Page 72 - Calculating Lost Profits

because C & O suffered no actual loss, it had no breach of contract loss against GM, even though the
dealer agreement between GM and C & O was breached.

The appellate court agreed that C & O had no breach of contract loss against GM and noted "a plaintiff
in a contract action is only entitled to be put in the same economic position that it would have been in
had the contract not been breached. See Ohio Valley Builders’ Supply Co. v. Wetzel Constr. Co., 151
S.E. 1, 4 (W. Va. 1929); 22 Am. Jur. 2d Damages § 28 (2003) ("The sole object of compensatory dam-
ages is to make the injured party whole for losses actually suffered; the plaintiff cannot be made more
than whole, make a profit, or receive more than one recovery for the same harm. . . . The plaintiff is not
entitled to a windfall, and the law will not put him in a better position than he would be in had the wrong
not been done or the contract not been broken."). fn 11

Cases Showing Exceptions to the Mitigation-of-Damages Doctrine

The mitigation-of-damages doctrine is not applicable to all damage calculations, as illustrated in the fol-
lowing two cases.

Ai Ping Lu v. Ravinder S. Grewal, et al. fn 12 was appealed by the plaintiff after the trial court found that
the plaintiff mitigated all damages that resulted from a breach of contract. The respondents entered into
a 10-year lease for a gas station on a property that was acquired by Ms. Lu. Although the lease did not
expire until June 30, 2003, no rent was paid after September of 2000. Ms. Lu discovered that the prem-
ises were vandalized and vacated, and she and her husband made necessary repairs and operated the
business. The respondents were sued for breach of the lease and argued that unpaid rent amounts should
be offset under the mitigation doctrine. The respondents argued that the plaintiff fully mitigated damag-
es with profits that were earned during the time of the respondent’s breach. The trial court found that the
plaintiffs suffered no damages because the mitigation profits (profits from running the business) exceed-
ed the amount of damages owed by the respondents. The court of appeal reversed, finding that the fair
market rental value was the appropriate mitigation measure to offset rents owed under a breach of con-
tract claim for lost rents.

Fiberlok, Inc. v. LMS Enterprises, Inc. fn 13 involved the supply and milling of resin by LMS for Fiber-
lok. Fiberlok entered into a supply contract agreement for LMS to supply Fiberlok with resin. LMS
could not procure the necessary resin from a third party, Dow Chemical Company, and the absence of a
reliable source of resin caused a breach of the contract between LMS and Fiberlok. LMS filed a counter-
claim against Fiberlok for lost profits. The district court awarded LMS, through its counterclaim, lost
profits of $460,000, based on an assumption that LMS could have purchased resin in the market and ful-
filled the contract with Fiberlok. On appeal, Fiberlok argued that LMS should have continued to pur-
chase resin for sale to other distributors. The appellate court, however, found that LMS was forced to
shut down its business as a result of Fiberlok’s failure to perform. Therefore, the court excused LMS
from the duty to further mitigate.

fn 11 See footnote 10.

fn 12 Ai Ping Lu. v. Ravinder S. Grewal, et al., 130 Cal. App.4th 790, 132 Cal Rptr.2d 406 (2003).

fn 13 Fiberlok, Inc. v. LMS Enterprises, Inc., 976 F. 2d 958, U.S. Ct. of Appeals, 5th Cir. (November 10, 1992).

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