301 P.3d 387
N.M.2013Background
- CNMEC shut off Sunnyland’s electricity for nonpayment the day before a fire at Sunnyland’s hydroponic tomato facility.
- Sunnyland’s water pumps共有 were powered by electricity, so loss of power translated into no water for firefighting.
- Sunnyland alleged both contract and tort damages from CNMEC’s alleged wrongful disconnection and ensuing fire impact.
- Trial court awarded over $21 million in damages (contract and tort) with tort damages reduced 80% for Sunnyland’s comparative fault; punitive damages of $100,000.
- Court of Appeals reversed several contract-related rulings and upheld other aspects, including pre- and post-judgment interest, while also addressing lost profits and offsets.
- Supreme Court granted certiorari to reexamine consequential contract damages and related issues, ultimately overruling prior tacit-agreement standard and clarifying the Hadley/Restatement approach to foreseeability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| What standard governs consequential contract damages in NM | Sunnyland urged the tacit-agreement rule. | CNMEC urged a conventional foreseeability standard. | Hadley/Restatement §351 standard applied; tacit-agreement overruled. |
| Whether special circumstances warranted consequential damages | Sunnyland contended special circumstances existed. | CNMEC argued no such special circumstances were proven. | No special circumstances found; no consequential damages upheld. |
| Lost profits supported by substantial evidence | Lost profits were proven with reasonable certainty. | Evidence insufficient or speculative. | Lost profits damages reversed/overruled for contract but reinstated for tort via substantial-evidence standard. |
| Punitive damages supported by evidence of corporate conduct | CNMEC conduct warranted punitive damages. | Record failed to show three factors for corporate punitive liability. | Punitive damages reversed due to lack of substantial evidence for Chavarria factor. |
| Offset due to insurer subrogation violates public policy | Setoff against subrogation lien should be barred. | Offset allowed under equity. | Offset not allowed; collateral-source rule and public policy require reversal. |
Key Cases Cited
- Camino Real Mobile Home Park P'ship v. Wolfe, 119 N.M. 436, 891 P.2d 1190 (1995) (consequential damages test; foreseeability emphasis in NM)
- Hadley v. Baxendale, 156 Eng. Rep. 145 ((Eng. 1854)) (foreseeability/Hadley rule as foundation for consequential damages)
- Kettering Mercantile Co. v. Sheppard, 19 N.M. 330, 142 P. 1128 (1914) (traditional new-business lost profits rule (overruled))
- Deaton, Inc. v. Aeroglide Corp., 99 N.M. 253, 657 P.2d 109 (1982) (recognizes lost profits for new businesses with reasonable certainty)
- Langley v. Pacific Gas & Electric Co., 262 P.2d 846 (Cal. 1953) (fact-specific special circumstances for foreseeability)
- Globe Refining Co. v. Landa Cotton Oil Co., 190 U.S. 540 (1903) ( tacit agreement concept cited in NM history)