• December 5, 2019

Unsophisticated litigants sometimes imagine they can just pick a number from thin air and claim it as their damages. (See, e.g., here and here (Congressman Nunes’ complaints claiming over $1 billion in defamation damages in two separate lawsuits).)

As most civil litigators know (putting aside Congressman Nunes’ lawyers, perhaps), in general, there is considerably more analysis, discipline, and evidence required to prove up damages. Southern Minnesota Beet Sugar Cooperative (“SMBC”) v. Agri Systems d/b/a ASI Industrial, Inc. (“ASI”), illustrates the point.

It turns out that, if you have silos containing 30,000 tons of sugar that fill from the top and empty from the bottom, you need machinery inside the silos to churn the sugar, in essence. Otherwise, the sugar sticks to the sides of the silos and the silos cannot completely emptied. The machines installed in the sugar silos to loosen the sugar from the silo walls are called “reclaimers.”

SMBSC contracted with ASI to build six silos with reclaimers. One failed catastrophically soon after start-up. (If you are interested in the engineering and technology detail, look here at pp. 8-12 to learn of SMBC’s theory, at least, as to how and why ASI blew it in its reclaimer design.)

The contract barred recovery of “consequential damages” and the parties are disputing (among other things) whether certain claimed damages (damages for “cover”) are “consequential damages” that SMBC waived by contract (see here at pp. 15-16).

As SMBSC points out (here at p. 26) , in the breach of contract context, “direct damages arise from the breach itself…Consequential damages are damages foreseeably resulting from the breach, such as lost profits.”

Maybe it is just us, but this distinction between “direct damages” and “consequential damages” seems at least a little unclear. It is therefore no surprise to us that there is some uncertainty in the law as to whether costs of “cover” are “direct damages” or “consequential damages.” This is the issue addressed in SMBSC v. ASI (whether SMBSC’s claimed damages are “consequential damages, which SMBSC waived).

The simple point of this post is that, notwithstanding a widespread misapprehension that damages in civil litigation are simply funny money wish-lists in commercial litigation, plucked from thin air, damages analysis is complex, critical, and the antithesis, really, of open-ended or arbitrary.

Leave a Reply

Your email address will not be published.