Opinion ID: 3163904
Heading Depth: 1
Heading Rank: 3

Heading: The Shareholders’ Sixth Claim

Text: Finally, the Shareholders contend that Sikorsky improperly calculated the total costs of the RU-38B program. This claim for breach of contract actually embodies three separate arguments relating to the calculation of the Stock Purchase Agreement’s “Deferred Payment Amount”: (1) that Sikorsky “double dipped” from the “Purchase Price Adjustment” and the Deferred Payment Amount; (2) that Sikorsky acknowledged the RU-38B program’s expenses were overstated by up to $500,000 but never attempted to determine the precise amount of the 6 overstatement; and (3) that Sikorsky improperly included “estimated” costs in its final calculation of the RU-38B program’s expenses. We conclude that the Shareholders’ arguments lack merit for substantially the same reasons provided by the district court. See Schweizer v. Sikorsky Aircraft Corp., No. 6:10-CV-6547(MAT), 2014 U.S. Dist. LEXIS 151951, at –44, 2014 WL 5460504, at –15 (W.D.N.Y. Oct. 27, 2014). Moreover, to the extent the Shareholders now complain that the RU-38B program’s expenses may have been overstated by as much as $500,000, the undisputed record evidence indicates that they themselves are to blame for these cost overstatements. The Shareholders’ cost-overstatement argument centers on an email from Schweizer’s Chief Financial Officer, Sharon Reed, in September 2007. When a Sikorsky representative asked Reed for an accounting of the program’s costs, Reed provided the figures to him but also remarked: “Please note that these numbers include direct material charges that we believe are over stated. We are in the process of auditing the direct material dollars charged to the program, but this cannot be accomplished prior to October 1. The magnitude of this overage could be in the range of $50,000 to $500,000.” J.A. 2494. The Shareholders latch on to this email to argue that Sikorsky may have overstated the RU-38B program’s costs. At her deposition, Reed explained why the costs could be overstated: When Schweizer received an invoice for parts, it would allocate that invoice to the programs for which the parts were intended, but its method of allocating the exact costs of the invoice to each program was imprecise. For example, if an invoice included parts intended for both the RU-38B and X2 programs, the invoice amount would be divided equally with 50% of the cost allocated to RU38B and 50% to X2, even if 80% of the invoice’s costs were actually destined for one program or the other. Reed agreed that Schweizer “didn’t have a system to be any more careful than that.” 7 J.A. 2055. A Sikorsky representative also provided uncontroverted testimony that, “[f]ollowing the sale of Schweizer Aircraft to Sikorsky, accounting for the costs of the RU-38B Program continued to be handled by Schweizer Aircraft finance personnel, according to the same accounting policy, utilizing the same system, overseen by the same individuals, as before the sale.” J.A. 336. In short, Sikorsky inherited a method of accounting from the Shareholders, and it is this method of accounting that may have caused an overstatement of the RU-38B program’s costs. Moreover, the Shareholders point to no provision of the contract or record evidence that would suggest that the parties intended to use a different method to calculate the RU-38B program’s costs after closing from the one that Schweizer used prior to closing. Where a breaching party has made difficult the precise calculation of damages, courts typically impose the burden of uncertainty on the wrongdoer. See, e.g., Lee v. Joseph E. Seagram & Sons, Inc., 552 F.2d 447, 455 (2d Cir. 1977) (“We hold that the method of proof used by the plaintiffs was adequate in the circumstances. Since Seagram’s breach has made difficult a more precise proof of damages, it must bear the risk of uncertainty created by its conduct.”). We similarly see no reason why the Shareholders should not bear the risk that the accounting system they devised may have led to an overstatement of the RU-38B program’s costs, particularly where the contract does not indicate a new method of accounting would be used after closing. For the reasons stated herein the judgment of the district court is AFFIRMED. FOR THE COURT: Catherine O’Hagan Wolfe, Clerk 8