Haskell/Davis Joint Venture et al v. TAKRAF USA, Inc. et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
HASKELL/DAVIS JOINT VENTURE,
a joint venture consisting of Haskell
Corporation and Davis Constructors
and Engineers, Inc.,
Plaintiff,
v.
TAKRAF USA, INC., and NORTH
AMERICAN SPECIALTY
INSURANCE COMPANY,
Defendants.
Case No. 3:20-cv-00234-SLG
ORDER ON DEFENDANTS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
Before the Court at Docket 36 is Defendants’ Motion for Partial Summary
Judgment. 	The motion is opposed.1 	Oral argument was not requested and was
not necessary for the Court’s decision. 	For the reasons set forth in this order,
Defendants’ motion is granted in part and denied in part.
BACKGROUND
This 	dispute 	relates 	to 	a 	Material 	Handling 	System 	(“System”) 	that
Defendant TAKRAF USA, Inc., (“TAKRAF”) sold to Plaintiff Haskell/Davis Joint
Venture (“HDJV”) as part of a construction project at the University of Alaska
1 Docket 46 (Opposition); Docket 53 (Reply).
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Fairbanks (“UAF”). Many of the relevant undisputed facts in this case are set out
in the Court’s previous order at Docket 55 and are not repeated here.
The parties’ contractual agreement is set out in a Purchase Order that
contains two provisions relevant to this motion. First, the Purchase Order contains
the following clause waiving both parties’ claims for consequential damages:
Seller and Buyer hereby waive any claim, other than the [liquidated
damages] provided by this agreement, in contract or in tort, for any
indirect, special or consequential damages, including but not limited
to lost revenues, lost financing, loss or delay in production, increased
costs of operations, reservoir damage and other type of consequential
damages in connection with any claim arising under or in connection
with this Purchase Order.2
Second, the Purchase Order contains a “Backcharge Procedure” that the parties
agreed to use to remedy any defaults in TAKRAF’s performance. 	The provision
states: “If a default in performance by Seller or its sub-suppliers causes Buyer to
incur costs to correct the default, Buyer and Seller agree to utilize [TAKRAF]’s
attached Backcharge Procedure to document the default and the remedy.”3 	The
Purchase Order defines a “backcharge” as follows:
A backcharge is a cost sustained by the Buyer and chargeable
to the Seller for performance of work by the Buyer or by others
on behalf of the Buyer which is the responsibility of the Seller.
Without limitation and by way of example only, backcharges
may result from:
2 Docket 48-3 at 17, § 10(G). The Purchase Order also provides that “[l]iquidated damages
. . . for seller’s failure to deliver equipment by the date or dates specified in this purchase order
shall be assessed at the rate of $16,000 per day,” with a “total aggregate maximum Liquidated
Damage liability” of 5 percent of the Purchase Order price. Docket 48-3 at 11–12, §§ 4(C) & (D).
3 Docket 48-3 at 6.
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i. 	Work performed by Buyer or by others on behalf of
Buyer, 	to 	correct 	Seller’s 	non-compliance 	with 	the
Purchase Order, acts of omission, or negligence.
ii. 	Work performed by Buyer or by others on behalf of the
Buyer, to correct warranty issues that have been properly
tendered to the Seller in a timely manner but have not
been cured.
iii. 	The backcharge procedure shall be as stipulated in the
Purchase Order attachments to. [sic]4
The Backcharge Procedure attached to the Purchase Order provides that TAKRAF
“reserves the right to self-correct” any reported problems with the System, and that
if it self-corrects a problem, TAKRAF would only be responsible for its own costs.5
The Backcharge Procedure further specifies that if TAKRAF requested the buyer
to correct a problem with the System instead of self-correcting it, TAKRAF would
reimburse the buyer for “direct material and labor costs involved with the re-work
plus a Ten Percent 10% fee for administration, overhead and profit,” but that “[i]n
no case” will TAKRAF be liable for “overtime rates, [or] special, indirect, or
consequential damage costs, including the loss of construction efficiency or
construction productivity.”6 	The Backcharge Procedure also provides that the
parties would settle all backcharges within 30 days of their presentation and that
“[u]nresolved backcharges will be escalated per the dispute resolution clause in
the Purchase Order.”7
4 Docket 48-3 at 13.
5 Docket 48-4 at 3, ¶ 5.
6 Docket 48-4 at 3, ¶ 6.
7 Docket 48-4 at 3, ¶¶ 11, 13. This is apparently a reference to Section 7 of the Purchase
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The Material Handling System was delivered in late 2016. 	After installing
and testing the System, HDJV concluded that it did not meet project specifications.
HDJV concluded that, “[a]mong other things, the Material Handling System was
unable to meet minimum throughput requirements, had undersized and failing
parts, and allowed excessive and dangerous amounts of coal dust and coal to spill
and/or escape the system.”8 	HDJV notified TAKRAF of these problems in
October 2018, and it delivered TAKRAF a formal notice of breach in June 2019.9
In April 2020, HDJV delivered TAKRAF a backcharge notice advising it of the extra
costs it had incurred up to that date.10 	HDJV also provided notice of TAKRAF’s
alleged 	breach 	to 	Defendant 	North 	American 	Specialty 	Insurance 	Company
(“NASIC”), which had provided the bond for TAKRAF’s performance.11
On September 22, 2020, HDJV filed the present suit against TAKRAF and
NASIC under this Court’s diversity jurisdiction. 	HDJV’s complaint alleged breach
of contract and breach of the implied covenant of good faith and fair dealing
(Claim 1), 	breach 	of 	express 	warranty 	(Claim 2), 	breach 	of 	UCC 	warranty
Order’s General Conditions. See Docket 48-3 at 13–14. However, the contract appears to have
no escalation clause.
8 Docket 1 at 5, ¶ 13.
9 Docket 1 at 5, ¶ 14.
10 HDJV’s Complaint alleges that it submitted a backcharge to TAKRAF and that TAKRAF
refused to accept it. Docket 1 at 5, ¶¶ 15–16. TAKRAF admits that HDJV submitted the
backcharge, but it denies any related refusal or breach of contract. Docket 6 at 7–8. TAKRAF
has provided a copy of the backcharge notice in question. See Docket 38-7 at 4–9.
11 Docket 6 at 7–8, ¶¶ 14–15.
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(Claim 3), and a claim against the performance bond (Claim 4).12 The parties later
stipulated to dismissal of the breach of warranty claims (Claims 2 and 3) with
prejudice.13 	On 	the 	remaining 	two 	claims, 	Claims 	1 	and 	4, 	HDJV 	seeks
compensatory damages for TAKRAF’s alleged breach of contract, an order
declaring the judgment recoverable against NASIC’s bond, and an award of its
fees and costs.14
LEGAL STANDARD
Under Rule 56 of the Federal Rules of Civil Procedure, a court “shall grant
summary judgment if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.”15
DISCUSSION
TAKRAF moves for partial summary judgment on the ground that the
Purchase Order’s exclusion of consequential damages bars “every category of
damages” HDJV’s complaint seeks.16 TAKRAF asserts generally that “[a]ll of the
damages sought by HDJV in this lawsuit are outside of what they contracted with
TAKRAF to obtain in the Purchase Order. Thus, they are consequential, and not
direct, 	damages.”17 	TAKRAF 	reasons 	that 	“[a]ll 	the 	claimed 	consequential
12 Docket 1 at 7–10, ¶¶ 22–45.
13 Docket 39.
14 Docket 1 at 11–12.
15 Fed. R. Civ. P. 56(a).
16 Docket 36 at 14.
17 Docket 36 at 10–11.
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damages arose after TAKRAF performed under the Purchase Order and involve
aspects of the System that are outside the scope of the Purchase Order,” because
“TAKRAF’s responsibilities under the Purchase Order were strictly limited to the
final design, manufacture, and delivery of the System.”18
HDJV 	responds 	generally 	that 	none 	of 	its 	claimed 	damages 	are
consequential, but rather are all direct damages that “would give HDJV the benefit
of what TAKRAF was supposed to give – a system that meets the specifications.”19
HDJV 	has 	not 	asserted 	that 	the 	Purchase 	Order’s 	consequential 	damages
exclusion is unconscionable.
As TAKRAF points out, HDJV’s Complaint does not specify its damages in
detail. 	In its breach of contract and good faith claim (Claim 1), HDJV claims “not
less than $1,371,134” in damages.20 In its claim against the bond (Claim 4), HDJV
claims damages “up to the [bond’s] principal amount of $4,035,961.00.”21 	The
Complaint provides no further details regarding damages. Accordingly, TAKRAF’s
motion bases its analysis of HDJV’s claimed damages primarily on: (1) a “TAKRAF
Complaint Cost Summary” HDJV’s counsel sent TAKRAF in January 2022;22 and
(2) the deposition testimony of HDJV vice president Terry Corrigan.23 	The
18 Docket 36 at 11.
19 Docket 46 at 2.
20 Docket 1 at 7, ¶ 28.
21 Docket 1 at 10, ¶ 45.
22 Docket 38-6 (Ex. A-6).
23 Docket 38-3 (Ex. A-3).
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“TAKRAF Complaint Cost Summary,” which HDJV’s counsel described as a
“spreadsheet of HDJV’s damages,”24 reads as follows:25
TAKRAF’s motion groups these damages into:
A. “Operation Damages” ($1,602,707.17), comprising:
1. “Staff Management & non-manual Labor” ($336,400.62);
24 Docket 38-6 at 1.
25 Docket 38-6 at 2.
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2. “Laborers Labor & Clean Up” ($1,065,532.12 for combined
2019-20 and 2020-21); and
3. “Pipefitter & Laborer Mods & Enhancement to Coal Handling”
($200,774.43)
B. “Production 	Damages” 	($40,233.87), 	comprising 	HDJV’s
spreadsheet’s “Material for Modifications & ST&C for Clean up”;
C. “Profit Damages” ($126,506.46), comprising HDJV’s spreadsheet’s
“Profit @ 7%”; and
D. “Potential Future Damages” ($793,300.22), comprising:
1. “Overhead @ 10%” ($164,294.10);
2. “Bond 1.5%” ($29,006.12); and
3. “Potential UAF Costs” ($600,000.00).26
TAKRAF 	asserts 	that 	the 	Purchase 	Order 	bars 	all 	four 	categories 	of
damages because they are all consequential damages.27 	HDJV maintains that
each of these categories of damages are direct damages, not consequential
damages, because HDJV incurred them while attempting to “remedy TAKRAF’s
defective system.”28
26 Docket 36 at 6–8. TAKRAF does not include HDJV’s “Estimated Legal & Other” costs
($120,000) in its argument.
27 Docket 36 at 13–14.
28 Docket 46 at 14–18.
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Under Alaska law,29 interpreting the meaning of a contract is usually a
question of law for the court.30 	A court’s goal “is to ‘give effect to the reasonable
expectations of the parties.’”31 To determine the parties’ reasonable expectations,
a court looks to “the language of the disputed provision and other provisions [of
the 	contract], 	relevant 	extrinsic 	evidence, 	and 	case 	law 	interpreting 	similar
provisions.”32
Under Chapter 2 of the Alaska Commercial Code, which adopts Article 2 of
the Uniform Commercial Code (“UCC”),33 buyers may recover consequential
damages “[i]n a proper case.”34 	Relevant here, the Code defines consequential
damages to include “loss resulting from general or particular requirements and
needs of which the seller at the time of contracting had reason to know and that
29 Because Plaintiffs’ claims arise under state law, the Court applies Alaska substantive law to
them. See, e.g., Freund v. Nycomed Amersham, 347 F.3d 752, 761 (9th Cir. 2003) (“Under the
rule of Erie [Railroad] Co. v. Tompkins, ‘federal courts sitting in diversity jurisdiction apply state
substantive law and federal procedural law.’” (citation omitted) (quoting Gasperini v. Ctr. for
Humanities, Inc., 518 U.S. 415, 427 (1996))); see also Docket 38-2 at 9, § 10(A) (specifying that
the Purchase Order “shall be interpreted under the laws of the State of Alaska”).
30 Norville v. Carr-Gottstein Foods Co., 84 P.3d 996, 1004 (Alaska 2004). Under Alaska law,
contractual interpretation only becomes a question of fact “when the parties present extrinsic
evidence to clarify a contract's meaning, when this evidence points towards
conflicting interpretations of the contract, and when the contract itself is reasonably susceptible
of either meaning.” Id. (quoting Little Susitna Constr. Co. v. Soil Processing, Inc., 944 P.2d 20,
23 (Alaska 1997)).
31 Graham v. Mun. of Anchorage, 446 P.3d 349, 352 (Alaska 2019) (quoting Stepanov v. Homer
Elec. Ass’n, 814 P.2d 731, 734 (Alaska 1991)).
32 Id. (quoting Flint Hills Res. Alaska, LLC v. Williams Alaska Petroleum, Inc., 377 P.3d 959, 975
(Alaska 2016)).
33 See Bendix Home Sys., Inc. v. Jessop, 644 P.2d 843, 845 & n.8 (Alaska 1982).
34 Alaska Stat. § 45.02.714(c).
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could not reasonably be prevented by cover or otherwise.”35 	The Code allows
parties 	to 	contractually 	limit 	or 	exclude 	consequential 	damages 	“unless 	the
limitation or exclusion is unconscionable.”36 	The District of Alaska has enforced
such consequential damages limitations.37
Common examples of consequential damages include lost profits, down or
idle time, increased insurance costs, interest or finance charges, loss of use of
goods, and increased overhead, labor, and equipment expenses.38 	However, in
this case, the consequential damages exclusion clause must be read in the context
of the parties’ entire agreement, including the Purchase Order’s Backcharge
Procedure.39 The Backcharge Procedure provides that if TAKRAF chooses not to
self-correct 	a 	deficiency 	and 	HDJV 	is 	required 	to 	perform 	work 	to 	correct
TAKRAF’s non-compliance with the Purchase Order, TAKRAF will reimburse
HDJV for HDJV’s “direct material and labor costs involved with the re-work plus a
35 Alaska Stat. § 45.02.715(b)(1).
36 Alaska Stat. § 45.02.719(c).
37 Anderson v. City of Seward, 475 F. Supp. 3d 986, 991–92 (D. Alaska 2020). Anderson was an
admiralty law case involving a contract for services, but federal admiralty law applies the same
“basic principles [of] the common law of contracts,” Clevo Co. v. Hecny Transp., Inc., 715 F.3d
1189, 1194 (9th Cir. 2013), and the Anderson court’s analysis of the consequential damages
exclusion at issue cited Alaska and Washington’s versions of the UCC limitation provision,
recognizing that “the UCC is a source of the federal common law.” Id. at 992 n.29.
38 67A Am. Jur. 2d Sales §§ 1136, 1141–42, 1147, 1150 & 1161–68 (Aug. 2022 update).
39 Some courts have recognized that the language in parties’ contracts can implicitly alter the
standard UCC common law definition of consequential damages. See, e.g., Am. Elec. Power
Co. v. Westinghouse Elec. Corp., 418 F. Supp. 435, 459 (S.D.N.Y. 1976) (explaining that by
listing examples of consequential damages, “[t]he parties have gone a long way in defining the
scope of consequential damages in the contract itself”); see also, e.g., Am. Tel. & Tel. Co. v.
N.Y.C. Hum. Res. Admin., 833 F. Supp. 962, 990 n.22 (S.D.N.Y. 1993) (“[P]arties are free to
provide the definition of consequential damages in the contract . . . .”).
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Ten Percent 10% fee for administration, overhead and profit,” although the
reimbursement 	will 	not 	include 	“overtime 	rates, 	[or] 	special, 	indirect, 	or
consequential damage costs.”40 	This provision clearly indicates that the parties
did not intend “direct material and labor costs” incurred to correct a deficiency to
be nonrecoverable damages in an action for breach of contract brought by HDJV.
It also demonstrates that the parties did not intend “administration, overhead and
profit” costs to be nonrecoverable damages, as long as such costs are limited to
10 percent of HDJV’s “direct material and labor costs involved with [a] re-work.”
With this contractual framework, the Court now analyzes the damages at
issue in TAKRAF’s motion. 	Because HDJV’s opposition memorandum did not
object to TAKRAF’s grouping of HDJV’s damages into “Operation Damages,”
“Production Damages,” “Profit Damages,” and “Potential Future Damages,” the
Court organizes its analysis around that grouping.
A. “Operation Damages”
TAKRAF 	asserts 	that 	HDJV’s 	“Operation 	Damages” 	are 	barred 	as
consequential damages because, as Haskell/Davis “repeatedly admit[ted]” in
depositions, the Operations Damages are for “increased costs of operations.”
TAKRAF 	points 	to 	the 	deposition 	testimony 	of 	HDJV’s 	vice 	president 	and
managing member Terry Corrigan, who testified that HDJV’s claimed damages for
increased labor costs were due to “the increased cost of operating [the] facility,
40 Docket 48-4 at 3, ¶ 6.
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including the clean-up and the operation and supervision and site management of
the system.”41 	TAKRAF emphasizes that it “was not responsible [for] installing,
commissioning, 	starting-up, 	operating, 	cleaning, 	maintaining, 	adjusting, 	or
enhancing the System.”42
HDJV 	maintains 	that 	its 	“Operation 	Damages” 	are 	not 	consequential
because 	HDJV 	incurred 	them 	to 	“replace[] 	the 	defendant’s 	performance.”
According to HDJV, these damages are direct damages because TAKRAF’s
delivery 	of 	a 	“defective 	system” 	could 	not 	satisfy 	the 	project’s 	“two 	key
requirements” of moving 100 tons of coal per hour without spillage. 	HDJV
emphasizes that UAF has not accepted the system TAKRAF supplied, and it
asserts that “costly and labor intensive” modifications will be necessary to make it
acceptable to UAF.43
In reply, TAKRAF reasserts its position that HDJV’s damages are “classic
consequential damages under the controlling caselaw.” 	TAKRAF asserts that
HDJV’s claim that its increased labor costs for cleaning up spillage and fixing
blockages in the system are direct damages is “akin to arguing that bailing water
from a leaky boat is fixing the boat.” TAKRAF asserts that “HDJV’s labor to clean
and shovel coal, for over three years, only addresses the consequences of the
41 Docket 38-3 at 8.
42 Docket 36 at 11.
43 Docket 46 at 14–18.
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allegedly defectively designed equipment and has absolutely nothing to do with
directly remedying or addressing the source of the leak.”44
In the Court’s view, the Purchase Order’s consequential damages exclusion
does not bar HDJV’s “Operation Damages” to the extent that they represent
HDJV’s “direct material and labor costs” involved with correcting aspects of the
System that failed to meet required specifications. 	In most cases, damages for
increased overhead and “extra labor, equipment, or other related expense[s]
incurred by the buyer in the effort to cure a defect” are consequential damages.45
But the Backcharge Procedure clearly indicates that HDJV may recover its “direct
material and [non-overtime] labor” costs in “re-work[ing]” a problem caused by
TAKRAF’s 	non-compliance 	with 	the 	contract 	without 	running 	afoul 	of 	the
consequential damages exclusion.46 If, as HDJV alleges, TAKRAF failed to design
and build the Material Handling System to the specifications incorporated in the
Purchase Order, then the costs HDJV incurred in attempting to make the System
acceptable to UAF would appear to constitute costs incurred for “[w]ork performed
by Buyer . . . to correct Seller’s non-compliance with the Purchase Order . . . [or]
to correct warranty issues that have been properly tendered to the Seller in a timely
44 Docket 53 at 7–10.
45 See, e.g., 67A Am. Jur. 2d Sales § 1150 (Aug. 2022 update).
46 Docket 48-4 at 3, ¶ 6.
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manner but have not been cured.” 	The Backcharge Procedure expressly made
such charges recoverable.47
The backcharge provision would be largely meaningless if the consequential
damages exclusion prevented HDJV from claiming such damages. 	For that
reason, interpreting the exclusion to bar all costs HDJV incurred while trying to
“correct 	[TAKRAF]’s 	noncompliance” 	would 	appear 	to 	contravene 	the 	well-
established principle of Alaska law that a contract “should be interpreted to give
effect, if possible, to all of its provisions.”48 	Accordingly, the Court concludes that
those portions of HDJV’s claimed “Operation Damages” representing “direct
material and [non-overtime] labor costs” incurred in correcting aspects of the
System 	that 	did 	not 	meet 	project 	specifications 	are 	recoverable 	under 	the
Backcharge Procedure and are not barred by the Purchase Order’s consequential
damages exclusion.49
47 Docket 48-3 at 13, § 6(E)(i)-(ii).
48 Peterson v. Wirum, 625 P.2d 866, 872 n.11 (Alaska 1981).
49 From the parties’ filings, it is not clear to the Court what portions of the “Operation Damages”
listed in HDJV’s damages spreadsheet constitute “direct material and labor costs” incurred in
attempting to correct aspects of the System that allegedly failed to meet the required
specifications. The Court disagrees with TAKRAF’s assertion that Terry Corrigan “repeatedly
stated” in his deposition that this category was solely for “operating the System.” In the excerpts
TAKRAF filed with the Court, Corrigan’s testimony does not address the nature of the “Pipefitter
& Laborer Mods & Enhancement to Coal Handling” costs. Nor did Corrigan explain whether
these damages include the nearly $50,000 in backcharges HDJV submitted to TAKRAF, Docket
38-7 at 4–5, which appear to be distinct from the potential future costs HDJV estimated. See
Docket 38-3 at 3. Determining if these costs were “direct material and labor costs” incurred to
correct the System’s alleged failure to meet specifications—and, if so, their respective
amounts—will be a question of fact for the factfinder.
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B. Production Damages
Neither 	party 	clearly 	explains 	what 	HDJV’s 	“Production 	Damages”
represent. 	These damages are listed in HDJV’s spreadsheet as “Material for
Modifications & ST&C for Clean up,” totaling $40,233.87. TAKRAF simply asserts
that the damages are barred as consequential damages because they “are for
additions and modifications to the System that were not included in the original
Purchase Order” and “were in addition to what was originally ordered.”50 	HDJV
simply maintains that the “Production Damages” are direct damages because they
represent the costs of “modifications [that] were made in an attempt to reduce the
spillage and/or increase the throughput capacity [of the System] – both of which
were a direct result of TAKRAF’s breach.”51
The lack of detailed information regarding these damages makes the Court
unable to determine their precise nature. 	Because the Court is uncertain what
these damages represent, the Court cannot say whether they fall within the
consequential damages exclusion clause or the backcharge provision. The Court
therefore concludes that TAKRAF has not met its summary judgment burden
regarding these damages.
50 Docket 36 at 12.
51 Docket 46 at 17.
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C. Profit Damages
TAKRAF asserts that HDJV’s “Profit Damages” are barred as consequential
damages because they “are drawn from lost revenues, which are consequential
by definition and were also expressly waived in the Purchase Order.”52 HDJV
maintains that these “Profit Damages” are “not necessarily ‘profit’, but rather
overheard costs necessary to run a project.”53
The Purchase Order’s exclusion clearly bars HDJV’s “Profit Damages” as a
separate category of damages. 	HDJV’s damages spreadsheet lists an entry for
“Overhead @ 10%”, comprising $164,294.10, immediately above the “Profit @
7%” 	entry, 	which 	comprises 	$126,506.46.54 	As 	previously 	explained, 	the
Backcharge Procedure permits HDJV to recover a fee for its “administration,
overhead and profit” costs. 	This fee is to comprise 10 percent of HDJV’s “direct
material and labor costs involved with the re-work” of a problem caused by
TAKRAF’s 	non-compliance 	with 	the 	contract 	which 	TAKRAF 	does 	not 	self-
correct.55 By the Backcharge Procedure’s plain language, this 10 percent fee for
“administration, overhead and profit” already includes recovery for “profit.” 	Thus,
because HDJV already claims a 10 percent fee for “Overhead @ 10%” in this case,
52 Docket 36 at 12.
53 Docket 46 at 17.
54 Docket 38-6 at 2.
55 Docket 48-4 at 3, ¶ 6.
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its additional claim for “Profit @ 7%” is duplicative of that claim and cannot be
separately recovered due to the consequential damages exclusion.
D. Potential Future Damages
TAKRAF asserts that HDJV’s “Potential Future Damages” are barred as
consequential damages because they are “entirely speculative, hypothetical,
remote, and/or contingent.”56 	HDJV maintains that the uncertain or speculative
nature of these damages is irrelevant to whether the Purchase Order’s exclusion
bars them. 	HDJV asserts that it should be allowed to prove these damages at
trial.57
TAKRAF’s 	“Potential 	Future 	Damages” 	is 	comprised 	of 	three 	entries:
“Overhead @ 10%”; “Bond 1.5%”; and “Potential UAF Costs.”58 In his deposition,
Terry Corrigan described “Overhead @ 10%” to be HDJV’s “corporate overhead”
and “Bond 1.5%” to be part of HDJV’s own payment and performance bonds.59
Corrigan described “Potential UAF Costs” to be HDJV’s estimate of the cost it
would take for HDJV to make the System acceptable to UAF, admitting that the
figure was “a shot in the dark really.”60
56 Docket 36 at 11–12.
57 Docket 46 at 17–18.
58 Docket 38-6 at 2.
59 Docket 38-3 at 8–9.
60 Docket 38-3 at 3.
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As HDJV correctly observes, whether HDJV’s “Potential Future Damages”
are 	remote 	or 	speculative 	is 	irrelevant 	to 	whether 	the 	Purchase 	Order’s
consequential damages exclusion bars them. Under Alaska law, “[t]he rule against
recovery of uncertain damages is . . . generally directed against uncertainty with
respect to the cause of rather than the extent of damages.”61 This rule applies to
both direct and consequential damages.62 Thus, whether HDJV’s “Potential Future
Damages” are too remote or speculative is not relevant to TAKRAF’s present
motion. 	Instead, the question is whether the Purchase Order provides for these
damages or excludes them.
First, the “Overhead @ 10%” costs do not appear to be future costs at all.
Rather, as noted above, the Purchase Order’s Backcharge Procedure expressly
provides for “a Ten Percent 10% fee for administration, overhead, and profit” for
costs the buyer incurred in correcting a problem with the System that the seller
chose not to self-correct.63 	The “Overhead @ 10%” figure HDJV lists in its
spreadsheet, $164,294.10, is exactly 10 percent of its subtotal of $1,642,941.04,
which is HDJV’s combined “Operation Damages” and “Production Damages”.
61 Dowling Supply & Equip., Inc. v. City of Anchorage, 490 P.2d 907, 909 (Alaska 1971); see
also, e.g., Native Alaskan Reclamation & Pest Control, Inc. v. United Bank Alaska, 685 P.2d
1211, 1222–23 (Alaska 1984) (“Damages are not recoverable for loss beyond an amount that
the evidence permits to be established with reasonable certainty.” (quoting Restatement
(Second) of Conts. § 352 (Am. L. Inst. 1981))).
62 See, e.g., Guard v. R & R Enters., Inc., 631 P.2d 1068, 1071–72 (Alaska 1981) (applying rule
to consequential damages); Nat’l Bank of Alaska v. J. B. L. & K. of Alaska, Inc., 546 P.2d 579,
589–90, 590 n.48 (Alaska 1976) (applying rule to direct damages).
63 Docket 48-4 at 3, ¶ 6.
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Thus, HDJV’s “Overhead @ 10%” would appear to represent 10 percent of its
costs under those provisions. 	To the extent the underlying costs are “direct
material and labor costs” that HDJV incurred to correct TAKRAF’s alleged non-
compliance with the terms of the contract, HDJV may recover 10 percent of those
costs 	under 	the 	backcharge 	provision 	regardless 	of 	the 	Purchase 	Order’s
consequential damages exclusion, provided HDJV adequately establishes them at
trial.
Second, HDJV’s “Potential UAF Costs” also appear to be recoverable.
These costs apparently represent outlays that HDJV projects it will need to make
the System acceptable to UAF.64 	As such, the “Potential UAF Costs” would
appear to be an estimation of future “direct material and labor costs” HDJV predicts
it will incur “to correct [TAKRAF]’s non-compliance with the Purchase Order,” in
accordance with the Backcharge Procedure. These “Potential UAF Costs” would
therefore appear to be directly recoverable for breach of the contract, provided
HDJV adequately establishes them at trial.
Third, however, HDJV’s “Bond 1.5%” costs are barred under the contract.
The Backcharge Procedure does not mention bonding costs. Rather, it only
mentions “administration, overhead and profit.”65 	On the one hand, if the parties
intended “overhead” to include bond costs, then HDJV’s “Overhead @10%” costs
64 See Docket 38-3 at 3.
65 See Docket 48-4 at 3, ¶ 6.
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would include its increased bond costs. A separate recovery for them under “Bond
1.5%” would be duplicative of the “Overhead @ 10%” costs. On the other hand, if
“overhead” was not meant to include increased bond costs, the bond costs would
appear to be consequential damages that are not recoverable under the Purchase
Order.66 	Therefore, the Court concludes that the Purchase Order bars recovery
for the “Bond 1.5%” costs listed in HDJV’s damages spreadsheet.
CONCLUSION
For the foregoing reasons, the Court concludes that the Purchase Order’s
consequential damages exclusion does not bar HDJV from recovering its “direct
material and [non-overtime] labor costs” incurred in correcting TAKRAF’s non-self-
corrected 	non-compliance 	with 	the 	contract’s 	specifications, 	as 	well 	as 	a
10 percent additional amount for “administration, overhead and profit.” 	Nor does
the consequential damages exclusion bar HDJV from recovering its “Potential UAF
Costs.” Defendants’ motion for partial summary judgment at Docket 36 is therefore
GRANTED IN PART with respect to:
• 	All portions of HDJV’s “Operation Damages” that do not represent
“direct material and [non-overtime] labor costs” incurred in physically
66 At least one court has held that a contractor’s increased bonding costs caused by another
party’s breach of contract are direct damages. See Moore Constr. Co. v. Clarksville Dep’t of
Elec., 707 S.W.2d 1, 15 (Tenn. Ct. App. 1985). But in the present case, by stating that “[i]n no
case shall [TAKRAF] be liable for . . . special, indirect, or consequential damages” immediately
after providing for recovery of “direct material and labor costs” and an additional 10 percent for
“administration, overhead and profit,” the Backcharge Procedure suggests that the parties
intended the Purchase Order to limit HDJV’s possible recovery to those enumerated costs and
expenses. See Docket 48-4 at 3, ¶ 6.
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correcting aspects of the Material Handling System that allegedly
failed to meet required specifications;
• 	HDJV’s “Profit Damages”; and
• 	The “Bond 1.5%” portion of HDJV’s “Potential Future Costs.”
Defendants’ motion is DENIED IN PART with respect to HDJV’s other
claimed damages.
IT IS SO ORDERED.
DATED this 28th day of October, 2022, at Anchorage, Alaska.
/s/ Sharon L. Gleason
UNITED STATES DISTRICT JUDGE
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