The use of alternative measures of damage

Preparing a party’s financial damages claim for trial can be an anxiety-provoking experience.
In a non-personal injury setting involving financial damages, there are many issues. Some critical ones include the appropriate measure of damages, the tension between using your client or an expert witness to explain the financial harm your client endured, and the use of summary documents to reflect financial damages while ensuring the underlying financial data is admitted in evidence to establish the proper foundation.
Tracking and reviewing recent decisions on these topics for use in a commercial case helps to reduce anxiety in trial preparation — not as well as a vacation might — but by assuring one that at least he or she is on the right track.
A recent Fourth Department decision restated an old maxim that a plaintiff need only present evidence on one measure of damages in cases where the plaintiff is entitled to recover the lesser of two alternative measures of damages. An interesting aspect of the decision is that it came up in the context of a small claims dispute that arose in the City of Sherill, Oneida County.
On Feb. 1, the Fourth Department held in Barron v. Dube (No. 07-00752) that a plaintiff need only present evidence on one measure of damages and the burden is on the defendant to present evidence of a lesser amount if it wishes to take advantage of the alternative measure of damages. The Fourth Department affirmed the county court’s decision to affirm the Sherill City Court’s small claims judgment in favor of plaintiffs in the amount of $5,020.
Frankly, it was surprising this proceeding was reported in the context of a civil dispute, and not in some violent criminal proceeding. The parties shared a backyard property line. The court found the defendant went onto the plaintiffs’ property, unbeknownst to the plaintiffs, and cut down all of the 23 cedar trees lining the backyard’s boundary. At every stage of the proceedings, including in the Appellate Division, these litigants represented themselves and submitted legal arguments in briefs complete with case citations, replies and surreplies. (Only one of the plaintiffs’ names appears in the Office of the Court Administration’s attorney directory.) At the small claims hearing, the plaintiffs presented evidence that the replacement value of the trees was $23,000, based on the trees’ age and height.
Small claims jurisdiction is only $5,000, plus costs, so in awarding $5,020, the court awarded the maximum within its authority. On appeal, the defendant correctly argued in her brief that the measure of damages for injury to the property was the lesser of the trees’ replacement cost or the diminution in value of the plaintiffs’ property. However, the Appellate Division rejected the defendant’s argument that the award was in error because the plaintiffs failed to offer proof on the diminution of their property’s value, citing Jenkins v. Etinger, 55 N.Y. 2d 35, 29 (1982) and Fisher v. Qualico Contracting Corp., 98 N.Y. 2d 534 (2002). The court ruled the plaintiffs only needed to submit proof on one of the measures of damages, and the burden was on the defendant to submit proof of a lesser amount if she wished to employ the alternative measure, id.
The Appellate Division relied on a pair of decisions from the Court of Appeals from 1982 and 2002, id. The cases both involved injury to real property. One involved damage to a pond resulting from poorly placed landfill on a neighbor’s property, Jenkins v. Etinger, 55 N.Y. 2d 35, 29 (1982). The other involved a negligently started fire that destroyed a plaintiff’s home, Fisher v. Qualico Contracting Corp., 98 N.Y. 2d 534 (2002).
Cases involving faulty construction also can involve the same alternative measures of damages. The general rule in cases of faulty construction is that a plaintiff is entitled to recover the market value of the costs to repair poor workmanship, see Rivers v. Deane, 209 A.D. 2d 936 (Fourth Dept. 1994). However, when a construction contract was substantially performed in good faith, and the correction of defects would result in economic waste, a defendant is entitled to offer proof on the difference in the value of the property as constructed and the value of the property had the contract been properly performed, see American Standard Inc. v. Schectman, 80 A.D. 2d 318 (Fourth Dept. 1981).
In 1920, Justice Cardozo wrote of the need to apply an alternative measure of damages to prohibit plaintiffs from reaping an economic windfall. In that case, the contractor overlooked installing plumbing pipe of the precise nature specified by the contract, and installed a different variety, see Jacob & Youngs v. Kent, 230 N.Y. 239 (1920). The Court of Appeals found that the cost to replace the pipe would have been astronomical compared to the de minimus reduction in value of the property, and the court would not permit this result, id., see also Restatement, Contracts, Sect. 346. However, courts do not hesitate to impose costs to repair, even if they are quite large, in cases where the failure to perform constitutes a substantial defect, see Bellizzi v. Huntley Estates Inc., 3 N.Y. 2d 112 (1957); Lyon v. Belosky Construction Inc., 247 A.D. 2d 730 (Third Dept. 1998).
New York law provides that plaintiffs need only present proof of damages on one of two alternative measures of damages in cases involving injury to property and construction defects. Defendants faced with such proof have the burden to present their own to prove a smaller amount of damages if they are able to take advantage of an alternative measure of damages.
Paul L. Leclair is a partner in the Rochester firm of Leclair Korona Giordano Cole LLP, where he concentrates his practice in civil litigation with an emphasis on business/commercial, construction, and personal injury matters.