Breach of Contract Claim Fails if Injury is Not Alleged

On April 9, 2020, Justice Sherwood of the New York County Commercial Division issued a decision in Computer Design & Integration of Ga., LLC v. MIO Partners, Inc., 2020 NY Slip Op. 30927(U), holding that a breach of contract claim must allege injury, explaining:

To sustain a breach of contract cause of action, plaintiff must show: (1) an agreement; (2) plaintiffs performance; (3) defendant's breach of that agreement; and (4) damages. . . .

It is undisputed that the Services Agreement is a valid and enforceable agreement between MIO and CDI. MIO argues it is not required to provide a specific calculation of damages, to survive this motion, and that the nominal damages available for a breach of contract are sufficient to allow this claim to survive. CDI contends MIO must have more than speculative damages. While New York courts allow the legal fiction of nominal damages, the party claiming breach of contract must allege an injury. A counterclaim is fatally deficient if it does not demonstrate how the counterclaim defendant's alleged breach of the agreement caused counterclaim plaintiffs any injury. In the absence of any allegations of acts showing damage, mere allegations of breach of contract are not sufficient to sustain a complaint, and the pleadings must set forth acts showing the damage upon which the action is based.

In the counterclaims, MIO asserts the following breaches: failing to obtain advance written authorization from MIO to perform services and incur expenses for which CDI now seeks payment; seeking payment for services that were not performed and expenses that were not incurred; failing to maintain accurate accounting records to substantiate all charges and expenses submitted to MIO for payment; failing to submit weekly time sheets to MIO for pre-approval; failing to obtain MI O's written approval of overages and expenses; failing to provide Statements of Work for additional services; and failing to submit invoices monthly.

The only injury alleged is unjustifiable charges MIO has already paid and time and expenses incurred resulting from CDI's breaches. MIO has alleged it paid CDI's bills for time not worked, which constitutes an injury. This claim will survive.

(Internal quotations and citations omitted).

A key element in commercial litigation is proving damages. As this decision shows, the inability to show damages can be fatal to a claim. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding proving damages.