Opinion ID: 3037325
Heading Depth: 4
Heading Rank: 2

Heading: Airflow Sciences Corp ($24,263.23)

Text: 3. American Arbitration Association ($62,603.63) 4. Baker, Sterchi, Cowden & Rice’s Legal Fees (Kansas) ($60,520.15) 5. W.C. Bakewell (Arbitration) ($1,680.85) 6. Black & Veatch International ($5,500,000.00) 7. Carlton Fields– Florida Law Firm ($4,166.95) 8. Cerquetti, Jeff– Power Plants WDUS ($886.47) 9. Double Tree Hotel Bills ($110,110.27) 10. Eagle Legal Services ($8,172.96) 11. Eduardo Echagarruga ($9,952.76) 12. HDH Construction Consultants ($144,879.75) 13. Michael Hafling (Kansas) ($5,660.55) 14. Huesby & Associates ($57,057.75) 15. A W Hutchinson & Associates, Inc. ($83,959.11) 16. IKON ($3,830.19) 12 instructed the jury on damages without differentiating between direct or consequential damages. In instructing the jury, the judge stated: Now, if you are awarding damages, it should be the full amount of the damages. The percentage question is one of law that’s taken care of later. So if there is to be a damage award, you don’t reduce it for the percentages, the Court does that. It should simply be the total amount.5 Transcript of Record at 102, Wartsila NSD N. Am., Inc. v. Hill Intern., Inc., 436 F. Supp. 2d 690 (D.N.J. 2006) (No. 266). Further, the jury verdict form did not ask the jury to distinguish between damages awarded for breach of contract, fraud, or negligence, or ask the jury to itemize damages. Question ten of the jury verdict form states: If you have answered that Defendant’s negligence, breach of contract, or fraud was a proximate cause of the damages sustained by Plaintiff, what amount, if any, would fully and fairly compensate Plaintiff? 17. Johnson, Allison & Hord, P.A. ($16,634.08) 18. Richard LeFebvre ($298,665.90) 19. Robert Maddox ($2,999.39) 20. McGuire, Woods, Battle & Booth, LLP ($6,752.21) 21. Ober, Kaler, Grimes & Shiver ($254,049.46) 22. Juan Radulovic ($4,089.32) 23. Sable, Makroff & Gusky, P.C. ($420.00) 24. URS Greiner ($36,075.51) 25. XACT Duplicating ($1,039.57) 26. XEROX Corporation ($4,917.35) 27. Chaffe McCall’s Legal Bills ($621,976.63) 28. Hill International ($188,917.36) 29. Allen Norton ($1,077.49) Total: $7,518,502.09 J.A. at 254-55 (previous incorrect calculations omitted). 5 The percentages referred to pertain to the contributory negligence claim against Wartsila. 13 J.A. at 257. The jury awarded $2,047,952 in total damages. In its posttrial Motion, Hill argued that because all the damages were consequential, they were barred by the exculpatory clause. The District Court denied the motion based on its conclusion that the damages awarded by the jury were not consequential. The District Court erred in denying the Motion. Maryland courts hold “that damages which a plaintiff may recover for breach of contract include both those which may fairly and reasonably be considered as arising naturally from the breach (general damages) and those which may reasonably be supposed to have been in the contemplation of both parties at the time of making of the contract (special damages).” 6 Addressograph-Multigraph Corp. v. Zink, 329 A.2d 28, 33-34 (Md. 1974). General damages are “damages that would follow any breach of similar character in the usual course of events.” 24 Willston on Contracts § 64:12 (4th ed. 2002). “Consequential damages . . . include those damages that, although not an invariable result of every breach of this sort, were reasonably foreseeable or contemplated by the parties at the time the contract was entered into as a probable result of a breach.” Id. “These, too, must be proximately caused by the breach, and the difference is that they do not always follow a breach of this particular character.” Id. The Fifth Circuit has addressed the distinction between general and consequential damages in a factually similar case in Reynolds Metals Co. v. Westinghouse Elec. Corp., 758 F.2d 1073 (5th Cir. 1985). In Reynolds, Westinghouse Electric Corporation contracted with Reynolds Metal Company to sell the latter a transformer. Id. at 1074. The contract price included not just the machinery, but a “competent” service engineer, provided by Westinghouse, who would install it. Id. The contract disclaimed 6 The terms “special damages” and “consequential damages”usually are viewed as synonymous. See 3 Dan B. Dobbs, Law of Remedies § 12.2(3), at 38 (2d ed. 1993) (“[S]pecial damages [are] also referred to as consequential damages and the terms are used interchangeably.”). 14 liability for “special, indirect, incidental, or consequential damages.” Id. Westinghouse sent an inexperienced engineer who failed to install the transformer properly. Id. at 1075. The equipment later suffered damage, in part as a result of the improper installation. Id. Reynolds then sued Westinghouse claiming that it had breached the contract by failing to provide a competent engineer. Id. at 1076. Reynolds sought compensation to repair the transformer. A jury found that Westinghouse had breached the contract, and awarded Reynolds the value of the transformer with interest. Id. at 1077. On appeal, Westinghouse objected to the amount of the damages, noting that a provision of the contract disclaimed liability for “special indirect, incidental and consequential damages.” Id. at 1078. The Fifth Circuit agreed with Westinghouse. It concluded that Reynolds was not entitled to the value of the transformer because that was a consequential damage. Id. at 1080. The Court stated: We recognize that it was a foreseeable consequence of Westinghouse's breach of contract that the alarm system might fail to detect ground current. It was also foreseeable that this failure might in turn permit burning within the transformer to occur unbeknownst to Reynolds and thus exacerbate the damage done to the transformer if short circuiting occurred. Such foreseeable damages are ordinarily recoverable under an expectancy theory, but they are nevertheless consequential losses and do not reflect the difference-in-value damages attributable to the original breach of contract. The proximate cause inquiry submitted to the jury here therefore cast too broad a net and captured more than those damages compensable under the contract. Id. (citations omitted). The Fifth Circuit concluded that the only damages for which Reynolds could recover was the “fee that would have been charged Reynolds by a competent and properly prepared service engineer less the market value of the services that [the service engineer] provided.” Id. Here, as part of a service contract, Hill provided Wartsila 15 with a consultant. The jury found that Hill’s actions breached its contract. As indicated by Reynolds, the amount paid by Wartsila for LeFebvre’s services, less the actual value, if any, of those services, constitutes direct damages. All of the remaining items submitted to the jury in Wartsila’s list of damages, though foreseeable, are not the type of damages that “would follow any breach of similar character in the usual course of events.” 24 Willston on Contracts § 64:12 (4th ed. 2002). Rather, some of the damages submitted to the jury resulted from a long series of contingent events, each one dependent upon specific decisions made by Wartsila based upon the facts and interests before it at the time. Wartsila’s damages are more clearly consequential than those in Reynolds because, while the damages in Reynolds arose immediately upon Westinghouse’s breach of contract, Wartsila’s damages arose years after the alleged breach and only as a result of numerous intervening acts by Wartsila, including hiring LeFebvre directly as an employee. The District Court erred in holding that “the damages recovered by Wartsila– including: (1) the costs associated with having the Hill consultant as an integral part of the original arbitration; and (2) the costs associated with re-arbitrating in an attempt to repair the damage caused by losing all testimony associated with the Hill consultant– are direct damages.” Wartsila, 436 F. Supp. 2d at 701. The District Court compared the damages awarded to Wartsila to those at issue in 21st Century Properties Co. v. Carpenter Insulation & Coatings Co., 694 F. Supp. 148 (D. Md. 1988). In 21st Century Properties, the plaintiffs brought claims of misrepresentation, breach of contract and breach of express warranty against the defendant after four of the roofs it had installed began to leak. The plaintiffs sought to recover the cost of replacing the defective roof, rather than the cost to repair it. Id. at 152. The defendant argued that the exculpatory clause barred the plaintiffs from recovering the monetary damages because they were consequential. Id at 152 n.4. The court, construing Maryland law, held that “the cost of replacing the allegedly defective roofs which plaintiffs seek to recover constitutes the direct damage, not incidental or consequential damages, caused by the wrongs 16 alleged.” Id. (citing Correlli Roofing Co. v. Nat'l Instrument Co., 214 A.2d 919, 921 (Md. 1965)). The type of damages sought in 21st Century Properties differs from the damages sought by Wartsila in this case. In 21st Century Properties, the parties directly contracted for the installation of the faulty roofs, which it sought to replace. In the case at hand, Hill and Wartsila contracted for LeFebvre to provide consulting services on the Project. LeFebvre only provided services under that contract from January 24, 1995 through May 25, 1995. On June 1, 1995, Wartsila hired LeFebvre directly, as an independent contractor, to provide assistance with construction and claims management on the Project. Further, when Hill supplied Wartsila with a consultant, it was not inevitable that two and a half years later, Wartsila was going to engage in arbitration and call LeFebvre as a key witness. Numerous intervening, contingent events occurred within those seven years, including: (1) the fact that the claims between the parties could not be resolved except through arbitration; (2) the fact that those claims were such that LeFebvre’s testimony was necessary and would be the centerpiece of the case; (3) the fact that LeFebvre was employed by Wartsila and, thus, available to testify; (4) the fact that LeFebvre committed perjury; and (5) the fact that Wartsila allegedly lost the arbitration as a result. Whether or not these events can fairly be called a foreseeable result of the initial breach, they are not inevitable. The District Court erred in failing to exclude evidence of “incidental, special, indirect, or consequential” damages. Further, the Court did not ask the jury to identify which portion of its award was based on Hill’s breach of contract or its alleged negligence.7 Thus, we cannot tell from the jury's verdict what portion of its award of damages was based on direct damages and what amount was based on consequential damages. In order to give effect to the exculpatory clause agreed to by these parties, there must be a new 7 Since negligence was excluded by the exculpatory clause as the basis for damages, damages characterized as flowing solely from negligence (which is, again, a matter open to debate, supra n. 2) should not have been allowed in any event. 17 trial on the issue of damages.