broad discretion of the trial court. See Pavone v. Pavone, 860 P.2d 1228, 1233 (Alaska 1993). The award will be affirmed `absent a clear showing that the trial court's determination was arbitrary, capricious, or manifestly unreasonable, or that it stemmed from an improper motive.' Alyeska Pipeline Serv. Co. v. Beadles, 731 P.2d 572, 575 (Alaska 1987) (quoting Alvey v. Pioneer Oilfield Serv., 648 P.2d 599, 601 (Alaska 1982)). With three minor exceptions, [39] we conclude that the award of costs must be upheld under this standard.