United States Naval Inst. v. Charter Communs., Inc.

936 F.2d 692 (2d Cir. 1991)

 

RULE:

A plaintiff who prevails on a claim for breach of contract is entitled to prejudgment interest as a matter of right.

FACTS:

Naval, as the assignee of the author's copyright in Red October, entered into a licensing agreement with Berkley in September 1984 (the "Agreement"), granting Berkley the exclusive license to publish a paperback edition of the Book "not sooner than October 1985." Berkley shipped its paperback edition to retail outlets early, placing those outlets in position to sell the paperback prior to October 1985. As a result, retail sales of the paperback began on September 15, 1985, and early sales were sufficiently substantial that the Book was near the top of paperback best-seller lists before the end of September 1985. Naval commenced the present action when it learned of Berkley's plans for early shipment, and it unsuccessfully sought a preliminary injunction. The court held that as to the quantification of that loss, it was within the prerogative of the court as finder of fact to look to plaintiff's sales. The court determined it was not error to lay the normal uncertainty in such hypotheses at the door of the wrongdoer who altered the proper course of events, instead at the door of the injured party. The court held that the prejudgment interest award was appropriate.

ISSUE:

May damages for breach of contract be based on the actual loss stated by the non-breaching party?

ANSWER:

Yes.

CONCLUSION:

The district court found that Berkley's alleged $ 724,300 profits did not define Naval's loss because many persons who bought the paperback in September 1985 would not have bought the book in hardcover but would merely have waited until the paperback edition became available. This finding is not clearly erroneous, and we turn to the question of whether the district court's finding that Naval suffered $ 35,380.50 in actual damages was proper. In reaching the $ 35,380.50 figure, the court operated on the premise that, but for the breach by Berkley, Naval would have sold in September the same number of hardcover copies it sold in August. Berkley challenges that premise as speculative and argues that since Naval presented no evidence as to what its September 1985 sales would have been, Naval is entitled to recover no damages. It argues alternatively that the court should have computed damages on the premise that sales in the second half of September, in the absence of Berkley's premature release of the paperback edition, would have been made at the same rate as in the first half of September. Evaluating the district court's calculation of damages under the clearly erroneous standard of review, we reject Berkley's contentions.

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