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The application of the lost volume seller theory is not prohibited in cases involving a breach of contract for personal services under Connecticut law. To qualify as a lost volume seller under Connecticut law, a party must prove that the subsequent contract is not a substitute for the opportunity that has been lost as a result of the breach. A "substitute" is a contract which a volume seller who has suffered the loss of one contract through the breach of another party has entered into in place of the broken contract and which the volume seller would not have been able, with his existing personnel and overhead costs, to perform had there been no breach.
Plaintiff Charles D. Gianetti was a physician specializing in the field of plastic and reconstructive surgery. Plaintiff was granted full clinical privileges as an assistant attending staff physician. The privileges were renewed on an annual basis. Plaintiff filed an application for the renewal of privileges but was declined by the defendant Norwalk Hospital’s medical staff on the basis of the recommendations of the defendant’s department of surgery, section of plastic and reconstructive surgery and credentials committee. Defendant hospital's board of trustees subsequently ratified the decision of the medical staff. On that year, plaintiff derived no income from services performed at the hospital owing to the nonrenewal of his privileges. As a response to the nonrenewal, plaintiff brought the present action against defendant seeking damages and injunctive relief. The case was thereafter referred to an attorney trial referee, who concluded in his report that an enforceable contract existed between the parties and, furthermore, that the defendant, through its employees and agents, had breached that contract by failing to follow the procedural requirements of its bylaws in declining to renew the plaintiff's privileges. The trial court held that the lost volume seller theory did not apply to personal service contracts, and thus, did not determine whether the doctor qualified as a lost volume seller. However, the appellate court reversed the trial court's judgment awarding plaintiff nominal damages on a breach of contract claim and held that as a matter of law, the lost volume seller theory applied to personal services contracts. Defendant appealed. The doctor cross-appealed, arguing he was entitled to damages for lost profits for more than only one year.
Did the appellate court err in holding that the lost volume seller theory applied to personal services contracts?
No. However, the judgment was reversed in part.
The court affirmed the appellate court's holding that, as a matter of law, the lost volume seller theory applied to personal services contracts. However, the court reversed the appellate court's finding that plaintiff was a lost volume seller. As the court held that it was an error to conclude that the plaintiff was a lost volume seller because without more, plaintiff’s testimony was not overwhelming and uncontroverted evidence of his capacity to perform under the contract with the defendant while assuming an increased workload at other hospitals. Therefore, any conclusions on that issue were improper. The court likewise ruled that it was an error to find that the plaintiff was entitled to lost profits damages for only the first year after the defendant terminated plaintiff’s privileges. The court thus remanded the case with instructions to trial court to consider the lost volume seller theory to plaintiff and make factual findings to that end. The court also found that the limited record was not an adequate basis for a determination as to whether the contractual relationship between the parties was intended to be renewable on an annual basis at the discretion of the defendant or whether it was intended to endure for an extended period of time.