O'Toole v. Northrop Grumman Corp.

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
SEP 9 2004
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
JOSEPH A. O’TOOLE,
Plaintiff-Appellant,
v. No. 03-2158
(D.C. No. CIV-99-1426 LH/RLP)
NORTHROP GRUMMAN CORP., (D. N.M.)
Defendant-Appellee.
ORDER AND JUDGMENT *
Before BARRETT , McKAY , and PORFILIO , Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument.
Plaintiff/Appellant Joseph O’Toole appeals from a final judgment in favor
of his former employer, defendant Northrop Grumman Corporation (Grumman),
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
entered after a bench trial, on his claims for consequential and punitive damages
for breach of a contract to relocate Mr. O’Toole from San Diego to Los Alamos,
New Mexico. We conclude that the district court did not err in declining to hold
Grumman liable for the capital loss on the sale of Mr. O’Toole’s San Diego home
and in denying an award of punitive damages. But we conclude that the district
court erred in holding that a pre-trial settlement on certain of Mr. O’Toole’s
undisputed contract claims precluded the recovery of consequential damages
associated with Grumman’s earlier refusal to pay those claims. We also conclude
that the court erred in holding that Mr. O’Toole failed to identify a provision of
the relocation contract that Grumman breached and in refusing to award
consequential damages on that basis. Our jurisdiction over this appeal arises
under 28 U.S.C. § 1291. We affirm in part and reverse in part.
I. Relevant facts and proceedings
As we noted in our opinion on a previous appeal in this case, the following
facts are undisputed:
[I]n May 1996, Grumman agreed to pay for certain relocation
expenses to Los Alamos, including moving expenses, expenses
incurred in selling the San Diego home, duplicate housing costs, and
expenses incurred in purchasing a home in Los Alamos. Mr. O’Toole
claimed entitlement to additional costs under his original relocation
agreement. When Grumman failed to timely pay certain of the
undisputed costs, Mr. O’Toole withdrew money from his employee
retirement plan to finance them, incurring taxes and penalties for
doing so.
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In May 1998, Grumman acknowledged its failure to pay and/or
properly handle certain amounts it agreed it owed Mr. O’Toole,
including duplicate housing costs and closing costs for the San Diego
house sale. Mr. O’Toole testified that Grumman refused to pay the
undisputed amounts and the amounts it agreed to pay for purchase of
a new home unless and until Mr. O’Toole withdrew his claims for
disputed relocation costs. He testified that, as a result of Grumman’s
refusal to comply with its agreement, he was again forced to borrow
money from his retirement account in October 1998 to buy a home in
Los Alamos in order to avoid paying capital gains tax on the sale of
his San Diego house. The record shows that, as of October 12, 2000,
Grumman still had not paid $26,230 of the undisputed expenses that
Grumman stipulated Mr. O’Toole was entitled to receive.
In his suit for breach of contract, Mr. O’Toole claimed entitlement to
the following: direct damages for these undisputed amounts still not
received under the relocation agreements; direct damages arising
from Grumman allegedly forcing Mr. O’Toole to sell his San Diego
home at less than market value, refusing to perform under the
disputed buy-out option, refusing to pay certain “gross up” benefits,
and refusing to pay disputed relocation costs; consequential damages
for expenses incurred as a result of Grumman’s failure to timely pay
or reimburse the undisputed relocation costs; and punitive damages
for his claim that Grumman intentionally, and with wanton disregard,
breached its promise to reimburse his relocation expenses.
Mr. O’Toole included as consequential damages arising from
Grumman’s refusal to reimburse and/or pay for relocation and new-
home purchase costs the costs incurred in moving from one rental
house to another while awaiting reimbursement or payment of
relocation and purchase costs; reimbursement for vacation days taken
to enable Mr. O’Toole to move from one rental to another and then to
a purchased home; reimbursement for interest and tax penalties on
the withdrawals from Mr. O’Toole’s retirement plan on monies used
to pay relocation and purchase expenses; reimbursement for
additional income taxes paid as a result of having no mortgage
interest or real estate tax deduction during the time period
Mr. O’Toole could not purchase another home for lack of funds; and
reimbursement for mortgage principle payments not made because
that money went toward rent.
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O’Toole v. Northrop Grumman , 305 F.3d 1222, 1224 (10th Cir. 2002) (citations
to record and footnote omitted). In December 2000 the district court granted
summary judgment on the issue of consequential damages. We reversed. We
held that New York law controlled resolution of the contract issues. Id. at 1225.
We further held that the court had erred
by limiting damages “within the contemplation of the parties” as a
matter of law to those consequential damages expressly discussed at
the time of contracting. It was reasonably foreseeable here, for
example, that Grumman’s failure to promptly pay or reimburse
relocation expenses would result in Mr. O’Toole having to borrow
money to pay for those expenses from some source, resulting in extra
costs to him. See Acquista v. N.Y. Life Ins. Co. , 285 A.D.2d 73, 730
N.Y.S.2d 272, 276 (N.Y. App. Div. 2001) (holding that money
damages equal to what breaching insurer should have paid in first
place may not be sufficient to place plaintiff in economic position he
would have been in had contract been performed because assumption
that plaintiff has access to alternative source of funds to pay that
which insurer wrongfully refused to pay is “frequently an inaccurate
assumption”); Airy Dev. Assocs. v. Sav. Bank of Utica , 241 A.D.2d
720, 660 N.Y.S.2d 453, 455 (N.Y. App. Div. 1997) (holding that,
after lender refused to honor its loan commitment, borrower may
have been entitled to consequential damages of additional interest
charges until borrower obtained subsequent mortgage from different
lender).
Id. at 1226-27 (footnote omitted). Our opinion was filed in September 2002. But
the parties partially settled the case in June 2001. This settlement covered
payment of the uncontested contract amounts that Grumman had previously
agreed were properly owed to O’Toole, including duplicate housing costs,
unreimbursed moving expenses and closing costs on the San Diego house, Los
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Alamos house purchase expenses, expenses for moving from the Los Alamos
rental property to the purchased home, and proper gross-up expenses, plus pre-
judgment interest from 1996 to 2001. Aplt. App. Vol. II at 645. Thus, the parties
went to trial only on the issues of the contested direct and consequential damages
issues and on the claim for punitive damages. After hearing the evidence, the
district court denied all requested relief.
II. Analysis
Mr. O’Toole raises three issues on appeal from the district court’s June
2003 final order. As the issues are all questions of law, our review is de novo .
Dang v. UNUM Life Ins. Co. of Am. , 175 F.3d 1186, 1189 (10th Cir. 1999). In
conducting our review, we accept the district court’s purely factual findings
unless they are clearly erroneous. Manning v. United States , 146 F.3d 808, 812
(10th Cir. 1998).
A. Capital loss on the San Diego residence. Mr. O’Toole argues that the
district court erred in not awarding capital-loss damages of $12,000 arising from
the sale of his San Diego home because Grumman used a “flawed process for
setting the sale price.” Aplt. Opening Br. at 12. Although Mr. O’Toole did not
expressly raise the point, as a preliminary matter, we are concerned that the
district court did not make any findings or conclusions regarding this claim. See
Fed. R. Civ. P. 52(a) (requiring court to find facts and make conclusions after
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bench trial); cf. Prairie Band of Potawatomi Indians v. Pierce , 253 F.3d 1234,
1245 (10th Cir. 2001) (noting that, “without adequate findings of fact and
conclusions of law, appellate review is in general not possible”). We assume that
the court denied the claim as part of its general denial of all “[o]ther [d]amage
[c]laims.” Aplt. App. Vol. IV at 939. We may “consider a district court’s failure
to make adequate findings of fact as nonreversible error if [we] can ascertain
from the record that one party or the other was clearly entitled to judgment in its
favor.” Prairie Band of Potawatomi Indians , 253 F.3d at 1246.
Mr. O’Toole alleges that Grumman forced him to list and sell the property
at an average-broker-price-opinion value instead of at 5% above the property’s
appraised market value, which was contrary to the terms of the relocation
contract. As a result of the property being “price[d] so low,”argues Mr. O’Toole,
he “left at least $12,000 of equity on the table.” Aplt. Opening Br. at 14. The
record, however, does not support his claim.
First, the relocation contract does not provide for listing the house at 5%
above appraised market value; it provides that the house must be listed for an
amount “not to exceed 5% above the appraised market value,” but only if the
employee wished to be paid continuing duplicate housing costs. Aplt. App. Vol.
III at 717. Second, the appraised value of the house was $220,000. See id. at
824. Five percent above the appraised value was $231,000, but Mr. O’Toole
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listed and sold the house for $243,500, which was more than that amount. Third,
Mr. O’Toole, and not Grumman, ultimately set the sales price; Mr. O’Toole’s
record cites do not support his claim that a Grumman supervisor “told him to” list
it at $243,500. And, finally, the relocation contract did not provide for
reimbursement for capital losses suffered from a home’s short sale, and
Mr. O’Toole could have chosen to continue to list his house at a higher price
instead of opting to receive continuing duplicate housing costs. Thus, Grumman
was entitled to judgment on this claim, and we find no error in the court’s failure
to award damages associated with it.
B. Consequential damages. We reach a different conclusion on the issue
of consequential damages, however. The district court denied consequential
damages arising from Grumman’s admitted failure to pay certain duplicate
housing costs because the parties had settled Mr. O’Toole’s claim for direct
damages related to duplicate housing costs in 2001. Aplt. App. Vol. IV at
938-39. But the parties specifically excepted from that settlement agreement the
disputed direct-damage claims and Mr. O’Toole’s claims for consequential and
punitive damages. Id. Vol. II at 645-46. Thus, Mr. O’Toole was not precluded by
settlement from continuing to pursue those claims, and Grumman benefitted by
stopping further accrual of consequential damages on undisputed claims after it
paid the undisputed amounts.
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The district court also generally denied consequential damages on its
conclusion that Mr. O’Toole “has failed to identify a provision of the [relocation]
contract that the defendant breached.” Id. Vol. IV at 939. But, as we noted in our
prior opinion, it is undisputed that Grumman admitted that it had refused to pay
certain relocation costs it agreed were covered under the contract, O’Toole , 305
F.3d at 1224, and it was “reasonably foreseeable that Grumman’s failure to
promptly pay or reimburse relocation expenses would result in Mr. O’Toole
having to borrow money to pay for those expenses from some source, resulting in
extra costs to him,” id. at 1226-27. These holdings are law of the case. See
Rohrbaugh v. Celotex Corp. , 53 F.3d 1181, 1183 (10th Cir. 1995). We therefore
remand for entry of an award of consequential damages that includes at least an
amount reimbursing the penalties paid and interest lost on the funds Mr. O’Toole
was forced to withdraw from his retirement account to pay for undisputed
relocation costs. And on remand, the court should consider all other claims for
consequential damages and make specific findings as to each claim. 1
1
For example, the district court has determined that Mr. O’Toole was not
entitled to a bridge loan because he intended not to purchase a house until he
knew whether he would have a job in Los Alamos the following year. The
relocation contract clearly contemplated repurchase of a home. While the finding
that Mr. O’Toole was not going to purchase a house for approximately a year
would preclude consequential damages related to the loss of a reduction in taxes
because of mortgage-interest deductions for that year, such preclusion would not
affect tax losses suffered in subsequent years until Grumman finally paid the
(continued...)
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C. Punitive damages. New York has a very stringent standard for
recovering punitive damages for breach of contract.
Punitive damages are available only in those limited circumstances
where it is necessary to deter defendant and others like it from
engaging in conduct that may be characterized as “gross” and
“morally reprehensible,” and of “‘such wanton dishonesty as to imply
a criminal indifference to civil obligations.’” . . . [The essential
elements of a punitive damages claim] are: (1) defendant’s conduct
must be actionable as an independent tort; (2) the tortious conduct
must be of [an] egregious nature . . . ; (3) the egregious conduct must
be directed to plaintiff; and (4) it must be part of a pattern directed at
the public generally. Where a lawsuit has its genesis in the
contractual relationship between the parties, the threshold task for a
court considering defendant’s motion to dismiss a cause of action for
punitive damages is to identify a tort independent of the contract.
...
[A] defendant may be liable in tort when it has breached a duty of
reasonable care distinct from its contractual obligations, or when it
has engaged in tortious conduct separate and apart from its failure to
fulfill its contractual obligations.
...
[W]here a party is merely seeking to enforce its bargain, a tort claim will
not lie.
New York Univ. v. Continental Ins. Co. , 662 N.E.2d 763, 767-68 (N.Y. 1995).
Although Mr. O’Toole argues that Grumman was motivated to breach its
relocation contract to protect itself from federal audits and penalties, he has not
identified a tort independent of the contract directed against him and the public in
(...continued)
1
money it admitted it owed and Mr. O’Toole could purchase a house.
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general to support his punitive damages claim. We therefore conclude that the
district court properly denied his claim for punitive damages.
Accordingly, we affirm in part, reverse in part, and remand for further
proceedings consistent with this order and judgment.
Entered for the Court
Monroe G. McKay
Circuit Judge
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