Shields Enterprises, Inc., Plaintiff-appellant, v. Americantours International, Inc., Defendant-appellee.shields Enterprises, Inc., Plaintiff-appellee, v. Americantours International, Inc., Defendant-appellant, 42 F.3d 1402 (9th Cir. 1994)

MEMORANDUM^* 

Shields Enterprises, Inc. (SEI) sued Americantours International, Inc. (ATI) to recover $103,508.40 SEI alleged ATI owed it for computer services. ATI counterclaimed for damages allegedly caused by SEI's breach of the computer services contract. After a bench trial, the district court rendered judgment against SEI on its complaint, and in favor of ATI on its counterclaim. The district court awarded ATI damages of $546,491.60.

SEI appeals and ATI cross-appeals. SEI argues the district court erred in not determining the time when ATI was required to mitigate its damages, and by failing properly to calculate the damage award. ATI argues the district court should not have deducted from its damage award $103,508.40 the court found ATI was excused from paying SEI.

We have jurisdiction under 28 U.S.C. § 1291. We vacate the district court's judgment and remand for additional findings.

In paragraph 15 of its Findings of Fact and Conclusions of Law, the district court found:

15. ATI also claims additional damages of $364,479.99 because it has paid $764,479.99 to SEI and expected to pay only a total of $400,000 for the Project. However, time and materials jobs are commonly underestimated. More importantly, ATI has not mitigated its damages in this regard. It originally expected the Project to be completed within six months. Why was it still paying SEI after eighteen months, no completion and many, many problems? Termination should have occurred many months earlier.

It is clear the district court found ATI was required to mitigate its damages and failed to do so. As a result of this failure to mitigate, the district court rejected ATI's claim of additional damages of $364,479.99. The court did not find, however, when ATI's duty to mitigate arose. SEI contends the duty arose no later than June 1990 when, according to its computation, ATI's total damages were $79,459 at most. SEI further contends the district court's award of $75,000 for additional consultants to examine ATI's computer system, $101,000 to purchase and $60,000 to modify another "off-the-shelf" accounting package, $228,000 in extraordinary accounting person-hours and $186,000 for overbilling will be affected by a finding of when ATI was required to mitigate its damages. SEI may or may not be correct. We cannot tell from the findings before us.

Without a finding by the district court as to when ATI was required to mitigate its damages, we cannot review meaningfully the district court's computation of the damage award. Accordingly, we must vacate the district court's judgment and remand this cause to the district court for findings as to (1) when ATI's duty to mitigate arose, (2) what impact, if any, that failure to mitigate had upon each element of damages claimed by ATI, and (3) the amount of damages to which ATI is entitled.

The district court is also directed to make specific findings as to the evidence which supports an award of $228,000 in extraordinary accounting person-hours. Finally, by finding that SEI was not entitled to recover $103,508.40 that it billed ATI, the district court may not deduct that amount from the damage award it renders in favor of ATI.

Judgment VACATED. Cause REMANDED to the district court for further findings of fact. Each of the parties shall bear its own costs for this appeal.