Opinion ID: 670733
Heading Depth: 2
Heading Rank: 1

Heading: Refusal to Award Damages

Text: 13 In refusing to award damages to Foote for WFR/LLI's breach of contract, the district court reasoned as follows: 14 Under the one satisfaction rule, a non-settling defendant is entitled to a credit of the amount received as settlement with another defendant against any amount recovered against him, provided that both the settlement and judgment represent common damages.... However, the 1992 Settlement does not represent satisfaction of the common damage claims of Foote, such that recovery against EDS would constitute double recovery. 15 ... Foote agrees in principle that a plaintiff should not recover a greater amount in damages for breach of an obligation than he would have received if the parties had fully performed.... However, Foote argues that its damages should not be measured against the 1992 Settlement because it does not claim WFR/LLI wrongfully prevented a settlement; but rather, that the breach of the Lease Agreement caused it to remain liable for 23 lease payments. This is a distinction without a difference. 16 Foote remained liable for these lease payments because WFR/LLI's refusal to consent to assignment of the Lease, in breach of the Lease, prevented EDS from assuming them. Also, Foote conveniently overlooks the fact that [the] 1985 Settlement would have also released all claims against EDS, including those for which Foote received the $1.1 million. Thus, if WFR/LLI had not breached the Lease Agreement and caused the 1985 Settlement to fail, Foote could not have obtained the $1.1 million Settlement against EDS in 1992. 17 .... 18 Accordingly, the question is whether the damages requested by Foote exceed $1.1 million. The lease payments which would have been assumed by EDS total $532,450.00. Foote seeks an award of interest as an element of damages totalling $439,271.25, which represents 18% interest on the payments as they came due. Foote also offers two other methods for calculating the amount of interest due. However, even accepting the amounts as calculated by Foote, the lease payments and interest do not exceed the $1.1 million obtained under the 1992 Settlement. To award damages against WFR/LLI would result in a windfall to Foote. 19 (Citations omitted.) 20 Foote argues that the district court erred in measuring damages against the benefits Foote would have received from the proposed 1985 settlement and did receive from the 1992 settlement. Foote maintains that it had separate causes of action against WFR/LLI and EDS. The action against WFR/LLI arises out of the lease agreement, not the failed settlement; the claims against EDS arise out of the faulty computer system. Foote argues that it was entitled to proceed with both of these claims once the 1985 proposed settlement fell through. 21 In addition, Foote points to paragraph five of the 1992 settlement agreement, quoted above, which specifically provides that the agreement does not affect any rights that either EDS or Foote has against WFR/LLI. Foote states that it would not have entered into that agreement had it known that the agreement would preclude recovery against WFR/LLI. Foote argues that the district court's action resulted in a windfall for WFR/LLI in that the company was found liable for breach of contract, but was not required to pay any damages. 22 According to WFR/LLI, Foote's damages should be measured against the benefits Foote would have realized under the 1985 proposed settlement agreement had it been consummated. Thus, the only measurable damages Foote should recover are the 23 extra lease payments plus interest. Because Foote received more than this amount from EDS in the 1992 settlement, Foote is not entitled to receive any money from WFR/LLI. 23 WFR/LLI also claims that the one satisfaction rule bars any further recovery. WFR/LLI argues that the 1992 settlement agreement released EDS from any and all Claims, of whatsoever kind or nature. According to WFR/LLI, this includes the lease payments EDS agreed to pay under the proposed 1985 settlement. WFR/LLI dismisses the limiting language of paragraph five as self-serving and not binding upon WFR/LLI, as it was not a party to the agreement. 24 The parties and the district court are in agreement with respect to the applicable law. Its application is what divides them. The basic legal principle that governs is that a plaintiff should be made whole for his injuries, but should not receive a windfall. The parties and the district court have also referred to the one satisfaction rule, which provides that a nonsettling defendant is entitled to an offset in the amount of the settlement between a settling defendant and the plaintiff. United States Indus., Inc. v. Touche Ross & Co., 854 F.2d 1223, 1236 (10th Cir.1988). A limitation upon the application of this rule, of course, is that the nonsettling defendant is only entitled to the offset if the judgment and the settlement relate to common damages. Id. 25 We think the district court erred in concluding, as a matter of law, that Foote may not recover from WFR/LLI a sum in damages equal to the lease payments because any such recovery would constitute a windfall for Foote. In 1985, Foote had claims against EDS for some $3.1 million in damages for breach of contract. These claims included damages for the lease payments Foote was obligated to pay for a faulty computer system. However, the claims also included myriad other items of damage incurred by Foote because of the failed PCIS. Foote was prepared to forego litigating all of these claims in exchange for $200,000 in cash and EDS's assumption of responsibility for the lease payments. Foote did not, at the time the 1985 settlement agreement was being negotiated, have any cause of action against WFR/LLI on any theory. 26 The proposed settlement fell through. One reason for the failure was WFR/LLI's breach of its covenant of good faith and fair dealing by refusing to consent to the assignment of the lease. As a result of this refusal, Foote acquired a cause of action against WFR/LLI for breach of contract, damages for which would later be identified as a sum equal to the lease payments which EDS would have assumed under the 1985 proposed settlement. At that point the proposed 1985 settlement with EDS became a nonevent. 27 Shortly after the failure of the 1985 proposed settlement, Foote instigated litigation against EDS. Foote maintains that its damages against EDS continued to mount over the years; by 1992, the damages amounted to more than $6 million. The $6 million figure is an aggregate damage amount for a host of claims Foote had against EDS arising from the faulty PCIS. One of Foote's claims, but only one, was its claim for the cost of 23 lease payments it was required to make for the allegedly useless computer system. In addition to its claims against EDS, Foote also had its claim against WFR/LLI for breach of the covenant of good faith and fair dealing contained in the lease agreement. Foote had also instigated litigation on this claim and by 1992 had won a summary judgment motion against WFR/LLI on the issue of liability. 28 Before the district court reached a final resolution on the claims between Foote and EDS, Foote agreed to forego prosecution of its myriad claims in consideration for $1.1 million. We agree with the district court's finding that this settlement does not represent satisfaction of the common damages claims. We cannot, however, agree with the district court's holding that any recovery from WFR/LLI would constitute a windfall for Foote. While it is true that Foote would probably not have been able to negotiate the 1992 settlement absent WFR/LLI's breach of contract, it is not true that the 1992 settlement left Foote better off than it would have been under the 1985 proposed settlement. 29 Our disagreement with the district court rests on two bases. First, the district court's holding depends on the assumption that Foote's non-lease claims remained static. As we mentioned earlier, Foote had a number of claims against EDS in addition to the remaining lease payments Foote was obligated to make. Foote argues that its damages claims almost doubled from 1985 to 1992. 30 Second, the district court's analysis failed to account for the full value of the 1985 proposed settlement. The district court's opinion discussed only the remaining lease payments and the interest on those payments. It did not recognize that the proposed settlement also required EDS to make a $200,000 lump sum payment. The full value of the proposed settlement cannot be calculated without accounting for the lump sum payment plus interest. When the increased damages are added to the lump sum payment plus interest, it rapidly becomes clear that Foote would not receive a windfall if it were to recover from WFR/LLI the lease payments plus interest. Thus, the district court erred in refusing to award damages to Foote.