On January 14, 2022, the Texas Supreme Court issued its opinion in Signature Industrial Services, LLC v. Ogden, _ S.W.3d _ (Tex. Jan. 14, 2022) [20-0396). The court address the age-old question of How to measure consequential damages in a breach of contract case? In its 30-page opinion, the supreme court answered that basic question and a few others. This article focuses on the former.
Facts: Signature Industrial Services, LLP (SIS) contracted with International Paper Company (IP) for SIS to provide services, with a total payment obligation of about $775,000. The scope of the project grew, and SIS invoiced $2.4 million in addition to what IP paid. See id. at 3. Before litigation between them ensued, SIS received an acquisition purchase offer of $42 million from a third party. IP was unaware of the potential purchase transaction. But, due allegedly to IP’s failure to make payment, SIS faced significant cash-flow issues which led to payroll taxes and other debts that SIS could not manage such that SIS “all but collapsed.” SIS and its president sued IP, alleging breach of contract and fraud claims. SIS then received three more offers from the prospective purchaser. The first was at the $42 million level, although with less cash up front. The latter two offers were around $10 million each. SIS rejected all of them and proceeded against IP. Id. at 4.
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