MY Imagination, LLC v. M.Z. Berger & Co., Inc.
2:14-cv-13321
E.D. Mich.Oct 29, 2018Background
- MY Imagination, a newly formed stationery company, purchased MZB’s stationery business under an Asset Purchase Agreement (APA) governed by New York law; the APA contemplated MZB assisting with license transfers and exiting the stationery business.
- MY Imagination sued MZB for breach of contract and torts after MZB allegedly failed to help transfer licenses and continued competing; district court originally granted summary judgment to MZB; Sixth Circuit affirmed in part and reversed in part, finding triable contract issues on two theories (commercially reasonable efforts re: licenses; solicitation of former customers).
- On remand, MY Imagination sought lost-profits damages, relying on expert Rodney Crawford, who calculated lost profits using MZB 2013 sales and MY Imagination’s internal projections; alternatively he offered a conservative Universal-license–based projection.
- MZB moved for summary judgment limiting MY Imagination to nominal damages, arguing New York law requires lost profits be proven with proximate causation and reasonable certainty and that the record lacks evidence that licensors would have transferred or that MY Imagination would have accepted licenses.
- The court found: (1) causation lacking because no third-party licensor testimony tying transfer to MZB’s efforts and some licensors (Universal, Nickelodeon) either refused or were declined; (2) reasonable-certainty lacking because MY Imagination was a new business, its own principals admitted lost profits would be speculative, and Crawford relied on speculative projections; (3) a contractual APA clause arguably limiting profit damages need not be resolved because lost profits fail on other grounds.
- Result: MZB’s motion granted—if the jury finds liability, MY Imagination is limited to nominal damages (no lost profits).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Entitlement to lost profits under New York law | MY Imagination: expert Crawford’s models show lost profits from license transfers (full-license and Universal-only scenarios). | MZB: lost profits are speculative; no evidence licensors would have transferred or that MY Imagination would have accepted; expert relies on conjecture. | Denied: lost profits unavailable; limited to nominal damages. |
| Causation for lost profits (proximate cause) | MY Imagination: MZB’s failure to use commercially reasonable efforts caused loss of licenses and business. | MZB: no proof that licensors would have consented even if MZB had acted; Universal and Nickelodeon outcomes contradict causation. | Denied: plaintiff failed to show but-for causation license-by-license. |
| Reasonable certainty of lost-profit calculation | MY Imagination: Crawford’s methodology (using 2013 sales and plaintiff projections) yields a reliable estimate. | MZB: Crawford depends on plaintiff’s speculative projections, ignores rejections and existing license control, lacks independent data. | Denied: calculations are speculative and not based on reliable, measurable factors. |
| Whether contractual limitation/bar excludes profit damages | MY Imagination: limitation applies only to indemnification contexts. | MZB: APA contains a clause excluding loss of profit damages. | Not resolved: court found restriction unnecessary to decide because lost profits fail on causation and certainty grounds; nominal damages only. |
Key Cases Cited
- Kenford Co. v. County of Erie, 67 N.Y.2d 257 (N.Y. 1986) (establishes three-part New York test for lost future profits: causation, reasonable certainty, and within parties’ contemplation)
- Schonfeld v. Hilliard, 218 F.3d 164 (2d Cir. 2000) (affirming summary judgment where lost profits projections were too speculative)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment burden-shifting principle)
- Kronos, Inc. v. AVX Corp., 612 N.E.2d 289 (N.Y. 1993) (nominal damages available for breach of contract under New York law)
- Kerzer v. Kingly Mfg., 156 F.3d 396 (2d Cir. 1998) (conclusory allegations insufficient to create factual dispute on damages)
- Washington v. Kellwood Co., [citation="714 F. App'x 35"] (2d Cir. 2017) (affirming nominal damages where plaintiff could not establish lost profits with reasonable certainty)