OPINION
In an earlier opinion issued in this case, the court resolved in plaintiffs favor the question of whether Western Union Telegraph Company (‘Western Union”), New Valley’s principal subsidiary, was entitled to recover contract damages as a result of the National Aeronautics and Space Administration’s (“NASA”) anticipatory repudiation of a contract promising NASA’s “best efforts” to launch Western Union’s communications satellite, the Westar VI-S, into earth orbit. New Valley Corp. v. United States,
I.
During the period relevant to this action (1984-1991), Western Union was a corporation in financial distress — a condition brought on by an ever — increasing interest burden arising out of indebtedness undertaken to finance capital expenditures that ultimately failed to produce their expected revenue flow. In an effort to arrest the decline in the company’s fortunes, Western Union began to sell off assets, including those comprising the company’s communications satellite division, the Westar Division. Included in the Westar
Western Union eventually went into bankruptcy and following its reemergenee from that process brought suit in this court seeking, inter alia, damages for NASA’s breach of contract. The case went to trial on the issue raised by defendant, namely, that because of Western Union’s precarious financial condition, the company would not have been able to perform the contract on the date that pеrformance was scheduled to occur and therefore had no basis for recovery of damages. In support of that argument, defendant relied on the Restatement (Second) of Contracts § 254(1) (1981) which declares that “[a] party’s duty to pay damages for total breach by repudiation is discharged if it appears after the breach that there would have been a total failure by the injured party to perform his return promise.”
We rejected defendant’s argument, concluding that section 254 is simply a codification of the general rule requiring a party seeking damages for breach of contract to demonstrate that the breach was the proximate cause of the injury claimed. New Valley,
II.
A.
Pursuant to the terms of the parties’ contract, any award for a breach of contract must be restricted to direct damages and may not include lost profits or other consequential damages. Specifically, under the heading “Limitation of United States Government and Customer Liability,” the launch services contract provided:
[T]he United States Government’s liability to the Customer ... whether or not arising as a result of an alleged breach of this Agreement, shall be limited to direct damages only and shall not include any loss of revenue, profits or other indirect or consequential damages.
Defendant maintains that the damages contemplated in the court’s earlier opinion constitute consequential damages and lost profits and therefore, based on the language quoted above, are not recoverable under the parties’ contract.
In support of this argument, defendant asserts that Western Union did not sell the Westar Division assets because of the breach but rather because it was confronting a liquidity crisis that left it withоut sufficient funds to satisfy its day-to-day operations and also meet its debt service obligations. Defendant thus maintains that plaintiffs damages cannot be said to flow directly from the breach but are instead the result of a collateral undertaking and therefore constitute consequential damages. More particularly,
We cannot accept this argument. Direct damages, or what are more often referred to as “general damages,” 24 Richard A. Lord, Williston on Contracts § 64:1, at 11 (4th ed.2002), are damages measured by the loss of the value of the performance promised by the breaching party. In other words, such damages are “based on the value of the very thing to which the plaintiff was entitled ..., they encompass paper losses or unrealized losses, and ... they are determined as of a particular date, usually by market measures.” 3 Dan B. Dobbs, Law of Remedies § 2.2(3), at 40-41 (2d ed.1993). Consequential damages (also called “special damages”), on the other hand, are those damages that “result as a secondary consequence of the defendant’s non-performance,” id. § 12:4(1), at 62, i.e., they “arise from the interposition of an additional cause, without which the аct done would have produced no harmful result,” United States v. Chicago B. & Q.R. Co.,
Consistent with these definitions, we believe that the damages identified in our earlier decision are direct damages rather than consequential damages. Specifically, we described those damages as the additional amount that Hughes Communications “would have paid for the Westar Division assets had they included a NASA launch contract.” New Valley,
Defendant’s assertion that the sale of the Westar Division assets was a collateral undertaking and hence rendered any loss identified with that sale a consequential damage is not correct. The sale of the Westar Division assets was not the cause of the loss claimed. Rather, the cause of that loss was defendant’s breach — an event that preceded the sale of the assets by many months. As we noted in our earlier opinion, the sаle was simply the focal point of the loss, i.e., the occasion when the market value of the launch contract could have been realized by Western Union had there in fact been no breach. Id.
Nor is defendant correct in describing as lost profits the gain that Western Union could have expected to realize from the sale of the launch contract. That gain- — -the difference between the contract price and the market price (or more specifically, the price Hughes Communications would have bеen willing to pay) — is synonymous with the very value of the performance for which Western Union had bargained. Such a value, by definition, constitutes general damages rather than lost profits. Accordingly, defendant’s motion for summary judgment must fail.
B.
Where defendant’s motion miscategorizes the damages identified in the court’s earlier decision, plaintiffs motion miscalculates them. As an initial matter, plaintiff does not limit its damages calculation to the sale value of the launch contract, as our opinion intended, but instead includes damages for the entirе loss associated with the sale of the Westar Division assets, including, in particu
The diminution in value of the Westar Division assets that we discussed in our earlier opinion was a reference to the launch contract only and not to any related assets whose market value might be dependent upon the availability of a launch contract, such as the Westar VI-S satellite itself. Clearly, a claim for the diminution in the value of the satellite (here, the demand for $11.7 million) is a claim involving a secondary injury traceаble to the breach and as such is a claim for consequential damages not recoverable under the parties’ contract.
Plaintiffs second point — that we accept the parties’ stipulation regarding the market value of a substitute launch contract as the basis for an entry of judgment in its favor — similarly misconstrues the court’s view of this ease. As framed in our earlier opinion, the upper boundary for the calculation of plaintiffs damages is not the market price for a substitute launch contract (the $31.6 million now claimed) but rather the price Western Union reasonably could have expected to receive from the sale of its launch contract. As we put it then: “The question we must address is how much more Hughes Communications would have paid for the Westar Division assets had they included a NASA lаunch contract.” Id.
Implicit in this position is the court’s view that market damages are not appropriate where actual damages are ascertainable. Had plaintiff entered into a substitute launch contract, for example, its damages would have been measured by the difference in price between the breached contract and the substitute contract. Hughes Communications Galaxy, Inc. v. United States,
CONCLUSION
For the reasons set forth above and consistent with the court’s earlier decision, the parties’ cross-motions for summary judgment are denied. The damages issue shall рroceed to trial. Accordingly, on or before September 29, 2006, the parties shall file a status report proposing a schedule for pretrial and trial proceedings on this issue.
Notes
. Hughes Communications acquired all of the Westar Division assets, which included three orbiting sаtellites as well as the Westar VI-S, for approximately $40 million. The portion of the sale price allocated to the Westar VI-S was $20.5 million.
. Dobb’s Law of Remedies provides a useful accounting metaphor that captures the difference between general damages and cоnsequential damages: “General damage awards aim at putting the plaintiff's balance sheet in the position it would have been in upon performance," id. § 12.2(3), at 40, whereas "the consequential damages measure emphasizes income or loss, or cash flow, including losses that may result far into the future," id. § 12.2(3), at 42.