Power Constructors, Inc. v. Taylor & Hintze

• Citation: 960 P.2d 20
• Decision Date: 19 June 1998
• Docket Number: Nos. S-7033,S-7123 and S-7124,s. S-7033
• Parties: POWER CONSTRUCTORS, INC., Appellant and Cross-Appellee, v. TAYLOR & HINTZE, Robert G. Taylor, Robert G. Taylor, P.S., John R. Herrig, William L. Hintze, Dudley Kirby Wright, Jr., and Robert P. Owens, Appellees and Cross-Appellants.
• Court: Supreme Court of Alaska (US)

Page 20

960 P.2d 20

POWER CONSTRUCTORS, INC., Appellant and Cross-Appellee, v. TAYLOR & HINTZE, Robert G. Taylor, Robert G. Taylor, P.S John R. Herrig, William L. Hintze, Dudley Kirby Wright, Jr., and Robert P. Owens Appellees and Cross-Appellants.

Nos. S-7033, S-7123 and S-7124.

Supreme Court of Alaska.

June 19, 1998.

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, C.J., and MATTHEWS, EASTAUGH and BRYNER, JJ.

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 professional 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. 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...