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MOA v. Coluccio Construction v. CH2M Hill Northwest (2/7/92), 826 P 2d 316
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NOTICE: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers are
requested to bring typographical or other formal errors to
the attention of the Clerk of the Appellate Courts, 303 K
Street, Anchorage, Alaska 99501, in order that corrections
may be made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
MUNICIPALITY OF ANCHORAGE and )
THE ANCHORAGE WATER & WASTEWATER )
UTILITY, )
)
Appellants/ ) File Nos. S-3844/4203
Cross-Appellees, ) S-4267
)
v. ) 3AN 88 31 Civil
)
THE FRANK COLUCCIO CONSTRUCTION) O P I N I O N
COMPANY, )
)
Appellee/ )
Cross-Appellant, ) File No. S-3898
Appellant, )
)
v. ) [No. 3808 - February 7,
1992]
)
CH2M HILL NORTHWEST, INC. an )
Oregon corporation, )
)
Appellee. )
________________________________)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Rene J. Gonzalez, Judge.
Appearances: Ann Resch and James E. Ramsey,
Deputy Municipal Attorneys, Anchorage, and
William J. Bender and David B. Adler, Skelle
nger, Bender, Mathias & Bender, Seattle, for
Municipality of Anchorage. Jeffrey Smyth,
Adolph & Smyth, Seattle, and Edgar R. Locke,
Beaty, Draeger, Locke & Troll, Anchorage, for
Frank Coluccio Construction. D.K. "Kirby"
Wright, Jr., Hintze, Herrig & Wright,
Seattle, for CH2M Hill Northwest.
Before: Rabinowitz, Chief Justice, Burke,
Matthews, Compton and Moore, Justices.
BURKE, Justice.
This appeal arises from a contract dispute between
Frank Coluccio Construction Company, on the one hand, and the
Municipality of Anchorage, The Anchorage Water and Wastewater
Utility, and CH2M Hill Northwest, on the other. The construction
company sued the other parties after they denied its claim for
equitable adjustment of contract price based on encountering
differing site conditions. After both an arbitration proceeding
and a jury trial, Frank Coluccio Construction obtained a verdict
of breach of contract and an award of damages. The case comes
before this court on various appeals and cross-appeals.
I
The facts of this contract dispute pertain to three
rather discrete controversies. The first controversy concerns
the conduct of a jury trial with Frank Coluccio Construction
Company (FCCC) as plaintiff against defendants Municipality of
Anchorage and The Anchorage Water and Wastewater Utility (collec
tively referred to as MOA). The second controversy involves the
same parties, but concerns FCCC's claims for costs and fees
arising out of the trial and a prior arbitration proceeding. The
final controversy is between FCCC and CH2M Hill Northwest, Inc.
(CH2M Hill), who was originally a defendant in FCCC's underlying
suit; the present dispute arises from the award of costs and fees
to CH2M Hill after it won summary judgment against FCCC.
A
In September 1986 FCCC was successful bidder on a $5
million, fixed-price contract for construction of an "effluent
tunnel" at Point Woronzof. The 2700 foot tunnel was to be
constructed through use of a tunnel boring machine. Because the
project involved use of federal funds, the contract included a
federally mandated "differing site conditions"(DSC) clause:
(a) The contractor shall promptly,
and before such conditions are disturbed,
notify the recipient in writing of:
(1) Subsurface or latent physical
conditions at the site differing materially
from those indicated in this subagreement, or
(2) Unknown physical conditions at
the site, of an unusual nature, differing
materially from those ordinarily encountered
and generally recognized as inhering in work
of the character provided for in this
subagreement.
(b) The recipient shall promptly
investigate the conditions. If it finds that
conditions materially differ and will cause
an increase or decrease in the contractor's
cost or the time required to perform any part
of the work under this subagreement, whether
or not changed as a result of such
conditions, the recipient shall make an equi
table adjustment and modify the subagreement
in writing.
Such clauses, which have long been staples of federal contracts,
are intended "to prevent bidders from increasing their bid prices
to protect against misfortunes resulting from unforeseen develop
ments, and thus avoid turning a construction contract into a
`gambling transaction.'" J.F. Shea Co. v. United States, 4 Cl.
Ct. 46, 50 (1983) (citation omitted).
FCCC began preliminary work in January 1987 and began
boring the tunnel on March 26, 1987. On April 21, 1987, after
completing about 850 feet of tunneling, FCCC encountered "running
ground," which it considered a DSC.1 Similar conditions were
encountered about 100 feet farther on. In order to deal with the
running ground, FCCC modified its tunnel boring machine and
changed its tunneling methods. Pursuant to the DSC clause, FCCC
sought equitable price adjustments of more than $3.8 million for
increased expenses caused by the running ground. MOA denied the
claims in their entirety, apparently on the basis that FCCC
encountered no ground condition that differed materially from
what was indicated in the contract.
FCCC then sued MOA and CH2M Hill, which had provided
design and construction management services to the municipality.
FCCC alleged breach of contract by MOA in not making an equitable
adjustment under the DSC clause and in failing to disclose all
material information in regard to the contract; unjust enrichment
by MOA in receiving the benefit of the extra work done by FCCC to
deal with the running ground; breach of implied warranty of
suitability of plans and specifications by MOA and CH2M Hill;
negligence by MOA and CH2M Hill in designing the plans and speci
fications and in disclosing material information; and fraudulent
misrepresentation by MOA of site conditions. The fraud claim was
eventually dismissed by stipulation of the parties.
B
In September 1988 FCCC, MOA, and CH2M Hill entered into
an "Agreement to Arbitrate." They declared that they "entered
into this Agreement in order to resolve the enumerated complex
entitlement issues involved in this dispute expeditiously and
disposi-tively, by submitting these issues to a panel of
experts." The agreement recited the parties' intent that the
arbitration panel's resolution of "liability/entitlement issues"
be "binding and nonappealable." It provided that the arbitrators
would be non-attorneys with "expertise in the field of tunneling
technology and design and underground construction."
After outlining fairly specific procedural guidelines,
the agreement addressed the arbitrators' product:
III. AWARD
The decision shall be in writing,
signed by the arbitrators, and shall state
the disposition of the case, identifying the
prevailing party. It shall not allocate
fault, if any, by percentage between the
defendants. Dissent may be noted and
identified.
. . . .
3.2 Findings of Fact and
Conclusions of Law. The panel shall enter
formal Findings of Fact and Conclusions of
Law to identify its decision-making process.
The participants shall each, after the panel
renders its written decision, prepare and
submit proposed Findings of Fact and
Conclusions of Law to the panel, from which
the panel shall assemble an appropriate
document. All members of the panel shall
execute the adopted Findings of Fact, noting
and identifying dissent, if appropriate. The
executed Findings of Fact and Conclusions of
Law shall be the arbitrators' final decision
for purposes of AS 09.43, et seq.
. . . .
3.5 Disposition of Decision. Upon
application of a party, the decision may be
filed with the Superior Court of the State of
Alaska, to become an official part of the
record of proceedings. Upon application of a
party, the Court shall confirm the decision
pursuant to AS 09.43.110 unless, within the
time limits imposed by AS 09.43.120 and AS
09.43.130, grounds are urged for vacating or
modifying or correcting the decision.
The superior court approved and ratified the arbitration agree
ment on December 2, 1988.
The arbitration took place shortly thereafter. As
specified by the arbitration agreement, the proceedings were
fairly formal: extensive discovery was undertaken prior to the
hearings; counsel represented the parties; the witnesses testi
fied under oath; and each side presented engineering and tunnel
ing experts. After considering the evidence and arguments, the
arbitrators rendered detailed "Findings of Fact and Conclusions
of Law"2 (Findings) and a brief "Award of Panel of Arbitrators"
(Award). The crux of the panel's findings was that
the physical index properties of the
materials actually encountered in the
excavation of the tunnel did not differ
materially from those indicated in the
Subagreement (contract), nor from those
reasonably to be expected by an experienced,
prudent contractor.
43. However, the Arbitrators find
that in certain reaches of the tunnel, the
ground behavior was materially different from
the behavior indicated in the Subagreement
(contract) and from that which could
reasonably be expected by an experienced,
prudent contractor. Specifically, FCCC
encountered running ground conditions more
severe than could have been anticipated or
than were indicated in the Subagreement
(contract).
The panel concluded that the unexpected ground behavior "consti
tute[d] a differing site condition as provided in the Differing
Site Conditions Clause set forth in the contract."
Having thus found that a compensable DSC existed, the
panel went on to express its view that FCCC had not acted in an
entirely reasonable and prudent manner in its preparations for
undertaking the tunnel construction. In essence, the panel felt
that FCCC should have foreseen the possibility of some running
ground, even though it could not reasonably have foreseen the
severity of the condition. The panel particularly cited FCCC's
failure to take into account the experience it had obtained
during a project on similar terrain in Washington; its failure to
seek the advice of the boring machine's manufacturer concerning
the physical characteristics indicated by the contract documents;
and its failure to reconsider its configuration of the machine
before beginning to tunnel, in light of a sample shaft excavated
in January 1987. The panel concluded these criticisms by noting
that they "attach[ed] great weight to the failure of FCCC to take
any mitigating steps to reduce the impact of a possible encounter
with limited running ground conditions prior to placing the Lovat
TBM in the ground at the Point Woronzof Tunnel." Concerning
defendants' behavior, the panel concluded that "no material
information was either inadvertently or deliberately withheld or
misrepresented." The panel found the plans, specifications and
design of the work were all reasonable.
With regard to FCCC's claims of entitlement, the panel
concluded that FCCC was entitled to an equitable adjustment under
the DSC clause of the contract. It noted that this conclusion
would also satisfy the claim of unjust enrichment. The panel
denied the remaining claims of breach of implied warranty and
negligence.
In the accompanying Award, the panel, without further
elaboration, "award[ed] a determination of entitlement to Frank
Coluccio Construction Company." It then noted, "Because it is
the determination of the Panel that this decision is not entirely
in favor of any one party hereto, the costs of this arbitration,
consisting of the statements for services of the Arbitrators,
shall be borne 50% by plaintiff and 50% by defendants."
C
MOA moved to have both the Findings and the Award
confirmed as the arbitrators' "award"pursuant to AS 09.43.110.3
In the alternative, MOA sought to have the Award confirmed, but
modified pursuant to AS 09.43.130 to include the Findings in
their entirety.4 FCCC opposed this motion, and filed a cross-
motion to have only the Award confirmed pursuant to section 110.
It argued in the alternative that any inclusion of the Findings
in the award should excise those portions critical of FCCC. The
superior court issued an order confirming both the Findings and
the Award on June 2, 1989.
In August 1989 the parties filed cross-motions for
entry of judgment on the confirmed award.5 As with the confirma
tion motions, MOA sought a judgment that incorporated the panel's
criticisms of FCCC. FCCC sought judgment merely on the issue of
MOA's liability for breach of contract as well as a directed
verdict to that effect for use in the upcoming jury trial on
damages. FCCC also asked the court for an order prohibiting "the
parties, witnesses, and counsel from introducing evidence of,
referring to, or in any other way making known to the jury, the
decision of the previous arbitration proceedings, including the
findings of fact, the conclusions of law, and facts of written
decision." CH2M Hill separately moved for its dismissal as a
defendant on the ground that the panel had decided against FCCC
on all the claims against CH2M Hill; FCCC opposed this motion.
On November 30, 1989, the superior court issued a
number of orders to resolve all outstanding issues in anticipa
tion of trial. The court ordered that experts could rely on so
much of the arbitrators' Findings as dealt with MOA's liability,
but could not "testify about, or rely on, the arbitrators' find
ings dealing with the issue of mitigation." Any expert opinion
on FCCC's failure to mitigate must be based on admissible
evidence presented at trial. The court concluded that the
"mitigation issue will be determined by the jury at trial and the
burden of proof will be on the defendants."
The court further held that the "arbitration panel
award, which is akin to a verdict on the issue of liability, is
clear that the only issue upon which a final determination was
made was plaintiff's `entitlement' to damages." The court's
review of the record led it to conclude that "the arbitrators
gave the mitigation issue only cursory treatment." Accordingly,
the court held that, admissibility and relevance notwithstanding,
"to admit the arbitrators' award, the findings of fact and
conclusions of law, and the arbitrators' initial written decision
would lead the jury to confusion, would be misleading, and would
be unfairly prejudicial to the plaintiff. Evidence Rule 403."
The court prohibited parties, witnesses and counsel from
referring to the Award and Findings in the presence of the jury.
The court next entered judgment in favor of CH2M Hill
and dismissed all claims against it. CH2M was awarded attorney
fees in the amount of $112,000. Finally, the court entered
judgment in FCCC's favor as to the issue of liability. "The
plaintiff is entitled to an equitable adjustment in its contract
price to the extent that it can establish what damages, if any,
it suffered as a consequence of its encounter with the differing
site conditions in performing its contract with defendants."
Trial was held from December 6 through December 20.
The jury returned a verdict in FCCC's favor of $2.11 million.
II
The primary substantive dispute on appeal involves
MOA's dissatisfaction with the superior court's handling of the
arbitrators' decision. Specifically, MOA attacks the form of
judgment entered on the award, the refusal of the superior court
to give "res judicata and claims preclusive effect"to the Find
ings, the refusal of the superior court to give evidentiary
effect to the Findings, certain of the court's jury instructions,
and the method by which the court allowed FCCC to prove its
damages.
A
As noted above, the superior court confirmed the Find
ings and the Award as the award of the arbitrators pursuant to AS
09.43.110. In entering judgment on the award, however, the court
limited itself to stating that judgment was entered in favor of
FCCC and against MOA as to liability. Contrary to MOA's wishes,
the court made no reference--and thus gave no legal effect--to
those portions of the Findings which indicated that FCCC did not
act reasonably and prudently in its preparations for constructing
the tunnel.
Arbitration is "essentially a creature of contract, a
contract in which the parties themselves charter a private tribu
nal for the resolution of their disputes." Nizinski v. Golden
Valley Electric Ass'n, 509 P.2d 280, 283 (Alaska 1973) (quoting
Astoria Medical Group v. Health Insurance Plan of Greater New
York, 182 N.E.2d 85, 87 (N.Y. 1962)). We have consistently held
that the law favors arbitration with the minimum of court
interference. E.g., id.; Anchorage Medical & Surgical Clinic v.
James, 555 P.2d 1320, 1321 (Alaska 1976). These basic principles
suggest that the parties are entitled to an award and judgment
that accords with their arbitration agreement. Furthermore, to
the extent that there is ambiguity in whether the arbitrators'
comments are "dicta"or "holdings,"they should be analyzed in
the context of the parties' contractual agreement to arbitrate.6
With regard to the nature of the case and the questions
to be submitted to the arbitrators, the agreement provides:
1.3 The claims as alleged in the
lawsuit are essentially for breach of
contract and unjust enrichment as against MOA
and for negligence in the preparations of
plans and specifications and breach of
implied warranty of plans and specifications
against CH2M.
1.4 Defendants MOA and CH2M have
answered and denied any and all liability for
damages alleged by FCCC. Substantial discov
ery has been taken in this case to date.
1.5 It is the intent of the
parties to submit all liability/entitlement
issues arising out of plaintiff's complaint
and defendants' answers to binding arbitra
tion.
The parties currently agree, in MOA's words, that "[t]he question
of damages was reserved for subsequent jury trial."
Setting aside FCCC's other claims, it is clear from the
agreement that FCCC claimed a breach of contract and MOA denied
any breach. The "liability/entitlement"issue for the arbitra
tors would then be, "Was there a breach of contract?" FCCC al
leged that MOA's refusal to grant an equitable adjustment of
price for FCCC's encounter with a DSC constituted a breach.
Because MOA concedes that it refused the equitable adjustment and
does not contest that the contract requires such an adjustment in
the event of a DSC, the question of whether there was a breach of
contract is congruent with the question of whether there was a
DSC. The panel's answer, broadly, was that there was a DSC,
though not necessarily to the extent that FCCC claimed.
The arbitrators' choice to answer a "yes or no" ques
tion with "yes, but . . ."does not change the fact that the
parties agreed to ask a yes or no question: "Was there a breach
of contract?" The legally operative answer was "Yes,"a fact of
which the arbitration panel was aware. The arbitrators made
clear in the "Initial Written Decision"their view that the "but"
portion of their answer was a "[r]ecommendation"to "be consid
ered during the evaluation of quantum" of damages. Their
ultimate "Conclusion of Law"in the Findings was "that FCCC is
entitled to an equitable adjustment of its contract price to the
extent that it can establish damages." This conclusion, in accor
dance with their authority under the arbitration agreement, is a
simple "yes/no"statement on liability, making clear that the
question of damages remains.
In attempting to fit its argument into the constraints
of the arbitration agreement, MOA very briefly contends--as it
did below--that "failure to mitigate [damages] by [a] contractor
is a liability issue." As support for this proposition, MOA
cites Lewis v. Anchorage Asphalt Paving Co., 579 P.2d 532, 533
(Alaska 1978) (Lewis II). Lewis in fact involved opposing claims
of breach of contract: The contractor sued for withheld
payments, and the client counterclaimed for breach of express and
implied warranties that the work would be completed in a
workmanlike manner, claiming damages over and above the withheld
amounts. Lewis v. Anchorage Asphalt Paving Co., 535 P.2d 1188,
1190 (Alaska 1975) (Lewis I). Thus, the issue of the
contractor's reasonableness in Lewis was in fact a "liability"
question. The crucial difference between Lewis and this case,
however, is that the contractor's unreasonable actions were
alleged to be a breach of contract. In no sense can Lewis be
said to stand for the general proposition that "mitigation of
damages" is a "liability"issue. In fact, neither Lewis I nor
Lewis II makes any reference to either the term or the concept of
"mitigation of damages."
We have accorded wide latitude to arbitrators in decid
ing what issues are arbitrable. University of Alaska v. Modern
Construction Inc., 522 P.2d 1132, 1138 (Alaska 1974). There is
little evidence here, however, that the panel undertook to arbit
rate the reasonableness of FCCC's action. The appropriate
process for determining the presence of a DSC is for the court--
or, as in this case, the arbitration panel--to "place itself
`into the shoes of a reasonable and prudent contractor.'" P.J.
Maffei Building Wrecking Corp. v. United States, 732 F.2d 913,
917 (Fed. Cir. 1984) (quoting H.N. Bailey & Assoc. v. United
States, 449 F.2d 387, 390 (Ct. Cl. 1971)). A DSC exists if the
actual conditions of the site differ materially from what such a
contractor would have expected based on indications in the
contract. Shank-Artukovich v. United States, 13 Cl. Ct. 346, 350
(1987). The panel followed this process precisely, with the
conclusion that the actual conditions were not foreseeable to a
reasonable and prudent contractor. In so doing, the panel noted
its view that certain of FCCC's actions did not conform with
those of a prudent and reasonable contractor. These comments are
understandable under the circumstances, without compelling the
conclusion that the arbitrators--technical, not legal, experts--
were undertaking to make a decision binding on the parties.
In their Award the arbitrators split the costs of
arbitration evenly between plaintiffs and defendants, "[b]ecause
it is the determination of the Panel that this decision is not
entirely in favor of any one party hereto." MOA suggests that
this reinforces its view that the panel intended for its comments
on FCCC's prudence to "limit"FCCC's entitlement. Such an
argument might make sense outside the context already outlined.
Here, however, it is a strained reading of the Award. Out of
four claims of liability against MOA and CH2M Hill, FCCC
prevailed on only one. This fact explains what the panel meant
in saying that the decision was not entirely in favor of any one
of the parties. MOA's view, however, cannot account for the
Award's simple statement that "the undersigned Panel awards a
determination of entitlement to plaintiff Frank Coluccio Construc
tion Company." Had the panel intended to limit the entitlement
that it did find, it very easily could have said that it "awards
a determination of limited entitlement." We see no reason to
read that added word into the arbitrators' otherwise plain
statement.7
B
MOA argues that the Findings should have been entered
into evidence on the issue of mitigation of damages and that its
experts should have been allowed to rely on the Findings in
calculating to what extent FCCC was responsible for its extra
costs. In large part, MOA constructs this argument on the assump
tion that it will prevail on its earlier arguments that judgment
should have been entered on the mitigation of damages issue and
that the Findings dealing with FCCC's prudence should have preclu
sive effect. The argument thus fails for the reason that it does
not in fact prevail on those earlier issues.
MOA also asserts that the court abused its discretion
in excluding any reference to the Findings under Evidence Rule
403.8 The superior court held that admission of the Findings
"would lead the jury to confusion, would be misleading, and would
be unfairly prejudicial to the plaintiff." This argument, too,
falls back on the same reasoning used in MOA's other arguments.
MOA says, for example, that "[i]t is incongruous to rule that a
party to litigation can be prejudiced by the evidentiary effects
of a judgment entered in that same litigation." Brief for
Appellant MOA at 48. The point is, of course, that judgment was
not entered on the issue of mitigation, nor should one have been.
Moreover, MOA's repeated reference to the panel's
comments on FCCC's prudence as a "judgment"on the issue makes
clear why the superior court reasonably concluded that introduc
tion of the "Findings"would confuse and mislead the jury. The
superior court obviously feared that the jury members might feel
that they were bound to accept the panel's conclusions on FCCC's
prudence, even if those conclusions conflicted with their own.
The court thus did not abuse its discretion in excluding the
Findings from evidence.9
III
FCCC relied on what it characterizes as a "modified
total cost"method to prove its damages at trial. As its expert
explained at trial, "In a modified total cost [analysis], . . .
[t]he normal procedure is to look at all the money that was
spent, subtract all the money that was paid, and then take a
deeper look." In other words, the damages are calculated by
starting with the contractor's costs in excess of what it was
paid, then attempting to back out any costs that are not
attributable to the DSC.10 The superior court allowed use of this
method over MOA's objection. MOA renews its objection before
this court.
As FCCC itself admits, the total cost method of proving
damages is universally disfavored. E.g., Boyajian v. United
States, 423 F.2d 1231, 1235 (Ct. Cl. 1970).11 We recently joined
this chorus of disapproval. Fairbanks North Star Borough v.
Kandik Constr., Inc., 795 P.2d 793, 798-99 (Alaska 1990), reh'g
granted on unrelated issue, Op. No. 3792 (Alaska December 27,
1991). FCCC is at pains to point out that its proffered method
is not the "total cost"method, but rather the "modified total
cost" method, which it asserts "has been widely adopted,
nationwide." The first case it cites as support for this
distinction is New Pueblo Constructors, Inc. v. State, 696 P.2d
185, 194 (Ariz. 1985). What the Arizona Supreme Court actually
said, however, was that "[i]t is misleading to refer to this as a
separate `method' for determining damages." Id. at 195. Even
"modified," the total cost method is only used as "a last
resort,"and then only under "close judicial scrutiny." Id. at
195, 196.
The preferred method of damages calculations is the so-
called "actual cost" method, in which each element of extra
expense incurred because of the DSC is added up for a total
claimed amount. See, e.g., J.D. Hedin Constr. Co. v. United
States, 347 F.2d 235, 259 (Ct. Cl. 1965); Laburnum Constr. Corp.
v. United States, 325 F.2d 451, 459 (Ct. Cl. 1963); State Highway
Comm'n v. Brasel & Sims Constr. Co., 688 P.2d 871, 877 (Wyo.
1984). Courts have also allowed a "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." New Pueblo, 696 P.2d at 194; see also North
Slope Technical Ltd. v. United States, 14 Cl. Ct. 242, 262 (1988)
(applying jury verdict method in DSC context).12
Courts have generally adopted a four-part test to
determine whether a total cost methodology should be allowed to
prove a contractor's damages:
The acceptability of the method hinges
on proof that (1) the nature of the
particular losses make it impossible or
highly impracticable to determine them with a
reasonable degree of accuracy; (2) the
plaintiff's bid or estimate was realistic;
(3) its actual costs were reasonable; and (4)
it was not responsible for the added
expenses.
Boyajian, 423 F.2d at 1243 (quoting WRB Corp. v. United States,
183 Ct. Cl. 409, 426 (1968)) (emphasis removed). Both parties
agree that this test applies here. The burden of proving that
each prong is met is on the contractor. New Pueblo, 696 P.2d at
196.
On appeal, MOA does not question the applicability of
prongs (2) and (3). It challenges the applicability of prong
(4), but on the grounds that FCCC's expert impermissibly
disregarded the arbitrators' "findings of fact"concerning FCCC's
prudence. To the extent that this argument rests on MOA's
general position that the entire Findings were binding and
admissible, it fails for the same reason the general position
fails.
MOA's challenge to prong (1) is not so easily
dismissed, however. Before a contractor may rely on a total cost
method, it must show that such a method is the only one available
under the circumstances. See, e.g., J.D. Hedin, 347 F.2d at 247;
cf. City of Whittier v. Whittier Fuel & Marine Corp., 577 P.2d
216, 224 n.29 (Alaska 1978) (approving jury instruction that puts
on plaintiff the burden of showing damages "by the best measure
that can be used under the circumstances"). MOA argues that FCCC
could have--and thus should have--used an actual cost method.
MOA points out that its own expert was able to make an actual
cost estimation of damages. Finally, it alleges that "FCCC made
no attempt to relate its claim for specific increased costs . . .
to the differing site condition."
FCCC rejects this last allegation as a "gross
mischaracterization[]." FCCC asserts that its expert was
prepared to present an actual cost analysis, but was not allowed
to do so on the "limited grounds"that he had not prepared the
analysis before the end of discovery. It also maintains that it
did in fact introduce evidence of its actual costs "through
original accounting records and through the testimony of its
comptroller Ann Meek."13 In summary, it asserts with little
amplification that it "did not exclusively rely upon [Modified
Total Cost] to prove its claim. . . . Only because Coluccio could
not possibly prove all of its losses by this method, did it also
employ the [Modified Total Cost] method." Brief of Appellee FCCC
at 57-58 (emphasis in original).
FCCC has clearly failed to bear its burden of showing
that "the nature of the particular losses make it impossible or
highly impracticable to determine them with a reasonable degree
of accuracy." Boyajian, 423 F.2d at 1243 (emphasis added). In
fact, it admitted at trial that its expert "had been able to put
together an actual cost analysis,"though he only did so after he
had been deposed and after the close of discovery. It reaffirms
that admission before this court, but maintains that the total
cost method is still allowable in that actual cost analysis would
not include "all"its losses.
There is no authority that FCCC cites--and our research
has revealed none--that supports the proposition that use of
total cost analysis is appropriate if an actual cost analysis
would not include all losses. As should be clear from the dis
cussion above, the law is quite the contrary: Total cost analy
sis is generally impermissible unless alternative methods of
analysis would not identify any losses. In a case very similar
to this one--involving changed conditions in construction of a
sewer tunnel--the Seventh Circuit noted:
Plaintiff presented its damages in
a very detailed accounting, as the difference
between the actual costs incurred, adjusted
downward for events unrelated to the changed
condition, and its bid. . . .
. . . .
Plaintiff, by selecting and
compiling all the costs of certain items that
directly related to the changed condition,
has rhetorically labeled its cost
presentation as reasonable because this
selective process does not include "all" of
the costs. However, the "total cost"
concept, even when applied to selective items
and rhetorically labeled "reasonable" based
on selectivity of items, cannot be accepted.
Fattore Co. v. Metropolitan Sewerage Comm'n, 505 F.2d 1, 3, 5
(7th Cir. 1974) (footnotes omitted). In this case FCCC made a
similar presentation, but labeled it "modified." As in Fattore,
however, the method is unacceptable absent a showing that it is
the only one available.
This conclusion, however, is not dispositive of MOA's
appeal. Had the jury heard only FCCC's modified total cost
theory and returned a verdict in the amount indicated by that
theory--$3.5 million--reversal would be mandated. Kandik, 795
P.2d at 798-99. However, the jury also heard MOA's actual cost
analysis and returned a verdict of only $2.1 million, less than
two-thirds of the amount asked for by FCCC. 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. Allen & O'Hara, Inc. v. Barrett Wrecking,
Inc., 898 F.2d 512, 519 (7th Cir. 1990); Nebraska Public Power
Dist. v. Austin Power, Inc., 773 F.2d 960, 968 (8th Cir. 1985);
Fattore, 505 F.2d at 5; Omaha Public Power Dist. v. Darin &
Armstrong, Inc., 288 N.W.2d 467, 475 (Neb. 1980).
Omaha Public Power, like the present case, involved a
construction project in which the contractor encountered unex
pected soil conditions. Omaha Public Power, 288 N.W.2d at 469.
The contractor presented total cost evidence to support its
damages claim. Id. at 473. The defendant objected to use of the
total cost method, id. at 472-73, and claimed that any costs
beyond the contractor's compensation were due to the contractor's
inefficiency, lack of experience and underbidding, id. The trial
judge accepted the total cost method as to part of the contrac
tor's claim, but awarded a lesser amount than claimed. Id. at
473-74. Noting that the trial judge was actually using the "jury
verdict"method, the Nebraska Supreme Court held:
Even in situations where courts have
rejected the total cost method of proving
damages, where the record contains reasonably
satisfactory evidence of what the damages
are, computed on an acceptable basis, the
court has adopted such other evidence, at
least where the evidence is sufficient upon
which to predicate a "jury verdict"award.
Id. at 475.
Similarly, in Fattore the trial judge considered the
contractor's total cost analysis, but awarded a reduced amount.
The appeals court upheld the award:
"Jury verdicts"have always been
supported if there was clear proof that the
contractor was injured and there was no more
reliable method for computing damages[,]
provided that the evidence adduced was suffi
cient to enable a court or jury to make a
fair and reasonable approximation.
Fattore, 505 F.2d at 5. Here, even though FCCC has not estab
lished that total cost is the only method available, neither is
there any indication that actual cost analysis by itself is
adequate. In short, this case is one which requires "a fair and
reasonable approximation"based on all the evidence of costs and
expenditures.
In Nebraska Public Power, the Eighth Circuit considered
a case in which the jury had been offered both "individual
claims"14 and total cost theories of damages. From the jury's
special verdict form, it apparently chose to award damages based
on the individual claim theory. Nebraska Public Power Dist., 773
F.2d at 968-69. The losing party argued that presentation of the
total cost evidence may have impermissibly influenced the jury.
Id. at 968.
The court rejected this argument. It noted first that
the trial judge's jury instructions clearly informed the jury
that they should accept the total cost evidence only if the four-
part test of its acceptability was satisfied in their minds, and
that the contractor bore the burden of proving that the test was
met. Id. It also noted that even when the method is not appro
priate as a measure of damages, as evidence it is "probative, and
does supply some evidence concerning the reasonableness of dam
ages. Moreover, the jury's verdict indicates that it was able
to, and did, use the total cost evidence only as a factor in
determining the damages to be awarded for the various delays."
Id. (citations omitted).
In this case, the trial judge instructed the jury
extensively on damages. Specifically, he told them in
Instruction 31 that they should award damages only if they were
"able to determine the amount of Plaintiff's losses with reason
able certainty, according to the best measure under the circum
stances." The court told them in Instruction 32 that FCCC had
the burden of proving damages with "enough evidence for you to
make a reasonable estimate of damages without speculation, guess
or conjecture." These strictures were essentially repeated in
Instruction 35:
In deciding the amount of damages
that the Defendants must pay to the
Plaintiff, you must keep in mind the
following rules:
First, that your general goal
should be to put the Plaintiff in as good a
position as it would have been in had the
Plaintiff not encountered a differing site
condition.
Second, you must have a reasonable
basis for fixing the amount of damages. The
Plaintiff is not required to show its damages
with mathematical exactness, but you must
have a reasonable basis for fixing damages in
this case. A mere guess is not enough.
In all such cases where a party to
an action asks for monetary damages, the
burden is upon that party to show that it has
been injured, and also, with reasonable
certainty and by the best measure that can be
used under the circumstances, the amount of
the compensatory damages which it claims.
The Plaintiff must prove its damages by a
preponderance of the evidence.
The judge also specifically instructed the jury on the four-part
test for acceptability of the total cost theory and clearly
stated that all four factors had to be established before apply
ing the theory.
The jury thus received instructions on damages perfect
ly in accordance with Alaska law. See Whittier Fuel & Marine
Corp., 577 P.2d at 222-24. Having received specific instructions
on the applicability of FCCC's theory of damages, the jury mem
bers rendered a verdict for substantially less than FCCC asked
and its analysis indicated. As MOA does not contend that the
verdict is not supported by substantial evidence, the inapplica
bility of the total cost theory is not cause for reversing the
jury's decision.
IV
FCCC appeals the superior court's denial of attorney's
fees incurred in the preparation of its administrative claim and
its denial of expert fees in excess of the limits prescribed by
Administrative Rule 7.
A
As a prerequisite to initiating legal action to recover
the excess costs imposed by the DSC, FCCC was contractually
required to file an administrative claim with MOA seeking an
equitable adjustment. In preparing this claim, the denial of
which constituted the breach of contract for which MOA was held
liable, FCCC incurred claimed costs of over $60,000, consisting
primarily of legal fees. FCCC intended to introduce evidence of
these costs at trial as an element of special damages. MOA moved
to exclude the evidence, however, on grounds that attorney's fees
are recoverable only pursuant to Civil Rule 82. The superior
court agreed and excluded the evidence, holding that "[a]ll
attorney's fees and costs issues will be determined by this court
under Alaska R. Civ. P. 82."
After trial, FCCC included these prelitigation attor
ney's fees in a motion for Rule 79 costs. The superior court
found that these costs were incurred by necessity. It further
noted that it
would award Coluccio some of the fees
and costs requested if the case law supported
such an award, [but] the Alaska Supreme
Court's decisions do not support the proposi
tion that this court has the discretion to do
so. . . .
. . . .
Coluccio has also not presented a
single Alaskan case which supports the recov
ery of attorney's fees incurred in pursuing
an administrative claim as costs under Rule
79(b).
The court consequently denied any award on this aspect of FCCC's
costs.
On appeal, FCCC first contends that the superior court
erred in excluding evidence of the administrative claim costs
from trial. It argues that these costs were "reasonably
foreseeable" damages stemming from MOA's breach of contract,
insofar as the contract required it to pursue the administrative
remedy before pursuing any legal remedy. Its support for this
contention consists of two federal contracts cases, discussed
below.
The well-established principle in federal contracts
cases is in fact the opposite: Legal fees associated with prose
cution of a claim--as opposed to performance of the contract--are
not recoverable as damages. E.g., Singer Co. v. United States,
568 F.2d 695, 720 (Ct. Cl. 1977); L.L. Hall Constr. Co. v. United
States, 379 F.2d 559, 569 (Ct. Cl. 1966); S.E. Contractors, Inc.,
AEC BCA No. 97-12-72, 74-2 B.C.A. (CCH) 10.676, at 50,698
(1974); Power Equip. Corp., ASBCA No. 5904, 1964 B.C.A. 4025,
at 19,808, 19,814 (1964).15 This includes the costs of preparing
the administrative claim for equitable adjustment. See Singer,
568 F.2d at 720.
The crucial distinction is whether the legal costs
incurred are "costs of performance"or costs associated with
prosecuting a claim. In S.E. Contractors, relied on by FCCC, the
government itself ordered extensive changes and an accelerated
performance of work. The Board of Contract Appeals held that
legal costs resulting from these government orders were essential
to performance and thus costs of performance. S.E. Contractors,
74-2 B.C.A. at 50,695. This holding, however, does not stand for
the proposition that any equitable adjustment claim is per se a
cost of performance. In fact, the board mentions nothing about
preparation of claims, and carefully separates out those legal
fees incurred in the subsequent, extended dispute with the
government. Id. at 50,698-99.
In a different case, the Armed Services Board of Con
tract Appeals did allow recovery of the legal fees incurred in
developing and presenting a claim for equitable adjustment to a
contracting officer. Allied Materials & Equip. Co., ASBCA No.
17318, 75-1 B.C.A. (CCH) 11,150, at 53,066, 53,087 (1975). A
subsequent litigant invoked that decision as establishing the
principle that the legal fees incurred in developing and present
ing a claim for equitable adjustment are always recoverable. The
Court of Claims rejected this view. Singer, 568 F.2d at 720-21.
The court noted that Allied Materials involved a situa
tion where government liability was not disputed and emphasized
"the equally important fact"that the adjustment was necessary to
completion of the contract. Id. at 721. It refused to expand
the holding beyond that type of situation. Id. The new United
States Claims Court recently reaffirmed, in disallowing a recov
ery of costs similar to those claimed by FCCC, that Singer "rec
ognized a very limited exception to the rule against the recovery
of claim preparation costs where there is both an acknowledgement
by the government of the contractor's entitlement and where the
adjustment is made in the midst of contract performance." Delco
Electric Corp., 17 Cl. Ct. 302, 333 (1989).
Neither of these factors is present in this case. MOA
consistently denied any liability until the arbitration panel
handed down its decision. Although the initial claim for equita
ble adjustment was made while work continued, the claim was
obviously not crucial to completion of the project, as FCCC
completed the tunnel without the adjustment dispute being re
solved. Furthermore, FCCC continued to revise its claimed enti
tlement after the excavation was completed. Thus, the conclusion
of the Singer court applies to this case as well: "Judged both
from the standpoint of the time of their submission and the
purpose of their submission, [the contractor's] requests for
equitable adjustment were not performance-related; they bore no
beneficial nexus either to contract production or to contract
administration. Accordingly, the attorneys' fees are not
recoverable." Singer, 568 F.2d at 721.
The second opinion relied on by FCCC, Dawco Construct
ion, is not in conflict, although it does include an award for
costs of preparing a claim. Dawco Construction Inc. v. United
States, 18 Cl. Ct. 682, 701 (1989). In that case, the contract
ing officer required the contractor to submit successive versions
of its claim under alternative costing theories, apparently
without notifying the contractor that he would not allow any
claim. Id. at 696-97. The court found that "[t]hese flip-flops
by defendant, demanding first the submission of plaintiff's claim
in one form, then another, and then yet another, was totally
unnecessary and unjustified." Id. at 696. The court did not
explain its inclusion of the claims preparation costs or cite to
any supporting authority. It is clear from its discussion,
however, that the court placed great weight on the fact that the
contracting officer himself requested the work in the midst of
performance without indicating to the contractor that he ques
tioned its basic entitlement. Id. As such, the case is inappo
site to the present situation, where MOA denied any DSC from the
outset and thus requested no cost documentation from FCCC.
In sum, there is no support for the conclusion that the
cost of preparing a claim for equitable adjustment is recoverable
as a cost of performance in a situation such as the present case.
Those costs are thus not available as an element of special
damages. The superior court therefore correctly excluded proof
of them from evidence.
FCCC does not make any attempt to claim entitlement to
a portion of these costs under Rule 82. Alaska State Housing
Auth. v. Riley Pleas, Inc., 586 P.2d 1244, 1249 (Alaska 1978)
("Civil Rule 82 only applies to `costs of the action' not
attorney's fees incurred in the conduct of a prior"proceeding).
It reasserts its argument below that the superior court should be
able to award these attorney's fees as Rule 79 costs, analogizing
to the recovery of paralegal fees referred to in Smith v.
Shortall, 732 P.2d 548, 550 n.1 (Alaska 1987). We do not see any
basis for the analogy, nor does FCCC supply any.
The main thrust of its argument is that FCCC incurred
these costs in a winning effort, so some mechanism should be
found for allowing it to recover them. This proposition has no
support in case law. The costs are attorney's fees--nothing
more, nothing less. This court long ago held that Rule 82 is
intended "only to partially compensate a client for the produc
tive work done by his attorney." State v. Abbott, 498 P.2d 712,
731 (Alaska 1972). The partial nature of the compensation is
evidenced, for example, by the schedule establishing the appro
priate award in "average cases." Alaska R. Civ. P. 82(a)(1). It
is also evidenced by the limitation of Rule 82 to costs arising
from the action. FCCC's fundamental complaint--that it should be
more fully compensated for the productive work of its attorneys
on the ground that some of the work went into preparing a claim
for equitable adjustment--is simply without merit in this context
of partial compensation.
B
After trial, FCCC sought to recover more of its expert
witness fees than allowed under Administrative Rule 7(c).16
Although FCCC sought over $130,000, the court applied the Rule 7
guidelines and awarded $475. In so doing, it noted that the case
was "highly technical and complex"and "by necessity[] required
the use of expert consultants and expert witnesses." The court
relied on this court's holding in Miller v. Sears, 636 P.2d 1183
(Alaska 1981):
Absent extraordinary circumstances, such
as bad faith or reprehensible conduct, not ex
isting here, the prevailing party may receive
as costs only those expert witness fees spec
ified in Administrative Rule 9(c) [current
Rule 7(c)] . . . . The intent of Rule 9(c)
is to limit the fees which can be taxed as
costs to those specified in the rule. Costs
in excess of those specified or which do not
meet the conditions of the rule are, like
many other litigation costs, not recoverable
from the losing party.
Id. at 1195 (footnote omitted). Finding no "bad faith or repre
hensible conduct,"the superior court felt constrained to deny
any award above the Rule 7 guidelines.
FCCC argues that the examples of bad faith and repre
hensible conduct were not meant to exhaust the possible "extraor
dinary circumstances"which justify departure from the Rule 7
guidelines. Rather, FCCC suggests that "`extraordinary circum
stances' should be any circumstance that the trial court, in its
sole discretion, believes to be truly `extraordinary,' and is
willing to enter a special finding, on a case-by-case basis, to
that effect." It argues that the superior court made such a
finding in this complex, highly technical case. FCCC asserts
that the purpose of the rule is to compensate, not to punish.
We disagree with FCCC's analysis of Miller. Our ex
plicit reference in Miller to bad faith and reprehensible conduct
is clearly a rejection of FCCC's compensation approach, id. at
1196 (Connor, J., dissenting), a rejection we have reiterated
since. See Fairbanks North Star Borough v. Tundra Tours, Inc.,
719 P.2d 1020, 1036-37 (Alaska 1986) (overturning award of expert
fees in excess of guidelines and stressing that the case did not
involve "those extraordinary circumstances where the losing party
should be punished").
The complexity of the case is irrelevant. We have
previously rejected any award of expert fees at all in a case
where no trial was held, citing the limitation in Rule 7 that
"additional compensation shall not exceed $25.00 per hour while
employed and testifying." Atlantic Richfield Co. v. State, 723
P.2d 1249, 1253 & n.7 (Alaska 1986). There, the litigation
involved a challenge to state tax laws, an obviously complex
topic; over $2 billion in revenue hinged on the outcome of the
case. Id. at 1250-51. After winning on summary judgment, the
state sought, among other things, compensation for experts in
excess of $330,000. Id. at 1253. Despite these manifestly
"extraordinary circumstances,"we applied the letter of Rule 7
and denied any recovery for expert consultants' fees. Id. (cit
ing Tundra Tours, 719 P.2d at 1020; Miller, 636 P.2d at 1195).
We thus affirm the superior court's award of expert fees in the
present case.
V
MOA cross-appeals on three issues, only one of which
need detain us.17 MOA asserts that the award of some $21,000 in
Rule 79 costs should be reversed and remanded "for further hear
ings in which FCCC will have the burden of identifying those
costs"incurred in prosecuting the contract claim against MOA, as
opposed to those incurred in prosecuting the unsuccessful tort
claims against CH2M Hill.
The argument as presented here is frivolous. MOA
asserts that, "[i]n a multi-claim, multi-defendant case where the
moving party won on some claims and lost on others, a Rule 79
request for costs must be appropriately apportioned so that only
those costs incurred as part of the moving party's winning claims
will be the subject of an award of costs." Cross-Appellant's
Brief at 20-21 (citing Bovee v. LaSage, 664 P.2d 160 (Alaska
1983)). In fact, Bovee involved a single defendant, who won on
all claims and whose questioned costs were in an entirely sepa
rate action. Id. at 164-65. The case says absolutely nothing
about the burden on a plaintiff who wins a $2.1 million suit
against one of two original defendants. MOA cites no other case
in the text of its argument on this issue.
We will overturn an award of costs only if the superior
court clearly abused its discretion. Kaps Transport, Inc. v.
Henry, 572 P.2d 72, 77 (Alaska 1977). Here, the litigated claims
involved intertwined issues of negligence and breach of contract
for which the plaintiff sought the same corpus of damages--
namely, its added expense in dealing with the DSC. MOA makes no
showing that the superior court clearly abused its discretion in
finding that the challenged costs were reasonably necessary for
pursuit of the claim against MOA, other than such broad allega
tions as that FCCC's "deposition costs were incurred either for
general discovery purposes or with regard to the tort claims
against CH2M Hill for breach of warranty and misrepresentation."
Such a conclusory statement does not begin to meet MOA's heavy
burden on appeal. We therefore affirm the superior court's award
of Rule 79 costs.
VI
After the arbitration panel found in favor of CH2M Hill
as to all claims against it, the superior court granted it summa
ry judgment. The court also awarded attorney's fees of $112,000,
out of a requested total of over $150,000. The court
specifically noted:
In determining the appropriate
amount to partially compensate CH2M Hill for
attorney expenses it incurred in defeating
all the causes of action asserted against it
by Coluccio, this court has carefully
considered the following factors: the
liability exposure, the duration and
complexity of this litigation which arose out
of a highly technical construction project,
and the extent and value of the services
rendered by CH2M Hill's attorneys. A close
scrutiny has been made by the court of the
summary of billings submitted by CH2M Hill to
assure that only those fees reasonably and
necessarily incurred were considered. To the
extent that work performed by more than one
attorney was duplicative and unnecessary, it
was not considered in determining a proper
award of attorney fees.
The court rejected FCCC's contention that CH2M Hill's participa
tion in the case was "minimal, duplicative and unnecessary" as
"not supported by the evidence." The clerk subsequently awarded
CH2M Hill costs of over $14,000. The court denied FCCC's motions
to reconsider these awards. FCCC now appeals, asking this court
to reverse and remand the awards of fees and costs with
instructions that CH2M Hill bear the burden of proof of
"apportion[ing] with specificity"between the costs and fees
incurred in defending itself and those incurred in defending MOA.
FCCC's appeal, which in some cases might have some
validity, is in this case balanced precariously on a falsehood
and a fallacy. The falsehood is that MOA and CH2M Hill entered
into an agreement whereby, in FCCC's words, "MOA contractually
assumed primary responsibility for the defense of both itself and
of its agent CH2M Hill." MOA and CH2M Hill did indeed enter into
a "Joint Defense Agreement." But nothing in the agreement
assigns MOA "primary responsibility"for defending CH2M Hill. In
fact, the agreement specifically provides that "[t]he cost of
defense of Claims III and IV, and any additional claims which may
be brought directly against CH2M Hill by FCCC, are the
responsibility of CH2M Hill, and the costs of defending against
these claims shall be segregated by the engineer in a separate
cost accounting system and not billed to the MOA." (Emphasis in
original.)
The main point of the agreement appears to be arranging
compensation for CH2M Hill to the extent that its engineers aided
in MOA's defense. The agreement particularly notes and preserves
any and all legal claims that the two defendants might have
against each other arising out of the FCCC suit. Finally, the
agreement specifically makes provisions "[t]o facilitate the
rendition of professional legal services to each party by its own
lawyers." Clearly, it is incorrect to say that CH2M Hill gave
over its legal defense to MOA. It was in both parties' interest
to cooperate, but that hardly creates any presumption that CH2M
Hill's lawyers minimally participated in the defense of the
company.
The fallacy implicit in FCCC's argument is that a
plaintiff can sue co-defendants for claims of $3.5 million--for
which they may or may not have eventual claims of indemnity
against each other--then complain that they did not coordinate
their legal efforts for maximum economic efficiency. CH2M Hill
faced a tremendous amount of liability in a highly complex case.
It had no responsibility to FCCC to economize on otherwise rea
sonable and necessary fees and costs merely because another party
also faced the same risks.
The superior court explicitly considered the factors
this court has previously identified as pertinent in establishing
a reasonable amount of attorney's fees. Atlantic Richfield Co.,
723 P.2d at 1252 ("court shall consider all relevant factors,
including the nature and value of services rendered, the duration
and complexity of the litigation, the novelty of the issues
presented, [and] the amount in controversy"). The court also
specifically noted that it did not take into consideration those
fees it deemed duplicative and unnecessary. State v. Fairbanks
North Star Borough School Dist., 621 P.2d 1329, 1335 (Alaska
1981). It had the opportunity to review the fees award in light
of FCCC's joint defense theory, and declined to alter the award.
The court's determination is not "manifestly unreasonable."
Tundra Tours, 719 P.2d at 1037. We therefore affirm the award of
attorney's fees to CH2M Hill.
AFFIRMED.
_______________________________
1. Frank Coluccio testified at trial:
Stand-up ground is ground that will
stand up [for] a minute or two so that our
[tunnel boring machine] can go forward. And
it only takes a minute or two to go forward.
. . .
But then if you got different kind
of ground, like--like say the Sahara Desert
where it's just sand, it just flows. Or like
sugar. . . . That's running ground and
flowing ground.
2. This document was based on an "Initial Written
Decision."
3. AS 09.43.110 provides:
Upon application of a party, the court
shall confirm an award unless within the time
limits imposed by AS 09.43.120 and 09.43.130
grounds are urged for vacating or modifying
or correcting the award, in which case the
court shall proceed as provided in AS
09.43.120 and 09.43.130.
4. The grounds on which modification may be made are
"evident miscalculation of figures or an evident mistake in the
description of a person, thing, or property"; award "upon a
matter not submitted to"arbitrators; and formal imperfections in
the award "not affecting the merits of the controversy." AS
09.43.130.
5. AS 09.43.140 provides:
Upon the granting of an order con
firming, modifying or correcting an award, a
judgment or decree shall be entered in
conformity with the award and be enforced as
any other judgment or decree.
6. "Generally, the interpretation of a writing is a
task for the court." Alyeska Pipeline Service Co. v. O'Kelley,
645 P.2d 767, 771 n.2 (Alaska 1982). As a question of law, then,
the standard of review is de novo. Langdon v. Champion, 745 P.2d
1371, 1372 n.2 (Alaska 1987).
7. MOA argues that the arbitration decision should
have been given claim preclusive and issue preclusive effect and
should have been considered res judicata on the issue of
mitigation of damages. These arguments are easily disposed of.
Res judicata cannot apply in the absence of "a judgment to which
res judicata could attach." C.J.M. Construction, Inc. v.
Chandler Plumbing and Heating, Inc., 708 P.2d 60, 61 n.1 (Alaska
1985). Similarly, one of the requirements for claim and issue
preclusion is resolution "by a final judgment on the merits."
Rapoport v. Tesoro Alaska Petroleum Co., 794 P.2d 949, 951
(Alaska 1990). As the superior court's refusal to enter judgment
on the question of mitigation was correct, it follows that the
court correctly denied preclusive and res judicata effect to the
parts of the Findings dealing with mitigation of damages.
8. Alaska R. Evid. 408 provides:
Although relevant, evidence may be
excluded if its probative value is outweighed
by the danger of unfair prejudice, confusion
of the issues, or misleading the jury, or by
considerations of undue delay, waste of time,
or needless presentation of cumulative
evidence.
"The standard of review of a trial court's decision to admit
evidence is abuse of discretion." Hutchins v. Schwartz, 724 P.2d
1194, 1197 (Alaska 1986).
9. MOA also alleges error in the court's denial of
two proposed jury instructions which embodied those aspects of
the Findings which were excluded from evidence. In fact,
proposed instruction W was a verbatim excerpt of a large portion
of the Findings. MOA's argument is essentially that the trial
court's refusal to grant the proposed instructions was error for
the same reason that its other contested decisions were error.
It thus fails for the same reasons.
10. In this case, FCCC's expert found a total cost to
FCCC of over $8.9 million. He subtracted an "under bid amount"
for a modified total cost of about $8.6 million. After
subtracting from this modified total cost an amount paid of about
$5.1 million, the expert concluded that FCCC's damages were
about $3.5 million.
11. See also, e.g., Moorhead Constr. Co. v. City of
Grand Forks, 508 F.2d 1008, 1016 (8th Cir. 1975); J.D. Hedin
Constr. Co. v. United States, 347 F.2d 235, 246-47 (Ct. Cl.
1965); New Pueblo Constructors, Inc. v. State, 696 P.2d 185, 194
(Ariz. 1985); Clearwater Constr. & Eng'g, Inc. v. Wickes Forest
Indus., 697 P.2d 1146, 1150 (Idaho 1985) (dictum); Omaha Pub.
Power Dist. v. Darin & Armstrong, Inc., 288 N.W.2d 467, 474 (Neb.
1980); State Highway Comm'n v. Brasel & Sims Constr. Co., 688
P.2d 871, 877 (Wyo. 1984).
12. The jury verdict method amounts to little more
than the principle, often stated by this court, that "a
contractor need not prove damages with mathematical precision,
[but] may only recover those damages which it proves with
reasonable certainty." Kandik, 795 P.2d at 798; see also L.L.
Hall Constr. Co. v. United States, 379 F.2d 559, 566 (Ct. Cl.
1966) (noting "well-established rule" that "an absolute
determination of the precise excess costs"is unnecessary, so
long as "an approximate and reasonable determination may be made
. . . in such amount as, in the judgment of fair men, resulted
from the breach").
13. FCCC later argues that it offered actual cost
evidence by "present[ing] a `checks and invoices' case through
introduction of its original accounting records, explained by
their custodian Ann Meek." This characterization stretches the
content of Meek's testimony. Although she did identify
apparently voluminous accounting records and describe FCCC's
accounting system, her quantitative testimony consisted primarily
of testifying that "the total cost"was $6,813,893 and that FCCC
was paid $5,093,013. Regardless of whether the "checks and
invoices" could be used to determine actual costs arising from
the DSC, Meek admitted on cross-examination that she had
undertaken no such analysis. When MOA objected to admission of
such a mass of accounting materials, FCCC's counsel conceded that
"[i]t certainly wouldn't be our attempt to send these into the
jury room and have the jury read every line of it, except to the
extent they wanted to check it." On appeal, however, FCCC
asserts that "[t]he jury took the books of account into their
deliberations with them, and, judging from the verdict, obviously
made use of them."
14. The court used the term "individual claim theory,"
but in context appears to mean essentially the same as "actual
cost": "The district court judge submitted Nebraska Power's
claims against Austin to the jury on the individual claim theory
of recovery. The jury was instructed . . . to determine from the
evidence the total actual damages attributable to [each
individual] claim." Nebraska Public Power Dist., 773 F.2d at
965.
15. These cases involving the United States generally
deal with the applicability of some statutory or regulatory bar
to assessing attorney's fees against the federal government.
E.g., Singer Co., 568 F.2d at 720. They are nevertheless
relevant to this discussion, as the fundamental question is
identical: Were the costs incurred in the performance of the
contract? Id. If not, then FCCC cannot claim them as
"reasonably foreseeable"damages.
16. Administrative Rule 7(c) states in relevant part
that "[r]ecovery of costs for a witness called to testify as an
expert is limited to the time when the expert is employed and
testifying and shall not exceed $50.00 per hour."
17. The first issue in MOA's Cross-Appeal brief is
predicated on FCCC's appeal of the court's use of the Rule
82(a)(1) schedule for award of attorney's fees. FCCC has not
appealed that award; the issue is therefore moot. The third
issue addressed in the Cross-Appeal brief is predicated on our
granting FCCC's request for remand on the issue of expert witness
fees. Because we have rejected that request, this issue also is
moot.
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