R. E. Davis Chemical Corp. v. Diasonics

Diasonics, Inc. (defendant) manufactured magnetic resonance instruments (MRIs). Diasonics had the ability to make multiple MRIs, but it was new to the market and having difficulty finding buyers. R. E. Davis Chemical Corporation (Davis) (plaintiff) contracted to buy an MRI for $1.5 million from Diasonics, making a $300,000 deposit. Davis later refused to accept or finish paying for the MRI. Diasonics eventually found another buyer and sold the MRI to that buyer for $1.5 million. Diasonics refused to return Davis’s deposit, and Davis sued for its return. Diasonics counterclaimed for the profits that it lost due to Davis’s contract breach. Diasonics claimed that it was a lost-volume seller because it could have made two sales had Davis not breached the sale contract. The trial court found that Diasonics was a lost-volume seller but that it was entitled only to the difference between the contract price to Davis and the MRI’s resale price, which amounted to $0. Diasonics appealed. On appeal, the Seventh Circuit ruled that a lost-volume seller may recover the profits lost due to a breached sale contract. On remand, the trial court found that Diasonics had lost approximately $450,000 in profit due to Davis’s breach. Thus, Diasonics could keep Davis’s deposit, and Davis had to pay an additional $150,000. Davis appealed, arguing that Diasonics could not recover its profits because it had not specifically identified who bought the MRI that was originally intended for Davis.