S.J. Groves & Sons Co. v. Warner Co.

Brief Fact Summary. A contract to provide concrete for the construction of a bridge was breached by one of the contracting parties.  At issue, was whether the non-breaching party properly mitigated its damages.

Synopsis of Rule of Law. Certain circumstances exist in the context of mitigation where "continuing with the performance of an unsatisfactory contractor will avoid losses which might be experienced by engaging others to complete the project."

Facts. The Appellant, S.J. Groves & Sons Co. (the "Appellant"), sub-contracted to perform concrete work on a bridge for the state of Pennsylvania.  The Appellant further subcontracted with the Appellee, Warner Co. (the "Appellee"), in March of 1970 to "deliver adequate supplies [of concrete] at scheduled times."  Based on three lengthy strikes and failure to meet state specifications, the project was behind deadline.  As a result of the delays, the Appellant attempted to secure other sources of concrete, but found no real alternatives.  The one other company in the area, Trap Rock, was not certified by the state.  The State stopped work on the project on June 21, 1972.  After a conference between representatives from the state, the Appellee and the Appellant, to discuss the Appellee's lapses, the state allowed work to continue on June 26, 1972, but the Appellee's performance remained erratic.  On July 11, 1972, Trap Rock was certified by the state and would have done the concrete work for the same price as the Appellee, but the Appellant decided to keep the Appellee as its sole cement supplier.  The district court found "as of July 12, 1972, Groves had an obligation to utilize Trap Rock as a supplemental supplier . . . in order to mitigate any possible 'delay damages' resulting from Warner's service."  As such, "the court did not award Groves all the delay damages it sought, allowing only $12,534 for overtime which had been paid on days when Warner's deliveries were late before, but not after, July 12, 1972." Additionally, "[s]ince the first pour on July 9, 1970 resulted in an unacceptable deck panel due to Warner's defective concrete and inadequate workmanship by Groves, the court allocated the cost of removing and replacing the panel. The total expenditure was $42,357.11 and Groves was awarded $10,589.43."  All told, the trial court found in favor of the Appellant, but only awarded the Appellant $35,401.28 and this appeal ensued.

Issue. Was the trial court's calculation of damage correct for the July 9, 1970 pour?
•    Did the trial court properly handle the mitigation of damages issue?

Held. Yes.  The court observed, "[t]he burden is on the plaintiff to establish proximate cause between breach and damage and if the loss caused by a breach cannot be isolated from that attributable to other factors, no damages may be awarded."  The court concluded, "the trial judge might well have decided that there was an inadequate basis for proration between damages precipitated by Warner's conduct and that of Groves, in which event there would have been no recovery."
•    No.  The court observes that the Appellant really had only three practical choices: "allow Warner to continue in the hope of averting even greater losses; substitute Trap Rock for all of Warner's work a choice made doubtful by Trap Rock's ability to handle the project; or, lastly, use Trap Rock as a supplemental supplier."  The court concludes that each of these possibilities have their own shortfalls, which the district court did not recognize.  The court quotes [In re Kellett Aircraft Corp.], which found "Where a choice has been required between two reasonable courses, the person whose wrong forced the choice can not complain that one rather than the other was chosen. … The rule of mitigation of damages may not be invoked by a contract breaker as a basis for hypercritical examination of the conduct of the injured party, or merely for the purpose of showing that the injured person might have taken steps which seemed wiser or would have been more advantageous to the defaulter. . . . One is not obligated to exalt the interest of the defaulter to his own probable detriment."  The court then declares, certain circumstances exist where "continuing with the performance of an unsatisfactory contractor will avoid losses which might be experienced by engaging others to complete the project."  In this type of setting, the best strategy for mitigating damages is sticking with the original plan.  As such, the court held the district court inappropriately found that the Appellant should have engaged Trap Rock.

Discussion. This case offers a unique perspective on how courts should confront the issue of mitigation of damages.