Opinion
NO. 2008-EQ-99
07-16-2014
New Hampshire Speedway, Inc., et al. v. Motor Racing Network, Inc., et al.
ORDER
This case involves litigation among four corporate entities involved in the auto racing business: Motor Racing Network, Inc. ("MRN"); New Hampshire Speedway, Inc. ("NHS"); Speedway Properties Co. LLC d/b/a Performance Racing Network ("PRN"); and Speedway Motorsports, Inc. ("SMI"). In 2008, NHS brought a declaratory judgment action against MRN alleging that a contract between the parties, which gave MRN the right to broadcast races at NHS, was an unenforceable illusory contract. MRN asserted that the contract was enforceable and brought counterclaims against NHS, PRN and SMI, alleging, inter alia, breach of contract and tortious interference with contractual relations. This Court found that the contract between NHS and MRN lacked consideration and, under applicable Florida law, was therefore illusory and unenforceable. The Court granted summary judgment in favor of NHS in the declaratory judgment action and against MRN in its counterclaims for tortious interference with contractual relations against NHS, PRN, and SMI. The Court allowed the case to go to trial on a promissory estoppel theory.
That decision was reversed in an unreported decision by the New Hampshire Supreme Court, New Hampshire Speedway, Inc. & a. v. Motor Racing Network, Inc., No. 2012-0215 (decided Sept. 25, 2013), in which the New Hampshire Supreme Court held that the contract did not lack consideration and was therefore enforceable under Florida law. The case is now on remand, and the parties have filed a number of motions. For the reasons stated in this Order, the Court renders the following determinations: MRN's Motion to Reconsider the Court's April 23, 2014 ruling that MRN's tortious interference claims are waived is DENIED; NHS's Motion for Summary Judgment is DENIED; NHS's Motion to Withdraw Stipulation is GRANTED; and NHS's Motion to Compel is GRANTED IN PART AND DENIED IN PART.
I
The New Hampshire Supreme Court order, reversing this Court's finding that the contract was illusory, did not mention MRN's claims for tortious interference with contractual relations. MRN moved to reinstate these claims. On April 23, 2014, this Court denied the Motion, because NHS established that while MRN had raised the tortious interference claim in its Notice of Appeal, it did not brief it in the Supreme Court. In its Order of April 23, 2014, this Court noted that NHS made clear in its appellate brief that it believed MRN was not raising any issues regarding tortious interference, and that it therefore believed this claim was waived on appeal. MRN never responded to the statement, and neither party addressed the tortious interference claims in their appellate briefing. Order, dated April 23, 2014, at 3.
In its order of April 23, 2014, the Court stated that the case was on all fours with Ross v. Eichman, 130 N.H. 556, 558 (1988) in which the New Hampshire Supreme Court specifically held that a party waives any claim it does not pursue after the trial court's initial order prior to the first appeal, which resulted in a decision. Under such circumstances, the lower court's order becomes the law of the case.
MRN's Motion to Reconsider argues that, in effect, Taylor v. Nutting, 133 N.H. 451, 456 (1993) overruled Ross because it held that under the law of the case doctrine, only such issues as were necessarily decided, either explicitly, or by necessary inference from the disposition, constitute the law of the case. See Taylor, 133 N.H. at 456; see also Saunders v. Town of Kingston, 160 N.H. 560, 566 (2010). The Court disagrees. Taylor is entirely consistent with Ross. Here, the Supreme Court's decision to specifically limit its reversal of the trial court order only with respect to the breach of contract claim "necessarily" involved the decision not to reverse the trial court order on the tortious interference claim.
MRN also argues that the waiver rule applies only in cases which are affirmed and not when there is a reversal. However, this argument is simply not supported by the law. See, e.g., Lally v. Flieder, 159 N.H. 350, 351-53 (2009); Hilario v. Reardon, 158 N.H. 56, 59 (2008). As a result, the Motion to Reconsider must be DENIED.
II
NHS argues that it is entitled to summary judgment on MRN's breach of contract because "[u]nder Florida law proof of actual and direct damages is an essential element of a breach of contract claim. . . ." and cites Friedman v. New York Life Ins. Co., 985 So.2d 56, 58 (Fla. 4th DCA 2008) to support its position. (NHS's Mot. for Summ. J. ¶ 3.) It argues that "[j]udgment may be entered for the defendant for damages is entirely speculative." Id. (citing A.R. Holland Inc. v. Wendco Corp., 884 So.2d 1006, 1008 (Fla. 1st DCA 2004)).
MRN objects principally on the ground that summary judgment is inappropriate because there are genuine issues of material fact but apparently concedes that "[u]nder Florida law MRN must show three things to prevail on its breach of contract claim: (1) a valid contract, (2) a material breach, and (3) damages. In re Standard Jury Instructions, 116 So. 3d 284, 306 (Fla. 2013) (citing Friedman v. New York Life Ins. Co., 985 So. 2d 56, 58 (Fla. 4th DCA 2008))." (MRN's Mem. in Opp. to Mot. for Summ. J. at 4, n.3.
Few principles are more generally accepted in American jurisprudence than the principle that damages are not an element of a breach of contract claim. For example, the Restatement (Second) of Contracts provides:
If the breach caused no loss or if the amount of the loss is not proved under the rules stated in this Chapter, a small sum fixed without regard to the amount of loss will be awarded as nominal damages.RESTATEMENT (SECOND) OF CONTRACTS § 346(2). For this reason, cases involving multiple contract claims are routinely treated as class actions, while cases that require individual proof of an element of damage—such as negligence, which requires proof of damage, or fraud, which requires proof of reliance—are not.
Despite the language of the lower court cases cited by the parties, the Florida Supreme Court has long recognized this rule. In re Standard Jury Instructions— Contract and Business Cases, 116 So.3d 284, 341 (2013) provides in relevant part:
504.11 NOMINAL DAMAGES
If you decide that (defendant) breached the contract but also that (claimant) did not prove any loss or damage, you may still award (claimant) nominal damages such as one dollar.
Note 2 to section 504.11 quotes Dep't of Transp. v. Weisenfeld, 617 So.2d 1071, 1086 (Fla. 5th DCA 1993) ("Whenever the intentional invasion of a legal right occurs the law infers some damage to the party whose rights were violated and if no evidence is adduced as to any particular specific loss or damage, the law 'rights' or remedies the wrong by awarding nominal damages, usually in the amount of $1.00."). The Weisenfeld court specifically notes the confusion in the intermediate appellate Florida courts:
"Does a legal cause of action always include an element of 'damages'?" The answer to this question should be "no", although many believe otherwise. There are distinct theoretical differences between a cause of action and damages. A cause of action is the statement of claim for which the law provides a remedy. Further, the law provides a remedy for a violation of all legal rights. Damages are only incidental to a cause of action and are to provide the recompense for loss, if any, that results from the breach of a legal right.Weisenfeld, 617 So.2d at 1086-87.
Confusion results from the fact that the one best known legal cause of action is for the tort of negligence, and that cause of action peculiarly does incorporate by definition an element of damages as an element of the cause of action. . . .
Despite the language of the cases cited by the parties, under the correct view of Florida law, it is error for a trial court to grant a directed verdict for a defendant if the plaintiff fails to prove any actual damages on a breach of contract claim. Walter Int'l, Inc. v. Salinas, 650 F.3d 1402, 1418 (11th Cir. 2011); Onontario of Florida, Inc. v. R.P. Trucking Co., 399 So.2d 1117, 1118 (Fla. 4th DCA 1981). Under these circumstances, summary judgment could not be granted for NHS even if the Court found that the expert methodology provided by MRN's damage expert does not suffice to establish damages as a matter of Florida law. Such a challenge is more properly made by a motion in limine pursuant to New Hampshire Rule of Evidence 702. It follows that NHS's Motion for Summary Judgment must be DENIED.
III
NHS has also filed a Motion to Withdraw Stipulation. There is no dispute that in the prior trial on the promissory estoppel claim, MRN and NHS entered into a Stipulation that provided as follows:
(1) Subject to other objections to admissibility set forth in paragraph 2, MRN may introduce at trial a summary document of MRN's claimed lost profits damages displaying an analysis of MRN's actual and anticipated profits at NHS and at other speedways without the need to introduce the source documents which support that data. Subject to other objections to admissibility set forth in paragraph 2, MRN may introduce at trial a summary document of PRN's actual and anticipated profits at NHS without the need to introduce the source documents which support that data.
(2) NHS will object to the introduction of MRN's lost profits evidence, including the summary documents set forth in paragraph 3, based on the arguments set forth in NHS's motions in limine filed contemporaneously with this Stipulation, and MRN intends to object to the exclusion of such evidence, both in objection to the motion and at trial.
At the outset, the Court notes that the Stipulation, by its terms, would not appear to bar discovery or cross-examination of plaintiff's expert regarding his damage calculation. Indeed as set forth in NHS's Motion for Summary Judgment, at the prior trial, MRN's damages expert, Mr. Frangoulis, was vigorously cross-examined on his assumptions, as well as the data supporting them. The Stipulation appears to accomplish no purpose other than that set forth in New Hampshire Rule of Evidence 1006, which permits summaries to be presented in the form of a chart, summary, or calculation. By its terms, it would not bar NHS from introducing any documents to show that the summary presented by MRN's expert is inaccurate.
But even assuming that the Stipulation was intended to limit NHS's trial strategy, NHS is nonetheless entitled to relief given the circumstances of this case. A trial court has authority to release a party from the effect of a stipulation if additional facts have come to light. Colby v. American Express Co., 77 N.H. 548, 548 (1915). NHS argues that it has obtained new information which establishes that MRN's experts conclusions are unsupported by fact. This is not a case where a party has prevailed in one phase of the case by making one argument and then relies on a contrary argument to prevail in another phase, thus invoking the doctrine of judicial estoppel. Eby v. State, No. 2013-35, 2014 WL 2688413, slip op. at *9 (N.H., June 13, 2014). While it is true, as MRN argues, that New Hampshire jurisprudence favors stipulations to expedite judicial proceedings, see Hudon v. City of Manchester, 141 N.H. 420, 423 (1996), the purpose of any trial is a search for truth and that purpose cannot be satisfied by holding a party to a stipulation when new facts have come to light that show the stipulation is inaccurate. Accordingly, NHS's Motion to Withdraw Stipulation must be GRANTED.
IV
NHS has filed a Motion to Compel, in which it seeks to compel responses to certain interrogatories and requests for production. Specifically, the Motion to Compel seeks, in substance, source documents that relate to MRN's counterclaim for lost profits as a result of not being able to broadcast NHS races. (NHS's Mem. Supp. Mot. to Compel at 1.) NHS asserts that at the first trial in this matter, MRN's expert, Peter Frangoulis, calculated MRN's lost profit by calculating MRN's lost revenue as result of NHS's refusal to allow it to broadcast the 2008 through 2010 races, and then estimating and deducting the incremental costs that MRN would have incurred to broadcast those races. NHS argues that it is entitled to documents that establish MRN's overall expenses, because damages, under applicable Florida law, cannot be calculated using only incremental costs.
MRN objects on a number of grounds. First, it argues that some of the requests seek information that does not exist. Second, it argues that some of the requests seek documents which have already been produced. Third, it implicitly argues that discovery into its damages is improper, based on the stipulation entered into pursuant to New Hampshire Rule of Evidence 1006 regarding damage summaries. Fourth, it argues that the requests are unreasonably burdensome and not reasonably calculated to lead to the discovery of admissible evidence. Finally, it argues that apart from all the other reasons the discovery should not be required, the discovery is irrelevant because its expert may be permitted to present an analysis on damages that does not account for general overhead expenses under controlling Florida law. The parties appear to agree that the Florida Supreme Court has never decided this precise issue and, as appears to frequently be the case, Florida intermediate appellate courts have issued what appeared to be facially inconsistent rulings. Since the issue of relevancy would be dispositive if decided against NHS, the Court considers it first.
A
NHS contends that Florida law requires the plaintiff to present evidence of all its costs to recover lost profits. In making this argument, NHS principally relies upon Del Monte Fresh Produce Co. v. Net Results, Inc., 77 So.3d 667, 674 (Fla. 3d DCA 2011) in which the court stated:
We have continuously held that the computation of damages in such a case requires the non-breaching party to deduct from anticipated contract revenue other costs incurred in performing the contractual services. Typically these include an appropriate allocation of overhead as well as any personnel expenses that would have been incurred.
MRN relies on Knight Energy Services, Inc. v. C.R. Int'l Enterprises, Inc., 616 So.2d 1079 (Fla. 4th DCA 1993), a one-page per curiam opinion in which the court upheld a trial court's award of damages of $90,000 to a plaintiff, based upon an oral contract. The trial court allowed the owner of a business to testify "unequivocally" that there were no costs or expenses necessary to fully perform the contract. The appellate court held that since the jury accepted the plaintiff's testimony, it was "not in a position to state that no reasonable juror could return a verdict as awarded." Knight Energy Services, Inc., 616 So.2d at 1080-81.
However, Knight Energy Services, Inc. appears to be inconsistent with virtually all other Florida intermediate appellate courts that have considered this issue. See Boca Developers, Inc. v. Fine Decorators, Inc., 862 So.2d 803, 805-86 (Fla. 4th DCA 2003); Indian River Colony Club, Inc. v. Schopke Const. & Engineering, Inc., 592 So.2d 1185, 1187 (Fla. 5th DCA 1992); Physicians Reference Laboratory, Inc. v. Daniel Seckinger, M.D. and Associates, P.A., 501 So.2d 107, 109 (Fla. 3d DCA 1987). Illustrative is Boca Developers, Inc., in which a decorator contracted with a developer to furnish several new model apartments. 862 So.2d at 804. After the developer breached, the decorator sued and obtained a jury verdict awarding lost profits. Id. The decorator argued that fixed costs did not have to be concluded in the calculation of its lost profits. According to the decorator, because it did such a large volume of business, this particular project did not increase its fixed overhead costs. Id. In rejecting the argument, the court explained that if the decorator worked on one hundred projects a year, and its fixed costs did not increase after the first fifty, it does not follow that the plaintiff could recover greater profits from the seventy fifth project than the twenty fifth project; instead the fixed expenses must be allocated across the board. Id. at 805-06.
In RKR Motors, Inc. v. Associated Uniform and Rental Supply, Inc., 995 So.2d 588 (Fla. 3d DCA 2008), the court accepted the reasoning of Boca Developers, Inc., Indian River and Physicians Reference and rejected the Knight analysis:
The holdings in Boca, Indian River, and Physicians Reference make perfect sense. Requiring a deduction of a share of fixed costs related to the performance of a contract allows for a true measurement of the amount the non-breaching party would have earned on the contract had there been no breach, which is the proper measure of damages.RKR Motors, Inc., 995 So.2d at 593.
The Court agrees. Under Florida law, lost profits cannot be awarded based on mere speculation but must be established with reasonable certainty. Forest's Mens Shop v. Schmidt, 536 So.2d 334, 336 (Fla. 4th DCA 1988). The approach taken by the courts in Boca, Indian River, Physicians Reference, and RKR Motors, Inc. is likely to allow the jury to obtain information to determine the appropriate measure of damages, if damages are to be awarded. Discovery into MRN's overhead is therefore likely to lead to admissible evidence.
B
MRN's other objections must therefore be considered. The Court has already ruled that the Stipulation entered into pursuant to New Hampshire Rule of Evidence 1006 does not preclude inquiry into MRN's damages. However, MRN cannot be required to produce documents that it already has produced, or that do not exist. To the extent the Motion to Compel seeks such documents, it must be denied. NHS seeks information covering a twelve year period from 1999 through 2010, even though damages are only sought from 2008. This request is plainly overbroad and must be limited to the years in which damages are claimed, and two years prior. Several of the production requests seek revenue and profit information regarding broadcast of races at other tracks by MRN. NHS has not explained why this information would likely lead to admissible evidence and would justify the burden of producing it; this request must be denied.
MRN points out that a literal reading of the request for "all" expense documents would require production of any individual receipt showing every corporate expenditure made by MRN. Such a reading would be unreasonable, and the Court expects the parties to meet and confer to come to a rational narrowing of this request.
Finally, NHS seeks production of certain source documents that are the subject of the Stipulation. MRN recites that production would be unduly burdensome but does not explain why. If the documents are maintained in the ordinary course of business, the request can be satisfied by simply allowing access to the documents, which would not ordinarily require undue expense. If the documents are in electronic format, the parties should be able to meet and confer, and subsequently determine whether the cost of production outweighs any potential benefit, or whether the cost of production should be shifted. Therefore, the Court will grant the Motion to Compel in accordance with the principles outlined in part IV of this Order, subject to the parties supplementing their pleading on the issues of burden and cost of production of information that must be produced.
SO ORDERED
__________
Richard B. McNamara,
Presiding Justice