GUESSING AS TO YOUR CONSTRUCTION DAMAGES IS NOT THE BEST APPROACH

Arbitrarily guessing as to your construction damages is NOT the best approach.  Sure, experts can be costly.  No doubt about it.  Having an expert versus guessing as to your construction damages caused by another party’s breach of contract is a no brainer.  Engage an expert or, at a minimum, be in a position to competently testify as to your damages caused by another party’s breach of contract.  Otherwise, the guessing is not going to get you very far as a concrete subcontractor found out in Patrick Concrete Constructors, Inc. v. Layne Christensen Co., 2018 WL 6528485 (W.D. New York 2018) where the subcontractor could not competently support its delay-related damages or change orders and, equally important, could not support that the damages were proximately caused by the general contractor’s breach of the subcontract.

 

In this case, the concrete subcontractor entered into a subcontract to perform concrete work for a public project. The project was delayed and the general contractor was required to pay liquidated damages to the owner.  Not surprisingly, the subcontractor disputed liability for delays and sued the general contractor for all of its delay-related damages “in the form of labor and materials escalation, loss of productivity, procurement and impact costs, field and home office overhead, idle equipment, inability to take on other work, lost profits, and interest.”  Patrick Concrete Constructors, 2018 WL at *1.

The general contractor moved for summary judgment as to the plaintiff’s delay-related damages – the subcontractor’s damages were nothing but guesses and the subcontractor could not prove the general contractor was the cause of the subcontractor’s damages.

The portion of the deposition transcript of the subcontractor’s president that may have also been its corporate representative as to damages is telling:

Q: After today’s exercise, do you believe you’re entitled to [$]681,740 under those items [regarding change orders]?

A: No.

Q: What amount [are] you entitled to?

A: I don’t know. I’d have to work it up.

Q: So as of right now, with my one chance to depose you, the person on damages, you can’t give me a figure that you’re actually entitled to?

A: No. We just ripped all these figures apart, so now I got to go back and refigure.

With regard to the amount of damages sought for “extra costs,” Bell [the President of subcontractor] testified as follows:

Q: Okay. Then you have – you total everything here, total of everything except for the Amount Due on Contract and Outstanding Change Order heading. So that [$]915[,000] basically added up everything under Extra Costs Not Submitted all the way down to Extra Equipment?

A: Yes.

Q: You’re asking for [$]915[,000] in this. Do you believe that’s actually what you’re entitled to today?

A: Well, like I said, we were – like you said, we have to do some adjustments here.

Q: Okay. Adjustments downward, correct, sir?

A: Yes.

Q: Can you tell me today what you think you’re actually entitled to?

A: No.

And, there was more.  The subcontractor could not locate its original estimate for the job, which is important for any loss of productivity or inefficiency claim – or any claim dealing with added labor and equipment usage. The subcontractor could not identify payroll records, time cards, vendor invoices, or anything to justify the damages it sought.  The subcontractor guessed as to labor hours without the back-up substantiating the labor hours and, equally important, could not establish it incurred the guesstimated labor hours caused by the general contractor.

In essence, Plaintiff [subcontractor] concedes that it cannot provide the Court with an “intelligent estimate without speculation or conjecture,” for either category of damages. Because Plaintiff has failed to make a factual showing sufficient to establish that the “extra costs” and “change orders” damages are capable of being proved with reasonable certainty, summary judgment dismissing these claims is appropriate.

***

Here, Plaintiff asserts that Defendant [general contractor] breached the Subcontract by delaying the Project, and that Defendant’s delay caused it to sustain damages. However, Plaintiff has admitted that Defendant was not responsible for all of the delay, and that Plaintiff and its reinforcing bar subcontractor contributed to the delay as well. Because, by Plaintiff’s own admission, it contributed to the damage-causing delays, it is required to allocate the amount of delay and resultant damages between, at a minimum, itself and Defendant.

Patrick Concrete Constructors, 2018 WL at *4.

 

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.

 

 

 

 

 

 

THE DIFFERENCE BETWEEN LOST PROFIT AND LOSS OF USE DAMAGES

ProfitSharingLost profits are a type of damages that are sometimes thrown around in a litigation.  However, these damages are very difficult to establish and prove and they really require expert testimony.  If the theory to recover lost profits is speculative, or the way the lost profits is measured is speculative, they will not be recoverable.  (Typically, lost profits require a history of profits to measure against and/or establishing the profitability of another business using a substantially similar business model for comparative purposes).  Lost profit damages have a difficult burden of proof in order to avoid the argument that they are speculative in nature.

 

Loss of use is another type of damages that is often confused with lost profit damages. Loss of use damages is generally the rental value of property / fair market value due to the loss of use of that property. See B&B Tree Service, Inc. v. Tampa Crane & Body, Inc., 38 Fla. L. Weekly, D970a (Fla. 2d DCA 2013) citing MD. Cas. Co. v. Fla. Produce Distribs., Inc., 498 So.2d 1383 (Fla. 5th DCA 1986) and Meakin v. Dreier, 209 So.2d 252 (Fla. 2d DCA 1968).  Hypothetically speaking, this type of damage can come into play if an owner is trying to recoup the rental value of units / fair market value of units that are out of service due to a defect, i.e., water intrusion problem.

 

There is a better argument for an owner under Florida caselaw to testify as to loss of use damages than lost profits, although with both types of damages, a qualified expert is preferential. “An owner is qualified to testify to the value of his property based on a presumed familiarity with the characteristics of the property, knowledge or acquaintance with its uses and purposes, and experience dealing with it….An owner must be shown to have knowledge regarding the property and its value sufficient to qualify him.” B&B Tree Service quoting Craig v. Craig, 982 So.2d, 724, 729 (Fla. 1st DCA 1993) (internal quotations omitted). The key is the owner’s familiarity with the property and value to support his opinion testimony regarding loss of use damages.

 

Understanding the differences between lost profit damages and loss of use damages, as well as the ways to prove such damages, is important if these are damages a party is looking to recover. Not understanding the burdens of proof for these types of damages can be fatal to recovery or can lead a party to an unrealistic method of thinking during the course of a case and prevent the party from entertaining reasonable settlement offers.

 

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.