R.R. Donnelley & Sons Co. v. Vanguard Transportation Systems, Inc.
641 F. Supp. 2d 707 (2009)
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Rule of Law:
A non-breaching party's duty to mitigate damages is suspended only as long as its reliance on the breaching party's assurances of performance is reasonable. When continued reliance becomes unreasonable, the failure to take available, low-cost measures to avoid losses precludes recovery for those avoidable damages.
Facts:
- Donnelley engaged Vanguard Transportation Systems to transport a shipment of time-sensitive advertising brochures for a Macy's post-Christmas sale from Kentucky to an Atlanta distribution center.
- The parties agreed that the delivery had to be made by 2:00 p.m. on Friday, December 16, 2005.
- Donnelley never informed Vanguard of the specific "drop-dead" date (December 21st) by which the brochures had to be delivered to have any value.
- Vanguard's driver arrived late on December 16th, and Donnelley's employee refused to allow him to unload, telling him to reschedule or wait several hours.
- The driver left with the load and dropped the trailer at a Vanguard lot located less than 20 miles from Donnelley's facility.
- Over the next several days (December 17th-21st), Vanguard repeatedly gave Donnelley equivocal assurances that it would "attempt" redelivery, citing various excuses like a lack of drivers and computer problems.
- Despite knowing the brochures would soon be worthless and that retrieval was simple and inexpensive, Donnelley took no action to pick up the load itself.
- Vanguard finally delivered the brochures on December 27, 2005, by which time they were valueless, causing Donnelley a loss of $81,650, which it had to credit to its client.
Procedural Posture:
- Donnelley filed a lawsuit against Vanguard Transportation Systems in federal court, alleging breach of contract.
- Donnelley sought damages of $81,650, representing the cost of the brochures, plus attorney's fees under the contract's indemnification clause.
- Vanguard answered the complaint, admitting to the late delivery but raising the affirmative defense that Donnelley failed to mitigate its damages.
- The case proceeded to a bench trial before a United States Magistrate Judge.
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Issue:
Does a non-breaching party's failure to take reasonable and inexpensive steps to mitigate its damages preclude it from recovering losses that could have been easily avoided, even when the breaching party provided equivocal assurances that it would eventually perform?
Opinions:
Majority - Cole, J.
Yes. A non-breaching party's failure to mitigate its damages precludes recovery for losses that it could have reasonably avoided. Although Vanguard breached the contract by failing to deliver on time, Donnelley had a duty to mitigate its damages. The court found that while this duty can be suspended when a party is 'lulled' by assurances from the breaching party, such reliance must be reasonable. By December 20th or 21st, given Vanguard's repeated failures and vague promises to merely 'attempt' delivery, it was no longer reasonable for a sophisticated commercial entity like Donnelley to passively wait. Donnelley possessed superior knowledge about the 'drop dead' date for the brochures' value but never shared this with Vanguard. Because mitigation—hiring a local carrier for a few hundred dollars to retrieve the trailer from a lot 20 miles away—was simple and inexpensive, Donnelley's failure to act was unreasonable. Therefore, the significant loss it suffered was an avoidable consequence of its own inaction and cannot be recovered from Vanguard.
Analysis:
This case provides a crucial illustration of the limits of the 'suspension' of the duty to mitigate damages. It clarifies that a non-breaching party cannot indefinitely rely on a breaching party's promises, especially when those promises are equivocal and performance repeatedly fails to materialize. The court emphasizes an objective standard of reasonableness, holding a sophisticated commercial party to a higher standard of proactive self-protection. This precedent reinforces that the duty to mitigate is not excused simply because the breaching party also has the ability to cure; the non-breaching party with superior knowledge of the stakes must take reasonable, low-cost steps to prevent damages from escalating.
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