Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC310893, Richard L. Fruin, Jr., Judge.
Parker Mills & Patel; Parker Mills Morin, David B. Parker, William K. Mills and Howard M. Fields for Defendant and Appellant.
Simke, Chodos & Sasaki, David Manning Chodos and Richard A. Fond for Plaintiff and Respondent.
ASHMANN-GERST, J.
A jury found in favor of respondent Cal-City Construction, Inc. (Cal-City) in its legal malpractice action against appellant Wilson, Elser, Moskowitz, Edelman & Dicker, LLP (Wilson Elser). The evidence established that Wilson Elser was retained to represent Cal-City after the Los Angeles Unified School District (District) removed Cal-City on a construction project known as “Belmont 2” and refused to make progress payments on a construction project known as “Belmont 3.” Wilson Elser advised Cal-City to walk off Belmont 3. Cal-City walked off and sued the District for breaching its contracts on both projects. Just prior to trial, Wilson Elser advised Cal-City that it should never have walked off Belmont 3, and that because it did so, its only option was to settle on unfavorable terms. Cal-City obtained a judgment against Wilson Elser for $2,478,500 plus costs. The award included $941,000 in damages related to the adverse settlement with the District, and $1,722,500 for lost future profits on the theory that Wilson Elser’s negligence caused Cal-City to lose bonding capacity and forfeit projects that it was thereby prevented from bidding on. Wilson Elser moved for judgment notwithstanding the verdict (JNOV) or, in the alternative, for partial JNOV regarding lost future profits. The motion was denied. Wilson Elser now appeals the judgment and the denial of the motion for JNOV and argues: (1) Cal-City failed to offer evidence that it would have obtained a better result in the underlying disputes but for Wilson Elser’s negligence; and (2) Cal-City’s award for lost future profits was based on speculative evidence. We conclude that substantial evidence supports a finding that Wilson Elser caused Cal-City damage in connection with the underlying disputes, and that the award of $941,000 must stand. However, we also conclude that the trial court should have granted a partial JNOV as to lost future profits. Cal-City’s evidence of lost profits was speculative and uncertain. We granted Cal-City’s petition for rehearing to amplify the law on this point, and to reject Cal-City’s contention that evidence in the record it did not previously cite calls for a different conclusion. We affirm the judgment, but only after modifying it to remove the award of lost future profits.
In Cal-City’s petition for rehearing, it stated that Wilson Elser’s opening brief “did not require Cal-City to direct the Court’s attention to the testimony of Mr. Mowrey and Mr. Lim in which they explain why Cal-City’s gross profit on any additional job is virtually identical to its net profit on that job; or the supporting testimony of Mr. Freedman; or the testimony of Mr. Lim in which he explained that Cal-City’s net taxable income, as reflected on its financial statements, is different from, and intentionally much lower than, what the controlling case law defines as net profit.” According to Cal-City, our failure to consider this evidence provides a ground for rehearing. Also, Cal-City complained that we made an error of law as follows: “The Statement of Facts in its Opinion does not reflect the Court having resolved all ambiguities in the record and indulged all inferences in favor of Cal-City, as an appellate tribunal is required to do on an appeal governed by the substantial evidence rule.” These assertions are unfounded. However, in our endeavor to be thorough, we have expanded our factual statement.
The Belmont 2 and Belmont 3 disputes
In 2000, Cal-City was the successful bidder on Belmont 2 and Belmont 3 and was awarded the projects. Each project required Cal-City to build a primary school center for children. The Belmont 2 contract was dated August 31, 2000. The price was $3,116,310, and the project was supposed to be completed in 150 calendar days. The Belmont 3 contract, which was dated December 22, 2000, provided that Cal-City would be paid $3,398,351. Cal-City had 180 days to complete work. Both contracts provided that the District could grant extensions by change orders.
While Cal-City was working on the south retaining wall at Belmont 2, a field engineer from the Division of the State Architect (State Architect) visited. The field engineer told Cal-City to stop building the south retaining wall until it had a sufficient plan for reengineering the south end pile. According to the field engineer, the original plan for the south end pile did not require that the excavation be deep enough. Based on the original schedule and plans, the south retaining wall was supposed to be built first. This changed Cal-City’s schedule. Instead of grading and compacting the entire site, it was forced to grade only half of the site. This resulted in delay.
It rained at Belmont 2 from December 2000 to the middle of March 2001. Cal-City covered the area with visqueen, a vinyl covering. But that helped only a little. Due to mud, Cal-City could not pour concrete to build foundations. On days it did not rain, Cal-City used sump pumps to suck water into a hose and expel it onto the street. Cal-City also removed water using buckets. Eventually, when the rain stopped, Cal-City dug up the mud and spread it out so that it would dry.
Cal-City needed District surveyors, but they did not show up on the days requested. Cal-City could not proceed. It did not know the location of the property lines or the building corners.
Nicholas J. Toghia (Toghia), an attorney who worked one day a week for Cal-City, contacted Cal-City’s bonding company, The Hartford Casualty Insurance Company (Hartford), and spoke to Paul Boucher (Boucher) for advice. Soon thereafter, Cal-City, Boucher and the District met. The meeting resulted in a plan for future action.
On February 1, 2001, the parties entered into a memorandum of understanding and amendment to the Belmont 2 contract. The project completion date was extended to June 1, 2001. The amendment also provided that “[t]he caisson shoring along the South property line has been deleted from the scope of work” and that “[t]he Architect of Record will prepare revised drawings of sloped grade with small concrete retaining wall to replace the caisson shoring design.” Further, the parties agreed: “Construction work shall continue without regard to the revised slope grade drawings. This new work is not considered part of the critical path. At such time as the drawings are finalized and approved, Cal-City will provide pricing for such work and will be issued an appropriate change order.” The parties agreed “to adjust the contract price to reflect the deduction of the value of the caisson shoring work and to compensate Cal-City for the 2-month delays incurred to date in the sum of $66,501.”
When Cal-City began working on the lunch shelter, it had to dig 17 to 18 feet deep for the caissons, which are concrete tubes. The caissons were supposed to support the patio. Cal-City found black, sticky soil with a gasoline smell. After smelling it, Young Lee (Lee), Cal-City’s project manager for both Belmont 2 and Belmont 3, got dizzy and nauseated. Cal-City’s workers and the nearby residents complained.
Lee asked the District to test the soil. After waiting a few weeks, Lee asked if he could have the site tested himself and was told yes. Lee hired a soils engineer. When the soils engineer arrived and Cal-City began drilling, a District inspector was present. He watched for about half an hour, made a phone call, then told the Cal-City to stop drilling. At that point, the soils engineer had taken two samples. Lee did not stop drilling because he had permission to drill, and because he wanted to get samples at 13 to 15 feet, which is the strata where he found the contamination. The District inspector called the police, who forced Cal-City to leave. Also, the District inspector confiscated the soil samples that Cal-City and its soils engineer had collected.
The parties met again and discussed the contaminated soil. The District stated that it had received testing results, but the results were not disclosed. Boucher thought this was unusual. Cal-City could not proceed with the project without knowing the test results. In Boucher’s view, the District was trying to get rid of Cal-City. But Cal-City was tenacious; it was working on the project even though it was not getting paid.
On April 23, 2001, the District served a three-day notice that informed Cal-City that it would be in default unless it cured a list of deficiencies.
On May 1, 2001, Larry Blackford, the District project manager, wrote an expulsion letter to Cal-City. The letter stated in part: “Pursuant [to] specification section 00500 Form 82.39 Article 16, you are hereby found in default of your contract and expelled from the construction site. [¶] Your failure to acknowledge the stop notice issued by the Inspector Of Record to cease unauthorized drilling and vacate the site is in violation of your contract.”
Prior to Belmont 2, Cal-City had never been thrown off a job, and it had never failed to complete a job.
Near the time Cal-City began working on Belmont 3, the District promulgated a new protocol for segregation of construction costs. It was stricter than the protocol used in the past. To get a progress payment on Belmont 3, Lee submitted a segregation of construction cost form to the District. Even though Lee used the same form and format he had successfully used in the past, the District refused to approve the form and authorize a payment. Lee amended the form twice, each time trying to address the District’s concerns, and each time it was again rejected by the District. He asked the District’s project manager why the form was being rejected but did not get an answer.
Belmont 3 grew more complicated when Cal-City uncovered 67 concrete blocks that had to be excavated. Those 67 concrete blocks were not in the District’s plans and specifications, so the cost of removal was not included in Cal-City’s bid. But Cal-City wanted to be paid. Cal-City retained Wilson Elser. G. Wayne Murphy (Murphy) was assigned the case.
Cal-City’s goal was to get permission to return to Belmont 2 by negotiation or litigation. As to Belmont 3, Cal-City wanted its segregation of construction cost forms approved, and it wanted to be paid for the removal of the 67 concrete blocks that were hindering progress at Belmont 3.
Murphy wrote a May 29, 2001, letter (walk-off letter) on Cal-City’s behalf stating that it was going to walk off Belmont 3. At the time Murphy drafted the walk-off letter, he believed Cal-City had winnable causes of action against the District in connection with Belmont 2 and Belmont 3. When Toghia saw the walk-off letter, he called Murphy to ask if the walk-off letter had been cleared by Hartford. According to Murphy, it had been. Eventually, the District sent several demands for Cal-City to return to the job. On both occasions Toghia asked Murphy for his advice. Each time Murphy replied: “Stay the course. Don’t return to the job.”
As of May 29, 2001, the subcontractors had not demanded full payment. Cal-City had a good relationship with them. The subcontractors usually waited to get paid until Cal-City got paid by the District.
Cal-City sued the District for breach of contract on Belmont 2 and Belmont 3. The District cross-complained, contending that it was entitled to recover the cost of completion on both projects. Soon afterwards, Cal-City told Wilson Elser that it wanted a jury trial. After Wilson Elser had billed Cal-City about $200,000, Murphy indicated that he might not try the case. Murphy said he had to attend a surety convention.
Murphy said John Sher (Sher) would take over the case. That was 60 days before trial. Sher said he was not a surety or construction lawyer, and that he was unfamiliar with the facts, the documents and the legal issues. According to Sher, he needed Toghia’s assistance.
Toghia learned that Wilson Elser did not post jury fees. Instead, it had checked a box on a form requesting a bench trial. Sher said Cal-City would have to move for relief from default. Sher went on to explain that he wanted a jury trial because the District’s lawyer had never been the lead lawyer in a jury trial. A motion for relief from default was heard and denied. At that point, trial was only a few days away.
Sher began to question whether Cal-City submitted proper segregation of construction cost forms. If the forms were not done properly, then Cal-City did not have a right to get paid, and did not have a right to walk-off Belmont 3. If that was true, Sher concluded that Cal-City was going to lose the Belmont 3 portion of its lawsuit. Also, the District would likely prevail on its cross-complaint for breach of contract.
During the second day of a settlement conference, Sher told Cal-City, “We did some last minute research and have determined that Cal-City can’t win the trial on Belmont 3 because the walk-off constitutes abandonment. And because Cal-City voluntarily abandoned [Belmont 3], I cannot win Belmont 3, so therefore the case has to be settled because you’re going to lose and I’m going to lose the trial.” Worse yet, Sher said that Cal-City would have to pay the District money for walking off Belmont 3. He indicated that he still thought the Belmont 2 case was winnable. Nonetheless, he thought the trial judge was biased. Sher stated: “I’m not going to try this case.”
Cal-City agreed to settle on unfavorable terms. It agreed to assign any project receivables to the District, pay the District $520,000, and not bid on District projects for five years.
Cal-City’s loss of bonding capacity
After Cal-City was expelled from Belmont 2 and walked off Belmont 3, Hartford reduced Cal-City’s bonding capacity from about $6 million to $500,000. This prohibited Cal-City from bidding on public works projects it considered to be within its expertise, which were projects from $1.5 million to $6 million. Toghia convinced Hartford to increase the capacity for a bid bond to $1.5 million. This allowed Cal-City to bid on a $1.24 million project. But when Cal-City was the low bidder, Hartford refused to issue the performance bond and the payment bond. Eventually Toghia placed the performance and payment bonds with Insco Dico, a local company.
The next project exceeded Insco Dico’s limits. Cal-City switched to a company called I.F.I.C. I.F.I.C. issued bonds for about eight months. But then it learned that Cal-City’s litigation with the District ended in a settlement and refused to issue any more bonds.
After a gap, Great American took over and wrote bonds. But it, too, ended its relationship with Cal-City after it demanded and received financial statements which revealed that Cal-City gave up its Belmont 2 and Belmont 3 receivables and had to pay the District $520,000.
Cal-City’s malpractice action against Wilson Elser
The events leading up to the lawsuit
Cal-City called witnesses such as Lee, Toghia and Sher to testify about the events surrounding Belmont 2 and Belmont 3. They testified, inter alia, about the problems Cal-City had with the toxic soil on Belmont 2, the expulsion from Belmont 2, the refusal of the District to approve the segregation of construction cost forms, the retention of Wilson Elser, Murphy’s advice to walk-off Belmont 3, Sher’s opinion that Cal-City was in breach of Belmont 3 and the settlement.
Mark Feldman
Mark Feldman (Feldman), a legal expert, was called to offer testimony regarding whether Wilson Elser committed legal malpractice. In particular, he testified as follows: the District had a dispute resolution office. The purpose of that office was to avoid litigation. Disputes could be resolved in weeks, and sometime hours. Wilson Elser should have told Cal-City to try resolving its dispute on Belmont 3 by utilizing the District’s dispute resolution services.
Keith Clements
Keith Clements, senior regional bond manager for Allied Nationwide Insurance Company, was called to testify regarding the impact of the settlement on Cal-City’s ability to get bonds. He testified that Cal-City was “very bondable” prior to the termination of Belmont 2. Cal-City handled every project on time, no bond claims were presented, it was taking care of small problems, and it was making money and growing over the years.
After the termination from Belmont 2, the walk-off from Belmont 3, and the settlement, Cal-City was in a terrible position. There was a possibility Cal-City could get limited bonding from a substandard carrier. But Cal-City lost the bonding capacity that it needed. After Great American refused to bond Cal-City, it had only a slim chance of getting bonded.
William Scott Mowrey, Jr.
William Scott Mowrey, Jr., (Mowrey), a forensic accountant, was called to testify regarding Cal-City’s lost profits from Belmont 2 and Belmont 3, lost profits due to the settlement with the District, and lost profits from future projects. Further, he was called to testify that Cal-City had the financial ability to continue working on Belmont 3 without getting paid.
According to Mowrey, Cal-City was owed $1,330,888 on Belmont 2. Mowrey concluded that the value of Cal-City’s work on the Belmont 3 contract was $349,682. Work performed outside of the scope of the Belmont 3 contract was worth $213,490. These numbers were contained in the contract payment request. Mowrey was asked: “Where did you get the project profit from [for Belmont 3]?” He replied: “And, again, this is the profit, the unearned profit on the project that—you know, the—theory would have been that had Cal-City prevailed in the underlying matter, that they would have been entitled to the project or profit or what they had bargained for when they did the contract originally.”
Mowrey did not state the profit for Belmont 3. From the reporter’s transcript, it appears that he was referring to an exhibit that was on display for the jury and which stated his opinion as to profit. Counsel’s questions and Mowrey’s answers often referred to Mowrey’s schedules without specifying what they said. While this may have been effective in front of a jury, it makes appellate review difficult because we do not know what, precisely, was presented.
As part of damages, Mowrey included the $520,000 Cal-City paid to the District in settlement, the $229,312 it paid to Wilson Elser, and the $59,661 it paid to others in litigation costs.
Next, Mowrey discussed lost profits on future projects.
He noted that Cal-City was awarded seven District projects in the 2.6 years before the disputes with the District. Those contracts were worth $14 million. He calculated that the average number of projects awarded to Cal-City per year was 2.7, and that the average contract was worth $2,001,123. Multiplying those two numbers, Mowrey concluded that the average annual value of Cal-City’s District projects was $5.4 million, and that its lost profits due to the five-year ban on District projects was $3,244,071.
Regarding lost profits on non-District projects, Mowrey examined Cal-City’s projects of interest and found that historically it was the successful bidder on 11.33 percent of those projects. Next, Mowrey looked at non-District projects of interest during three periods during which Cal-City did not have bonding: May 30, 2001, to September 7, 2001, then from April 11, 2003, to July 18, 2003, and then April 20, 2004, through September 29, 2005. The contracts during the first period were worth $57,345,073. The average successful bids would have yielded contracts worth about $6.5 million. The average gross margin was 12.18 percent, which meant Cal-City would have made $791,323. For the next period, the contracts from the projects of interest were worth $67,980,000. Using the same percentages as before, Mowrey concluded that Cal-City would have made $938,078. And for the last period, the total value of contracts was $47 million. Multiplying that figure by 12.18 percent, Mowrey stated that Cal-City’s damages were $5,739,868. In his view, the damages derived from the inability to obtain bonding was $7,469,269.
Based on calculations, the number should have been $648,597.18. This is arrived at by multiplying $47 million by 11.33 percent and arriving at $5,325,100 and then multiplying that number by 12.18 percent. For a reason that is not clear, Mowrey multiplied $47 million by 12.18 percent. The reporter’s transcript does not establish whether $47 million is the value of all contracts on projects of interest, or only 11.33 percent of those contracts. If it was 11.33 percent of those contracts, then the total value of all contracts was $532,510,000. Nowhere in the reporter’s transcript did Mowrey say that the contracts were worth $532 million.
This figure does not comport with our calculation. Adding $791,323, $938,078 and $648,597.18, the total should have been $2,377,998.18.
When asked how he arrived at the gross margin of 12.18 percent, Mowrey replied: “That was analyzed on schedule 16, and schedule 16 determines the gross margin or gross in [sic] percentage for each of these projects. [¶] There were 24 projects in total, and if you look at the . . . totals there for the top part, they’re about 10.46 percent. But they are influenced by the negative percentages associated with number 2 and with a zero percent associated with Belmont [3].” Mowrey removed Belmont 2 and Belmont 3 from his schedule, and also the District projects. He stated: “So at the very bottom is the total of the gross margin from completed contracts, [non-District contracts], and it is 12.18 percent.” Mowrey’s figures represented “[p]ercentage of profits to revenue.”
Mowrey explained that his damages analysis differed from that of Freedman, the defense expert, regarding Belmont 2. Freedman used a 6 percent profit margin to determine the lost profits. He did this after subtracting expenses from revenues. Mowrey, however, stated: “He’s going on a historical basis for the contract as opposed to the terms of the contract.” To explain, Mowrey testified: “Well, [Freedman is] using the history of Cal-City in determining the 6 percent profit, but . . . this is a contract. This is a contract that has a set profit associated with it. The contract wasn’t completed. [¶] So . . . my opinion is you don’t go back to a historical profit percentage when you’ve got damages surrounding a contract where there was unjustified termination.”
Mowrey was asked to explain incremental profit margin. He stated that “incremental profit margin is a term of art in lost profit analysis. And it states that wherever there’s a loss of revenues or sales, you need to subtract whatever expenses are related to the production of those revenues or sales in order to come up with incremental profits. So you have to make sure that you take every expense that varies with the sales in order to come up with the incremental profits, and that’s what [Freedman] did when he did his 6 percent.”
To differentiate his analysis from that of Freedman, Mowrey testified: “Well, in later analysis where I actually use a profit percentage it differs from mine because I’m of the opinion that in this particular industry, contracting industry, the gross margin, in fact, sets forth the incremental profit. Based upon the notes to the financial statements and so forth, there’s indirect overhead and all sorts of expenses that are in the administrative and general expense of the category [sic] of the financial statements are allocated up [sic] into direct costs so that you have all of the costs that are related to those projects, that are related to the completion of the projects, are carried up [sic]. And I did my calculation based on that.”
Counsel asked: “Now, what does that mean in English?”
Mowrey said that when the contract is done, the contractor figures in overhead and profit. And when a contractor segregates costs, it “segregates out overhead and profit.” The Belmont 2 contract called for profit and overhead of 15 percent. As a result, Mowrey did not think it was appropriate for Freedman to use a 6 percent profit figure to establish damages. Cal-City was entitled to recover the costs of construction as well as profits.
In Mowrey’s estimation, Freedman’s analysis was not a valid analysis of lost profits. Mowrey stated: “I don’t think he’s included all of the elements of damages that are recoverable. I would disagree with the percentage of completion that he used, and I think that the profits that are recoverable as damages here are the contract profits and not historical profit percentage.”
The total damages were $13,000,814.
Mowrey moved on to testify on an aspect of causation. He was asked if Cal-City had the financial ability to continue working on Belmont 3 past the walk-off of May 29, 2001. He indicated that Cal-City had $234,000 in the bank on May 31, 2001, and that it had a $500,000 line of credit and a $200,000 line of credit. Cal-City could have continued working for a month or two. And assuming the subcontractors would wait to be paid, Cal-City would have had time to work out its problems with the District.
Woo Lim
Woo Lim (Lim), Cal-City’s senior officer, testified regarding Cal-City’s finances.
In 1996 and 1998, Cal-City billed $4.75 million. In 1999, it billed $9 million. The next year it billed almost $10 million. From 2000 to 2001, that amount increased to almost $17 million. In 2002, Cal-City’s billings went over $18 million, then back down to $17.75 million in 2003.
After deducting construction costs, Lim arrived at gross profit from operation. That included everything but “owner’s expense wage [sic] and taxes and owner’s expenses.” In 1996, gross profit was $383,000. By 1999, it was $1.5 million. In 2000, gross profit was $828,000. The next three years, respectively, it was $1.75 million, $1.6 million, and $2,132,000.
Lim testified that Cal-City’s net income was $85,000 in 1997, $502,688 in 1999, and $96,749 in 2000. Cal-City suffered a $47,436 loss in 1998. Lim, though, testified that the gross profit was Cal-City’s profit. He stated his understanding of net income thusly: “[W]e would [be able to] deduct everything we are allowed to deduct and also owner would spend everything we’re allowed to spend and also we try to save the taxes for tax purpose and make it small.”
According to Lim, Cal-City had completed a variety of projects for the District in the past. Regarding personnel, in 2001, Cal-City had 30 employees. One employee, a superintendent, worked on Belmont 3. Another employee, a project manager, split time between Belmont 3 and another project. Cal-City’s payroll for Belmont 3 was about $5,000 to $6,000 on a monthly basis.
Kathy Littman
In its defense, Wilson Elser called Kathy Littman (Littman), a director of the District’s facilities department.
According to Littman, the Belmont 2 contract required Cal-City to notify the District if contamination was found. Depending upon the type of contamination, and depending upon an assessment by the District’s environmental health and safety department, Cal-City was either supposed to stop work completely, or work around the contaminated area. The District was required to evaluate the contamination and determine the necessary action. Moreover, Cal-City was expected to comply with the California Occupational Safety and Health Act obligations. In light of those obligations, Cal-City was required to inform its employees and subcontractors of the nature and extent of the contamination. Nothing in the Belmont 2 contract prevented Cal-City from ascertaining the nature of the peril. Also, the Belmont 2 contract provided for extensions necessitated by rain delays.
Littman acknowledged that Cal-City did not have approval for all the necessary plans at Belmont 2. But then she testified: “There were revisions on the site, which is typical for a construction site.”
The District’s only purpose in rejecting a segregation of construction cost form was to obtain accurate information. It did not reject those forms unless there was good cause. If the District rejected a segregation of construction cost form, that did not mean that the District intended to continue rejecting it. The District required contractors to inquire how they could amend forms that had been rejected. A stricter protocol for segregation of construction costs was being used in Belmont 3. Cal-City was free to ask what it was required to submit to get paid. There was a process in place for a contractor or his representative to obtain necessary information.
Freedman
Wilson Elser called Freedman as a damages expert.
Freedman testified that on Belmont 2, Cal-City was given profit and overhead of 15 percent. Exclusive of the 15 percent profit and overhead, the Belmont 2 contract paid for the cost of administrators on the job such as the project manager, and any costs associated with the project, such as fencing, trailers and the like. The 15 percent profit and overhead was designed to permit Cal-City to defray general operating overhead that existed regardless of the Belmont 2 contract. According to Freedman, Cal-City’s average profit was 3 percent. Also, its incremental profit was 6 percent.
The special jury verdict and judgment
In a special jury verdict form, the jury found that Wilson Elser was negligent in performing legal services in connection with Belmont 2 and Belmont 3. Also, the jury concluded it was more likely than not that, in the absence of Wilson Elser’s negligence, Cal-City would have obtained a better result in resolving its disputes with the District over Belmont 2 and Belmont 3. The jury found that Cal-City suffered $941,000 in damages related to Belmont 2 and Belmont 3, and that it suffered $1,722,500 in damages related to lost profits on projects other than Belmont 2 and Belmont 3. On Wilson Elser’s cross-complaint, the jury found that Cal-City owed $185,018 for legal services that had not been paid.
Judgment was entered.
Wilson Elser’s motion for JNOV
Wilson Elser filed a motion for JNOV. It argued that the Belmont 2 contract was void because it had not been approved by the State Architect, and that Cal-City could not have prevailed on Belmont 3. In the alternative, Wilson Elser argued that the future lost profits damages were speculative. If the trial court did not grant JNOV, Wilson Elser sought partial JNOV on lost profits.
The motion for JNOV was denied.
This timely appeal followed.
We issued an opinion on March 5, 2008. Cal-City filed a timely petition for rehearing. In its petition for rehearing, Cal-City argues that the testimony of Mowrey, Lim and Feldman provided substantial evidence of its lost net profits; the statement of facts in our prior opinion did not resolve all ambiguities and engage all inferences in favor of Cal-City; we failed to consider case law permitting the recovery of gross profits when they are the equivalent of net profits; and we misinterpreted the controlling case law. We granted the petition.
STANDARD OF REVIEW
A challenge to the sufficiency of the evidence supporting a judgment is reviewed under the substantial evidence rule. Our task is to determine whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which will support the jury’s factual findings. When two or more inferences can reasonably be deduced from the facts, “a reviewing court is without power to substitute its deductions for those of the [trier of fact]. If such substantial evidence be found, it is of no consequence that the [trier of fact] believing other evidence, or drawing other reasonable inferences, might have reached a contrary conclusion. [Citations.]” (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 874.)
In reviewing an order denying or granting a JNOV, we determine whether the trial court’s ruling is supported by substantial evidence. (Trujillo v. North County Transit Dist. (1998) 63 Cal.App.4th 280, 284.)
DISCUSSION
1. Causation.
According to Wilson Elser, “[n]owhere in the 3000-page Reporter’s Transcript is there evidence (or even an attempt to show) that had Cal-City not settled with [the District], it would have prevailed at trial, much less that it could have settled the case on more favorable terms.”
We disagree.
a. The test for causation in a legal malpractice action.
When a plaintiff sues its lawyer for malpractice, the plaintiff must establish that but for the lawyer’s negligence, the plaintiff would have obtained a more favorable judgment or settlement in the underlying action. (Viner v. Sweet (2003) 30 Cal.4th 1232, 1241, 1244 [holding that the “but for” test applies to transactional malpractice the same as to litigation malpractice.)
b. Cal-City offered evidence of causation.
To prevail on Belmont 2, Cal-City had to prove the following elements: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) resulting damages. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.) Also, Cal-City could not have prevailed unless it could overcome the District’s defenses.
There is no dispute that Cal-City had a contract. Lee’s testimony, and the reasonable inferences that can be drawn from it, establish that Cal-City was performing to the extent possible. Cal-City suffered delays, but the evidence suggested that those delays were excused. The Belmont 2 contract provided for extensions necessitated by rain delays. Also, the District caused delays when it failed to get new plans for the south retaining wall, when it failed to provide surveyors, and when it refused to identify, or allow Cal-City to identify, the contamination. Because the Belmont 2 contract required Cal-City to address any contamination it found, and Cal-City received permission to drill, the inference is that the District’s decision to expel Cal-City was a breach of the Belmont 2 contract. Due to the expulsion, Cal-City was denied the benefit of its bargain. Cal-City did not pursue Belmont 2, however, because Sher said Cal-City stood to lose on Belmont 3, the right to a jury trial had been lost, and the trial judge was biased. That evidence creates that reasonable inference that but for Wilson Elser’s negligent advice on Belmont 3 and its negligent failure to secure a jury trial, Cal-City would have prevailed on Belmont 2. This evidence is substantial in nature, and it permitted the jury to find causation as to Belmont 2.
Wilson Elser avers that Littman was prepared to remove Cal-City from Belmont 2. But she did not. And, in any event, this is merely conflicting evidence that we are required to disregard.
The claim related to Belmont 3 involves transactional malpractice. The question is whether, but for Wilson Elser’s negligence, Cal-City would have been better off if it had stayed on the job. The evidence supports an affirmative finding. Feldman testified that the District had a dispute resolution office designed to avoid litigation, and Littman testified that the only reason the District rejected segregation of construction cost forms was to obtain accurate information. She also testified that at the time Belmont 3 commenced, the District had adopted stricter protocols for the segregation of construction cost forms. The reasonable inference is all contractors had to adjust to the new protocol, and that if Wilson Elser had advised Cal-City to seek the District’s assistance in resolving its payment dispute, the dispute would have been resolved. Mowrey’s testimony and Lim’s testimony supported an inference that the subcontractors would have worked until Cal-City got paid, and that Cal-City had sufficient capital to continue working on Belmont 3 until its disputes were resolved. Thus, there is an inference that but for Wilson Elser’s negligence, Cal-City would have stayed on the job and it would have been paid and received the benefit of its bargain.
c. Enforceability of the Belmont 2 contract and Belmont 3 contract.
Education Code section 17307 provides that no contract for the construction of a school is valid, and no public money shall be paid for work done on such contract, unless the Department of General Services provides written approval of a project’s plans and specifications.
The State Architect is a division of the Department of General Services.
Wilson Elser argues that the Belmont 2 contract was void pursuant to Education Code section 17307 because the plans and specifications had not been approved by the Department of General Services, and that Cal-City could not have prevailed on a claim for breach of that contract. Also, Wilson Elser contends that Cal-City could not have prevailed on Belmont 3 because there was no evidence that its plans and specifications were ever approved.
Below, Wilson Elser neglected to argue that the Belmont 3 contract was void. Arguments raised for the first time on appeal are considered waived. (Steele v. Totah (1986) 180 Cal.App.3d 545, 551–552.) Thus, Cal-City was at least entitled to prevail on damages related to Belmont 3, which means that there is no basis for reversing the award of Belmont 2 and Belmont 3 damages. They were not segregated, and Wilson Elser did not argue that they were excessive.
Moreover, regarding Belmont 2, Sher testified: “The District took the position that [the plans] had been approved and that there had been changes, but they were going to have to get approval on those changes.” Moreover, the February 1, 2001, memorandum of understanding between the parties deleted the caisson shoring along the south property line from the scope of work. The price was adjusted accordingly. The parties further agreed that when revised slope grading drawings were approved, Cal-City would provide pricing and the District would issue an appropriate change order. All this constitutes substantial evidence that the Belmont 2 plans had been approved. And the further inference is that even if an approval of a redesign on any portion of Belmont 2 was pending, approval would have been forthcoming and Cal-City could have gotten paid. Also, Education Code section 17307 was never raised in the underlying litigation. This is with good reason. Both Cal-City and the District sued for breach of the Belmont 2 contract, presuming that the contract was valid. Thus, there is an inference that even if Education Code section 17307 was arguably applicable, it would not have barred Cal-City from its recovery.
2. Lost profits.
Wilson Elser contends that Cal-City failed to offer sufficient evidence establishing with reasonable certainty that the lost profits damages occurred, and the extent of those damages. We agree.
In its petition for rehearing, Cal-City contends: “This Court’s principal basis for setting aside the jury’s award of damages for lost profits resulting from impaired bonding capacity was based upon its conclusion that Cal-City’s expert, Mr. Mowrey, impermissibly used gross profits rather than net profits as his measure of damages. That issue, however, was neither raised in nor fairly encompassed by [Wilson Elser’s] brief.” We disagree with the foregoing sentence. First, our principal basis for setting aside the jury’s award of damages for lost profits was that they were too speculative and uncertain. Only as an addendum did we conclude that Mowrey’s testimony failed to establish net lost profits. Second, lost profits, as Cal-City admits, must be net profits (or the equivalent), so the issue was fairly encompassed in the issues raised by Wilson Elser. Not only did Wilson Elser argue that the lost profits were not recoverable, it also argued that the evidence had to show damages with reasonable certainty as to their occurrence and extent. To make this argument, Wilson Elser pointed out that Mowrey’s testimony was out of synch with Cal-City’s historical net income. On page 20 of the opening brief, Wilson Elser stated: “Not only were Mr. Mowrey’s opinions based on speculation—a wish list of projects—Cal-City’s own financial records (which showed net income) showed the absurdity of the award of $1,722,500 for lost profits. Mr. Lim, Cal-City’s most senior officer, testified through a Korean interpreter that the company’s net income for 1997 was $85,000; for 1998 it was a negative $47,437; for 1999 it was $502,688; and for 2000 it was $86,749. . . . Damages for the loss of prospective profits for a business with a demonstrated past earning history are recoverable only if they can be ascertained with reasonable certainty from the past volume of business and other provable data relevant to probable future sales. [Citation.] Under this standard, the future lost profits awarded by the jury herein have no relationship to Cal-City’s past earning history.” In the reply brief, Wilson Elser stated: “[L]ost prospective net profits may be recovered if the evidence shows, with reasonable certainty, both their occurrence and extent.” Previously, Cal-City did not attempt to explain—as it is attempting now—that while its net income was low, that was merely for tax purposes, and that its net revenues were much higher. Nonetheless, our analysis of Mowrey’s testimony in our initial opinion comported with the law. “[Government Code section 68081] does not require that a party actually have briefed an issue; it requires only that the party had the opportunity to do so. By requiring the parties to file opening and responding briefs, the California Rules of Court automatically give the parties the opportunity to brief every issue that is raised in the appeal. [Citation.]” (People v. Alice (2007) 41 Cal.4th 668, 677.) The Alice court explained: “We do not suggest, of course, that the parties have a right . . . to submit supplemental briefs or be granted a rehearing each time an appellate court relies upon authority or employs a mode of analysis that was not briefed by the parties. The parties need only have been given an opportunity to brief the issue decided by the court and the fact that a party does not address an issue, mode of analysis, or authority that is raised or fairly included within the issues raised does not implicate the protections of [Government Code] section 68081.” (People v. Alice, supra, at p. 679.)
a. Case law regarding lost profits.
In order to recover, a plaintiff must establish lost profits with reasonable certainty as to both their occurrence and extent. (Maggio, Inc. v. United Farm Workers (1991) 227 Cal.App.3d 847, 869–870.) In the construction context, our Supreme Court stated: “Loss of business, restriction of research, reduction of bonding capacity, and destruction of a former advantageous competitive position comprise imponderable factors which may affect different companies to differing extents and amounts. Measurement of the damages requires proof of the effect of these factors upon the profits of plaintiff. [Citation.]” (Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 301 (Warner Construction).) A plaintiff must put on the best evidence of which the nature of the case is capable. (Ibid.)
In Warner Construction, the plaintiff argued that its working capital was impaired by the defendant’s actions, which curtailed the plaintiff’s construction operations and research. This led to a loss of bonding capacity. The court stated that “an award for lost profits could not be criticized as speculative.” (Warner Construction, supra, 2 Cal.3d at p. 301.) But the plaintiff presented no evidence “to show the loss of profit resulting from this alleged impairment of capital.” (Ibid.) The court went on to explain that the “[p]laintiff has not presented the ‘best evidence’ available. It did not present evidence of its profits for the years preceding or following 1965; it presented no expert analysis or breakdown of the damages. The damages attributed by plaintiff to loss of capital amount to an annual return of over 30 percent on the capital; plaintiff presented no evidence that its business achieved such a rate of return on invested capital. In sum, although plaintiff undoubtedly sustained damage from the loss of capital, the amount of damage is entirely uncertain, and we cannot believe that plaintiff has brought forth the best evidence of which the case is capable.” (Id. at p. 30.)
In Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 47 Cal.App.4th 464 (Arntz), the case relied upon most by Cal-City, a jury found that a surety breached a contract to provide bonding. The jury awarded the contractor $16.5 million for lost future profits after the contractor’s expert witnesses opined that the lost profits were between $15.8 million and $18.8 million. The defendant argued that damages for lost bonding capacity are inherently speculative. Further, it argued that damages for lost bonding capacity could only be established with proof of specific, identified construction projects that the contractor had prepared bids on but could not submit due to the lack of a bond. (Arntz, supra, 47 Cal.App.4th at p. 489.) The Arntz court stated that “lost profit from impaired bonding capacity is recoverable in a proper case, and is not inherently speculative. [Citations.]” (Ibid.) For authority, the Arntz court cited to Warner Construction. Arntz did not set forth the substance of the expert’s testimony. Rather, the Arntz court simply stated it had reviewed the expert’s testimony and deemed it to be substantial evidence because it was not inherently improbable. (Id. at pp. 489–490.) Though Arntz gave a cursory analysis of whether damages were speculative, it did not analyze whether they were uncertain.
S. C. Anderson, Inc. v. Bank of America (1994) 24 Cal.App.4th 529, 535 (S.C. Anderson) is instructive in loss of bonding capacity cases. Due to loss of bonding capacity, the plaintiff was unable to submit a prepared $2,980,000 bid on a school district project. The bid would have been the low bid. The plaintiff claimed it lost its 5 percent profit margin, which was $140,588. (Id. at pp. 534–535) The trial court granted a nonsuit. (Id. at p. 535.) The court affirmed. The plaintiff did not offer evidence that its bid was accurate or reasonable or that it could have done the work required under the plans and specifications for the amount of its bid that represented the projected costs of the project. There was no evidence whether the bid contained accurate statements of the cost of work estimated. As well, there was no evidence of the nature and scope of the project. The court stated: “We recognize [the plaintiff] was not required to establish the amount of its damages with absolute precision, and was only obliged to demonstrate its loss with reasonable certainty. [Citation.] However, the law also compels the plaintiff to present ‘the best evidence . . . [of damages] of which the nature of the case is capable.’ [Citation.] Here there was no showing by [the plaintiff] that it was impossible or impracticable to produce evidence relating to the accuracy of its bid, its ability to competently and efficiently perform the [school district] project, or its likely net profit. [Citations.]” (Id. at pp. 537–538.) From S.C. Anderson we glean the rule that a construction company seeking to recover lost profits due to loss of bonding capacity must demonstrate, with the best evidence available, the likely net profit it would have realized on lost business.
That lost profits must be net rather than gross is beyond dispute. (Gerwin v. Southeastern Cal. Assn. of Seventh Day Adventists (1971) 14 Cal.App.3d 209, 222, [“When loss of anticipated profits is an element of damages, it means net and not gross profits”].) If a plaintiff was allowed to recover gross profits, it would be unjustly enriched. Net profits, the only profits recoverable, “‘are the gains made from sales “after deducting the value of the labor, materials, rents, and all expenses, together with the interest of the capital employed.” [Citation.]’” (Id. at p. 223.) If the evidence in a case establishes loss of gross revenue rather than loss of pecuniary gain, damages based on lost profits cannot be upheld. (Ibid.) Gross profits can be recovered only when they are equivalent to net profits, such as when operational costs are fixed regardless of a defendant’s breach. (Automatic Vending Co. v. Wisdom (1960) 182 Cal.App.2d 354, 358 [an award of gross profits may be allowed to the plaintiff when they also constitute the net profits].)
Olcese v. Davis (1954) 124 Cal.App.2d 58, 63, a case cited by Cal-City in its petition for rehearing, stated that “[n]et profits are the gains made from sales ‘after deducting the value of the labor, materials, rents’” and other expenses. It went on to state that “‘“[g]ross profits are really not profits at all, for they generally refer to the excess in the selling price over the cost price without deducting the expenses of resale and other costs of doing business. [Citation.]”’”
Against this backdrop, our Supreme Court examined the issue of lost profits in Lewis Jorge Construction Management, Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 960, 968 (Lewis Jorge).
In Lewis Jorge, the plaintiff was awarded a construction contract for a school district. The contract was terminated in 1996. At trial, the plaintiff presented evidence that in June 1996 it had a bonding limit of $10 million per project, and an aggregate limit of $30 million. A year later, the plaintiff’s bonding limits were cut in half. In 1998, the plaintiff ceased bidding. It sued the school district for breach of contract and sought, inter alia, lost profits. “[The plaintiff] sought to prove the extent of its lost future profits on unidentified construction projects, using as the relevant period the date of the [school district’s] breach to the date of trial, and relying on its profitability during the four years preceding the breach. [The expert], a financial analyst who specialized in calculating lost profits claims, projected that [the plaintiff] had lost $95 million in gross revenue for future contracts that, based on its past history, it would likely have been awarded. Historically, [the contractor] had realized a profit of about 6 percent of revenue. [The expert] calculated lost profits on unidentified projects at $4,500,000, which discounted to present value came to $3,148,107.” (Lewis Jorge, supra, 34 Cal.4th at p. 966.) The court concluded that lost profits on unidentified projects could not be recovered as general contract damages. (Lewis Jorge, supra, at p. 973.) Further, the court analyzed whether the lost profits were reasonably contemplated by the parties and could qualify as special damages. To recover special damages, the plaintiff had to prove that it was reasonably probable that it would have earned a profit in the claimed amount, and that the damages were foreseeable. In rejecting the damages, the court stated that “the lost profits [the plaintiff] claimed it would have made on future construction projects were uncertain and speculative.” (Id. at p. 977.) Additionally, the court concluded that the lost profits were not foreseeable damages. (Ibid.)
Lewis Jorge reviewed a series of cases. It explained that Arntz is the only California decision upholding damages for a contractor’s lost profits on future contracts due to loss of bonding capacity. (Lewis Jorge, supra, 34 Cal.4th at p. 973.) As to cases from other jurisdictions, the court noted: “Although a few cases state that a contractor suing for breach of contract may recover as special damages any profits it might have earned on other unawarded construction contracts, such damages are frequently denied as too speculative. [Citation.]” (Id. at p. 975.) Other cases barred recovery “not because the amount of lost profits [was] speculative or remote, but because their occurrence [was] uncertain. [Citations.]” (Id. at p. 976.)
A sampling of cases from other jurisdictions provides guidance.
In Hirsch Electric Co. v. Community Services, Inc. (1988) 536 N.Y.S.2d 141 (Hirsch), it was claimed that a general contractor’s breach of contract made it impossible for a subcontractor to receive bonding to bid on a subsequent job. According to the subcontractor, it would have bid on the subsequent job, it would have been the low bidder, and that it would have received the job and earned a profit of $800,000. The court stated that these contentions were “based on inferences piled upon inferences and, as a matter of law, are too speculative to give rise to the recovery of damages for lost profits [citation].” (Id. at p. 143.)
The claim in Manshul Const. Corp. v. Dormitory Authority (1981) 444 N.Y.S.2d 792 (Manshul) was similar to the one in Hirsch. A plaintiff contractor sought $1,800,000 for loss of anticipated revenues. It argued that if the parties’ contract had gone smoothly, plaintiff would have realized future profits: (1) if there were other jobs; (2) if it had estimated other jobs; (3) if it had bid on other jobs; (4) if the jobs had been awarded by the owners; (5) if the plaintiff had been low bidder; (6) if the jobs had proceeded; (7) if plaintiff had no problems; (8) if plaintiff had been paid and (9) if the jobs had been big and successful enough to generate profits. (Id. at pp. 803–804.) The plaintiff offered evidence that there were jobs available for bidding, their previous success rate in bidding, and their previous profit rate. (Id. at p. 803.) Unanswered were the following questions: During the relevant period, were jobs available comparable to those in previous years? Had the economic and market conditions changed? Would the plaintiff have actually been the successful bidder under changed economic and market conditions? Could there be any assurances that future jobs taken by the plaintiff would go smoothly, and that the plaintiff would earn a significant profit? Would there have been enough jobs for the plaintiff to earn $1,800,000, or even the $800,000 that the jury awarded? The court stated: “The intervening factors, the open-ended possibilities and the wishful nature of the inferences leads this Court to the inevitable conclusion that plaintiff Manshul’s claim for damages for loss of anticipated revenues is too speculative to stand as a matter of law.” (Id. at p. 804.)
The contractor in Rocky Mountain Construction Co. v. United States (1978) 218 Ct.Cl. 665, 666 sought damages based on lost future profits. In making a claim, the contractor argued that it was prevented from bidding on other jobs due to changes made in its government contract. The United States Court of Claims concluded that it was “wholly conjectural whether [the contractor] would have been awarded those additional contracts” and that “as a matter of law such speculative and remote damages are not compensable. [Citations.]” (Ibid.)
b. Arntz impliedly conflicts with Lewis Jorge and is neither controlling nor persuasive; we opt not to follow Arntz.
Arntz was decided by the First District of the California Court of Appeal. As a result, Arntz does not tie our hands and we are free to disagree with it. (Greyhound Lines, Inc. v. County of Santa Clara (1986) 187 Cal.App.3d 480, 485 (Greyhound).) But we respect stare decisis; it serves “the important goals of stability in the law and predictability of decision.” (Ibid.) As a result, “we ordinarily follow the decisions of other districts without good reason to disagree.” (Ibid.)
We have good reason to disagree with Arntz.
First, Lewis Jorge and Arntz are, at least impliedly, at odds. The expert in Lewis Jorge, as did Mowrey, calculated lost profits using past profitability as a model. The Supreme Court held that the lost profits damages were both speculative in amount and uncertain as to their occurrence. Given a choice between the Supreme Court and the First District, we must follow the former.
Case law is not consistent in the use of the words speculative and uncertain. Sometimes the word speculative is used to refer to occurrence, as in Warner Construction, and sometimes it is used to refer to the amount of damages, as in Lewis Jorge. The word uncertain is given opposite meanings in those two cases. For purposes of this opinion, we adopt the definition implied in Lewis Jorge. Uncertain is a term of art referring to the occurrence of damages and speculative is a term of art referring to the amount of damages.
Cal-City contends that our reading of Lewis Jorge is misplaced, and that Arntz remains good law because it is supported by Warner Construction. Warner Construction, Cal-City points out, found the plaintiff’s evidence lacking because it did not demonstrate past profitability. In its petition for rehearing, Cal-City advances the following theory: “Thus, even if Arntz had never been decided, [Warner Construction] would provide a legal basis for the lost profits award in this case, as Cal-City’s proof in this case, which analyzed the company’s history to establish the cost of the opportunities lost because of its impaired bonding capacity, provided precisely the type of proof that would have permitted recovery under the [Warner Construction] rule. [¶] Lewis Jorge does not overrule Arntz or even criticize it.”
We are not persuaded. Cal-City reads Warner Construction too expansively and improperly discounts Lewis Jorge. Warner Construction merely noted that the plaintiff failed to offer the best evidence available, which would have been evidence of past profitability. It did not state—and had no occasion to hold—that past evidence of profitability would have been sufficient to sustain an award of lost profits. As Lewis Jorge explained, Warner Construction “did not reach the merits of the contractor’s lost profits claim.” (Lewis Jorge, supra, 34 Cal.4th at p. 974.) In contrast, Lewis Jorge specifically held that the lost profits claimed by the plaintiff were uncertain and speculative.
Cal-City argues “the Supreme Court [in Lewis Jorge] engaged in no discussion of the expert’s methodology and nowhere suggested that his analysis was speculative or otherwise lacking.” According to Cal-City, “the determining factor in Lewis Jorge was not that the expert’s method for calculating damages was too speculative, it was that loss of bonding as a result of the defendant’s breach of the contract was not sufficiently certain—i.e., foreseeable—to support a claim that the parties foresaw or contemplated it when entering into the contract.” The problem for Cal-City is that Lewis Jorge rejected lost profits as special damages on alternative grounds, i.e., because they were speculative and uncertain, and because they were unforeseen. It is axiomatic that “[w]hen an appellate court bases its decision on alternative grounds, none is dictum.” (Greyhound, supra, 187 Cal.App.3d at p. 485.) We cannot ignore one of these two grounds in favor of the other.
Second, Arntz analyzed lost profits in three very short paragraphs. The only issues argued by the defendant were that the lost profits were speculative, and that the plaintiff had to produce prepared bids as an offer of proof. Arntz did not discuss what was meant by the word speculative—whether it referred to the extent or occurrence of damages—and it did not expressly analyze the damages to determine whether the extent and occurrence had been reasonably shown. The court simply said that lost profits from impaired bonding capacity are not inherently speculative, and that the expert’s testimony was not inherently improbable. The analysis in Arntz was cursory, and it did not properly parse the issues. Also, Arntz did not discuss the expert’s testimony, and an opinion is not authority for a proposition not considered. (Serna v. Superior Court (1985) 40 Cal.3d 239, 257.) Arntz does not establish that evidence of past profitability is sufficient to show the extent and occurrence of lost profits.
Third, we find that the reasoning in Hirsch and Manshul, cited by Lewis Jorge, is persuasive. To say that a contractor would have been awarded a particular number or percentage of contracts, or any at all, is piling inference upon inference. Also, there are too many variables that could affect what might have happened, such as changes in competition, problems on future jobs, cost of materials and labor, lawsuits, and the size and timing of future jobs. With all the open-ended possibilities, lost profits in such a case are speculative and uncertain.
Based on the foregoing discussion, we decline to follow Arntz. We opt, instead, to hold that lost profits for future construction contracts cannot be established by their availability and an extrapolation from a contractor’s past success in the industry and history of making a profit.
c. Certainty of the occurrence and extent of Cal-City’s lost profit damages.
The jury awarded Cal-City $1,722,500 for lost future profits. According to Wilson Elser, Mowrey’s testimony was insufficient to support the jury’s finding. We agree. Though Warner Construction suggested the possibility that lost profits could be recovered due to loss of bonding capacity and Arntz upheld such an award, Lewis Jorge and our concerns with Arntz lead us to decide the lost profits issue in Wilson Elser’s favor. In Lewis Jorge, the expert multiplied projected gross revenues by a 6 percent historical profit. Our Supreme Court rejected his testimony as speculative and uncertain. In our view, a similar fate must befall Mowrey’s testimony.
There is no need to analyze Mowrey’s theories. As a matter of law, the lost profits claimed are not recoverable.
d. The motion for JNOV.
Wilson Elser requested a partial JNOV as to lost profits. A trial court is empowered to grant a partial JNOV. (Beavers v. Allstate Ins. Co. (1990) 225 Cal.App.3d 310, 314.) And a JNOV must be granted whenever a motion for directed verdict should have been granted had it been made. But can a trial court grant a partial JNOV as to some but not all damages?
Code of Civil Procedure section 630, subdivision (b) provides that a trial court can grant a directed verdict as to some but not all issues involved in an action. However, if damages are inadequate or excessive, all a trial court can do is deny a new trial on the condition that the opposing party agrees to an additur or remittitur. (Code Civ. Proc., § 662.5.) On the other hand, if a plaintiff is entitled to one type of damages awarded but not another, then there is no logical impediment to a partial JNOV. (See Teitel v. First Los Angeles Bank (1991) 231 Cal.App.3d 1593, 1605, fn. 6. [“A [JNOV] for an amount less than the jury verdict would seem appropriate where there can be no dispute as to the amount”].)
Wilson Elser was entitled to a partial JNOV in its favor with respect to the lost profits damages award. Code of Civil Procedure section 629 provides, in relevant part: “If the motion for judgment notwithstanding the verdict be denied and if a new trial be denied, the appellate court shall, when it appears that the motion for judgment notwithstanding the verdict should have been granted, order judgment to be so entered on appeal from the judgment or from the order denying the motion for judgment notwithstanding the verdict.” Based on this, we are compelled to order entry of a partial JNOV in Wilson Elser’s favor.
DISPOSITION
Wilson Elser is entitled to a partial JNOV with respect to the lost profits award. The judgment is hereby modified to eliminate the lost profits damages. As modified, the judgment is affirmed.
The parties shall bear their own costs.
We concur: BOREN, P. J., DOI TODD, J.