Damages

The recent motions by Wright-Pierce in the RIB lawsuit calls into question the validity of the $10,326,883 damages claimed by Wolfeboro.  That is the amount of damages claimed by our experts, Fuss & O’Neill, in their initial expert report dated October 19, 2012.  Here’s the breakdown:

  1. $1,283,893 Site Investigation/Evaluation of Disposal Alternatives
  2. $1,218,391 Land Purchase/Easements
  3. $1,012,588 Design and Permitting Costs
  4. $2,840,089 Construction Costs
  5. $386,428 Expenses to Remediate and Address Site Failures
  6. $319,680 Operational Costs
  7. $3,273,564 Borrowing Costs

That adds up to $10,334,633 – $7,750 more than the total stated in the same report, but lets not sweat the small stuff, apparently it’s par for this course.

WP argues the damage estimate was solely the product of Mr. Phillip Forzley at F&O.  They then go on to question his sources and methods.  According to the motion filed and the transcript of his deposition, he got most of those figures directly from Dave Ford in the form of spreadsheets that Dave gave him.  When compiling the report, he did not ask for or examine the underlying invoices or attempt to reconcile them with actual project related activities.

One principle that WP bases it’s objections on is that these damages are being presented by a guy who claims to be an expert at what he is testifying to.  WP says that he is just an engineer and is only doing some arithmetic in adding up what the Town gave him as applicable costs.  Basically, it is the Town who determined that these were damages and not the so called expert.  He admits that he didn’t reject any of the items given to him by the Town.

Further, WP says the guy isn’t an expert anyway.  He has no training or experience in calculating damages and didn’t consult with any other experts, such as a real-estate appraiser, in compiling his damage opinion.

In the deposition, Mr. Forzley states that subsequent to the original report, he asked the Town for the detailed invoices and tried to corroborate the original figures.  He was unsuccessful, and said he produced a new estimate of $8,876,055.12.  Apparently the report containing the new estimate was issued after the date for supplementing expert testimony.  WP will probably object to being asked to defend against a new complex estimate at this late date, especially since it is based on old information that has been in existence for years.

The fundamental methodology used in the damage calculation is based on his opinion that the RIB site is a total-loss, and therefore everything that has ever been spent on it is a recoverable damage.  WP has filed three motions in disagreement.

The first is a motion to preclude total loss theory.   They claim that the Town has not produced sufficient evidence that the site is a total loss and that they have not investigated any of the suggested methods of remediation.  That’s a whole other discussion dealing with the so called remediation plan and the Town’s currently successful efforts to suppress it.

The second is a motion to exclude evidence of damages  claiming that Mr. Forzley  is not an expert and that he didn’t use the required reliable methodology.

The third  motion to preclude evidence of betterment damages asks that the damages be viewed using the principle of “betterment” which says basically that you cannot be made more than whole.  That you cannot get the use of something and then be reimbursed for it as well.  Automobile casualty is based on this principle.  When you “total” your car, you get a settlement for the present value, not what you paid for it.  The use you got prior to the loss is a betterment that you received.

WP argues that a RIB has a useful life of 20 years, and that by the time our current permit expires in 2017, we will have enjoyed the benefit of it’s use for 8 years, or 40% of it’s useful life.  So they apply that fraction to the construction and operation damages claimed.

Mr. Forzley also believes the land is a total loss, because it has “no value to the town”.  WP argues that the value to the town is irrelevant.  The land has some current market value, and if it’s not worth anything to the town, the town can sell it.  The town’s loss (or profit) would be the difference between what they paid and what they sell it for.  Consider that the town sold it for what they paid.  Is the town entitled to a $1.2 million windfall?  WP says that as a matter of law the town is not.  WP made the point that with the new road,  the land might be of interest as a sand and gravel site.  In any event, Mr. Forzley did not explore the residual value with a real-estate expert.  This seems to be a good example of why you want someone familiar with the principles of damage estimating.

They go on to say that $1,283,893 Site Investigation/Evaluation of Disposal Alternatives was a project unrelated to the RIB site, has little to do with the design and performance of the RIB site, and isn’t an actual damage.

Lastly, they say that the $3,273,564 in borrowing costs is not recoverable under New Hampshire law, and even if it were, hasn’t been described in sufficient detail to adequately present any defense.

Bottom line is that they feel that the damages claimed should be about $3 million and have asked that the Town’s expert witness not be allowed to testify about the damages because he is not an expert and because the details of his opinion were not supported by timely documentation.

I’ll be curious to see how this one goes.  It’s would be hard for Wolfeboro to press this case without being able to discuss the amount of the resulting damages.  Maybe the judge will decide to just let the guy take the stand and let WP’s attorneys rip him apart in front of the jury.  My concern is that if these issues are matters of law as WP contends, a ruling in Wolfeboro’s favor might become a valid basis for an appeal.  So even if the Town wins, it can look forward to another year or two of legal fees and wastewater limbo while an appeal slogs through the system.

I have to wonder why our attorneys didn’t do a better job of presenting the damage case.

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