Commercial Division Blog

Posted: June 12, 2023 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Commercial, Breach of Contract, Damages, Summary Judgment

Plaintiff Entitled to Pursue Lost Profits on $830 Million Hotel Casino Project

In an Opinion, dated May 25, 2023, in BML Properties Ltd. V. China Construction America, Inc., Index No. 657550/2017, Justice Andrew Borrok denied defendants’ motion for summary judgment. The Court previously found that the fraud claims were not duplicative of the breach of contract claims because they relied on misrepresentations of then-current facts regarding the project. In this Opinion, the Court, among other things, refused to preclude plaintiffs, at this stage, from seeking lost damages. The Court explained:

Lost profits are recoverable as direct, not consequential, damages when they (i) were within the contemplation of the parties at the time the agreement was entered into, and (ii) are capable of measurement with reasonable certainty (Biotronik A.G. v Conor Medsystems Ireland, Ltd., 22 NY3d 799, 806, 988 N.Y.S.2d 527, 11 N.E.3d 676 [2014]).

. . . .

This case involves a joint venture specifically formed for the purpose of developing a hotel in an established market where the profits of comparable hotels were known and considered in moving forward with the Project such that it cannot be said that profits were either outside the scope of the contract or too speculative. Accordingly, summary judgment and dismissal is not appropriate. Indeed, as early as April 2008, there appear to be investor decks reflecting projected earnings for the Project based on other established successful hotels in the same market (see NYSCEF Doc. No. 623). These materials were undoubtedly available to the Defendants as part of their diligence review in entering into the Investors Agreement and these known comps form the basis for David Bones' expert report (NYSCEF Doc. No. 620). Put another way, this case does not involve a stadium in an untested market or a tangential loan where the plaintiff failed to meet certain funding requirements for an extension of the loan. Thus, the defendants are not entitled to dismissal of the claims seeking lost profits at this stage. For the avoidance of doubt, at trial, BMLP bears the burden of demonstrating the understanding and expectations of the parties with respect to such lost profits.

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