                              UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT


                              No. 13-1369


VCA CENVET, INCORPORATED, now known as Antech Diagnostics
Incorporated,

                Plaintiff – Appellant,

           v.

CHADWELL ANIMAL HOSPITAL, LLC,

                Defendant – Appellee.



Appeal from the United States District Court for the District of
Maryland, at Baltimore.      James K. Bredar, District Judge.
(1:11-cv-01763-JKB)


Argued:   December 10, 2013              Decided:   January 16, 2014


Before NIEMEYER, SHEDD, and KEENAN, Circuit Judges.


Affirmed in part, reversed in part, and remanded by unpublished
opinion. Judge Shedd wrote the opinion, in which Judge Niemeyer
and Judge Keenan joined.


ARGUED: Brian E. Casey, BARNES & THORNBURG, LLP, South Bend,
Indiana, for Appellant.       Meighan Griffin Burton, WRIGHT,
CONSTABLE & SKEEN, LLP, Baltimore, Maryland, for Appellee.   ON
BRIEF: David R. Pruitt, BARNES & THORNBURG LLP, South Bend,
Indiana; Patrick R. Buckler, SPENCE & BUCKLER, P.C., Towson,
Maryland, for Appellant.    Michael Gordon, WRIGHT, CONSTABLE &
SKEEN, LLP, Baltimore, Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit.




                                2
SHEDD, Circuit Judge:

                                            I.

     In December 2009, VCA Cenvet, Inc. (now known as “Antech

Diagnostics,         Inc.”),     a    California    corporation          that    provides

commercial         laboratory    services,       entered    into     a    Lab    Services

Agreement          (“LSA”)     with    Chadwell     Animal    Hospital,          LLC,     a

veterinary         hospital     in    Abingdon,    Maryland. 1     Under        the   LSA,

Chadwell agreed to purchase lab services exclusively from Antech

for four years in exchange for discounted prices and rebates.

Antech agreed that if Chadwell used its services exclusively and

purchased at least $78,000 worth of services per year (or $6,500

per month), Antech would issue Chadwell a “loyalty rebate” equal

to 17% of its purchases each month.

        In October 2010, Chadwell learned that VCA Cenvet was a

subsidiary of the corporation VCA Antech. Chadwell’s principals,

Drs. Keith Gold and Ruby Schaupp, did not approve of Antech’s

business          philosophy    and    decided     they    would     no    longer       use

Antech’s services. Chadwell then entered into a lab services

contract with another provider.

        Antech filed this lawsuit in the United States District

Court       for    the   District     of   Maryland,      alleging       that    Chadwell

breached the LSA’s exclusivity provision. Antech sought damages

        1
            By its terms, the LSA is governed by California law.




                                            3
equal to its expected gross revenue for the remainder of the

LSA’s term, plus the rebates and discounts it had already given

Chadwell, totaling $273,000. In the alternative, Antech alleged

that       Chadwell     had    been    unjustly      enriched        by    the    receipt    of

discounted rates premised on the completion of the LSA’s four-

year       term.      Antech     sought     restitution         of    the        rebates    and

discounts        Chadwell      received       prior      to     the       breach,    totaling

$44,844. Chadwell conceded that it breached the LSA but argued

that   the      terms    of    the    contract     limited       Antech’s        recovery    to

$16,096.66, the amount of the rebates.

       The      parties       filed     cross-motions          for    summary       judgment.

Chadwell        argued    that    the      terms   of    the    LSA       limited    Antech’s

damages to repayment of the rebates and that awarding Antech its

lost profits would be unconscionable. 2 Antech appeared to argue

that       it   was    entitled       to   recover      both    the       rebates    and    its

expected gross revenue for the remainder of the four-year term. 3



       2
       Chadwell also argued that Antech was estopped from seeking
damages beyond the rebates and that Antech’s unjust enrichment
claim failed as a matter of law because there was an express
contract between the parties. The district court concluded there
was no equitable or promissory estoppel or unjust enrichment
claim. The parties have not appealed these decisions.
       3
        As the district court noted, Antech’s memorandum in
support of its motion for summary judgment was “somewhat opaque”
as to what judgment it would have the court enter. VCA Cenvet,
Inc. v. Chadwell Animal Hosp., LLC, 2012 WL 4005542, at *6 (D.
Md. Sept. 10, 2012).




                                              4
      The district court rejected Chadwell’s argument that the

default provision in Section 3.2 of the LSA limited Antech’s

recovery to repayment of the rebates. The court held that, if

Section 3.2 was a liquidated damages provision, it was void as a

penalty. The court also rejected Antech’s argument that it was

entitled     to       recover    both    the   amount     of   the     rebates       and    its

expected gross revenue. The court then explained that neither

party      had   “submitted       the    evidence    or     arguments        necessary       to

truly test whether there is any dispute of material fact between

them that would require resolution by a jury.”                         2012 WL 4005542,

at   *7.    Accordingly,         the    district    court      held    the    motions       for

summary judgment in abeyance and ordered further briefing on the

issue of lost profits.

      In    its       supplemental      briefing,    Antech        requested        an    order

awarding it damages in the amount of its lost profits, totaling

$198,644.        In    response,       the   district     court       held    that       Antech

failed      to    establish      the    occurrence       and    extent       of     its    lost

profits     with      reasonable       certainty    and     that      an    award    of    lost

profits would result in Antech’s unjust enrichment. The court

further held that even if Antech had established lost profits of

$198,644, such an award would be unconscionable. The district

court then concluded that Antech could not recover the discounts

it   provided         Chadwell    under      the   LSA    because      it    had    provided

Chadwell the same discounts before the parties entered into the


                                               5
contract. Finally, the court held that Antech was entitled to

recover $16,096.66 for the rebates. Accordingly, the district

court granted Chadwell’s motion for summary judgment, awarding

Antech $16,096.66 in damages, and denied Antech’s cross-motion.

       On appeal, Antech argues that the district court erred in

denying   its   summary   judgment    motion    and   in   granting   summary

judgment for Chadwell. We may review the district court’s denial

of Antech’s motion for summary judgment because it is appealed

along with the order granting Chadwell’s cross-motion. See Nat’l

Coal. for Students with Disabilities Educ. & Legal Def. Fund v.

Allen, 152 F.3d 283, 293 (4th Cir. 1998).

                                      II

       We review both the grant of Chadwell’s motion for summary

judgment and the denial of Antech’s motion for summary judgment

de novo. See Henson v. Liggett Group, Inc., 61 F.3d 270, 274

(4th   Cir.   1995).   When   faced   with     cross-motions   for    summary

judgment, we “review each motion separately on its own merits to

determine whether either of the parties deserves judgment as a

matter of law.” Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th

Cir. 2003) (internal quotation marks omitted). In considering

each individual motion, we “resolve all factual disputes and any

competing, rational inferences in the light most favorable to

the party opposing that motion.” Id. (internal quotation marks

omitted). The party moving for summary judgment has the initial


                                      6
burden of showing that no genuine issue of material fact exists

and that it is entitled to judgment as a matter of law. Estate

of Kimmell v. Seven Up Bottling Co. of Elkton, Inc., 993 F.2d

410, 412 (4th Cir. 1993).

                                     A.

       We first address the district court’s denial of Antech’s

motion for summary judgment, in which Antech sought $198,644 in

lost profits. Antech calculated these profits by subtracting its

estimated variable costs from its expected gross revenue for the

remainder    of   the   four-year   term.      To   determine   its   expected

revenue, Antech calculated its revenue under the LSA for 2010,

then applied a 4% annual increase for 2011-2013. Antech next

applied a constant 29% variable cost rate to to its expected

revenue for 2010-2013. Antech argues that the district court

erred in denying its summary judgment motion because Chadwell

failed to submit its own evidence of Antech’s lost profits and

therefore failed to create a genuine issue of material fact. We

disagree.

       Under California law, a plaintiff in a breach of contract

case   may   recover    damages   for       lost   future   profits   when   the

evidence makes their occurrence and extent reasonably certain.

See Grupe v. Glick, 160 P.2d 832, 840 (Cal. 1945). The award of

lost profits means the award of net, not gross, profits. Gerwin

v. Se. Cal. Ass’n of Seventh Day Adventists, 92 Cal. Rptr. 111,


                                        7
119 (Cal. Ct. App. 1971). “Net profits are the gains made from

sales after deducting the value of the labor, materials, rents,

and   all    expenses,    together     with   the       interest     of   the    capital

employed." Id. at 119-20 (internal quotation marks omitted).

      Although      Antech   factored        its       variable     costs    into    its

formulation of lost profits, it failed to account for its fixed

costs,      which   included    “salaries          &    wages,      contract     labor,

benefits,     travel,     consulting    services,         repairs    &    maintenance,

freight & delivery, telephone, occupancy, rent, depreciation &

amortization,       and   administrative       costs.”        J.A.    337.      Antech’s

proffered calculation of its lost profits is not sufficient to

support the grant of Antech’s summary judgment motion because

California law confines a plaintiff’s recovery for lost profits

to his profits after deducting all of his expenses. See Gerwin,

92 Cal. Rptr. at 119-20. Antech did include an estimation of its

fixed costs in the record, but because Antech failed to deduct

all of its costs from its expected revenue when it moved for

summary judgment, Antech has not established the occurrence and

extent of its lost profits as a matter of law. Accordingly, we

affirm      the   district   court’s     denial         of   Antech’s       motion   for

summary judgment. 4


      4
       Although the district court denied Antech’s motion for
summary judgment based on the insufficiency of Antech’s evidence
of its lost profits, we are not confined to the grounds relied
(Continued)


                                         8
                                       B.

    We next review the district court’s grant of Chadwell’s

motion for summary judgment. Although the district court held

that Section 3.2 of the LSA is not an enforceable liquidated

damages    provision,    Chadwell    argues      on    appeal     that   it   was

entitled to summary judgment because Section 3.2 is a liquidated

damages clause that limits Antech’s recovery to return of the

rebates.    In   the    alternative,        Chadwell   argues     that    summary

judgment   was   appropriate    because       awarding   Antech    its    claimed

lost profits would be unconscionable and because Antech cannot

establish its claim for lost profits with reasonable certainty.

We disagree with each of these contentions.

                                       1.

     Chadwell first argues that this court should affirm the

district   court’s     grant   of   its      motion    for   summary     judgment

because Section 3.2 of the LSA is a liquidated damages provision

that limits Antech’s recovery to return of the rebates. 5 The




on by the district court and can affirm the district court’s
decision on any legal basis supported by the record. Bryant v.
Bell Atlantic Md., Inc., 288 F.3d 124, 132 (4th Cir. 2002).
    5
        Section 3.2 of the LSA states:

          3.2     Default.  If  (i)  Animal  Hospital  Owner
     breaches    the exclusivity provisions set forth in
     Section 1    hereof . . . then such shall constitute an
     event of    default with respect to the Rebate. At any
(Continued)


                                       9
purpose of a liquidated damages provision is to “stipulate[] a

pre-estimate of damages in order that the parties may know with

reasonable certainty the extent of liability for a breach of

their contract.” ABI, Inc. v. City of Los Angeles, 200 Cal.

Rptr. 563, 573 (Cal. Ct. App. 1984). Under Section 3.2 of the

LSA,   Antech     can   recover    the   amount     of     the    previously    paid

rebates    upon     Chadwell’s      breach     of    the     LSA’s      exclusivity

provision. This is not a liquidated damages provision because it

provides only for a return of the rebates paid prior to the

breach; it is not a “pre-estimate of damages” that Antech would

suffer as a result of the breach. See id. There is simply no

reasonable      relationship      between     the   amount       of   rebates   that




       time after the occurrence of an event of default,
       Antech may declare the entire amount of the Rebates
       previously paid to be billable and due immediately;
       NOTE HOWEVER, if the Animal Hospital Owner lab volume
       during any month falls below the stated rebate
       threshold in [sic], the rebate will not be apply [sic]
       to that month BUT that does not constitute default as
       long as the exclusivity provisions set forth in
       Section 1 are maintained. The remedies available to
       Antech hereunder are intended to compensate Antech for
       the rebate and discounts provided hereunder, which
       rebate and discounts would not have been provided
       unless Animal Hospital agreed to the Minimum Average
       Annual   Fee  requirements    set   forth herein,   the
       requirements   set  forth   in    Section 1   regarding
       exclusivity, and the payment for Laboratory Services
       hereunder in a timely manner.

J.A. 23.




                                         10
Antech may have paid before Chadwell’s breach and the actual

damages     that    Antech   would      suffer     because    of   the     breach.

Accordingly, Section 3.2 of the LSA is not a liquidated damages

provision, and it does not limit Antech’s recovery to return of

the rebates.

                                        2.

     Chadwell      next   argues     that    the   district    court     properly

granted summary judgment in its favor because awarding Antech

its lost profits would be unconscionable. The district court

concluded    that    it   would    be    unconscionable       to   award   Antech

$198,644 in lost profits, explaining that the practical effect

of such an award would be to require Chadwell to pay for its

laboratory services twice for the three years remaining on the

LSA’s term—once to Antech for breaching the contract and once to

the replacement laboratory. The district court also expressed

concern that an award of lost profits would compensate Antech

nearly $200,000 for not performing any services and that Antech

did not detrimentally rely on the LSA because its agreement to

provide services was not exclusive.

     California law is clear that lost profits are recoverable

as damages for breach of a contract where evidence makes their

occurrence and extent reasonably certain, Sargon Enters., Inc.

v. Univ. of S. Cal., 288 P.3d 1237, 1253 (Cal. 2012), and the

damages are not unconscionable and grossly oppressive, see Cal.


                                        11
Civil Code § 3359. A damages award is excessive “only when it is

so    grossly    disproportionate         to    the   injury    suffered   that    the

award appears to be the product of passion or prejudice,” Saret-

Cook v. Gilbert, Kelly, Crowley & Jennett, 88 Cal. Rptr. 2d 732,

746 (Cal. Ct. App. 1999).

       The lost profits claimed by Antech are reasonably certain,

and there is no suggestion they are the product of such passion

or prejudice. We therefore hold that the district court erred in

concluding      that   an    award   of    Antech’s      lost   profits    would    be

unconscionable. 6

                                           3.

       Finally, Chadwell argues that we should affirm the grant of

summary judgment in its favor because Antech did not establish

its    lost     profits     with   reasonable         certainty.   In   considering

Chadwell’s summary judgment motion, we view all inferences in

the light most favorable to Antech as the non-moving party, see

Hardwick ex rel. Hardwick v. Heyward, 711 F.3d 426, 433 (4th

Cir. 2013), keeping in mind that Chadwell bore the burden of

establishing that Antech’s recovery was limited to return of the


       6
       The district court acknowledged in its opinion that each
of the concerns it raised with respect to awarding Antech its
lost profits is a “natural consequence[] of allowing plaintiffs
to seek lost profits for breaches of requirements contracts like
this one.” VCA Cenvet, Inc. v. Chadwell Animal Hosp., LLC, 2013
WL 2151659, at *5 n.6 (D. Md. Feb. 22, 2013).




                                           12
rebates   as     a   matter     of   law,   see    Kimmell,     993   F.2d   at   412.

Because we find that Chadwell failed to meet this burden, we

reverse    the       district    court’s         grant   of    Chadwell’s    summary

judgment motion.

     Antech introduced evidence of its lost profits in the form

of testimony from key executives, financial records detailing

actual invoices for services performed before Chadwell breached

the LSA, and documentation estimating Antech’s expected revenue

and projected costs. Viewing the evidence before the district

court in the light most favorable to Antech, the record tended

to show the occurrence and extent of Antech’s lost profits. See

Sargon Enters., 288 P.3d at 1253. Although Antech’s calculation

of its lost profits alone cannot support the damages award as a

matter    of   law,    we   find     that    Antech      has   introduced    evidence

sufficient to allow a proper calculation damages. Accordingly,

we reverse the grant of Chadwell’s motion for summary judgment.

                                        III.

     For the foregoing reasons, we affirm the denial of Antech’s

motion for summary judgment, reverse the grant of Chadwell’s

motion for summary judgment, and remand for further proceedings

consistent with this opinion.

                                                                 AFFIRMED IN PART,
                                                                 REVERSED IN PART,
                                                                      AND REMANDED




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