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Chinese Hospital Association v. Jacobs Engineering Group, Inc.

United States District Court, N.D. California

November 15, 2019

CHINESE HOSPITAL ASSOCIATION, Plaintiff,
v.
JACOBS ENGINEERING GROUP, INC., Defendant.

          ORDER RE: DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON CONSEQUENTIAL DAMAGES RE: DKT. NO. 48

          JACQUELINE SCOTT CORLEY, UNITED STATES MAGISTRATE JUDGE.

         Plaintiff Chinese Hospital Association alleges that Defendant Jacobs Engineering Group, Inc. breached its written agreement with Plaintiff for architectural services. Defendant's motion for partial summary judgment on Plaintiff's right to recover consequential damages is now pending before the Court.[1] (Dkt. No. 48.[2]) Having considered the parties' briefs and having had the benefit of oral argument on November 14, 2019, the Court GRANTS IN PART and DENIES IN PART Defendant's motion for summary judgment. The express language of the parties' contract bars Plaintiff's claim for lost profits, increased operational costs, and construction delay damages.

         FACTUAL BACKGROUND

         In Spring 2007, Chinese Hospital, a nonprofit healthcare services corporation, contracted with Carter & Burgess, Inc., an architecture firm, to design a new hospital. (Dkt. No. 29 at 23, McFarlin Decl. at ¶ 3; Dkt. No. 29 at 57.) At some point thereafter, Carter & Burgess was acquired by Jacobs Engineering Group, Inc. (“Jacobs”) and under a novation agreement between Chinese Hospital, Carter & Burgess, and Jacobs, Jacobs took over Carter & Burgess' rights and responsibilities under the Design Contract. (Dkt. No. 29 at 23, McFarlin Decl. at ¶ 4.) In the Fall of 2013, Plaintiff “became aware of serious defects in the construction documents” and terminated the parties' contract as of November 7, 2013. (Complaint at ¶ 11.) Plaintiff thereafter hired another architectural firm to complete the project. (Id. at ¶ 13.)

         PROCEDURAL BACKGROUND

         Five years later, Plaintiff filed a certificate of merit in the Superior Court of the County of San Francisco pursuant to California Code of Civil Procedure § 411.35(b)(1). (Dkt. No. 1-5.) The next day, it filed this action in that same court pleading a single cause of action for breach of contract against Defendant. (Dkt. No. 1-3.) Defendant thereafter removed the action based on diversity jurisdiction and four days later filed a motion to dismiss for failure to state a claim. (Id.) The Court granted the motion to dismiss to the extent Plaintiff's breach of contract claim rests on Defendant's ordinary obligation to perform work consistent with the standard of care imposed on an architect, but denied the motion to the extent Plaintiff's claim is based on a different breach of the contract. (Dkt. No. 20.)

         Defendant thereafter moved for summary judgment on the affirmative defense of waiver, but the Court denied the motion on the grounds that Defendant had not met its burden of proving as a matter of law that Plaintiff waived its right to recover damages by terminating the parties' contract “for convenience.” (Dkt. No. 41.) Defendant requested the opportunity to separately move for summary judgment on its claim that under the contract Plaintiff is limited to general damages and cannot recover consequential damages. Plaintiff has since filed a statement of damages sought and the parties have submitted briefing on the consequential damages issue. (Dkt. Nos. 45, 48, 53, 54.)

         DISCUSSION

         Defendant moves for summary judgment on the issue of consequential damages. In particular, Defendant contends that certain of the damages sought by Plaintiff are barred by the consequential damages waiver in the Design Contract.

         A. Damages for Breach of Contract

         “Contract damages seek to approximate the agreed-upon performance.” Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 515 (1994); see also Cal. Civ. Code, § 3300 (“[f]or the breach of an obligation arising from contract, the measure of damages ... is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom.”). The injured party's damages cannot, however, exceed that which it would have received if the contract had been fully performed on both sides. Cal. Civ. Code, § 3358.

         “Contractual damages are of two types-general damages (sometimes called direct damages) and special damages (sometimes called consequential damages).” Lewis Jorge Constr. Mgmt, Inc. v. Pomona Unified Sch. Dist., 34 Cal.4th 960, 968 (2004). General damages are “those that flow directly and necessarily from a breach of contract, or that are a natural result of a breach.” Id. Because general damages are “a natural and necessary consequence” of a breach, they “are often said to be within the contemplation of the parties, meaning that because their occurrence is sufficiently predictable the parties at the time of contracting are ‘deemed' to have contemplated them.” Id. In contrast, consequential damages “are those losses that do not arise directly and inevitably from any similar breach of any similar agreement. Instead, they are secondary or derivative losses arising from circumstances that are particular to the contract or to the parties.” Id.

         B. Plaintiffs Damages

         1. The ...


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