Gruber v. S-M News Co.

Gilbert Gruber (plaintiff) entered into an exclusive-dealership agreement with S-M News Co. (S-M) (defendant). Under the agreement, S-M was to sell up to 90,000 Christmas-card sets produced by Gruber. S-M had never sold Christmas cards before. S-M was to pay Gruber $0.84 for each set delivered. Gruber manufactured the sets, but S-M refused to sell any. Four years later, Gruber managed to sell 40,000 sets at $0.06 per set. Gruber sued S-M for breach of contract. The first trial court dismissed the action at the close of Gruber's case, concluding that the claim was barred by the statute of frauds. The court of appeals reversed and ordered a new trial. At the second trial, S-M attempted to prove that it had made a reasonably diligent effort to sell the cards. Three of S-M's distributors testified that the cards were not worth the $2 sale price given what other cards were available. S-M also had an expert testify that no more than 5,000 to 10,000 sets could have sold at that price. Gruber had an expert testify that S-M could have sold 80 to 85 percent of the cards. Gruber also offered evidence that one retailer would have purchased 50 sets of cards from S-M. Gruber requested damages for lost profits or, in the alternative, out-of-pocket expenses. Gruber also presented evidence of labor and materials expenses totaling $19,934.44. S-M argued that Gruber would have lost money even if S-M had performed in full. S-M was found liable for breach of contract. The trial judge then turned to a determination of the appropriate measure of damages.