2018 CO 56
Colo.2018Background
- U.S. Welding (Welding) and Advanced Circuits (Advanced) entered a requirements contract: Advanced agreed to buy all its liquid nitrogen from Welding; initial two-year term began June 16, 2011 and auto‑renewed for one year on June 16, 2013.
- Advanced sought bulk deliveries (cheaper) in late 2013; negotiations with Welding failed. Advanced solicited bids and contracted with Buckeye for bulk deliveries, then informed Welding it would terminate at the contract end (June 16, 2014) but also sought a buyout amount to be excused earlier (after Feb 28, 2014).
- Advanced began receiving bulk deliveries from Buckeye on Feb 26, 2014; the district court found Advanced breached the contract by accepting Buckeye deliveries before contract expiration (equivalent to 161 dewars).
- Welding refused to provide a pre‑expiration lost‑profits projection or to convert to bulk deliveries; district court held Welding failed to mitigate and awarded no damages. The court of appeals affirmed on mitigation.
- The Colorado Supreme Court granted certiorari and reversed the courts below, holding a nonbreaching party cannot be required to mitigate by surrendering contractual rights (i.e., accept an accord/buyout in lieu of contract remedies) and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument (Welding) | Defendant's Argument (Advanced) | Held |
|---|---|---|---|
| Whether Welding was required to provide a pre‑expiration projection/buyout as mitigation | Welding argued it was not required to give up contract rights or accept a buyout; its damages should be measured by actual sales Advanced diverted during the term | Advanced argued the buyout offer was a reasonable mitigation option and Welding’s refusal was a failure to mitigate, barring recovery | Court held a nonbreaching party cannot be compelled to mitigate by surrendering contract rights; requiring a buyout would force relinquishment and is not required |
| Proper measure of damages (actual lost sales vs. projected expected purchases) | Welding: damages measured by actual amount Advanced purchased from another seller during contract term (lost‑volume seller expectation) | Advanced: damages should be based on hypothetical expectations of what would have been purchased under dewar deliveries | Court held damages should be measured by the injured party’s actual loss (value of the other party’s actual performance lost), not a speculative projection of hypothetical purchases |
| Whether failure to mitigate is an affirmative defense and its burden | Welding: argued mitigation defense must be pled and proved, and steps requiring relinquishment of rights cannot be required | Advanced: argued Welding’s refusal to settle/convert justified denial of damages under mitigation principles | Court reiterated failure to mitigate is an affirmative defense that must be pled and proved; relinquishment of contractual rights cannot form the basis for mitigation liability |
| Whether rejecting a settlement/accord can bar all recovery or affect prevailing‑party fees | Welding: rejecting buyout should not bar recovery of damages actually suffered; fee issues moot if recovery permitted | Advanced: relied on mitigation and settlement rejection as justification to deny damages and fees | Court held denying all recovery for refusing a buyout would be improper; rejecting a settlement may have other statutory consequences for fees/costs but cannot eliminate recovery for proven damages caused by breach |
Key Cases Cited
- Fair v. Red Lion Inn, 943 P.2d 431 (Colo. 1997) (duty to mitigate does not require abandoning contractual rights or accepting disadvantageous renegotiation)
- Publicker Chem. Corp. v. Belcher Oil Co., 792 F.2d 482 (5th Cir. 1986) (cannot mitigate by accepting arrangement conditioned on surrender of rights under repudiated contract)
- Teradyne, Inc. v. Teledyne Indus., Inc., 676 F.2d 865 (1st Cir. 1982) (rejecting mitigation that requires surrender of breach claims)
- Stanspec Corp. v. Jelco, Inc., 464 F.2d 1184 (10th Cir. 1972) (no duty to accept modified contract that conditions abandonment of right of action)
- Stone v. Satriana, 41 P.3d 705 (Colo. 2002) (failure to settle cannot amount to failure to mitigate when settlement would forfeit legal rights)