Meinrath v. Singer Co.
87 F.R.D. 422, 1980 U.S. Dist. LEXIS 12324 (1980)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under New York law, damages for a breach of contract consisting solely of the failure to pay money are limited to the principal amount owed plus the prevailing legal rate of interest. Consequential damages for losses sustained in separate, unrelated business ventures are not recoverable for such a breach.
Facts:
- Leopold Meinrath, a Belgian entrepreneur, entered into a multi-part Agreement with The Singer Company on September 7, 1973.
- Under the Agreement, Singer purchased Meinrath's exclusive distribution rights and his 'Unicard companies' for $280,000, employed him at a salary of $40,000, and agreed to pay him bonus compensation ranging from $220,000 to $720,000 based on computer sales.
- A dispute arose over the bonus compensation, with Meinrath alleging Singer failed to pay the full amount owed.
- Meinrath claimed that Singer was aware of his other subsisting business ventures and his need for the bonus payments to provide them with working capital.
- Meinrath alleged that as a direct result of Singer's failure to make timely bonus payments, his other Unicard businesses suffered substantial losses, leading to the liquidation of two companies and a decline in net worth of a third.
Procedural Posture:
- Leopold Meinrath commenced this action against The Singer Company in the U.S. District Court for the Southern District of New York to recover bonus compensation.
- Meinrath filed an amended complaint seeking the unpaid bonus, consequential damages for the failure of his other businesses, and damages for the devaluation of the U.S. dollar.
- Singer filed an amended answer raising eight affirmative defenses and asserting two counterclaims.
- Singer, as defendant, filed a motion for summary judgment to dismiss Meinrath's claims for consequential damages and dollar devaluation damages.
- Meinrath, as plaintiff, filed a cross-motion to strike all of Singer's affirmative defenses and for summary judgment on Singer's two counterclaims.
- The case is now before the district court for a decision on these cross-motions.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Under New York law, are consequential damages for losses in separate business ventures and damages for currency devaluation recoverable for a breach of contract that consists solely of a failure to pay money?
Opinions:
Majority - Judge Weinfeld
No. When a breach of contract consists only of a failure to pay money, the remedy for the breach is limited to the principal owed plus damages in the form of interest at the prevailing legal rate. The law presumes that interest is the measure of all damages for the withholding of money that is due. This rule bars recovery for both consequential damages to unrelated businesses and losses from currency devaluation. The court reasoned that for nearly a century, the Supreme Court's decision in Loudon v. Taxing District has established that all damages for delay in payment are provided for by the allowance of interest. This rule promotes certainty and avoids turning simple contract disputes into complex trials about speculative losses in far-flung business enterprises. The court distinguished cases like Spang Industries, where consequential damages were allowed, because those involved breaches for unique goods or services, and the damages were directly related to completing the breached contract itself, not to collateral ventures. Similarly, a claim for losses due to currency devaluation is not cognizable, as the contract was denominated in U.S. dollars, and allowing such a claim would be akin to compensating for general inflation, a result the court cannot endorse.
Analysis:
This decision reaffirms a long-standing and bright-line rule in contract law that limits damages for the non-payment of money to the principal plus statutory interest. By rejecting the claim for consequential damages, the court prevents the expansion of liability into speculative areas and maintains a clear distinction between a simple failure to pay and a breach involving non-delivery of unique goods or services. This case serves as a strong precedent against attempts to recover for remote, collateral business losses in debt collection and payment dispute cases, thereby promoting predictability and limiting the complexity of litigation. Future plaintiffs seeking to hold a defendant liable for the failure of their business empire due to non-payment will need to have such a remedy explicitly bargained for and included as a liquidated damages clause in the contract.
