United States District Court, D. Maryland
JAMES K. BREDAR, District Judge.
VCA Cenvet, Inc. ("Plaintiff") brought this suit against Chadwell Animal Hospital, LLC ("Defendant") for alleged breach of contract and unjust enrichment. Now pending before the Court is Plaintiff's motion for summary judgment. (ECF No. 84.) The issues have been briefed (ECF Nos. 84, 85, 87), and no hearing is required, Local Rule 105.6. For the reasons explained below, Plaintiff's motion for summary judgment is DENIED.
The facts here are largely unchanged as recounted in ECF No. 69. In summary, Plaintiff provides commercial lab services to animal hospitals, and Defendant is an animal hospital in Maryland. The parties entered into a four-year contract titled Lab Services Agreement ("LSA"), whereby Defendant agreed to purchase lab services exclusively from Plaintiff for the duration of the contract. In return, Plaintiff agreed to give Defendant a "loyalty rebate" equal to 17% off all lab services for that same term. Defendant breached the contract by terminating it after one year, and Plaintiff filed this suit on June 28, 2011 seeking damages for lost profits. (ECF No. 1.) Defendant filed a motion for summary judgment in June, 2012 (ECF No. 44), and Plaintiff filed a cross-motion for summary judgment in July, 2012, (ECF No. 47). The Court denied Plaintiff's motion, granted Defendant's motion, and ordered that the case be closed. (ECF No. 70.)
Plaintiff appealed the Court's decision to the United States Court of Appeals for the Fourth Circuit. (ECF No. 73.) The Court of Appeals first affirmed this Court's denial of Plaintiff's motion for summary judgment, explaining that Plaintiff had failed to "establish the occurrence and extent of its lost profits as a matter of law." VCA Cenvet, Inc. v. Chadwell Animal Hosp., LLC, 552 Fed.Appx. 217, 220 (4th Cir. 2014). Specifically, the appellate court noted that Plaintiff had failed to include a calculation of its fixed costs in estimating lost profits. Id. The Circuit Court went on to reverse this Court's grant of Defendant's motion for summary judgment, holding that Plaintiff does not seek unconscionable damages, and also that Plaintiff's calculation was sufficient to survive a motion for summary judgment. Id. at 220-22.
On remand, Plaintiff filed this motion for summary judgment to decide the remaining issue of damages. (ECF No. 84.)
II. LEGAL STANDARD
"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing predecessor to current Rule 56(a)). The burden is on the moving party to demonstrate the absence of any genuine dispute of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). If sufficient evidence exists for a reasonable jury to render a verdict in favor of the party opposing the motion, then a genuine dispute of material fact is presented and summary judgment should be denied. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). However, the "mere existence of a scintilla of evidence in support of the [opposing party's] position" is insufficient to defeat a motion for summary judgment. Id. at 252. The facts themselves, and the inferences to be drawn from the underlying facts, must be viewed in the light most favorable to the opposing party, Scott v. Harris, 550 U.S. 372, 378 (2007); Iko v. Shreve, 535 F.3d 225, 230 (4th Cir. 2008), who may not rest upon the mere allegations or denials of his pleading but instead must, by affidavit or other evidentiary showing, set out specific facts showing a genuine dispute for trial, Fed.R.Civ.P. 56(c)(1). Supporting and opposing affidavits are to be made on personal knowledge, contain such facts as would be admissible in evidence, and show affirmatively the competence of the affiant to testify to the matters stated in the affidavit. Rule 56(c)(4).
Plaintiff seeks an order granting summary judgment in its favor and granting $176, 778 in damages for lost profits. (ECF No. 84.) Plaintiff reaches this sum by applying the equation laid out in the appellate court's ruling: Lost Profits = Gross Revenue MINUS Variable Costs MINUS Fixed Costs. (ECF No. 84-1 at 1-2 (citing VCA Cenvet, 552 Fed.Appx. 217).)
The standard measure of damages for breach of contract under California law is the aggrieved party's expectation interest. See New W. Charter Middle Sch. v. L.A. Unified Sch. Dist., 114 Cal.Rptr.3d 504, 515 (Cal.Ct.App. 2010). "This is described as the benefit of the bargain that full performance would have brought." Id. (citing Akin v. Certain Underwriters at Lloyd's London, 44 Cal.Rptr.3d 284, 288 (Cal.Ct.App. 2006)). As a general principle, "damages for the loss of prospective profits are recoverable where the evidence makes reasonably certain their occurrence and extent." Grupe v. Glick, 160 P.2d 832, 840 (Cal. 1945). "[O]nce their existence has been so established, recovery will not be denied because the amount cannot be shown with mathematical precision." Resort Video, Ltd. v. Laser Video, Inc., 42 Cal.Rptr.2d 136, 146 (Cal.Ct.App. 1995) (quoting Berge v. Int'l Harvester Co., 190 Cal.Rptr. 815, 822 (Cal.Ct.App. 1983)).
However, recovery must be limited to net profits, because "[t]o allow [P]laintiff to recover a judgment based in part on [its] gross profits would result in [its] unjust enrichment." Gerwin v. Se. Cal. Ass'n of Seventh Day Adventists, 92 Cal.Rptr. 111, 119 (Cal.Ct.App. 1971) (internal citations omitted). The Court of Appeals held that net profits equals gross revenue less variable and fixed costs. VCA Cenvet, 552 Fed.Appx. at 220.
Plaintiff asks the Court to find that there is no remaining genuine issue of material fact, and that Plaintiff is owed damages of $176, 788 as a matter of law. The Court denies Plaintiff's request, and finds that Plaintiff's estimate fails to demonstrate the absence of any genuine dispute of material fact for at least three reasons.
First, Plaintiff has not offered sufficient evidence to support its calculation of gross revenue. Plaintiff asserts that it would have realized an additional $279, 779 in gross revenue had Defendant not breached the LSA. ( See ECF No. 84-1 at 7-8.) It justifies this estimate by taking its total gross revenue in Year 1 of the LSA, $86, 180, and assuming that this total would increase by 4% each year for the remaining three years of the deal. Plaintiff bases this 4% increase on "industry experience, its projected annual fee increases for its tests ...