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Date: 03-31-2002

Case Style: Anthony R. Gold, et al. v. Ziff Communications Company

Case Number: 1-99-3142

Judge: Cousins

Court: Illinois Court of Appeals, First District

Plaintiff's Attorney: Unknown

Defendant's Attorney: Unknown

Description: Plaintiffs Anthony Gold (Gold), PC Brand, Inc. (PC Brand), Software Communications, Inc. (SCI), and Hanson & Connors, Inc. (Hanson), sued defendant Ziff Communications Company, doing business as Ziff-Davis Publishing Company (Ziff), for breach of contract, seeking damages arising from Ziff's alleged breach of an agreement which provided that any company controlled by Gold could advertise in Ziff's publications at reduced rates. This action was previously before this court in Gold v. Ziff Communications, 265 Ill. App. 3d 953, 638 N.E.2d 756 (1994) (Gold II), which remanded for trial the "control" issue, i.e., "the question of whether Gold violated the terms of the amended Ad/List agreement with his holdings in PC Brand." Gold II, 265 Ill. App. 3d at 965.

After a five-week trial, the jury found Ziff liable and awarded two verdicts: (1)$44,580,000 to PC Brand, Inc./Gold for future lost profits and business value damages; and (2) $10,800,000 to Hanson & Connors, Inc./SCI/Gold for future lost profits and business value damages. The trial court subsequently awarded prejudgment interest of $26,773,834.58 to PC Brand, Inc./Gold and $6,486,265.27 to Hanson & Connors, Inc./SCI/Gold.

Ziff now appeals, arguing that: (1) the trial court erred by accepting the claims of multiple plaintiffs on a single verdict form; (2) PC Brand and Hanson were not proper plaintiffs; (3) evidence failed to support the jury’s verdict that Ziff breached the contract as to PC Brand and caused damages; (4) damages awarded to Gold and PC Brand were based on speculation; (5) evidence failed to support the jury’s verdict that Ziff breached the contract as to Hanson and caused damages; (6) the trial court erred by awarding prejudgment interest; and (7) certain errors occurred at trial which entitle Ziff to a new trial. Additionally, plaintiffs cross-appeal a ruling concerning the return of funds that it deposited into escrow.


In 1981, Gold founded PC Magazine for users of personal computers. In 1982, Ziff, a publisher of specialty magazines, bought the magazine from Gold for more than $10 million. In connection with the purchase, Gold and Ziff signed a letter dated November 19, 1982, providing Gold or a company he "owned and controlled" a right to advertise at an 80% discount on a limited number of pages in PC Magazine, as well as free usage of Ziff's subscriber lists (collectively, the ad/list rights). Gold intended to use these ad/list rights as the foundation for computer mail order companies he planned to set up.

In 1983, Gold formed SCI to use the ad/list rights. SCI, wholly owned by Gold, conducted a mail order software business and advertised in PC Magazine at the 80% discount. On September 15, 1986, Gold and Ziff signed another agreement (Ad/List Agreement) which modified the 1982 agreement. Paragraph 4(i) of the Ad/List Agreement, which presented the control issue remanded for trial, stated that the ad/list rights:

"may only be used by you [Gold] personally or by a company which you control (that is, in which you own at least 51% of the voting stock) and may not be assigned, transferred or allocated to any other person or entity".

Gold was to receive the 80% ad discount and free subscribers' list usage, and those rights were expanded to other Ziff publications. Gold's ads were to be subject to the current rate card in effect for the particular publication. Rate cards contained price lists and conditions.

Paragraph 2(ii) stated that Ziff could withhold approval of list usage if it determined that the mailing could injure Ziff's business reputation and Ziff had to make its objections within seven days. Paragraph 4(ii) prohibited Gold from advertising products of existing advertisers, and paragraph 4(iii) prohibited Gold from competing with Ziff in the sale of ad space in its magazine. Paragraph 6(b) stated that a failure by Ziff to "insist upon strict adherence to any term of this agreement on any occasion shall not be considered a waiver." The Ad/List Agreement also contained a December 31, 1992, expiration date and a right to terminate upon breach of a "material provision" and failure to cure within 30 days. Explicitly, New York law governed.

To maximize the use of the ad/list rights, Gold formed two new mail order companies in late 1987 and early 1988 -- Hanson and PC Brand. Gold formed Hanson to sell software by sending catalogs to names on Ziff's subscriber lists. Hanson took over SCI's business and assumed most of its assets. Gold hired Howard Gosman to operate Hanson as its president.

Gold also contacted Stephen Dukker and they negotiated a structure for a new business which became PC Brand. On January 15, 1988, Gold and Dukker signed a number of interrelated agreements drafted by their attorney, Richard Friedman. One agreement provided that Gold assigned ad/list rights to PC Brand and, in return, PC Brand was to pay Gold or SCI the cash value of the 80% discount used by PC Brand once it became profitable. Also, Gold owned 90% of PC Brand's stock while Dukker owned 10%. Gold, however, agreed to transfer shares to Dukker each year, so that Dukker would hold 51% record ownership when the Ad/List Agreement expired on December 31, 1992. Dukker was named president though December 31, 1992, and had sole responsibility for determining the amount of directors' fees, so long as he and Gold were paid equally.

PC Brand's certificate of incorporation defined voting shares as shares of stock "which confer unlimited voting rights in the election of one or more directors." PC Brand's certificate and bylaws also provided that: (1) only two directors, Dukker and Gold, would serve on the board until December 31, 1992; (2) the Dukker-Gold board composition could only be changed unanimously; (3) upon death or incapacity of either Gold or Dukker, the remaining director would become sole director; and (4) the certificate of incorporation could not be amended without unanimous consent of the stockholders.

PC Brand began operations in May 1988. Gold's capital contribution to PC Brand was about $1,000. Several internal memoranda to Ziff's in-house counsel, Malcolm Morris, indicated that fullrate advertisers learned of Gold's ad/list rights and demanded similar treatment. Plaintiffs allege that complaints by full-rate advertisers motivated Ziff to breach the Ad/List Agreement as to PC Brand and Hanson.

Three contract disputes arose between Gold and Ziff in 1988. The first dispute involved Hanson's use of the discounted space in PC Magazine to place full-page ads of other advertiser's products. On May 13, 1988, Morris declared a breach of the Ad/List Agreement based on these ads, stating that they constituted a transfer of Gold's discount to the manufacturers whose products appeared in the ads. Plaintiffs allege that the objectionable ads were nearly identical to ads Gold had run for several years through SCI without objection. In July 1988, Gold told Morris that Hanson was voluntarily refraining from placing the large ads for third-party products. At trial, Hanson claimed damages resulting from Ziff's refusal to run the large ads.

The second dispute concerned Hanson's use of Ziff's subscriber lists. The Ad/List Agreement gave Gold access to Ziff's lists six times per year. On May 10, 1989, Hanson requested the lists for a sixth mailing. On May 22, 1989, Morris wrote to Gold that Ziff would release its lists only if Hanson paid outstanding invoices and provided Ziff with other financial assurances. Plaintiffs allege that even after Hanson paid the outstanding amount, Ziff refused to release the subscriber list unless Hanson provided proof that it had working capital and inventory of goods to fill orders from the catalog mailing. Ziff, on the other hand, alleges that Hanson was insolvent and unable to pay its debts and its request for assurances was reasonable. Plaintiffs also allege that Ziff delayed in providing a subscriber list for Hanson’s second catalog. Howard Gosman, president of Hanson, testified that in June 1989 Hanson ceased active business operations because Ziff erected roadblocks when Hanson attempted to utilize the ad/list rights.

The third dispute centered around the issue of whether Gold "controlled" PC Brand for purposes of utilizing the Ad/List Agreement. Ziff alleges that it first learned of PC Brand through a May 13, 1988, letter in which Gold stated he owned and controlled PC Brand. PC Brand began placing ads at the 80% discount rate in May 1988. After reviewing PC Brand’s corporate records, Ziff informed Gold in a letter dated November 8, 1988, that "PC Brand is not eligible for allocation of the rights under the Ad/List Agreement" based on Ziff’s conclusion that PC Brand was not controlled by Gold. The letter stated that Gold’s 90% record ownership of stock was meaningless and that Dukker, as president, had greater control of the company. The letter also stated that PC Brand must pay full price for ads it had placed at the 80% discount and that if the matter was not resolved in 30 days, Ziff would have to consider other appropriate steps.

Gold testified that he contacted Morris repeatedly in the days following November 8, 1988, but Morris would not reveal what changes in PC Brand’s structure would cure the perceived problem. Gold, Dukker, Morris and Ziff’s senior vice president, Phil Sine, met on December 6, 1988, to discuss PC Brand. At the meeting, Sine stated that the 20% rate Gold’s companies paid for advertising was too little and that Ziff wanted to double the price to 40% of the full rates.

On December 13, 1988, plaintiffs obtained a preliminary injunction requiring Ziff to continue to give PC Brand six pages of ads in each issue of PC Magazine at the 80% discount. On September 26, 1989, this court affirmed the granting of the injunction in Gold v. Ziff Communications Co., 196 Ill. App. 3d 425, 553 N.E.2d 404 (1989) (Gold I). In January 1989, PC Brand requested that Gold’s 80% discount also be made available in PC Week. Ziff agreed if some additional security was provided or if 40% was paid for the additional ads, but PC Brand refused.

In November 1989, Gold and Dukker amended PC Brand's articles of incorporation to require annual election of directors. Gold testified that the amendments were designed to meet the objections in Morris' November 8, 1988, letter. Morris characterized the amendments as "cosmetic changes" which did not eliminate the problem of the basic arrangement of PC Brand.

In September 1990, the trial court granted partial summary judgment in plaintiffs' favor on the issue of whether Gold controlled PC Brand after the November 1989 corporate amendments. In October 1990, Ziff allowed PC Brand to place ads in PC Week and permitted more than six pages in PC Magazine at the 20% rate. Dukker testified that it was too late, however, because PC Brand's shortage of working capital and inability to raise capital from outside sources had already damaged the company.

In December 1990, Tandon Corporation, an international computer manufacturer, contacted PC Brand about a possible investment. On March 12, 1991, the trial court entered summary judgment in favor of Ziff on the question of Gold's control of PC Brand before the November 1989 corporate amendments. On March 21, 1991, Dukker and Gold signed a letter of intent to sell PC Brand’s stock to Tandon for $4,577,045 plus payment of its debts before the injunction against Ziff was lifted. PC Brand was receiving the full ad/list benefits at this time. On March 26, 1991, the trial court vacated the September 1990 summary judgment it had entered in plaintiff's favor and dissolved the preliminary injunction which required Ziff to give PC Brand six pages of discounted ad space. By March 29, 1991, Tandon learned of the dissolution of the injunction and terminated the letter of intent. In June 1991, PC Brand was sold to Tandon for $1.5 million plus assumption of corporate debt. Ziff alleges that the $3,077,045 difference between the value in the letter of intent and final sale was solely attributable to the lost value of the ad/list rights

On July 8, 1993, the trial court granted Ziff's motion for summary judgment regarding the "control" issue and awarded Ziff $6,562,555.26 on its counterclaim. On August 9, 1994, this court reversed and remanded for a new trial, holding that the control issue was a jury question that could not be resolved as a matter of law. The court held that "the record is replete with factual questions, the most important of which is the subjective intent of Gold and Dukker when they created PC Brand and entered into the interrelated agreements." Gold II, 265 Ill. App. 3d at 965.

At trial, Gold testified that he initially owned 90% of PC Brand's stock while Dukker owned 10%. When PC Brand's assets were sold in 1991, Dukker had acquired 18% of the stock while Gold owned 82%. Gold stated that at all times, he owned 51% or more of PC Brand's stock. Gold and Dukker both testified that their intent was to structure PC Brand to conform with the Ad/List Agreement.

* * *

After determining individual growth rates in sales for each company, Hosfield averaged all of the growth rates except for Dell. He assigned a one-third weight to Dell and two-thirds weight to the average of the other 15 companies to calculate PC Brand's growth rate. He explained that Dell was assigned extra weight because Dell sold computers in the same manner as PC Brand. Hosfield also tested whether the growth rate calculated for PC Brand was reasonable by using PC Brand's growth rate to forecast the sales of the 16 companies. Hosfield then calculated terminal value by taking the projected earnings for 1995 and dividing them by a capitalization rate. Applying the discount rate to the cash flow projections and the terminal value, Hosfield concluded that PC Brand would have a value of $41,263,142 as of December 31, 1992. Hosfield employed the same method to conclude that Hanson would have a value of $25,769,445 as of December 31, 1992.

Adding lost profits and subtracting debt, Hosfield estimated that PC Brand was entitled to $45,392,491 damages while Hanson was entitled to recover $29,606,686. The jury awarded $44,580,000 to PC Brand, Inc./Gold for future lost profits and business value damages and $10,800,000 to Hanson & Connors, Inc./SCI/Gold for future lost profits and business value damages. The trial court subsequently awarded prejudgment interest of $26,773,834.58 to PC Brand, Inc./Gold and $6,486,265.27 to Hanson & Connors, Inc./SCI/Gold.

* * *

Under New York law, insistence upon terms that are not contained in a contract constitutes repudiation. REA Express, Inc. v. Interway Corp., 538 F.2d 953, 955 (2d Cir. 1976). After reviewing the record in this case, it is our view that a trier of fact could conclude that there was sufficient evidence to establish that Ziff insisted upon terms not within the contract. We conclude that the evidence was sufficient to establish that the breach regarding PC Brand commenced in December 1988.

* * *

In the present case, Ziff points to Dukker’s testimony about Hambrecht & Quist refusing to provide financing due to litigation as plaintiffs’ only causal evidence. However, plaintiffs alleged the following additional facts: PC Brand incurred costs for non-Ziff advertising at full rates; PC Brand spent additional amounts on Ziff advertising above the agreed 20% discount; PC Brand lost potential investors due to pending litigation concerning ad/list rights; and it incurred legal fees to enforce the Ad/List Agreement. The jury could reasonably conclude that those problems caused PC Brand's cash flow difficulties and resultant damages. Viewed in the light most favorable to plaintiffs, the evidence fails to overwhelmingly favor Ziff. Ziff also argues that PC Brand’s losses are not "directly traceable" to Ziff’s refusal to allow use of the ad/list benefits. See Kenford Co. v. County of Erie, 67 N.Y.2d 257, 261, 493 N.E.2d 234, 235, 502 N.Y.S.2d 131, 132 (1986) (Kenford I) (damages must be directly traceable to the breach, not remote or the result of other intervening causes). In support of its view, Ziff cites an Illinois case, Movitz v. First National Bank, 148 F.3d 760 (7th Cir. 1998). In Movitz, a real estate investor sued a bank for negligence and breach of contract, alleging that the bank's negligent evaluation of a Houston office building before investor's purchase caused his loss. The building had defective air conditioning ducts, which the bank failed to detect before the purchase. The Houston real estate market also collapsed that year. Tenants vacated the building, the mortgagee foreclosed and almost the entire investment was lost. Movitz, 148 F.3d at 761.

* * *

Under New York law, a plaintiff is entitled to recover lost profits only if he can establish with reasonable certainty both the existence and amount of such damages. Kenford I, 67 N.Y.2d at 261, 493 N.E.2d at 236, 502 N.Y.S.2d at 132. The damages may not be merely speculative, possible or imaginary (Kenford I, 67 N.Y.2d at 261, 493 N.E.2d at 236, 502 N.Y.S.2d at 132), though lost profits need not be proven with mathematical precision (Ashland Management Co. v. Janien, 82 N.Y.2d 395, 403, 624 N.E.2d 1007, 1010, 604 N.Y.S.2d 912, 915 (1993)). Guided by these general principles, we turn to Ziff’s specific arguments.

* * *

In Kenford I, Erie County had contracted with Kenford Company, Inc., and Dome Stadium, Inc. (DSI), to construct and operate a domed stadium. In exchange for the land donation, the county was supposed to begin construction within 12 months of the contract date and, upon completion, the county was to enter into a 20-year management agreement with DSI. When the construction was not timely commenced, DSI sued the county and sought lost profits that it would have received under the management agreement. The court held that DSI could not recover lost profits because their existence could not be proven with reasonable certainty. Kenford I, 67 N.Y.2d at 260, 262-63, 493 N.E.2d at 236, 502 N.Y.S.2d at 133.

Similarly, in Schonfeld II the court held that lost profits could not be recovered for breach of promise to fund a proposed cable television channel. The channel consisted of untested programming (an "Americanized" version of BBC) with no established customer base. The court found that the channel was a new entertainment venture similar to the proposed stadium in Kenford I. The court emphasized that the channel "never saw the light of day" and its profits were purely hypothetical. Schonfeld II, 218 F.3d at 173. Though the defendants argued that they were experienced cable channel operators, the court noted that defendants and BBC had never jointly operated a cable channel before and this was an introduction of a new product into a new market. Thus, without a historic record of operations, the court concluded that there was no basis from which lost profits could be projected for this new business. Schonfeld II, 218 F.3d at 173.

In contrast, Ashland involved a dispute between an investment firm and a former employee who was awarded lost profits for breach of contract. The employee had developed a mathematical model for determining investment strategy and tried to sell it to the firm. When a dispute arose during negotiations, the firm sued to prevent employee from using his model and the employee counterclaimed for breach of contract. Even though the parties were launching a new investment strategy, the court held that they were not entering a new or unfamiliar business. The new but tested strategy would be introduced by an existing financial management corporation with an extensive customer base. Thus, the projection of future profits was not speculative. Ashland, 82 N.Y.2d at 406, 624 N.E.2d at 1012, 604 N.Y.S.2d at 917.

The instant case is more analogous to Ashland. Unlike Kenford I and Schonfeld II, PC Brand was not a new business that had never seen the light of day. Plaintiffs also argue that PC Brand could also draw upon Gold’s prior experience with SCI, which conducted mail order sales using the ad/list rights and the name "PC Brand" from 1982 through 1988. However, plaintiffs do not allege whether SCI was a success under Gold’s management.

Ziff also argues that PC Brand’s history of losses precludes recovery for lost profits. Ziff cites several cases, including Proteus Books Ltd. v. Cherry Lane Music Co., 873 F.2d 502 (2d Cir. 1989), and Schneidman v. Tollman, 691 N.Y.S.2d 58, 261 A.D.2d 289 (1999). In Proteus, the court found that it was difficult to assess a book publisher’s future earnings because its sales performance in the United States had been consistently poor. Proteus, 873 F.2d at 510. Similarly, the court in Schneidman denied limited partners in the motel business the recovery of lost profits because the properties at issue had no history of profits whatsoever. Schneidman, 691 N.Y.S.2d at 59, 261 A.D.2d at 290. ("Far from generating profits, the properties operated at a staggering loss, were ultimately foreclosed upon by lenders, and even subsequent to foreclosure left an outstanding indebtedness of millions of dollars").

In the instant case, PC Brand reported increasing net sales as follows: $7,708,453 in 1988, its first year of operation; $28,872,523 in 1989; and $37,559,537 in 1990. Unlike the book publisher in Proteus, PC Brand’s sales performance was progressively higher each fiscal year. Ziff further contends that PC Brand’s net profit was only $150,000 in 1989 and it was insolvent by 1990 with losses of $3.1 million. Unlike the properties in Schneidman, however, PC Brand did turn a profit of $150,000 in 1989. A jury could reasonably conclude that the subsequent losses occurred because the full ad/list rights were unavailable starting in December 1988 and PC Brand was only entitled to six discounted advertising pages under the preliminary injunction.

Ziff further argues that, based on these figures, PC Brand could not predict the amount of lost profits with any degree of certainty. However, "'[a] person violating his contract should not be permitted entirely to escape liability because the amount of the damages which he has caused is uncertain.'" Aqua Dredge, Inc. v. Stony Point Marina & Yacht Club, Inc., 583 N.Y.S.2d 648, 650, 183 A.D.2d 1055, 1058 (1992), quoting Wakeman v. Wheeler, 101 N.Y. 205, 209, 4 N.E. 264, 266 (1886).

* * *

The court in H&P denied the plaintiff recovery for lost profits because plaintiff relied solely on the speculative basis of projections drawn from other businesses and gave no financial account of its own business whatsoever. H&P, 943 F. Supp. at 331 ("plaintiff has given no account of the scope of its business in Illinois or anywhere else prior to its abortive operations in New York, much less any account of profits it may have derived from similar operations"). Similarly, the court in Lovely denied plaintiffs profits because the only evidence they presented on this issue was a vague reference to another successful business in a newspaper. Lovely, slip op. at 6 ("The only 'evidence' plaintiffs have offered to support their claim for lost future profits is their allusion to a newspaper report about an unnamed women’s clothing manufacturer allegedly making 'millions'").

Mehta, Lovely, and H&P are inapposite because Mehta did not even involve the use of comparable companies, while Lovely and H & P discounted the use of similar businesses because the parties failed to submit any evidence of actual sales figures from their own businesses. In contrast, here, Hosfield calculated PC Brand’s lost profits based upon its own audited financial statements in conjunction with industry data for other companies. Hosfield explained that he used the discounted cash flow method and did not conduct a comparable company analysis. Hosfield used the results of other companies only to determine an industry growth rate and confirm his projections of PC Brand’s actual sales.

* * *

Upon inspection, the agreement refers to the rate card for the purpose of establishing the price of each discounted advertising page. "'[A] reference by the contracting parties to an extraneous writing for a particular purpose makes it a part of their agreement only for the purpose specified.'" F. Garofalo Electric Co. v. Hartford Fire Insurance Co., 799 F. Supp. 8, 11 (E.D.N.Y. 1992), quoting Guernini Stone Co. v. P.J. Carlin Construction Co., 240 U.S. 264, 277, 60 L. Ed. 636, 642, 36 S. Ct. 300, 306 (1915). Thus, we do not believe that the agreement's reference to the rate card incorporates its liability exclusions. Moreover, the fact that Ziff expressly included liability exclusions in its rate card but failed to mention them in the Ad/List Agreement is significant.Like Trademark, plaintiffs present no evidence that the parties ever discussed lost profits liability. Instead, plaintiffs simply point to Ziff's "awareness" that there was a large downside risk for PC Brand if the ad/list benefits were denied. The only contractual provision plaintiff cites permits Gold to use the ad/list rights in a "business which [he] set[s] up which is engaged in mail order sales or similar distribution of products." Again, this provision states the purpose of the contract, but does not provide any further insight as to whether Ziff "was agreeing to underwrite the hypothetical profits from these plans." Goodstein Construction Corp. v. City of New York, 80 N.Y.2d 366, 375, 604 N.E.2d 1356, 1362 (1992). Without more, it cannot be said that the parties reasonably contemplated Ziff's liability for lost profits under New York law.

* * *

The court emphasized that defendant assumed a definite obligation to pay lost profits by the express terms of the agreement. In fact, a sum of $3,027,500 was explicitly set forth in the contract schedule as contemplated profits. The court concluded that the moneys plaintiff sought were general damages flowing as a natural and probable consequence of the breach. American List, 75 N.Y.2d at 43-44, 549 N.E.2d at 1164.

Unlike American List, Ziff did not assume a definite obligation for plaintiffs' lost profits by the express terms of the agreement. Since the agreement itself is silent on the subject of damages, we cannot agree that the moneys plaintiffs seek to recover can be characterized as "general" damages. Thus, the award for lost profits is reversed.

* * *

"It is a fundamental proposition of contract law, including the law of New York, that the loss caused by a breach is determined as of the time of the breach." Sharma v. Skaarup Ship Management Corp., 916 F.2d 820, 825 (2d Cir. 1990). In the instant case, we have already determined that Ziff breached the agreement as to PC Brand in December 1988. However, Hosfield used the discounted cash flow approach to calculate the fair market value of PC Brand as of December 31, 1992. Plaintiffs offer no explanation why Hosfield used December 1992 rather than December 1988, except to say that Ziff was not prejudiced by this result. In our view, the business value of PC Brand should have been assessed at the time of the breach.

* * *

In sum, on the issue of damages, we believe that a new trial limited to the question of damages is necessary to subtract recovery for lost profits and recompute business value damages for breach, commencing in December 1988. See Midland Hotel Corp. v. Reuben H. Donnelley Corp., 118 Ill. 2d 306, 319-20, 515 N.E.2d 61 (1987) (approving a new trial limited to the issue of damages where there was sufficient evidence to find defendant liable and defendant was not prejudiced).

* * *

However, we agree with Ziff’s contention that it did not breach the agreement when it refused to allow Hanson to run third party ads. Although Ziff may have allowed SCI to run similar ads in the past, paragraph 4(ii) of the Ad/List Agreement expressly prohibits Gold from promoting products or services of "businesses which were already advertisers in any PC Publication prior to [Gold] obtaining control."

* * *

Ziff relies on older New York decisions which denied the award of interest because damages were not reasonably ascertainable before trial. See Faber v. City of New York, 222 N.Y. 255, 262, 118 N.E. 609, 611 (1918) (court denies prejudgment interest because value of rock excavation had no established market value as of a fixed day from which interest could be calculated); Gray v. Central R. Co. of New Jersey, 157 N.Y. 483, 487-88, 52 N.E. 555, 556-57 (1899) (plaintiff could not recover interest on its damages for nonacceptance of a steamboat at a contract price because the vessel had no well-defined market value); Grobe v. Kramer, 33 N.Y.S.2d 901, 178 Misc. 247 (1942) (plaintiff not entitled to interest on damages for fraudulent deprivation of stocks because the value of the stock on the day of the commission of fraud was not fixed and capable of computation).

However, more recent New York cases cited by defendant dispense with the requirement that amount due must be ascertainable before interest can be awarded. In Galloping, Inc. v. QVC, Inc., 27 F. Supp. 2d 466 (S.D.N.Y. 1998), licensor sued defendant for breach of licensing agreement and was awarded damages for amounts attributable to advance royalties, including lost profits. Defendant argued that licensor was not entitled to prejudgment interest on lost profits because the "amount was not 'readily ascertainable' at a fixed date prior to entry of judgment." Galloping, 27 F. Supp. at 468-69. The court rejected defendant's argument and noted that New York law granted prejudgment interest on awards of lost profits even though the damages were not ascertainable until the court fixed the amount. See also Brushton-Moira Central School District v. Fred H. Thomas Associates, P.C., 91 N.Y.2d 256, 692 N.E.2d 551, 669 N.Y.S.2d 520 (1998) (school district was entitled to prejudgment interest in breach of contract action against architect for defective wall panels, though cost to repair or replace panels was to be determined at trial); S. Leo Harmonay, Inc. v. Binks Manufacturing Co., 597 F. Supp. 1014, 1029-30, 1036 (S.D.N.Y. 1984) (court granted prejudgment interest on damages for labor inefficiency, even though these damages, "uncertain in amount," were not ascertained until the court made its posttrial findings of fact and conclusions of law).

Click the case caption above for the full text of the Court's opinion.

Outcome: For the same reasons noted for PC Brand, we reverse Hanson’s lost profit award because such damages were not within the reasonable contemplation of the parties. We also remand for a new trial limited to the issue of business value damages to be recomputed as of the date of breach, commencing in October 1988.

Since we remand the case for calculations of business value damages, we do not reach Ziff's contention that the jury's verdict may have included amounts for lost value of money.

Affirmed in part and reversed in part; remanded with directions.

Plaintiff's Experts: Mark Hosfield

Defendant's Experts: David Ruder, Stanley Seitz, Paul Yeh, and John Kleiman.

Comments: None

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