Gianetti v. Norwalk Hospital, SC 16640 (Conn. 11/11/2003)

• Decision Date: 11 November 2003
• Docket Number: SC 16640.
• Court: Connecticut Supreme Court
• Parties: CHARLES D. GIANETTI v. NORWALK HOSPITAL ET AL.

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CHARLES D. GIANETTI v. NORWALK HOSPITAL ET AL.

SC 16640.

Supreme Court of Connecticut.

Argued January 13, 2003.

Officially Released November 11, 2003.

ZARELLA, J.

In this certified appeal, the named defendant, Norwalk Hospital (hospital),¹ appeals, and the plaintiff, Charles D. Gianetti, cross appeals from the judgment of the Appellate Court, which, inter alia, reversed the judgment of the trial court awarding the plaintiff nominal damages in connection with his breach of contract claim. The primary issue is whether the Appellate Court properly determined that the facts elicited at trial reasonably could only support the conclusion that the plaintiff was a lost volume seller of services and that he was entitled to damages for lost profits only for the year of 1984. We conclude that the record does not support that determination and, accordingly, we reverse in part the judgment of the Appellate Court and remand the case for a new hearing in damages.

The following facts and procedural history are relevant to the resolution of this appeal. The plaintiff is a physician who specializes in the field of plastic and reconstructive surgery. In 1974, the plaintiff was granted provisional clinical privileges as a member of the hospital's medical staff. In 1976, the plaintiff was granted full clinical privileges as an assistant attending staff physician. The plaintiff's privileges were renewed on an annual basis² through 1983. During this time period, the plaintiff also had clinical privileges at four other area hospitals.

In 1983, the last year for which the plaintiff was granted privileges, there were four plastic surgeons, including the plaintiff, who worked in conjunction with the hospital's emergency department. Neither the plaintiff nor the other plastic surgeons were required to remain physically at the hospital while "on call." Rather, they were summoned to the hospital as their services were needed. Three of the plastic surgeons who covered call at the hospital also simultaneously covered call at other area hospitals. Each plastic surgeon was responsible for billing his patient or the patient's medical insurance carrier for any services performed.

In 1983, the plaintiff applied for the renewal of privileges for 1984. On the basis of the recommendations of the hospital's department of surgery, section of plastic and reconstructive surgery and credentials committee, the medical staff of the hospital declined to renew the plaintiff's privileges for 1984. The hospital's board of trustees subsequently ratified the decision of the medical staff.

In 1984, a year in which the plaintiff derived no income from services performed at the hospital owing to the nonrenewal of his privileges, the plaintiff's gross income was $ 225,815. In 1983, the plaintiff earned $ 43,687 in gross income from services performed at the hospital and $ 172,890 in gross income from all other services performed, including services performed at other hospitals, for a total gross income of $ 216,577.

In response to the nonrenewal of privileges, the plaintiff brought the present action against the hospital in December, 1983, seeking, inter alia, damages and injunctive relief. The case thereafter was referred to an attorney trial referee, who concluded in his report that an enforceable contract existed between the hospital and the plaintiff and, furthermore, that the hospital, through its employees and agents, had breached that contract by failing to follow the procedural requirements of its bylaws in declining to renew the plaintiff's privileges.³

The trial court subsequently accepted the referee's report and rendered judgment in favor of the plaintiff on the issue of liability. The trial court then conducted a hearing to determine the appropriate remedy, after which the court declined to grant the plaintiff injunctive relief because he did not prove that he had suffered irreparable harm or that he was without an adequate remedy at law. In addition, the court awarded the plaintiff $ 1 as nominal damages, reasoning that the evidence adduced by the plaintiff did not provide a basis for finding any economic loss or damages arising out of the hospital's breach of contract. The court based its award of nominal damages on its determination that the plaintiff was not a lost volume seller inasmuch as he provided personal services to the hospital and that, consequently, the doctrine of mitigation of damages applied. Thus, the court rendered judgment awarding the plaintiff nominal damages only.

The plaintiff thereafter appealed to the Appellate Court. The Appellate Court affirmed the trial court's denial of injunctive relief but reversed that part of the judgment awarding nominal damages. Gianetti v. Norwalk Hospital, 64 Conn. App. 218, 233, 779 A.2d 847 (2001). The Appellate Court concluded that the lost volume seller theory can apply to personal service contracts such as the one between the plaintiff and the hospital; see id., 226, 230;⁴ and that, in light of the evidence contained in the record, the trial court should have deemed the plaintiff a lost volume seller and should have awarded him damages equal to his lost profits in 1984 only.⁵ Id., 231. Thus, the Appellate Court remanded the case to the trial court for a new hearing in damages with guidance on the appropriate method of calculating damages. See id., 233.

We thereafter granted the hospital's petition for certification to appeal limited to two issues. First, "did the Appellate Court properly conclude that the plaintiff was a lost volume seller?" (Internal quotation marks omitted.) Gianetti v. Norwalk Hospital, 258 Conn. 945, 788 A.2d 95 (2001). Second, "did the Appellate Court properly conclude that the plaintiff was not required to mitigate damages . . . and that he was entitled to more than nominal damages?" Id., 946. We also granted the plaintiff's petition for certification to cross appeal limited to the following issue: "Did the Appellate Court properly conclude that, on the remand, the plaintiff was entitled to prove damages for only one year?" Gianetti v. Norwalk Hospital, 258 Conn. at 946, 788 A.2d 95 (2001). This appeal and cross appeal followed.

I

We begin with the hospital's first claim, namely, that the Appellate Court improperly determined that the plaintiff was a lost volume seller as a matter of law. The hospital essentially makes two arguments in support of this claim. First, although the hospital does not challenge the Appellate Court's legal conclusion that the lost volume seller theory may apply to contracts for personal services, such as the one between the hospital and the plaintiff, it does contend that the Appellate Court improperly concluded that the plaintiff was a lost volume seller. In particular, the hospital asserts that the Appellate Court improperly declined to credit the trial court's factual finding that the plaintiff would have been unable to perform under the contract with the hospital while simultaneously performing under the contracts with the other hospitals after the hospital had declined to renew his privileges. Accordingly, the hospital requests that we reverse the judgment of the Appellate Court and reinstate the trial court's award of nominal damages on the basis of that court's factual findings. Alternatively, the hospital requests that we reverse the judgment of the Appellate Court insofar as that judgment depends on that court's conclusion that the plaintiff was a lost volume seller as a matter of law, and remand the case to the trial court for reconsideration of the facts under the lost volume seller theory.

We conclude that the record does not support the hospital's assertion that the plaintiff was not a lost volume seller on the basis of the trial court's factual findings. We also conclude that the record does not support the Appellate Court's determination that the facts were sufficient to conclude that the plaintiff was a lost volume seller as a matter of law. Accordingly, we reject the Appellate Court's conclusion that the plaintiff was a lost volume seller as a matter of law and agree with the hospital's alternative claim that the proper remedy in this instance is to remand the case for a new hearing to afford the trial court an opportunity to determine whether the plaintiff was a lost volume seller under the circumstances of this case.

We begin our analysis with a brief discussion of the lost volume seller theory. Comment (f) to § 347 of the Restatement (Second) of Contracts provides that, in cases in which a contract has been breached, if there is a factual finding that an "injured party could and would have entered into the subsequent contract, even if the [underlying] contract had not been broken, and could have had the benefit of both, he can be said to have `lost volume' and the subsequent transaction is not a substitute for the broken contract." 3 Restatement (Second), Contracts § 347, comment (f), p. 117 (1981). Thus, "the lost volume seller theory allows [for the] recovery of lost profits despite resale of the services that were the subject of the terminated contract if the seller . . . can prove that he would have entered into both transactions but for the breach." Green Tree Fin. Corp. v. Alltel Info. Servs., Inc., Civ. No. 02-627 (JRT/FLN), 2002 U.S. Dist. LEXIS 18764, *25-*26 (D. Minn. September 26, 2002). Although the lost volume seller theory is commonly understood to apply to contracts involving the sale of goods,⁶ it applies with equal force to contracts involving the performance of personal services such as employment contracts. 22 Am. Jur. 2d 592, Damages § 509 (1988).

To qualify as a lost volume seller, a party must prove that the subsequent contract is not a substitute for the opportunity that has been lost as a result of the breach. See 3 Restatement (Second), supra, § 350, comment (d), p. 129. "A `substitute' is a contract which a volume seller who has suffered the loss of one contract through...