## Facts

- Plaintiffs negotiated with defendants’ agent for a ten-year lease of concession space for a fast-food Chinese kitchen to be built in a shopping mall.
- The parties executed a contract to lease in January 1972, and plaintiffs paid a \$1,666 deposit.
- In reliance on the lease and defendants’ communications that the project was progressing, plaintiffs arranged financing, ordered equipment and furnishings, hired staff, advertised, and incurred other preparatory expenses.
- Defendants had previously granted a third party a right of first refusal related to the same premises.
- Defendants ultimately leased the premises to another party and returned plaintiffs’ deposit.
- Plaintiffs sued for breach of contract, seeking lost profits and damages for emotional distress.
- At trial, plaintiffs presented expert testimony estimating lost profits using an income-stream method based partly on a comparable Chinese kitchen operating in the same mall and expense estimates drawn from industry standards.
- The jury awarded plaintiffs \$175,000 in lost profits and \$50,000 for emotional distress.

## Issues

1. Whether a new or unestablished business may recover lost future profits for breach of a lease when profits are proved with reasonable certainty.
2. Whether emotional-distress damages are recoverable for breach of a commercial lease when the breach is accompanied by wanton or reckless conduct.

## Decision

- The Supreme Court of Hawai‘i affirmed the judgment for plaintiffs.
- It held that lost profits are recoverable by a new business if proved with reasonable certainty, and the jury could credit plaintiffs’ expert methodology and supporting comparables.
- It upheld emotional-distress damages because such damages may be awarded for breach of contract when the breach results from wanton or reckless conduct, which the evidence supported here.
- It affirmed the denial of defendants’ post-trial motions for judgment notwithstanding the verdict or a new trial.

## Legal Principles

- Lost profits are not categorically barred for a new business; they may be awarded when the plaintiff proves anticipated profits with reasonable certainty rather than speculation.
- Reasonable certainty may be shown through evidence of a closely comparable business (including similar operation, product, and customer base) and reasonably supported expense projections.
- Emotional-distress damages for breach of contract may be awarded when the breach is accompanied by wanton or reckless conduct.
- A party’s knowledge of the other side’s substantial reliance, combined with continued assurances and later leasing the promised premises to another, can support a finding of wanton or reckless breach.
- Where the record contains competent evidence supporting damages, appellate review defers to the jury’s resolution of conflicting testimony and will not reweigh credibility.

## Conclusion

The court sustained substantial damages for a breached commercial lease, holding that a new business may recover lost profits proven with reasonable certainty and that emotional-distress damages are available when the breach is wanton or reckless, as shown by defendants’ knowing disregard of plaintiffs’ reliance and reassurances followed by leasing to another.


Chung v. Kaonohi Ctr. Co., 62 Haw. 594, 618 P.2d 283 (Haw. 1980)