BARBARA M.G. LYNN, Bankruptcy Judge.
Before the court is the Reorganized Debtors' Motion for Summary Judgment on All Future Damages Claims because such Claims are Barred by Settlement and Release, Accord and Satisfaction, Judicial Estoppel, and Equitable Estoppel, and Do Not Qualify for Administrative Expense Priority (the "Motion"), filed by Pilgrim's Pride Corporation ("PPC"), PFS Distribution Company, PPC Transportation Company, To-Ricos, Ltd., To-Ricos Distribution, Ltd., Pilgrim's Pride Corporation of West Virginia, Inc., and PPC Marketing, Ltd. (collectively, "Debtors"). The court held a hearing on the Motion on March 9, 2011, at which counsel for Debtors and certain Growers
The Objections are subject to the court's core jurisdiction pursuant to 28 U.S.C. §§ 1334 and 157(b)(2)(B). This memorandum opinion and order constitutes the court's findings of fact and conclusions of law. FED. R. BANKR.P. 9014 and 7052.
Debtors are large chicken integrators with operations in the United States, Puerto Rico, and Mexico. Debtors each commenced a voluntary chapter 11 case in this court on December 1, 2008 (the "Commencement Date"). The court consolidated these chapter 11 cases for joint administration pursuant to Rule 1015(b) of the FEDERAL RULES OF BANKRUPTCY PROCEDURE.
On April 1, 2009, the court entered the Order Pursuant to Section 502(b)(9) of the Bankruptcy Code and Bankruptcy Rule 3003(c)(3) Establishing the Deadline for Filing Proofs of Claim and Approving the Form and Manner of Notice Thereof (the "Bar Date Order"). Each of the Growers filed a proof of claim in accordance with the Bar Date Order (collectively, the "Proofs of Claim"). By their respective Proofs of Claim, the Douglas Growers, the El Dorado Growers, and the Enterprise Growers requested reimbursement for itemized prepetition expenses
On July 10, 2009, Debtors filed motions by which they sought authority to reject their contracts with the Growers (the "Rejection
In exchange for the Growers executing the Release Agreement, Debtors agreed to pay the Growers an aggregate consideration of $2,450,000, which Debtors tendered shortly after obtaining court approval
In the Motion, Debtors assert that the court should grant summary judgment with respect to the Growers' claims for Future Damages "because [such claims] are barred by the doctrines of settlement and release, accord and satisfaction, judicial estoppel, equitable estoppel, and because they do not qualify for administrative expense priority." Motion at 2. Because the court agrees with Debtors that the Release Agreement, coupled with PPC's tender of $2,450,000, bars the Growers' claims for Future Damages, the court need not consider PPC's other arguments.
The effect of the court's order approving the Release Agreement was the rejection of any of the Growers' contracts which had not been previously terminated. Rejection of a contract under 11 U.S.C. § 365 provides the non-debtor party with a prepetition claim for breach of contract damages. See In re El Paso Refinery, L.P., 220 B.R. 37, 40 (Bankr.W.D.Tex. 1998) ("[T]he act of rejection is deemed to equal a breach of the contract occurring the day prior to the filing of the bankruptcy petition, and the non-debtor is given a pre-petition claim for damages arising from such a breach, measured (in the usual case) by the terms of the contract and applicable state (or federal) law."); see also 11 U.S.C. § 502(g). As set forth above, the Release Agreement provides that, in exchange for Debtors' tender of the $2,450,000 payment, the Growers agree to release Debtors from any and all liability for "all breach of contract claims, including all claims for contract rejection damages." DX A.1, app. 004-005. Thus, to the extent the Growers claims for Future Damages run to the rejection of their growing contracts (or to any breach of contract which occurred prepetition), such claims were satisfied by the Release Agreement and may no longer be maintained.
As Debtors note, the key question presented to the court is "whether the Future Damages ... now claimed by the Growers are simply the already-released, breach-of-contract damages under a different name." Brief to Motion at 13. Neither party disputes that lost profits are a measure of damages for breach of contract under Arkansas, Alabama, Georgia, and North Carolina law.
The problem with the Growers' argument is that an award of Future Damages in connection with the Growers' excepted claims would result in double recovery. Lost profits are typically recoverable for breach of a contract "where the business has been established, has made profits and there are definite, certain and reasonable data for their ascertainment, and such profits were in the contemplation of the parties at the time of the contract...." KAR Printing, Inc. v. Pierce, 276 Ga.App. 511, 623 S.E.2d 704, 705 (2005); see also Keith v. Day, 81 N.C. App. 185, 343 S.E.2d 562, 568 (1986); Gadwall Prods., Inc. v. Fletcher, No. CA 06-1265, 2007 WL 1556089, at *6 (Ark.Ct. App. May 30, 2007); Int'l Paper Co. v. Madison Oslin, Inc., 985 So.2d 879, 886-87 (Ala.2007). Damages for a breach of contract claim "are intended to place an injured party, as nearly as possible, in the same position they [sic] would have been if the injury had never occurred." John Thurmond & Assocs. v. Kennedy, 284 Ga. 469, 668 S.E.2d 666, 668 (2008); see also Goolesby v. Koch Farms, LLC, 955 So.2d 422, 427 (Ala.2006); First United Bank v. Phase II, Edgewater Addition Residential Prop. Owners Improvement Dist. No. 1 of Maumelle, 347 Ark. 879, 69 S.W.3d 33, 46 (2002); Lee Cycle Center, Inc. v. Wilson Cycle Center, Inc., 143 N.C. App. 1, 545 S.E.2d 745, 750 (2001). This is really another way of saying that the non-breaching party is entitled to expectation damages—that is, the benefit of its bargain. See, e.g., Cajun Forge Co. v. Anvil Int'l, Inc. (In re Cajun Forge Co.), No. 04-5074, 2008 WL 5144536, at *13 (Bankr.W.D.La.2008) ("A fundamental tenet of contract law ... is that a non-breaching party is entitled to damages that restore to the non-breaching party `the benefit of [its] bargain'—i.e. expectation damages." (quoting Duncan v. Theratx, Inc., 775 A.2d 1019, 1022 n. 6 (Del. 2001))).
The Release Agreement, by its plain language, provides that any claims for contract rejection damages (and any claims based on prepetition breaches of contract) the Growers may have had against Debtors were released. See DX A.1, app. 004-005. This release took effect upon entry by the court of the order approving the Release Agreement and payment to the Growers by Debtors of the $2,450,000 consideration. By becoming parties to the Release Agreement, the Growers agreed to accept $2,450,000 as expectation damages. To the extent lost profits (i.e., Future Damages) were required to provide the Growers' with the benefit of their bargain with Debtors, such Future Damages were necessarily included within the $2,450,000 consideration paid to the Growers, and the Growers were barred from further seeking such damages. See Schmaltz v. Walder, 566 S.W.2d 81, 83 (Tex. Civ. App.—Corpus Christi 1978, writ ref'd n.r.e.) ("A settlement agreement and release ... is a complete bar to any later action based on matters included in the settlement agreement and covered by the
As noted above, the Growers stake their claim to Future Damages on the proposition that, since the claims excepted from the Release Agreement are for causes of action other than breach of contract/contract rejection damages, the Growers may recover Future Damages to the extent applicable law allows such damages to be collected under the excepted causes of action. To this end, the Growers point out that "[t]he proper measure of damages for fraud is expectation damages including the benefit of the bargain."
Nor are the Growers' arguments regarding the other bases for their claims (e.g., under the North Carolina Unfair or Deceptive Trade Practices Act and the Arkansas Deceptive Trade Practices Act, or for breach of fiduciary duty) any more persuasive.
The Growers' argument further is inconsistent with bankruptcy policy. Had the Growers not executed the Release Agreement, they likely would have been allowed claims for the rejection of their contracts pursuant to 11 U.S.C. § 502(g). Having received payment for these contract rejection claims, to award the Growers a second time the same damages on a tort theory of liability would clearly result in the Growers receiving substantially different (and better) treatment than other, similarly situated creditors. Assuming for sake of argument that general unsecured creditors in the case were paid pro rata (therefore receiving less than a 100% recovery on their claims), a double recovery (or doubled claim) for the Growers would result in a windfall at the expense of the other unsecured creditors. Such a result runs contrary to the Congressional policy that "equity is equality"—that is, similarly situated creditors should be treated the same. See, e.g., In re Elcona Homes Corp., 863 F.2d 483, 484 (7th Cir.1988). The fact that, in the case at bar, Debtors' plan of reorganization provided for full payment of unsecured creditors' claims (rather than a pro rata distribution) does not alter the court's conclusion that the Growers are entitled only to a single recovery of their damages.
In holding as it does, the court in no way suggests that the Growers are entirely prohibited from bringing any of the claims excepted from the Release Agreement; Debtors admitted as much when they stated that, assuming (for sake of argument) that Debtors used misrepresentations to induce the Growers to invest in or upgrade their chicken farms, "[the Growers'] investment (less profits) would represent the damages proximately caused by the representations"—i.e., the Growers would be entitled to reimbursement for out-of-pocket expenses, but not expectation damages. Brief to Reply to Growers' Response at 2. To the extent that the Proofs of Claim and the Administrative Expense Claims request damages other than Future Damages, the Growers may indeed be due recovery. But where, as here, an injured party enters into a contract to receive compensation in full satisfaction of certain damages, that party must be deemed whole with respect to those damages and be prohibited from seeking further redress. As the Court of Appeals for the Ninth Circuit recently noted, "[a]t some point, litigation must come to an end."
For the foregoing reasons, the Motion is GRANTED, and, to the extent they request Future Damages, the Siler City Growers' proofs of claim and the Administrative Expense Claims are DENIED.