RKR Motors, Inc. v. Associated Uniform Rental & Linen Supply, Inc., Case No. 3D05-2130 (Fla. App. 10/25/2006), Case No. 3D05-2130.
| Decision Date | 25 October 2006 |
| Docket Number | Case No. 3D05-2130. |
| Court | Florida District Court of Appeals |
| Parties | RKR MOTORS, INC., a Florida corporation, d/b/a AUTOHAUS of POMPANO, Appellant/Cross-Appellee, v. ASSOCIATED UNIFORM RENTAL & LINEN SUPPLY, INC., a Florida corporation, Appellee/Cross-Appellant. |
Hodgson Russ and Richard A. Goetz (Boca Raton), for appellant/cross-appellee.
Boies, Schiller & Flexner and Bruce A. Weil, for appellee/cross-appellant.
Before GERSTEN, SUAREZ, and ROTHENBERG, JJ.
RKR Motors, Inc., d/b/a Autohaus of Pompano ("RKR Motors"), appeals a final judgment awarding Associated Uniform Rental & Linen Supply, Inc. ("Associated"), $82,444.00, in lost profits. Associated cross-appeals claiming the trial court should have awarded it liquidated damages in the amount of $102,309.00. We affirm in part the trial court's final judgment finding actual lost profits of $82,444.00, but reverse the trial court's final judgment on the cross-appeal and remand for entry of final judgment in the liquidated damages amount of $102,309.00.
RKR Motors and Associated entered into three, five-year contracts in 2000, wherein Associated was to rent and launder uniforms to RKR Motors for the use of RKR Motors' employees. The contracts contained a liquidated damages clause which provided that, if the customer terminated the contracts before expiration, damages would be based on a certain formula and the length of time remaining on the contracts. RKR Motors terminated the contracts prior to their expiration. Associated then brought the present action. The parties stipulated that RKR Motors had breached the contracts and that the only issue to be determined at the bench trial was the amount of profits lost by Associated due to RKR Motors' breach of contract. Associated presented expert testimony that Associated's actual lost profits were $82,444.00, and that Associated's damages pursuant to the liquidated damages clause were $102,309.00. RKR presented expert testimony that Associated's actual lost profits were $10,437.00, and that Associated was not entitled to liquidated damages. After hearing all the testimony, the trial court entered final judgment for Associated in the amount of $82,444.00, and denied Associated's request for liquidated damages. This appeal and cross-appeal follow.
Three witnesses testified at trial. Of the three, two were experts on the issue of the amount of lost profits. Two issues were presented. The first is what is the appropriate legal standard to be used in this case to determine lost profits for breach of contract and the second is which expert provided evidence that met the legal standard.
Associated's expert concluded that Associated's actual lost profits were $82,444.00. He first determined the amount remaining under the contract to be paid by RKR Motors to Associated. He then made adjustments to that amount by deducting costs attributed to Associated in performing the contract, such as sales tax, the cost of the garments, the cost to launder the garments, the cost to wash the garments and the cost to repair and maintain the machines. He testified that he deducted a total of approximately thirty-seven and one-half percent of the contract price as expenses attributable to Associated. He then deducted expenses, such as the fuel costs related to making the stops to deliver these garments. After making these deductions, he arrived at a total actual lost profit for the three years remaining under the contract of $82,444.00. He testified that the income from this contract was only one and one-half percent of Associated's total income of over $4 million. As the profits from the contract were a small percentage of Associated's overall income, he did not deduct certain expenses, such as officers' salaries, office rent or certain employees' salaries. He testified that these expenses did not decrease or increase, but remained the same both before the contracts were entered into and after the contracts were terminated. These expenses were not necessary to perform the contracts and, therefore, did not warrant being deducted.
RKR's expert arrived at approximately the same figure for the remainder of the contracts, but arrived at a different amount for actual lost profits. Aside from deductions for actual costs to service the contracts, he deducted a percentage of the administrative expenses, the general expenses of the company as a whole, and the expenses for selling and delivery to arrive at actual lost profits of $10,437.00 over three years. The trial court, at the end of all the evidence, found Associated's expert to be more credible and determined that his calculations met the requirements of Florida law for establishing lost profits.
This court's standard of review is twofold. First, we have de novo review to determine whether the trial court's interpretation and application of Florida law as to lost profits for breach of contract were correct. See Gilliam v. Smart, 809 So. 2d 905 (Fla. 1st DCA 2002). Second, should we find the trial court's interpretation and application to be correct, we must then determine whether there was competent substantial evidence to support the trial court's findings of fact. See Developers of Am., Corp. v. ABC Promotions Unltd., Inc., 549 So. 2d 1042 (Fla. 3d DCA 1989). We find that the trial court's interpretation and application of Florida law as to lost profits for breach of contract is correct and also find that the record contains competent substantial evidence to support the trial court's findings of fact.
The amount of lost profits as damages for breach of contract is determined by subtracting the service contractor's cost of performance from the contract price, including both fixed and variable costs. Physicians Reference Lab., Inc. v. Seckinger, 501 So. 2d 107 (Fla. 3d DCA 1987). The evidence at trial must show what costs are involved to be deducted. If the evidence is that certain costs are not necessary for the performance of the contracts in question, those costs do not have to be deducted solely because they are costs incurred by the plaintiff in running its overall business. In Knight Energy Servs., Inc. v. C.R. Int'l Enters., 616 So. 2d 1079 (Fla. 4th DCA 1993), the appellate court upheld the jury award of lost profits amounting to basically the total contract price. The plaintiff testified at trial that his business had a fixed overhead which did not change due to the contracts in question. He testified there was a fixed overhead and that employees' salaries were being paid no matter which client was involved. His company was already paying those salaries, the phone bill, etc., with or without the contracts. There were no additional costs associated with the contracts in question to be deducted from the contract price. Defense counsel questioned the representative in an attempt to demonstrate that some overhead expenses were necessary to perform the contracts. The jury accepted the plaintiff's position and awarded, basically, the total of the contract price. The appellate court upheld the verdict as the jury had accepted the plaintiff's testimony. The appellate court stated: "We are not in a position to state that no reasonable juror could return the verdict as awarded." Knight, 616 So. 2d at 1080.
In Boca Developers, Inc. v. Fine Decorators, Inc., 862 So. 2d 803, 805 (Fla. 4th DCA 2003), the same appellate court further explained its decision in Knight. The court stated that, in Knight, "[p]laintiff testified unequivocally that there were no deductible costs or expenses necessary to fully perform this contract." In Boca, the appellate court would not affirm an award totaling the contract price as, contrary to Knight, there was no testimony that the fixed costs, such as salaries of employees, were not involved in furnishing services pursuant to the contract.
Associated's expert testified that fixed costs such as salaries and office rent were the same prior to the contract being entered into and subsequent to its termination and that the only expenses to be deducted were those specific to the performance of the contracts. Therefore, there were no further costs involved in furnishing the services required under the contracts. The trial court found Associated's expert's testimony to be credible specifically stating in the final judgment:
As such, the costs that were expended for overhead would have been expended regardless, as Plaintiff was not seeking to expand...operations, nor was the payment to provide for the expansion of operations by hiring more employees and expanding production facilities....Since the overhead is already ongoing and the salaries are already being paid, the only extra overhead to incur in order to service the Defendant's account is contained within an evaluation provided by Plaintiff's expert, which is the amount Plaintiff needs to expend over and above what Plaintiff is already expending in order to service Defendant's account.
Therefore, the trial court properly interpreted Knight and properly applied the facts of this case to Knight in awarding the actual lost profits. The record also contains competent substantial evidence to support the trial court's factual findings. As the Fourth District Court of Appeal stated in Knight, we are not in a position to say that no reasonable juror could return the verdict awarded.
It is very important in this analysis, as well as in any analysis by an appellate court, for the court to keep in mind the court's standard of review. As stated above, we review this case based on de novo review of the law which simply means that we are free to decide the question of law without deference to the trial judge. See Execu-Tech Bus. Sys. v. New Oji Paper Co., 752 So. 2d 582 (Fla. 2000). Our next standard for review in this case is whether or not there is...
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