Court of Special Appeals of Maryland - 53 Md. App. 656
In the 1983 case, Wartzman v. Hightower Productions, Ltd., the Maryland Court of Special Appeals dealt with a breach of contract dispute involving a corporation and its attorney. Hightower Productions, Ltd. formed with the goal of setting a flagpole sitting world record by singer-entertainer Woody Hightower. To do this, they hired lawyer Paul Wartzman to properly incorporate the venture and obtain authorization for stock sales to fund the project. However, Wartzman failed in these tasks.
As a result, the project was abandoned, and Hightower Productions sued Wartzman for breach of contract and negligence, seeking damages for expenses incurred based on their reliance on the contract. The jury awarded $20,000 in damages to the plaintiff, which Wartzman appealed, claiming the damages were excessive and speculative, and that Hightower Productions didn't mitigate its losses.
The appellate court upheld the award, stating that the plaintiff was entitled to recover damages for expenses incurred in reliance on the contract. The court rejected Wartzman's argument that the plaintiff should have hired another attorney, as this would create an additional burden and not guarantee success.
This case is important because it highlights the principles and limitations of reliance damages in contract law. Reliance damages aim to return the injured party to the position they would have been in had the contract not been made, but are subject to restrictions such as foreseeability, causation, certainty, mitigation, and avoiding double recovery. The case also demonstrates how courts may award damages for out-of-pocket expenses incurred as a result of contract reliance, particularly in cases where expectation damages are too speculative or uncertain.
The case involves a dispute between Hightower Productions LTD. and their law firm over breach of contract and negligence. Hightower sued the law firm for failing to prepare an offering memorandum and ensure that the corporation made the required disclosures to prospective investors. The jury awarded Hightower $170,508.43 in damages, but the law firm appealed, arguing that the trial court erred in allowing Hightower to recover "reliance damages" or "development costs." The court held that the recovery of damages based on reliance interest is limited, and the breaching party can avoid being a guarantor of the success of the venture by proving loss. The contention that allowing reliance damages in a case makes the breaching party an insurer of the venture is without merit.
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