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Power Constructors, Inc. v. Taylor & Hintze (6/19/98), 960 P 2d 20
Notice: This opinion is subject to correction before publication in
Pacific Reporter. Readers are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907)
264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
POWER CONSTRUCTORS, INC., )
) Supreme Court Nos. S-7033/7123/
Appellant and ) 7124
Cross-Appellee. )
) Superior Court No.
v. ) 3AN-91-1074 CI
)
TAYLOR & HINTZE, ROBERT G. )
TAYLOR, ROBERT G. TAYLOR, )
P.S., JOHN R. HERRIG, WILLIAM ) O P I N I O N
L. HINTZE, DUDLEY KIRBY )
WRIGHT, JR., and ROBERT P. )
OWENS, )
)
Appellees and ) [No. 5001 - June 19, 1998]
Cross-Appellants.)
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Dana Fabe, Judge.
Appearances: Hal P. Gazaway, Anchorage, for
Appellant and Cross-Appellee. Paul L. Davis, Anchorage, for
Appellees and Cross-Appellants, Robert G. Taylor and Robert G.
Taylor, P.S. Leroy J. Barker and Julia B. Bockmon, Robertson,
Monagle & Eastaugh for Appellees and Cross-Appellants Taylor &
Hintze, William L. Hintze, John R. Herrig, Dudley Kirby Wright,
Jr., and Robert P. Owens.
Before: Compton, Chief Justice, Matthews,
Eastaugh, and Bryner, Justices. [Fabe, Justice, not
participating.]
BRYNER, Justice.
I. INTRODUCTION
A four-million-dollar powerline construction project gone
awry spawned two generations of litigation. The first, a suit by
the general contractor, Power Constructors, Inc. (PCI), against the
project engineer and project designer, languished in court for
three years, died for lack of prosecution, and was laid to rest in
Power Constructors, Inc. v. Acres American, 811 P.2d 1052 (Alaska
1991). The second, a legal malpractice action by PCI against its
former attorneys, matured to a jury verdict for PCI that the trial
court found less favorable than the defendants' pretrial offer of
judgment. All parties challenge the resulting judgment. The
controversy centers on PCI's proof of damages and the trial court's
valuation of the actual judgment in comparison to the offer of
judgment. We affirm the trial court's rulings on these central
issues but remand for recalculation of prejudgment interest.
II. FACTS AND PROCEEDINGS
A. The Powerline Construction Project
In 1984 PCI entered into a contract with the City of
Seward (City) to build an electrical line and substation near Moose
Pass for the sum of $4,327,290. Construction was slated to take
seven months, beginning in January 1985 and ending by July 1. PCI
finished the project approximately four months late and
substantially over budget. Upon completion, PCI prepared and
submitted to the City a close-out request for reimbursement of
additional costs totaling $2,484,000. Pursuant to the terms of
their contract, PCI and the City entered into arbitration and
reached an eventual settlement in which the City paid $1,161,325
and assigned to PCI its existing claims against various parties
involved in the powerline project, including project engineer
Acres/Hascomb, JV (A/H), and project designer Ebasco Services, Inc.
(Ebasco).
B. PCI's Original Action against A/H and Ebasco
In November 1986 PCI, in its own right and as the
assignee of the City's rights, filed a superior court action
through the law firm of Groh Eggers & Price against A/H and Ebasco.
The complaint alleged breach of contract, misrepresentation, and
negligence by both defendants and sought damages in excess of
$1,000,000. Particularly relevant for purposes of this appeal is
PCI's complaint against A/H, which focused primarily on alleged
negligence and misrepresentations by A/H relating to the
availability of poles for the powerline project. The heart of
PCI's theory was that A/H was responsible for a late, inadequate
and out-of-sequence delivery of powerline poles, causing extensive
delay and forcing PCI to absorb substantial costs beyond those
reflected in its bid on the project.
For more than eighteen months after PCI filed its
complaint, its case against A/H and Ebasco remained largely
dormant. On June 8, 1988, PCI retained the firm of Taylor & Hintze
to substitute for Groh Eggers & Price. A week later, the court
sent the parties notice to show cause why the case should not be
dismissed pursuant to Alaska Civil Rule 41(e) for lack of
prosecution. Taylor & Hintze responded to this notice, advising
that the firm had just entered its appearance and requesting
additional time to become familiar with the case. The trial court
vacated its notice of dismissal and allowed the case to continue.
On November 9, 1989, after PCI's case lapsed into an
additional seventeen months of procedural inactivity, the superior
court issued another notice of proposed dismissal for lack of
prosecution. On December 29, 1989, the superior court dismissed
the suit with prejudice. In May 1991, this court affirmed the
dismissal, observing that PCI might have "recourse to a profes-
sional malpractice action against counsel." Power Constructors,
811 P.2d at 1056.
C. PCI's Legal Malpractice Action
1. Pretrial proceedings
Several months later, PCI filed suit against a number of
Taylor & Hintze attorneys and against the firm itself
(collectively, TH), alleging negligent acts and omissions in TH's
handling of PCI's suit against A/H and Ebasco. PCI later amended
its complaint to include claims for breach of contract, warranties,
and various fiduciary duties, as well as gross negligence; PCI
requested punitive damages.
On February 4, 1994, TH made an offer of judgment for a
total of one million dollars. PCI did not accept this offer.
Prior to trial TH moved for partial summary judgment on
the issue of punitive damages; the motion was granted, and PCI's
punitive damage claim stricken. TH moved to bar PCI from relying
on the "total cost method"of proving damages on its original
powerline construction project claims against A/H and Ebasco. The
court granted the motion, directing that PCI rely on the "actual
cost method."
TH also moved to preclude admission of any evidence
concerning a November 29, 1989, memorandum written to the City of
Seward by TH attorney Robert Owens, in which Owens estimated PCI's
damages in the underlying case at $5,041,134. For its part, PCI
moved to estop TH from denying that PCI had suffered the amount of
damages specified in Owens's November 29 memorandum. The trial
court denied both motions, declining to estop TH from contesting
the issue of damages but allowing PCI to rely on TH's memo as
evidence of damages.
TH further moved for an order precluding PCI from seeking
damages for the expenses PCI incurred in originally pursuing its
claim for additional compensation against the City of Seward; TH
likewise moved to bar PCI from seeking damages for the City's
expenses in defending against PCI's claim. The trial court allowed
PCI to claim these expenses as damages, but only to the extent that
PCI could show that the expenses directly related to construction
problems attributable to A/H or Ebasco.
2. Trial
PCI's case against TH proceeded to trial using the
"trial-within-a-trial"approach for proof of malpractice damages.
Under this approach, in order to show that TH's malpractice
resulted in compensable damages, PCI was required to try the merits
of its underlying case against A/H and Ebasco as part of its
malpractice case against TH.
At the conclusion of PCI's evidence, and again at the
conclusion of its own case, TH moved for directed verdicts on the
grounds that PCI failed to prove (1) causation and damages by the
actual cost method, (2) its damages with sufficient specificity, or
(3) the collectibility of any judgment that PCI might have received
in the underlying action. The court denied these motions, finding
sufficient evidence of actual, specific, and collectible damages.
At the conclusion of TH's case, PCI moved for a directed verdict on
the issue of TH's liability. The court denied this motion as well.
The jury returned a verdict for PCI in the amount of
$419,905. The verdict found TH negligent and that its negligence
resulted in dismissal of PCI's suit against A/H and Ebasco. On the
merits of the underlying action, the jury found no negligence or
misrepresentation on the part of Ebasco but found A/H liable to PCI
and the City for both negligence and misrepresentation. The jury's
award of $419,905 reflected its conclusion that A/H's negligence
caused the City of Seward to suffer $40,000 in increased
administrative costs and $136,271 in arbitration expenses, and PCI
to suffer $200,000 in increased construction costs and $43,634 in
arbitration expenses. [Fn. 1]
3. Posttrial proceedings
Following trial PCI moved for entry of judgment, for an
award of attorney's fees, and for a determination of prejudgment
interest. In support of these motions, PCI submitted a proposed
judgment calculating its total recovery at $1,090,000 -- $90,000
more than TH's pretrial offer of judgment.
The trial court subsequently rejected PCI's computations
and, for purposes of comparison with TH's offer of proof,
recalculated the judgment to be worth at most $895,802. Relying on
this figure, the court ruled that PCI's verdict resulted in a
judgment less favorable than TH's offer of judgment.
The court proceeded to fix prejudgment interest at the
reduced rate of 5.5%. The court awarded attorney's fees to PCI
only through the date of the offer of judgment, and, in so doing,
used Civil Rule 82's partially contested (without trial) schedule.
In addition, using the Rule 82 contested (trial) schedule, the
court awarded attorney's fees to both the Taylor & Hintze law firm
and its principal member, Robert G. Taylor (who was separately
represented), from the date of their offer of judgment to the date
of the verdict. The court likewise awarded both the law firm and
Taylor their post-offer costs.
PCI appeals; TH cross-appeals.
III. PCI'S APPEAL
A. Quasi-Estoppel
1. Standard of review
The applicability of estoppel to a particular set of
facts is a question of law subject to independent review. See
State v. United Cook Inlet Drift Ass'n, 895 P.2d 947, 950 (Alaska
1995). This court adopts the rule of law that is most persuasive
in light of precedent, reason, and policy. See Sopcak v. Northern
Mtn. Helicopter Servs., 924 P.2d 1006, 1008 (Alaska 1996).
2. Discussion
In preparing for trial, TH pursued a strategy aimed at
showing that PCI's original suit against A/H and Ebasco would have
resulted in a verdict of no more than $115,000 and that this sum
was therefore the maximum amount that PCI could claim against TH
for its alleged negligence in allowing the original suit to be
dismissed. Prior to trial, PCI sought a ruling estopping TH from
contending that PCI's damages in the underlying suit would have
been "anything less than $5,041,134.94." PCI pointed to a November
29, 1989, memorandum by TH attorney Robert Owens estimating PCI's
damages in the underlying case at this amount. PCI argued that it
would be unconscionable for TH to change its position in the
malpractice case. The trial court denied this motion; PCI
challenges the denial on appeal.
As it did below, PCI relies on Jamison v. Consolidated
Utilities, Inc., 576 P.2d 97, 102 (Alaska 1978), where this court
stated that quasi-estoppel "precludes a party from taking a
position inconsistent with one . . . previously taken where
circumstances render assertion of a second position unconscion-
able." Jamison set out five relevant criteria for evaluating a
quasi-estoppel claim:
Among the many considerations which may
indicate that an inconsistent position is unconscionable and the
doctrine of quasi-estoppel should be applied are whether the party
asserting the inconsistent position has gained an advantage or
produced some disadvantage through the first position; the
magnitude of the inconsistency; whether changed circumstances tend
to justify the inconsistency; whether the inconsistency was relied
on by the party claiming estoppel to his detriment; and whether the
first assertion was made with full knowledge of the facts.
Jamison, 576 P.2d at 102-03.
Applying these criteria, we conclude that the trial court
properly denied PCI's claim of quasi-estoppel. While Owens's
assessment of PCI's damages was facially inconsistent with the
position adopted by TH at trial, Owens's November 1989 memorandum
was by its own terms a tentative, "best case scenario"estimate.
The memorandum expressed numerous qualifications, explaining that
it relied on PCI-supplied total cost summaries and other data, and
assumed that this information could be proved at trial; it warned
that PCI's cost-accounting process was "unorthodox"and subject to
attack at trial; and it cautioned that "further analysis and
additional discovery will be required before we can determine if
any of the claimed expenses are attributable to the City [of
Seward]."
The express language of the memorandum thus obviously and
unmistakably reserved TH's right to change its position on the
issue of PCI's damages. In light of this language, it hardly seems
surprising that TH would change its position after a full
opportunity to discover, analyze, and develop PCI's damages
evidence in an adversarial context.
Owens's memo must also be assessed in context with other
memos addressing PCI's damages that were generated by TH at
approximately the same time. For example, in a memo dated
September 20, 1989, TH engineer Gregg Gottgetreu (who had analyzed
much of PCI's construction cost data) warned Owens of the highly
contingent nature of PCI's damages evidence. [Fn. 2] And in a memo
dated November 9, 1989, TH attorney Rube Junes estimated PCI's
"total cost claim"to be "within the range of $2.0 to $2.5 million
rather than the approximate $7.0 million claim presented [by PCI]."
These circumstances make it clear that this initial
position, as asserted by TH, as reflected in Owens's memo, was not
based "on full knowledge of the facts,"Jamison, 576 P.2d at 103;
that the "magnitude of the inconsistency,"id. at 102, between its
original and later numerical estimates is more apparent than real;
and that "changed circumstances tend to justify the inconsistency."
Id. Moreover, PCI has failed to show how TH gained any advantage
or placed PCI at any disadvantage by taking the position stated in
Owens's 1989 memorandum. Nor has PCI shown any detrimental
reliance. [Fn. 3] Hence, the Jamison criteria do not support PCI's
estoppel claim. [Fn. 4]
B. Punitive Damages
1. Standard of review
This court reviews superior court summary judgment orders
de novo to determine whether there are any genuine issues of
material fact and whether the moving party is entitled to judgment
as a matter of law on the established facts. See Mount Juneau
Enters., Inc. v. City & Borough of Juneau, 923 P.2d 768, 772-73
(Alaska 1996). We draw all reasonable inferences of fact against
the moving party and in favor of the non-moving party. See
Providence Washington Ins. Co. v. Fireman's Fund Ins. Cos., 778
P.2d 200, 203 (Alaska 1989).
2. Discussion
In its complaint against TH, PCI requested an award of
punitive damages. This claim was based on allegations that TH,
while representing PCI in the suit against A/H and Ebasco, made
active efforts to be retained as counsel by a company named
Enserch, a subsidiary of Ebasco. PCI asserted that TH's efforts
created a conflict of interest and amounted to "gross negligence
. . . evidencing a reckless indifference"to PCI's best interests.
In granting summary judgment to TH on punitive damages,
the trial court started from the premise that, in order to prevail
on its claim, PCI would be required to prove the existence of a
conflict before PCI's original action was dismissed -- in other
words, a showing of post-dismissal contacts between TH and Enserch
would not suffice to trigger punitive damages. PCI did not dispute
this reasoning. [Fn. 5] While acknowledging that PCI had presented
evidence indicating that TH made contact with Enserch and was
retained to represent that company in a matter unrelated to PCI's
case after the case was dismissed, the court found that PCI had
presented no evidence to substantiate its claim that TH and Enserch
had engaged in social interactions beginning in the summer of 1988
-- several months before the dismissal. Accordingly, the court
found no evidence of pre-dismissal conflict to support a claim of
punitive damages.
In its opening brief, PCI cites Bohna v. Hughes,
Thorsness, Gantz, Powell & Brundin, 828 P.2d 745, 760 (Alaska
1992), for the propositions that the attorney-client relationship
involves a fiduciary duty and that punitive damages may be awarded
when this duty is breached through conduct manifesting reckless
indifference to the client's rights. PCI insists that TH's
contacts with Enserch were sufficient to show this kind of reckless
indifference. In advancing this argument, however, PCI does not
address the trial court's pivotal finding: that PCI had failed to
prove any pre-dismissal contacts at all between TH and Enserch.
Our review of the record establishes that the trial court's finding
was accurate when the court ruled on the punitive damages issue.
In its reply brief, PCI points for the first time to
"later evidence"indicating that a TH attorney agreed to represent
Enserch a month before the dismissal of PCI's original case -- at
about the same time the superior court issued notice of its intent
to dismiss for lack of prosecution. [Fn. 6] But as PCI admitted
below, this evidence was not included in the trial court record
when the court ruled on summary judgment, so it was not available
for the court's consideration.
While the superior court is not limited to evidence
expressly called to its attention by a party moving for summary
judgment and should examine the entire record before ruling on the
motion, see American Restaurant Group v. Clark, 889 P.2d 595, 598
(Alaska 1995), the court must necessarily base its decision on the
record before it when it rules. The "later evidence"referred to
by PCI did not join the record until shortly before trial, when PCI
filed it as an exhibit in support of a motion unrelated to the
previously resolved issue of punitive damages. [Fn. 7] At no time
thereafter did PCI call the evidence to the court's attention in
connection with its punitive damages claim or seek reconsideration
of the trial court's earlier summary judgment ruling on the issue.
[Fn. 8]
Moreover, even assuming the "later evidence"established
a conflict of interest and a breach of TH's fiduciary duty to PCI,
PCI has failed to allege or show that this breach had any causal
connection to the dismissal of PCI's case, which resulted from an
apparently unrelated eighteen-month-long period of procedural
inactivity. Nor has PCI alleged or shown any other actual
prejudice resulting from the alleged breach of fiduciary duty.
Finally, to the extent that the "later evidence"might
support a finding of conflict of interest, that conflict would seem
de minimis. PCI cites no convincing authority that a fiduciary
breach of this kind would, standing alone, constitute reckless
indifference sufficient to sustain an award of punitive damages.
We find no error in the trial court's decision striking
PCI's punitive damages claim.
C. Jury Instructions
1. Standard of review
Issues involving the adequacy of jury instructions
generally raise questions of law and are subject to de novo review.
See Sever v. Alaska Pulp Corp., 931 P.2d 354, 361 n.11 (Alaska
1996). As long as the jury is properly instructed on the law,
however, the trial court has broad discretion to determine whether
to give instructions specially tailored to the case at hand. See
Buchanan v. State, 561 P.2d 1197, 1207 (Alaska 1977). Rulings on
such instructions are reviewed for abuse of discretion. See, e.g.,
Stoneking v. State, 800 P.2d 949, 951 (Alaska App. 1990).
An instruction erroneously stating the law will not be
grounds for reversal unless it results in actual prejudice. See
Beck v. State, Dep't of Transp. & Pub. Facilities, 837 P.2d 105,
114 (Alaska 1992). And an instruction that is not objected to will
be reviewed only for plain error -- that is, for obvious error
creating a high likelihood of injustice. See Conam Alaska v. Bell
Lavalin, Inc., 842 P.2d 148, 153 (Alaska 1992).
2. Refusal to instruct on TH's spoliation of evidence
PCI challenges the superior court's refusal to give
Proposed Instruction Number 40:
The failure of [PCI] to present evidence that
supports claims it and the City of Seward had against
Acres/Hanscomb and EBASCO in the underlying case, should not be
construed against [PCI], if failure to present such evidence is due
to the failure of defendant attorneys to preserve such evidence.
To the contrary, you are instructed that in the absence of such
evidence, you may construe the missing evidence in favor of [PCI].
PCI argues that the proposed instruction was warranted in light of
evidence establishing that TH, while acting as PCI's counsel,
failed to preserve evidence developed by key witnesses who are now
deceased.
In Sweet v. Sisters of Providence, 895 P.2d 484, 492
(Alaska 1995), observing that "for every wrong there is a remedy,"
we recognized that under certain circumstances, burden shifting may
be an appropriate remedy for an opposing party's spoliation of
evidence. See id. (quoting Smith v. Superior Court, 198 Cal. Rptr.
829, 832 (Cal. App. 1984)). In the present case, however, PCI's
claim of entitlement to a spoliation instruction suffers from a
lack of supporting facts. The evidence assertedly lost by TH was
evidence developed by PCI's own employees. This evidence was
apparently within PCI's control at all relevant times. PCI has not
shown that the loss of this evidence resulted from TH's negligent
handling of the A/H-Ebasco lawsuit. [Fn. 9] Nor has PCI made a
convincing showing of actual prejudice. Our review of the record
persuades us that the trial court did not err in refusing to give
the proposed instruction.
3. The "trial-within-a-trial"instruction
PCI next contends that the trial court erred in
instructing the jury to apply the trial-within-a-trial approach in
deciding PCI's legal malpractice claim. Jury Instruction Number 20
directed the jury "to determine what the outcome would have been if
[PCI's] lawsuit against [A/H] and Ebasco Services had not been
dismissed. Thus, you are hearing this case as if you were the jury
in the [PCI v. A/H-Ebasco] case." The instruction required PCI to
prove that it would have been successful in the underlying suit,
that it would have been awarded damages, and that the judgment
would have been collectible from A/H or Ebasco.
In challenging the trial court's instruction, PCI urges
us to "leave it within the discretion of the trial judge to
determine the manner in which the plaintiff may proceed to prove
its claim for damages." However, PCI has failed to establish that
the trial court believed itself precluded from exercising
discretion on the issue. Although our decisions have twice
approvingly mentioned the trial-within-a-trial approach, [Fn. 10]
we have not expressly adopted it. Given that we have never
formally embraced the approach, the trial court was not necessarily
constrained to use it.
PCI cites Lieberman v. Employers Insurance of Wausau, 419
A.2d 417, 426-27 (N.J. 1980), for the proposition that the trial-
within-a-trial approach should not have been applied to this case.
Yet Lieberman is readily distinguishable; there, in finding the
approach improper, the court relied primarily on the reversed roles
of the parties in the malpractice and underlying actions: the
plaintiff in the malpractice case had been the defendant in the
underlying suit. See id. at 426. The court in Lieberman stated
that, if the trial-within-a-trial approach were used in those
circumstances, the jury "would not obtain an accurate evidential
reflection or semblance of the original action." Id. at 427. [Fn.
11]
PCI claims that the trial-within-a-trial approach was
unsuitable to this case for an entirely different reason: because
"several witnesses with testimony favorable to PCI have died."
PCI's argument is unpersuasive. As we have previously noted in
discussing PCI's proposed spoliation instruction, PCI has failed to
demonstrate that it lost any materially favorable evidence as a
result of negligence by TH. Hence, the claim of lost evidence does
not support PCI's argument that the trial court erred in adopting
the trial-within-a-trial approach. [Fn. 12]
4. Proof of collectibility
PCI further argues that the trial court erred in
instructing that PCI was required to prove that "any judgment would
have been collectible"from A/H or Ebasco.
Professional negligence consists of four elements: duty,
breach, causal connection between negligent conduct and injury, and
"actual loss or damage resulting from the professional's
negligence." Belland v. O.K. Lumber Co., 797 P.2d 638, 640 (Alaska
1990). When a legal claim is lost through professional negligence,
actual damage occurs only if the claim is meritorious and has
value; the plaintiff bears the burden of proving these elements of
damage. See Ridenour v. Lewis, 854 P.2d 1005, 1006 (Or. App.
1993). In such cases, however, it is far from clear whether proof
of a lost claim's value requires evidence showing that a judgment
on the lost claim would actually have been collectible.
This court has never faced the issue; authorities
elsewhere are divided. See generally Jourdain v. Dineen, 527 A.2d
1304, 1306 (Me. 1987). Some decisions hold that "collectibility of
the [underlying] judgment is an element of proof in a legal
malpractice action and that the burden is . . . placed on the
plaintiff to prove collectibility." Id. at 1306. [Fn. 13] Others,
like Jourdain itself, adopt a contrary view. See id. at 1307
("uncollectibility of a judgment should be treated as a matter
constituting an avoidance or mitigation of the consequences of
one's negligent act"). [Fn. 14]
Recently, in Kituskie v. Corbman, 682 A.2d 378, 382 (Pa.
Super. 1996), appeal granted in part, 693 A.2d 967 (1997), the
Pennsylvania Supreme Court concluded that, when legal malpractice
results in the loss of a meritorious claim, the malpracticing
attorney should bear the burden of disproving collectibility. In
reaching this decision, the court reasoned that "the plaintiff
should not have the added burden . . . since he or she has already
been allegedly wronged by two parties (the third party and the
attorney)." Id.
We find Kituskie persuasive. Because the need to
determine collectibility is caused by professional negligence, and
the requirement of proving collectibility arises only after
malpractice has been proved, [Fn. 15] policy would seem to militate
in favor of requiring the malpracticing attorney to bear the
inherent risks and uncertainties of proving uncollectibility.
Practicality seems to point to the same conclusion: there is no
good reason to presume from a record silent on the issue of
collectibility that the underlying judgment at issue would not
eventually be collected. [Fn. 16]
We thus adopt the rule imposing upon defendants the
burden of proving uncollectibility. Accordingly, we conclude that
the trial court erred in instructing the jury that PCI bore the
burden of proving collectibility. But the error does not require
reversal. Here, by awarding damages to PCI, the jury necessarily
found that PCI had met its burden of proving collectibility. [Fn.
17] Accordingly, the error did not result in actual prejudice and
was therefore harmless. See Beck v. State, Dep't of Transp. & Pub.
Facilities, 837 P.2d 105, 114 (Alaska 1992).
5. Impromptu change in instructions on nondisclosure
PCI's next argument arises from the trial court's
impromptu decision to amend jury instructions dealing with the
elements of PCI's misrepresentation and nondisclosure claims
against A/H in the underlying breach of contract action. To
explain our resolution of this argument, we must describe the
factual context in which it arose.
During pre-final-argument discussions on instructions,
PCI asked the trial court to instruct the jury on PCI's claims in
the underlying case that A/H had misrepresented and failed to
disclose material facts to both PCI and the City. The court agreed
to instruct on misrepresentation and nondisclosure as to the City
and on misrepresentation as to PCI, but questioned the legal basis
for an instruction on the claim that A/H had failed to disclose
facts to PCI. The court reasoned that, because an action for
nondisclosure presupposes a contractual duty to disclose, and
because A/H's contract in the underlying case was with the City
rather than PCI, PCI's nondisclosure claim could apply only as
between A/H and the City. PCI pointed out, however, that A/H had
acted as the City's agent in dealing with PCI on the construction
project and had thus inherited the City's contractual duty of
disclosure toward PCI. The court accepted this argument and agreed
to instruct on PCI's theories that A/H had misrepresented and
failed to disclose material facts to both the City and PCI.
A day later, however, as the court read the instructions
to the jury after the parties' final arguments, the scope of PCI's
nondisclosure claim became confused. PCI had apparently neglected
to delete extraneous language from the final form of two
instructions that immediately preceded the instructions on
misrepresentation and nondisclosure. As the court read these
instructions to the jury, it caught the errors and corrected them
by blacking out the extraneous language and instructing the jury to
disregard the blackouts. The court then began reading aloud the
next instructions, which dealt with misrepresentation and nondis-
closure. Apparently distracted by the mistakes it had just
corrected, and evidently recalling its earlier concern over the
scope of PCI's nondisclosure claim but failing to recall the
previous day's discussions on the topic, the court erroneously
assumed that the nondisclosure instruction's references to A/H's
failure to disclose facts to PCI were also mistaken:
[Court reading to the jury]: Power
Constructors claims that it was damaged because of Acres/Hanscomb's
-- because Acres/ Hanscomb failed to disclose certain information.
In order to win on this claim Power Constructors must establish
that it is more likely true than not true that, one, Acres/Hanscomb
failed to disclose information to Power Constructors --
[Court addressing counsel]: Counsel,
please approach . . . .
After a brief conference at the bench, the court excused
the jury, discussed the matter with the attorneys, and proposed to
delete all references to A/H's duty to disclose information to PCI.
Despite the previous day's discussions, PCI's counsel expressly
agreed with the proposal:
[Court]: [I]t's my understanding that what
was decided yesterday in fixing that instruction was that the . .
. failure to disclose theory, was the City of Seward's . . . theory
because of the contractual relationship it had with [A/H].
However, this entire instruction is done as if it were [A/H that]
had a contract with [PCI] and it was their claim. And so I think
we just clarified at the bench it should be City of Seward,
correct?
[PCI's counsel]: That's correct.
The court proceeded to make the changes, asking item by
item if counsel agreed with its rewording of the instructions.
PCI's counsel repeatedly and consistently agreed. As changed, the
instruction limited PCI's nondisclosure claim to A/H's failure to
disclose information to the City.
Upon completing the revision, the court called back the
jury, apologized for the inconvenience, explained that the need to
modify the instructions "is my fault,"and read aloud the remainder
of the instructions, including the newly modified instructions on
nondisclosure. After allowing the jury to retire for delibera-
tions, but before sending it the written jury instructions, the
court again asked the parties if they had "anything else regarding
jury instructions." PCI's counsel replied, "No, Your Honor."
Late the next day, PCI filed a motion challenging the
revised nondisclosure instructions and asserting its earlier claim
that A/H had failed to disclose information to PCI. PCI asked for
curative instructions or, alternatively, a mistrial. By then, the
court had received word that the jury had reached a verdict. The
court convened the parties and, as a potential curative measure,
suggested sending the jury a copy of the original nondisclosure
instructions and an amended verdict form, together with a note
advising the jury that the confusion over the instructions was the
court's fault, not counsel's.
Counsel for TH objected vigorously, contending that PCI's
counsel had waived any objection by agreeing to the previous day's
last-minute revisions. The court then asked PCI's counsel why he
had failed to object. Counsel replied that "[t]he whole thing
caught me off guard." When reminded by the court that he had
expressly agreed to various revisions, and when pressed to explain
why, counsel demurred, asserting that he did not specifically
recall agreeing to any revisions. The court was unpersuaded.
Noting that PCI had waited more than twenty-four hours to assert
its changed position, during which time the jury had completed its
deliberations, the court concluded that no curative measures were
warranted. [Fn. 18] The jury was called in, and returned its
verdict.
PCI now claims that it was prejudiced by the court's
decision to change the instructions in the jury's presence, after
closing arguments had been completed. According to PCI, the
court's action amounted to a violation of Alaska Civil Rule 51(a).
[Fn. 19] In our view, however, PCI has waived this argument by
expressly endorsing the modified instructions that were read to the
jury. See Conam Alaska v. Bell Lavalin, Inc., 842 P.2d 148, 152
n.6, 153 (Alaska 1992). [Fn. 20]
Nor has PCI established plain error. PCI did not claim
below that the revised instruction caused it prejudice by
undercutting any position asserted by its counsel in final
argument. Cf. Rollins v. State, 757 P.2d 601 (Alaska App. 1988).
It advances this claim on appeal, but fails to substantiate it.
[Fn. 21] PCI also argues that the trial court handled the matter
in a manner that was likely to prejudice the jury against it. But
the record belies this claim: it establishes that the trial court
assumed all blame and did nothing to disparage the parties.
More significant, it appears that the complained-of error
had no actual effect on the verdict. PCI's claims of nondisclosure
were intrinsically tied to its claims of misrepresentation. And
although the jury found that A/H had injured PCI by a misrepre-
sentation, it awarded no compensation for this injury beyond the
amount it awarded for A/H's negligence. Given these circumstances,
the possibility of an incremental award of damages based on a
finding of nondisclosure seems virtually nil. We find no
reversible error on this point.
D. Value of Verdict in Comparison to Offer of Judgment
1. Standard of review
Calculation of the value of a verdict to determine if it
exceeded an offer of judgment presents questions of law, which we
review de novo. See Pratt & Whitney Canada, Inc. v. Sheehan, 852
P.2d 1173, 1182 n.13 (Alaska 1993).
2. Prejudgment interest and attorney's fees on the
underlying claim
For purposes of comparing the value of PCI's $419,905
verdict with the value of TH's million-dollar pretrial offer of
judgment, the trial court made a single award of prejudgment
interest; the interest ran from December 18, 1985 -- the date on
which PCI submitted its cost overrun claim to the City of Seward --
to February 4, 1994 -- the date of TH's offer of judgment. PCI
claims error, contending that two awards of prejudgment interest
should have been calculated -- one for the underlying claim against
A/H and one for the malpractice claim against TH.
PCI asserts that the court should first have calculated
a total value for its underlying claim against A/H by awarding
prejudgment interest from the accrual date of PCI's original cause
of action against A/H to the accrual date of its malpractice claim
against TH (that is, the date the court dismissed PCI's original
case against A/H), and adding this award -- together with an
appropriate award of prevailing-party costs and attorney's fees --
to the principal amount of PCI's recovery against A/H, as found by
the jury. In PCI's view, the court should then have awarded
prejudgment interest on the total value of the underlying judgment
from the date PCI's malpractice cause of action accrued until the
date of the offer of judgment. [Fn. 22]
PCI's argument has merit. We have long recognized that
the purpose of prejudgment interest is to compensate the injured
party for the time it has been less than whole. See Davis v.
Chism, 513 P.2d 475, 481 (Alaska 1973). Since prejudgment interest
is a form of consequential damages, see Farnsworth v. Steiner, 638
P.2d 181, 184 (Alaska 1981), an award of prejudgment interest
becomes a part of the judgment proper. See Bohna v. Hughes,
Thorsness, Gantz, Powell & Brundin, 828 P.2d 745, 759 (Alaska
1992).
Two judgments are at issue in a legal malpractice case,
the judgment in the underlying cause affected by the malpractice
and the judgment sought against the attorney for malpractice. In
Bohna, we recognized that the value of each of these judgments must
be separately considered when the trial court determines whether a
jury award for malpractice exceeds a pretrial offer of judgment.
See id. Since the malpractice award compensates for the loss of a
favorable judgment or the entry of an unfavorable one, the total
value of the lost or unfavorable judgment must first be
established; this entails calculation of prejudgment interest and
attorney's fees on that judgment. See id. Costs and attorney's
fees in the malpractice case must then be based on the underlying
judgment's total value. See id.
TH seeks to distinguish Bohna because it was not a lost-
claim case: the plaintiff in the malpractice action in Bohna had
been held liable in the underlying action, and a judgment had
actually been entered against him. See id. at 751. TH contends
that the circumstances here are different, since no judgment was
ever entered on PCI's lost claim against A/H. TH reasons that,
because it is impossible to determine the date a final judgment
would have been rendered in the underlying suit, prejudgment
interest should not have been added to the fictitious judgment.
This claim of uncertainty is more illusory than real.
TH's negligence caused PCI to lose its claim against A/H. This
loss constitutes PCI's injury in the malpractice case. The loss
occurred when the superior court dismissed the underlying cause.
It follows that the value of the underlying cause must be
determined as of the date of the dismissal. Since the purpose of
the malpractice award is to restore PCI as closely as possible to
its position on the date of loss, [Fn. 23] prejudgment interest
accrued as of that date is properly included in the total value of
the underlying recovery. See Bohna, 828 P.2d at 759. On the same
date, PCI's malpractice action against TH accrued, thereby
triggering accrual of prejudgment interest on the second cause.
PCI also claims that $44,495 should have been added to
the total judgment on the underlying case to reflect attorney's
fees it would have received under Civil Rule 82 as a prevailing
party against A/H. While the addition of these fees might have
been appropriate had PCI's underlying claim been against A/H alone,
PCI also proceeded against Ebasco in the underlying case, and it
did not prevail against Ebasco. This added a twist to the
attorney's fees issue in the underlying case, for, as the trial
court correctly recognized:
It would be logically inconsistent in
determining the total loss to plaintiffs due to dismissal of the
lawsuit to allow plaintiff to recover for attorney's fees as
prevailing party against [A/H] in the underlying suit without
deducting the amount which it would have had to pay to Ebasco as a
prevailing party in the underlying suit.
The trial court noted that Ebasco undoubtedly would have
been awarded prevailing-party fees. Finding that Ebasco's fees
against PCI actually might have exceeded PCI's fees against A/H,
the court treated the overall outcome of the attorney's fees issue
as a "wash"and declined either to add prevailing-party attorney's
fees to the underlying judgment to reflect PCI's recovery against
A/H or to deduct fees from the judgment to reflect Ebasco's
entitlement to a recovery against PCI.
In our view, the trial court's analysis of the attorney's
fee issue is sensible and supportable. The court correctly
determined that Ebasco would have been entitled to prevailing-party
fees. See Myers v. Snow White Cleaners & Laundry, 770 P.2d 750,
753 (Alaska 1989). Recognizing and providing for this award in the
calculation of the total underlying judgment entails no more
uncertainty than recognizing and providing for the award of fees
PCI would have recovered against A/H. And given the breadth of
trial court discretion in fixing reasonable fees under Civil Rule
82, we find no basis for concluding that the trial court abused its
discretion in treating the opposing fee awards as a "wash."
In sum, the trial court erred in failing to allocate
prejudgment interest separately to each judgment; the error will
necessitate recalculation of the awards in both the underlying and
malpractice actions. [Fn. 24] The trial court did not abuse its
discretion in failing to add prevailing-party attorney's fees to
the underlying judgment.
3. Commencement of prejudgment interest
PCI separately challenges the trial court's determination
setting December 18, 1985, as the date that prejudgment interest
began to accrue. On that date, PCI submitted its cost-overrun
claim to the City of Seward. PCI claims that the date should
properly have been January 7, 1985, the date it first incurred
damages from A/H's misrepresentations.
Damages normally carry interest from the time a cause of
action accrues. See State v. Phillips, 470 P.2d 266, 274 (Alaska
1970). "A cause of action for misrepresentation in a business
transaction is complete when the injured person has . . . suffered
pecuniary loss or has incurred liability as a result of a
misrepresentation." Austin v. Fulton Ins. Co., 444 P.2d 536, 539
(Alaska 1968) (citing Restatement of Torts sec. 899 cmt. c (1939)).
In the present case, the record provides no clear
indication of the date when PCI first suffered pecuniary loss
resulting from A/H's negligence and misrepresentation. Construc-
tion of the powerline occurred over many months, and PCI incurred
costs over the entire period of construction. PCI's attempts to
link specific cost increases to specific acts of negligence or
misrepresentation were imprecise, and the submission of its overrun
claim marked the first point at which its construction-related
losses were clearly shown to have been incurred. The construction-
related damages awarded by the jury were pegged to no particular
event or expenditure. And a major part of the jury verdict covered
the City's and PCI's arbitration expenses, which accrued after the
construction project was completed. Under these circumstances,
trying to determine exactly when PCI actually suffered the losses
that the jury found compensable would be a futile endeavor.
We are not persuaded that the trial court erred in
selecting the date of PCI's cost-overrun claim as the date of
commencement for prejudgment interest.
4. Rate of interest
The trial court began its prejudgment-interest calcula-
tion by applying the normal statutory rate of 10.5%. See former AS
09.30.070(a). [Fn. 25] PCI contends that the court should instead
have applied interest at 11.5%. PCI asserts that during the
powerline construction project, as a result of A/H's negligence and
misrepresentations, it was forced to borrow two million dollars
from Alaska Mutual Bank at 11.5% for "operations." According to
PCI, its rate for prejudgment interest should have been fixed at
the rate it actually paid to Alaska Mutual.
In support of this argument, PCI cites Tookalook Sales &
Service v. McGahan, 846 P.2d 127, 130 (Alaska 1993). Tookalook is
not entirely on point. Tookalook establishes that an aggrieved
party who is forced to borrow funds may pursue and receive a
compensatory damages award that includes the interest actually paid
for the loan; in such cases, however, to avoid double recovery, the
borrower is barred from claiming prejudgment interest on the
compensatory interest award. See id. Tookalook thus gives
borrowers in these circumstances an option: they may seek actual
interest from the jury as damages or statutory interest from the
court as prejudgment interest.
Here, in presenting its underlying case against A/H and
Ebasco to the jury, PCI chose not to claim the Alaska Mutual loan
or the interest thereon as items of damage; the jury's damage award
did not include these items. Having bypassed that option, PCI's
remaining recourse was to seek prejudgment interest from the court,
at the rate prescribed by law; this it did. [Fn. 26] We find no
error.
5. Commencement date for interest rate reduction
Under former Rule 68(b)(1) and former AS 09.30.065(1),
[Fn. 27] the normal statutory rate for prejudgment interest is
reduced by 5% per year when a party's award of damages proves less
favorable than an offer of judgment. After determining that PCI's
jury verdict was less favorable than TH's pretrial offer of
judgment, the trial court reduced the rate on PCI's prejudgment
interest award from 10.5% to 5.5%. Because the trial court did not
separately calculate prejudgment interest for the malpractice and
underlying claims, however, its reduction of the prejudgment
interest award reached back to December 18, 1985 -- the accrual
date for prejudgment interest on the underlying claim. PCI claims
error: "Neither Rule 68 nor A.S. 09.30.065 clearly address[es] a
malpractice action"where part of the damages would be the
prejudgment interest on the loss from the underlying action.
This argument has merit. As we have previously indi-
cated, prejudgment interest on the underlying claim in a legal
malpractice action becomes part of the underlying judgment; as
such, it stands apart from interest awarded on the judgment for the
malpractice claim. Within the malpractice case, the interest
component of the underlying judgment is part of the principal upon
which interest is awarded. It follows that a reduction of interest
under former Rule 68(b)(1) and former AS 09.30.065 should reach
back only to the accrual of the malpractice claim. On remand, the
trial court should recalculate the reduction accordingly.
6. Offer of judgment's costs component
TH's offer of judgment was "inclusive of all costs
(including court awarded attorney's fees and prejudgment
interest)[.]" PCI claims that the offer to pay "all costs"should
be taken to mean "the entire amount of the costs incurred"by PCI,
whether or not taxable under Civil Rule 79. PCI goes on to assert
that the "all costs"provision has significance in assessing the
relative values of the offer of judgment and the actual judgment,
since the actual judgment incorporates only properly taxable costs.
PCI thus argues that, for comparison purposes, the actual judgment
should have been increased by an amount reflecting untaxable costs
that TH ostensibly would have paid had PCI accepted the offer of
judgment. In our view, however, this argument proceeds from a
strained and untenable reading of the offer's "all costs"language.
The trial court did not err in rejecting the argument.
7. Effect of miscalculations on offer of judgment
Advancing an "appropriate calculation"of value adjusted
to reflect all of its claims of miscalculation, PCI argues that the
total judgment resulting from its jury verdict is worth $1,084,458.
Because this amount exceeds the million-dollar pretrial offer of
judgment, PCI proposes that the trial court erred in treating the
offer as superior. This argument is governed by our rejection of
most of PCI's miscalculation claims. The limited points on which
we have found error will not affect the overall comparison.
E. Attorney's Fees
1. Standard of review
An award of attorney's fees under Civil Rule 82 will be
overturned only when it is manifestly unreasonable. See
Feichtinger v. Conant, 893 P.2d 1266, 1268 (Alaska 1995). The same
standard applies to an award of fees under Rule 68, which governs
offers of judgment. See Hayes v. Xerox Corp., 718 P.2d 929, 938
(Alaska 1986). It is primarily for the trial court to decide
whether and to what extent multiple representation is reasonable
and should be compensated. See Integrated Resources Equity Corp.
v. Fairbanks N. Star Borough, 799 P.2d 295, 304 (Alaska 1990). In
determining whether the trial court's decision to compensate
multiple attorneys is manifestly unreasonable, we consider a
variety of relevant factors, including whether differing legal
theories are present, whether one aspect of the litigation requires
independent counsel, and whether the trial court granted substan-
tially less than actual billings. See id.
2. Award of fees for two sets of attorneys
PCI filed its malpractice action against the law firm of
Taylor & Hintze and against various individual members of the firm,
one of whom was Robert G. Taylor. Two law firms entered
appearances for the defendants: Taylor & Hintze and all individual
members except Taylor were represented by one firm; Taylor had
separate counsel. All defendants joined in TH's pretrial offer of
judgment. Because their offer proved more favorable than PCI's
verdict, they were entitled to an award of post-offer prevailing-
party attorney's fees calculated under Civil Rule 82. Former
Alaska R. Civ. P. 68(b)(1). Applying Rule 82's "contested with
trial"schedule, the trial court awarded defendants 30% of their
actual attorney's fees from the date of the offer of judgment
through trial; the fee award covered billings submitted by both
sets of defense counsel, totaling $143,397 to TH and $144,489 to
Taylor.
PCI challenges the dual attorney's fee award on numerous
grounds: (1) Taylor and TH asserted "virtually identical"defenses;
(2) TH and Taylor were a single "party"under Civil Rule 68(b)(1);
(3) the award of double fees amounted to a windfall for defendants'
malpractice insurer and was inequitable because PCI "had to
litigate against an insurance carrier which spent 2 million dollars
contesting the amount of plaintiff's damages"; (4) the dual award
covered fees that both counsel had not actually needed to incur;
and (5) the award deprived PCI of access to the courts as
guaranteed by the constitutional rights of equal protection and due
process.
These arguments are meritless. PCI's suit named a law
firm and six individual attorneys as defendants in a malpractice
claim arising from the dismissal of a sizable and complex breach of
contract action. Taylor and TH asserted substantially different
positions: TH admitted liability and disputed only damages; Taylor
denied liability. An affidavit submitted by TH's counsel declared
that "[counsel for Taylor] and [I] made every effort to minimize
expense and duplication. We coordinated our efforts on motion
work, deposition preparation and trial preparation to the extent
possible."
The trial court found this affidavit credible, concluding
that the fees incurred after the offer of judgment by each firm
were "reasonable and necessary,"and that the lead attorneys for
the co-defendants "made every effort to minimize expense and
duplication and coordinated their efforts on motion work,
deposition preparation and trial preparation to the greatest extent
possible." The court further found that "all of the hourly rates
charged by the various attorneys and paralegals are reasonable."
PCI has failed to show that these findings are manifestly
unreasonable. See Integrated Resources Equity Corp., 799 P.2d at
304; Conant, 893 P.2d at 1268. Nor has PCI shown that they are
beyond the contemplated scope of the offer-of-judgment rule [Fn.
28] or are otherwise oppressive.
The purpose of Rule 68 is to encourage settlement and to
avoid protracted litigation. See Continental Ins. Co. v. U.S.
Fidelity & Guar. Co., 552 P.2d 1122, 1125-26 (Alaska 1976). The
joint offer of judgment "clearly indicated all claims between the
parties would be resolved if the offer were accepted,"Taylor
Constr. Serv., Inc. v. URS Co., 758 P.2d 99, 102 (Alaska 1988), and
unequivocally put PCI on notice that, "in failing to accept the
offer, [PCI] assumed the risk of the penalty." Id. A sizable and
experienced company, PCI assumed this risk with open eyes. The
trial court's fee decision is not manifestly unreasonable.
IV. TH's CROSS-APPEAL
A. Arbitration Expenses as Damages
1. Standard of review
We ordinarily review trial court rulings on evidentiary
issues for abuse of discretion. See Landers v. Municipality of
Anchorage, 915 P.2d 614, 616 n.1 (Alaska 1996). However, when the
question is whether the trial court applied the correct legal
standard in its ruling, the question presented is one of law, see
id., which we review de novo. See Sopcak v. Northern Mtn.
Helicopter Servs., 924 P.2d 1006, 1008 (Alaska 1996).
2. Discussion
At trial, PCI sought to recover around $660,000 in
arbitration expenses. A portion of this sum represented expenses
PCI incurred in preparing its own construction claims for
arbitration with the City; the balance represented expenses
incurred by the City in negotiating and preparing for arbitration
with PCI, which PCI claimed as assignee of the City's rights. Over
TH's objection, the trial court allowed PCI to pursue its claims
for arbitration expenses. However, the court specified that PCI
would be limited to presenting evidence of "expenses that directly
relate to extra costs actually caused by [A/H] or Ebasco prior to
the settlement between [PCI and the City]." The jury ultimately
awarded $43,634 for arbitration expenses sustained by PCI as a
result of A/H's negligence and $136,271 for arbitration expenses
similarly sustained by the City.
TH acknowledges that PCI was entitled to recover for any
proven arbitration expenses incurred by the City as a result of
A/H's negligence. However, TH claims that PCI was not entitled to
recover its own arbitration expenses, since they were in essence
costs incurred by PCI in developing and preserving its claim
against A/H. Recovery of such costs, in TH's view, is barred under
Curt's Trucking Co. v. City of Anchorage, 578 P.2d 975 (Alaska
1978).
PCI counters that the arbitration expenses it recovered
were not incurred in asserting or protecting a direct claim against
A/H, but were instead incurred in a separate proceeding forseeably
resulting from A/H's negligence and misrepresentations. Such
recovery, asserts PCI, is allowed under Transamerica Title
Insurance v. Ramsey, 507 P.2d 492 (Alaska 1973).
In Curt's Trucking, 578 P.2d at 981, we recognized that
expenses incurred in protecting, developing, or asserting a claim
against a party who has inflicted tortious harm are ordinarily not
recoverable as damages in an action against the party who inflicted
the harm. [Fn. 29] By contrast, in Ramsey, 507 P.2d at 497, we
recognized that when the negligent party embroils the injured party
in litigation with a third party, the injured party is entitled to
recover from the negligent party all costs of the third-party
litigation.
In the present case, the jury determined that A/H's
negligence and misrepresentations caused PCI and the City to become
embroiled in arbitration. A/H's negligence caused damages to PCI
that it sought to recover from the City under the terms of its
construction contract. That contract required PCI to submit its
claim to arbitration; if the City chose to defend its rights under
the contract, it was likewise contractually bound to do so through
the arbitration proceeding. Though precipitated by A/H's negli-
gence, PCI's arbitration claim was a contractual claim against the
City, not an assertion of its tort claim against A/H. The contract
between PCI and the City did not require or permit PCI to preserve
or assert claims against A/H through arbitration. [Fn. 30] Indeed,
the contract expressly provided that PCI and the City were the only
parties involved in the arbitration proceeding.
Given these circumstances, we find little merit to TH's
claim that PCI's arbitration expenses amounted to costs of
asserting its cause of action against A/H. The arbitration process
is more readily likened to a third-party proceeding of the kind we
considered in Ramsey. To the extent that the proceeding was caused
by A/H's negligence or misrepresentations and generated costs
incurred by PCI, PCI was entitled to an award against A/H for its
expenses. We find no error in the trial court's decision to allow
PCI's arbitration expenses to be treated as damages. [Fn. 31]
B. Sufficiency of Damages Evidence
1. Standard of review
In reviewing the denial of a motion for a directed
verdict or for a judgment notwithstanding the verdict, this court
asks whether, viewing the evidence in the light most favorable to
the non-moving party, reasonable jurors could differ in their
assessment of the particular issue. See Gonzales v. Safeway
Stores, Inc., 882 P.2d 389, 395 n.4 (Alaska 1994).
2. Procedural and legal background
In order to recover lost profits in a breach of contract
action, the plaintiff must present to the jury evidence sufficient
to calculate the amount of the loss caused by the breach. See City
of Palmer v. Anderson, 603 P.2d 495, 500 (Alaska 1979). Damages
must be proved with reasonable certainty. See Geolar, Inc. v.
Gilbert/Commonwealth, Inc., 874 P.2d 937, 945-46 (Alaska 1994).
The party seeking damages must provide a reasonable basis for
computing the award. See Conam Alaska v. Bell Lavalin, Inc., 842
P.2d 148, 154 (Alaska 1992).
Our cases have discussed four methods of proving damages
in a construction contract case: the actual cost method, the total
cost method, the modified total cost method, and the jury verdict
method. See Anchorage v. Frank Coluccio Constr. Co., 826 P.2d 316,
324-27 (Alaska 1992). The preferred method is the actual cost
method, "in which each element of extra expense incurred because of
the [alleged breach] is added up for a total claimed amount." Id.at 325.
By contrast, "[t]he total cost method calculates damages
by determining the difference between the actual costs incurred on
a project, plus a reasonable amount for profit, and the contract
price." Geolar, 874 P.2d at 943. This method is disfavored
because "it assumes that the defendant's breach was the cause of
all of the extra cost,""it assumes plaintiff's bid was accurately
computed,"and it assumes that plaintiff was not responsible for
increases in cost. Fairbanks N. Star Borough v. Kandik Constr.,
Inc. & Assocs., 795 P.2d 793, 798 (Alaska 1990), opinion vacated in
part on reh'g, 823 P.2d 632 (Alaska 1991) (relevant parts
unaffected). For these reasons, the proponent of total cost
evidence must establish that no other form of proof is practicable.
See Coluccio, 826 P.2d at 325. [Fn. 32]
Similar to the total cost method, and similarly
disfavored, is the modified total cost method, which fixes amounts
actually spent for various parts of a contract and compares those
costs with some form of estimate-derived reasonable cost. [Fn. 33]
The "central aspect"of both the total cost and modified total cost
methods "is a comparison between the contractor's initial estimates
and the actual cost of performing the contract." Geolar, 874 P.2d
at 944.
The fourth method of proof is the 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.'" Coluccio, 826 P.2d at 325 (quoting New Pueblo
Constr., Inc. v. State, 696 P.2d 185, 194 (Ariz. 1985)).
Before trial began, the trial court granted a motion by
TH to prohibit PCI from relying on the total cost method to prove
damages and requiring, instead, that damages be proved by the
actual cost method:
PCI must establish its damages, and any right
to recovery, by means of the actual cost method of establishing
damages. In other words, PCI must establish each element of extra
expense incurred, and that each such expense was caused by
defendants' negligence, before it will be entitled to an award for
such expense.
At the conclusion of PCI's case-in-chief, TH filed
motions for a directed verdict on damages, asserting that PCI's
witnesses had failed to present an actual cost case, had relied
instead on total cost evidence, and had failed to present
sufficient evidence to establish causation of damages or to
establish its damages with sufficient specificity. The trial court
declined to direct a verdict against PCI, concluding that, although
PCI's evidence incorporated some total cost elements, ample
evidence of causation had been presented, particularly as to A/H;
the court further concluded that specificity as to the amount of
damages was of secondary importance. [Fn. 34] Essentially, the
court embraced the jury verdict method, stating, "It seems to me
the way to handle this is a very carefully worded jury instruction
. . . which requires the jury to find causation with precision and
to let them know that that was the burden that Plaintiffs had."
Accordingly, at the close of the case, the court defined
the actual cost method and instructed the jury that "Plaintiff must
use the actual cost method to establish its damages." The court
defined the total cost method, as well, and instructed that "[y]ou
may not use this method to determine PCI's damages, because it does
not differentiate between the various entities which may have
caused any damage to PCI."
The court also advised the jury, "you must have a
reasonable basis for fixing damages in this case." The court
warned that delay and damages in the performance of the powerline
project could potentially have been caused by numerous contract
participants other than A/H or Ebasco, and it told the jury that
"[f]or each item of damages claimed . . . you must determine that
such item of damage was legally caused by [A/H] or Ebasco Services
before making an award . . . for that item."
On appeal, TH renews the objections it raised below. TH
complains that the trial court erred in allowing PCI to present a
case based entirely on total cost evidence. After undertaking an
extensive review of the damages evidence, TH encapsulates its claim
as follows:
PCI's evidence ignored causation, and PCI
witnesses simply assumed that all injuries were caused by A/H and
Ebasco. That assumption duplicates the underlying premise, and the
essential evidentiary weakness of the total cost approach. The
jury had no evidentiary basis for distinguishing between injuries
caused by A/H and those caused by PCI, Ebasco, the COS [City of
Seward], CEA [Chugach Electric], the U.S.F.S [United States Forest
Service] and others, therefore it could not isolate which specific
injuries were caused by A/H. Since the jury could not isolate what
injuries were caused by A/H, it therefore could not determine
damages flowing from those injuries. Nor could the jury use the
resultant percentage of fault to determine the damages relating to
the arbitration expenses incurred by PCI and the COS or the COS's
increased administrative costs.
In short, TH maintains that PCI's reliance on a total
cost case left the jury with no rational basis for a verdict:
The jury's award can only be explained as a
result of the averaging method, the adoption of an arbitrary
percentage calculation, or the random selection of figures
improperly based on speculation.
We disagree. TH's view of the case is not taken, as ours
must be, in the light most favorable to PCI. See Gonzales v.
Safeway Stores, Inc., 882 P.2d 389, 395 (Alaska 1994). PCI's
evidence cannot be dismissed as a mere total cost case.
Although the evidence included a healthy dose of
information concerning the total cost of the delays, the jury heard
detailed testimony concerning PCI's actual construction of the
powerline project. Witnesses who had worked on the project told of
the delays, frustrations, and economic problems PCI experienced;
they recounted details of PCI's dealings with A/H and other
contract participants; they described A/H's alleged misrepresenta-
tions and acts of negligence; and they tied those acts to specific
problems in PCI's performance of the contract. The jury also heard
a significant amount of cost analysis and received volumes of
paperwork documenting and analyzing virtually every phase of
construction. Some of the analysis was based on a total cost
approach, but some was in the form of expert opinion, and much
consisted of specific testimony and records memorializing PCI's
actual work experience.
This admixture of evidence left the jury with much more
to consider than "the difference between the actual costs incurred
on a project, plus a reasonable amount for profit, and the contract
price." Geolar, 874 P.2d at 943. In addition to establishing
total project costs significantly exceeding the original contract
price, the evidence strongly suggested that a substantial amount of
PCI's added costs resulted from delayed and out-of-sequence
delivery of powerline poles. The evidence also described instances
in which A/H misled PCI with regard to pole delivery, and it
described the effects of A/H's misrepresentations and negligence on
PCI's construction efforts. While PCI never submitted itemized
proof of actual added costs attributable to A/H's misconduct, it
presented enough information to support a strong inference that A/H
had caused PCI a substantial amount of actual harm and to enable
the jury to form a reasonable, though perhaps imprecise, estimate
of the extent of that harm.
This is hardly a situation in which the jury was fed, and
swallowed whole, a case based solely on total cost analysis. See,
e.g., Coluccio, 826 P.2d at 327 ("Had the jury heard only FCCC's
modified total cost theory and returned a verdict in the amount
indicated by that theory . . . reversal would be mandated."). As
the trial court correctly recognized, the strong showing that A/H
caused PCI actual harm was particularly significant in establishing
the sufficiency of the damages evidence to submit to the jury,
despite the relative weakness of PCI's evidence on precise damages.
In a factually distinct but legally analogous situation, we
recently observed:
It is, of course, the law that the fact of
damages must be proven by a preponderance of the evidence. "To
recover for future medical expenses one must prove to a reasonable
probability that they will occur." Blumenshine v. Baptiste, 869
P.2d 470, 473 (Alaska 1994) (citing Maddocks v. Bennett, 456 P.2d
453, 458 (Alaska 1969)). Once the fact of damages has been proven
to a reasonable probability, the amount of such damages, on the
other hand, need only be proven to such a degree as to allow the
finder of fact to "reasonably estimate the amount to be allowed for
[the] item [of damages]." Id. (citing Henderson v. Breesman, 77
Ariz. 256, 269 P.2d 1059, 1061-62 (Ariz. 1954)).
Pluid v. B.K., 948 P.2d 981, 984 (Alaska 1997). [Fn. 35]
As the trial court also correctly recognized, the
evidence in this case was suitable and sufficient to submit to the
jury under the jury verdict method: [Fn. 36]
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.
Coluccio, 826 P.2d at 327. The jury heard substantial evidence
unrelated to the total cost method; it was carefully and
specifically instructed to ignore all that was not evidence of
actual cost; [Fn. 37] and its modest verdict -- which fell far
closer to TH's position than to PCI's -- bears witness to its
ability to sift through the chaff and find the grain. TH's motions
for directed verdicts were properly denied.
C. Deduction of Ebasco's Fees in the Underlying Case
TH contends that the trial court erred in refusing to
deduct from the value of PCI's judgment in the underlying case an
amount reflecting the prevailing-party attorney's fees that would
have been awarded to Ebasco, who was found to be faultless. This
argument is disposed of by our prior discussion of PCI's claim that
its own prevailing-party fees against A/H should have been added to
the judgment in the underlying case. See supra Part III.D.2. As
we have already indicated above, the trial court did not abuse its
discretion in offsetting the attorney's fee awards and declaring
them a "wash."
D. TH's Attorney's Fees
1. Standard of review
The trial court has broad discretion in awarding
attorney's fees; we will not find an abuse of that discretion
absent a showing that the award was "arbitrary, capricious,
manifestly unreasonable, or . . . stem[med] from an improper
motive." Bohna, 828 P.2d at 766-67 (quoting Tobeluk v. Lind, 589
P.2d 873, 878 (Alaska 1979)); see also Van Dort v. Culliton, 797
P.2d 642, 644 (Alaska 1990).
2. Discussion
As we have already discussed, the trial court awarded TH
30% of the attorney's fees incurred by defendants after their
February 4, 1994, offer of judgment. The award adopted the
percentage set out in former Civil Rule 82(b)(2) for prevailing
parties who recover no money in cases that go to trial. [Fn. 38]
Relying on the factors listed in Rule 82(b)(3), TH requested an
award exceeding the 30% guideline. The trial court denied the
request, specifically finding that in light of all the facts before
it no adjustment was called for.
TH argues that the trial court erred in failing to award
enhanced fees. According to TH, the circumstances of this case are
"exactly"what the provisions of former Rule 82(b)(3) were designed
to address. PCI refutes the assertion, and the parties engage in
an intense debate over the listed factors.
We have never vacated a trial court's decision refusing
to enhance fees under former Rule 82(b)(3). See, e.g., Fairbanks
N. Star Borough v. Lakeview Enters., Inc., 897 P.2d 47, 61-62
(Alaska 1995); Aetna Cas. & Sur. Co. v. Marion Equip. Co., 894 P.2d
664, 671-72 (Alaska 1995) (declining to find an abuse of discretion
where trial court awarded 20% fees to prevailing party and refused
to enhance the award where party cited no authority for enhanced
fee award); cf. Municipality of Anchorage v. Gentile, 922 P.2d 248,
264 (Alaska 1996) (discussing attorney's fees in class actions,
where enhanced fees are permitted under Rule 82 and favored under
Rule 23). TH has not persuaded us that the circumstances here are
exceptional, and our review of the record convinces us that the
trial court's fee decision was not arbitrary, capricious, or
manifestly unreasonable. See Bohna, 828 P.2d at 766-67. It must
therefore stand.
E. Remaining Issues
1. Collectibility
At trial, TH moved for a directed verdict on the ground
that PCI had failed to present sufficient evidence to prove that a
judgment in the underlying case would have been collectible against
A/H or Ebasco. The trial court denied the motion. TH contends
that this was error. In so contending, TH does not argue that the
evidence at trial conclusively established that the underlying
judgment could not have been collected; when viewed in the light
most favorable to PCI, the evidence certainly would not compel this
conclusion. TH argues, instead, only that PCI offered insufficient
affirmative evidence to meet its burden of proving collectibility.
But we have already held in Part III.C.4 that PCI did not bear the
burden of proving collectibility; rather, TH bore the burden of
proving uncollectibility. This holding disposes of TH's directed
verdict claim.
2. Award of full fees as discovery sanction
TH contends that the trial court erred in failing to
award defendants full attorney's fees as a sanction for PCI's
production of unprepared and unknowledgeable witnesses at deposi-
tions conducted under Civil Rule 30(b). The imposition of dis-
covery sanctions is vested in the sound discretion of the trial
court. See Underwriters at Lloyd's London v. The Narrows, 846 P.2d
118, 119 (Alaska 1993). Our review of the record convinces us that
the court did not abuse its discretion here.
3. Failure to instruct on professional duties
At trial, TH proposed that the trial court instruct the
jury that PCI's attorneys were bound to perform only those legal
services that they were hired to perform, to ensure all pleadings
were well grounded in fact and warranted by existing law, and to
avoid incurring unnecessary fees and costs. The court balked at
the proposal, saying that it would be "totally unfair to [PCI] for
me to be inserting myself into the position of expert witness for
[TH] as to what the proper duties of the attorneys were." TH
concedes that these issues were addressed by PCI's expert witness,
but argues that the trial court should have accepted the proposed
instruction since the evidence showed that PCI's president told its
attorneys to "stand still." When read as a whole, however, the
instructions actually given adequately informed the jury of the
relevant law. See Kavorkian v. Tommy's Elbow Room, 694 P.2d 160,
166 (Alaska 1985).
We find no error.
4. Costs
TH lastly challenges the trial court's order affirming
the Clerk's Taxation of Costs. The award of costs is committed to
the broad discretion of the trial court. See Pavone v. Pavone, 860
P.2d 1228, 1233 (Alaska 1993). The award will be affirmed "'absent
a clear showing that the trial court's determination was arbitrary,
capricious, or manifestly unreasonable, or that it stemmed from an
improper motive.'" Alyeska Pipeline Serv. Co. v. Beadles, 731 P.2d
572, 575 (Alaska 1987) (quoting Alvey v. Pioneer Oilfield Serv.,
648 P.2d 599, 601 (Alaska 1982)). With three minor exceptions,
[Fn. 39] we conclude that the award of costs must be upheld under
this standard.
IV. CONCLUSION
This case is REMANDED for recalculation of prejudgment
interest and amendment of the cost award as directed herein. In
all other respects, the judgment is AFFIRMED.
FOOTNOTES
Footnote 1:
1 The jury found no additional damages attributable to
A/H's misrepresentations.
Footnote 2:
2 Gottgetreu's memo to Owens stated, in relevant part:
The net result of this cursory monetary
analysis is that we may not be able to support a damage
quantification assessment that would be lucrative enough for the
City to pursue the claim with any vigor. If PCI's lost profits
could be computed, and if perhaps business devastation could be
proven and calculated, the value sought may make the City's
decision to pursue Ebasco and Acres/Hanscomb easier.
Footnote 3:
3 To the contrary, it appears that PCI placed no reliance
whatsoever on the Owens estimate. In litigating its malpractice
claim against TH, PCI advanced various claims concerning the extent
of the damages involved in the underlying action against A/H and
Ebasco; none of those claims adopted the Owens estimate.
Footnote 4:
4 PCI urges us to add a sixth criterion to the Jamison
estoppel analysis: the existence of a fiduciary relationship
requiring full and fair disclosure. PCI cites only one case in
support of this proposition -- Pedersen v. Zielski, 822 P.2d 903,
909 (Alaska 1991) -- which is inapposite because it addresses the
fiduciary duty of "full and fair disclosure"in the context of a
doctor's misrepresentation of the causes of a patient's paralysis,
not in the context of quasi-estoppel. Id. In any event, the
fiduciary relationship between TH and PCI seems largely irrelevant
with respect to Owens's November 1989 memo, which was addressed to
the City of Seward rather than to PCI, and was not written to
disclose information to PCI but rather to provide support for TH's
request that the City contribute money to fund PCI's litigation.
PCI also complains of the trial court's failure to
instruct the jury that TH could be bound by the November 1989
assessment of damages. PCI cites Clary Insurance Agency v. Doyle,
620 P.2d 194, 201 (Alaska 1980), which states that a plaintiff is
entitled to a jury instruction "consonant with the theory of her
case if such enjoys evidentiary support." This rule assumes,
however, that a party's theory of the case is legally tenable. Our
conclusion that TH was not estopped from taking a position on
damages contrary to that expressed in Owens's memo is thus
dispositive: because that theory was legally untenable, PCI was not
entitled to an instruction on its theory of estoppel.
Footnote 5:
5 In fact, the trial court expressly noted PCI's agreement
with this premise in its order granting TH's motion for summary
judgment on punitive damages. Later, during the trial, the court
confirmed PCI's position: "So the only thing that is at issue is
then the pre-dismissal conduct, correct?" PCI replied in the
affirmative.
Footnote 6:
6 This evidence first came to light shortly before trial,
when TH, in a supplemental response to PCI's earlier interro-
gatories, conceded that TH's representation of Enserch began in
October 1988. According to the supplemental response, the
representation "did not involve litigation,"but instead "involved
a review of a request for equitable adjustment that was to be
submitted to the United States Army Corps of Engineers"regarding
construction of dining facilities at Fort Wainwright.
Footnote 7:
7 PCI attached this evidence as Exhibit 4 to its
"Opposition to Motion in Limine to Preclude Introduction of
Evidence at Trial Concerning any Potential Conflict of Interest of
Defendants,"filed August 22, 1994. PCI points to no earlier
appearance in the record of this document.
Footnote 8:
8 In fact, PCI's pretrial motion acknowledged -- without
stating a reason -- that PCI did not intend to rely on this
evidence as a ground for reconsideration of the trial court's
summary judgment order striking punitive damages.
Footnote 9:
9 PCI advances a general allegation that TH had an
obligation to preserve the evidence by promptly taking depositions
and engaging in related discovery. However, PCI fails to explain
why TH should have deposed PCI's own witnesses. Moreover, PCI has
failed to explain why TH should be held to a superior duty of
preservation than PCI itself. Well before TH entered the case, PCI
had been required to assemble and organize its evidence for
purposes of submitting its arbitration claim against the City.
Footnote 10:
10 In Shaw v. State, Department of Administration, 861 P.2d
566, 573 (Alaska 1993), we held that, to prevail in a civil action
for legal malpractice allegedly occurring in a criminal case, Shaw
was required to prove that the jury would have found him innocent
if his attorney had performed competently. We went on to comment
that, "as most civil malpractice plaintiffs, [Shaw] will have to
present a 'trial within a trial.'" Id. In so observing, we quoted
from 2 Mallen & Smith, Legal Malpractice sec. 27.1, at 624 (3d ed.
1989):
[The elements of the legal malpractice action]
are traditionally handled by having a trial within a trial, the
goal of which is to determine what the result of the underlying
proceeding or matter should have been. . . . The trial judge must
determine issues of law which were not previously urged or
adequately decided.
Id. at 573 n.12 (markings in original).
In Diamond v. Wagstaff, 873 P.2d 1286, 1290 n.2 (Alaska
1994), the parties debated the desirability of adopting the trial-
within-a-trial approach, but we found it unnecessary to decide the
issue.
Footnote 11:
11 The proper method of proof, the court concluded, was to
use expert testimony as to what as a matter of reasonable
probability would have transpired at the original trial. Id. at
427.
Footnote 12:
12 PCI also cites Native Alaskan Reclamation and Pest
Control, Inc. v. United Bank Alaska, 685 P.2d 1211, 1223 (Alaska
1984), in support of its challenge to the trial-within-a-trial
method. That case, however, is inapposite, since it merely
recognizes that trial courts have discretion to require a "lesser
degree of certainty"in proof of damages when the wilful nature of
a breach of contract prejudices the non-breaching party's ability
to prove damages. See id. (citing Restatement (Second) of
Contracts sec. 352 cmt. a (1981)).
Footnote 13:
13 See, e.g., McDow v. Dixon, 226 S.E.2d 145, 147 n.2 (Ga.
App. 1976); Taylor Oil Co. v. Weisensee, 334 N.W.2d 27, 29 (S.D.
1983); Tilly v. Doe, 746 P.2d 323, 326 (Wash. App. 1987).
Footnote 14:
14 See also Tydeman v. Flaherty, 868 P.2d 755, 758 (Or. App.
1994); Springer v. Haugeberg, Rueter, Stone & Gowell, P.C., 860
P.2d 912, 914 (Or. App. 1993); Ridenour v. Lewis, 854 P.2d 1005,
1006 (Or. App. 1993).
Footnote 15:
15 The issue of collectibility poses singular problems in
the context of legal malpractice cases, for the actual value of the
underlying judgment -- whether awarded or lost -- becomes the
determining measure of the primary judgment against the negligent
attorney. It is this need to fix the actual value of the
underlying judgment that places collectibility in issue. The issue
arises only once malpractice is established.
Footnote 16:
16 See, e.g., Ridenour, 854 P.2d at 1006 ("A judgment may
have value because it is collectible from the judgment debtor's
assets or prospective assets, or because the judgment debtor's
insurance partly or wholly covers the claim. A judgment may also
have market value as an assignable property interest.").
Footnote 17:
17 We find no reasonable possibility that the jury's limited
award of damages to PCI reflects a finding of partial collecti-
bility. TH's defense at trial centered on the contention that PCI
had failed to prove the causation and amount of the losses it
claimed to have sustained during the powerline construction
project. PCI's evidence of collectibility suggested that both
Ebasco and A/H had been insured. Neither this evidence nor any
other that the parties have called to our attention could have
provided the jury a logical basis for finding that a judgment
against A/H or Ebasco would have been only partially collectible.
The jury's express finding of no misrepresentation or negligence by
Ebasco is logically unrelated to the issue of collectibility.
Furthermore, PCI has not argued that the error in instructing on
collectibility might have led the jury to find that part, but not
all, of PCI's damages against A/H were collectible.
Footnote 18:
18 In relevant part, the court stated:
[W]hat I recall happened is that I indicated
'Isn't this supposed to be the City of Seward's claim based on the
contractual relationship and that special relationship to
disclose,' and what I recall everybody saying at the bench was yes.
. . . [S]o I excused the jury. I'm quite certain that I didn't do
anything at that point to give any indication to the jury that it
was anybody's, quote, fault. . . . When we excused the jury we went
through and I believe the record will be clear that as we went
through there was an agreement by Mr. Gazaway [PCI's counsel] that
in fact, yes, this was the City of Seward's claim for
nondisclosure. So this isn't a matter of wording in an
instruction, this is a matter of whose claim is it, is it the City
of Seward's claim or is it the City of Seward and PCI's claim. . .
. Everybody agreed to the redaction and then I brought the jury
back, and reread the instruction. To the extent that there was a
problem, it could've been brought up then. To the extent it was a
problem even after then, that jury went out at 3:00 o'clock or
3:30, I think, 3:20, it's now 20 of five [the next day] and we got
this filed in our chambers somewhere in the 4:00 o'clock today
range, so it's been 24 hours. So to the extent there was truly a
concern, this could've been handled in a teleconference, it
could've been handled in some way other than at 4:00 o'clock after
we have a jury verdict[,] this is brought to our office, apparently
without service on the Defendants.
Footnote 19:
19 Civil Rule 51 states, in relevant part: "The court shall
inform counsel of the final form of jury instructions prior to
their arguments to the jury." We note that PCI's reliance on this
rule appears misguided, since the court did in fact inform the
parties prior to their arguments of the instructions it intended to
give and obtained the parties' approval. In undertaking a
midstream revision of the instructions, the court merely attempted
to conform the instructions to its recollection of the agreed-upon
version. The resulting error was one of faulty recollection, not
failure to inform, as required under the rule. This case is thus
readily distinguishable from Methodist Hospitals of Dallas v.
Corporate Communications, Inc., 806 S.W.2d 879, 883 (Tex. App.
1991), which PCI cites in support of its Rule 51 argument.
Footnote 20:
20 Moreover, PCI has yet to offer any explanation for its
24-hour delay in reasserting its original position -- a delay that
effectively precluded any meaningful corrective action because it
occurred while the jury deliberated the case and decided on a
verdict. Even assuming that PCI's endorsement of the modified
instruction could be explained as an understandable consequence of
being "caught off guard,"its claim of error would be foreclosed by
this unexplained failure to call the issue to the court's attention
in a timely manner.
Footnote 21:
21 Indeed, PCI has failed to designate for the record a
transcript of its final argument to the jury.
Footnote 22:
22 Although the trial court rejected it as "an improper
double award,"this approach would merely have compounded
prejudgment interest on the date that PCI lost its underlying cause
of action and accrued its malpractice claim.
Footnote 23:
23 Cf. Beaulieu v. Elliott, 434 P.2d 665, 670-71 (Alaska
1967) (valuing future income at present worth).
Footnote 24:
24 This adjustment will not increase the value of PCI's
total award above TH's million-dollar offer of judgment.
Footnote 25:
25 AS 09.30.070(a) was amended to tie the rate of interest
on judgments in Alaska's courts to that of the "12th Federal
Reserve District discount rate in effect on January 2"of the year
the judgment is entered. However, the amended section applies only
to causes of action "accruing on or after August 7, 1997." Ch. 26
sec. 55, SLA 1997. Therefore, the former version of AS
09.30.070(a),
which was in effect when PCI's cause of action accrued, governs.
Footnote 26:
26 In any event, PCI failed to establish that its Alaska
Mutual loan was brought about by its contractual difficulties on
the Seward powerline project. According to PCI president Ralph
Hixon, none of the loan proceeds were put into the powerline
project; the "primary part"of the loan went to "our North Slope
operation and the camp and stuff there."
Footnote 27:
27 AS 09.30.065 was amended substantially in 1997; however,
the amended section applies to causes of action "accruing on or
after August 7, 1997." Ch. 26, sec. 55, SLA 1997. Similarly Rule
68
was amended in 1997 with only prospective application. See Alaska
Supreme Court Order No. 1281 (effective August 7, 1997).
Therefore, the former versions of AS 09.30.065 and Rule 68, which
were in effect when PCI's cause of action accrued, govern.
Footnote 28:
28 PCI cites Greiner v. Zinker, 573 S.W.2d 884, 885 (Tex.
App. 1978), and Patterson Dental Co. v. Dunn, 592 S.W.2d 914, 918
(Tex. 1980), as support for its claim that Civil Rule 68(b)(1)'s
reference to "party"refers to all defendants collectively, thus
precluding an award of fees to two sets of defense counsel. The
cited cases are inapposite, however, since they interpret "party"
for purposes of allocating peremptory challenges in jury selection.
Footnote 29:
29 We stated in Curt's Trucking:
Whenever tortious injury is inflicted,
the party suffering harm faces, at a minimum, disruption and
inconvenience. In the process of protecting a claim and acting
upon it, an injured party usually expends time, effort and money.
Some of these items are readily quantifiable, while others either
defy valuation entirely or are measurable only when the party
suffering damage is a large organization with a specialized
division to conduct the necessary claims activities. Such costs
normally should be regarded as unrecoverable expenses which arise
due to the inherent friction within our system of damage recovery
through civil litigation. As such, they are not properly included
as items of damage.
578 P.2d at 981 (footnote omitted) (citing Rimer v. State Farm Mut.
Auto. Ins. Co., 148 S.E.2d 742 (S.C. 1966)).
Footnote 30:
30 The fact that PCI's claim against the City was not a
necessary step in the preservation of its case against A/H
distinguishes this case from Rimer v. State Farm Mut. Auto. Ins.
Co., 148 S.E.2d 742 (S.C. 1966), which TH relies on as persuasive
authority for its position.
Footnote 31:
31 PCI's right to recover the City's arbitration expenses
arose from the City's assignment of its rights to PCI. Since the
jury found that the City's arbitration expenses resulted from A/H's
negligence toward the City, not A/H's negligence toward PCI, the
City's right to recover against A/H is subject to the same analysis
that applies to PCI. TH nevertheless suggests that the entire sum
of $136,271 awarded by the jury for the City's arbitration expenses
reflects costs the City incurred "in developing its own claim for
direct damages caused by the negligence of [A/H] and Ebasco during
the claims and arbitration proceedings." TH contends that it would
not be proper to award damages for such costs. Thus, TH argues,
the award for the City's arbitration expenses should also be set
aside. TH's entire argument on this point, however, is set out in
a single conclusory paragraph that provides no meaningful basis for
decision. We thus decline to consider this point. See Adamson v.
University of Alaska, 819 P.2d 886, 889 n.3 (Alaska 1991) (holding
that where a point is cursorily briefed it will not be considered
on appeal).
TH separately contends that the evidence at trial does
not support the jury's verdict for PCI's arbitration expenses and
the City's arbitration expenses and administrative costs. We
address this point below, as part of our discussion of TH's broader
challenge to the sufficiency of PCI's damages evidence as a whole.
Footnote 32:
32 Impracticability of other methods is actually the first
of four threshold requirements set out in Coluccio; the complete
list is as follows:
(1) the nature of the 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.
Coluccio, 826 P.2d at 325 (Alaska 1992).
Footnote 33:
33 We have described two variants of the modified total cost
approach. The first was described in Coluccio, 826 P.2d at 324:
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.
The second was described in Geolar:
Geolar's calculations . . . involved estimat-
ing how long Geolar should have taken to
complete a given amount of work under its original estimates;
comparing this amount of time to the amount of time the work
actually took to complete; and multiplying the difference by the
cost of labor, equipment, supervision, and overhead per unit of
time.
Geolar, 874 P.2d at 943-44 (Alaska 1994).
Footnote 34:
34 In arguing the directed verdict motion, counsel for
defendant Taylor effectively conceded that PCI's evidence
established damages with specificity and that the only point at
issue was causation:
And I think -- I think they've proved in
spades to you that if we can prove -- if they can prove causation,
then they may have enough information as far as damages are
concerned . . . . But they skip over the ultimate problem that
they've had in this case from the very beginning, and that is
proving who caused what damages. They simply don't have that.
Footnote 35:
35 Our holding in Pluid fully addresses and resolves TH's
related argument that the jury's award of administrative and
arbitration costs is unsupported because PCI failed to present
evidence apportioning any specific portion of those costs to A/H's
negligent acts. In our view, the evidence made it clear that A/H's
acts resulted in substantial administrative and arbitration costs,
and it sufficed to allow a reasonable estimate of those costs.
Footnote 36:
36 TH insists that the jury verdict approach, like the total
cost and modified total cost approaches, is disfavored and cannot
be applied unless proof by the actual cost method is impossible or
highly impracticable. But we have never so held. In fact,
Coluccio applied the jury verdict method to affirm a judgment after
expressly finding that the case could not have been properly
submitted under a modified total cost approach, because the
plaintiff had failed to establish that it was the only approach
available. See 826 P.2d at 326-27.
Footnote 37:
37 The trial court did not inform the jury of the four
Coluccio factors that the jury was required to find before
considering total cost evidence. See supra note 29. Such an
instruction was found critical in Geolar, 874 P.2d at 945-46. In
the present case, however, the instruction was unnecessary, and
could potentially have been undesirable, because the court directed
the jury to rely on actual cost evidence and precluded it from
considering total cost evidence under any circumstances. Perhaps
for this reason, TH did not request a Coluccio instruction.
Footnote 38:
38 Rule 82 was amended substantially in 1997; however, the
amended rule applies only to cases filed on or after August 7,
1997. Alaska Supreme Court Order No. 1281 (effective August 7,
1997). Therefore, the former version of Rule 82, which was in
effect when PCI filed its complaint, governs.
Footnote 39:
39 The three exceptions are as follows:
a. The Taylor & Hintze law firm seeks recovery of $1459.64 as
one-third of the out-of-state airfare for a court reporter who
traveled to depositions by agreement of the parties. They claim
that PCI and defendant Robert Taylor were awarded pro rata costs
for the reporter's airfare, and they complain of disparate
treatment. At the cost hearing, the clerk declared that the cost
was allowable; however, in the Clerk's Taxation of Costs for the
Taylor & Hintze law firm (costs order 2 of 3), the expense was
disallowed as "a convenience to the parties involved, rather than
a necessity." The record before us does not disclose whether a
comparable cost was allowed to PCI and defendant Taylor, and PCI
has not responded to the claim of disparate treatment. Under the
circumstances, we remand the issue for clarification. The parties
should be treated equally with respect to this item.
b. The second page of the Clerk's Taxation of Costs for
defendant Taylor (costs order 3 of 3) clearly states that defendant
Taylor should receive 3 days, at $66 per day, as travel expenses
for Robert Benson. The total reached, however, is only $132 ($66
x 2), instead of the proper $198 ($66 x 3). This appears to be an
error in computation and should be corrected on remand.
c. The final paragraph of the Clerk's Taxation of Costs for
defendant Taylor (costs order 3 of 3) should reflect that costs
included therein are awarded in favor of defendant Taylor and
against PCI rather than in favor of PCI and against Taylor; it is
clear from the context of the taxation of costs that this was
intended.
