World of Boxing LLC v. King
2015 U.S. Dist. LEXIS 11964, 107 F.Supp.3d 265, 2015 WL 427225 (2015)
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Rule of Law:
When a non-breaching party seeks reliance damages, the breaching party bears the burden of proving with reasonable certainty that the non-breaching party would have suffered a loss had the contract been fully performed in order to offset those damages.
Facts:
- Don King Productions (King) and World of Boxing (WOB) entered an agreement for a boxing match between their respective fighters, Guillermo Jones and Denis Lebedev.
- Pursuant to the agreement, WOB paid $800,000 into an escrow account.
- The contract stipulated that $250,000 of the escrowed amount was an 'immediately payable' and 'non-refundable' payment to King.
- In preparation for the fight, WOB incurred approximately one million dollars in expenses for transportation, lodging, facilities, and promotion.
- King failed to ensure his boxer, Guillermo Jones, participated in the bout, causing its cancellation.
- After the cancellation, WOB refunded most ticket sales but retained approximately $75,000 in revenue from tickets that were not refunded.
Procedural Posture:
- World of Boxing (WOB) sued Don King in the U.S. District Court for the Southern District of New York (a federal trial court) for breach of contract.
- The district court previously ruled on the merits, finding that King had breached the agreement.
- WOB then filed a motion for summary judgment, asking the court to determine the amount of contract damages it was owed.
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Issue:
Does a party that breached a contract bear the burden of proving with reasonable certainty that the non-breaching party would have suffered a loss had the contract been performed in order to offset the non-breaching party's claim for reliance damages?
Opinions:
Majority - Judge Scheindlin
Yes. A party that breached a contract bears the burden of proving with reasonable certainty that the non-breaching party would have suffered a loss in order to reduce reliance damages. The court reasoned that reliance damages aim to restore the injured party to the position they were in before the contract. To reduce these damages, the breaching party (King) must prove the non-breaching party's venture was doomed. King failed to meet this burden; he merely pointed to pre-bout ticket sales and ignored other potential revenue streams like television broadcasting and intangible benefits like building a business reputation. The court found it implausible that WOB, a sophisticated party, would enter a contract for a world title match that was certain to result in a massive loss. However, the court did find that the contract unambiguously designated $250,000 as a non-refundable payment to King, which he is entitled to keep.
Analysis:
This case reinforces the principle that the burden of proving a losing contract falls squarely on the party that committed the breach. The decision protects a non-breaching party's ability to recover preparatory expenses, especially in ventures where profit may not be immediate or easily quantifiable. It establishes that a breaching party cannot merely speculate about potential losses to reduce damages; they must prove with 'reasonable certainty' that the venture was not feasible and that losses were inevitable. This precedent is significant for industries like entertainment and promotions, where initial expenses can be high and profits can come from various, sometimes speculative, sources beyond initial sales.
