Opinion ID: 689117
Heading Depth: 2
Heading Rank: 3

Heading: Resolution of Damages Proof

Text: 21 Indu Craft concedes that it proffered no evidence with respect to fixed costs. Decisional law analyzing the role of fixed costs in damages calculations is sparse since most breaches of contract in a business setting do not result in the termination of a business. Plaintiff relies on our decision in Linblad Travel, 730 F.2d at 93, for its view that overhead costs need not be deducted from income to calculate damages. That reliance is misplaced. Linblad determined that fixed costs should not have been included in the damages calculation where plaintiff was an ongoing business whose fixed costs were not affected by the breach. Id. 22 In the present case, plaintiff's cessation of business may very well have reduced or eliminated fixed overhead costs. Such savings, resulting from the Bank's breach, are properly offset from lost profits. Hence, the failure to deduct fixed costs when utilizing lost profits to calculate damages renders such measurement too imprecise for judicial use. However, proof of lost profits is but one method of proving the amount necessary to restore plaintiff to the economic position he would have been in absent the breach. An alternative methodology, extrapolating the value of a business as an ongoing entity from the company's past earnings, establishes a plaintiff's damages without suffering the same defect. By resorting to past earnings, this methodology already incorporates the necessary deduction of fixed and variable costs, providing an accurate measurement of plaintiff's loss as adjusted for savings resulting from the breach. 23 In fact, when the breach of contract results in the complete destruction of a business enterprise and the business is susceptible to valuation methods, such an approach provides the best method of calculating damages. Cf. Sharma v. Skaarup Ship Management Corp., 916 F.2d 820, 825 (2d Cir.1990) (where the breach involves the deprivation of an item with a determinable market value, the market value at the time of the breach is the measure of damages), cert. denied, 499 U.S. 907, 111 S.Ct. 1109, 113 L.Ed.2d 218 (1991). The methodology of determining a business's earnings and applying an earnings multiplier to fix the value of a business that was completely terminated is one we have approved. See Lamborn v. Dittmer, 873 F.2d 522, 533-34 (2d Cir.1989). 24 The Bank attacks various aspects of the testimony offered by the plaintiff's expert. To the extent he departed from general valuation practices or adopted procedures subject to criticism, defendant had ample opportunity to elicit these facts and argue them to the jury. The expert's training and background and the procedures he followed in arriving at a valuation presented the jury with the question of whether or not to accept the expert's opinion and what weight to give it. See Enercomp, Inc. v. McCorhill Pub., Inc., 873 F.2d 536, 550 (2d Cir.1989). 25 Further, when reviewing the sufficiency of the damages evidence, we are guided by the principle that if a plaintiff has shown it more likely than not that it has suffered damages, the amount of damages need only be proved with reasonable certainty. See W.L. Hailey & Co. v. County of Niagara, 388 F.2d 746, 753 (2d Cir.1967) (collecting New York cases). New York has long had an established rule that: 26 [W]hen it is certain that damages have been caused by a breach of contract, and the only uncertainty is as to their amount, there can rarely be good reason for refusing, on account of such uncertainty, any damages whatever for the breach. A person violating his contract should not be permitted entirely to escape liability because the amount of the damages which he has caused is uncertain. 27 Wakeman v. Wheeler & Wilson Mfg. Co., 101 N.Y. 205, 209, 4 N.E. 264 (1886); see Randall-Smith, Inc. v. 43rd St. Estates Corp., 17 N.Y.2d 99, 105-06, 268 N.Y.S.2d 306, 215 N.E.2d 494 (1966). The wrongdoer must shoulder the burden of the uncertainty regarding the amount of damages. See Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918, 926 (2d Cir.1977). Indu Craft's proof of value of its business as a going concern was adequate to meet these tests for sufficiency. 28 After expressly finding that plaintiff's proof of lost value was sufficient, we are at a loss as to why the trial court then set aside the jury award. The jury's special verdict sheet made no distinction between the two methods of proving damages, and the figures were well within the range testified to by plaintiff's expert who set a low value of $3.3 million and a mid-range of $4.3 million. The jury found that Indu Craft was damaged in a total amount of $4.25 million, less $1 million for a failure to mitigate, for net total damages of $3.25 million. Had lost profits evidence not been presented, evidence of the lost value of Indu Craft as a going enterprise, standing alone, would have been sufficient to support the jury's award of damages. Hence, the judgment as a matter of law with respect to the contract claim must be reversed and the jury award reinstated, although the award must be modified as we discuss in a moment. II Prima Facie Tort Award 29 We pass now to discussion of the grant of the motion for judgment as a matter of law setting aside the prima facie tort jury award. That award was amply justified by the proof. The Bank and Chokshi engaged in deliberate delay in issuing letters of credit and made an unprecedented demand only on plaintiff that such letters be backed by confirmed orders from all of plaintiff's customers. Their conduct ultimately drove Indu Craft out of business. The jury was entitled to find that this web of wrongdoing was not woven by innocent hands. Clearly the same wrongdoing also served as the basis for the jury finding that defendants intentionally acted with malice and without excuse to injure Indu Craft, thereby committing a prima facie tort against plaintiff. See Freihofer v. Hearst Corp., 65 N.Y.2d 135, 142, 490 N.Y.S.2d 735, 480 N.E.2d 349 (Prima facie tort affords a remedy for the infliction of intentional harm, resulting in damage, without excuse or justification, by an act or series of acts which would otherwise be lawful. (internal quotes omitted)). 30 As pointed out above, the jury awarded Indu Craft $2 million on its breach of contract claim, after adjusting for its failure to mitigate damages, and $1.25 million on its prima facie tort claim. Upon plaintiff's counsel's request, the trial court asked the jury foreman if the jury meant Indu Craft to receive a total award of $3.25 million or if the prima facie tort award was meant to be subsumed by the larger contract award. The foreman responded that the intended award was $3.25 million, which, upon being polled, the jury confirmed. The magistrate then ruled on the motion for judgment as a matter of law that the awards were duplicative for the same injury and vacated the prima facie tort award. 31 A plaintiff seeking compensation for the same injury under different legal theories is of course only entitled to one recovery. See Wickham Contracting Co. v. Board of Educ., 715 F.2d 21, 28 (2d Cir.1983). The question we must answer was whether this doctrine was violated by the jury's award for defendants' prima facie tort. A court's role is to reconcile and preserve whenever possible a seemingly inconsistent jury verdict. See Machleder v. Diaz, 801 F.2d 46, 57 (2d Cir.1986), cert. denied, 479 U.S. 1088, 107 S.Ct. 1294, 94 L.Ed.2d 150 (1987); Minpeco, S.A. v. Hunt, 718 F.Supp. 168, 181 (S.D.N.Y.1989). This role derives from the Seventh Amendment's obligation on courts not to recast factual findings of a jury, see Atlantic & Gulf Stevedores, Inc. v. Ellerman Lines, Ltd., 369 U.S. 355, 364, 82 S.Ct. 780, 786, 7 L.Ed.2d 798 (1962), and is based on the notion that juries are not bound by what seems inescapable logic to judges. Morissette v. United States, 342 U.S. 246, 276, 72 S.Ct. 240, 256, 96 L.Ed. 288 (1952). 32 The jury's award of a net total of $3.25 million was in accordance with the expert's testimony. While it is possible that the jury impermissibly compensated Indu Craft twice for the same injury, it is equally rational to believe that the jury found that Indu Craft suffered $3.25 million worth of injuries and merely allocated that amount between the two different causes of action, one for breach of contract and one for tort. See Gentile v. County of Suffolk, 926 F.2d 142, 153-54 (2d Cir.1991) (where jury awarded $75,000 for state malicious prosecution claim and $75,000 for federal Sec. 1983 claim, conceivable that jury found $150,000 of unduplicated injuries and merely split the amount equally). 33 That the jury meant the total award to be $3.25 million is clearly supported by their responses when being polled after the verdict. A jury's award is not duplicative simply because it allocates damages under two distinct causes of action. See id. at 154. The Bank made no showing other than the allocation of the award. Thus, it failed to establish the jury awards were duplicative. Because of our duty to reconcile a jury's verdict whenever possible, we think this award easily reconcilable and see no impermissible double recovery in the jury contract and tort awards. As a consequence, the judgment must be reversed and the jury's prima facie tort award reinstated. III The Counterclaim 34 We now consider the remaining issue, which is the denial of the Bank's motion for judgment as a matter of law on its $1.7 million contract claim after the jury returned a no cause for action against it. Under its line of credit Indu Craft owed the Bank approximately $1.7 million for which the Bank asserted a counterclaim. Plaintiff admits this amount was outstanding, but maintains the Bank's actions in driving it out of business prevented it from performing under the note and thereby excuse performance. This prevention doctrine is often viewed as a corollary to the implied covenant of good faith. See Sharma v. Skaarup Ship Management Corp., 699 F.Supp. 440, 449 (S.D.N.Y.1988), aff'd, 916 F.2d 820 (2d Cir.1990), cert. denied, 499 U.S. 907, 111 S.Ct. 1109, 113 L.Ed.2d 218 (1991). The jury agreed that the Bank prevented plaintiff's performance and returned a verdict on the counterclaim in favor of Indu Craft. The district court denied the Bank's motion for judgment as a matter of law. 35 While the parties have exerted much energy disputing the applicability of the prevention defense to the note, we are persuaded by a more compelling rationale urged by the Bank that judgment should have been granted. It is the purpose of damages under a breach of contract action to place the aggrieved party in the same economic position that it would have occupied absent the breach. See Linblad Travel, 730 F.2d at 92. Awarding Indu Craft the value of its business and at the same time relieving it from its obligation under the note actually places Indu Craft in a better economic position than it would otherwise have occupied, a result the law disfavors. To avoid such a windfall and place Indu Craft in the position it would have been in but for the Bank's breach of contract, the debt under the note must be set off from the damages owed Indu Craft.