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True N. Composites, L.L.C. v. Trinity Indus. - 65 F. App'x 266 (Fed. Cir. 2003)

Rule:

On the one hand, damages for breach of contract under Delaware common law typically include both damages for breach and those consequential damages that were reasonably foreseeable at the time the contract was made. On the other hand, contractual damages under the Uniform Commercial Code are limited and include only that needed to put the aggrieved party in as good a position as if the other party had fully performed but neither consequential or special nor penal damages may be awarded.

Facts:

Trinity Industries, Inc and True North Composites, LLC had an agreement to co-develop and build composite railcars. Following cost overruns and difficulties in agreeing on final specifications, True North sued for breaches of the agreement and the duty of good faith and fair dealing. At trial, Trinity argued that Delaware's version of the UCC governed the Agreement because it was a contract predominantly for goods and that the UCC limited the types of damages that True North could be awarded if breach were found. The jury found that Trinity breached the Agreement, therefore, awarding damages for diminution of business value, closure costs, lost profits, and the unreimbursed tooling and equipment costs and learning curve costs to True North. Trinity renewed its motion for judgment as a matter of law, arguing that True North was not, as a matter of law, entitled to damages for diminution of business value, closure costs, lost profits, and the unreimbursed tooling and equipment costs and learning curve costs, because these damages are either barred by the UCC or are speculative.

Issue:

Was the award of damages for True North proper and supported by evidence?

Answer:

Yes, in part.

Conclusion:

The Court held that the Uniform Commercial Code (UCC) governed the agreement because the agreement was predominantly for the sale of goods. Because the district court erred as a matter of law in concluding that the agreement was not predominantly for goods, the appellate court reversed that part of the district court's decision. Because consequential damages were not permitted under the UCC, the appellate court vacated the award for diminution of business value and closure costs. As the jury's award of lost profits was supported by substantial evidence, the court affirmed that portion of the district court's decision. Because the undercarriage manufacturer did not appeal the denial of its motion for judgment as a matter of law as to unreimbursed tooling and equipment costs and learning curve costs, the appellate court did not disturb that portion of the judgment.

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