United States District Court, S.D. New York
WORLD OF BOXING LLC, VLADIMIR HRUNOV, and ANDREY RYABINSKIY, Plaintiffs,
DON KING and DON KING PRODUCTIONS, Inc., Defendants.
Kent A. Yalowitz, Esq., Matthew D. Grant, Esq., Arnold & Porter, LLP, New York, NY, for Plaintiffs.
T. Barry Kingham, Esq., Andrew B. Zinham, Esq., Curtis, Mallet-Prevost, Colt and Mosle LLP, New York, NY, for Defendants.
OPINION AND ORDER
SHIRA A. SCHEINDLIN, District Judge.
On October 1, 2014, I ruled that Don King, doing business as Don King Productions, breached his agreement with Vladimir Hrunov and Andrey Ryabinskiy, who do business as World of Boxing (collectively "WOB"), when he failed to "cause Guillermo Jones to participate in [a] bout" against Denis Lebedev ("the bout"). The remaining question - addressed in this Opinion - is the amount that King owes to WOB. After my merits ruling, WOB moved for summary judgment on a reliance theory of contract damages. For the reasons set forth below, the motion is GRANTED in part and DENIED in part.
Because WOB's "lost profits" - i.e., its expectation damages - "cannot be reasonably quantified, " it seeks instead to recover the costs it incurred in anticipation of the bout. These costs are divided into two categories. First, per the terms of the parties' agreement, WOB paid $800, 000 into an escrow account, of which "$250, 000 [was] immediately payable to King." Second, WOB expended approximately one million dollars in preparation for the bout. These expenses include, inter alia, transportation, lodging, facilities, and promotion. WOB has moved to recover both categories of costs, for a total of approximately $1.8 million. Of this, King concedes that $536, 000 - which represents the portion of the escrow account not immediately payable to King ($550, 000), minus legal fees, plus interest - is due to WOB per the terms of the parties' escrow agreement ("Agreement"). The parties' dispute therefore concerns (1) the remaining $250, 000 from the escrow account, and (2) the one million dollars of preparatory costs.
King has raised two arguments. First, he maintains that WOB should not be able to recover the $250, 000 that was immediately payable to him upon execution of the Agreement. According to King, the disposition of that sum is governed by the terms of the Agreement, which earmarks the $250, 000 as a "non-refundable" payment to King, to be retained "whether or not the bout occur[s]." Second, King argues that although WOB is correct that "New York law provides for recovery of reasonable, foreseeable, reliance damages, " those damages must be offset by "any loss that... the injured party would have suffered had the contract been performed." And in this case - according to King - WOB would have incurred significant losses even if the bout had gone forward. Therefore, its reliance damages should be capped at the amount of revenue that WOB could reasonably have expected from the bout, which, if measured in terms of the ticket sales that WOB was forced to refund, is just shy of $100, 000. In light of this, King asks this Court either (1) to enter judgment for WOB in that amount, plus return of the $536, 000 currently being held in escrow, or (2) to deny WOB's motion on the grounds that parties have a material dispute of fact regarding whether, and to what extent, WOB would have suffered losses if the bout had occurred.
III. STANDARD OF REVIEW
Summary judgment is appropriate "only where, construing all the evidence in the light most favorable to the [non-moving party] and drawing all reasonable inferences in that party's favor, there is no genuine issue as to any material fact and... the movant is entitled to judgment as a matter of law."
IV. APPLICABLE LAW
New York courts have long distinguished between two different forms of redress in breach of contract suits: "expectation damages" and "reliance damages." Expectation damages provide the injured party with the benefit she would have enjoyed had no breach occurred - i.e., they aim to fulfill the injured party's expectations from the contract. Reliance damages, by contrast, seek to restore the injured party to the position she was in before the contract was formed. They allow for recovery of "expenditures [the injured party] made in reliance on defendant's representations and that he otherwise would not have made." Under New York law,  when expectation damages defy precise calculation, reliance damages are the appropriate remedy. That is what WOB seeks.
To calculate reliance damages, courts must assess the costs that "a plaintiff [incurred from]... expenditures made in preparation for performance or in performance, less any loss that... the injured party would have suffered had the contract been performed.'" The purpose of offsetting reliance damages against anticipated losses is to ensure that contract damages do no more than make an injured party whole - i.e., to ensure that damages do not "put the plaintiff  in a better position than he would have occupied had the contract been fully performed." Thus, "[i]f the breaching party establishes that the plaintiff's losses upon full performance would have equaled or exceeded its reliance expenditures, the plaintiff will recover nothing under a reliance theory."
Typically, the party who moves for summary judgment bears the burden of demonstrating that no material dispute of fact exists. In this context, however, it is the party in breach - in this case, King - that bears the burden of "prov[ing] with reasonable certainty" what losses the "injured party would have ...