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October 7, 2005.


The opinion of the court was delivered by: FRANCIS CAIAZZA, Chief Magistrate Judge


In this diversity action filed pursuant to 28 U.S.C. § 1332 and before this court on remand, Kirk Brisbin, the owner and sole employee of Specialty Manufacturing, seeks damages from Superior Valve Co. ("Superior"),*fn1 for the anticipatory breach of three contracts which obligated Superior to buy industrial parts made in Korea on behalf of and sold by Specialty. The court is well acquainted with this matter, having conducted a six day bench trial in January 2002. At the conclusion of that trial, the court found in favor of Specialty with respect to the breach of the two written contracts, assessing lost profit damages in the amount of $746,675.00. The court also awarded damages in connection with a third (oral) agreement,*fn2 finding that Specialty was entitled to $12,200 based on the doctrine of promissory estoppel. Both parties appealed to the Court of Appeals for the Third Circuit. Superior contested this court's findings with respect to liability and its assessment of damages for lost profits. In its cross appeal, Specialty argued that it was entitled to prejudgment interest on the damage award, and to damages for lost profits on the oral contract. In Brisbin v. Superior Valve Co., 398 F.3d 279 (3d Cir. 2005), the Court of Appeals affirmed this court's finding that Superior had breached the written contracts, and did not disturb the assessment of reliance damages with respect to the oral contract. The Court of Appeals did, however, reverse this court's calculation of lost profits damages, concluding that the award was too speculative and should be reexamined on remand.

Following a meticulous review of the record in light of the Court of Appeals' identification of questions to be resolved on remand, this court is constrained to conclude that the record cannot support the award of damages for lost profits. The court must also decline Specialty's invitation to consider the availability of reliance damages as an alternative to lost profits damages. The record establishes that this issue was not raised on appeal and was waived as a result. The court will, however, calculate prejudgment (and postjudgment) interest on the award of reliance damages already made.

  Because the parties are familiar with the facts as recounted at trial and in earlier opinions, the court will move directly to the tasks placed before it by the Court of Appeals, referring to the facts only as necessary to provide context for its conclusions of law.

  A. Lost Profits

  The parameters of Pennsylvania law regarding recovery of lost profits for breach of contract are clear. Lost profits are available to the wronged party as an element of consequential damages. National Controls Corp. v. National Semiconductor Corp., 833 F.2d 491, 495 (3d Cir. 1997) (citing 13 PA. Cons. Stat. § 2714(c)). The injured party bears the burden of establishing entitlement to and the extent of lost profits. Delahanty v. First Pa. Bank, N.A., 464 A.2d 1243, 1257. (Pa.Super. 1983). In order to satisfy that burden, the injured party must demonstrate that evidence in the record is sufficient to establish the extent of damages with reasonable certainty. Advent Systems, Ltd. v. Unisys Corp., 925 F. 2d 671, 680 (3d Cir. 1991) (citing Delahanty, 464 A.2d at 1258). Although mathematical precision is not required, there must be evidence from which damages can be calculated without engaging in speculation. Advent, 925 F.2d 681. Typically, the extent of lost profits may be established by reference to evidence of past profits, profits made by others similarly situated, or through expert testimony. Massachusetts Bonding & Ins. Co. v. Johnston & Harder, Inc., 343 Pa. 270 (1941).

  Calculating the amount of lost profits in this matter was problematic. Because Specialty was a relatively new venture, it did not have a history of engaging in business of the type transacted here; there was no established course of dealing between Specialty and Superior. Furthermore, Specialty did not offer evidence relating to general practice in the industry, or expert testimony bearing on damages. Recognizing, however, that Specialty had been injured, and that Brisbin had expended substantial effort to salvage the Specialty-Superior relationship in the face of Superior's almost total failure to cooperate, this court attempted to make Specialty whole by calculating its lost profits with respect to the most concrete evidence in the record.

  The court considered the shell contract first, concluding that Specialty was entitled to lost profits totaling $585,425.00. This figure was derived by determining Specialty's cost of manufacturing the shells, $228,525.00 for a full year of production, and subtracting that cost from the amount that Superior was obligated to pay, $345,610.00, for the same year. The court concluded that Specialty's profit for each of the five years of the shell contract would have been $117,085.00, bringing total lost profits on this contract to $585,425.00.

  Lost profits on the 1065 valve contract were similarly determined. Superior committed to pay Specialty $246,250 during the first year of the contract. Specialty's manufacturing costs were $192,500.00, leaving a one year profit of $53,750.00. This amount was multiplied by three years, the term of the contract, for a total lost profits award of $161,250. Concluding that these awards were sufficiently certain to satisfy the requirements of Pennsylvania law, this court noted that it had ascertained the awards based on the only evidence in the record pertaining to pricing, i.e., the prices fixed in the contracts signed by the parties.

  The Court of Appeals determined that these lost profits calculations were flawed: "[A]s of the date of Superior's breach (approximately fifteen months into the contracts), Specialty had not yet begun full-time production on either the 1065 valves or any of the shells." Brisbin, 398 F.3d at 290. As a result, the Court of Appeals concluded that it was unreasonable for this court to have extended the contracts beyond their expiration dates to allow Specialty to recover "its full expectation interest." Id. The following observation made by the Court of Appeals is well taken:
The contracts neither provide for development time nor guarantee a minimum of full time production. Sympathy aside, it is axiomatic that a court may not rewrite the clear provision of a contract to make it more reasonable or to protect a party against an unwelcome result.
Id. Despite this error in awarding Specialty full expectation damages, the Court of Appeals stated that Specialty might yet be entitled to the recovery of lost profits provided that the record made at trial contained specific evidence regarding the date upon which each contract item would have gone into full time production. The Court wrote that if Brisbin could establish "the date full-time production would have begun for each project, he [could] recover lost profits for the valves and shells from that date through May 27, 2001 and May 27, 2002, respectively." Id.

  On remand, this court has been directed to examine the record in order to determine whether a date for full-time production of valves or shells can be ascertained. The court has undertaken this review of the record, and does not find any way to identify a definite production date for any of the contract items. In fact, the court is convinced that it would be impossible for Specialty to establish this date even if the record could be reopened.

  First, as the court has noted, Specialty has never before undertaken work of this type and cannot rely upon its course of performance to fix a production date. Furthermore, Specialty had, at best, only some control over delays in the production process. Much of the delay was ultimately attributable to Superior's imposition of additional testing requirements, its failure to specify alleged deficiencies in the samples produced, its claim to have lost approvals and test results, and its overall refusal to communicate effectively with Specialty. Under the terms of both contracts, which heavily favored the drafter, Superior, production of the 1065 valves or shells could have been delayed indefinitely. As even Specialty admits in its Memorandum of Law Following Remand, "[T]he time period that full production would have begun [under either contract] is difficult to determine. (Memo at 2).

  According to the Court of Appeals' analysis, determining a date of production for each product is essential to the calculation of a lost profits award. Given all of the variables affecting Specialty's ability to produce a finished product, the court is convinced that establishing a definite production date is impossible. This inability to fix even one date of production is entirely fatal to Specialty's claim for lost profits. We need not reach the other questions posed by the Court of Appeals. For example, whether Specialty's Korean subcontractor would have been able to source component parts necessary for the manufacture of the 1065 valves is irrelevant. Even had a reliable source been identified in the record, Specialty would not be able to establish a definite date of production.

  The same is true for the other issues which the Court of Appeals asked this court to consider on remand: "when, [if ever] the valves could have met Superior's quality control requirements," Brisbin, 398 F.3d at 292, whether lost profits damages for breach of the 1065 contract should have been determined using a valve sales estimate of 8-10,000 instead of the 25,000 originally contemplated, and whether Superior had granted First Article approval for 4" or 5" shells. Id. Regardless of how these questions are answered, the record will not establish when production of any of the valves or shells would have begun. Accordingly, the court must conclude, as ...

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