Lost Profits and Breach of Contract Damages: Illinois Law

imageIn Santorini Cab Corporation v. Banco Popular, 2013 IL App (1st) 122070, the plaintiff cab company sued a bank for breaching two contracts to transfer taxicab medallions totalling $96,000 ($48,000 each).  The plaintiff sought damages for lost profits (profits it would have earned had the bank transferred the medallions) and the increased value of the medallions as of the trial date.

After a bench trial, the court entered judgment for the cab company but in an amount (about $40,000) much lower than the company sought.  The trial court previously entered partial summary judgment for the bank and excluded plaintiff’s lost profits evidence as a discovery sanction.  The court also ruled that the proper measure of plaintiff’s damages was the difference between the medallions’ contract price and their value on the date of breach (2007); not on the trial date (2011).  The cab company appealed.

Holding: Trial court affirmed.

Reasons: The trial court properly barred the plaintiff from offering lost profits evidence.  The Court noted that plaintiff repeatedly failed to respond to defendant’s discovery requests for information to support plaintiff’s claimed damages.

Lost Profits Standards and Discovery Sanctions

Under Illinois law, lost profits can be awarded as long as there is a sufficient basis to estimate them with  reasonable certainty.  Lost profits won’t be awarded where the proof is remote or speculative.  (¶¶ 18-19).  The plaintiff has the burden of proving lost profits by presenting a reasonable basis for their computation.  A common source of lost profits evidence is a plaintiff’s track record of past profits as a gauge of what future profits would have been (if there was no breach of contract).

Here, the plaintiff didn’t meet its burden of proving lost profits.  Since the plaintiff failed to comply with defendant’s lost profits discovery on multiple occasions, the trial court properly struck plaintiff’s damage claims as a discovery sanction under Supreme Court Rule 219.

Rule 219 gives the trial court wide latitude to impose discovery sanctions, including barring a non-complying party from offering evidence on issues sought by the ignored discovery requests.  (¶¶ 21-22).

Contract Damages – From When to When?

The Court also affirmed the trial court’s damage award of $37,550 which consisted of the difference in the (a) contract price of each medallion ($48,000) and (b) the medallion’s value on the date of breach ($66,775).

Breach of contract damages seek to put the plaintiff in the position he would have been in had the contract been performed, but not in a better position.  Contract damages should not provide plaintiff with a windfall.  (¶ 26).

In a personal property case, the measure of damages is the difference between the contract price and the market price of the item at the time of breach.  ¶ 27. But where there is no market for the item, this rule doesn’t apply.  Instead, the damage amount is “actual loss” to the buyer as shown by the  evidence.  (¶¶ 26-27).

Here, there was a definite market for cab medallions.  The evidence was that there were thousands of cab medallions bought and sold over a 3 1/2 year period preceding the trial date and several medallions were sold the month of the bank’s breach.  The Court found that the trial court properly averaged the sale price of medallions sold in Chicago during the month and year of breach (Feb. 2007) and sustained the lower court’s damage award for the plaintiff.

Take-aways:

Santorini provides a nice gloss on contract damages and lost profits requirements in the personal property context.  It clarifies that contract damages involving personal property  are measured on the date of breach; not a later trial date.  This case also shows how crucial it is to timely and properly answer discovery requests on damages issues; especially if you have the burden of proof at trial.

It’s crucial for parties to vigilantly update discovery responses – especially on damage computations – so they aren’t barred from offering damages evidence at trial.

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PaulP

Litigation attorney at Fisher Kanaris, P.C. representing businesses and individuals in all types of commercial disputes.