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Klayman v. Judicial Watch, Inc.

United States District Court, District of Columbia

June 15, 2017

LARRY KLAYMAN, Plaintiff,
v.
JUDICIAL WATCH, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          COLLEEN KOLLAR-KOTELLY United States District Judge.

         On January 13, 2017, the Court held a continued Pretrial Hearing in this matter to discuss “the current posture of this case and how it shall proceed.” Minute Order, Jan. 13, 2017. As relevant here, the Court required the parties to submit briefing regarding the types of damages that Plaintiff could pursue with respect to his five remaining claims, in light of the discovery sanctions that had previously been imposed upon Plaintiff during the course of this litigation. The purpose of this request was to assess whether the evidentiary limitations imposed on Plaintiff essentially limited him to nominal damages on the five remaining claims, all of which seek relief for breach of contract. Following receipt of the parties' briefing, the Court held a further Pretrial Hearing on April 20, 2017. Therein, Plaintiff stated an additional and unprecedented request to pursue damages for intentional infliction of emotional distress with respect to the remaining claims. See Hr'g Tr. 18:24-19:8, Apr. 20, 2017, ECF No. 398. Although the Court noted its reluctance to countenance either emotional distress damages, or a new claim for intentional infliction of emotion distress, in an abundance of caution the Court permitted Plaintiff: first, to identify those documents, solely from the materials produced by Defendants in this action, which show that Defendants were on notice of Plaintiff's emotional distress claim; and second, to brief the issue of whether, as a matter of law, such damages could be recovered in the context of Plaintiff's remaining claims for breach of contract. Minute Order, April 20, 2017.

         Having reviewed the parties' pleadings and supporting materials, [1] the Court is now in a position to rule on the types of damages that Plaintiff can pursue at trial. For the reasons stated below, the Court finds that Plaintiff is limited to nominal damages (or specific performance) as to all claims other than his claim that Defendants breached the non-disparagement clause in the Severance Agreement. ECF No. 14-1 (“Severance Agreement”). Accordingly, Defendants' [386] Motion Pursuant to the Court's January 13, 2017 Minute Order is GRANTED.

         On the disparagement claim, the Court remains willing to at least consider relaxing its prior discovery sanctions and permitting Plaintiff to testify, but based on the materials furnished to date, the Court is not yet convinced that Plaintiff has made out a case for recovering reputation damages. Accordingly, Plaintiff shall be permitted to provide the Court and Defendants with documents, solely from materials that have already been produced in the course of this litigation, evidencing the amount of monetary damages that he sustained from specific lost business opportunities that flowed from the alleged breach of the non-disparagement clause in the Severance Agreement. Absent such evidence, however, reputation damages cannot be pursued with respect to the non-disparagement claim, and Plaintiff shall consequently be limited to nominal damages as to all of his remaining claims in this litigation.

         Finally, the Court has received and reviewed Plaintiff's Motion to Consolidate. For the reasons stated by the Court during the April 2017 Pretrial Hearing, which are memorialized below, that Motion shall be DENIED.

         I. DISCUSSION

         A. Plaintiff's Remaining Claims Only Seek Breach of Contract Damages

         The Court previously concluded that, as to Plaintiff's “Second Amended Complaint, the following allegations of breach of contract asserted in Counts Seven and Eight remain viable”: (1) Defendants' alleged failure to make a good faith effort to remove Plaintiff as guarantor of a lease for Judicial Watch's headquarters; (2) Defendants' failure to pay health insurance for Plaintiff's children; (3) Defendants' filing a motion to strike Plaintiff's appearance in a Florida litigation; (4) Defendants' failure to provide Plaintiff with access to documents regarding a client; and (5) Defendants' alleged disparagement of Plaintiff and misrepresentations of the reasons for his departure from the organization. Klayman v. Judicial Watch, Inc., 628 F.Supp.2d 112, 118 (D.D.C. 2009) (Kollar-Kotelly, J.). All five of these claims are styled as breach of contract claims for alleged violations of the Severance Agreement.

         Claims (1), (2), and (3) are stated in paragraph 66 of the Second Amended Complaint, which lists a number of ways in which Defendants allegedly breached the Severance Agreement. Compl. ¶ 66 (“[Defendants] engaged in the following additional conduct in breach of the Severance Agreement”); ¶ 66C (“Judicial Watch failed to pay Klayman and his family for health care insurance”); ¶ 66F (“Judicial Watch failed to make a good faith effort to remove Klayman as a personal guarantor from the lease for Judicial Watch's headquarters at 501 School Street, S.W., Washington D.C.”); ¶ 66G (“Judicial Watch filed false and frivolous legal pleadings”). As noted, Counts Seven and Eight are the only remaining counts associated with these three claims. Count Seven seeks breach of contract damages for the violations alleged in paragraph 66. Id. at 28 (“COUNT SEVEN - Breach of Contract - Damages”); ¶ 139 (“As alleged above, Judicial Watch breached the Severance Agreement as set forth in above in Paragraph 66.”). Count Eight adds a demand for specific performance with respect to claim (1). Id. ¶ 145. Furthermore, the damages count associated with Count Seven seeks a monetary award of “a sum in excess of five-hundred thousand dollar . . . .” Id. at 32.

         With respect to claim (4), only specific performance is sought. Compl. at 29 (“COUNT EIGHT - Breach of Contract - Specific Performance”); ¶ 146 (“Judicial Watch has failed to provide Klayman access to documents as required under the Severance Agreement.”). Finally, claim (5) was not challenged by Judicial Watch in its motion for summary judgment, which sought dismissal of “[a]ll aspects of Count Seven except for Klayman's ‘disparagement' claim arising from the allegation that Judicial Watch actively misrepresented the reasons for his departure or otherwise created the allegedly false impression that he was forced to leave the organization[.]” ECF No. 269, at 38 (emphasis added); see Klayman, 628 F.Supp.2d at 121 n.5. Accordingly, Count Seven, which seeks breach of contract damages, remains viable as to Claim (5).

         In sum, claims (1) through (5) are ordinary breach of contract claims that seek either economic damages or other contract remedies, namely, specific performance. With respect to these claims, no reference is found in the complaint to punitive or emotional distress damages, or any other type of consequential damages.

         B. The Discovery Sanctions Limit Plaintiff to Nominal Damages

         As relevant here, Plaintiff has on two occasions been subject to discovery sanctions by this Court for litigation misconduct. Taken together, these essentially preclude him from proffering affirmative evidence at trial either to establish damages with respect to his remaining breach of contract claims, or to defend against Defendants' counterclaims. On the first occasion, the Court affirmed the imposition of discovery sanctions by Magistrate Judge Alan Kay, which “prohibited [Plaintiff] from testifying to or introducing into evidence any documents in support of his damage claims or in support of his defenses to Defendants' counterclaims.” Klayman v. Judicial Watch, Inc., 256 F.R.D. 258, 263 (D.D.C.), aff'd, 628 F.Supp.2d 84 (D.D.C. 2009) (Sanctions I). The basis for this sanction was the severe prejudice imposed on Defendants by Plaintiff's failure to produce “any of the documents requested by Defendants.” Id.

         Subsequently, this Court imposed additional sanctions on Plaintiff for his failure to comply with the dictates of the pretrial process delineated by the Pretrial Scheduling and Procedures Order, ECF No. 330, including by failing to identify exhibits or witnesses for trial in the manner required by that Order. Klayman v. Judicial Watch, Inc., 802 F.Supp.2d 137, 143 (D.D.C. 2011) (Sanctions II). In particular, the Court struck Plaintiff's “defective contributions to the parties' revised Joint Pretrial Statement[, ]” and precluded Plaintiff “from introducing any witnesses or exhibits at the trial in this action.” Id. at 151. As with the sanctions imposed by Magistrate Judge Kay, the Court was guided principally by the “long line of burdens unfairly imposed upon Defendants as a result of [Plaintiff's] conduct in this litigation[, ]” not least of which was the failure to abide by the pretrial process, which is essential to “put both the Court and the parties on notice of which issues of fact and law are in dispute.” Id. at 149-50 (internal quotation marks omitted). Nor was the Court blind to the effect that this further sanction would have on Plaintiff's case, recognizing that its “application in this action will effectively prevent Klayman from carrying his burden of proof on his claims, thereby almost certainly requiring dismissal.” Id. at 151. And although Plaintiff now indicates that there is an ambiguity in the sanctions decisions regarding whether he can personally testify at trial for purposes of seeking damages on his remaining claims, that is plainly not the case. See Pl.'s Resp. to Defs.' Mot. Pursuant to Jan. 13, 2017 Minute Order, at 1 n.1. Magistrate Judge Kay's sanctions order expressly precluded Plaintiff “from testifying to . . . in support of his damage claims . . . .” Sanctions I, 256 F.R.D. at 263. This Court's further sanction merely extended the scope of this order by precluding Plaintiff from introducing any witnesses at trial, including himself. Sanctions II, 802 F.Supp.2d at 143. In sum, the sanctions previously imposed by Magistrate Judge Kay and this Court preclude Plaintiff from proffering any affirmative evidence at trial, including his own testimony, with respect to the damages he sustained as a result of the remaining claims for breach of contract.

         Under District of Columbia law, to recover damages for a breach of contract, a plaintiff must “provide some reasonable basis upon which damages may be estimated.” Window Specialists, Inc. v. Forney Enterprises, Inc., 106 F.Supp.3d 64, 92 (D.D.C. 2015) (citing Mashack v. Superior Mgmt. Servs., Inc., 806 A.2d 1239, 1241-42 (D.C.2002)). Although a plaintiff need not prove damages “with mathematical certainty, ” he must provide “some reasonable basis on which to estimate damages.” Garcia v. Llerena, 599 A.2d 1138, 1142 (D.C. 1991) (internal citations omitted). If the plaintiff establishes breach of contract, but fails to “demonstrate actual damages” or its “proof of damages is vague or speculative, ” then the party is “entitled to no more than nominal damages.” Window Specialists, 106 F.Supp.3d at 92 (citing Cahn v. Antioch Univ., 482 A.2d 120, 130 (D.C.1984)). Failure to offer a “reasonable basis for calculating” damages means that the plaintiff “has not met its burden of proof” to recover damages for breach of contract, and may only recover nominal damages. Id.

         Here, even if Plaintiff is able to establish that Judicial Watch breached the Severance Agreement with respect to his remaining claims, sanctions will preclude him from introducing the necessary affirmative evidence to establish the amount of damages he sustained as a consequence of that breach. For instance, the economic damages flowing from the failure to pay his family's medical insurance can only be shown by the introduction of billing statements for the insurance payments that he made, or the medical expenses that he had to cover, and no such documents were produced by Plaintiff in discovery. Likewise, economic damages stemming from the filing of false pleadings in the Florida litigation can reasonably only be established by documentary evidence, which was not produced by Plaintiff during discovery, showing Plaintiff's lost revenue as an attorney in that case, or by establishing the amount of hours he spent defending against the allegedly frivolous pleadings. Similarly, although it is difficult for the Court to conceive of what specific economic damages flowed from Defendants' alleged failure to remove Plaintiff as a guarantor of Judicial Watch's lease of its headquarters, any such damages would need to be established with substantial testimonial and documentary evidence (e.g., if Plaintiff's ability to obtain credit was impaired), none of which, again, was produced by Plaintiff during discovery. The same is true of Plaintiff's disparagement claim-the Court cannot conceive of how Plaintiff could establish damages for this claim without substantial testimony and evidence showing how he was harmed by Defendants' allegedly disparaging conduct. Nonetheless, for the reasons detailed below, the Court has been at least willing to consider relaxing its sanctions to permit Plaintiff to testify as to his disparagement claim, with the notion that such testimony could at least theoretically establish reputation damages. Whether such testimony would suffice to establish damages as a matter of law is assessed in the following section. For the remaining claims, however, the Court finds that Plaintiff is limited to nominal damages (except for claim (4), which is limited to specific performance); and although Plaintiff seeks to pursue damages for emotional distress in connection with his remaining claims, as discussed below, that is precluded by law.

         C. Availability of Reputation Damages for Plaintiff's Disparagement Claim

         As a general “rule, ” reputation damages are not recoverable for a breach of contract claim. See, e.g., Redgrave v. Boston Symphony Orchestra, 855 F.2d 888, 892 (1st Cir. 1988) (explaining that Massachusetts is in agreement with “virtually all other jurisdictions” in holding that reputation damages are unavailable in contract actions); Smith v. Positive Prods., 419 F.Supp.2d 437, 453 (S.D.N.Y. 2005) (“Damages to reputation generally are not recoverable in a breach of contract.”); Stancil v. Mergenthaler Linotype Co., a Div. of Eltra Corp., 589 F.Supp. 78, 85 (D. Haw. 1984) (adopting “the majority view that damages for injury to reputation are not properly awardable in a breach of contract suit.”); O'Leary v. Sterling Extruder Corp., 533 F.Supp. 1205, 1209 (E.D. Wis. 1982) (“The courts seem to be in general agreement that damages for injury to reputation are not properly awardable in a breach of contract suit.”); Herrera v. Union No. 39 School District, 917 A.2d 923, 933 (Vt. 2006) (holding that for breach of an employment contract, harm to reputation is considered to be “outside the range of foreseeable losses”).

         Although stated as a general rule, however, the unavailability of reputation damages actually stems from the application of two general requirements for recovering consequential damages in a breach of contract action. First, the consequential damages sought must have been “in the contemplation of both parties at the time they made the contract, ” Redgrave, 855 F.2d at 893 (stating the rule of Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854)). Second, consequential damages must be proved with reasonable certainty, beyond mere speculative loss. See Rice v. Cmty. Health Ass'n, 203 F.3d 283, 287 (4th Cir. 2005); Redgrave, 855 F.2d at 892.

         The District of Columbia applies these same two factors to determine if consequential damages are recoverable. In particular, such damages are recoverable if they “could reasonably have been in contemplation of both parties when they made the contract.” Phenix-Georgetown, Inc. v. Charles H. Thompkins Co., 477 A.2d 215, 225 (D.C. 1984); see also Sears, Roebuck & Co. v. Goudie, 290 A.2d 826, 832-33 (D.C.), cert. denied, 409 U.S. 1049 (1972) (holding that plaintiff should have “reasonably contemplated” that a breach of contract in providing adequate air conditioning would result in loss of business income). Additionally, consequential damages may not be based on “mere speculation or guesswork.” Vector Realty Grp., Inc. v. 711 Fourteenth St., Inc., 659 A.2d 230, 234 (D.C. 1994) (quoting Romer v. District of Columbia, 449 A.2d 1097, 1100 (D.C. 1982)). Rather the “evidence offered must form an adequate basis ...


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