What Is My Duty To "Mitigate" My Damages? - R.R. Donnelley & Sons v. Vanguard Transportation Systems, Part 1
As Judge Posner has put it:
“If you invite someone to dinner, and hours after he was due he still hasn't arrived, you had better infer that he isn't coming, and start eating. You can't let yourself and your other guests starve merely because there is a slight chance that he will show up days later.”
The recent case of R.R. Donnelley & Sons Co. v. Vanguard Transportation Systems, Inc. (N.D.IL Doc. No 06 C 5837) has ended in an interesting decision based entirely on the failure of one party to affirmatively act to “mitigate” its damages even though the other party breached their agreement and could also just as easily have mitigated the damages.
The opinion has an excellent description of the duty to mitigate:
“The so-called duty to mitigate damages, which is often referred to as a general contractual duty is a principle of ancient vintage. Referring to mitigation of damages-or as it is called in tort law “avoidable consequences “in terms of a “duty” is somewhat misleading, because a plaintiff incurs no liability for failing to act. Rather, the amount of loss that could reasonably have been avoided by stopping performance or making substitute arrangements is simply subtracted from the amount that would otherwise have been recoverable as damages. Phrased differently, the duty to mitigate damages “forbids the victim of a breach of contract, which might well be involuntary, to allow his damages to balloon (when he could easily prevent that from happening), as he might be tempted to do in order to force a lucrative settlement.”
“The victim of the breach must “ ‘exercise reasonable diligence and ordinary care in attempting to minimize the damages after injury has been inflicted.’ “ And while he must act with “reasonable dispatch,” the injured party is not required to take steps that involve “undue risk or burden.” But there are instances where the victim of the breach might be lulled by the breaching party into inaction because of assurances that all will be well. “[T]o put this differently, the [breaching party] may not insist on mitigation when by its words or deeds it has led the [non-breaching party] to believe that it has assumed what would otherwise be the buyer's burden of mitigation.” While that is going on, the duty to mitigate is suspended.” [Internal citations omitted]
The case involved the shipment of time-sensitive brochures by Vanguard to an R.R. Donnelley facility in Atlanta. The brochures were for a Macy’s after-Christmas sale and needed to be delivered by December 21 in order to be mailed out and received timely by consumers for the December 27th Sale.
R.R. Donnelley contracted with Vanguard to deliver the brochures to its facility by no later than 2:00 p.m. on December 16th. This time was important because the contract between the parties contained a “time is of the essence” clause. Vanguard got to the facility after 2:00 p.m. on the 16th and delivery was not made. Rather than wait to be able to unload the delivery on the 16th, the driver for the Vanguard truck took the trailer with the materials to a facility and left them there. The parties contacted each other regarding scheduling a new delivery over the next few days each time a delivery was expected or possible, something occurred to kept that delivery from happening, and ultimately, no delivery was ever made. The brochures did not get mailed in time for the Macy’s sale.
R.R. Donnelley paid the company that printed the brochures $81,650 for damages it suffered because the brochures did not get mailed for Macy’s and then sued Vanguard for the $81,650 in damages for breach of the agreement to deliver the brochures by the 16th.
The parties completed discovery and had a trial. Of the many findings made by the Court after it heard the evidence one regarded R.R. Donnelley’s failure to take action and mitigate its damages.
In many cases, the steps for mitigation are varied and may not amount to a full recovery of the damages suffered by a party because of the breach, but for R.R. Donnelley in this case the Court decided:
“all that would have been entailed was the minimal cost of renting a truck from a local cartage company and driving the half hour to the Vanguard lot to pick up the load and delivering it to the Atlanta facility. Mr. Menne, of Vanguard, estimated that the cost would have been about $250. Even if that estimate is low, the cost would have been less than the $750 it cost to haul the load the several hundred miles from Kentucky to Georgia.”
The court found that of the roughly $81,000 in damages claimed by R.R. Donnelly, $80,000 could not be assessed against Vanguard because of R.R. Donnelly’s failure to mitigate. The court held that because the money at issue was only nominal, and R.R. Donnelley didn’t request nominal damages, judgment should be made in favor of Vanguard due to the failure of the plaintiff to mitigate.
This same duty to mitigate applies to construction. It is best to understand that you cannot sit around and wait for something to happen thinking you have a remedy at law when some action on your part could completely alleviate your damages.
Tomorrow we will discuss Part 2 – The reason R.R. Donnelley wasn’t entitled to enforcement of its indemnity provision for attorney’s fees.