California Court of Appeal, G Companies Management, LLC v. LREP Arizona, LLC, Docket No. G060992

Interest Rates

 

Usury Law

 

Public Policy

 

Waiver

 

California Law

 

Forum Selection Clause

 

Loan Agreement

 

 

Procedure:

 

Third Party Cross-Complaint in Favor of Another Forum

 

Order Granting a Motion to Quash Service of Summons or Granting a Motion to Stay the Action on the Ground of Inconvenient Forum

 

 

Remedies:

 

Declaratory Relief

 

Equitable Indemnity

 

Reimbursement

 

Contribution

 

Equitable Apportionment

 

 

 

 

 

Appeal from an order of the Superior Court of Orange County, Nathan R. Scott, Judge. Reversed and remanded.

 

 

G Companies Management, LLC, a California limited liability company, appeals from an order staying its cross-complaint against LREP Arizona, LLC, based on the forum selection clause in a loan agreement between the parties. The cross-complaint alleges multiple causes of action, all based on the assertion that the interest rates charged in the loan agreement were usurious under California law, and G Companies contends the trial court erred because a forum selection clause is not enforceable if doing so would deprive a California resident of the protections of our fundamental public policy.1

 

 

1The order staying the third party cross-complaint in favor of another forum is appealable. (Code Civ Proc., §904.1, subd. (3) [an appeal may be taken “from an order granting a motion to quash service of summons or granting a motion to stay the action on the ground of inconvenient forum”].)

 

 

By virtue of its inclusion in article XV, section 1, of our Constitution, and because it cannot be waived, we find that California’s usury law does reflect a significant public policy. It prohibits money lending at rates higher than specified, even while recognizing numerous exceptions to those rate limitations. The complexity of the law does not imply a lack of commitment to the policy. To the contrary, such a fine-tuned approach suggests that significant effort has gone into determining the circumstances under which interest rate limitations are necessary for the protection of Californians.

 

 

If the circumstances of a loan transaction do not fit into one of the exceptions to California’s interest rate limitation, and the rate charged is higher than allowed, then the transaction violates California’s public policy against usury. And since California’s usury law reflects a significant public policy designed to protect its citizens, our law precludes enforcement of a forum selection clause that will deprive a California resident of that protection.

 

 

The loan agreement specified the use of an escrow agent located in Arizona and stated that the loan closing would take place at the agent’s office. The agreement also stated that it “shall be construed and governed by the laws of the state of Arizona without regard to conflict of laws principles. The Parties irrevocably submit to the exclusive jurisdiction of any federal or state court located within Maricopa County, Arizona over any dispute arising out of or related to this Agreement. Each party hereby irrevocably agrees that all claims with respect to such dispute or any suit, action or proceeding related thereto shall be heard and determined in such courts. G Companies defaulted on the loan, failing to make the first payment due in February 2016. In July 2016, LREP foreclosed on the real property given as security—obtaining it for a credit bid of $315,000—leaving an unpaid loan balance of over $4.6million.

 

 

G Companies, in turn, filed a cross-complaint against LREP, seeking declaratory relief, equitable indemnity and reimbursement, contribution, and equitable apportionment, all based on LREP’s alleged conduct of “collecting usurious interest against the Guarantor Plaintiffs (and indirectly but certainly against the Borrower G Companies as well), ”which is characterized as “illegal, unconscionable, criminal and a breach of the implied covenant of good faith and fair dealing in the LREP Loan Documents.”

 

 

LREP moved to dismiss or stay the cross-complaint, based upon the mandatory forum selection clause contained in the loan agreement. It argued that enforcement of the clause was not unfair or unreasonable because the chosen Arizona forum is closely tied to the transaction, the parties are sophisticated, and they agreed to it.

 

 

(Hyundai Securities, 232 Cal.App.4th at p. 1391). Hyundai Securities does not involve a motion to enforce a forum selection clause. It concerns the enforcement of an existing Japanese judgment under California’s Uniform Foreign-Country Money Judgments Recognition Act (Code Civ. Proc., §§1713-1725; the Act). The court concluded the existing Japanese judgment, which incorporated a 20 percent postjudgment interest rate allowed under Japanese law, was required to be recognized as a valid foreign country money judgment under the Act, but upon entry as a California judgment, the 20 percent rate would no longer be applied. Instead, the California judgment would accrue postjudgment interest at the 10 percent rate allowed under California law.

 

 

We explained in Hall that “while ‘California does not have any public policy against a choice of law provision, where it is otherwise appropriate’ [citation]. . . [citation], ‘an agreement designating a foreign law will not be given effect if it would violate a strong California public policy ... or “result in an evasion of ... a statute of the forum protecting its citizens.’”” (Hall, supra, 150 Cal.App.3d at pp. 416-417.) We then reasoned that if the pending litigation were transferred to Nevada where Nevada law would be applied, the investors would lose the benefit of California’s Corporate Securities Law of 1968 (Corp. Code, §25000 et seq.), which would otherwise govern the exchange. The investors would thus be denied California’s unwaivable protections against fraud and deception in securities matters. (Hall, supra, 150 Cal.App.3d at p.417.) Consequently, the trial court erred by enforcing the provision.

 

 

California’s Policy Against Usury

 

Usury in California is addressed in California Constitution, article XV, section 1, which sets interest rates, with exceptions. As explained in Bisno v. Kahn (2014) 225 Cal.App.4th 1087, 1098, “The usury law is based upon article XV, section 1 of the California Constitution as well as an initiative measure adopted in 1918. [Citations.] The initiative measure has not been codified but is published in Statutes and Amendments to the Codes and [West’s Annotated] Civil Code. [Citations.] The initiative measure remains in full force and effect except to the extent it conflicts with the constitutional usury provision. [Citations.] We refer to the constitutional and initiative provisions collectively as the ‘usury law.’” (See Civ. Code, §1916-5 [“This act whenever cited, referred to, or amended may be designated simply as the ‘usury law’”].

 

 

Our usury law does not set ironclad limitations on allowable interest rates. It allows different interest rates to be charged in different circumstances and exempts large categories of lenders while giving our Legislature the power to impose limitations on the exempt lenders. (Cal. Const., art XV, §1.) The law’s complexity has prompted our Supreme Court to remark that “the usury law is ...riddled with so many exceptions that the law’s application itself seems to be the exception rather than the rule.” (Ghirardo, supra, 8 Cal.4th at p. 807.) That may be true, but the inclusion of the usury law in our Constitution reflects it involves an important public policy. (Stevenson v. Superior Court (1997) 16 Cal.4th 880, 892 [“the California Constitution amply established the existence of a fundamental public policy”]; see Green v. Ralee Engineering Co. (1998) 19 Cal.4th 66, 71 [“aside from constitutional policy, the Legislature, and not the courts, is vested with the responsibility to declare the public policy of the state”].) We find it significant that the protections of our usury law cannot be waived. (WRI Opportunity Loans II, LLC v. Cooper (2007) 154 Cal.App.4th 525, 542-543 [because a usurious provision is void under California law, the prohibition against usury cannot be waived].) A public policy that cannot be waived qualifies as fundamental. (Brack v. Omni Loan Co., Ltd. (2008) 164 Cal.App.4^th 1312, 1323 [“The relative significance of a particular policy or statutory scheme can be determined by considering whether parties may, by agreement, avoid the policy or statutory requirement”].

 

 

Our usury law protects sophisticated borrowers as well as unsophisticated ones. (Ghirardo, supra, 8 Cal.4th at p. 807 [“There is . . . no exemption in the usury law for sophisticated borrowers. We decline to create one”].)

 

 

(…) We therefore conclude the trial court abused its discretion when it concluded California’s usury law does not reflect a fundamental public policy.

 

 

 

 

(California Court of Appeal, Feb. 15, 2023, G Companies Management, LLC v. LREP Arizona, LLC, Docket No. G060992, Certified for Publication)

 

California Court of Appeal, Water for Citizens of Weed Cal. v. Churchwell White LLP, Docket No. C093421

 

Remedies:

 

-       Remedy of Cancellation

 

-       Action to Quiet Title

 

 

Property Interest

 

California Law

 

 

 

 

A void or voidable instrument that might cause harm to a party if left outstanding or in the chain of title can be removed by the remedy of cancellation, often referred to as removing a cloud on title. (Civ. Code, §§3412-3414; see Pixley v. Huggins, supra, 15 Cal. at p. 132.) An action to quiet title, however, may address adverse claims in addition to those traditionally referred to as clouds on title. As stated earlier, a quiet title action, unlike in a cancellation action, “is for the purpose of stopping the mouth of a person who has asserted or is asserting a claim to the plaintiff’s property.... It is not aimed at a particular piece of evidence, but at the pretensions of an individual.” (Castro, supra, 79 Cal. at p. 446.)

 

(Pixley v. Huggins (1860) 15 Cal.127, 134.)

 

(Castro v. Barry (1889) 79 Cal. 443, 446.)

 

 

 

 

(California Court of Appeal, Feb. 9, 2023, Water for Citizens of Weed Cal. v. Churchwell White LLP, Docket No. C093421, Certified for Publication)

 

U.S. Court of Appeals for the Sixth Circuit, Product Solutions Int., Inc. v. Aldez Containers, LLC, Docket No. 21-2952

Veil-Piercing “Claim.”

 

Veil Piercing Action

 

Piercing the Corporate Veil

 

Is Piercing the Corporate Veil a Remedy or a Separate Cause of Action?

 

Res Judicata In Diversity Actions (Application of Federal Law or of State Law?)

 

Michigan Law

 

 

 

 

Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 2:21-cv-11129.

 

 

Plaintiff Product Solutions International, Inc. (“PSI”) appeals the dismissal of its complaint against Aldez Containers, LLC (“Aldez”). PSI sued Aldez and associated parties in 2019 alleging various claims arising from a contract dispute. The district court dismissed Aldez from that suit because PSI failed to state a claim against Aldez. In 2021, PSI filed a second complaint solely against Aldez for the same conduct as the 2019 suit. The district court held that the 2021 suit was barred by res judicata. We AFFIRM.

 

 

On September 24, 2019, PSI commenced an action (the “2019 suit”) against P.B. Products, Copek, Byrne, and Aldez. Prod. Sols. Int’l, Inc. v. P.B. Prods., LLC, No. 19-CV-12790, 2020 WL 3129978, at *1 (E.D. Mich. June 12, 2020). That diversity suit alleged breach of contract, promissory estoppel, fraud, silent fraud, negligent misrepresentation, innocent misrepresentation, and non-acceptance of conforming goods under the Uniform Commercial Code. Id. The complaint contained no allegations regarding any duty owed or any breach by Aldez. Id. at *3. The defendants jointly moved to dismiss the complaint. Id. at *1. The district court granted the motion in part, dismissing Copek, Byrne, and Aldez from the suit, but permitted some claims against P.B. Products to continue. Id. at *3. PSI never sought leave to amend its complaint to fix the deficient allegations against Aldez.

 

 

On May 17, 2021, PSI commenced the present action (the “2021 suit”) against Aldez. In the 2021 suit, PSI sued Aldez only for breach of contract, promissory estoppel, and non-acceptance of conforming goods under the Uniform Commercial Code. PSI had alleged these three claims in the 2019 suit and the claims arose from the same facts. Aldez moved to dismiss the complaint arguing that it was barred by res judicata and that it failed to state a claim. PSI responded that in the 2019 suit, its claims were pleaded directly against Aldez, whereas in the 2021 suit, it sought to pierce P.B. Product’s corporate veil and hold Aldez vicariously liable. The district court granted the motion to dismiss solely on the basis of res judicata. It held that PSI’s claims in the 2021 suit “[were], or could have been, resolved in the first” suit. (Op. & Order Granting Def.’s Mot. to Dismiss, R. 9, PageID # 191.) PSI timely appealed.

 

 

The parties’ briefing in this appeal almost exclusively focuses on the merits of the district court’s application of res judicata. Accordingly, the first issue we must address is whether federal or state res judicata law governs this case. PSI seeks to apply federal principles of res judicata, whereas Aldez believes Michigan law should be applied. An intra-circuit split seems to have developed on whether federal or state res judicata law applies in diversity actions. In Rawe v. Liberty Mutual Fire Insurance Co., 462 F.3d 521, 528 (6th Cir. 2006), we held that in “successive diversity actions, federal res judicata principles apply.” See also Allied Erecting & Dismantling Co. v. Genesis Equip. & Mfg., Inc., 805 F.3d 701, 709 (6th Cir. 2015) (citing Rawe favorably); J.Z.G. Res., Inc. v. Shelby Ins. Co., 84 F.3d 211, 214 (6th Cir. 1996) (“We shall apply federal res judicata principles in successive federal diversity actions.”). However, recently, we have cast doubt on Rawe, suggesting that it was inconsistent with then-existing Supreme Court precedent, and was therefore wrongly decided from the start. N.D. Mgmt., Inc. v. Hawkins, 787 F. App’x 891, 896 (6th Cir. 2019). Specifically, five years before Rawe, the Supreme Court held that federal courts sitting in diversity should apply “the law that would be applied by state courts in the State in which the federal diversity court sits” so long as the state rule is not “incompatible with federal interests.” Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508–09 (2001). Rawe made no mention of Semtek. Furthermore, in 2008, two years after Rawe, the Supreme Court reiterated that “for judgments in diversity cases, federal law incorporates the rules of preclusion applied by the State in which the rendering court sits.” Taylor v. Sturgell, 553 U.S. 880, 891 n.4 (2008) (citing Semtek, 531 U.S. at 508). (…) Therefore, as binding Supreme Court precedent, we must follow Semtek over Rawe and apply Michigan law.

 

 

(…) In the 2019 suit, the district court dismissed PSI’s claims against Aldez for failing to state a claim. Specifically, the district court found that “the complaint did not allege that Aldez was a party to any contract. The complaint merely alleged that Aldez is a shipping company.” Prod. Sols. Int’l, 2020 WL 3129978, at *3. In the 2021 suit, PSI altered its “claims” and now seeks to pierce P.B. Products’ corporate veil and hold Aldez vicariously liable. Besides changing the theory of recovery, the 2019 and 2021 complaints are virtually identical. We agree with the district court that the pleadings fail to allege sufficient facts to plausibly claim breach of contract, promissory estoppel, and non-acceptance of conforming goods under the Uniform Commercial Code. To get around the obviously deficient pleadings, PSI has added a few paltry allegations that “P.B. Products, LLC is the agent, alter ego, and mere instrumentality of [Aldez].” (Compl., R. 1, PageID  #2.) It argues that in the 2019 suit all its claims were filed as “direct claims” against Aldez, but the 2021 suit’s complaint is different because it brings a veil-piercing “claim.” However, piercing the corporate veil is not a cause of action under Michigan law.1 Gallagher v. Persha, 891 N.W.2d 505, 509 (Mich. Ct. App. 2016) (recognizing that under Michigan law, piercing the corporate veil is “a remedy, and not a separate cause of action”). In fact, PSI admitted at oral argument that the 2021 suit is preemptively seeking relief in the hopes it receives a favorable judgment in its 2019 suit against P.B. Products. We are not aware of any context under Michigan law that permits a party to recover for an alleged injury before obtaining a judgment. We refuse to let PSI do that in this case.

 

 

1PSI relies primarily on Gallagher v. Persha, 891 N.W.2d 505, 515 (Mich. Ct. App. 2016), to argue that it is entitled to bring its second veil piercing action. However, in that case, the Michigan Court of Appeals held that “when a judgment already exists against a corporate entity, an additional cause of action is not needed to impose liability against a shareholder or officer if a court finds the necessary facts to pierce the corporate veil.” Id. at 515 (emphasis added). In the present appeal, no previously obtained judgment exists—the 2019 suit is still pending. Accordingly, Gallagher cannot save PSI’s 2021 suit.

 

 

Because the complaint does not allege any wrongdoing by Aldez and corporate veil piercing is not a cause of action under Michigan law, the 2021 suit’s complaint fails to state a claim.

 

 

The issue of whether the dismissal of the 2021 action will have any preclusive effect on PSI’s ability to bring a Gallagher-type action in the event it obtains a favorable judgment in the 2019 suit is not yet ripe. Accordingly, we decline to address it.

 

 

 

(U.S. Court of Appeals for the Sixth Circuit, Aug. 22, 2022, Product Solutions Int., Inc. v. Aldez Containers, LLC, Docket No. 21-2952, Recommended for Publication)

Data Scraping - Remedies

Data

 

Data Scraping

 

 

Remedies

 

Cease-and-Desist Letter

 

Trespass to Chattels

 

Copyright Infringement 

 

Misappropriation 

 

Unjust Enrichment 

 

Conversion

 

Breach of Contract 

 

Breach of Privacy

 

 

 

 

(…) Entities that view themselves as victims of data scraping are not without resort, even if the CFAA does not apply: state law trespass to chattels claims may still be available. And other causes of action, such as copyright infringement, misappropriation, unjust enrichment, conversion, breach of contract, or breach of privacy, may also lie. See, e.g., Associated Press v. Meltwater U.S. Holdings, Inc., 931 F. Supp. 2d 537, 561 (S.D.N.Y. 2013) (holding that a software company’s conduct in scraping and aggregating copyrighted news articles was not protected by fair use).

 

 

(…) LinkedIn’s cease-and-desist letter also asserted a state common law claim of trespass to chattels. Although we do not decide the question, it may be that web scraping exceeding the scope of the website owner’s consent gives rise to a common law tort claim for trespass to chattels, at least when it causes demonstrable harm. Compare eBay, Inc. v. Bidder’s Edge, Inc., 100 F. Supp. 2d 1058, 1070 (N.D. Cal. 2000) (finding that eBay had established a likelihood of success on its trespass claim against the auction-aggregating site Bidder’s Edge because, although eBay’s “site is publicly accessible,” “eBay’s servers are private property, conditional access to which eBay grants the public,” and Bidder’s Edge had exceeded the scope of any consent, even if it did not cause physical harm); Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 437–38 (2d Cir. 2004) (holding that a company that scraped a competitor’s website to obtain data for marketing purposes likely committed trespass to chattels, because scraping could—although it did not yet—cause physical harm to the plaintiff’s computer servers); Sw. Airlines Co. v. FareChase, Inc., 318 F. Supp. 2d 435, 442 (N.D. Tex. 2004) (holding that the use of a scraper to glean flight information was unauthorized as it interfered with Southwest’s use and possession of its site, even if the scraping did not cause physical harm or deprivation), with Ticketmaster Corp. v. Tickets.Com, Inc., No. 2:99-cv-07654-HLH-VBK, 2003 WL 21406289, at *3 (C.D. Cal. Mar. 7, 2003) (holding that the use of a web crawler to gather information from a public website, without more, is insufficient to fulfill the harm requirement of a trespass action); Intel Corp. v. Hamidi, 30 Cal. 4th 1342, 1364 (2003) (holding that “trespass to chattels is not actionable if it does not involve actual or threatened injury” to property and the defendant’s actions did not damage or interfere with the operation of the computer systems at issue) (Fn. 21).

 

 

 

 

 

(U.S. Court of Appeals for the Ninth Circuit, April 18, 2022, HIQ Labs, Inc. v. LinkedIn Corp., Docket No. 17-16783, for Publication, p. 41)

 

 

U.S. Court of Appeals for the Eleventh Circuit, Acrylicon USA, LLC v. Silikal GmbH, Docket No. 17-15737

 

Distribution Agreement

 

Licensing Agreement

 

Trade Secret

 

Contract Drafting

 

Remedies:

 

Money Recovery for Both Unjust Enrichment and Actual Damages

 

Direct and Consequential Damages

 

Lost Profits

 

Liquidated Damages

 

Nominal Damages

 

Georgia Law

 

Evidence: Videotaped Depositions

 

 

 

The agreement provided that AC-USA and its affiliate, AcryliCon International, Ltd. (“AC-International”), would be Silikal’s exclusive distributors of 1061 SW and that Silikal would not sell the resin without AcryliCon’s written permission.

 

According to AC-USA, Silikal breached the agreement by selling 1061 SW without its written permission, so it sued Silikal under common law for breach of contract (“Contract” claim) and under the Georgia Trade Secrets Act of 1990 (“GTSA”) for misappropriation of the shared trade secret (“Misappropriation” claim).

 

In 2008, AC-USA was incorporated. That same year, AC-USA entered into a licensing agreement with two affiliates of AC-International—Raliz AG and AcryliCon Distribution Est.—that gave AC-USA the right to import, market, and sell « AcryliCon Systems » in the United States, including the 1061 SW resin. AC-USA was not permitted to sell AcryliCon Systems outside of the United States without permission from AC-International.

 

AC-USA’s Contract claim is based on Paragraph 5 of the GSA Contract, titled “Confidentiality and Use of 1061 SW.” Paragraph 5 provides in full:

Silikal represents and warrants that it has not disclosed the formula for 1061 SW resin or sold or distributed 1061 SW resin, directly or indirectly, to anyone other than AcryliCon during the pendency of the Silikal/AcryliCon relationship. Silikal hereby covenants and agrees that it will preserve the secrecy of the formula for the 1061 SW resin. Silikal will not disclose or use in any way, directly or indirectly, the 1061 SW resin or formula for the 1061 SW resin. Silikal further covenants and agrees NOT to sell or distribute 1061 SW resin to anyone other than AcryliCon, or as expressly permitted in writing by AcryliCon. Within 10 days of this Settlement Agreement, Silikal shall ship by DHL to Bjorn Hegstad . . . all laboratory records and other available documents regarding the formulation and development of the 1061 SW resin.

 

(…) AC-USA presented the testimony of seven witnesses via videotaped depositions.

 

To prove a claim for misappropriation of trade secrets under the GTSA, a plaintiff must show that “(1) it had a trade secret and (2) the opposing party misappropriated the trade secret.” Penalty Kick Mgmt. Ltd. v. Coca Cola Co., 318 F.3d 1284, 1290–91 (11th Cir. 2003).

O.C.G.A. § 10–1–761(2) reads in full: (2) “Misappropriation” means:

(A) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(B) Disclosure or use of a trade secret of another without express or implied consent by a person who:

(i) Used improper means to acquire knowledge of a trade secret;

(ii) At the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was:

(I) Derived from or through a person who had utilized improper means to acquire it;

(II) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

(III) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or

(iii) Before a material change of position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

 

(…) Silikal’s violation of the duties created by the GSA Contract gave AC-USA a claim for breach of contract, not for misappropriation of a trade secret.

 

(…) Silikal argues in its supplemental brief that the District Court erred in entering the revised judgment for AC-USA on its Contract claim because AC-USA failed to prove actual damages from Silikal’s breach. We agree, and hold that AC-USA is instead entitled only to an award of nominal damages.

 

(…) Actual damages for breach of contract, by contrast, “are given as compensation for the injury sustained as a result of the breach of a contract.” O.C.G.A. § 13–6–1 (emphasis added). The fundamental difference between restitution and actual damages, therefore, is that the former is measured by the defendant’s gain, while the latter is measured by the plaintiff’s loss. Dan B. Dobbs, Law of Remedies § 4.1(1), at 555 (2d ed. 1993).

 

A plaintiff who proves misappropriation of a trade secret under O.C.G.A. § 10–1–763 may recover money for both unjust enrichment and actual damages.

 

Actual damages under Georgia law may be direct or consequential. Direct damages “arise naturally and according to the usual course of things from the breach.” Denny v. Nutt, 375 S.E.2d 878, 879 (Ga. App. 1988) (quoting Quigley v. Jones, 334 S.E.2d 664, 665 (Ga. 1985)). Consequential damages, by contrast, arise “as the probable result of the breach.” Id. The key distinction between direct damages and consequential damages is that the former compensate for the value of the promised performance, while the latter compensate for additional losses incurred as a result of the breach. See Imaging Systems Int’l., Inc. v. Magnetic Resonance Plus, Inc., 490 S.E.2d 124, 127 (Ga. Ct. App. 1997) (noting that consequential damages “may include profits which might accrue collaterally as a result of the contract’s performance,” while direct damages “may include profits necessarily inherent in the contract”).

 

A plaintiff may not recover consequential damages for breach unless such damages are within the contemplation of the parties at the time the contract was made, are “capable of exact computation,” and “are independent of any collateral enterprise entered into in contemplation of the contract.” O.C.G.A. § 13–6–8.

 

Lost profits that are not part of the benefit of the bargain may be recovered as consequential damages. Imaging Systems Int’l., 490 S.E.2d at 127. However, “the profits of a commercial business are dependent on so many hazards and chances, that unless the anticipated profits are capable of ascertainment, and the loss of them traceable directly to the defendant’s wrongful act, they are too speculative to afford a basis for the computation of damages.” Johnson Cnty. School Dist. v. Greater Savannah Lawn Care, 629 S.E.2d 271, 273–74 (Ga. Ct. App. 2006). Accordingly, a plaintiff seeking lost profits must provide “information or data sufficient to enable the trier of fact to estimate the amount of the loss with reasonable certainty.” Bearoff v. Craton, 830 S.E.2d 362, 373 (Ga. Ct. App. 2019) (quoting Pounds v. Hosp. Auth. Of Gwinnett Cnty., 399 S.E.2d 92, 94 (Ga. Ct. App. 1990). “This ‘information or data’ must include evidence showing that the business claiming lost profits had ‘a proven track record of profitability.’” Id. (quoting EZ Green Associates v. Georgia-Pacific Corp., 770 S.E.2d 273, 277 (Ga. Ct. App. 2015)). “The plaintiff must also show the expected profit for the relevant time period” including “the business’s projected revenues, as well as its projected expenses, for that time frame.” Id. (quoting Johnson Cnty., 629 S.E.2d at 274).

 

(…) In line with this principle, we note that while Georgia law enforces provisions for liquidated damages, O.C.G.A. § 13–6–7, it only does so to the extent such provisions are not penal in nature, Broadcast Corp. of Ga. v. Subscription Television of Greater Atlanta, 338 S.E.2d 775, 776–77 (Ga. Ct. App. 1985). A provision for liquidated damages will be treated as an unenforceable penalty unless (1) the injury caused by the breach is difficult or impossible to accurately estimate; (2) the parties intended to provide for damages rather than a penalty; and (3) the stipulated sum is a reasonable pre-estimate of the probable loss resulting from the breach. Southeastern Land Fund v. Real Estate World, 227 S.E.2d 340, 343 (Ga. 1976). “Where a designated sum is inserted into a contract for the purpose of deterring one or both of the parties from breaching it, it is penalty.” Broadcast Corp. of Ga., 338 S.E.2d at 777 (quoting Florence Wagon Works v. Salmon, 68 S.E. 866, 866 (Ga. Ct. App. 1910)).

 

If a plaintiff proves a breach of contract but fails to prove actual damages, the plaintiff “may recover nominal damages sufficient to cover the costs of bringing the action.” O.C.G.A. § 13–6–6.

 

Georgia law permits recovery of attorney’s fees “where authorized by some statutory provision or by contract.” Smith v. Baptiste, 694 S.E.2d 83, 87 (Ga. 2010).

An award of nominal damages is sufficient to make the plaintiff a prevailing party. King v. Brock, 646 S.E.2d 206, 207 (Ga. 2007).

 

 

(U.S. Court of Appeals for the Eleventh Circuit, January 26, 2021, Acrylicon USA, LLC v. Silikal GmbH, Docket No. 17-15737, Publish)