Opinion ID: 715406
Heading Depth: 2
Heading Rank: 3

Heading: proof of cost of capital damages

Text: 69 Although the outcome of this issue might have been different had we reversed on the RICO claims, we find that the district court erred in excluding the cost of capital damages evidence. We therefore reverse on this issue. 70 The district court previously granted PG & E's summary judgment motion, finding that cost of capital damages were recoverable. The court stated that 71 ... PG & E seeks to recover not only the excess fees it incurred because of the overarching conspiracy to rig the bids for electrical work on the Diablo Canyon Nuclear Power Plant, but also the excess finance charges engendered by the excess fees it paid. 72 In its Order Denying Defendants' Motion for Reconsideration of this Court's Order of July 27, 1993 Granting PG & E's Motion for Summary Judgment as to Cost of Capital Damages, the district court clarified that, 73 [c]ost of capital is an out-of-pocket expense. Prejudgment interest is not. The latter accrues during the pendency of an action. The former flows directly from conduct upon which the action is based. PG & E's claim for cost of capital damages arises from Defendants' allegedly wrongful conduct, not from the fact that its recovery has been delayed by the pendency of this action. 74 The district court also stated that if PG & E financed only 75 percent of the entire project, it can recover finance charges only on 75 percent of the overcharges it incurred on Contract 8802. Id. at 6. 75 The district court later found that it would not allow recovery on any equity financing cost-of-capital damages, stating that the law only supported the recovery of debt financing costs. Since PG & E failed to prove what portion of the total construction cost was financed using debt, equity or retained earnings, the district court found that PG & E did not produce sufficient evidence for a reasonable jury to conclude the specific amount of excess finance costs it incurred on borrowed funds. 76 PG & E argues that it should have been given more latitude in proving the extent of damages caused by Fischbach's alleged conspiracy. It cites principally to Niagara Mohawk Power Corp. v. Stone & Webster Engineering Corp., 1992 WL 121726, 1992 U.S. Dist. LEXIS 7721 (N.D.N.Y.1992), for the proposition that equity and debt financing are identical costs. It is true that this case allowed the plaintiff to present evidence of financing costs as part of the damages arising from the defendant's alleged tortious conduct. 1992 WL 121726 at  31, 1992 U.S. Dist. LEXIS 7721 at  107. The Niagara court stated that all that is required is that a plaintiff's proof of financing costs damages be commercially reasonable and foreseeable under the circumstances. Id. at  32, 1992 U.S. Dist. LEXIS 7721 at  117, citing LILCO v. IMO Industries, 1990 WL 64588 at  4-5, 1990 U.S. Dist. LEXIS 5351 at  16. 77 In a footnote that PG & E highlights, the Niagara court indicated that plaintiff's chief financial officer was going to testify that plaintiff raised money to pay for the costs by selling preferred stock and common stock, issuing long-term and short-term securities and making substantial borrowing, and incurred a finance cost on each source. Id. at  32 n. 72, 1992 U.S. Dist. LEXIS at  116 n. 72. Again, this does not establish that the Niagara court really considered the equity versus debt issue. 78 In considering this issue, the distinction between financing costs through debt as opposed to equity is illogical. If a plaintiff actually established a conspiracy, then the plaintiff should recover finance costs, regardless of where the plaintiff got the funds. 79 As with the recoverability of other types of damages, the amount is a question of fact. But the damages must be reasonably certain and traceable to the breach, not remote or the result of other intervening causes. PG & E may have met this requirement if a conspiracy is indeed established. 80 Based on the foregoing, we find that the district court should not have excluded the evidence on this issue. For the foregoing reasons, we REVERSE and remand for further proceedings on both the Sherman Antitrust claim and the damages issue, and AFFIRM on the RICO claims.