Blogs

Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts
Posted: August 1, 2016

Contract Claim Dismissed on Summary Judgment for Failure to Prove Damages

On July 19, 2016, Justice Bransten of the New York County Commercial Division issued a decision in MadCap Acquisitions LLC v. American Towers LLC, 2016 NY Slip Op. 31395(U), granting a defendant summary judgment dismissing the breach of contract claim against it on the ground that the plaintiff had failed to prove damages, explaining:

American Tower asserts that MadCap’s claim for loss of future profits, i.e., the anticipated profits from the hypothetical joint venture with American Tower to acquire the Telecom Rights, is foreclosed by the Court of Appeals’ decision in Kenford Company v. County of Erie, 67 N.Y.2d 257, 261 (1986). In Kenford, the Court explained that, to recover for lost profits,

First, it must be demonstrated with certainty that such damages have been caused by the breach and, second, the alleged loss must be capable of proof with reasonable certainty. In other words, the damages may not be merely speculative, possibly or imaginary, but must be reasonably certain and directly traceable to the breach, not remote or the result of other intervening causes. In addition, there must be a showing that the particular damages were fairly within the contemplation of the parties to the contract at the time it was made.

. . .

Applying the Kenford standard to the facts in this case, it is clear that MadCap has failed to meet its burden. First, MadCap has not shown that the damages were reasonably certain and directly traceable to the breach. Although MadCap’s damages estimate was calculated using a market rate formula for the distribution of profits between the partners that is typically utilized by real estate and private equity investors, MadCap’s model relies on several, significant assumptions, undermining any certainty that the damages projection may have had. Indeed, the projection is based on the assumption that MadCap decided to partner with American Tower, despite receiving numerous bids, and that American Tower, under no contractual obligation to partner with MadCap, agreed. MadCap also assumes that the parties were able to agree on the terms of the partnership, including the investment model for the purchase of the Telecom Rights, and the various fees that MadCap now seeks. Finally, MadCap assumes that a contract memorializing those terms was executed by the parties, and the Telecom Rights were successfully purchased pursuant to those terms.

Accordingly, MadCap’s claim for damages, dependent on each of the above assumptions-with little basis in fact-is nothing more than a speculative projection of
lost profits. Although the law does not require mathematical precision, MadCap has failed to show that the damages were reasonably certain.

In addition, MadCap has failed to show that the damages were in the contemplation of the parties at the time the Agreement was executed. As the above makes clear, the Agreement does not memorialize a partnership between MadCap and American Tower, nor does it memorialize the purchase of the Telecom Rights. Rather, the Agreement outlines obligations with respect to non-circumvention, non-disclosure and confidentiality.

(Internal quotations and citations omitted) (emphasis added).

View posts