Opinion ID: 2452319
Heading Depth: 1
Heading Rank: 6

Heading: Whether the district court used the appropriate measure of damages

Text: We now consider whether the district court used the appropriate measure of damages when it awarded C & S promissory estoppel damages representing the difference between Dynalectric's bid and the amount that the three replacement contractors charged C & S to complete the same work. Drennan v. Star Paving Company, 51 Cal.2d 409, 333 P.2d 757, 761 (1958), the seminal promissory estoppel case in the subcontract bidding context, illustrates how damages should typically be computed in this situation. In Drennan, a general contractor was preparing a bid for a construction project. Id. at 758. Before the general contractor submitted its bid, a subcontractor submitted a bid of $7,131.60 to the general contractor to perform the paving portion of the project. Id. The general contractor then incorporated the subcontractor's bid into its own bid for the project. Id. Shortly thereafter, the subcontractor informed the general contractor that it would not perform the work for the price it had originally quoted in its bid. Id. at 758-59. Ultimately, the general contractor obtained a replacement pavement subcontractor to complete the work at a cost of $10,948.60. Id. at 759. The Drennan court affirmed the trial court's determination that the general contractor was entitled to $3,817, the difference between the subcontractor's bid and the amount that the general contractor had to pay the replacement subcontractor to complete the work. Id. at 759, 761. In the decades since Drennan, courts have consistently and uniformly applied the same measure of damages for promissory estoppel claims arising from a subcontractor's repudiation of its obligations to a general contractor. See, e.g., John Price Associates, Inc. v. Warner Elec, Inc., 723 F.2d 755, 756-57 (10th Cir.1983) (appropriate measure of damages for general contractor's promissory estoppel claim was the difference between nonperforming electrical subcontractor's bid and the bid of the substituted subcontractor that completed the work); Preload Technology v. A.B. & J. Const. Co., Inc., 696 F.2d 1080, 1091, 1093 (5th Cir.1983) (damages were properly calculated as the difference between the original subcontractor's bid and the replacement subcontractor's bid); Janke Const. Co., Inc. v. Vulcan Materials Co., 527 F.2d 772, 780 (7th Cir.1976) (general contractor was entitled to award representing the difference between subcontractor's quoted prices for certain construction materials and the cost of replacement materials); Double AA Builders v. Grand State Const., 210 Ariz. 503, 114 P.3d 835, 837, 843 (Ariz.Ct.App.2005) (upholding award consisting of the difference between nonperforming insulation subcontractor's bid and the cost of a replacement subcontractor); Riley Bros. Constr., Inc. v. Shuck, 704 N.W.2d 197, 204 (Minn.Ct.App. 2005) (damages were properly computed as the difference between masonry subcontractor's unperformed bid and the amount paid to two replacement subcontractors to complete the work); Branco Enterprises v. Delta Roofing, 886 S.W.2d 157, 158, 161 (Mo.Ct. App.1994) (award based upon the difference between roofing subcontractor's bid and the amount a substitute subcontractor charged was necessary to prevent injustice). We see no reason to depart from the well-established measure of damages used in Drennan. Interestingly, despite the consensus that the measure of damages adopted in Drennan is appropriate in the type of situation presented here, courts have not definitively labeled this measure expectation or reliance damages. See Edward Yorio & Steve Thel, The Promissory Basis of Section 90, 101 Yale L.J. 111, 146 (1991) (noting the ambiguity in the caselaw with respect to classifying this measure of damages). Scholars appear to agree, however, that the Drennan measure of damages is, in fact, expectation damages. See id. (concluding that this measure represents expectation damages, even if occasionally labeled reliance damages); W. David Slawson, The Role of Reliance in Contract Damages. 76 Cornell L.Rev. 197, 221-22 (1990) (discussing the near impossibility of proving true reliance damages in the subcontract-bidding context and indicating that the Drennan measure of damages represents expectation damages); Charles L. Knapp, Reliance in the Revised Restatement: The Proliferation of Promissory Estoppel, 81 Colum. L.Rev. 52, 57 n.35 (1981) (noting the ambiguity in the caselaw on this issue and stating that an award of damages based upon the difference between the nonperforming subcontractor's bid and the amount paid to a replacement subcontractor is the classic expectation remedy). As previously noted, Dynalectric's bid was for $7,808,983. C & S was forced to pay $10,310,598 to three replacement subcontractors to complete the work that Dynalectric refused to perform. Thus, the district court awarded C & S $2,501,615, the difference between Dynalectric's bid and the amount C & S paid to the replacement subcontractors. This measure of damages placed C & S in the same position that it would have occupied if Dynalectric had performed as it promised, and thus, it constitutes expectation damages. It is plain that justice required this measure of damages and that the damages the district court awarded were foreseeable and reasonably certain. As the district court found, Dynalectric made an unequivocal promise by submitting a bid to C & S for the electrical subcontracting of the Project. Dynalectric thereafter repeatedly assured C & S of the accuracy of the bid that it had submitted. The record demonstrates that Dynalectric fully anticipated that C & S would rely on its bid by incorporating it into its own bid for the Prime Contract. The record also shows that Dynalectric is an experienced and sophisticated subcontractor that could readily anticipate that C & S would be forced to use replacement electrical subcontractors at a higher cost to complete the work that it refused to perform. Finally, the damages that the district court awarded were reasonably certain because C & S presented detailed evidence showing that $2,501,615 represented the difference between Dynalectric's original bid and the amount that the three replacement subcontractors charged.