Such an obligation was implied from the existence of a "no-strike" clause in the collective bargaining agreement between the parties.
The action had been bifurcated as to the issues of liability and damages and the above-cited Opinion dealt only with the issue of liability. In this Opinion, after a lengthy hearing on the question and the submission of briefs by the parties, I consider the issue of damages.
Unlike a jury, which may award damages without substantiation of its reasons for arriving at a certain amount, the district court in such a situation is obliged to set out the rationale behind its damage awards. In such a case as this, where the weeks of testimony were filled with disputes over the intricate mysteries of accounting techniques, to set out in exhaustive detail the step-by-step financial contentions of either side would be a task of Augean
dimensions. Rather, I will proceed by setting out those broader principles to which I have adhered in a comprehensive examination of the minutiae of the parties' claims.
I recognize that damages, in a case such as this, can neither be proved nor found with precision. The party seeking damages must prove that the conduct which imposes liability upon another was a material cause of injury to the business or property of the claimant. Then, once the fact of injury is established, the trier of fact may make a reasonable estimate of damages. I distinguish between proof of the fact of damages and proof of the amount of damages. It seems to me that any other approach would work an injustice. For a clear and concise expression of this approach in a different context, see the Opinion of Judge Van Dusen in Edward C. Rea and 22 Ford Inc. v. Ford Motor Co., 497 F.2d 577, Third Circuit Court of Appeals filed April 26, 1974.
The fundamental rule to which I have adhered in awarding damages is the basic contract rule of Hadley v. Baxendale, 156 Eng. Rep. 145 (1854): damages are recoverable only for those injuries that may be shown to have been within the contemplation of the defendant as occurring as a probable result of its breach. The foreseeability test is not, of course, to be taken literally: it does not mean that if the defendant contends that he was unable to predict that in the future what did happen would happen, the plaintiff should leave empty-handed. Rather, foreseeability is but a shorthand legal expression for the ascertainment of that sine qua non of all legal judgments, proximate cause, by means of hindsight. As stated in Corbin on Contracts, Vol. 5, § 1007, the foreseeability test is "the only substantial test of the legal requirements as to proximate causation and remoteness". Id. at 71.
John Stuart Mill described the cause of an event as the sum total of its antecedents, and in the ultimate, metaphysical sense his axiom is indisputable. But the law, with neither the inclination nor the infinite resources necessary for such weighty contemplations, cannot be concerned with ultimate causes. The very cornerstone of Anglo-American civil law is the principle that no person may recover except for an injury proximately caused by another.
Nor can there be any doubt that foreseeability is the test to be applied in the context of a Section 301 action for damages such as this. As stated in Wilson & Co. v. United Packinghouse Workers, 181 F. Supp. 809 (N.D. Iowa 1960):
"In an action against a union under § 301 for damages caused by a breach of a no-strike provision in a contract, the measure of damages recoverable is the actual loss sustained by the plaintiff as a direct result of the breach. U.E.W. v. Oliver Corp., 205 F.2d 376, 388 (8th Cir. 1953). Such loss would be that which may reasonably and fairly be considered as arising naturally from the particular breach of contract involved and which may reasonably be supposed to have been in the contemplation of the parties at the time the agreement was entered into . . . . " Id. at 820-21. (Emphasis added.)
In short, because a collective bargaining agreement is a contract and enforceable as such, the traditional criteria for the ascertainment of damages where a contract has been breached - foreseeability and proximate cause - are applicable. Williston on Contracts, (3d ed. 1968) §§ 1020A and 1362.
I have taken pains to point this out for two reasons: first, because foreseeability and proximate cause are the fundamental tenets which I have borne in mind throughout my consideration of the question of damages in this case; and second, because repeatedly the parties seem to have lost sight of these principles in making their contentions before the Court. Both sides are equally guilty of this basic misconception of the theory of the lawsuit, but plaintiff's unfounded contention that "this case will not accomplish what it should accomplish unless the finding on liability is accompanied by a substantial damage award" is illustrative. In the first place, it would be plainly improper for this Court or any other to weight its damage award in a Section 301 action in one direction or another on the basis of some public policy it wished to further or deter. Moreover, what are sought here, as they must be under the terms of the LMRA are compensatory, not punitive damages. Int. Brotherhood of Teamsters v. Morton, 377 U.S. 252, 84 S. Ct. 1253, 12 L. Ed. 2d 280 (1964). This Court has based its damage award on the sole permissible standard for the award of damages in a Section 301 action -- foreseeability and proximate cause. The remainder of the Opinion is constructed to exemplify the application of the Hadley v. Baxendale principle to the facts before the Court.
The strike against Eazor took place in the period from August 20 until September 25, 1968. Primarily, it is for losses sustained during this period that plaintiff seeks to recover. For the year 1968 Eazor lost, according to the figures of the Interstate Commerce Commission, $296,000.00. But an analysis of the plaintiff's books and records shows that the company had done fairly well in the first two quarters of 1968, and had in fact made a profit. Thus, the $296,000.00 figure is somewhat misleading, since the loss in the strike period was set off against and reduced by the profit made earlier in the year. Plaintiff submits and this Court finds that during the period August 20 to September 25, 1968, Eazor lost a total of $1,079,332.00. It is this figure which will be used as a starting point for the discussion of plaintiff's losses.
It should be noted at the outset that plaintiff seeks to be compensated for lost profits in this action as well as for the actual losses it sustained. Theoretically, the plaintiff's right to do so is unquestionable. If, in a hypothetical instance, it were to be shown that as the direct result of an illegal strike a company had lost $50,000.00 during a certain period and moreover had been deprived of the $50,000.00 in profits it would have made during that period, the correct measure of damages in such an instance would be $100,000.00. This case however does not present such an instance.
This case is comparable to the contrasting hypothetical situation wherein a company, damaged as the result of an illegal strike, demonstrates that it lost $50,000.00 during the period of the strike, but convincing evidence is introduced to show that the company would have lost $25,000.00 during that period under normal business conditions. Clearly, the proper measure of damages in the latter situation would be $25,000.00 and lost profits would not be includible as an item of compensation.
Here, as in the second example, plaintiff has failed to demonstrate that it would have made a profit during the relevant period and this Court finds that it would not have. Without such conclusive proof, lost profits are not compensable. In addition, plaintiff seeks to recover what it terms "consequential losses". The company seeks to recover for these consequential losses both as a separate item of damages and as an aspect of its lost profits claim. That is, plaintiff contends that the consequential losses primarily took the form of lost business and asks the Court to infer that had that business "lost" been regained, the company would have made a profit. This Court finds that neither aspect of the consequential losses claim is compensable in this case. Plaintiff has failed to carry his burden of proof that (a) the consequential losses for the years 1969 and 1970 were proximately caused by the August/September 1968 work stoppage
or (b) that the company would have made a profit, absent the strike, in 1968, 1969 or 1970.
The evidence which is most illustrative of the reasoning behind the Court's findings is the Eazor firm's own language in its reports to its stockholders on a quarterly and annual basis. The Eazor shareholder reports succinctly document the Court's findings. Stated positively, the losses the company sustained in 1969 and 1970 were due to numerous causative factors other than the 1968 strike. Stated negatively, this Court finds that plaintiff has failed to sustain its burden of showing that any losses other than those sustained during August and September of 1968 were caused by the strike.
In the first two quarterly reports for the year 1968, Eazor reported substantial sales increases and in both reports expressly attributed this auspicious financial development to the integration of their operations with those of the recently acquired Daniels Motor Freight Company. The quarterly report for the three-month period ending September 30, 1968, the period which included the work stoppage, reads in relevant part as follows:
"TO OUR FELLOW STOCKHOLDERS:
Sales in the third quarter of this year increased $1,441,109 and in the first nine months $10,822,363. This increase is attributed to the acquisition of Daniels Motor Freight Inc., plus growth in our other areas.
Unfortunately we suffered an illegal strike lasting from August 20th to September 25th which started with our Daniels drivers and was very costly to your company, resulting in a deficit of $722,516 for the third quarter and $552,507 for the nine months.