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Kuratle Contracting Inc. v. Linden Green Condominium

Superior Court of Delaware, New Castle

November 15, 2013

KURATLE CONTRACTING, INC., a Delaware Corporation Plaintiff,
v.
LINDEN GREEN CONDOMINIUM, ASSOCIATION, a Delaware Corporation Defendant.

Submitted: October 31, 2013.

Upon Defendant Linden Green's Motion to Exclude Expert Testimony of David J. Ford, CPA, DENIED.

ORDER

M. Jane Br., Superior Court Judge.

On this 15th day of November, 2013, it appears to the Court as follows:

1. Kuratle Contracting, Inc. ("Kuratle"), the plaintiff, entered into a contract with the Linden Green Condominium Association ("Linden Green"), the defendant, in November 2002, whereby Linden Green retained Kuratle "to manage the maintenance, operations, landscaping, snow removal and finances of [Linden Green]."[1]

2. The 2002 contract was about to expire, so Kuratle and Linden Green entered into a new contract in 2007. The 2007 contract was to be operative from January 1, 2008 until December 31, 2012. According to Kuratle, in early September 2010 Linden Green's then-current President, Ronald Jones ("Jones"), requested that Kuratle draft a new contract, despite the fact that the 2007 contract, by its terms, would not expire until the end of 2012. Shortly after Jones' request, Kuratle drafted a new contract, which was signed by the respective agents of Linden Green and Kuratle at the end September 2010.[2] According to its terms, the 2010 contract was operative from January 1, 2010 through December 31, 2017.

3. On December 12, 2011, over a year after the 2010 contract was executed, Linden Green sent a letter to Kuratle contending that it submitted the 2010 contract to an attorney who advised that the contract was "invalid and unenforceable." Linden Green's December 12 letter further indicated that their attorney found some "problems" with the 2007 contract. Linden Green thereafter requested Kuratle sign an addendum to the 2007 contract. Kuratle refused to sign the addendum and, as a result, Linden Green terminated its business relationship with Kuratle.

4. Kuratle filed suit against Linden Green on March 7, 2012, alleging breach of contract. Kuratle contends that Linden Green breached the 2010 contract by failing to perform its obligations and by wrongfully terminating the parties' business relationship. Kuratle seeks $1, 088, 519.30 in damages for Linden Green's alleged breach of the 2010 contract. Kuratle asserts, in the alternative, that assuming the 2007 contract was not superseded and replaced by the 2010 contract, Linden Green breached the 2007 contract by wrongfully terminating the contract before the contract's December 31, 2012, expiration term. Kuratle seeks $120, 541.50 for Linden Green's alleged breach of the 2007 contract. Linden Green filed its Answer and asserted a counterclaim on April 13, 2012.

5. To support its claim that Linden Green's alleged breach of contract caused it to suffer compensable damages, Kuratle retained David J. Ford, CPA ("Ford"). Ford was engaged by Kuratle to calculate damages associated with Kuratle's claim that Linden Green breached the 2010, or alternatively the 2007, contract. Ford drafted and submitted two expert reports, one assuming Linden Green breached the 2007 contract and the second assuming Linden Green breached the 2010 contract (collectively "Reports").

6. Relying on the American Institute of Certified Public Accountants in their Practice Aid on Calculating Lost Profits, the Reports explain that only lost "net" profits are allowed as damages. Ford explains, through the Reports, that lost net profit is computed, in general, by estimating the gross revenue that would have been earned but for the wrongful act, from which the avoided costs, which are defined as those costs that were avoided because of the loss of revenue, are subtracted.

7. In drafting the Reports, Ford analyzed relevant books and records to determine the historical amount of revenue earned by Kuratle from the 2007 and 2010 contracts, respectively, prior to the alleged breach. Ford also determined the historical gross profit earned by Kuratle during the five-year period immediately before Linden Green's alleged breach. In conducting the wages component of Kuratle's direct costs, Ford relied on information provided in the Delaware Wages 2011 Survey, [3] rather the wage expenses historically incurred by Kuratle. Ford estimated the lost net profit that, in his opinion, Kuratle could have earned under the 2007 and 2010 contract, respectively, if it were not for Linden Green's alleged breach. Following computation of the lost net profit, Ford then computed the pre-judgment interest that Kuratle could have earned on the lost net profit between the dates of the breach through the date of trial.

8. Linden Green takes issue with Ford's analysis, methods, and conclusions. On October 15, 2013, Linden Green moved to exclude Ford's testimony, contending Ford's "opinions operate under a flawed factual predicate, are unreliable and not of use to the jury."[4] Linden Green cites four errors with Ford's Reports.

9. First, Linden Green asserts that the Reports "understat[e] costs and consequently overstat[e] revenue;" because the Reports identified only 6 of the 25-30 expenses listed on Kuratle's Profit and Loss statements as being the direct costs associated with generating revenue from the 2007 and 2010 Agreements, respectively. Although Ford was aware that Kuratle "had a few contracts beyond [that with] Linden Green, " Linden Green asserts that virtually all costs incurred by Kuratle are related to its contract with Linden Green, and therefore Ford erred by only considering six expenses as direct costs.

10. Second, Linden Green argues that Ford should have used the wage expenses historically incurred by Kuratle, as shown in Kuratle's Profit and Loss Statements, to calculate the wages component of the direct costs to be deducted from revenues when calculating lost profits. Linden Green contends that it was improper for Ford, instead, to rely on the ...


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