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.

CREATIVE AVENUE FOR JUDGMENT CREDITOR TO COLLECT A JUDGMENT

images-1I have a judgment against another entity.  Now what?  I want to briefly talk about this “now what?” in the context of the recent decision in MYD Marine Distributor, Inc. v. International Paint, Ltd., 41 Fla. L. Weekly D2364a (Fla. 4th DCA 2016).  Although this case is not a construction case, it poses an interesting issue for any entity that has a judgment entered against it (known as the judgment debtor) while it is contemporaneously the plaintiff and pursuing monetary damages in an unrelated case or cases.   This case also presents an avenue for any judgment creditor to pursue in the event other post-judgment collection efforts are unsuccessful. 

 

In this case, a judgment creditor received a judgment for $550,000 against the judgment debtor.  The judgment creditor proceeded with post-judgment collection activities and recovered only $120,000 from these activities.  The judgment debtor at this time was the plaintiff in an unrelated lawsuit.  The judgment creditor instituted proceedings supplementary pursuant to Florida Statute s. 56.29 to have the judgment debtor’s pending lawsuit assigned to it.  This would allow the judgment creditor to control the pending lawsuit, settle the lawsuit, and, importantly, utilize any proceeds from the lawsuit to reduce the judgment.   The trial court allowed this assignment and the appellate court affirmed:

 

Donovan [judgment creditor] used section 56.29 to initiate proceedings supplementary. Section 56.29(5) provides that a court “may order any property of the judgment debtor, not exempt from execution, in the hands of any person, or any property, debt, or other obligation due to the judgment debtor, to be applied toward the satisfaction of the judgment debt.” A “chose in action” is “property” within the meaning of section 56.29(5). A “chose in action” is a “personal right not reduced into possession, but recoverable by a suit at law. . . . A right to receive or recover a debt, demand, or damages on a cause of action ex contractu or for a tort or omission of a duty.” MYD’s [judgment debtor’s] lawsuit against Lauderdale Marine [unrelated party] was a chose in action subject to the reach of section 56.29(5) proceedings supplementary.

MYD Marine Distributor, supra (internal citations omitted).

 

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.

 

 

BREACH OF A CONSTRUCTION CONTRACT & AN EQUITABLE REMEDY?

UnknownIn payment or collection-type lawsuits, the party suing for money sometimes asserts a claim for unjust enrichment or quantum meruit as an alternative equitable remedy to a breach of contract claim.   Frankly, sometimes a party will do this as a means to throw everything against the wall hoping something, just something, sticks.   However, if there is a contract by and between the parties, equitable claims such as unjust enrichment or quantum meruit will invariably fail.   They will fail because a party cannot circumvent a contract simply because their recourse may prove better under an equitable theory.  It doesn’t work like that! And, it should not!

 

For example, in Daake v. Decks N Such Marine, Inc., 41 Fla. L. Weekly D1992e (Fla. 1st DCA 2016),  a contractor was hired to construct a seawall and a beach house on two lots.  One lot was owned by the homeowners in a personal capacity and the other lot was owned by them in the name of a family trust. The contractor was unpaid and sued the owners for breach of contract and sued the family trust for quantum meruit.  The problem was that the family trust was deemed a party to the contract.  Because the family trust was a party to the contract, the contractor could NOT recover any damages under an equitable theory such as quantum meruit or unjust enrichment.   This was a harsh ruling, but the correct ruling since the contractor was deemed a party to the contract.  The contractor was owed money but did not sue the family trust for breach of contract.  As a result, the contractor could not recover money by bypassing a breach of contract claim for an equitable quantum meruit claim.  A court cannot award damages under an equitable theory when the contractor has an adequate remedy of law—a breach of contract claim. See Daake, supra, (“Quantum meruit is premised upon the absence of an express and enforceable agreement; accordingly, the existence of a valid, written contract between the parties necessarily precludes the doctrine’s application.”).

 

There are times where pleading alternative theories of liability is important.  This includes pleading a breach of contract claim and an alternative equitable claim such as unjust enrichment or quantum meruit.  This becomes important if you do NOT know whether a certain party will actually be bound by and deemed a party to the contract, which was the situation in Daake.    With that said, in your typical payment / collection-type lawsuit, there is a contract between the parties and the equitable claim will fail and should fail.  If parties could bypass the harsh remedy of contractual provisions by suing for unjust enrichment or quantum meruit, believe me, they would.   When parties are owed money or lost money on a contract, they typically want to avoid risks they agreed to by virtue of the contract.

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

LIQUIDATED DAMAGES IN CONSTRUCTION CONTRACTS – WHO BEARS THE BURDEN?

imagesLiquidated damages are in many, many construction contracts.   They are designed to capture an owner’s damages if a project, or portion thereof, is not substantially completed by an agreed date.  The liquidated damages provision contemplates that the contractor will be liable for a daily rate of “x” for each day of delay beyond the substantial completion date (or any agreed change to this date).   Sometimes there is a cap on the contractor’s liquidated damages exposure (say, capped at the contractor’s fee) and sometimes there is no cap.   On private projects, the liquidated damages provision is a negotiated provision.  Typically, on public projects, the liquidated damages provision is not negotiated, but is known upfront and the contractor can try to account for that risk in any bid or proposal.

 

Assume a project is completed 100 days beyond the agreed-upon substantial completion date.  The contract provides for liquidated damages of $2,000 per day with no cap.  This means the contractor has liquidated damages exposure in the amount of $200,000.  The question, however, is who bears the burden relating to the 100-day delay that triggers the application of the liquidated damages provision. Understanding this burden is important, especially if you are the contractor looking to challenge this assessment and, perhaps, support a claim for extended general conditions / overhead.

 

The owner’s initial burden is typically an easy burden—known as the burden of persuasion.  The owner really just needs to produce evidence that the project was not substantially completed by the agreed-upon date.  Once the owner does this, the burden shifts to the contractor to prove that the owner prevented performance, there was excusable delay such as concurrent delay, or the owner caused the delay or a portion of the delay (e.g., design-changes, late change orders, etc.).   The contractor will want to do this to not only establish it is not liable for a majority or all of the assessed liquidated damages, but that the owner is liable for the contractor’s extended general conditions / overhead associated with delay.  Once the contractor does this, the burden of proof then shifts back to the owner since the owner carries the overall burden relating to its assessment of liquidated damages. 

 

This sentiment was conveyed In the Armed Services Board of Contract Appeal’s decision in In re Idela Const. Co., ASBCA No. 45070, 2001 WL 640978 (ASBCA 2001) (internal quotations and citations omitted):

 

In order to assess liquidated damages the Government [owner] must prove by a preponderance of the evidence that the contractor is in default, that it did not prevent performance or contribute to the delay, and that the appellant was the sole cause of the days of delay. The Government has established that substantial completion did not occur until 109 days after the adjusted contract completion date.

 

In order to defeat the Government’s claim for liquidated damages, the appellant [contractor] must come forward with evidence to show that the Government prevented performance or contributed to the delay or that the delay was excusable. Because liquidated damages is a Government claim, the Government continues to have the overall burden of proof, and if the responsibility for days of delay is unclear, or if both parties contribute to the delay, for the Government [t]o recover liquidated damages the Government must prove a clear apportionment of the delay attributable to each party.

  

See also Sauer, Inc. v.  Danzig, 224 F.3d 1340, 1347 (Fed. Cir. 2000) “(As a general rule, a party asserting that liquidated damages were improperly assessed bears the burden of showing the extent of the excusable delay to which it is entitled.); A.G. Cullen Const., Inc. v.  State System of Higher Educ., 898 A.2d 1145, 1162 (Pa. 2006) quoting PCL Constr. Servs., Inc. v. U.S., 53 Fed. Cl. 479, 484 (2002) (“As to the applicable burden of proof in a liquidated damages claim, the government has “the ultimate burden of persuasion as well the initial burden of going forward to show that the contract was not completed by the agreed contract completion date and that liquidated damages were due and owing.”).

 

 

Remember, a liquidated damages provision is a common provision in construction contracts.  Make sure you appreciate how this clause is triggered, the application of the clause, and who carries what burden when its comes to assessing and challenging liquidated 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.