Corotoman, Inc. v. Central West Virginia Regional Airport Authority

• Court: Court of Appeals for the Fourth Circuit
• Decided: July 19, 2024
• Docket: 23-1873
• Status: Unpublished

Opinion

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UNPUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 23-1873

COROTOMAN, INC.,

Plaintiff - Appellant,

v.

CENTRAL WEST VIRGINIA REGIONAL AIRPORT AUTHORITY, INC.,

Defendant - Appellant.

Appeal from the United States District Court for the Southern District of West Virginia, at Charleston. Irene C. Berger, District Judge. (2:21-cv-00545)

Argued: May 7, 2024 Decided: July 19, 2024

Before GREGORY, HEYTENS, and BENJAMIN, Circuit Judges.

Question certified to the Supreme Court of Appeals of West Virginia by unpublished order. Judge Gregory directed entry of the order with the concurrences of Judge Heytens and Judge Benjamin.

ARGUED: Mark Russell Sigmon, MILBERG COLEMAN BRYSON PHILLIPS GROSSMAN, PLLC, Raleigh, North Carolina, for Appellant. Mychal Sommer Schulz, BABST, CALLAND, CLEMENTS, ZOMNIR, P.C., Charleston, West Virginia, for Appellee. ON BRIEF: Lucy N. Inman, Scott C. Harris, Katharine W. Batchelor, MILBERG COLEMAN BRYSON PHILLIPS GROSSMAN, PLLC, Raleigh, North Carolina, for Appellant. Austin D. Rogers, BABST CALLAND, P.C., Charleston, West Virginia; Melissa Foster Bird, NELSON MULLINS RILEY & SCARBOROUGH LLP, Huntington, West Virginia, for Appellee. USCA4 Appeal: 23-1873 Doc: 39-1 Filed: 07/19/2024 Pg: 2 of 9

ORDER

GREGORY, Circuit Judge:

The United States Court of Appeals for the Fourth Circuit, availing itself of the

privilege afforded by the State of West Virginia through the Uniform Certification of

Questions of Law Act, West Virginia Code § § 51-1A-1 to 51-1A-13, hereby requests that

the Supreme Court of Appeals of West Virginia exercise its discretion to resolve a certified

question of law. Pursuant to West Virginia Code § 51-1A-6(a)(1), we identify the

“question of law to be answered” as:

Whether, in the appropriate case, West Virginia courts would apply the gross disproportionality rule to limit an injured party’s damages in a breach of a construction contract dispute; and, if so, how gross disproportionality is calculated, which party (the breaching party or the injured party) bears the burden of proving gross disproportionality and the specific amount of the alternative form of damages, and what is the consequence of that party failing to meet its burden.

Resolution of this question is outcome determinative in the present appeal, as the appropriate

award of damages is conclusively resolved by the applicability of the gross disproportionality

rule and the burden of proof if the rule applies. And, in our view, there is no controlling court

decision, constitutional provision, or statute of West Virginia answering this question,

rendering it appropriate for certification. See W. Va. Code § 51--1A-3; Grattan v. Bd. of

Sch. of Comm’rs of Balt. City, 805 F.2d 1160, 1164 (4th Cir. 1986) (explaining that

certification is appropriate where this Court is “required to address a novel issue of local

law which is determinative in the case”). We acknowledge that the Supreme Court of

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Appeals of West Virginia “may reformulate the question.” § 51-1A-6(a)(3). Accordingly,

we exercise our discretion to sua sponte certify a question of state law. See Shears v.

Ethicon, Inc., 64 F.4th 556, 563 (4th Cir. 2023).

I.

The Central West Virginia Regional Airport Authority operates the Yeager Airport in

Charleston, West Virginia. In the mid-2000s, the Airport Authority decided to remove a large

hill (which the parties refer to as a knoll) at the end of the airport’s runway. J.A. 3234–35.1

Because of the knoll’s location, airplanes approaching or departing the runway had to change

elevation very quickly, which was costly and more difficult than ascending or descending at

the usual rate. J.A. 3183. The Airport Authority obtained grants from the Federal Aviation

Administration (FAA) to acquire the property that would be affected by the project and to

complete the construction work to remove the knoll. J.A. 3237–39. Corotoman, Inc., owned

some of the property that the Airport Authority sought to acquire. J.A. 1988.

To avoid costly and time-consuming condemnation proceedings, the Airport

Authority aimed to acquire the property voluntarily. J.A. 3240–41. Before making an

offer to Corotoman, however, it retained Zdrojewski & Company to conduct an appraisal

of the property in late 2010. J.A. 3952–53. The Zdrojewski appraisal determined that the

value of the property at the time was $180,000. J.A. 1814.

The Airport Authority offered Corotoman $260,125 for the property. J.A. 3211–

13. Corotoman’s president, John Wellford, rejected the offer. J.A. 3245. Instead, the

1 Citations to the “J.A” refer to the Joint Appendix filed by the parties in this appeal. 3 USCA4 Appeal: 23-1873 Doc: 39-1 Filed: 07/19/2024 Pg: 4 of 9

parties negotiated an agreement under which, among other things, the Airport Authority

would be allowed to enter Corotoman’s land to remove the knoll, and, after the knoll had

been removed, the Airport Authority would overblast the land to further decrease the

elevation to 35 feet below the ground level established by removing the knoll. J.A. 445,

453–54. Overblasting is a process by which holes are drilled to the required depth (here

35 feet), explosives are placed into the holes, the explosives are detonated to loosen the

land, and the loose material is subsequently removed and carted off. J.A. 2366, 2372–73,

3757. The overblasting requirement was to Corotoman’s benefit because the overblasted

land would be flatter and thus easier to develop; the requirement was not related to or

necessary for preventing interference with airplane trajectories arriving at or departing

from the airport. The overblast would happen after the knoll removal on the land where

the knoll had been when the elevation was already low enough so as not to interfere with

the approaching and departing airplanes.

With respect to damages, the agreement between the parties provided that

in the event of a breach occurring after commencement of the Project, Corotoman may, in its discretion and as the circumstances reasonably dictate, revoke the License granted herein and/or seek the greater of either (1) actual, compensatory, consequential, and/or incidental damages or (2) liquidated damages in the amount of ten thousand dollars ($10,000.00) per breach.

J.A. 457.

The knoll-removal project was completed per the Airport Authority’s requirements,

but the overblast was never done. J.A. 2866. Corotoman filed suit against the Airport

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Authority in 2019, alleging breach of contract. 2 J.A. 18. In January 2022, the district court

granted Corotoman’s motion for partial summary judgment, concluding that the undisputed

facts established that the Airport Authority had breached the agreement by failing to

overblast the land, and that no valid defenses excused the breach. J.A. 2874.

In lieu of a bench trial in open court on the issue of damages, the parties filed written

submissions and evidence. J.A. 5118. These included an expert report from each party

regarding the cost to complete the overblast. J.A. 5122. Corotoman’s expert opined that

the overblast would cost $14,659,351. Id. The Airport Authority’s expert opined that

Corotoman’s expert had overestimated the costs of removing the blasted material and thus

estimated the total cost to be $4,381,080. Id. The district court concluded that this cost to

complete was grossly disproportionate to the value of the property, which it approximated

based on the 2010 Zdrojewski appraisal. But the district court conceded that it could not

establish the current value of the property because the appraisal was “too outdated, both in

terms of current property values and the current condition of the property.” J.A. 5131. It

held that awarding cost-to-complete damages (damages in the amount that it would cost to

complete the outstanding work, here, the overblast) would “serve only to penalize the

Airport Authority and act as a windfall to Corotoman, rather than placing Corotoman in

the position it would be in absent the breach.” J.A. 5132. Thus, it concluded that

2 The suit was filed and jurisdiction was proper in federal court under 28 U.S.C. § 1334(b) because Corotoman originally filed this case as an adversary proceeding in its Chapter 11 bankruptcy, and this claim directly affects the bankruptcy estate. We have jurisdiction under 28 U.S.C. § 1291 over the district court’s final judgment, which it issued on July 28, 2023. 5 USCA4 Appeal: 23-1873 Doc: 39-1 Filed: 07/19/2024 Pg: 6 of 9

Corotoman was entitled only to diminution-in-value damages (damages in the amount that

the property value decreases as a result of the breach). Id. Finding that “the record is

devoid of any evidence that would allow the Court to determine the diminution in value

caused by the Airport Authority’s breach,” it further held that Corotoman had failed to

meet its burden to prove damages beyond mere speculation and was thus entitled only to

nominal damages. J.A. 5135. Corotoman timely appealed and argued before this Court

that the district court erred in not awarding cost-to-complete damages.

II.

Under West Virginia law, “[a] claim for breach of contract requires proof of the

formation of a contract, a breach of the terms of that contract, and resulting damages.”

Sneberger v. Morrison, 776 S.E.2d 156, 171 (W. Va. 2015). Only the question of damages

is at issue in this appeal. “As a general rule, the proper measure of damages in such cases

involving building contracts is the cost of repairing the defects or completing the work and

placing the construction in the condition it should have been in if properly done under the

agreement contained in the building contract.” Steinbrecher v. Jones, 153 S.E.2d 295, 304

(W. Va. 1967). But many states have an exception to this default rule: the injured party

may not recover cost to complete damages if those damages would be grossly

disproportionate to the value that the uncompleted work adds to the property. See, e.g.,

Nichols Const. Corp. v. Va. Machine Tool Co., 661 S.E.2d 467, 473 (Va. 2008); Panorama

Vill. Homeowner’s Ass’n v. Golden Rule Roofing, Inc., 10 P.3d 417, 422 (Wash. App.

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2000); Andrulis v. Levin Const. Corp., 628 A.2d 197, 206–08 (Md. 1993). This exception

is called the gross disproportionality rule.

The district court applied the gross disproportionality rule to this case and then

concluded that Corotoman was entitled only to nominal damages because the record was

devoid of evidence of the diminution in value resulting from the Airport Authority’s

breach. The question before us is whether the district court erred in applying the gross

disproportionality rule, and, if not, to which party’s detriment the lack of evidence in the

record inures.

The Airport Authority argues that West Virginia courts have expressly recognized

the gross disproportionality rule and points to two cases. See Resp. Br. at 21 (citing

Steinbrecher, 153 S.E.2d at 304; Trenton Constr. Co. v. Straub, 310 S.E.2d 496, 499 (W.

Va. 1983). Contrary to the Airport Authority’s contention, however, these cases do not

actually enshrine the gross disproportionality rule in West Virginia law. In Steinbrecher

v. Jones, the court stated only that the gross disproportionality rule, recognized in “some

states,” was “not involved under the facts presented by the evidence produced at the trial

held in this present case, so [the court did] not need to discuss it.” 153 S.E.2d at 304. And

in Trenton Construction Co. v. Straub, the court cited its discussion in Steinbrecher and

again concluded that the gross disproportionality rule was “not involved under the facts

presented at trial” because the cost was “clearly not disproportionate to the value of the

Straubs’ home and the trial court was correct in applying the cost of repair rule.” 310

S.E.2d at 499. Neither case can fairly be read as resolving the applicability of the gross

disproportionality rule under West Virginia law.

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We thus face the novel local-law question of whether West Virginia courts would

apply the gross disproportionality rule in the appropriate case and, if so, how

disproportionality is calculated, which party bears the burden of proving gross

disproportionality and the specific amount of the alternative form of damages, and what

consequences follow if that party fails to meet its burden. Because the answer is

“determinative” in this appeal and “there is no controlling appellate decision, constitutional

provision or statute” of West Virginia, certification is appropriate. § 51-1A-3.

III.

In light of the foregoing, pursuant to the privilege made available to this Court by

the West Virginia Uniform Certification of Questions of Law Act, it is hereby ORDERED:

(1) That the question set forth herein be certified to the Supreme Court of

Appeals of West Virginia for resolution;

(2) That the Clerk of this Court transmit to the Supreme Court of Appeals of

West Virginia, under the official seal of this Court, a copy of this Order of

Certification; and

(3) That the Clerk of this Court provide the original or copies of all or such

portions of the record before this Court as may be requested by the Supreme Court

of Appeals of West Virginia, with any and all such requests being effective upon

notification by ordinary means from the Clerk of the Supreme Court of Appeals.

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Pursuant to West Virginia Code § 51-1A-6(a)(4), we note that all of the parties in

this matter are represented by counsel, and the names and addresses of counsel of record

for the parties are:

Counsel for the Plaintiff, Corotoman, Inc.:

Katharine Wood Batchelor Mark Russell Sigmon Scott Crissman Harris MILBERG COLEMAN BRYSON Lucy Noble Inman PHILLIPS GROSSMAN, PLLC MILBERG COLEMAN BRYSON Suite 1001 PHILLIPS GROSSMAN, PLLC 5 West Hargett Street 900 West Morgan Street Raleigh, NC 27601 Raleigh, NC 27603

Counsel for the Defendant, Central West Virginia Regional Airport Authority, Inc.:

Katrina Noel Bowers Melissa G. Foster Bird Austin Drake Rogers NELSON MULLINS RILEY Mychal Sommer Schulz & SCARBOROUGH, LLP BABST, CALLAND, Suite 200 CLEMENTS, ZOMNIR, P.C. 949 3rd Avenue Suite 1000 Huntington, WV 25701 300 Summers Street Charleston, WV 25301

This Order of Certification is entered by Judge Gregory, with the concurrences of

Judge Heytens and Judge Benjamin.

QUESTION CERTIFIED

A True Copy, Teste Nwamaka Anowi, Clerk FOR THE COURT: BY: ____________ Jeffrey S. Neal Deputy Clerk Roger L. Gregory United States Circuit Judge