O'Toole v. Northrop Grumman Corp.

• Decision Date: 28 August 2007
• Docket Number: No. 05-2174.,05-2174.
• Parties: Joseph O'TOOLE, Plaintiff-Appellant, v. NORTHROP GRUMMAN CORP., Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

499 F.3d 1218

Joseph O'TOOLE, Plaintiff-Appellant, v. NORTHROP GRUMMAN CORP., Defendant-Appellee.

No. 05-2174.

United States Court of Appeals, Tenth Circuit.

August 28, 2007.

Alexander A. Wold, Jr., of Alexander Wold & Associates, P.C., Albuquerque, NM, for Plaintiff-Appellant.

Edward Ricco (Scott D. Gordon with him on the brief), of Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, NM, for Defendant-Appellee.

Before MURPHY, SEYMOUR, and TYMKOVICH, Circuit Judges.

SEYMOUR, Circuit Judge.

This is the third appeal in this case concerning Mr. O'Toole's claims for consequential damages flowing from Northrop Grumman Corporation's breach of a contract to pay his relocation expenses to Los Alamos, New Mexico. See O'Toole v. Northrop Grumman Corp., 305 F.3d 1222, 1225 (10th Cir.2002) (O'Toole I); and O'Toole v. Northrop Grumman Corp., 113 Fed.Appx. 314, 317-19 (10th Cir.2004) (O'Toole II). Our jurisdiction arises under 28 U.S.C. § 1291, and we affirm in part, reverse in part, and remand for further proceedings.

I PROCEDURAL HISTORY

The dispute in this case arose after Northrop Corporation acquired Grumman Aerospace, for whom Mr. O'Toole worked. At the relevant time, Mr. O'Toole was on loan to the federal government to work on a project in San Diego under a four-year "secondment agreement" and Grumman's relocation policy. He subsequently relocated to Los Alamos. Mr. O'Toole sued to recover unpaid relocation expenses and consequential damages flowing from alleged breaches of the Grumman contract. In the last appeal, we held that the district court erred in denying consequential damages. O'Toole II, 113 Fed.Appx. at 317-19. We reasoned it was undisputed that Northrop Grumman did not pay certain relocation costs it agreed were due, and it was reasonably foreseeable that Mr. O'Toole would have to get money from some source to pay those expenses "resulting in extra costs to him." Id. at 319. Noting that these holdings were law of the case, we remanded with directions "for entry of an award of consequential damages that includes at least an amount reimbursing the penalties paid and interest lost on the funds Mr. O'Toole was forced to withdraw from his retirement account to pay for undisputed relocation costs." Id. We further directed the district court to "consider all other claims for consequential damages and make specific findings as to each claim." Id.

On remand, the district court considered post-trial memoranda on damages from both parties. On May 23, 2005, the court entered a decision granting Mr. O'Toole three awards of consequential damages (and prejudgment interest on two of those awards) and denying his other claims.

II

THE DISTRICT COURT'S AWARD

The district court awarded or denied the following claims:

(1) awarded $15,540, plus pre-judgment interest, for withdrawals from the Grumman Savings and Investment Plan (SIP) to pay taxes and penalties on $15,230 Mr. O'Toole borrowed from the SIP to cover unreimbursed moving expenses in 1996;

(2) awarded $13,400, plus pre-judgment interest, for withdrawals from the SIP to pay taxes and penalties on the $13,000 Mr. O'Toole borrowed from the SIP to cover unreimbursed expenses in 1998;

(3) denied damages for the lack of a mortgage interest deduction on his tax return for the time between July 1, 1997, until September 1998 (4) awarded $2000, without interest, for lost equity in a home purchase;

(5) denied damages for lost vacation pay and moving costs for the moves to the second and third rental homes;

(6) denied damages in excess of $1000 for incidental moving expenses;

(7) denied damages for selling his current home and buying a home he could have afforded if Northrop Grumman had followed its policies correctly;

(8) denied lost earnings, and lost earnings on earnings, on the money Mr. O'Toole withdrew from the SIP to cover unreimbursed relocation expenses;

(9) denied damages for Northrop Grumman's failure to recall him to his prior job in Bethpage, New York;

(10) denied damages for Northrop Grumman's failure to follow its grievance policy;

(11) denied gross-up on damages it awarded;

(12) awarded interest on the damages at the federal reserve rate instead of awarding lost earnings and lost earnings on earnings for withdrawals from the SIP; and

(13) awarded, in total, $31,970 plus costs.

See Aplt. Opening Br. at 9-10 (providing citations to district court's memorandum opinion).

Mr. O'Toole contends the district court erred in items (3), (4), (5), (8), (11), (12), and (13) of its award. He argues in addition that the court erred by failing to address his claim for lost earnings on the uncontested damages paid in the partial settlement in 2001, and his claim for penalties and taxes on SIP withdrawals made to cover increased taxes because he had no mortgage interest deduction in 1997 and 1998.¹

III ANALYSIS

We determined in the first appeal that New York law applies to this case. O'Toole I, 305 F.3d at 1225. We stated that Mr. O'Toole is entitled to damages that will put him in the same economic position in which he would have been if Northrop Grumman had not breached the contract with him, including any foreseeable economic injury resulting from the breach and the costs of mitigation. See id. at 1226. We review the district court's findings on damages for clear error. See Easley v. Cromartie, 532 U.S. 234, 242, 121 S.Ct. 1452, 149 L.Ed.2d 430 (2001); Furr v. AT & T Tech., Inc., 824 F.2d 1537, 1547 (10th Cir.1987). To reverse under this standard requires that, based on the entire evidence, we have a "definite and firm conviction that a mistake has been committed." Easley, 532 U.S. at 242, 121 S.Ct. 1452. We review the district court's legal conclusions de novo. Dang v. UNUM Life Ins. Co. of Am., 175 F.3d 1186, 1189 (10th Cir.1999).

Mr. O'Toole does not dispute the amounts the district court awarded to reimburse him for the taxes and penalties he paid on withdrawals from his retirement account to pay undisputed relocation costs. In 1996, $15,540 was withdrawn to pay taxes and penalties, as shown in item (1) of the district court's order, and in 1998, $13,400 was withdrawn to pay taxes and penalties, as shown in item (2). Rather, as explained below, Mr. O'Toole disputes the district court's failure to award lost earnings on these amounts, plus earnings on earnings, along with other items of consequential damages.

A. Moving Expenses and the Value of Vacation Time Used to Move (Item 5)

We affirm the denial of Mr. O'Toole's claim for moving expenses. The district court denied this claim because Mr. O'Toole did not hire movers or pay a moving fee to anybody, and he has provided no legal authority to justify an award for the value of his own labor.

We also affirm the denial of Mr. O'Toole's claim for the value of vacation time he used to move twice between rental houses in Los Alamos. Although the district court erroneously denied relief because Mr. O'Toole no longer worked for Northrop Grumman at the time he made these moves, Mr. O'Toole did not contend his vacation time had a cash value or cite any legal authority showing he can claim his salary as the value of his vacation time.

B. Lost Mortgage Interest Deduction (Item 3)

The district court denied Mr. O'Toole's claim for damages for the lack of a mortgage interest deduction on his tax returns for the time between July 1, 1997, until September 1998. We remand this claim for reconsideration.

Mr. O'Toole argued that he was entitled to a lost mortgage interest deduction because Northrop Grumman's failure to pay his relocation costs prevented him from buying a house in Los Alamos before September 1998. He asserted that the lack of an interest deduction raised his taxes, which caused him to withdraw funds from his SIP to pay his increased taxes in 1997 and 1998, and incur taxes and penalties on the SIP withdrawal. He also claims we directed that such an award be made, Aplt. Opening Br. at 12, but we actually held only that such a claim was not foreclosed and that the district court should consider it. O'Toole II, 113 Fed.Appx. at 319 & n. 1. Mr. O'Toole presented tax returns for 1996, 1998, and 2000 in support of these claims.

The district court agreed that Mr. O'Toole "sustained some damage by way of having to pay more income tax than he otherwise would have paid commencing in mid-1997." Aplt.App., vol. V at 992. The court concluded, however, that it would be "virtually impossible" to calculate the loss due to not having a mortgage interest deduction. Id. The court stated that because Mr. O'Toole did not itemize in 1998 and did not provide a 1997 return, it was unclear what his other deductions would have been. See id.

Mr. O'Toole argues that he provided sufficient evidence to support an award for his lost mortgage interest deduction. We agree this claim is not speculative, assuming Mr. O'Toole seeks a minimum award. He correctly states that the tax savings on a mortgage interest deduction are determined by his federal and state tax rates and the amount of mortgage interest claimed, not by the amount of his other deductions. See Aplt. Opening Br. at 17-18. The evidence could support an award, for example, as long as the mortgage interest he would have been able to claim on his federal taxes exceeded the standard deduction, and as long as the calculation of damages included only the amount of an itemized interest deduction that would have exceeded the standard deduction.

Mr. O'Toole testified that $1500 a month was a reasonable figure to assume would have gone to interest payments, based on the rent he had been paying in Los Alamos. See Aplt.App., vol. 1A at 169-71. He showed that this is less mortgage interest than he actually paid in 1996 on his house in California or paid in the year 2000 on his house in Los Alamos. Aplt. Opening Br. at 18 & n. 77 (citing tax returns at Aplt.App., vol. II at 473, 498). Mr. O'Toole's present calculation of the resulting loss does not match his testimony...