Court Opinion

ID: 9781726
Source: CourtListenerOpinion
Date Created: 2023-08-30 17:17:53.659294+00
Date Added: 2024-06-11T07:34:35.099755
License: Public Domain

Justice COATS,
dissenting.
I agree with the majority's articulation of the "rule of certainty," governing the recovery of damages for breach of contract in this jurisdiction, but we part company over its interpretation of the rule as applied to this case. Although the plaintiff's expert testimony about the future profitability of producing the medical diagnostic instrument at issue here may have been admissible evidence, I nevertheless consider it insufficient to predict, with reasonable certainty, the future production choices of the defendant company. More broadly speaking, I consider it impossible to divine, with the required degree of certainty for a damage award, as yet unmade, and contractually unconstrained, choices whether to commit capital to any particular project in the future, and I do not believe the authorities relied on by the majority suggest otherwise.
The uncertainty of predicting future losses, whether they might be profits or royalties or any other kind of losses, provides the impetus for striking the balance attempted by the rule of certainty. See Pomeranz v. McDonald's Corp., 843 P.2d 1378, 1381 (Colo.1993). Although wide variations in the nature of contractual arrangements and the *101likely effects of their breach unquestionably render the determination of "reasonable certainty" in any particular case highly fact dependent, the inclusion of a contractual condition allowing unfettered discretion to either continue or discontinue production, at the defendant's choice, radically alters the calculus of predictability. By virtually ignoring the qualitative difference between market conditions and subjective preference, and treating a party's unbridled freedom of choice as simply one more factor to be taken into account by a jury, the majority, at least to my mind, transforms our rule of certainty into a license for speculation.
The court of appeals apparently foresaw the difficulty of predicting damages in the face of an open-ended entitlement to produce no more than the defendant chose, and it therefore found, in reliance on the implied duty of good faith and fair dealing, this contractual term to simply be illusory. Perhaps in recognition that the implied duty of good faith and fair dealing cannot inject substantive terms into a contract or obligate a party to accept a material change in existing contractual terms, the majority would not similarly nullify the defendant's right to terminate production. Instead, it detects in this contractual condition no special significance at all.
Unlike the breach of a franchise agreement, however, where the issue is limited to the predictability of continued sales by the franchisee, see maj. op. at 98-99, or the breach of an agreement to exclusively distribute copyrighted material, where the issue is limited to a prediction about future sales, see maj. op. at 98-99, determining future losses on the basis of a contractual provision like that described by the majority in this case is not limited to making predictions about future sales or even continued profitability. It involves a psychological prediction about future choices that are in no way limited by the contract.
Furthermore, to acknowledge the speculative nature of future royalties under these contractual conditions would not deprive the plaintiff of meaningful remedies. To the extent that the defendant has breached its contract, it presumably no longer has a right to, and therefore might be enjoined from, further use of the defendant's contribution in production, of Storage Tech. Corp. v. Quantum Corp., 370 F.Supp.2d 1116, 1118 (D.Colo.2005) (acknowledging right to grant injune-tive relief to prevent violation of right secured by patent), leaving the defendant free to make other exclusive use contracts. By the same token, having established its right to royalties for the use of its contribution, in both the past and the future, the defendant is not barred from returning to court, should the defendant refuse to comply with its legal obligation to pay royalties on any future sales. See I Can't Believe It's Yogurt v. Gunn, No. 1997 WL 599391, at 24 (D.Colo.1997) ("At worst, if the franchisor had not terminated the franchise agreement it might have been required to sue again or perhaps again and again to compel the franchisee to pay those future royalties in a timely fashion as those royalties acerued ...." (quoting Postal Instant Press, Inc. v. Sealy, 43 Cal.App.4th 1704, 51 Cal.Rptr.2d 365 (1996))); see also Am. Mach. & Constru. Co. v. Stewart & Haas, 115 La. 188, 38 So. 960 (1905) (holding that where royalties accruing from year to year were not certain or absolute, equity was done by reserving plaintiff's right to sue for royalties as they accrued).
Finally, I am concerned about what appears to be the majority's addition of a punitive dimension to the rule of certainty. The majority acknowledges that awarding damages on the basis of the full 3,000 unit ceiling effectively deprives the defendant of its bargained-for right to terminate production at any time and pay only a "closure payment," rather than royalties on unproduced units. Without explanation or authority, however, it simply holds that because of the defendant's breach, it no longer has the option to avoid paying royalties, even if it ceases production. See maj. op. at 100.
While the majority purports to treat a contractual right to terminate production at any time as merely one additional factor for the jury's consideration, in fact it effectively eliminates the defendant's freedom of choice as a penalty for its breach. In this way, it backhandedly accomplishes precisely what the court of appeals attempted by extending *102the implied condition of good faith and fair dealing. The majority actually increases the reasonable certainty of a damage award for future losses by simply eliminating the provision of the contract that created the greatest uncertainty. I find the majority's approach no more persuasive or satisfying than that of the court of appeals.
I therefore respectfully dissent.
I am authorized to state JUSTICE EID joins in this dissent.