Opinion ID: 6497766
Heading Depth: 3
Heading Rank: 2

Heading: Damages for Breach

Text: Fiber-Span argues Transit’s damages are measured by calculating the “difference … between the value of the goods accepted and the value they would have had if they had been [as] warranted.” (Fiber-Span Op. Br. at 36 (quoting N.Y. U.C.C. § 2-714).) And, it says, because Transit’s only evidence of damages are invoices totaling $66,687, an amount Transit had already deducted from its final invoice, no additional damages should be awarded. In response, Transit argues that the Bankruptcy Court rightly concluded that FiberSpan breached the Purchase Agreement, and so damages of $1,283,606 were properly awarded for the full purchase price plus initial installation. We conclude that the Bankruptcy Court erred by calculating damages as the full purchase price of the Initial Build and its installation. Transit is only entitled to the difference in value as defined by N.Y. U.C.C. § 2-714. Under the Warranty Provision, through which damages to Transit must flow, the first choice of relief is framed as follows: “Materials not meeting the warranties will be replaced, repaired and/or re-performed as applicable,” by Fiber-Span. (J.A. at 406.) If that non-monetary path had been followed by Fiber-Span, the company may have been on the hook for de-installing and re-installing the repaired or replaced Nodes. But Fiber-Span did not choose that path, so we turn to 31 the backup relief contemplated by the Warranty Provision, which provides that, “[i]f [Fiber-Span] is unable to repair, replace, or re-perform, [Fiber-Span] shall refund all costs incurred by [Transit] associated with warranty.” (J.A. at 406.) The operative language is “all costs incurred by [Transit] associated with warranty[,]” and the question is how to define those costs. Certain cases recognize the availability of a full refund of the purchase price of goods under N.Y. U.C.C. § 2-719. In those instances, however, the contract at-issue explicitly provided for a refund of the purchase price. See, e.g., President Container Grp. II, LLC v. Systec Corp., 467 F. Supp. 3d 158, 168 (S.D.N.Y. 2020) (“The warranty provision provides that [the seller’s] ‘liability in connection with this transaction is expressly limited to the repair or replacement … or refund of purchase price.’”); APS Tech., Inc. v. Brant Oilfield Mgmt. & Sales, Inc., 2015 WL 5707161, at  (S.D.N.Y. Sept. 29, 2015) (“The [purchase agreement] contained a one-year limited warranty …, disclaimed all other warranties, and limited [the seller’s] remedies to repair, replacement or refund of the purchase price of the equipment.”). That is not what the parties agreed to here. The Bankruptcy Court in effect read the phrase “refund of purchase price” into the Purchase Agreement. In our view, the operative language is at least ambiguous. See Eternity Glob. Master Fund Ltd. v. Morgan Guar. Tr. Co. of N.Y., 375 F.3d 168, 173 (2d Cir. 2004) (contract terms are ambiguous if they “could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in 32 the particular trade or business” (citation and internal quotation marks omitted)). Consequently, it is permissible to look to the default damages provision set out in N.Y. U.C.C. § 2-714, which states that “[t]he measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted.” That conclusion is supported by the circumstances as they developed. Transit accepted the goods (albeit under protest), proclaimed their satisfactory quality to the MTA/NYCTA, insisted on and received modifications to them, and then used them for several years before replacing them. Interpreting the words “refund all costs incurred by [Transit] associated with warranty” to mean that Transit was free to use the goods, which proved serviceable for longer than the period of the warranty, and then pay nothing – because of a full refund – is at odds with the “overriding goal of UCC remedies[.]” United States for Use & Benefit Saunders Concrete Co., Inc. v. Tri-States Design Const. Co., Inc., 899 F. Supp. 916, 923 (N.D.N.Y. 1995) (citation omitted). That goal is “to put the wronged party in as good a position as it would have been if the other party had fully performed.” Id. The result Transit wants, by contrast, is to be put in a far better position than it would have been absent the breach. Accordingly, the Bankruptcy Court should have calculated the difference in value between the non-conforming Nodes and the contracted-for Nodes, rather than awarding a full refund.13 The only evidence of such damages apparent to 13 Although it is likely now apparent, we also hold that Transit is not entitled to the initial installation costs. The 33 us from the appellate record is the $66,687 that Transit withheld after submitting a final installment on the Milestone 7 invoice. Still, on remand, Transit should have the opportunity to highlight for the Bankruptcy Court any other evidence of the difference in value, should such evidence exist in the trial record.