You can
search the entire site.
or go to the recent opinions, or the chronological or subject indices.
Conam AK et al v. Bell Lavalin et al (11/27/92), 842 P 2d 148
<![CDATA[
Notice: This 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
CONAM ALASKA, an Alaska Joint )
Venture between CONAM ) Supreme Court Nos. S-4022/4039
CONSTRUCTION COMPANY and ) Superior Court No.
CHAMPION CONSTRUCTORS, INC., ) 3AN-85-16236 Civil
)
Appellant and )
Cross-Appellee.)
)
v. ) O P I N I O N
)
BELL LAVALIN, INC., an Alaska )
Corporation, F. ROBERT BELL )
AND ASSOCIATES, an Alaska )
Sole Proprietorship, LAVALIN, )
INC., a Canadian Corporation, )
PARTEC LAVALIN, INC., a )
Canadian Corporation, )
CIMARRON HOLDINGS, INC., a )
Texas Corporation, )
) [No. 3900 - November 27, 1992]
Appellees and )
Cross-Appellants. )
)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
Brian Shortell, Judge.
Appearances: Kenneth D. Jensen, Kevin
M. Morford, Jensen, Harris & Roth, Anchorage,
for Appellant and Cross-Appellee. Hugh G.
Wade and David P. Gorman, Wade & De Young,
Anchorage, for Appellees and Cross-Appellants
Bell Lavalin, Inc., Partec Lavalin, Inc. and
Lavalin, Inc. David B. Ruskin and Mary
Louise Molenda, David B. Ruskin, P.C.,
Anchorage, for Appellee F. Robert Bell &
Associates.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton and Moore, Justices.
COMPTON, Justice.
This case arises from a failed subcontractor
relationship on a project on the North Slope. Conam
Alaska appeals the superior court's dismissal of its
professional negligence cause of action and the
superior court's formulation of a jury instruction on
piercing the corporate veil. Bell Lavalin cross-
appeals, seeking to overturn the jury's verdict that
Conam Alaska was excused from performing the contract
and was entitled to damages.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. THE PARTIES
The various business entities that evolve out of the
parent corporations and their interrelationship makes
presentation of this case difficult. We therefore
start with a brief discussion of the corporate
relationships.
Bell Lavalin, Inc. (Bell Lavalin) is an Alaska
corporation formed by F. Robert Bell & Associates (FRB)
and Lavalin, Inc. (Lavalin) for the purposes of bidding
on and performing large construction jobs on the North
Slope. FRB and Lavalin each held fifty percent of Bell
Lavalin's corporate stock. Bell Lavalin had no
employees of its own. F. Robert Bell (Bell), the sole
proprietor of FRB was president of the corporation; its
other officers and directors were all employees of
Lavalin or FRB. Lavalin is a Canadian
corporation operating internationally as a
multidisciplinary engineering and construction
management firm. It has the financial capability and
staff to undertake a large engineering and construction
management project. However, Lavalin did not have
experience or contacts in Alaska. It therefore joined
with FRB, which had experience and contacts in North
Slope civil engineering.
Partec Lavalin, Inc. (Partec), is a Canadian
corporation, wholly owned by Lavalin. Partec is one of
Lavalin's engineering resources.
Conam Alaska (Conam) is an Alaska joint venture between
two Alaska corporations, Champion Constructors, Inc.
and Conam Construction Company. Conam Construction Co.
is a subsidiary of Cimarron Holdings, Inc. Champion
Constructors is a subsidiary of Cook Inlet Region, Inc.
(CIRI), an Alaska Native Corporation. The joint
venture was formed to perform general construction on
the North Slope.
B. THE PROJECT
The dispute which generated this litigation arose out
of the construction of four 55,000 barrel oil storage
tanks at Kuparuk for ARCO Oil and Gas Company (ARCO).
The tanks were to be built on gravel pads with vinyl
lined containment dikes around each tank. The tanks
would be used by ARCO to hold oil diverted from the
pipeline connecting the Kuparuk production wells to the
TransAlaska Pipeline.
After ARCO issued a request for proposals (RFP) for the
project in October 1984, Bell Lavalin and Conam had
numerous discussions about creating some type of
relationship and performing the project together. They
bid the project as a team1 and eventually agreed that
Bell Lavalin would be the prime contractor, responsible
for all design work, and Conam would be the
subcontractor, responsible for all construction in the
field. Bell Lavalin was awarded the project. It
subcontracted the design work to FRB and Partec, and
the field construction to Conam. Conam then
subcontracted the off-site fabrication and on-site
erection, coating and insulation of the tanks to
Rockford Corporation (Rockford).
C. THE CONTRACTS
ARCO's RFP called for a design/build format whereby the
contractor was to perform all engineering, design and
construction necessary to complete the project. The
contract between ARCO and Bell Lavalin was an "end
result" contract, rather than a "method and means"
contract. This allowed the contractor to select
construction techniques to achieve the desired result.
The contract contained only the general project
specifications, which were included in the RFP, and
provided that all project specific plans,
specifications and drawings be prepared by Bell Lavalin
and approved by ARCO. The contract required
substantial completion by November 30, 1985. The
timing of the project was critical since ARCO justified
the expense on savings it would realize from having the
tanks operational during the planned spring 1986
shutdown of the TransAlaska Pipeline. Thus the prime
contract required that Bell Lavalin submit a project
schedule. A schedule was submitted and was revised
three times. The first three versions indicated that
design would be completed by June 1, 1985. The fourth
schedule had design and engineering completed by
September 20, 1985.
The subcontract between Conam and Bell Lavalin
incorporated the prime contract in its entirety by
reference. Conam would supply all labor and material
necessary to complete the construction work within the
time required by the ARCO contract.2 Conam was also
responsible for all quality control. The subcontract
also required that Bell Lavalin inform Conam of any
communication Bell Lavalin had with ARCO which affected
Conam's interests.
The subcontract included a procedure for modifying
Conam's obligations under the contract. Conam could
submit Contract Change Requests (CCRs), which would
indicate a need for change in specifications, the
anticipated impact of a change in plans on the schedule
and break down the estimated cost of the particular
change. Bell Lavalin would review the CCRs and forward
them to ARCO for approval. ARCO would issue Contract
Change Directives (CCDs), specifying the modified
obligation. This procedure was used repeatedly
throughout the project.
The subcontract between FRB and Bell Lavalin provided
that FRB was responsible for all civil design work.
The subcontract between Partec and Bell Lavalin
assigned Partec all the remaining design work. In
addition, Partec was to serve as Bell Lavalin's agent
in providing off-site and on-site project and
construction management services.
D. THE PROBLEMS
The problems began when ARCO moved the tank site,
causing delays in earthwork and design. Instead of
completing the design and engineering and formulating
project specific specifications at the start of the
project, Bell Lavalin furnished designs as the project
went along. Bell Lavalin had announced its intention
to ARCO to rely on the general specifications included
in the RFP, but did not communicate this to Conam.
Only a small percentage of the plans were completed by
June 1. Conam repeatedly requested the missing design
and engineering and advised Bell Lavalin that the lack
of design information was causing delays.
The project fell behind schedule quickly. Bell
Lavalin made repeated requests upon Conam to accelerate
work. At ARCO's request, Bell Lavalin relieved Conam
of its quality control responsibilities.
Conam submitted several CCRs as the project went along.
ARCO approved more than $1 million in changes through
this procedure. Bell Lavalin, however, frequently
changed cost and other data before forwarding the forms
to ARCO, including deleting all parts of the CCRs which
indicated that there would be a schedule impact.
Similarly, references to the lack of contract drawings
were deleted. Additionally, Bell Lavalin would extend
to Conam a portion of the additional expenses granted
by ARCO.
The project was dealt a serious setback when Rockford
walked off the job on July 19, 1985, after ARCO
rejected the steel tank sections supplied by Rockford.3
Following the Rockford walkoff, Conam requested that
Bell Lavalin ask ARCO to grant a time extension for
completion. Bell Lavalin requested of ARCO that the
completion date be moved to the spring and the project
shut down for the winter. The specified work could not
be performed in the winter because the project called
for the installation of a dynaloy liner. Dynaloy is a
vinyl product which becomes very brittle in cold and
would be impossible to install in the winter.
On July 31, 1985, Bell Lavalin proposed two alternative
schedules to ARCO. One schedule assumed that Conam
could get Rockford back on the job. The other assumed
a new vendor would be found. Both provided for a
winter shutdown.
On August 1, 1985, Bell Lavalin, ARCO and Conam met to
discuss the scheduling proposals. Conam left the
meeting with the understanding that an extension was
granted.4 Conam then resubcontracted with Rockford and
also with Interstate Coatings for work which assumed a
winter shutdown. The new subcontracts were made with
Bell Lavalin's approval. Rockford returned to the
project on August 4, 1985.
On August 8, ARCO advised Bell Lavalin that it would
require a detailed analysis of the impact of the
Rockford walkoff and documentation demonstrating how a
time extension would be utilized before granting an
extension. On that same date, Bell Lavalin indicated
to Conam that ARCO had reneged on the promised
extension. Around August 15 Bell Lavalin rejected a
Conam schedule including the six month extension. On
August 26 Conam submitted another revised schedule
which showed a December 15 completion date, but
included the caveat that some of the work "may be a
problem due to weather." This revised schedule was
approved by ARCO.
Problems arose again in September. After Rockford
completed work on the first tank, the quality control
inspector, an FRB employee under Partec supervision,
approved the work and released the tank to be
sandblasted and coated by Interstate Coatings.
Interstate Coatings mobilized its operations to the
North Slope. However, shortly after it began the
sandblasting, Interstate Coatings was ordered to stop
by Bell Lavalin after ARCO inspectors rejected the
tanks. Conam was forced to hand-grind the tanks and
work was delayed for 2-1/2 weeks. Also, after two
tanks had almost been completed, Partec substantially
revised the piping requirements. Substantial reworking
was required and the sandblasting was further delayed.
Ultimately, Interstate Coatings was not able to
recommence work until October 8, 1985. By this time,
weather conditions made it very difficult to coat the
tanks. On November 15, 1985, Conam indicated to
Bell Lavalin by letter that further work on the project
was commercially impracticable and proposed a revised
schedule, consistent with the schedule presented to
ARCO in July, with weather sensitive work being
performed in the spring. Conam continued working
pending an answer from Bell Lavalin. Bell Lavalin
stopped payment on a progress payment check previously
delivered to Conam. The check was for over $800,000.
Bell Lavalin demanded that Conam continue work without
interruption. On November 19, 1985, Conam demobilized
its work force. Bell Lavalin completed the project in
March 1986 after ARCO eliminated the requirement for
the dynaloy liner.
At the time of Conam's walkoff, about 87% of the base
contract work had been completed. The contract sum
claimed by Conam for the work completed, including
agreed upon change orders was $9,738,932. Conam also
claimed that it was due an additional $1,668,597 for
other change order work, the value of which had not yet
been agreed. Conam had been paid $5,486,350. Thus
Conam's contract claim was for $4,438,200, 87% of the
value of the work actually performed ($11,407,529 x
.87, or $9,924,550), less the amount received
($5,486,350). ARCO settled with both parties paying
Conam $1 million and Bell Lavalin $1.2 million.
E. THE TRIAL
Conam filed suit. It alleged one count of breach of
contract, one count of abandonment of contract, and one
count of breach of duty of good faith and fair dealing
against Bell Lavalin; one count of fraud, and one count
of negligent design and engineering against Bell
Lavalin, FRB and Partec. Because Bell Lavalin had few
assets, Conam also sought to pierce the corporate veil
or have Bell Lavalin declared a joint venture to reach
the assets of FRB and Lavalin.
Bell Lavalin counterclaimed against Conam and its
parent corporations, alleging four claims of breach of
contract and one claim of willful interference with
contract. Bell Lavalin also sought to pierce the
corporate veils of Conam Construction and Champion
Constructors to reach the assets of Cimarron Holdings
and CIRI.
The trial court granted the Lavalin parties' motions to
dismiss Conam's fraud and professional negligence
claims and Conam's motions to dismiss Bell Lavalin's
claims for willful interference claim and breach of
contract. The trial court cited as its reason for
dismissing Conam's failure to adequately establish a
basis for the jury to determine the amount of damages
stemming from the Lavalin parties' malpractice.
The jury found for Conam on its breach of contract and
abandonment counts and awarded Conam $4,230,898.42.5
The jury found against Conam on the piercing the
corporate veil and joint venture counts and the breach
of duty of good faith and fair dealing claim. The jury
found against Bell Lavalin on its breach of contract
counterclaims.
Conam appeals the dismissal of its professional
negligence claim and the giving of Jury Instruction 35
on piercing the corporate veil. Bell Lavalin cross-
appeals the jury's verdict awarding Conam contract
damages.
II. DISCUSSION
A. JURY INSTRUCTION 35
All
parties agree
that Conam did
not object6 to
Jury
Instruction 357
at trial as
required by
Civil Rule
51(a).8 Thus
this court will
not review the
jury
instruction
unless the
giving of the
challenged
instruction was
plain error.
Miller v.
Sears, 636 P.2d
1183, 1189
(Alaska 1981).9
Plain error
will be found
when an obvious
mistake exists
such that the
jury
instruction
creates "a high
likelihood that
the jury will
follow an
erroneous
theory
resulting in a
miscarriage of
justice."
Ollice v.
Alyeska
Pipeline
Service Co.,
659 P.2d 1182,
1185 (Alaska
1983).
This court's ultimate determination in analyzing plain
error in jury instructions is simply whether a correct
instruction would have likely altered the result. See,
e.g., Hout v. NANA Commercial Catering, 638 P.2d 186,
189 (Alaska 1981)("unlikely . . . [it] would have
altered the result"); Miller, 636 P.2d at 1190;
(imprecise jury interrogatory did not likely mislead
jury); City of Nome v. Ailak, 570 P.2d 162, 171 (Alaska
1977)("application of instruction sought by appellant
would not have altered the result").
Because of the policy underlying Rule 51(a), this court
has placed a heavy burden on the appellants to prove
that an error was highly likely determinative. We have
emphasized that we will not speculate on whether the
error altered the result. Holiday Inns of America,
Inc. v. Peck, 520 P.2d 87, 92 (Alaska 1974). Rather,
the appellant must prove with some certainty that the
jury was determinatively misinfluenced.
We are not persuaded that Conam has met this burden.
All Conam has argued is that it had a strong case.
Leaving aside a detailed review of the evidence, it can
be said that Conam presented probably a close case for
piercing the corporate veil. However, this court would
be speculating to say that a correct instruction would
have changed the result.
Conam also argues that the exception set forth in Zeman
v. Lufthansa German Airlines, 699 P.2d 1274, 1280
(Alaska 1985), to the general policy against reviewing
issues not objected to at trial be applied in this
case. In Zeman we held that arguments which "(1) are
not dependent on new facts, (2) are closely related to
the appellant's trial pleadings and (3) could have been
gleaned from the pleadings"need not be expressly
presented to the trial court. Id. See State v.
Northwestern Const., Inc., 741 P.2d 235, 239 (Alaska
1987) (applying Zeman). Rather, the appellant is given
leeway to "expand or refine details of an argument
otherwise preserved on appeal." Zeman, 699 P.2d at
1280 (emphasis added).
Zeman, however, has never been extended to reviewing
jury instructions. Such an extension would be
inappropriate in light of the policy underlying Rule
51(a) that "counsel should make a specific objection to
a given instruction, even if he has previously argued
his position to the court. The trial court needs an
identifiable opportunity to rule on a party's
position." Brown v. Estate of Jonz, 591 P.2d 532, 534
(Alaska 1979). Indeed, the most liberal application of
Rule 51(a) by this court was in Girves v. Kenai
Peninsula Borough, 536 P.2d 1221, 1223 (Alaska 1975).
See Brown, 591 P.2d at 534. In Girves, we considered
appellant's point contesting a jury instruction when,
although appellant failed to state the grounds for her
objection to the given instruction, appellant had
objected to the refusal to give her proposed
instruction and argued the issue at length. In
comparison, Conam not only failed to object to Jury
Instruction 35, but expressly agreed with the entire
set of instructions calling them "letter perfect."
Thus the trial court was afforded no opportunity to
correct errors before reading the instruction to the
jury. Girves, 536 P.2d at 1223. See Holiday Inns, 520
P.2d at 90 (Alaska 1974). See also State v. Dupere,
709 P.2d 493, 498 n.5 (Alaska 1985), modified on reh'g,
721 P.2d 638 (Alaska 1986) ("The fact that the trial
court was aware of the State's position on the issue
does not excuse the State's failure to object to the
instructions when afforded the opportunity to do so.").
Zeman requires neither an objection nor extensive
argument. The Zeman exception is simply incompatible
with Rule 51(a).
Thus, even if Jury Instruction 35 is an erroneous
statement of the law of piercing the corporate veil,
Conam has not met the burden of proving that the error
was highly likely to alter the result. We do not need
to comment on the law of piercing the corporate veil.
The jury's verdict is affirmed.
B. PROOF OF DAMAGES
1. Professional negligence.
We must now determine whether Conam adequately
established a basis upon which the jury could award
damages resulting from the Lavalin parties' alleged
professional negligence. The party seeking damages
bears the burden of proof of such damages. Alaska
Airlines, Inc. v. Sweat, 584 P.2d 544, 549 (Alaska
1978). Damages must be proven beyond speculation.
City of Whittier v. Whittier Fuel and Marine Corp., 577
P.2d 216, 222 (Alaska 1978). Generally, however, the
degree of certainty required to establish tort damages
will vary with the nature of the tort and the
circumstances. Restatement (Second) of Torts 912
(1979).
We have held that evidence was not sufficient to create
a jury question on damages. In Whittier Fuel, we held
that a single witness's testimony did not establish a
nexus between the wrongful conduct and the loss where
the issue was one of the subjective motivations of the
parties.10 577 P.2d at 224. In Dowling Supply and
Equipment, Inc. v. City of Anchorage, 490 P.2d 907, 909
(Alaska 1971), we found that a single witness's
testimony, unsupported by business records or
indications of profit margin, was insufficient.
There are two aspects to damages. The first is
causation, that is, the evidence must prove that the
loss was caused by the tort. The second is amount.
The party seeking damages must provide the jury with a
"reasonable basis"for computing the award. Whittier
Fuel, 577 P.2d at 222-24.
Causation is the major concern. Dowling, 490 P.2d at
909-910 ("[t]he rule against recovery of uncertain
damages is therefore generally directed against
uncertainty with respect to the cause of rather than
the extent of damages"); see also 22 Am. Jur. 2d
Damages 486 at 567 (1988) (noting that courts are
more lenient in allowing the jury to speculate as to
the amount of damages after their cause has been
proven). While the amount of damages need not be
proven with mathematical accuracy, there must be "some
competent evidence" upon which to base an award.
Dowling, 490 P.2d at 909.
The Lavalin parties contend that Conam did not meet its
burden in regard to either aspect of damages. They
point out that Conam's evidence consisted of one expert
witness who admitted that it was impossible to
segregate specific instances of negligence with the
corresponding damages. They also maintain that Conam's
method amounts to a "total cost"approach, which this
court has disapproved.
The Lavalin parties rely on Huber, Hunt & Nichols, Inc.
v. Moore, 137 Cal. Rptr. 603 (Cal. App. 5th 1977). In
Huber, a contractor sued its architect for negligent
design and supervision. Id. at 609. The contractor
attempted to recover as damages the difference between
the amount bid and the amount actually spent. The
court held that the contractor could not maintain an
action for negligence without proving the measure of
damages with specificity. The "total cost" approach
used to estimate damages did not adequately establish
causal connection between the architect's negligence
and the cost overruns. Id. at 621-23.
Huber noted that the total cost method required the
jury to assume five things: the contractor's original
estimate was accurate; the cost overruns were
proximately caused by the architect's errors; the
errors were proximately caused by the architect's
negligence; the overruns were not attributable to
delays caused by factors other than the architect's
negligence, and the overruns could not have been
compensated for in the modification process built into
the construction contract. Id. at 297-99. The court
stated that this method of calculating damages would
create a cause of action every time a contracting bid
proved to be imprecise. Id. at 615.
Huber is apposite for the proposition that the "total
cost" approach is disfavored for calculating tort
damages.11 Conam argues that the concerns with the
total cost approach are not applicable in torts,
because part of the reason the total cost method is
disfavored is because it fails to exclude from a
contract award those damages only recoverable in tort.
However, the policy disfavoring the total cost approach
is based on the lack of proof of proximate cause. See
Kandik, 795 P.2d at 799 ("the plaintiff must relate the
specific amount of increased costs to the particular
breach"). Proximate cause is just as much an element
of tort damages as it is an element of contract
damages. The weakness in Conam's evidence is
in proof of causation, not, as the Lavalin parties
contend, amount. Conam's method required the jury to
make only one of the assumptions which concerned the
Huber court: the jury would have to assume that all the
overruns were traceable to appellees' errors and
omissions.12 Conam was actually able to provide the
jury with some numerical reference for calculating the
amount of damages.13
Conam's primary evidence on negligence was the
testimony of its expert, Bruce Campbell. Campbell
identified three areas in which the appellees'
negligence caused cost overruns. First there was the
failure to provide job-specific specifications which
changed the nature of the project from design/build to
fast track construction.14 This change directly led to
increased costs and delays.15 Second, Campbell
testified about inconsistent specifications for the
required weld quality, noting that the criteria were
changed after 80% of the welds had been done. Again,
delays resulted.16 Third, Campbell addressed the CCR
modifications. Campbell testified that Bell Lavalin's
modifications of its CCRs and skimming from the ARCO
grants resulted in between 45 and 80 days delay.
Campbell attempted to isolate the cause for the delays.
For one delay, he proposed three possible sources:
authorized changes in the schedule; lack of plans and
specifications; and Conam's understaffing or other
inefficiency. Campbell was able to eliminate the first
possibility because there was no evidence of a schedule
change in the weekly reports. Likewise, Campbell was
able to eliminate Conam's inefficiency because the
weekly reports show no evidence of understaffing or
complaints by Partec, the construction manager. Thus
for at least some delays, Campbell was able to
formulate an opinion that the appellees' conduct was
the proximate cause of the delay.
However, Campbell admitted that he was limited in
proving direct causal links.17 Many of his calculations
on delays and costs were pure estimates. His methods
looked at the effect of the negligence on the whole
project, rather than creating a link between a specific
delay and a specific cost.18
Further, Campbell admitted that the actions of ARCO,
and perhaps even Conam, may have contributed to the
cost overruns.19 Campbell was not able to separate out
plan delays which may have been caused by ARCO's
changes. Also, Campbell did not account for the
amounts ARCO paid for some of its damages in a
settlement with Conam. Campbell repeatedly referred to
concurrent factors which might have led to delays, but
which he could not quantify. Basically, all Campbell
could testify to was that "a portion" of the cost
overrun was attributable to the engineering negligence.
The other weakness in Conam's proffered evidence is
quantifying the damages traceable to the separate
conduct of Bell Lavalin and Partec.20 Conam admitted
that Campbell was unable to segregate the overruns from
negligence by the various appellees. Conam instead
relied on other evidence, such as the project plan log,
to prove which appellee was responsible for which
delay.21 Viewing the evidence in the light most
favorable to Conam, we conclude that reasonable jurors
could not disagree on the damages issue. The cause of
the damage which Conam claimed was never satisfactorily
proven. Despite Conam's effort, cause remained too
speculative to submit the issue of damages arising from
professional negligence to a jury.
2. Breach of contract.
The jury found that Conam's nonperformance was excused
and Conam was entitled to damages because 1) Bell
Lavalin breached a mutual agreement to give Conam the
time extension including the winter shutdown; and 2)
Conam's nonperformance was excused because of
commercial impracticability. Either finding alone was
adequate for Conam to be entitled to damages. Thus, in
order to reverse the award of contract damages we must
overturn both of the jury findings.
a. Discharge of Performance Duty.
In the Brief of the Cross-Appellants, Bell Lavalin
urges this court to overturn the jury verdict which
found that Conam's nonperformance of the contract was
excused because of Bell Lavalin's breach of its mutual
agreement to grant a time extension.22 The thrust of
its argument is that although a promise of a time
extension and a winter shutdown was made and breached,
public policy underlying construction subcontracts
requires that the promise not be recognized as
enforceable.23
Conam replies that the grant of the time extension was
not a modification but rather part of the existing
contract.24 It further argues that it had fulfilled all
of the requirements for receiving an extension and that
Bell Lavalin had conceded that Conam was entitled to
one.
In its reply brief, Bell Lavalin apparently abandons
many of its earlier arguments and concedes that an
enforceable promise to grant a time extension with a
winter shutdown existed and was repudiated. Instead,
Bell Lavalin argues that the breach was only a partial
breach and that it was not sufficient justification for
walking off the job. It cites the Restatement (Second)
of Contracts 237, 241 (1979) as authority that only
a "material"or "total"breach of a contract relieves a
party of its duty of performance. It then sets out
that the breach was not in fact material.
According to Alaska Appellate Rule 212(c)(3), a reply
brief may not raise contentions not previously raised
in either the appellant's or appellee's briefs. Alaska
R. App. P. 212(c)(3). Although, Bell Lavalin argues in
its opening brief that generally the breach of this
promise should not justify termination,25 it raises the
theory of partial and nonmaterial breach for the first
time in its reply.26 Thus, this court need not even
consider the issue.
Even if the argument is considered, it is unpersuasive.
The jury was instructed on materiality and it is
undisputed that the instruction was proper. The jury
was instructed that "termination is justified only in
the event of a total breach." A "total breach" was
defined for them as one which "so substantially impairs
the value of the contract to the injured party at the
time of the breach, that material inconvenience or
injuries will result if the injured party is forced to
complete its performance and make a claim for damages."
The jury was then given the same set of factors for
determining "totality"which Bell Lavalin set out in
its reply brief.
Bell Lavalin has not put forward any evidence which
indicates that the fair minded jurors could not differ
on this issue. We thus have no reason to overturn the
jury's verdict.
b. Commercial Impracticability.
Because we conclude that the jury's finding of breach
of contract is supported by the evidence, we need not
address the issue of its finding of commercial
impracticability.
III. CONCLUSION
We AFFIRM the jury's determination that the corporate
veil should not be pierced. Even if Jury Instruction
35 was an improper statement of the law on piercing the
corporate veil, we will not consider it. Conam failed
to object to the instruction at trial and has not met
its burden of proving that giving Instruction 35 was
plain error highly likely determinative.
We AFFIRM the superior court's directed verdict in
favor of Bell Lavalin and Partec on the claim of
professional negligence. We AFFIRM the jury's
verdict awarding Conam damages for Bell Lavalin's
breach of contract.
_______________________________
1. Conam and Bell Lavalin entered into a verbal agreement
whereby Conam agreed not to provide its prices to other
contractors bidding on the job and Bell Lavalin agreed
not to accept quotes from other general contractors.
2. The exception was the fabrication of certain pump and
control modules which were to be fabricated off-site
and delivered to the job site by Bell Lavalin. Conam
remained responsible for installing the modules.
3. Evidence introduced at trial established that
Rockford's bid to Conam deviated from ARCO's RFP
specifications. The main defect was that ARCO wanted
the anti-corrosive coating applied to the tank steel
after the tanks had been installed and hydrotested.
Instead, Rockford applied the first coating off-site.
4. The jury found that an extension had been granted.
Bell Lavalin admitted as much in its briefs on cross-
appeal.
5. With interest, attorney's fees, costs and paralegal and
computer research fees, the total judgment came to
$7,291,103.48.
6. To say that Conam did not object is generously
understated. After long discussions, Conam commented
that Jury Instruction 35 was "letter perfect."
7. Jury Instruction 35 provides:
Generally, the law regards a corporation as being
separate and distinct from its shareholders. One
or more shareholders of a corporation may be the
alter ego of the corporation, and liable for any
damages assessed against the corporation, if the
shareholder or shareholders have used the
corporate form to defeat public convenience,
justify wrong, commit fraud, or defend crime, and
if you also find that a sufficient number of the
following tests are met to satisfy you, it is more
likely than not that the shareholder or
shareholders did not allow the corporation to
exercise an individual status, or to act as an
independent entity:
A. The shareholders sought to be
charged own all or most of the stock of
the corporation.
B. The shareholders have
subscribed to all of the capital stock
of the corporation or otherwise caused
its incorporation.
C. The corporation has grossly
inadequate capital.
D. The shareholders use the
property of the corporation as their
own.
E. The directors or executives of
the corporation do not act independently
in the interests of the corporation but
simply take their orders form the
shareholders in the latter's interests.
F. The formal legal requirements
of the corporation are not observed.
It is not necessary that all six of these factors be
found in order to conclude that the corporation is the
alter ego of its shareholder or shareholders.
8. No party may assign as error the giving or
failure to give an instruction unless the
party objects thereto before the jury retires
to consider its verdict, stating distinctly
the matter to which the party objects and the
grounds for objection.
Alaska R. Civ. P. 51(a) (1991-92).
9. Ordinarily the legal sufficiency of a jury instruction
is a question of law upon which this court should
exercise its independent judgment. Fairbanks North
Star Borough v. Kandik Const., Inc. & Assoc., 795 P.2d
793, 797 (Alaska 1990), vacated in part on reh'g, 823
P.2d 632 (Alaska 1991).
10. The Lavalin parties cite Whittier Fuel for the
proposition that "mere witness conclusions" are
inadequate proof of amount to create a jury question on
damages. Whittier Fuel, 577 P.2d at 223 (quoting
Levene v. City of Salem, 229 P.2d 255, 263 (Or. 1951)).
However, we held in that case that the testimony of a
single witness was sufficient to provide the jury with
a reasonable basis upon which to calculate the amount
of damages stating:
We will not require that a plaintiff in
a contract suit present an accountant's
balance sheet in order to substantiate his
damages. Once actual damages are shown and
there is a reasonable basis for computing an
award, a defendant's opportunity for pre-
trial discovery of the evidentiary basis for
the amount claimed, the right to cross-
examine witnesses and to present evidence, as
well as the judge's duty to instruct the jury
on the issue of certainty provide adequate
protection against speculative verdicts.
Id. at 224 (footnote omitted). We then found that the causation
element was not proven with adequate certainty and
modified the verdict accordingly. Id.
11. This court has previously held that the total cost
approach was disfavored for contract damages.
Fairbanks North Star Borough v. Kandik Construction ,
Inc. & Asoc., 795 P.2d 793, 798-99 (Alaska 1990),
vacated in part on reh'g, 823 P.2d 632 (Alaska 1991).
12. The other assumptions are not applicable on these facts.
The original bid is not relevant to the issue of
damages. The trial court admitted that there was a
jury question on negligence, even though it was a weak
case. Conam is alleging a failure of the CCR process,
so a jury should not assume that some of the overruns
were addressable there. Lastly, Conam supplied
evidence of other potential delays for the jury to
consider.
13. With respect to the lesser requirement of valuation,
Conam contends that it established an adequate basis
for assessing damages by setting out a range from which
the jury could select the appropriate award. The floor
of this range is the amount of contract damages which
the jury calculated as $4,230,898.42. The ceiling of
the range is $6.3 million which represents what Conam's
expert testified was the difference between how much
Conam was paid and how much it spent. This leaves a
range of less than $2.1 million from which the jury
could select.
Conam contends that the amount of contract damages is
an accurate floor because contract damages will
necessarily be a subset of tort damages. This is
because tort damages include all items which could be
contract damages plus some which are not available
under contract theories. This amount may properly be
considered on appeal because the same evidence with
which the jury calculated the contract damages was
available to calculate tort damages. The net
expenditure is an appropriate ceiling because it
represents the upper limit of damage to Conam and could
be lowered if the jury found adequate proof of
comparative negligence.
Conam attempted to quantify the damages with more
specificity throughout its expert testimony, but
admitted it was difficult. In discussing the change
order process, however, Conam's expert was able to
derive dollar amounts which could provide the jury with
a reasonable basis for calculating damages. For one
set of CCRs, Conam was able to calculate a definite
amount.
14. Bruce Campbell testified that in a design/build project,
the contractor has the complete plans for the whole
project before building begins. In a fast track
project, the design and construction occur
simultaneously as the project goes along. Because the
design is subject to constant change and revision and
the construction cannot be planned ahead, a fast track
project can be considerably more expensive.
15. Campbell attributed a one month delay in coating the
interior of the tanks, at 55 employee-hours a day, to
the failure to provide specifications for what degree
to grind the sharp edges within the tanks. The
specifications provided to Conam called for "coatable
surface,"a nebulous specification.
16. Campbell outlined the delays:
We had very definite defined delays that occurred in
the tanks. We had a three day delay that occurred
in June during the stop work order, and the tanks
were initially being coated in the State of
Washington. And, then we got a 17-day delay when
Rockford exited the job and later -- later came
back. So, that's about 20 days there that are
pretty well defined. In addition, it's pretty
well defined in the record that painting could
have started, coating could have started in the
interior of Tank a, CPF 2 on about the first week
in September, and it didn't start until about the
first week in October, and that was caused, among
other things, by the grinding that was required in
that tank, and that added about another thirty
days to the process. So, what I've done is I've
taken those -- and, I say those items are
particularly access -- particularly accessible to
the lack of having end result and job specific
specifications. And, I think that in my analysis,
in my book. . . . I finally ended up with an
amount which I determined to be approximately 54
days.
17. Campbell testified as to his general conclusion:
I know that the total money spent by Conam in
performing approximately 87 percent of the work
was roughly 11.7 million dollars. I know that
they were paid approximately 5.4 million dollars.
And, all I can say is that a portion of that
difference is attributable to the lack of
engineering.
18. Rather than subtract out specific parts of the project
which Conam did not perform, Campbell instead took the
value of the entire project and calculated the value of
Conam's work to be 87% of the entire project to reflect
that in total Conam performed 87% of the contract.
19. Campbell's testimony left it unclear whether ARCO was
negligent in failing to provide job-specific
specifications initially or whether it was all Bell
Lavalin's negligence in using the general
specifications provided by ARCO. With respect to
Conam, Campbell admitted that Conam had overrun some of
its estimates despite working efficiently.
20. In fact, Conam waived its appellate claim against FRB on
this issue because it could not isolate that part of
its damages which were separately caused by the
negligence of FRB alone.
21. Campbell was only able to say that FRB was responsible
for the design below the vertical support member (VSM)
beam and Partec for the design above the VSM beam.
Conam also argues that if vicarious liability is
established as set forth above, it does not matter who
caused the damages.
22. This request amounts to a review of the denial of Bell
Lavalin's motions for directed verdict and judgment
n.o.v. on the issue of whether Conam was justified in
terminating its performance and seeking damages for
Bell Lavalin's breach of contract. The appropriate
standard of review is whether the evidence, viewed in
the light most favorable to the non-moving party, is
such that reasonable minded jurors in the exercise of
prudent judgment could not differ in their decision as
to the facts. Clark v. Greater Anchorage, Inc., 780
P.2d 1031, 1034 (Alaska 1989).
23. Bell Lavalin argues that principles of construction law
recognize that subcontractors are placed in a difficult
position. It contends that it is vital in construction
subcontracts that the contractor retains control to
schedule and reschedule the project as needed without
doubting that the subcontractor will walk off the job
because such rescheduling amounts to a breach of a
promised schedule. Bell Lavalin argues: "A central,
absolutely controlling ingredient in virtually every
construction contract is a mutual commitment that the
job will be prosecuted to completion regardless of
problems which are inherent in construction, including
sometimes arbitrary changes which may be decreed by the
owner, defects in the design, unanticipated site
conditions, extraneous interference by third parties,
and the inevitable weather factor." Thus, the
modification must be analyzed with strict scrutiny
before it can be enforced in place of the "carefully
crafted" contract provisions. Moreover, Bell Lavalin
contends that its promise was insufficiently definite
to be enforceable.
Bell Lavalin also argues that the failure of Conam to
walkoff the project at the time of the repudiation
amounts to a waiver of its right to terminate
performance. However, this argument is supported only
by a reference to the Restatement of Contracts 317(2)
(1937). This provision of the first Restatement was
repudiated in Restatement, (Second) of Contracts 378
(1981). Therefore the Lavalin parties argument for
election of remedies and waiver is not persuasive.
24. Conam refers to 89(c) of the subcontract.
25. Bell Lavalin asserts that "[t]he issues which must be
addressed concern, first, the nature and weight of
proof which is required to establish the existence and
terms of an oral amendment to a integrated written
contract; and, second, the nature of the conduct by a
general contractor which justifies termination of work
by a subcontractor." With respect to the second issue,
the Brief of the Cross-Appellants read as follows:
The subcontract, Exhibit 233, represents an almost
absolute commitment by Conam to proceed with and
complete the work in accordance with Bell
Lavalin's schedule, conditioned only upon Bell
Lavalin's commitment to pass on progress payments
which Bell Lavalin received from the owner. The
parties provided for changes in the work, defects
in the plans, scheduling and rescheduling of the
work by Bell Lavalin to accommodate the owner,
resolution of disputes between the resident
construction manager and the subcontractor and, if
necessary, for the arbitration of disputes between
Conam and Bell Lavalin. There is simply no
evidence of any conduct by Bell Lavalin which
released Conam from its commitment to complete the
work.29/
29. Bell Lavalin admits, for the
purpose of this motion, that if a promise of
a winter shutdown (as opposed to an
indefinite time extension) was made to Conam,
that Bell Lavalin did breach that promise.
(Footnote 28 omitted). No further argument is made on this
point.
26. Bell Lavalin's shift in gravamen is manifested by the
argument headings used in its briefs. In the opening
brief, the heading reads: "The trial court erred in
submitting to the jury Conam's theory of a promise by
Bell Lavalin to grant a time extension including a
winter shutdown." In the reply brief the heading
reads: "Was the failure of Bell Lavalin to grant Conam
a time extension under the circumstances in this case
an event which justified the termination of work by
Conam?"
]]>
