UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEW HAMPSHIRE
Alford Johnson, as Trustee
of the Martha Wood Trust
v. Civil No. 11-cv-459-JD
Opinion No. 2014 DNH 110
The Capital Offset
Company, Inc., et al.
O R D E R
Alford Johnson, as the trustee of the Martha Wood Trust,
brought suit against The Capital Offset Company, Inc.; its
president, Jay Stewart; a consultant who later worked for Capital
Offset, Stephen Stinehour; and Acme Bookbinding Company, alleging
claims arising from printing and binding a photography book,
Spiritual Passports. Capital Offset, Stewart, and Stinehour
move, in limine, to exclude evidence of damages for the costs
incurred in producing Spiritual Passports and evidence of lost
profits for books that were not sold. In response, Johnson
agrees that certain costs incurred for the production of
Spiritual Passports will not be claimed as damages but objects to
the motion to the extent it seeks to exclude other claimed
damages. The court directed the parties to brief the issue of
the application of the Uniform Commercial Code (“UCC”) in this
case, which they have done.
I. Application of the UCC - RSA Chapter 382-A:2
Capital Offset, Jay Stewart, and Stephen Stinehour contend
that RSA chapter 382-A:2 (“UCC”) governs the breach of contract
claim and defenses in this case.1 Johnson contends that the UCC
does not apply to the breach of contract claim because the
parties’ agreement was for services not for goods. The parties
agree that a contract existed between Johnson and Capital Offset
for printing and binding Spiritual Passports and that the
contract was not memorialized by a single signed document but
instead was provided in a “fluid process of estimates.” They
also agree that one of the estimates, dated July 9, 2009,
contains many of the contract terms.
The UCC applies to transactions in goods. RSA 382-A:2-102.
For purposes of the UCC, “goods” are defined as “all things
(including specially manufactured goods) which are movable at the
time of identification to the contract for sale . . . .” RSA
382-A:2-105. When a contract involves both goods and services,
the court may apply the “gravamen of the action” test or the
“predominant factor” test to determine whether the UCC governs.
In re Trailer & Plumbing Supplies, 133 N.H. 432, 435 (1990).
The “gravamen of the action” test “simply asks whether the
underlying action is brought because of alleged defective goods
or because of the quality of the service rendered.” Id. at 436.
The “predominant factor” test examines the nature of the
transaction in the contract and whether the predominant factor,
thrust, or purpose of the contract is the rendition of a service,
1
Johnson alleges breach of contract against only Capital
Offset. Therefore, the other defendants are not affected by the
issue of the application of the UCC in this case.
2
with goods incidentally involved, or is a sales transaction with
labor only incidentally involved. Id. (citing Bonebrake v. Cox,
499 F.2d 951, 960 (8th Cir. 1974)). An example given of a
service contract, with incidental goods, is a contract with an
artist for a painting, and an example of a sales transaction
contract, with incidental labor, is installation of a water
heater in a residence. Trailer & Plumbing,
133 N.H. at 436.
In this case, Johnson alleges that under their contract,
Capital Offset “agreed to print a certain number of copies of
Spiritual Passports in a manner consistent with Plaintiff’s
specifications and industry standards for the printing and
binding of fine art books.” Compl. ¶ 69. Johnson further
alleges that Capital Offset failed to print the books as agreed
and that Acme Bookbinding, as Capital Offset’s agent, failed to
bind the books as agreed. As such, the action was brought
because of the quality of the services provided by Capital
Offset, although the result was defective books. Under the
gravamen of the action test, therefore, the UCC does not apply.
Similarly, application of the predominant factor test weighs
in favor of a service contract. Like a contract for an artist to
paint a picture, Johnson hired Capital Offset to produce an art
book of photographs by printing the photographs and having the
pages bound into books. Therefore, the contract was for
services, printing and binding the books. See, e.g., Curtis
Publishing Co. v. Sheridan, 53 F.R.D. 642, 644 (S.D.N.Y. 1971);
accord Wills v. 10-X Mfg. Co.,
609 F.2d 248, 254 (6th Cir. 1979);
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see also Duro Bag Mfg., Inc. v. Printing Servs. Co., Inc., 2010
WL 3586855, at *5 (S.D. Ohio Sept. 9, 2010).
In Colonial Life Ins. Co. of Am. v. Elec. Data Sys. Corp.,
817 F. Supp. 235, 239 (D.N.H. 1993), the court concluded that a
contract for the license of computer software was a transaction
in goods for purposes of the UCC because the servicing
contemplated by the contract was to support the software product.
Here, in contrast, the services to be provided by Capital Offset
were the purpose of the contract, to produce the book. The UCC
does not apply to the breach of contract claim in this case.
II. Motion to Exclude Evidence of Damages
Capital Offset, Stewart, and Stinehour all move to exclude
evidence of damages based on the costs of producing Spiritual
Passports and damages due to lost profits. The motion appears to
focus on the breach of contract claim against Capital Offset, but
also mentions other claims in passing. The two categories of
damages are addressed separately.
A. Costs Incurred in Producing Spiritual Passports
The defendants challenge certain items listed as damages by
Johnson. In his response to the motion, Johnson agreed that
certain costs associated with producing Spiritual Passports are
not recoverable as damages because those costs would have been
incurred regardless of the defendants’ conduct. The remaining
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disputed damages are seventeen items for costs incurred between
June 1, 2006, and June 1, 2010.2
1. Breach of Contract
To the extent that Capital Offset relies on the provisions
of RSA 382-A:2 to exclude production costs, those arguments are
inapposite to this case.
“‘The goal of damages in actions for breach of contract is
to put the non-breaching party in the same position it would have
been in if the contract had been fully performed.’” Audette v.
Cummings, 82 A.3d 1269, 1275 (N.H. 2013) (quoting Robert E.
Tardiff, Inc. v. Twin Oaks Realty Tr.,
130 N.H. 673, 677 (1988)).
The nonbreaching party is entitled to consequential damages that
are caused by the breach and that “could have been reasonably
anticipated by the parties as likely to be caused by the
defendant’s breach.” George v. Al Hoyt & Sons, Inc.,
162 N.H.
123, 134 (2011). “The requirement of reasonable foreseeability
may be satisfied in either of two ways: (1) as a matter of law
if the damages follow the breach in the ordinary course of
events; or (2) by the claimant specifically proving that the
breaching party had reason to know the facts and to foresee
injury.”
Id. “A party claiming damages for breach of contract
must show, by a preponderance of the evidence, that the damages
were caused by the defendant’s alleged wrongful act, as well as
2
The list is reproduced as Appendix A to this order.
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the extent and amount of such damages.” Audette, 82 A.3d at
1275.
The disputed items are money paid to Stephen Stinehour to
produce and print a prospectus for the book and to consult on
printing, the costs of Johnson’s efforts to find a publisher, the
cost of a consultation for a distribution agreement, marketing
expenses, a fee paid to Susan Cox for art direction, and costs
for trips to Capital Offset and to Acme Bookbinding. Capital
Offset contends that the disputed amounts cannot be recovered as
damages for breach of contract because they were incurred in
producing the books and were not caused by any breach of the
contract. Johnson argues that the disputed damages are amounts
that were paid in preparation for producing Spiritual Passports
and are recoverable for breach of contract because those efforts
were wasted when the defendants’ conduct caused the failure of
the book.
The seventeen disputed amounts, which total $39,021.47, were
incurred in preparation to produce Spiritual Passports. Under
the circumstances of this case, Capital Offset likely had reason
to know that Johnson had spent money to prepare for publication
of the book and that breach of their contract would cause him to
lose the value of those preparations. Therefore, Johnson will be
allowed to present evidence of the disputed amounts to prove
damages, if he chooses to proceed under the lost costs of
production damages theory.
Johnson acknowledges that he cannot recover both the amounts
spent for wasted efforts in producing the book and his future
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costs for reproducing the book. He contends, however, that he
can present evidence of both although he can recover under only
one theory. To avoid confusing the jury, Johnson will be
required to elect which breach of damages theory he will pursue
at trial.
2. Breach of Fiduciary Duty
Johnson contends that certain amounts paid to Stinehour for
his consulting services, which are included in the challenged
costs, are recoverable as damages for Stinehour’s breach of
fiduciary duty. The defendants do not challenge any damages in
the context of the breach of fiduciary duty claim. Therefore,
those damages are not excluded.
3. Other Claims
The defendants state that “[t]he costs listed other than
incidental damages further cannot be recovered for plaintiff’s
claims of misrepresentation, fraudulent misrepresentation, or
violations of the Consumer Protection Act where, as a matter of
law, these costs were not incurred as a result of the alleged
wrongful conduct.” The defendants do not identify which costs
are incidental damages and which are those that could not be
recovered under the tort claims, leaving the issue unclear.
Therefore, the disputed damages items cannot be excluded for
purposes of the other claims.
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B. Lost Profits
The defendants also contend that Johnson cannot recover
damages for lost profits from the sale of Spiritual Passports
because Johnson does not have an expert witness to support that
claim for damages. The defendants argue that lost profits are
speculative and that in this case an expert is necessary to
establish lost profits. In addition, the defendants assert that
the costs incurred in producing the book and the amount Johnson
planned to charge in selling the book would show a loss rather
than a profit.
In response, Johnson argues that he is entitled to show his
lost revenue, as distinct from lost profits, on the sale of the
books. Johnson, apparently, concedes that sales of the books
would not have yielded provided a profit. He states that he
would have received 50% of the gross sales of Spiritual
Passports, which was to be sold for $75 a copy, and that those
revenues would have helped to offset the costs of production. He
further contends that the lost revenue claim does not require
expert testimony. Johnson again acknowledges that he is entitled
to damages for either the lost costs of producing the defective
book or the future costs that will be incurred in reproducing it,
but not both.
Based on the present motion and Johnson’s response, this
case does not raise an issue of lost profits. The defendants
have not argued that expert testimony is required in this case to
show lost revenue due to the failure of the publication of
Spiritual Passports. However, as is noted above, Johnson will be
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required to elect a theory of damages and will not be able to
proceed claiming both lost costs for producing the book and
future costs for reproducing the book.
Conclusion
For the foregoing reasons, the UCC, RSA chapter 382-A:2,
does not govern the breach of contract claim in this case. The
defendants’ motion to exclude certain evidence of damages
(document no. 126) is denied.
The plaintiff shall elect which damages theory he will
pursue and shall notify the defendants and the court of that
election on or before June 20, 2014.
The parties would be well-advised to discuss a resolution of
this case prior to expending additional resources to litigate it.
SO ORDERED.
____________________________
Joseph A. DiClerico, Jr.
United States District Judge
May 22, 2014
cc: Lawrence F. Boyle, Esq.
Gary M. Burt, Esq.
Anthony M. Campo, Esq.
Thomas J. Pappas, Esq.
Arnold Rosenblatt, Esq.
Mark W. Shaughnessy, Esq.
William N. Smart, Esq.
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APPENDIX A
DATE Description Amount Spent
6/1/06 Amount paid to Stephen Stinehour to print a prospectus. $900.00
07/14/06 Amount paid to Stephen Stinehour to prepare prospectus. $818.45
08/02/06 Amount paid to Stephen Stinehour for additional prints for $67.60
the prospectus.
02/16/07 New York visit to prospective publisher. $506.50
06/01/07 Amount spent to find a publisher. $874.45
03/22/07 Additional amount spent to find a publisher. $2,103.66
07/11/07 Consultation on distribution agreement. $1,800.00
02/21/08 Large print on canvas for marketing purposes. $575.00
06/02/08 Production advance to Fresco Fine Art Publications. $5,000.00
10/21/08 A marketing trip to the Peruvian Embassy. $246.38
07/04/09 Amount spent for layout and design prints. $4,724.65
07/15/09 Trip to Offset to check presses. $4,673.30
08/20/09 Additional art direction fee to Susan Cox. $10,000.00
10/26/09 Print consulting fee paid to Stephen Stinehour. $5,000.00
11/18/09 Trip to Acme Bookbinding. $639.06
12/17/09 Book signing in Taos, New Mexico. $642.42
06/01/10 Cost for marketing piece. $450.00
Total $39,021.47
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