Reliance damages are not insurance. Courts will not knowingly put the plaintiff receiving a reliance recovery in a better position than he would have occupied had the contract been fully performed.
The Merry Gentleman was released but it flopped. Merry Gentleman blames the lead actor, Michael Keaton, and brought this breach of contract action against him and defendant George and Leona Productions, Keaton’s “loan-out company” that he uses for professional contracting. They say Keaton (1) failed to prepare the first cut of the film in a timely fashion, (2) submitted a first cut that was incomplete, (3) submitted a revised cut that was not ready for the producers to watch, (4) communicated directly with officials at the Sundance Film Festival and threatening to boycott the festival if they did not accept his director's cut instead of the producers' preferred cut, (5) failed to cooperate with the producers during the post-production process, and (6) failed to promote the film adequately.
Will a court award reliance damages in a breach of contract action if doing so would put the non-breaching party in a better position than it would have been in if it had never entered into the contract?
The Court affirmed the trial court’s holding. Aparty seeking reliance damages under § 349 has a relatively low bar to clear to establish causation and that once it makes this showing, the burden shifts to the breaching party to prove any reduction in those damages. But, an injured party cannot reasonably claim that all of its expenditures were caused by the other party's breach without some reason to think the breach destroyed the entire value of the breaching party's performance. In this context, the breach does not cause the complete loss of investment.
Keaton’s breach did not amount to $5.5 million in damages, because the movie still did well at Sundance Festival and did well with critics. To award the full $5.5 million invested would put The Merry Gentlemen in a much better position than it was before the contract was made.