West Virginia Supreme Court Places Burden on Breaching Parties to Prove "Gross Disproportionality"

In Corotoman, Inc. v. Central West Virginia Regional Airport Authority, Inc., the Supreme Court of Appeals of West Virginia clarified the application of the "gross disproportionality" doctrine in construction contract disputes. The decision provides important guidance for owners, contractors, developers, and public entities by confirming that cost-to-complete damages remain the default measure of recovery and by establishing which party bears the burden of proving that such damages should be limited.

The dispute arose from an agreement related to a runway improvement project at Yeager Airport in Charleston. Under the agreement, the Central West Virginia Regional Airport Authority was to perform blasting work to lower the elevation of property owned by Corotoman, Inc., thereby making the property more suitable for development. While the Airport Authority completed the runway project, it did not perform the additional blasting work. Corotoman sued for breach of contract, and the federal district court ruled in its favor.

Damages became the central issue on appeal. The parties ultimately agreed that the cost to complete the overblasting was $4,381,080. The district court concluded that an award in that amount would be grossly disproportionate to the value of the land and would result in a windfall. Because the record did not establish diminution in value, the court limited Corotoman to nominal damages. Corotoman appealed, and the Fourth Circuit asked West Virginia’s highest court to clarify the governing rule under state law.

The Supreme Court of Appeals of West Virginia held:

• The gross disproportionality doctrine may apply in construction contract disputes.
• Disproportionality is measured by comparing the cost of completion to the diminution in value.
• The breaching party bears the burden of proving gross disproportionality.
• Absent that proof, the non-breaching party may recover its otherwise proven cost-to-complete damages.

For parties involved in West Virginia construction projects, the decision provides greater clarity regarding the circumstances under which a court may limit construction contract damages based on the gross disproportionality doctrine.

While the Court confirmed that the gross disproportionality doctrine applies in construction contract cases, it also made clear that a breaching party cannot avoid cost-to-complete damages simply by arguing that the repair costs are too high. Instead, the breaching party must present competent valuation evidence showing both the diminution in value and that the cost to complete or repair the work is grossly disproportionate to that amount.

In practical terms, the ruling benefits property owners and other parties seeking damages by preserving cost-to-complete damages as the starting point. For contractors, public entities, and other defendants, the decision highlights the need to evaluate potential valuation issues early and develop evidence to support any argument that claimed repair or completion costs should be limited.