Opinion ID: 1198908
Heading Depth: 2
Heading Rank: 1

Heading: Arbitration Expenses as Damages

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]