Reasonable Methods for Computing Damages are Actual Total Method and Jury Verdict Method

Power Constructors, Inc. v. Taylor & Hintze, 960 P.2d 20 (Alaska 1998)

In this case, a contractor brought a legal malpractice action against its former law firm and several attorneys.  The contractor’s case was a “trial-within-a-trial” approach, which required the contractor to demonstrate the merits of its underlying case (concerning a deficient powerline construction project) as part of its malpractice case.  At trial, the jury returned a verdict for the contractor, and both parties appealed the damages award in the jury’s verdict.

The decision was affirmed in part.  The Supreme Court of Alaska held that the party seeking damages must provide a reasonable basis for computing the award.  The court considered four methods of proving damages in a construction contract case (the actual cost method, the total cost method, the modified total cost method, and the jury verdict method), and cited cases holding that the total cost method (i.e. calculating damages by determining the difference between the actual costs incurred on a project plus a reasonable amount for profit, and the contract price) and the modified total cost method (i.e. calculating damages by fixing the amounts actually spent under various provisions of a contract and then comparing those costs with some form of estimate-derived reasonable cost) are disfavored.  The court concluded that, although the preferred method is the actual cost method (i.e. calculating damages by totaling each element of extra expense incurred because of an alleged breach of contract), the jury verdict method (i.e. presenting actual data to a finder of fact) is also a reasonable basis for computing damages.

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