TCJL today filed an amicus curiae brief in a case that, if not corrected, expands the measure of consequential damages in breach of contract cases. Signature Industrial Services, LLC and Jeffry Ogden v. International Paper Company (No. 20-0396) arose from a $775,000 construction contract for the installation of machinery at a paper mill in Orange County. The contractor submitted numerous change orders without adequate backup, which the owner disputed. After the contractor rejected the owner’s offer to settle the dispute, the contractor filed suit in a Jefferson County district court. The jury awarded the contractor $122 million, including $36 million in emotional distress damages. The owner’s appeal was transferred to the Corpus Christi Court of Appeals under the case equalization order. The Corpus Court reduced the damage award, including striking the emotional distress damages altogether, but allowed more than $14 million in consequential damages based on the unrealized book value of the contractor to stand. Both parties petitioned SCOTX for review. The contractor contends that the Corpus Christi court of appeals cut the damages too much, while the owner argues that the consequential damages award contradicts precedent established by SCOTX and every other Texas court of appeals.
In our brief, we argue that the problem with the Court of Appeals’ decision is that it recognizes a wildly speculative measure of damages—an unrealized decrease in a company’s book value (in this case offered by an “expert” with minimal qualifications at best)—that will now be put to use to leverage settlements at a much higher value than the case should have based on the actual losses involved. If any garden variety contract dispute can be converted into a multi-million-dollar lawsuit by alleging that a breach caused an unrealized decline in the paper value of a claimant’s business, such a change will incentivize lawsuits with artificially inflated damages claims. TCJL’s experience over the past 35 years tells us that creating or expanding the availability of speculative damages inevitably destabilizes the judicial process by making every lawsuit a lottery ticket. Further, court of appeals’ decision effects a major expansion of liability for the Texas businesses community by creating a loophole around this Court’s precedents and permitting plaintiffs to recover speculative measures of damages. This decision should be closely scrutinized—and promptly rejected—by the Supreme Court. Allowed to stand, the decision threatens to trammel not only the substantial, growing, and dynamic business activity in South Texas but also the fair and efficient civil justice system across the state, which has enabled the remarkable economic growth that Texas has experienced over the last quarter-century.