Court: District Court, S.D. New York; February 1, 2015; Federal District Court
On October 1, 2014, a ruling determined that Don King, operating as Don King Productions, breached his contract with Vladimir Hrunov and Audrey Ryabinskiy of World of Boxing (WOB) by failing to ensure Guillermo Jones participated in a scheduled bout against Denis Lebedev. The current opinion addresses the amount owed by King to WOB. WOB seeks summary judgment for reliance damages, claiming it cannot quantify lost profits. Instead, WOB is pursuing approximately $1.8 million in incurred costs related to the bout, which includes $250,000 from an escrow account and about $1 million in preparatory expenses. King concedes that $536,000 from the escrow is owed but disputes the remaining $250,000, arguing it is a non-refundable payment as per the agreement, and that WOB's reliance damages should be offset by potential losses incurred had the bout occurred, estimating these at just under $100,000. King requests either a judgment for WOB reflecting this amount plus the escrow, or a denial of WOB's motion due to factual disputes over the extent of WOB's potential losses. The court notes that summary judgment is appropriate when no genuine issue of material fact exists. Under New York law, two types of damages in breach of contract cases are distinguished: expectation damages, which aim to fulfill the injured party's contract expectations, and reliance damages, which restore the party to their prior position by covering expenditures made in reliance on the contract. WOB's claim falls under reliance damages due to the inability to calculate expectation damages precisely.
Reliance damages are calculated based on the plaintiff's expenditures related to contract performance, minus any losses the plaintiff would have incurred had the contract been fulfilled. This offset ensures that damages restore the plaintiff to their original position without providing a windfall. If the breaching party can prove that the plaintiff's potential losses would have equaled or exceeded their reliance expenditures, the plaintiff is entitled to nothing. In this case, the breaching party, King, must demonstrate the losses the injured party, WOB, would have suffered had the contract been performed.
King asserts that $250,000 of the $800,000 deposit is a non-refundable signing bonus, which the Agreement supports, allowing him to retain this amount if the bout fails to occur. WOB did not negotiate for a refund provision, thus the money belongs to King.
Regarding preparatory expenditures, King does not dispute their calculation or reasonableness but argues that WOB's damages should be limited to $98,607, representing ticket refunds. He claims WOB's potential benefits from the bout are solely from ticket sales, which is incorrect. WOB also anticipated revenue from the bout's television broadcast and promotional activities. Although King correctly points out that WOB has not provided a detailed accounting of these potential revenues, the burden of proof rests on King to show that WOB would not have realized any further revenue. King has failed to present any evidence or theory to support his claim, indicating a lack of credible economic analysis.
King's argument posits that WOB's revenue from the Cruiserweight World Title match would fall short of the pledged signing bonus, suggesting that WOB would incur a loss. This assertion is deemed implausible due to the significant nature of the bout and the sophistication of both WOB and King in the boxing industry. The likelihood that WOB would unknowingly undertake such a costly venture is considered low. Moreover, WOB might have anticipated long-term benefits from the bout, such as future broadcasting profits, enhanced relationships with fighters like Lebedev, or improved reputation in boxing. This notion challenges King's perspective, which overlooks the common business practice of making strategic investments that may not yield immediate profits but are intended to pay off over time.
An analogy is drawn to an art dealer's investment in promoting an event, where losses are expected but serve a greater purpose of capital investment. The text emphasizes that a breach of contract claim should account for potential future benefits rather than simply focusing on immediate financial returns. The burden lies with the breaching party to prove that losses were inevitable without the breach. Citing *St. Lawrence Factory Stores v. Ogdensburg Bridge, Port Authority*, it is highlighted that reliance damages should not be capped unless it can be established that the contract completion was unfeasible. In this case, WOB's investment does not appear doomed, and King’s interpretation of the law is incorrect. Consequently, WOB is entitled to recover its preparatory costs.
Reliance damages aim to restore injured parties to their pre-contract position, avoiding any windfall. In this case, WOB retained about $75,000 from ticket sales despite the breach, which will be deducted from the final judgment to prevent WOB from profiting from preparatory costs alongside these retained revenues. WOB is entitled to two remedies: the return of funds from the escrow account and payment from King equating to WOB's incurred costs, minus the $800,000 already paid to King and the retained ticket sales revenue. WOB is also entitled to prejudgment interest from April 25, 2014. A proposed final judgment must be submitted by February 9, 2015. King's dispute is limited to the extent of WOB's projected losses, not the incurred costs themselves. The agreement is governed by New York law, and summary judgment is deemed appropriate as no rational jury could side with the non-moving party based on the overall record.
Reliance damages aim to restore the non-breaching party to the position it would have occupied had it not relied on the alleged promise of the breaching party. The agreement between the parties was governed by New York law, as outlined in the referenced documents. In the event the bout does not occur, the remaining deposit amount would be returned to the World Boxing Association (WOB) after accounting for specified fees and interest. There are disputes regarding WOB’s claimed preparatory expenses, which are framed as issues of labeling rather than substance. King contends that WOB failed to produce documentation supporting its claims of revenue, particularly regarding broadcasting rights. However, Kopylkov's deposition indicates that a framework existed for calculating broadcasting revenue based on ratings. King’s assertion that WOB relied solely on ticket sales for revenue is challenged by the fact that WOB incurred significant losses relative to its ticket revenue, laying out over $1.8 million compared to approximately $175,000 in ticket sales. King has not contested the entitlement to prejudgment interest, which is established under New York law for prevailing parties in breach of contract claims. Prejudgment interest is mandatory unless expressly waived, and it is calculated from the earliest date the cause of action arose.
