Opinion ID: 1962755
Heading Depth: 2
Heading Rank: 3

Heading: Issues Affecting the Computation of Plaintiffs' Damages

Text: The Sales Article of the Uniform Commercial Code contains a four-year statute of limitations. D.C.Code § 28:2-725(1) (2001) provides that [a]n action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. DCLP argued, and the trial court agreed, that this provision is inapplicable to the plaintiffs' causes of action and that, instead, D.C.Code § 12-301(8) (2001) applies. That statute supplies a three-year limitations period for all actions for which a limitation is not otherwise specially prescribed. We agree with DCLP and the trial court. We need not settle the debate over whether the Sales Article of the U.C.C. applies generally to cable television service contracts. See note 8, supra. Regardless of the answer to that question, the four-year statute of limitations in the Sales Article is inapplicable because the plaintiffs did not sue for breach of any contract. The hornbook definition of the term breach of contract is an unjustified failure to perform all or any part of what is promised in a contract. Fowler v. A & A Co., 262 A.2d 344, 347 (D.C.1970) (internal quotation marks and citation omitted). The plaintiffs did not contend that DCLP breached its contracts with them by charging the $5.00 late fee; they merely sought to invalidate that charge and recover sums they had paid. The plaintiffs' claims therefore were not governed by the statute of limitations for breach of contract actions. As those claims also were not specially governed by any other statute of limitations, the residual clause of D.C.Code § 12-301(8) applied.
The plaintiffs contend that the trial court erred in allowing DCLP to keep a portion of the invalid late fees that it collected ($2.43 out of every $5.00 payment). The plaintiffs argue that the court should have required DCLP to disgorge the late fees in their entirety because the late fee provision was void. To the contrary, we hold that the trial court correctly permitted DCLP to recoup what the jury determined (and what the plaintiffs do not dispute) were DCLP's actual damages. We further hold that it is the net figure rather than the gross figure i.e., the amount of the plaintiffs' overpayment rather than the full amount of the late fees that they paidthat is subject to trebling under the CPPA. It is true that an exorbitant liquidated damages provision is void and will not be enforced. Where exorbitant liquidated damages have been collected, disgorgement is therefore an appropriate remedy. But the invalidation of a contractual liquidated damages provision does not deprive the non-breaching party of a remedy for the other party's breach of the contract. The non-breaching party is entitled to prove and recoveror recoup, if it is the defendantits actual damages. See H.J. McGrath Co. v. Wisner, 189 Md. 260, 55 A.2d 793, 796 (1947) ([I]t does not follow [from invalidation of liquidated damages] that the defendant was precluded from showing damages by way of recoupment.); see also Lake River Corp., 769 F.2d at 1292 (The parties did not contract explicitly with reference to the measure of damages if the agreed-on damage formula was invalidated, but all this means is that the victim of the breach is entitled to his common law damages.) (citing RESTATEMENT (SECOND) OF CONTRACTS § 356, cmt. a (1981)); Kingston Constructors, Inc. v. WMATA, 930 F.Supp. 651, 656 (D.D.C.1996) (Where a liquidated damage clause is stricken, only actual damages may be recovered.). The jury found that DCLP's actual damages amounted to $2.43 per late payment, presumably on the premise, not challenged here, that subscribers contractually obligated themselves to pay a reasonable charge to reimburse DCLP for its collection costs if they failed to pay on time. [20] DCLP was entitled to recoup its actual damages; to put it differently, the plaintiffs' net damages were not the total amount of the late fees they paid, but only the unjustified excess portion thereof ($2.57 per late payment). See Burch, 732 A.2d at 901 (awarding damages representing the difference between the invalid late fees that the plaintiff paid to the defendant cable television service and the defendant's actual damages sustained as a result of late payments). The CPPA entitles the plaintiffs to three times the actual damages they suffered from DCLP's wrongful conduct. As a recoupment of damages intrinsic to the late payments rather than a setoff of an extrinsic claim, [21] DCLP's recovery is deducted from the plaintiffs' gross damages before rather than after trebling. So, for example, when a company is victimized by price-fixing, its damages that may be trebled are not the total price it paid, but rather the overcharge. See Burlington Indus., Inc. v. Milliken & Co., 690 F.2d 380, 385 (4th Cir.1982) (Plaintiffs are entitled to recover the overcharge stemming from the illegal combinationi.e., the difference between the prices actually paid and the prices that would have been paid absent the conspiracy.) Where the victimized company had reduced some of its damages by obtaining a price reduction in the form of kickbacks, these savings [too] were properly deducted from the damage award before trebling. Id. at 387-88. Similarly, when an employee sued under the Fair Labor Standards Act to recover double damages for being paid insufficient wages, the Second Circuit calculated the wages due and then subtracted the wages that had been paid before applying the multiplier. See Tran v. Alphonse Hotel Corp., 281 F.3d 23, 35 (2d Cir.2002). [22] So here too, it is not the gross amount of late fees that the plaintiffs paid, but the net amount of the overcharge that represents the plaintiffs' actual damages and that should be trebled.
The plaintiffs requested prejudgment interest on their damages award pursuant to D.C.Code § 15-108 (2001). That statute provides that [i]n an action . . . to recover a liquidated debt on which interest is payable by contract or by law or usage, the judgment for the plaintiff shall include prejudgment interest. [23] Although the trial court considered the equitable arguments in support of prejudgment interest to be persuasive, the court denied the plaintiffs' request on the ground that the amount DCLP owed had not been liquidated. [24] The issue is a subtle one, but we conclude that the plaintiffs were entitled to prejudgment interest as a component of their actual damages prior to trebling. By the terms of D.C.Code § 15-108, the judgment for the plaintiff shall include prejudgment interest if: (1) the action is one to recover a liquidated debt, and (2) interest is payable on that debt by contract or by law or usage. Where both statutory conditions are met, prejudgment interest is mandatory. See Nolen v. District of Columbia, 726 A.2d 182, 184 (D.C. 1999). In this case there is no dispute that the second condition is satisfied, presumably because it is indeed customary to pay interest on funds that are withheld and not paid when due (as the late fees charged by DCLP might be said to illustrate.) See id. at 184-85. The only dispute is over whether the plaintiffs' action was one to recover a liquidated debt within the meaning of the statute. A liquidated debt is one which `at the time it arose, ... was an easily ascertainable sum certain.' District of Columbia v. Pierce Assocs., Inc., 527 A.2d 306, 311 (D.C.1987) (quoting Kiser v. Huge, 170 U.S.App. D.C. 407, 421, 517 F.2d 1237, 1251 (1974), rev'd in part on other grounds, 171 U.S.App. D.C. 1, 517 F.2d 1275 (1975) (en banc)). Plaintiffs argue that their claim was for an easily ascertainable sum certain, namely the full (liquidated damages) amount of the void $5.00 late fees that the plaintiff class had paid. DCLP responds that while the plaintiffs' claim was ascertainable, it was reduced by an unliquidated amountthe actual damages that DCLP proved at trialand hence the debt was not liquidated either. Prejudgment interest is an element of complete compensation to a creditor for the loss of use of money that a debtor wrongfully withholds. Riggs Nat'l Bank v. District of Columbia, 581 A.2d 1229, 1253 (D.C.1990). Statutes providing for prejudgment interest are thus remedial and should be generously construed so that the wronged party can be made whole. Id. at 1255. Bearing that precept in mind, we observe that D.C.Code § 15-108 focuses on the nature of the plaintiff's action. The statute requires only that the plaintiff's action be one to recover a liquidated debt, not that the debt ultimately adjudicated be liquidated. Consistent with that distinction, we held in Giant Food, Inc. v. Jack I. Bender & Sons, 399 A.2d 1293, 1302-03 (D.C.1979), that where a plaintiff's claim is for a liquidated sum, the plaintiff will be entitled to prejudgment interest under § 15-108 even if the plaintiff's recovery is reduced at trial by an unliquidated amount that the plaintiff owes the defendantwhether the defendant's unliquidated claim is founded on a separate transaction or on the same transaction on which the plaintiff filed suit. In the latter regard, the court differentiated between setoffs and recoupments, albeit the court did not use that precise terminology. In the case of a setoff the plaintiff will be entitled to prejudgment interest on the full amount of its claim, while in the case of a recoupment, the plaintiff will be entitled to prejudgment interest only on the difference between the two claimswhat we called in Giant Food the interest on the net balance approach. [25] The interest on the net balance rule applies in this case. The plaintiffs sued for a liquidated debt, namely the sum total of invalid $5.00 late fees paid to DCLP by the plaintiff class. That liquidated debt was reduced only because DCLP proved an offsetting claim for the actual damages it had sustained from late payments, a claim on which it bore the burden of proof. Since DCLP's offsetting claim was based on the same transactions as the plaintiffs' claim, it was a claim for recoupment. Accordingly, the plaintiff class is entitled under D.C.Code § 15-108 and Giant Food to an award of prejudgment interest on the difference (the net balance), i.e., the overcharge damages that the class was awarded. Since the prejudgment interest was part of the class's actual damages, it is added prior to the trebling under the CPPA.