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The Proper Method for Determining Damages in a Breach of Contract Case in Florida

houseWhenever you go to court to seek relief based upon an alleged breach of contract, there are several keys to success. There is establishing liability. There is also establishing your damages. Both are essential parts of a positive outcome. Experienced Florida contract litigation attorneys can help with regard to crafting a winning case on both of these vital components.

The latter of these two was a major problem in one recent breach of contract case from the Second District Court of Appeal. The case involved two LLCs with very similar names that had entered into a contract to engage in a business venture. One LLC was responsible for finding “distressed mortgages that holders were typically willing to sell for less than face value.” The other LLC provided the capital to finance the purchase of the mortgages, and the first LLC serviced the loans for the second LLC. The parties executed the deal in 2003.

Then, the housing collapse happened, and the LLC responsible for finding the properties and servicing the loans fell deeply into debt. The parties worked out an oral agreement in which the servicing entity would not service any more loans and would transfer all of its existing files to its contract partner.

The transfer took place, but there was a hitch. The servicing LLC allegedly included in the transfer 170 files that weren’t supposed to be included and for which it later resumed servicing those loans. This resumption led to a breach of contract lawsuit, alleging that the servicing LLC breach the oral “walkaway” contract when it resumed servicing the disputed 170 accounts.

The trial court ruled for the plaintiffs, assessing against the servicing LLC damages in the amount of all of the money it had received on the 170 disputed loans after November 2008.

The defendant appealed, and it won. The key to its success came down to a very important element of any civil case, including commercial lawsuits such as breach of contract actions:  the plaintiff’s method of proving the damages it suffered. In a breach case like this, the amount of the plaintiff’s damages was the amount of lost profits it suffered. The law places the burden of proving these lost profits directly on the plaintiff that was allegedly victimized by the breach.

Proving the plaintiff’s lost profits in this case meant something different from just establishing the amount of the defendant’s total gross collections. The amount of damages was the total gross collections, minus the costs the plaintiff “necessarily would have incurred in servicing” the loans if the defendant had not been doing so in its stead due to the breach.

The trial court had concluded that the defendant wasn’t entitled to a “setoff” for those costs. This, the appeals court explained, was a misapplication of the purpose of awarding damages in a breach of contract case. In these cases, the damages award is designed to put the injured entity back in the same position in which it would have been had the breach never occurred. Giving the plaintiff the amount awarded in this case would put it in an even better position than it would have been in had the breach not taken place, and, under the law, that was improper.

For your breach of contract or other commercial litigation matter, don’t take chances. Reach out to the skilled South Florida contract litigation attorneys at Stok Folk + Kon, who have been helping business clients for many years as they handle their business disputes and seek proper recovery for resulting damages.

Contact us online or by calling (305) 935-4440 to schedule your consultation and find out how this firm can help you protect your interests.

More blog posts:

Your Commercial Contract’s Damages Clause and Your Florida Breach of Contract Case, Florida Business Lawyers Blog, April 11, 2017

Lack of Evidence of Expenses Costs Florida Radiosurgery Center in Pursuit of Lost Profits Damages, Florida Business Lawyers Blog, Nov. 11, 2016

Photo Credit: KellyAlpert, [CC0 License], via Pixabay.