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DAMAGES IN A COMMERCIAL CONTEXT - Texas …

DAMAGES IN A COMMERCIAL CONTEXT RICHARD G. MUNZINGER El Paso, Texas Scott, Hulse, Marshall, Feuille, Finger & Thurmond, State Bar of Texas 27TH ANNUAL ADVANCED CIVIL TRIAL COURSE August 25-27, 2004 - Dallas September 22-24, 2004 Corpus Christi November 10-12, 2004 - Houston CHAPTER 30 The author wishes to acknowledge the contributions of Chantel Crews and M. Gus Pick, Thomas R. Erickson, Morgan Hazelton, Henry J. Paoli, R. Duane Frizell, Oscar Javier Ornelas, Jose Luis Carbonell, Casey S. Stevenson, and Katari Buck. These attorneys provided significant assistance towards the completion of this paper. 641912 v2 Richard G. Munzinger is a shareholder with the law firm of Scott, Hulse, Marshall, Feuille, Finger & Thurmond, , El Paso, Texas . He was born in El Paso, Texas , September 22, 1938; is a graduate of the University of Texas ( , 1950; , 1966); College of the State Bar of Texas and admitted to the bar, 1966, Texas ; District Court, Western District of Texas and Court of Appeals, Fifth Circuit; Supreme Court.

DAMAGES IN A COMMERCIAL CONTEXT RICHARD G. MUNZINGER El Paso, Texas Scott, Hulse, Marshall, Feuille, Finger & Thurmond, P.C. State Bar of Texas

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Transcription of DAMAGES IN A COMMERCIAL CONTEXT - Texas …

1 DAMAGES IN A COMMERCIAL CONTEXT RICHARD G. MUNZINGER El Paso, Texas Scott, Hulse, Marshall, Feuille, Finger & Thurmond, State Bar of Texas 27TH ANNUAL ADVANCED CIVIL TRIAL COURSE August 25-27, 2004 - Dallas September 22-24, 2004 Corpus Christi November 10-12, 2004 - Houston CHAPTER 30 The author wishes to acknowledge the contributions of Chantel Crews and M. Gus Pick, Thomas R. Erickson, Morgan Hazelton, Henry J. Paoli, R. Duane Frizell, Oscar Javier Ornelas, Jose Luis Carbonell, Casey S. Stevenson, and Katari Buck. These attorneys provided significant assistance towards the completion of this paper. 641912 v2 Richard G. Munzinger is a shareholder with the law firm of Scott, Hulse, Marshall, Feuille, Finger & Thurmond, , El Paso, Texas . He was born in El Paso, Texas , September 22, 1938; is a graduate of the University of Texas ( , 1950; , 1966); College of the State Bar of Texas and admitted to the bar, 1966, Texas ; District Court, Western District of Texas and Court of Appeals, Fifth Circuit; Supreme Court.

2 He currently is a member of the Supreme Court Advisory Committee and has been a lecturer for the State Bar of Texas for many years. DAMAGES In A COMMERCIAL CONTEXT Chapter 30 i TABLE OF CONTENTS I. II. BREACH OF A. General DAMAGES v. Special B. Pleading C. Proving 1. Cause in 2. 3. D. 1. Service a. Real Property b. Personal c. Substantial 2. Sales a. Seller s b. Buyer s E. Viability of Certain Types of DAMAGES For Breach of 1. Lost 2. Mental 3. Liquidated 4. Nominal 5. Exemplary 6. Attorney s 7. Reliance 8. Quantum F. Repudiation or Anticipatory Breach of G. Promissory III. COVENANTS NOT TO A. DAMAGES B. Liquidated DAMAGES for Covenants Not to C. Exemplary DAMAGES in Covenants Not to IV. A. Statutory Usury & 1. Statutory 2. Interest ..13 3. Civil a. No Agreement Between the Parties to Charge b. Agreement Between the Parties to Charge Interest at a Specified c. Debtor Remains Liable on Principal Amount If Interest Charged or Received Is Less Than Twice the Legal d.

3 Usury Involving a Charge and Receipt Exceeding Two Times the Maximum Legal 4. Attorney s 5. Criminal 6. De Minimis 7. Opportunity to B. Common Law Usury C. Federal V. COMMON LAW A. Direct 1. Out-Of-Pocket DAMAGES In A COMMERCIAL CONTEXT Chapter 30 ii a. Related To b. Related To The Purchase Of c. Related To Service d. Related to Joint e. Related To Construction f. Related To Futures g. With Respect To The Sale Of h. Relating To i. Related To Purchase Of j. Where Benefit-of-the-Bargain DAMAGES Are Difficult or Impossible to 2. Benefit-of-the-Bargain DAMAGES for a. Related to Construction b. Related to Service c. Related to Purchase of Promissory d. Related to e. Related to the Sale of f. Related to the Sale of Real 3. Equitable Remedy of Restitution for B. Consequential 1. Mental Anguish 2. Lost Profits for 3. Loss of Credit for 4. Lost Wages for 5. Miscellaneous Losses for C. Exemplary VI. STATUTORY A. Generally.

4 30 B. Statutory Fraud DAMAGES VII. CONSTRUCTIVE VIII. NEGLIGENT A. Elements ..32 B. Pecuniary C. Independent Injury D. Negligent Misrepresentation DAMAGES IX. TORTIOUS INTERFERENCE WITH EXISTING A. Elements ..34 B. Actual C. Unjust Enrichment As the Measure of Lost Profit D. Exemplary E. X. TORTIOUS INTERFERENCE WITH PROSPECTIVE CONTRACTS OR PROSPECTIVE BUSINESS RELATIONS ..35 A. Recoverable DAMAGES Similar to DAMAGES Available for Tortious Interference with Existing B. Malice Is C. Recovery of Lost Profits D. Mental Anguish DAMAGES E. Availability of Exemplary F. XI. A. Elements ..37 DAMAGES In A COMMERCIAL CONTEXT Chapter 30 iii B. Fair Market Value at Time of C. Other D. Exemplary DAMAGES E. Lost XII. DAMAGES FOR BREACH OF FIDUCIARY A. B. General 1. Restitution Type of a. Reduction in b. Disgorgement / Forfeiture of c. Recouping Commissions and Decline in d. Recovering the Fair Market Value of the Property, Interest, and e.

5 2. Recouping a. Profits Earned at the Expense of the b. Usurpation of Corporate Opportunity not Applicable to all c. Lost Profits & Carrying 3. Constructive C. Consequential 1. Mental D. Exemplary 1. Secret 2. Numerous Bad 3. Self 4. Ousting from 5. Secret E. Attorney s XIII. A. B. Nominal C. General D. Special 1. Defamation Per Se v. Defamation Per 2. Elements of Special 3. Lost a. Before and after b. Newly established 4. Exact Proof Of Business Loss Is Not 5. Loss of Time/Loss of 6. Decreased Earning E. Exemplary 1. Malice 2. Nominal DAMAGES Will No Longer Support Exemplary 3. Exemplary DAMAGES against a Corporate 4. Failure To Retract Does Not Support Malice, Nor Does Defendant s Balance 5. Self-Publication May Support Award of Exemplary F. Special Mitigation of DAMAGES Rules in Libel XIV. BUSINESS A. B. Compensatory 1. a. Evidence of Direct b. DAMAGES When a Business Is DAMAGES In A COMMERCIAL CONTEXT Chapter 30 iv c.

6 Loss of C. Consequential D. Exemplary E. Product F. False Disparagement of Perishable Food Product XV. CIVIL A. Lost Profits For B. Out-of-pocket Expenses/Consequential DAMAGES for C. Mental Anguish For D. Disgorgement of Defendant s E. Exemplary DAMAGES For XVI. UNFAIR A. Trademark 1. Defendant s Profits for Trademark 2. Plaintiff s Actual DAMAGES for Trademark 3. Enhanced DAMAGES for Trademark 4. Alternative Statutory DAMAGES for 5. Prejudgment Interest for Trademark 6. Attorneys Fees for Trademark B. XVII. RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT ( RICO )..59 A. Lost Profits For RICO B. Out-of-pocket DAMAGES For RICO C. Decrease in Property Value For RICO D. Personal Injuries and Emotional Distress For RICO E. Lost Wages Recoverable For RICO F. Treble DAMAGES For RICO G. Attorney s Fees For RICO H. Prejudgment Interest for RICO XVIII. A. Generally ..62 B. Lost Profits and Future Loss of Profits for Antitrust C. Treble DAMAGES for Antitrust D.

7 Attorney s Fees for Antitrust XIX. SPECIAL ISSUES IN THE RECOVERY OF LOST PROFITS AS CONSEQUENTIAL A. B. Cases Upholding Recovery for Lost C. Cases Disallowing or Reducing Recovery of Lost XX. EXEMPLARY A. Burden of 1. Actions Filed Before September 1, 2. Actions Filed On or After September 1, B. Limits on Exemplary 1. Actions Filed Before September 1, 2. Actions Filed On or After September 1, C. Constitutional Limitations on Exemplary D. Exemplary DAMAGES Against a Corporation or Other XXI. ECONOMIC LOSS DAMAGES In A COMMERCIAL CONTEXT Chapter 30 v XXII. RECENT A. Texas Supreme Court B. New 1. No. 3: Amendment to Article III of the Texas 2. 4: The Omnibus Civil Justice Reform DAMAGES In A COMMERCIAL CONTEXT Chapter 30 1 DAMAGES IN A COMMERCIAL CONTEXT I. INTRODUCTION Courts and practitioners frequently struggle with the appropriate standards of recoverable DAMAGES in COMMERCIAL litigation cases. While terms such as lost profits, and benefit-of-the-bargain are used frequently to describe DAMAGES , it is not always clear precisely what is included within these elements of DAMAGES .

8 In addition, the remedies and DAMAGES available in COMMERCIAL litigation are broad and vary with the circumstances of the particular case. This paper does not purport to encompass every available remedy in COMMERCIAL litigation. That subject could be the topic of an entire seminar unto itself. Accordingly, non-monetary sanctions or other non-monetary equitable remedies are not addressed in this paper. Similarly, DAMAGES available under the Texas Deceptive Trade Practices Act are excluded from this paper. The scope of this paper is to provide the reader with the recognized DAMAGES recoverable for a collection of causes of action regularly pled in COMMERCIAL litigation. The paper also examines the evidence necessary to establish or defeat a party s right to recovery of COMMERCIAL DAMAGES . The paper is organized by specific causes of action and discusses the DAMAGES that are available through the common law or various statutes governing each cause of action.

9 Additionally, the paper discusses in depth lost profits and punitive DAMAGES in COMMERCIAL litigation. II. BREACH OF CONTRACT A. General DAMAGES v. Special DAMAGES Monetary DAMAGES for breach of contract are characterized either as general or special DAMAGES . See Nobility Homes of Texas , Inc. v. Shivers, 557 77, 78 (Tex. 1977). General or direct DAMAGES naturally and necessarily flow from a wrongful act and are conclusively presumed to be a foreseeable consequence of a breach of contract or wrongful act. See First Nat l Bank of Hico v. English, 240 503, 507 (Tex. Civ. App. Waco 1951, no writ). Direct DAMAGES are imposed by law whether within the contemplation of the parties or not. See American Bank of Waco v. Thompson, 660 831, 834 (Tex. App. Waco 1983, writ ref d ). Special DAMAGES , on the other hand, are those injurious consequences which are not deemed as a matter of law to have been foreseen, but which are shown as a matter of fact to have been contemplated or anticipated by the defendant.

10 English, 240 at 507 (citation omitted). These DAMAGES are also referred to as incidental or consequential DAMAGES . RESTATEMENT (SECOND) OF CONTRACTS 347(b) (1981). Special DAMAGES cover losses other than the value of the breaching party s performance, which arise naturally, although not necessarily, from the other party s breach. Stuart v. Bayless, 964 920, 921 (Tex. 1998). B. Pleading DAMAGES The mere allegation of a breach or other wrongdoing in a plaintiff's petition is generally sufficient notice of general DAMAGES . Sherrod v. Bailey, 580 24, 28 (Tex. Civ. App. Houston [1st Dist.] 1979, writ ref d ). Special DAMAGES must be specifically pled because they vary with the circumstances of each case. TEX. R. CIV. P. 56; Sherrod, 580 at 28. Plaintiff s counsel should therefore plead all elements of special DAMAGES with sufficient particularity in order to provide fair notice to the defendant.


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