In a recent unpublished opinion, the Michigan Court of Appeals held that the damages incurred by a plaintiff in a breach of contract case were not so uncertain and speculative to warrant reversal of a $119,500 jury award. Syed Ali v. Syed Ahmed et. al., Docket No. 335983 (May 15, 2018).
https://law.justia.com/cases/michigan/court-of-appeals-unpublished/2018/335983.html
Syed Ali managed six Liberty Tax Services owned by Syed Ahmed in the Detroit area. Ali resigned during the off-season of 2011 due to Ahmed’s failure to honor oral profit-sharing promises. Ahmed sued Ali, and the parties quickly settled. The settlement agreement provided that Ali would manage the six Liberty Tax Services for the 2012 season, that Ahmed would pay Ali a salary for his work, that Ahmed would sell Ali three of the franchises for $100,000 each, and that the profits from the 2012 season would be divided after a deduction for salaries. The settlement agreement was breached by Ahmed due to the failure of a third-party consent requirement. The issue then moved to the amount of damages.
“The measure of damages in relation to a breach of contract is the pecuniary value of the benefits the aggrieved party would have received if the contract had not been breached.” Doe v Henry Ford Health Sys, 308 Mich App 592, 601; 865 NW2d 915 (2014). The damages here were Ali’s share of profits for the 2012 tax season of the tax businesses he managed. The agreement specified that the amount due was for profits generated through May 30, 2012. However, the parties never agreed on the amount of profit. “Uncertainty as to the fact of the amount of damage caused by the breach of the contract is fatal” to a claim, but “some uncertainty as to the amount of damages is allowable.” Home Ins Co v Commercial & Indus Sec Servs, Inc, 57 Mich App 143, 147; 225 NW2d 716 (1974). Here, contract damages were 50% of the net profit for the 2012 tax season through May 30. However, Ahmed argues that the amount of those damages was not proved with reasonable certainty. The burden of proving those damages with reasonable certainty falls to the party asserting the breach of contract- Ali. However, “damages must not be conjectural or speculative in their nature, or dependent upon the chances of business or other contingencies.” Doe at 602.
Tax returns and bank statements from Ahmed’s parent business (the corporation that owned the six Liberty Tax Services) were used as evidence. Also, Ali and Ahmed, who were both intimately familiar with running the tax service businesses, both testified regarding the documents and other financial aspects of the tax preparation businesses. Ahmed asserted that Ali failed to present an expert witness to analyze the tax returns and bank statements and formulate an opinion on the business’s net profits. Ahmed routinely comingled his businesses by transferring money from one business to another and ran his business in a way that the Court described as “would make a precise number difficult to attain”. Ahmed argued that the jury, therefore, could not precisely determine the amount of damages based on the general information provided in the tax returns and bank statements without a detailed accounting of the profit.
However, where “the fact of damages has been established and the only question to be decided is the amount, the certainty requirement is relaxed.” Van Buren Charter Twp v Visteon Corp, 319 Mich App 538, 551; 904 NW2d 192 (2014). The Court stated “[h]ere, the trial court did not err in denying defendants’ motion for a directed verdict. The jury was able to evaluate the tax returns and bank statements, as well as the parties’ testimony to calculate profits earned through May 30, 2012 with reasonable certainty.” The Court also stated that “[t]he jury did not have to speculate about the amount of profit, again, as they were able to evaluate tax returns, testimony, and bank statements regarding the business’s profits. JNOV would have been improper under these circumstances.” The Court affirmed the trial court’s holding.
This article was written by Ryan Hansen, Law Clerk
