were reduced to writing. We disagree. The contracts included the essential terms, the City fully performed in accordance with the contracts, and Reliable itself referred to the written contracts when it submitted CP-45s to the City. Reliable cannot refer to the written contracts at one time and then later claim that there are no such written contracts. The 10-year statute of limitations applies.
We therefore grant in part the plaintiff's motion for summary judgment on its breach of contract claim. There is a question of fact, however, as to the amount of damages. We agree with defendants in that the plaintiff's damage calculation is lacking in statistical reliability.
There are many ways to estimate damages. One possibility would be to go invoice-by-invoice and determine an almost exact overcharge amount. Although this may be a cumbersome and time-consuming project, it is a viable alternative since essentially all invoices and price lists have been accounted for and provided to the City.
Another method of estimation is similar to that performed by the City. This involves taking a numerical sample of invoices to calculate damages. Thus, a number of invoices would be examined and the results from that sample would be extrapolated to the population. The population is then the number of invoices or in this case about 9,900 invoices. Here the City examined 418 of the 9,900 invoices, thus examining 4.2% of total invoices. Since it chose a number of invoices, the question posed is essentially what percentage of the number of invoices include an overcharge. For instance, if the City found that 209 (or 50%) of the 418 invoices were overcharged, then it could conclude that 50% of the 9,900 invoices were in error or overcharged. The next step would be to put this information into dollars. Thus, an average overcharge amount (or per cent) would be determined. This average overcharge error (28% as estimated by the City) could then be extrapolated to the population as follows: 50% of total amount of all invoices times 28% equals damage estimation.
Although this is similar to the City's calculation, several points should be made regarding its estimation. As mentioned by defendants, when selecting a sample of invoices, the population is the total invoices and therefore the percentage error must be applied to the invoice dollar total. In the City's report the overcharge percentage (28%) was multiplied by the total purchases. This would only be proper if the sample had been taken from total payments made by the City to Reliable and therefore had been drawn from the ledgers used by the City to arrive at its total purchase amount (the City's rep. at 3).
Second, if a number of invoices are to be reviewed, then each invoice selected should be kept in the sample, and those invoices selected should probably be randomly chosen. Thus, no items from the selected group should be excluded. If, as in the plaintiff's case, it is impossible to determine the necessary product information from some of the invoices, then those items should be so noted and extrapolated as such to the population. This is not to say that the indeterminable items would be considered to be correct, but either a separate estimation of those items could be calculated or the same percentage rate of error for the determinable items could be extrapolated to these items.
Another sampling technique is one that is based on the dollar amount of total invoices, whereby the sample consists of selecting invoice dollar amounts from the population. This, in essence, is what defendants advocate in their memorandum. For example, if the invoices total $ 1,000,000 and it was determined that a review of 20% of the population would be representative, then a sample -- either randomly or judgmentally chosen
-- of invoices totalling $ 200,000 (20% of $ 1,000,000) would be examined. The amount of the dollar overcharge (or error) from this sample could then be directly extrapolated to the population. Thus, if the total overcharge from the $ 200,000 sample was $ 20,000 (10%), then the estimated population overcharge would be 10% or $ 100,000 (10%*$ 1,000,000). This calculation again is similar to the one performed by the City. However, the City's sample was of a number of invoices and not of a dollar amount of invoices.
Finally, we point out that before the sample is drawn it should be established what an adequate sample size would be. Also, the sample should be representative of the population. Thus, if there are particularly large vendors (or contracts) that comprise a significant amount of the invoices, then those vendors/contracts should represent a significant portion of the sample. Similarly, if more invoices pertain to one year, then more from that year should be included in the sample. If the sample is chosen randomly, then the sample should theoretically represent the population, and if the sample is chosen judgmentally, then those factors should be kept in mind.
We have noted just a few of the many possible methods to arrive at a damages estimation. While we decline to comment on what a reasonable estimation of damages would be, we question the reliability of plaintiff's damage calculation. However, we also point out that when the City performed its estimation it did not have complete records and cannot be prejudiced for information that was not made available to it. If plaintiff decides to change its approach and recalculate the damages prior to trial, it must notify defendants.
The City requests this court to order an accounting "should we decide that the damage figure is not certain enough." The accounts in this case are not so complicated that only a court of equity can satisfactorily unravel them. Dairy Queen v. Wood, 369 U.S. 469, 478, 8 L. Ed. 2d 44, 82 S. Ct. 894 (1962). A jury, under proper instructions from the court, would be able to determine the amount of damages. Id. at 479. An accounting is therefore not warranted and the defendants have the right to a jury determination on the damages issue.
JAMES B. MORAN,
Chief Judge, U.S. District Court
March 30, 1993.