689 F. App'x 155
4th Cir.2017Background
- MEBN contracted with MBI in Sept. 2013 for a prefabricated blast‑resistant TV studio (BRB) to be delivered and installed in Baghdad; price ~$534,311 and $187,001 down payment paid. Delivery deadline originally Dec. 31, 2013; later amended (Jan. 2014) to April 16, 2014 with a $100,000 credit and a time‑of‑the‑essence clause.
- MBI missed deadlines, invoked force majeure in July 2014 (citing Iraq war conditions) and said delivery into Iraq was not possible; MEBN treated Aug. 3, 2014 as breach and sued Sept. 2014.
- MEBN contracted in Oct. 2014 with local builder Al Soor to construct a permanent brick‑and‑mortar studio (the Substitute Building) for $175,541 to mitigate continuing hotel/studio rental costs; Al Soor completed the building in Oct. 2015 after delays.
- BRB arrived in Baghdad in Nov. 2014 but MEBN refused installation because it had already hired Al Soor and sued; district court granted summary judgment for MEBN on liability and held a damages bench trial, awarding $701,536.
- On appeal MBI challenged several rulings on damages and evidence: exclusion of post‑breach attorney communications (Fed. R. Evid. 408), admission of damages after Apr. 2015 (discovery supplementation under Fed. R. Civ. P. 26/37), whether the UCC governs, mitigation reasonableness, and proximate causation of later damages.
Issues
| Issue | Plaintiff's Argument (MEBN) | Defendant's Argument (MBI) | Held |
|---|---|---|---|
| Exclusion of post‑breach attorney communications (Rule 408) | Communications were settlement negotiations but admissible for non‑prohibited purposes (e.g., waiver/estoppel, effect on listener). | Communications barred by Rule 408 and should be excluded. | District court properly excluded them under Rule 408; appellate court found no abuse of discretion. |
| Admission of damages after April 2015 (discovery supplementation) | Damages after Apr. 2015 arose from ongoing rental and Al Soor delays; MEBN had no additional documents to supplement. | Evidence should be barred because MEBN failed to supplement discovery about Al Soor delays (Rule 26/37). | MBI waived trial objection by failing to object at trial; no plain error shown; evidence admitted. |
| Governing law: UCC vs. common law; measure of damages | Even if UCC applied, MEBN’s cover cost ($175,541) is less than contract price; MEBN seeks consequential/direct damages (rental, construction). | Contract was sale of goods (BRB) so UCC governs and limits damages. | Whether UCC applied unnecessary—same recovery under either regime; court’s foreseeability/contemplation finding supported. |
| Mitigation and proximate causation for damages after Al Soor delays | Hiring Al Soor to build a permanent studio was reasonable mitigation; MBI’s breach proximately caused MEBN’s ongoing costs; Al Soor’s delays were not a superseding cause. | MEBN should have waited for MBI/BRB or terminated Al Soor when BRB arrived; Al Soor’s delays broke causation chain. | District court properly found mitigation reasonable and that Al Soor’s delays did not supersede MBI’s breach; award affirmed. |
Key Cases Cited
- Gentry v. E. W. Partners Club Mgmt. Co., 816 F.3d 228 (4th Cir. 2016) (standard of review for evidentiary rulings)
- Fiberglass Insulators, Inc. v. Dupuy, 856 F.2d 652 (4th Cir. 1988) (settlement negotiations admissible for non‑prohibited purposes at court’s discretion)
- United States v. Henry, 673 F.3d 285 (4th Cir. 2012) (limits on overturning discretionary evidentiary rulings)
- Universal Furniture Int’l, Inc. v. Collezione Europa USA, Inc., 618 F.3d 417 (4th Cir. 2010) (standard for reviewing mixed question of law/fact in contract cases)
- Coakley & Williams, Inc. v. Shatterproof Glass Corp., 778 F.2d 196 (4th Cir. 1985) (contract characterization—UCC vs. common law is factual question)
- Princess Cruises, Inc. v. Gen. Elec. Co., 143 F.3d 828 (4th Cir. 1998) (predominant factor test for mixed goods/services contracts)
- Roanoke Hosp. Ass’n v. Doyle & Russell, Inc., 214 S.E.2d 155 (Va. 1975) (direct vs. consequential damages and foreseeability under Virginia law)
- Exxon Co. U.S.A. v. Sofec, Inc., 517 U.S. 830 (U.S. 1996) (limited role of proximate‑cause analysis in contract damages)
- Anderson v. City of Bessemer, 470 U.S. 564 (U.S. 1985) (appellate courts defer to factfinder where two permissible views of evidence exist)