Collins Entertainment Corp. v. Coats and Coats Rental Amusement
355 S.C. 125, 584 S.E.2d 120 (2006)
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Rule of Law:
Under the 'lost volume seller' doctrine, a seller or lessor who has a supply capacity great enough to have made both the breached sale and subsequent sales is entitled to recover the lost profit from the breached contract, as a subsequent sale is not considered mitigation of damages.
Facts:
- In 1996, Collins Entertainment Corporation (Collins) entered into a six-year lease agreement to supply video poker machines to two bingo halls.
- The lease stipulated that any subsequent purchaser of the bingo halls must assume the lease agreement.
- In 1997, American Bingo and Gaming Corporation (American) purchased the assets of the bingo halls.
- American refused to assume the lease agreement with Collins.
- American removed Collins' video poker machines from the premises.
- Collins possessed a surplus of video poker machines in its warehouse, sufficient to supply both the bingo halls and other potential customers simultaneously.
- Following the removal, Collins was able to place 19 of the 20 machines into other locations.
Procedural Posture:
- Collins Entertainment Corporation sued American Bingo and Gaming Corporation in a South Carolina trial court for intentional interference with contract, and the matter was referred to a master-in-equity.
- The master-in-equity found American liable and awarded Collins actual and punitive damages.
- American, as appellant, appealed the master's decision to the South Carolina Court of Appeals.
- The Court of Appeals affirmed the trial court's judgment.
- The South Carolina Supreme Court granted a writ of certiorari to review the Court of Appeals' decision.
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Issue:
Does the 'lost volume seller' doctrine apply to exempt a lessor with excess supply capacity from the duty to mitigate damages for intentional interference with a lease agreement?
Opinions:
Majority - Justice Waller
Yes. The 'lost volume seller' doctrine applies because it properly calculates damages for a seller who has lost a sale and whose subsequent resale does not truly mitigate damages. The doctrine does not erode the duty to mitigate; rather, it recognizes that for a seller with excess capacity, a subsequent sale would have occurred regardless of the breach, meaning the seller has still lost the volume of the original sale. By definition, a lost volume seller cannot mitigate through resale because the breach still results in the loss of one sale and its corresponding profit. The court found that South Carolina's adoption of UCC-related statutes tacitly approved of the doctrine and that there was sufficient evidence in the record to demonstrate Collins had the excess capacity to qualify as a lost volume seller.
Dissenting - Chief Justice Toal
No. The 'lost volume seller' doctrine should not be applied in this case because it is a measure of damages for breach of contract, whereas the claim against American is for the tort of intentional interference with contract. Damages for torts are not measured by contract rules. Furthermore, applying the doctrine here results in an improper double recovery, as Collins was awarded damages for the breach from the original party and is now recovering for the same lost benefits under a tort theory against American. This allows Collins to be compensated twice for a single injury.
Concurring - Justice Pleicones
Yes. The 'lost volume seller' doctrine applies because a lost-volume seller or lessor cannot mitigate damages, and therefore has no duty to attempt to do so. The dissent's distinction between tort and contract claims is unpersuasive because a breach of contract is a necessary element of tortious interference, making contract-based damage calculations like the lost-volume doctrine applicable. While I agree with the dissent that Collins appears to have received an improper double recovery, that specific issue was not included in the writ of certiorari and is therefore not properly before the court.
Analysis:
This decision formally adopts the 'lost volume seller' doctrine into South Carolina law, aligning the state with the majority of U.S. jurisdictions. It clarifies that sellers with a provably inexhaustible supply of goods or services can recover lost profits from a breach, even if they 'resell' the item, because the resale does not make them whole. The case provides a clear standard for plaintiffs who can demonstrate they would have made both the breached sale and the subsequent sale. The opinions also highlight the ongoing legal debate about the appropriate measure of damages when a breach of contract also forms the basis for a tort claim like intentional interference.
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