## Facts

- Maine Rubber International planned to relocate its tire-manufacturing business to a new site known as the DuraStone property.
- Maine Rubber entered into a purchase-and-sale agreement for the DuraStone property that included an environmental condition.
- Maine Rubber hired Environmental Management Group, Inc. (EMG) to perform a Phase I Environmental Site Assessment for a \$1,900 fee.
- EMG reported that its Phase I assessment found no environmental hazards on the property.
- Relying on EMG’s report, Maine Rubber waived the environmental condition and proceeded toward completing the DuraStone transaction.
- In anticipation of moving to DuraStone, Maine Rubber spent money on items such as engineering work, site-plan consulting, site studies, legal fees, and other relocation-preparation expenses.
- More than six months after EMG’s report, the U.S. Environmental Protection Agency and the Maine Department of Environmental Protection identified environmental hazards at the DuraStone property.
- Maine Rubber faced time pressure and did not proceed with an orderly relocation to DuraStone; instead, it terminated the DuraStone purchase agreement and moved to a different property.
- Maine Rubber claimed it incurred higher relocation costs, lost profits from disruption, and wasted expenditures tied to the abandoned DuraStone move.
- Maine Rubber sued EMG for breach of contract; a jury found EMG in breach and awarded Maine Rubber \$1,900 (contract price), \$211,625 (out-of-pocket preparation expenses), and \$486,600 (lost profits).

## Issues

1. Whether Maine Rubber’s lost profits were recoverable as contract damages for EMG’s breach—specifically, whether the evidence showed such losses were within the parties’ contemplation and reasonably foreseeable when the Phase I contract was made.
2. Whether Maine Rubber’s out-of-pocket expenditures paid to third parties in preparation for moving to DuraStone were recoverable as foreseeable, non-speculative damages caused by the breach.
3. Whether EMG was entitled to a new trial on damages after the jury verdict.
4. Whether the judgment should be amended to include prejudgment interest on the damages that remained recoverable.

## Decision

- The court granted EMG’s renewed motion for judgment as a matter of law in part and set aside the jury’s \$486,600 lost-profits award.
- The court denied the renewed motion in part and left intact the jury’s \$1,900 contract-price award and \$211,625 award for Maine Rubber’s out-of-pocket relocation-preparation expenses.
- The court denied EMG’s motion for a new trial on damages.
- The court granted Maine Rubber’s motion to alter or amend the judgment to include prejudgment interest on the recoverable damages.

## Legal Principles

- Contract damages are limited to losses that arise naturally from the breach or were within the parties’ reasonable contemplation as a probable result of breach at the time of contracting.
- Lost profits are a form of consequential damages and require proof that the type of profit loss claimed was reasonably foreseeable to the breaching party when the contract was formed.
- A relatively low-cost, limited-scope service contract (such as a Phase I environmental assessment) does not, without supporting proof, make large lost-profit exposure foreseeable simply because the client planned a business relocation.
- Reliance-type expenditures paid to third parties in preparation for a transaction may be recoverable when they are a reasonably foreseeable result of the breach, supported by concrete proof, and not speculative.
- On renewed judgment as a matter of law, the court reviews the trial record in the light most favorable to the nonmoving party but may remove a damages award that lacks legally sufficient evidentiary support.
- A new trial on damages is not required where the surviving damages are supported by the evidence and are not against the weight of the evidence.
- Prejudgment interest may be awarded on compensatory contract damages as permitted by applicable state law to compensate for the time value of money.

## Conclusion

The District of Maine held that Maine Rubber did not present sufficient evidence that, when EMG agreed to perform a \$1,900 Phase I assessment, the parties contemplated EMG would be responsible for Maine Rubber’s relocation-related lost profits if the assessment was wrong; accordingly, the court struck the jury’s lost-profits award but upheld the contract price and the proven, foreseeable out-of-pocket expenses incurred in preparation for the DuraStone move, and amended the judgment to add prejudgment interest on the remaining damages.


Maine Rubber International v. Environmental Management Group, Inc., 324 F. Supp. 2d 32 (2004)