Karma International, LLC v. Indianapolis Motor Speedway, L
Not specified in text, using docket numbers (2019)
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Rule of Law:
Under Indiana law, a claim for breach of contract damages fails if the evidence of damages is based on mere speculation or conjecture. The plaintiff must present non-speculative evidence demonstrating that the claimed damages were the natural, foreseeable, and proximate consequence of the defendant's breach.
Facts:
- In early 2016, Indianapolis Motor Speedway, LLC ('Speedway') and Karma International, LLC ('Karma') negotiated an agreement for Karma to host a Maxim-branded party during the 100th running of the Indianapolis 500.
- During negotiations, Speedway officials told Karma's CEO that they would have 'no problem' selling a minimum of 1,500 tickets for the party.
- The parties signed a formal agreement in March 2016, where Speedway promised 'marketing support via [its] social channels and … dedicated e-mail to [its] database.'
- In the same agreement, Karma promised to provide a 'banner ad on Maxim.com (minimum 1 million impressions)' and social media marketing for other race-weekend events.
- In May 2016, Speedway sent four promotional emails to various segments of its database, one of which went to over 149,000 subscribers.
- Karma never ran the promised banner ad on Maxim.com nor did it provide the promised social media support.
- The Maxim party was a financial failure; Karma spent over $635,000 but generated only about $215,000 in revenue, with only 92 full-price tickets sold.
Procedural Posture:
- Karma sued Speedway for breach of contract in the U.S. District Court for the Southern District of Indiana (trial court).
- Speedway filed a counterclaim against Karma, also for breach of contract.
- Speedway moved for summary judgment on Karma's claim.
- The district court granted summary judgment in favor of Speedway on Karma's claim, ruling that Karma's evidence of damages was too speculative.
- Speedway's counterclaim proceeded to a jury trial.
- The jury returned a verdict in favor of Speedway, finding Karma liable and awarding $75,000 in damages.
- Karma filed a post-trial motion for judgment as a matter of law or, in the alternative, for a new trial.
- The district court denied Karma's post-trial motions.
- Karma, as the Plaintiff-Appellant, appealed the summary judgment ruling and the denial of its post-trial motions to the U.S. Court of Appeals for the Seventh Circuit.
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Issue:
Does a claim for breach of contract damages fail under Indiana law if the evidence supporting the amount of damages is based on speculative, pre-contractual oral assurances of success rather than concrete proof of harm proximately caused by the alleged breach?
Opinions:
Majority - Sykes, Circuit Judge
Yes. A claim for breach of contract damages fails under Indiana law if the evidence is merely speculative. Indiana law requires that a plaintiff prove damages with reasonable certainty, and this evidence cannot be based on conjecture. Karma's entire damages theory rested on pre-contractual statements by Speedway officials that they could sell 1,500 tickets. This prediction is not evidence of harm caused by Speedway's alleged breach (failing to email its entire database). Karma offered no expert testimony or other evidence to prove a causal link between Speedway's specific email strategy and the party's poor ticket sales, especially given the numerous other potential explanations for the failure. Karma's argument is more akin to promissory estoppel, which is not available when an express contract governs the dispute. The court also affirmed the jury's verdict on Speedway's counterclaim, finding sufficient evidence that Karma breached its advertising obligations and that the damages awarded were based on an objective standard of foreseeability, not the subjective expectations of Speedway's officials.
Analysis:
This decision reinforces the critical contract law principle that damages must be proven with reasonable certainty and cannot be speculative. It serves as a strong caution to litigants that optimistic, pre-contractual verbal assurances are insufficient to establish a claim for lost profits without concrete evidence of causation. The case also clarifies the distinction between a breach of contract claim and a promissory estoppel theory, affirming that the existence of an express contract bars recovery under an implied theory. Finally, it confirms that the foreseeability of damages in a contract breach is judged by an objective standard, meaning an expert can testify to what damages were reasonably foreseeable, regardless of what the parties subjectively anticipated.
