CARCO GROUP, Inc. v. Maconachy
718 F.3d 72
| 2d Cir. | 2013Background
- Cross-appeals from remand judgment awarding damages, fees, costs, and interest to Carco and related counterclaims.
- District Court found Maconachy breached two contracts (EA and APA) proximately causing Carco losses; damages and fees awarded accordingly.
- On appeal, Court vacates breach judgment and remands for proximate-causation findings and damage quantification, and for recalculation of fees.
- Court reverses a 20% across-the-board fee reduction and denial of prejudgment interest on fees; otherwise affirms related rulings on faithless servant claim.
- Record showed Maconachy’s breaches existed from 2000 to 2005; District Court assessed damages including salary disgorgement and lost opportunities.
- On remand, court must determine proximate cause with citations to record and potentially offset damages if appropriate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proximate causation linking breaches to damages | Maconachy breached EA/APA and damages flow directly from breaches. | Remand record does not adequately connect breaches to quantifiable loss. | Vacate and remand for proper proximate-cause findings. |
| Damages measurement and offset | Carco’s damages include contract and related losses; salary recovery should reflect value conferred. | Intervening market factors may offset some damages; offset discussion required. | Remand to reassess damages and potential offsets in light of proximate-cause findings. |
| Attorneys’ fees and costs award basis | District Court properly awarded fees under APA § 9.1 with detailed scrutiny. | Flawed due to proportionality concerns to damages and prior reductions. | Twenty-percent reduction was error; fees recalculated on remand consistent with proximate-cause findings. |
| Prejudgment interest on attorneys’ fees | APA language and New York CPLR support prejudgment interest on fees. | Interest should be limited to damages or not extend to fees absent express provision. | Remand to award prejudgment interest on fees if contract damages are affirmed. |
Key Cases Cited
- Continental Insurance Co. v. Lone Eagle Shipping Ltd. (Liberia), 134 F.3d 103 (2d Cir. 1998) (proximate causation review is fact-intensive and deferential on appeal)
- McDaniel v. County of Schenectady, 595 F.3d 411 (2d Cir. 2010) (abuse-of-discretion standard for fee awards; deference to district court)
- Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186 (2d Cir. 2003) (contract interpretation governs fee awards when contract interpretation is at issue)
- Krear & Co. v. Nineteen Named Trustees, 810 F.2d 1250 (2d Cir. 1987) (interest on contract-based attorney’s fees under contract language and law)
- Diamond D Enterprises USA, Inc. v. Steinsvaag, 979 F.2d 14 (2d Cir. 1992) (reasonableness and proportionality of fee awards under contract damages)
- Tractebel Energy Marketing, Inc. v. AEP Power Marketing, Inc., 487 F.3d 89 (2d Cir. 2007) (consequential damages must be proven with reasonable certainty)
- Kenford Co. v. County of Erie, 67 N.Y.2d 257 (New York 1986) (damages measurement principles in contract cases)
- Solow Management Corp. v. Tanger, 19 A.D.3d 225 (1st Dep’t 2005) (interest on contract-based attorney’s fees under CPLR §5001 consideration)
- In Time Products, Ltd. v. Toy Biz, Inc., 38 F.3d 660 (2d Cir. 1994) (treats interest on attorney’s fees when contract provides for fees)