Opinion ID: 2318702
Heading Depth: 3
Heading Rank: 2

Heading: The Extent of the System's Damages

Text: Any measure of damages resulting from a contractual breach must be based on the facts at hand and the realities of the parties' situations. In the present case, Milliman misstated the amount that the State should provide to the System under statutory contribution formulae. As a result, the State did not contribute an extra $34 million, spread out over twenty-two years. [5] For purposes of context, those contributions would be $1.5 million per year if spread out evenly. In response to Milliman's faulty underestimation, the State did not seem to change accordingly its revenue-collection practices. This is not surprising, considering that the State, in the same timespan, contributed many billions of dollars$1.3 billion in fiscal year 2010 alone. Such a minuscule annual amount of missing contributions did not affect the System's target funding goal and, therefore, did not alter the State's behavior. Although an appendage of the State, i.e., the System, did not possess for its immediate use the $34 million, the State at large did. The true impact of the calculation error was that the State, and not the System, retained and invested (or applied) the $34 million elsewhere. Thus, proper damages would be the difference in the investment return only. The story of damages would be written differently, of course, if the error had caused the employee-members not to make $34 million worth of contributions. In that instance, no one would enjoy the use of the $34 millionthat is to say, the State's financial statements would be missing $34 million. That is not the case here. When calculating damages flowing from a contractual breach (absent a contractual agreement governing the calculation of damages in the event of breach), courts endeavor to put the parties in the position that they would have been but for the breach. St. Paul at Chase Corp. v. Manufacturers Life Ins. Co., 262 Md. 192, 250, 278 A.2d 12, 40 (1971) (The Court should endeavor to place the injured person, so far as possible, by monetary award, in the position he would have been if the contract had been properly performed. (internal quotation marks and citation omitted)). As this Court stated: The damages which a plaintiff is entitled to recover for a breach of contract should be such as may fairly and reasonably be considered as either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of a breach of it. St. Paul at Chase Corp., 262 Md. at 240, 278 A.2d at 35 (internal quotation marks and citation omitted). To do so, we must judge not what the non-breaching party wants to recover, but what he/she/it should recover in light of the facts at hand. In the present case, the parties did not establish in their contract how damages would be calculated in the event of a breach. As such, we must determine how to make the non-breaching party whole, in light of what may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract.... Id. Given that the State, as a single government, was not deprived of the use of the $34 million, the proper damages amounti.e., the amount needed to fulfill the State's expectationsis the difference in the investment return. Such a calculation has the added benefit of approximating what the parties would have expected reasonably. Milliman was being paid $100,000 a year for its actuarial services and would not have expected reasonably to pay for damages, totaling almost $100 million, for damages not suffered actually as a result of its actions. If the State/System thought a breach should lead to a windfall, whereby the actuary would match sums already in the State coffers, then it should have specified as much in the contract; it did not.