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Defendant Not Prejudiced by Disposal of Damaged Goods (Spoliation)/Lost Profits Recoverable Where Purchase Price Set at Time of Damage

The Second Department affirmed several rulings made by the trial court in the damages aspect of a trial in which plaintiff alleged defendant’s malfunctioning sprinkler system ruined over $1 million worth of clothing stored in the building. The fact that plaintiff disposed of some of the damaged clothes and sold the remainder for salvage (spoliation) did not prejudice the defendant. And, the fact that a purchase price for some of the goods had already been set at the time of the loss allowed recovery for lost profits because the loss was not speculative:

The Supreme Court providently exercised its discretion in denying that branch of the defendant’s motion which was pursuant to CPLR 3126 to preclude the plaintiff from offering at trial any evidence of damages based upon spoliation of evidence. The defendant failed to establish that it was severely prejudiced by the disposal and sale of the damaged goods, fatally compromising its ability to mount a defense and necessitating such relief as a matter of fundamental fairness… . * * *

“Generally, where property is damaged but not destroyed, the measure of damages is the difference between the market value before the damage and the market value afterwards” … . The market value of a merchant’s goods is the price at which they could be replaced in the market, not the retail price at which they could be sold … . This is because allowing recovery of the retail value of damaged goods “would in effect overcompensate the merchant by allowing recovery of unearned profits” (2-248 Warren’s Negligence in New York Courts § 248.01[3][b] [2013]).

Here, however, the plaintiff was not holding the goods in stock in anticipation of trying to sell them at retail for “uncertain and indefinite profits which the plaintiff might have made” from their sale … . Rather, the goods were already under contract for a specified price and awaiting delivery. “[W]here . . . a loss of profits is the natural and probable consequence of the [defendant’s negligence], and their amount is shown with reasonable or sufficient certainty, there may be a recovery” … .  Ever Win Inc v 1-10 Indus Assoc, 2013 NY Slip Op 07933, 2nd Dept 11-27-13

 

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