Award of Damages Reversed for Failure to Conform to the Evidence

Award of Damages Reversed for Failure to Conform to the Evidence

      In a recent decision by the Kentucky Court of Appeals, it reversed an award of damages to the plaintiff that did not conform to the damages placed in evidence even though it was less than the damages sought and the same amount requested by plaintiff’s counsel in his closing argument.  Pennington v. Wheeler and Clevenger Oil Co., 2012 WL 3762031 (Ky. App. Aug. 31, 2012) (Not To Be Published).  This was the second trip of this particular dispute to the Court of Appeals, it having in 2009 reversed a damage award of only $10.00.  2009 WL 792736 (Ky. App. Mar. 27, 2009) (reviewed denied Oct. 21, 2009). 

      Briefly, Pennington had granted to Wheeler and Clevenger Oil Co. (“Wheeler”) an option to acquire a convenience store for which Wheeler had an exclusive supply agreement for gasoline.  Pennington did not do so, transferring the lease rather to Trador.  At the first trial, it had been demonstrated that Wheeler had incurred damages (i.e., loss profits) in the amount of $162,968.64 over a projected lease period of 32 months.  At the second trial, Mark Clevenger, a co-owner of Wheeler, testified to losses incurred of $583,013.81.  Also introduced into evidence was the lease between Pennington and Trador, showing that it obligated Trador to pay to Wheeler $4,000 per month for a total of $236,000 over a projected 59-month period.  However, even as Clevenger had testified to damages exceeding $583,000, in his closing arguments counsel sought an award of $236,000 from the jury, that being the amount to be paid to Pennington by Trador under the lease, it being stated by Wheeler’s attorney that “his client would be ‘happy’ with that amount and thought it would be ‘fair’.”  2012 WL 3762031, *3, fn 4.

      Pennington appealed on the basis that the jury’s award of damages was not based upon substantial evidence.  The Court wrote that:

It is well established in this jurisdiction that the measure of damages for breach of contract is that sum which will put the injured party into the same position he would have been had the contract been performed.

To that end, the jury had been instructed that:

You will determine from the evidence and award [Wheeler] a sum of money that will fairly and reasonably compensate it for the loss of profit it sustained, directly as  result of the failure of [Pennington] to comply with the right of first refusal, not to exceed $583,013.81.  Id.

      In overturning the jury’s verdict, the Court wrote that:

We conclude the jury disregarded the instruction because there was no evidence which supported an award of $236,000 as a measure of lost profit.  The evidence was that Wheeler’s lost profit was either $583,013.01 or $0.  A jury is ordinarily permitted to award damages, in its discretion, which are less than the amount sought by the plaintiff, but more than the amount admitted by the defendant….

   Here, however, the jury award cannot stand because in awarding the exact amount of rental payments, the jury clearly disregarded the instructions…. The jury disregarded the instruction to arrive at an amount of damages based upon Wheeler’s lost profit, and Pennington is entitled to a new trial.

      The Court of Appeals reviewed and rejected an appeal based upon the failure to give a mitigation of damages instruction.  The Court recognized that, while there is a general obligation to mitigate damages, Pennington had failed in his obligation to demonstrate that it “feasible and reasonable” for Wheeler to mitigate, namely by acquiring through either purchase or lease a similar convenience store.