## Facts

- Sunday Players, Inc. and Daryl K. Washington (SP) entered a 2003 license agreement making Kellwood the exclusive manufacturer, licensee, and promoter of SP’s athletic compression-wear products.
- SP was a small start-up with limited historical sales (under $200,000 total).
- SP claimed Kellwood breached the agreement by failing to market and promote SP’s products.
- At trial, SP’s damages expert used a comparator (“yardstick”) approach based on Under Armour’s compression-wear revenues and market share, projecting SP would reach roughly half of Under Armour’s volume within a few years and calculating millions in lost profits and business value.
- A jury found Kellwood liable and awarded SP $4.35 million in damages.
- Post-trial, the district court held SP’s damages proof was speculative, vacated the verdict, and entered judgment as a matter of law for $1 nominal damages; it denied SP a new trial on damages.

## Issues

1. Whether the license agreement’s marketing-expenditure provision tied to SP’s sales eliminated Kellwood’s underlying marketing obligations.
2. Whether SP proved lost profits and lost business value with reasonable certainty, or whether the Under Armour comparator theory was too speculative to support the jury’s award.
3. Whether the district court abused its discretion by denying a new trial on damages when SP sought to present expanded theories and new damages evidence.
4. Whether challenged evidentiary rulings required reversal of the liability verdict.

## Decision

- The Second Circuit affirmed the liability judgment, rejecting the argument that the sales-based marketing-spend provision eliminated Kellwood’s duty to market.
- The court affirmed judgment as a matter of law reducing damages to $1 nominal damages because SP’s lost-profits and valuation proof lacked reasonable certainty.
- The court affirmed denial of a new trial on damages, holding the district court acted within its discretion in refusing a retrial based on new evidence and speculative theories.
- The court found no reversible evidentiary error affecting the liability determination.

## Legal Principles

- Under New York contract law, lost profits must be proven with reasonable certainty; speculation or conjecture cannot support substantial damages.
- A comparator (“yardstick”) damages model must rely on a reasonable comparator; projecting a start-up’s performance from an industry leader’s revenues and market position may be legally insufficient absent a sound basis.
- A contract clause tying marketing expenditures to sales may operate as a cap on spending rather than a condition that eliminates the duty to undertake reasonable marketing efforts.
- When breach is shown but compensatory damages are not proven with adequate certainty, the proper remedy may be nominal damages.
- Trial courts have broad discretion to deny new trials where a party seeks to relitigate damages using new evidence or substantially revised theories that could have been presented earlier.

## Conclusion

The Second Circuit upheld the breach-of-contract liability finding but affirmed vacatur of the $4.35 million verdict and entry of $1 nominal damages because SP, a start-up with minimal sales history, failed to prove lost profits or business value with reasonable certainty, and it was not entitled to a damages retrial based on new, expanded, and still speculative proof.


Washington v. Kellwood Co., 714 F. App’x 35 (2d Cir. 2017)