Opinion ID: 3010664
Heading Depth: 3
Heading Rank: 2

Heading: Damages Appropriate to the Breach of

Text: the Teaming Agreement Having established the necessary standard of proof to recover damages as a consequence to breach of contract, we now address whether plaintiffs have met such a burden. The district court held that it could not assess expectation damages measured in lost profits because the parties never agreed to a price on plaintiffs' subcontract. While the district court considered the possibility of restitution damages, it concluded that it could not place a definite value on the benefit realized by defendant as a result of plaintiffs' performance. Plaintiffs do not claim reliance damages on appeal, nor did the district court address that possibility as an alternative measure of damages.
Plaintiffs maintain on appeal that they have met their burden of proving expectation damages to a reasonable 19 certainty. Although courts have applied expectation damages to remedy the breach of a teaming agreement, see Air Tech., 199 N.E.2d at 548-49, we find the requisite proof of plaintiffs' expectation interest, measured in reasonably certain lost profits, lacking in this case. Even when discounted to reflect uncertainty, there would be absolutely no basis for the district court to place a value on plaintiffs' subcontract. As the record clearly demonstrates, the parties were far from agreeing on a contract price, financing fees, and other terms of the subcontract. Indeed, the district court found through ample support in the record that significant obstacles stood in the way of an agreement on the subcontract's price, and that the plaintiffs had not presented sufficient evidence that further negotiations would likely have proven fruitful. It is true, as plaintiffs note, that the Pennsylvania law of contracts allows for some uncertainty in calculating damages -- perhaps even a significant amount of uncertainty -- but a lost profits calculus based solely on unsubstantiated speculation and conjecture cannot form the basis of recovery. See Spang & Co., 545 A.2d at 866. Such a vague and speculative determination would have been necessary in this case if the district court assessed lost profits as damages, and accordingly the district court correctly declined to award expectation damages. See E. Allan Farnsworth, supra, 87 Colum. L. Rev. at 264 (lost profits not appropriate with a breach of a preliminary agreement because there isno way of knowing what the terms of the ultimate agreement would have been, or even whether the parties would have arrived at an ultimate agreement); Brent E. Newton, supra, 91 Colum. L. Rev. at 2028 (same).
Notwithstanding any uncertainty in assessing lost profits as a measure of expectation damages, contract law does not preclude an otherwise appropriate remedy under a restitution theory of damages. This is especially the case where, as here, unknown variables cloud a reasonably certain calculation of lost profits stemming from the breach of the teaming agreement. See Air Tech., 199 N.E.2d at 549. Thus, we agree that it would be appropriate for the district 20 court to measure the fair value of [the subcontractor's] contribution to [the prime contractor's] agreement, in order to protect the subcontractor's restitution interest. Id. As the district court properly concluded in this case, plaintiffs contributed valuable services to defendant's Greek RFP bid and significantly enhanced its chances of winning the project. However, the court ultimately held thatit is not clear how to quantify the value of those services, and therefore denied restitution as a measure of damages. While we share the district court's appreciation of the difficulties in measuring the benefit conferred on defendant, we believe the court's denial of restitution as a possible remedy premature without an evidentiary hearing. The district court, with characteristic courtesy, did invite the parties to further brief the issue of restitution, but it did not offer them an opportunity to present additional evidence that might shed light on the quantification of restitution damages. Such evidence might include the testimony of knowledgeable experts in the field who would testify as to the reasonable value of plaintiffs' technical and consulting services in this market of government contracting. Furthermore, as the plaintiffs claimed before the district court, defendant saved approximately $2 million by subcontracting with Craig and Airflow. See App. at 835. If this is indeed the case, the district court may then consider how much of that savings reflected preliminary services rendered by the plaintiffs that ultimately benefitted the Craig proposal. Thus, given the possibility of the plaintiffs' proving reasonable restitution damages, we will vacate the district court's entry of judgment against defendant for nominal damages in the amount of $1. In arriving at this conclusion to remand, we believe that equitable considerations must predominate over a parochial approach to the number of issues properly before us.