E. C. Ernst, Inc. v. Koppers Co., Inc.
| Decision Date | 25 July 1980 |
| Docket Number | 79-2290 and 79-2320,Nos. 79-2184,79-2320,No. 79-2290,79-2290,s. 79-2184 |
| Citation | 626 F.2d 324 |
| Parties | 6 Fed. R. Evid. Serv. 763 E. C. ERNST, INC., Appellant in, v. KOPPERS COMPANY, INC., Appellant in |
| Court | U.S. Court of Appeals — Third Circuit |
Arthur S. Friedman (argued), Peter F. Gass, Emanuel Kapelsohn, Friedman & Gass, New York City, Gerald S. Lesher, Baskin & Sears, Pittsburgh, Pa., for E. C. Ernst, Inc.
Harold R. Schmidt (argued), Edward C. Schmidt, Brian W. Asbaugh, Edward B. Wood, Karl Alexander, Rose, Schmidt, Dixon, Hasley, Whyte & Hardesty, Pittsburgh, Pa., Templeton Smith, Pittsburgh, Pa., for Koppers Co.
Before SEITZ, Chief Judge, and GARTH and HIGGINBOTHAM, Circuit Judges.
The plaintiff, E. C. Ernst, Inc., and the defendant, Koppers Co., both appeal from a final judgment in this diversity case involving Pennsylvania law of construction contracts.
In the late spring of 1973, the defendant entered into a contract with Jones & Laughlin Steel Corp. (J&L) under which the defendant was to act as general contractor for the construction of a coke battery at J&L's Aliquippa, Pennsylvania, plant. The coke battery was to be modeled on a similar facility being built by the defendant in Indiana. Both involved some novel technology for loading and preheating coal prior to its conversion to coke.
After drawing up plans and soliciting bids for subcontractors, the defendant entered into a contract in June of 1974 with the plaintiff under which the plaintiff would be the electrical subcontractor on the Aliquippa project. This contract called for a completion date in June 1975.
As work progressed, difficulties developed. Problems at the Indiana site required the defendant to modify the original plans for the Aliquippa job. These modifications, and other reasons, required the plaintiff to do extra work not contemplated in the original contract with the defendant. In addition, a variety of factors led to delays in completing the project. As a result, the plaintiff incurred extra expense because it had to work into the winter of 1975. The project was completed in January 1976, approximately six months late.
The plaintiff filed this diversity suit raising several claims. Count 1 of the complaint sought damages for the plaintiff's expenses incurred due to the defendant's delay. The district court found the defendant liable but did not award damages on this count, a ruling the plaintiff contests on appeal.
Count 2 sought recovery of extra costs due to additional work done by the plaintiff. This extra work was done pursuant to "drawing revisions" submitted by the defendant to the plaintiff. "Drawing revisions" are changes in the original drawings and specifications upon which the original contract is based. The district court calculated damages of $1,484,000 on this count but deducted $500 from each separate drawing revision, leaving a total of $1,421,920. The defendant appeals the liability and damage aspects of this ruling, and the plaintiff appeals the $500 deduction.
Count 3 of the complaint involved additional work done by the plaintiff pursuant to field authorizations and directives issued by the defendant. The defendant appeals the district court's award of damages of $9,581.64 on this count.
In addition, the defendant counterclaimed to recover for services supplied to the plaintiff during the construction of the coke battery. The defendant appeals the district court's denial of those claims. Finally, the defendant appeals the district court's award of prejudgment interest.
We first consider count 1, which dealt with damage to the plaintiff due to delays in completing the project. The district court made several findings with respect to the cause of the delay. It first found that the plaintiff was not responsible for the delay. It then concluded that the defendant was responsible for all of the delay. See E. C. Ernst, Inc. v. Koppers Co., 476 F.Supp. 729 (W.D.Pa.1979). Because the defendant was responsible for all the delay, there was no need for the district court to apply the rule of Lichter v. Mellon-Stuart Co., 305 F.2d 216 (3d Cir. 1962), which deals with apportioning damages where the defendant is responsible for some, but not all, of the delay.
The plaintiff sought to prove its damages by using a variation of the "total cost" approach. Essentially, this method requires calculation of actual cost and of cost under the contract. The contract figure is then subtracted from the actual cost to find damages due to delay.
The district court denied damages for two reasons. First, it found that the plaintiff's method of proof was too hypothetical and artificial. Second, the court rejected the total cost approach as a method of proving damages. See 476 F.Supp. at 753.
At the outset, the district court incorrectly rejected the total cost method because we believe that Pennsylvania, if faced with the question, would approve of that approach. Generally, under Pennsylvania law, damages need not be proved with mathematical certainty, only reasonable certainty. E. g., Exton Drive-In, Inc. v. Home Indemnity Co., 436 Pa. 480, 261 A.2d 319, 324 (1970). Moreover, evidence of damages may consist of probabilities and inferences. See generally 11 P.L.E. Damages, § 158. We believe that a method that permits subtraction of contract cost from actual cost satisfies those standards. The objections normally made to the approach such as that the bid may not be a reasonable estimate, can be adequately handled by making them a question of fact in each case.
This is not to say, however, that a plaintiff merely may label damages evidence as being under the total cost method and leave the matter at that. Under the total cost method, at a minimum the plaintiff must provide some reasonably accurate evidence of the various costs involved. Cf. Seger v. United States, 469 F.2d 292, 303-04, 199 Ct.Cl. 766 (1972) (). In general, where the damages are due to delay, there are a variety of costs generated to the subcontractor. These include extra hours expended, whether because the men are idle or otherwise, increases in wages because the work is done at a later time, and so forth. Here the main controversy centers on the extra manhours created by the delay. 1
The plaintiff's witness on delay hours, Robert Anthony, who made his calculations after the project was completed, testified that he computed damages as follows: Anthony first figured the total number of journeyman hours expended on the project by the plaintiff. He then calculated what the amount of manhours under the contract would have been absent the delay by averaging three estimates prepared by the plaintiff at the time of the bid. Anthony then subtracted this amount from the total number of manhours. He also subtracted manhours that either were not covered by count 1 or for which the plaintiff received compensation.
This left a total of roughly 100,000 manhours, which represented the total number of delay hours expended on the project. The problem was that this figure covered a three year period from 1974 to 1976, and the plaintiff paid different wage rates for those years. To allocate the number of delay hours to each year, Anthony utilized the following approach. He decided that the major cause for delay was the extraordinary number of drawing revisions submitted by the defendant to the plaintiff. See note 1 supra. He therefore calculated what percentage of drawing revisions were submitted in each year in question. Anthony then multiplied the total manhour figure due to delay above by each percentage to arrive at delay manhours per year (i.e., delay manhours times percentage of drawing revisions submitted in 1975 equals delay manhours for 1975). Finally, he multiplied the number of manhours so calculated for each year by the relevant wage rate to come up with a damage figure.
The district court found the use of the drawing revisions as a basis for allocating the delay manhours objectionable. It stated: 476 F.Supp. at 753.
We cannot say that the district court erred in its assessment of the testimony of Anthony. Indeed, its objection to Anthony's allocation of the delay hours to the various years is well founded. Anthony's assumption seems to have been that because 38.9% of the drawing revisions were submitted in 1974, then 38.9% of the delay hours occurred in 1974. As the district court noted, this is not supported by logic or fact. 2 Because the number of drawing revisions in and of itself had no relation to the amount of delay hours generated and because Anthony admitted that he made no analysis of the impact the revisions had on the amount of delay hours, the plaintiff's evidence simply was not geared to revealing when the delay hours occurred.
Even though the district court properly rejected Anthony's testimony as to allocation of delay hours, we believe that a remand is necessary. The district court found that the defendant is liable for all the delay, and we have reviewed the evidence and the defendant's contentions and conclude this ruling was not erroneous. Thus the district court's opinion has the effect of finding liability with no damages even though it recognized that the plaintiff had suffered some damage and that the defendant was entirely responsible for this damage.
Here, the plaintiff seems to have relied on Anthony's testimony as the heart of its case. We also note...
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