Liberty Petroleum Realty, LLC v Gulf Oil, L.P.
Annotate this CaseDecided on November 14, 2023
Supreme Court, Bronx County
Liberty Petroleum Realty, LLC,
EAST RIVER PETROLEUM REALTY, LLC, Plaintiffs,
against
Gulf Oil, L.P., CUMBERLAND FARMS, INC. & ANJON OF GREENLAWN, INC., Defendants.
Index No. 22163/2015E
Doris M. Gonzalez, J.
Defendants move in limine for an Order excluding testimony and evidence concerning lost profits and other damages claimed by the plaintiffs
This action concerns claims for tortious interference with contract [FN1] against the defendants. Generally, it is alleged that the defendants caused Go-Green Realty Corp. and its affiliates (together, the "Go Green Entities"), the owner-operators of five gasoline stations, to breach certain franchise agreements, and to enter into agreements by which defendants became the gasoline supplier to the Go Green Entities. Plaintiffs seek compensatory damages based exclusively upon their purported lost sales (and lost profits incurred thereby) due to the purported breaches of the franchise agreements.
Defendants argue that the plaintiffs are precluded from pursuing damages because plaintiffs were paid liquidated damages by the Go Green Entities pursuant to their franchise agreements.[FN2] The franchise agreements provided for liquidated damages upon a breach by the Go Green Entities. The liquidated damages in the franchise agreements were calculated based on the total number of gallons of gasoline remaining on the franchise agreements at the time of the breach, multiplied by three cents per gallon. Defendants argue that "[p]laintiffs are now precluded, as a matter of law, from pursuing additional compensatory damages arising from these same purported lost sales from the volumes of gasoline remaining on the Franchise Agreements — against the Go Green Entities or against anyone else." (Emphasis added.)
Initially, this Court finds that the motion in limine is inappropriate and may be denied as a disguised motion for summary judgment. Although a motion in limine can be useful a tool to [*2]exclude inadmissible evidence, it cannot be used as a substitute for a summary judgment motion. (See In re Singer, 99 AD3d 802, 803, 952 N.Y.S.2d 214 [2d Dept. 2012] ["While the movants characterized their motion as one for in limine relief, the record reveals that the entire motion actually was one for summary judgment on the issues of self-dealing and appreciation damages. A motion in limine is an inappropriate substitute for a motion for summary judgment"]). It is admitted by the defendants that if they prevail on this motion, the action must be terminated in defendants' favor. This dispositive motion is in effect an untimely motion for summary judgment. To preserve the record, however, this Court will address the merits.
Initially, the Court rejects the defendants' arguments that allowing a recovery against the defendants of an amount in excess of the contractual liquidated damages on a theory of tortious interference would defeat the bargain made by the Go Green Entities. In this regard, defendants argue that, "To allow such claims to stand would prevent the Go Green Entities from achieving the finality of remedy they bargained for when they agreed to the Liquidated Damages provision in the first instance — as the Go Green Entities could not contract with any new supplier without Plaintiffs' threat of lost profits damages hanging over them. This played out here as the Go Green Entities had to enter into indemnification agreements in order to persuade a new distributor and new brand to supply them with gasoline." To the contrary, it can hardly be said that it was in the contemplation of the parties (the plaintiffs or the Go Green Entities) when the original franchise agreement was made, that the Go Green Entities would breach the contract and then indemnify those parties who allegedly tortiously interfered with that contract. The argument is specious. The ramifications of the decision by the Green Go Entities to indemnify the defendants rests on the Green Go Entities, and cannot be used to defeat the plaintiffs' right, if any, to recover on a theory of tortious interference with contract, so long as such a recovery accords with New York law.
The defendants argue that under New York law a "reasonable liquidated damages clause precludes any recovery of actual damages." (U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 71 [2d Cir. 2004].) This is obviously true as between the parties to the contract. But this precept does not answer the question presented here, i.e., whether liquidated damages clause may limit the liability of a non-contracting party, i.e., a party alleged to have tortiously interfered with the contract.
The question presented here is said to be a novel question under New York law. Some jurisdictions "have held, consistent with the idea of limiting the plaintiff's recovery to true contract damages, that a contract limitation on damages, including a liquidated damages clause, would also limit the plaintiff's damages in a claim against the defendant for interference with contract." (Dan B. Dobbs, Paul T. Hayden and Ellen M. Bublick, The Law of Torts (2d ed.), § 644; see Western Oil & Fuel v. Kemp, 245 F.2d 633, 643- 44 [8th Cir. 1957] [limiting damages to the liquidated damages amount recoverable in an action for breach of contract]; Memorial Gardens v. Olympian Sales & Mgt. Consultants, 690 P.2d 207, 212 [Colo. 1984] [awarding no damages for tortious interference where plaintiff received the benefits of the liquidated damages provision].) The reasoning of these cases appears to be that it would be unfair to allow the plaintiff to recover more against the tortious interferer than against the party breaching the contract. Other courts have held to the contrary. (Sulzer Carbomedics v. Or. Cardio-Devices, Inc., 257 F.3d 449, 456 [5th Cir. 2001] [district court did not err in determining that the limitation of liability provision in the contract did not preclude liability for tortious interference]).
Defendants argue that although the precise question presented here is novel under New York law, a preclusion of damages would accord with existing case law. Defendants argue that Simon v. Royal Business Funds Corp. (34 AD2d 758, 310 N.Y.S.2d 409 [1st Dept. 1970], aff'd without opinion, 29 NY2d 692, 275 N.E.2d 21, 325 N.Y.S.2d 649 [1971]), supports their arguments. In Simon, the plaintiff recovered a judgment against a corporation for a commission. He then sued other defendants for inducing the breach of contract. The First Department held that while a claim for tortious interference with contract was not barred, "plaintiff does not plead any additional damage sustained by him flowing from the wrongful acts of the defendants." In other words, plaintiff was entitled to only one recovery and had been fully compensated. Here, on the other hand, plaintiffs indeed seek additional damages, that being the difference between the lost profits plaintiffs sustained the liquidated damages recovered from the Green Go Entities. Simon does not suggest that the plaintiffs cannot recover from the defendants, but rather supports a recovery because additional damages are sought.
Although some court accord with the defendants' position, defendants have not shown that the weight of authority in other jurisdictions supports the defendants' arguments. In any event, under New York law, breach of contract and tortious interference with contract " ' are not the same or identical causes of action, but, rather, wholly separate and distinct legal wrongs, giving rise to different causes of action, has long been settled' " (North Shore-Long Is. Jewish Health Sys., Inc. v Aetna US Healthcare, Inc., 27 AD3d 439, 440, 811 NYS2d 424 [2006], quoting Singleton Mgt. v Compere, 243 AD2d 213, 216). Simply put, there is no logical basis to find under New York law that a contractual limitation of damages should extend to the tortious conduct of non-contracting parties.
Recovery for tortious interference sounds in tort, and the damages recoverable are tort damages. With all due respect to the law in other jurisdictions, there no logic to the theory, at least under New York law, that a contractual limitation should be applied to limit the damages recoverable from tortfeasors. In fact, the illogic of such a position is clear — the tortfeasor would have the advantage of the contractual limitations of the very contract of which they tortiously induced a breach. Such a policy would encourage tortious behavior as allowing an artificial limitation on the damages recoverable from the tortfeasor.
Accordingly, it is
ORDERED that the motion is denied.
ENTER:Date: November 14, 2023
HON. DORIS M. GONZALEZ, J.S.C. Footnotes
Footnote 1: "Tortious interference with contract requires the existence of a valid contract between the plaintiff and a third party, defendant's knowledge of that contract, defendant's intentional procurement of the third-party's breach of the contract without justification, actual breach of the contract, and damages resulting therefrom." Lama Holding Co. v. Smith Barney Inc., 88 NY2d 413, 424, 668 N.E.2d 1370, 1375, 646 N.Y.S.2d 76, 82 (1996) (citations omitted).
Footnote 2: In a separate federal court action, the plaintiffs sued the Green Go Entities and recovered the liquidated damages as set forth under the contracts, which damages have been fully paid.
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