ECONOMIC DAMAGES CANNOT BE BASED ON SPECULATION

shutterstock_630016574Economic damages, unlike non-economic damages (such as those in personal injury disputes), need to rest on a reasonable basis.  Economic damages are those routinely seen in a construction dispute.  These damages cannot be based on conjecture or guesswork and need to be supported by competent substantial evidence.  Otherwise, the economic damages will be deemed too speculative because they are not reasonably quantifiable.   I recently discussed a case involving the professional boxer Canelo Alvarez that was sued by a former promoter for unjust enrichment.  Although the promoter recovered a jury verdict for unjust enrichment damages against Canelo Alvarez, the verdict was reversed because the methodology utilized by the promoter to demonstrate damages was speculative.  This is definitely not what a plaintiff wants to happen after prevailing at the trial level! 

 

Parties are generally involved in civil disputes because of damages.  Without damages, there is no lawsuit.  Thus, a party’s damages, and the methodology used to calculate the damages, is critical.  While economic damages do not need to be demonstrated with mathematical precision, they do need to be supported by competent substantial evidence, i.e., they need to be based on a reasonable degree of certainty. 

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

QUICK NOTE: MITIGATION OF DAMAGES IN CONTRACT CASES

imagesIn an earlier article, I discussed an owner’s measure of damages when a contractor breaches the construction contract.  This article discussed a case where the contractor elected to walk off a residential renovation job due to a payment dispute when he demanded more money and the owners did not bite.  This case also discussed the commonly asserted defense known as mitigation of damages, i.e., the other party failed to properly mitigate their own damages.  

 

In the breach of contract setting, mitigation of damages refers to those damages the other side could have reasonably avoided had he undertaken certain (reasonable) measures.  This is known as the doctrine of avoidable consequences

 

In contract cases, there is really no “duty to mitigate” because the claimant “is not compelled to undertake any ameliorative efforts”; rather, he is merely prevented from recovering damages he “could have reasonably avoided.” The word “reasonably” is important. The doctrine of avoidable consequences does not allow a trial court to reduce damages “based on what ‘could have been avoided’ through Herculean efforts.  It applies only where a claimant fails to undertake measures to avoid damages that are available to him without undue effort or expense.

Forbes v. Prime General Contractors, Inc., 43 Fla.L.Weekly D2094a (Fla. 2d DCA 2018) (internal citations omitted).

 

Stated differently, (1) what reasonable efforts could the other party have undertaken to avoid damage or further damage and (2) if the other party employed such efforts, what is the quantum of those avoidable damages.  Typically, you want these addressed by an expert witness so that there is evidence of reasonable efforts the other side could have undertaken and had these efforts been undertaken their damages would be reduced to “X” or it would have prevented them from incurring “Y” in damages. 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

CONTRACTOR WALKS OFF JOB. WHAT ARE THE OWNER’S DAMAGES?

shutterstock_1059607865What are your damages as the result of a breach of the construction contract?  This is an important question, right?  It is probably the most important part of your case.  If you didn’t have damages, you wouldn’t be in a dispute. So, I repeat, what are your damages as the result of a breach of the construction contract? The below case explains dealing with a contractor that elected to walk off the job mid-construction.

 

In Forbes v. Prime General Contractors, Inc., 43 Fla.L.Weekly D20194a (Fla. 2d DCA 2018), owners hired a contractor to perform a residential renovation job for $276,000.  The owners were to pay the contractor in five draw payments (common for residential jobs) where the third draw payment was due upon the contractor’s completion of the dry-in (as defined in the contract).  After the contractor received the first two draw payments totaling $138,000 plus an additional $6,000 for updated architectural plans, the contractor claimed the job doubled in price and demanded that the owners pay the contractor the third draw payment immediately (before it was due) plus an additional $31,450.  The contractor refused to continue unless the owners agreed to its terms, and then walked off the job when the owners would not agree to these terms (nor should the owners agree to those terms).  At the time the contractor walked off the job, the owners’ home was not habitable due to the construction.

 

The owners sued the contractor for breach of the construction contract and had two damages methodologies they could employ:

 

 

(1) they could deem the contract a total breach, treat the contract as void, suspend their own performance under the contract, and look to be placed in the position they would have been in prior to entering the contract (i.e., had they not hired the contractor); or

(2) they could seek the damages that would place them in the position had the contractor completed the contract.  This damages methodology is more common and would result in the owners seeking the difference between the total amount to complete the contract and the amount owed under the original contract.  For example, if the owners were all in at $376,000 to complete the contract, the contractor would be liable for $100,000, since the owners were always planning on the original contract amount of $276,000. 

 

In this case, however, the owners chose the less common first damages methodology.  The reason being is that the owners could not find another contractor that was reasonably willing to complete the contract.  Also, because the home was uninhabitable, the owners were forced to buy another house versus indefinitely renting.  This resulted in the owners losing the uninhabitable house to foreclosure and their $45,000 equity in the house.  Accordingly, the owners, seeking to be put in the position had they never hired the contractor, sought to recover, among other damages (i) the first two draw payments totaling $138,000 plus the additional $6,000 for updated architectural drawings, (ii) $5,600 in rent, and (iii) $45,000 in lost equity.  These were permissible recoverable damages under the first damages methodology: 

 

They [owners] sought to be put in the position they would have occupied had they never contracted with Prime [contractor]. It was clear at trial that the Forbeses [owners] regarded the breach as total; indeed, they were explicit that they were entitled to suspend their own performance under the contract. And the damages they asked the court to award — return of payments made under the contract and the equity in their home at the time of contracting — were of a type that regarded the contract as void and attempted to restore the Forbeses to their precontractual situation.

 Forbes, supra.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

DOCTRINE OF AVOIDABLE CONSEQUENCES AS AFFIRMATIVE DEFENSE

shutterstock_694657774The doctrine of avoidable consequences is an affirmative defense that can be used in certain property damage lawsuits.  This is a defense that does not go to liability, but it goes to damages.  This doctrine of avoidable consequences defense holds that a plaintiff cannot recover damages caused by a defendant that the plaintiff could have reasonably avoided.  See Media Holdings, LLC v. Orange County, Florida, 43 Fla.L.Weekly D237c (Fla. 5th DCA 2018).  Stated differently, if the plaintiff could have reasonably avoided the consequences of the damages caused by the defendant then the plaintiff cannot recover those damages.  However, the defendant needs to prove this defense — the burden is on the defendant to establish this defense (ideally through expert testimony).  

 

For example, in Media Holdings, a party that was putting on a trade show at a convention center caused the fire sprinkler system to be set off causing substantial water damage.  The owner of the convention center sued the party.  The party argued the doctrine of avoidable consequences, i.e., that the convention center’s damages were caused by or exacerbated by its failure to shut down the sprinkler system as soon as reasonably possible; had the convention center done so, its damages would be much different.  This defense was a question of fact.  Remember, it is not a defense as to liability because the party did cause the sprinkler system to be set off.  Rather, it went directly to the amount of damages the plaintiff was seeking. 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.