Opinion
In this certified appeal, the named defendant, Norwalk Hospital (hospital),
The following facts and procedural history are relevant to the resolution of this appeal. The plaintiff is a physician who specializes in the field of plastic and reconstructive surgery. In 1974, the plaintiff was granted provisional clinical privileges as a member of the hospital’s medical staff. In 1976, the plaintiff was granted full clinical privileges as an assistant attending staff physician. The plaintiffs privileges were renewed on an annual basis
In 1983, the last year for which the plaintiff was granted privileges, there were four plastic surgeons, including the plaintiff, who worked in conjunction with the hospital’s emergency department. Neither the plaintiff nor the other plastic surgeons were required to remain physically at the hospital while “on call.” Rather, they were summoned to the hospital as their services
In 1983, the plaintiff applied for the renewal of privileges for 1984. On the basis of the recommendations of the hospital’s department of surgery, section of plastic and reconstructive surgery and credentials committee, the medical staff of the hospital declined to renew the plaintiffs privileges for 1984. The hospital’s board of trustees subsequently ratified the decision of the medical staff.
In 1984, a year in which the plaintiff derived no income from services performed at the hospital owing to the nonrenewal of his privileges, the plaintiffs gross income was $225,815. In 1983, the plaintiff earned $43,687 in gross income from services performed at the hospital and $172,890 in gross income from all other services performed, including services performed at other hospitals, for a total gross income of $216,577.
In response to the nonrenewal of privileges, the plaintiff brought the present action against the hospital in December, 1983, seeking, inter alia, damages and injunctive relief. The case thereafter was referred to an attorney trial referee, who concluded in his report that an enforceable contract existed between the hospital and the plaintiff and, furthermore, that the hospital, through its employees and agents, had breached that contract by failing to follow the procedural requirements of its bylaws in declining to renew the plaintiffs privileges.
The plaintiff thereafter appealed to the Appellate Court. The Appellate Court affirmed the trial court’s denial of injunctive relief but reversed that part of the judgment awarding nominal damages. Gianetti v. Norwalk Hospital,
We thereafter granted the hospital’s petition for certification to appeal limited to two issues. First, “[d]id the
I
We begin with the hospital’s first claim, namely, that the Appellate Court improperly determined that the plaintiff was a lost volume seller as a matter of law. The hospital essentially makes two arguments in support of this claim. First, although the hospital does not challenge the Appellate Court’s legal conclusion that the lost volume seller theory may apply to contracts for personal services, such as the one between the hospital and the plaintiff, it does contend that the Appellate Court improperly concluded that the plaintiff was a lost volume seller. In particular, the hospital asserts that the Appellate Court improperly declined to credit the trial court’s factual finding that the plaintiff would have been unable to perform under the contract with the hospital while simultaneously performing under the contracts with the other hospitals after the hospital had declined to renew his privileges. Accordingly, the hospital requests that we reverse the judgment of the Appellate Court and reinstate the trial court’s award of nominal damages on the basis of that court’s factual
We conclude that the record does not support the hospital’s assertion that the plaintiff was not a lost volume seller on the basis of the trial court’s factual findings. We also conclude that the record does not support the Appellate Court’s determination that the facts were sufficient to conclude that the plaintiff was a lost volume seller as a matter of law. Accordingly, we reject the Appellate Court’s conclusion that the plaintiff was a lost volume seller as a matter of law and agree with the hospital’s alternative claim that the proper remedy in this instance is to remand the case for a new hearing to afford the trial court an opportunity to determine whether the plaintiff was a lost volume seller under the circumstances of this case.
We begin our analysis with a brief discussion of the lost volume seller theory. Comment (f) to § 347 of the Restatement (Second) of Contracts provides that, in cases in which a contract has been breached, if there is a factual finding that an “injured party could and would have entered into the subsequent contract, even if the [underlying] contract had not been broken, and could have had the benefit of both, he can be said to have ‘lost volume’ and the subsequent transaction is not a substitute for the broken contract.” 3 Restatement (Second), Contracts § 347, comment (f), p. 117 (1981). Thus, “[t]he lost volume seller theory allows [for the] recovery of lost profits despite resale of the services that were the subject of the terminated contract if the seller . . . can prove that he would have entered into both transactions but for the breach.” Green Tree Financial Corp. v. Alltel Information Services, Inc.,
To qualify as a lost volume seller, a party must prove that the subsequent contract is not a substitute for the opportunity that has been lost as a result of the breach. See 3 Restatement (Second), supra, § 350, comment (d), p. 129. “A ‘substitute’ is a contract which a volume seller who has suffered the loss of one contract through the breach of another party has entered into in place of the broken contract and which the volume seller would not have been able, with his existing personnel and overhead costs, to perform had there been no breach.” Katz Communications, Inc. v. Evening News Assn.,
Therefore, “a party claiming to be a lost volume seller must establish that it would have had the benefit of both the original contract and the subsequent contracts had there not been a breach. . . . This test has both objective and subjective components.” (Citations omitted.) Ullman-Briggs, Inc. v. Salton, Inc., 754 F. Sup. 1003, 1008 (S.D.N.Y. 1991). Specifically, “to recover lost
We now adopt
A
The hospital claims that the Appellate Court improperly declined to credit the trial court’s factual findings. As we previously have noted, the hospital does not challenge the Appellate Court’s conclusion that the lost volume seller theory may apply, under appropriate circumstances, to contracts for personal services. The hospital argues, however, that, notwithstanding the trial court’s erroneous rejection of the applicability of the lost volume seller theory to personal service contracts, the court’s factual finding regarding the plaintiffs lack of capacity to perform under the contract with the hospital while simultaneously assuming an increased workload at the other hospitals at which the plaintiff had privileges not only does not support the Appellate Court’s conclusion that the plaintiff was a lost volume seller, but demonstrates that the plaintiff was, in fact, not a lost volume seller. The plaintiff counters that, in
According to the hospital, two specific parts of the trial court’s memorandum of decision resolve the capacity issue. First, the hospital claims that the trial court’s statement, “[t]his [was] not a lost volume seller’ theory of damage [s] case [in which] the [plaintiff] had enough capacity to have fully performed the contract as well as his . . . other business,” is dispositive of the factual issue of whether the plaintiff was a lost volume seller. We disagree.
This statement, when read out of context, strongly supports the hospital’s position. When the statement is read in the context of the trial court’s entire memorandum of decision, however, it is clear that the statement does not dispose of the capacity issue.
The trial court stated in its memorandum of decision: “This is not a ‘lost volume seller’ theory of damage[s] case [in which] the [plaintiff] had enough capacity to have fully performed the contract as well as his . . . other business. See McMahon v. Bryant Electric Co.,
We first note that the trial court made this statement on the basis of its inteipretation of our decision in McMahon v. Bryant Electric Co., supra,
The hospital also contends that the portion of the trial court’s memorandum of decision in which the court examines the gross income models offered by the plaintiff in support of his claim of damages also contains dispositive factual findings regarding the plaintiffs lack of capacity to perform under the contract with the hospital while simultaneously assuming an increased workload at the other hospitals. Specifically, the hospital refers to that portion of the trial court’s memorandum of decision in which the court, after having reviewed the plaintiffs gross income models, states that it “must . . . test the reasonableness of the conclusions raised in [certain of the gross income models]. . . . [T]hose [models] merely took a particular percentage based on past history of . . . income [earned at the hospital] as it compared to gross income and came up with the projected figure for ‘lost’ . . . income. It did not factor
According to the hospital, “[t]he Appellate Court failed to give [the foregoing] finding[s] as to ‘capacity’ the proper weight and credit which [they] deserved in support of the trial court’s [decision].” The hospital argues, therefore, that the trial court’s findings regarding the plaintiffs capacity to work support its contention that the plaintiff was not a lost volume seller. We disagree.
We note that, in this portion of the trial court’s memorandum of decision, the trial court alludes to the plaintiffs capacity to work after evaluating certain income models through which the plaintiffs expert analyzes the plaintiffs projected gross income over a period of fifteen years commencing on the date of the breach. The assumption underlying these models is that the plaintiff had an unlimited capacity to work during this time period. As we previously have noted, the trial court found that this proposition was not reasonable or credible. In our view, because the models purport to gauge actual damages for fifteen years, and the testimony of the plaintiffs expert supported the plaintiffs claim concerning projected damages for an additional ten
Thus, although the trial court’s rejection of the plaintiffs contention that he possessed the capacity to perform under the contract with the hospital while assuming an increased workload at the other hospitals may have been valid with regard to the fifteen year period following the breach, that rejection was not necessarily valid with respect to shorter time periods. Accordingly, we reject the hospital’s contention that the trial court’s factual finding regarding the plaintiffs capacity to work compelled the Appellate Court to conclude that the plaintiff was not a lost volume seller.
There is an additional reason why we reject the hospital’s claim that the trial court’s factual finding regarding the plaintiffs capacity to work provided a sufficient basis to conclude that the plaintiff was not a lost volume seller. As the plaintiff notes, the trial court only was concerned with whether the plaintiff had mitigated his damages and, consequently, focused its analysis on the plaintiffs gross income rather than the number of medi
B
Having determined that the trial court’s factual findings did not establish that the plaintiff was not a lost
The deteimination of whether a party qualifies as a lost volume seller involves questions “of fact to be resolved according to the circumstances of each case.” 3 Restatement (Second), supra, § 347, comment (f), p. 117. “Ordinarily it is not the function of this court or the Appellate Court to make factual findings, but rather to decide whether the decision of the trial court was clearly erroneous in light of the evidence ... in the whole record. . . . Conclusions of fact may be drawn on appeal only where the subordinate facts found [by the trial court] make such a conclusion inevitable as a matter of law ... or where the undisputed facts or uncontroverted evidence and testimony in the record make the factual conclusion so obvious as to be inherent in the trial court’s decision.” (Citations omitted; internal quotation marks omitted.) State v. Reagan,
We are mindful of the general rule that, in drawing factual conclusions, “the trial court has discretion to reject even uncontested evidence, on the theory that the fact finder is uniquely well situated to make determi
We begin with the capacity issue. The issue of whether the nonbreaching party possessed the requisite capacity to perform under multiple contracts simultaneously is one of fact for the trier; e.g., Rubin v. Schwartz, 191 App. Div. 2d 171, 172,
In addition, the Appellate Court concluded that the plaintiff actually intended to make “additional sales of his services in the future, whether or not the hospital breached its contract with him.” Gianetti v. Norwalk Hospital, supra,
We conclude that, on the present state of the record, the Appellate Court improperly determined, as a matter of law, that the plaintiff was a lost volume seller. Therefore, we agree with the hospital’s alternative claim that this case should be remanded for a new hearing to afford the trial court an opportunity to determine whether the plaintiff qualifies as lost volume seller under the circumstances of this case.
We turn, therefore, to the next certified issue, namely, whether the plaintiff was required to mitigate damages. We note that resolution of the issue of whether the plaintiff was a lost volume seller directly controls the resolution of the issue of whether the plaintiff had a duty to mitigate damages. Thus, the trial court’s determination on remand as to whether the plaintiff was a lost volume seller will resolve the issue of whether the plaintiff had a duty to mitigate.
We recognize that “[t]he obligation to mitigate damages turns upon the particular facts in the individual case, and applies when the . . . contractor is freed from his or her obligation to perform services called for in the contract, and as a consequence may turn his or her time and efforts, which otherwise would have been expended in performance of the contract, to other
Indeed, “[t]he lost volume seller theoiy is a response to a breaching [party’s] right to have a non-breaching seller [of services] mitigate damages. In other words, [the] seller can avoid the effect of its failure to mitigate by proving that it was a lost volume seller.” Storage Technology Corp. v. Trust Co. of New Jersey,
Ill
We turn, finally, to the plaintiffs cross appeal. On cross appeal, the plaintiff claims that the Appellate Court improperly concluded that he was entitled to prove damages for only one year, namely, 1984. The plaintiff claims that, although the Appellate Court properly concluded that he was a lost volume seller, that court improperly made a factual determination regarding the length of the contract between the plaintiff and the hospital, thereby limiting the plaintiffs recoverable profits to one year. The plaintiff cites to the hospital’s bylaws, which previously had been determined to form an integral part of the contract between the plaintiff and the hospital; see Gianetti v. Norwalk Hospital,
On the basis of our review of the bylaws, we cannot conclude, as the Appellate Court did, that “[t]he term of each of [the plaintiffs] contracts was for one year and any breach . . . could, as a maximum, only involve one year.” Id., 230. As we previously noted, the bylaws require written documentation of the reasons supporting the recommendation for the nonrenewal of privileges and, more importantly, provide the physician with an opportunity to appeal such recommendation. In other words, the plaintiff “had a right to reappointment until the governing authorities determined after a hearing conforming to the minimum requirements of procedural due process that he did not meet the reasonable standards of the hospital.” (Internal quotation marks omitted.) Hackethal v. Loma Linda Community Hospital Corp.,
Our review of the bylaws does not completely resolve the present issue, however. As this court already has concluded in an earlier decision in this matter, “the [hospital’s] . . . bylaws, by themselves, do not constitute an enforceable contract between th[e] hospital and the plaintiff’; Gianetti v. Norwalk Hospital, supra,
Accordingly, upon remand, in order to determine the appropriate time period for calculating the plaintiffs lost profits, the trial court must also determine how long the parties reasonably could have expected the contractual relationship to have continued. Of course, the party proving lost profits must comply with our well settled law that “such damages must be proved with reasonable certainty.” Beverly Hills Concepts, Inc. v. Schatz & Schatz, Ribicoff & Kotkin,
The judgment of the Appellate Court is affirmed insofar as it upholds the trial court’s denial of injunctive relief. The judgment of the Appellate Court is otherwise reversed and the case is remanded to that court with direction to remand the case to the trial court for further proceedings according to law.
In this opinion the other justices concurred.
Notes
The plaintiff, Charles D. Gianetti, also named as defendants William F. Hughes and Horace A. Laffaye, the chairmen of the department of surgery of the hospital, E. J. Tracey, the chief of staff of the hospital, Joel Singer, the chief of the hospital’s section of plastic and reconstructive surgery, and Norman A. Brady, the hospital president. The court, Berdon, J., subsequently granted the plaintiffs motion to add, as additional defendants, physicians
Privileges at the hospital are renewed on an annual basis, effective as of January 1. Physicians who have been granted privileges by the hospital are required to reapply annually for the renewal of privileges.
“The [hospital] objected to the acceptance of the [referee’s] report, whereupon the parties agreed to reserve [certain] questions of law for appellate review, which [this court] decided in Gianetti v. Norwalk Hospital,
“In Gianetti, [this court] held [inter alia] that the bylaws of the hospital did not create a contract between the plaintiff and the . . . hospital but
The Appellate Court rejected the trial court’s conclusion that our decision in McMahon v. Bryant Electric Co.,
In McMahon, we held that the trial court properly declined to instruct the jury on the doctrine of mitigation of damages in a case involving an alleged breach of contract for the sale and delivery of merchandise. McMahon v. Bryant Electric Co., supra,
It is clear, therefore, that, in McMahon, we only were concerned with whether mitigation principles applied under the facts rather than with limiting the application of what is now known as the lost volume seller theory. Accordingly, we agree with the Appellate Court that McMahon cannot be interpreted to prohibit the application of the lost volume seller theory to cases involving a breach of contract for personal services.
The Appellate Corot adopted a three-prong test for determining whether a seller qualifies as a lost volume seller. The seller must establish: (1) the capacity to make an additional sale; (2) that it would have been profitable to make an additional sale; and (3) that it probably would have made an additional sale in the absence of the buyer’s breach. Gianetti v. Norwalk
Subsection (2) of § 2-708 of the Uniform Commercial Code embodies the lost volume seller theory in the context of contracts for the sale of goods. Section 2-708 (2) provides: “If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this Article (Section 2-710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.” U.C.C. § 2-708 (2), IB U.L.A. 265 (1989).
Section 2-708 (2) is codified with technical variation only at General Statutes § 42a-2-708 (2).
The Appellate Court adopted a test identical in all material respects in the present case. See Gianetti v. Norwalk Hospital, supra,
The plaintiff testified that his increase in gross income in the years following the hospital’s breach was due in large part to the increase in fees earned in connection with the performance of each surgical or medical procedure.
We note, however, that, in part I A of this opinion, we rejected the hospital’s contention that the trial court’s finding that the plaintiffs testimony regarding his capacity to work over a twenty-five year period lacked credibility compelled the conclusion that the plaintiff did not qualify as a lost volume seller.
We have not addressed the remaining prong of the lost volume seller test, namely, whether it would have been profitable for the plaintiff to have maintained his contract with the hospital while increasing his workload elsewhere. In the context of this case—one involving a contract for personal services—the relevant inquiry under the profitability prong is whether the plaintiff could have performed under the contract with the hospital and assumed the increased workload at the other hospitals the year after the breach without having incurred additional costs that would have eliminated the profitability of such an increased workload. See Katz Communications, Inc. v. Evening News Assn., supra,
“The general rule in breach of contract cases is that the award of damages is designed to place the injured party, so far as can be done by money, in the same position as that which he would have been in had the contract been performed.” (Internal quotation marks omitted.) Torosyan v. Boehringer Ingelheim Pharmaceuticals, Inc., supra,
Article V, § S, of the Norwalk Hospital Medical Staff Bylaws (1981) provides in relevant part:
“a. At least forty (40) days prior to each annual meeting of the medical staff, the credentials committee shall complete its review of all pertinent information available on each medical staff member for the purpose of determining its recommendations for reappointments to and promotions in the medical staff and for the delineation of clinical privileges for the ensuing calendar year. . . .
“b. Each recommendation concerning the reappointment or promotion of a medical staff member and the clinical privileges to be granted upon reappointment or promotion shall be based upon such member’s professional competence and clinical judgment in the treatment of patients, his ethics and conduct, his attendance at medical staff meetings, his participation in departmental and staff affairs, documentation of continuing medical education, and the performance of committee assignments. At least forty (40) days prior to each annual meeting of the medical staff, the credentials committee shall make written recommendations to the departments, the executive committee and the medical staff concerning the reappointment or promotion of each member of the medical staff, including the specific clinical privileges to be granted to each reappointee for the ensuing calendar year.
“c. At least fifteen (15) days prior to the final scheduled board of trustees meeting in the medical staff year, the medical staff shall make written recommendations to the board of trustees . . . concerning the reappointment or promotions of each member of the medical staff, including the specific privileges to be granted to each reappointee for the ensuing calendar year. Where non-reappointment or a change in clinical privileges is recommended, the reasons for such recommendation shall be stated. Thereafter the procedure provided in Section 2, of this Article V relating to recommendations on applicants for initial appointment shall be followed.”
Article V, § 2, of the Norwalk Hospital Medical Staff Bylaws (1981) provides in relevant part:
“e. When the recommendation of the medical staff is adverse to the practitioner, either in respect to appointment or clinical privileges, the chief executive officer shall promptly so notify the practitioner by certified mail, return receipt requested. No such adverse recommendation shall be forwarded to the board of trustees until after the practitioner has exercised or has been deemed to have waived his rights to a hearing as provided in Article VIII of these bylaws.
“f. If, after the medical staff has considered the report and recommendations of the ad hoc hearing committee as appointed in Article VIII, Section 4 of these bylaws and . . . such recommendation continues to be adverse, the chief executive officer following notification in writing from the chief of staff, shall promptly so notify the practitioner by certified mail, return receipt requested. The chief executive officer shall also forward such recommendation and documentation to the board of trustees, but the board of*568 trastees shall not take any action thereon until after the practitioner has exercised or has been deemed to have waived his right to an appellate review as provided in Article VIII of these bylaws.
“h. At its next regular meeting after all of the practitioner’s rights under Article VIII have been exhausted or waived, the board of trustees shall act in the matter. ...”