SAMPLE – CASE BRIEF: CARDINAL CONSULTING CO. v. CIRCO RESORTS, INC., 297 NW 2d 260 (Minn. 1980) Plaintiff: Cardinal was a Minnesota corporation with two principals, O=Neill and Haas, formed to promote travel tours from the Midwest to Las Vegas on airplanes chartered by Cardinal for that purpose. The company would book hotel rooms in Las Vegas at a discount rate and would send one group to Las Vegas by plane while returning from Las Vegas with another group.

Parties:

Plaintiff: Cardinal was a Minnesota corporation with two principals, O=Neill and Haas, formed to promote travel tours from the Midwest to Las Vegas on airplanes chartered by Cardinal for that purpose. The company would book hotel rooms in Las Vegas at a discount rate and would send one group to Las Vegas by plane while returning from Las Vegas with another group.

Defendant: Circo was a Nevada corporation which operated the Las Vegas Hotel, Circus Circus.

Procedural History:

Cardinal brought a lawsuit in Minnesota against Circo. Cardinal claimed that Circo had breached a contract between the parties.

The parties had jury trial in Minnesota and the jury found in favor of Cardinal and against Circo for $71,500, all of which except $1,905. was for lost profits, not actual expenses paid out by Cardinal.

Circo moved the trial judge to set aside the jury=s award, or to have a new trial, or to elinate the lost profits from the award as too speculative. The trial judge denied Circo=s motions.

Circo brought this appeal to the Supreme Court of Minnesota, which affirmed the trial court=s judgment.

Facts:

The alleged contract was that Circo would reserve 50 hotel rooms in Hotel Circus Circus for Cardinal at an agreed price of $18. per night, later reduced to $16. per night on weeknights. The reservations would be for a period from January 11, 1976, through April 22, 1976. The parties made this verbal agreement in June, 1975, and Cardinal confirmed the deal in writing by a letter on June 18, 1975.

In early October, 1975, Valentine, the representative of Circo, met again with O=Neill and Haas of Cardinal to find out how their promotion was going. Cardinal told Valentine there might be a problem selling out the first three tours in January, so Valentine told them there would be no problem cancelling in January because that was a slow season in Las Vegas. Cardinal sent another letter to Valentine on October 18, 1975, requesting rooms to be reserved in 1977 as well as requesting an extension of the 1976 program, but made no mention of possible cancellation of som January, 1976, tours.

On December 19, 1975, Cardinal told Valentine that Cardinal was cancelling the first three tours in January, which was confirmed by a Cardinal letter of December 16.

Valentine met with Cardinal on December 13, 1975, and presented a written contract for Cardinal to sign. Cardinal refused to sign the contract because it had different terms than they had already agreed. The written contract had been prepared by a new manager at Circo. The new Circo manager refused to rewrite the written contract to reflect the formerly agreed terms and stated that without this new agreement being signed there was no contract.

On January 5, 1976, Cardinal received a letter from Circo cancelling the rooms that had been reserved by Cardinal. Cardinal cancelled some of their booked flights and later reached an agreement with a newly opened Las Vegas hotel for rooms and salvaged as much of their season as possible by booking some tours, eight of which they managed to book at 100 percent capacity, although not back-to-back. Cardinal=s business was ruined by their problems with Circo and Cardinal went out of business.

Cardinal claimed they lost profits that they would have earned had Circo complied with the terms of their contract.

Legal Issues:

1. Was there a binding contract between Cardinal and Circo? Most of the terms were agreed verbally and were never reduced to writing beyond a couple of letters.

2. Did Cardinal have the right to cancel its three January trips? Did Circo then also have a right to cancel its reservation, as it claimed was the standard in the Las Vegas hotel industry?

3. Was Cardinal damaged by a breach of contract by Circo? Since Cardinal was a newly started business how could it prove that would have succeeded if the contract were not breached?

4. Was Cardinal required to have an economic expert to prove its lost profits, since it had no definite figures on expenses it saved from not carrying out this work and its claimed profits were speculative? Circo said Cardinal=s business failed because it was just a couple of guys working out of a house with insufficient operating capital.

5. Should the trial judge have reduced or thrown out the amount awarded by the jury as excessive?

Result:

The appeals court affirmed the trial court. It said the jury had sufficient evidence to find that there was a valid contract, that the terms of the contract allowed Cardinal to cancel some trips but did not allow Circo to cancel, and that the profits claimed to have been lost by Cardinal were reasonable. The appeals court stated that the trial judge was in the best position, along with the jury, to make determinations about the credibility of the witnesses and sufficiency of the evidence, so the trial court would not substitute its judgment for the facts found by the trial judge and jury.

Legal Discussion:

The court considered whether a valid contract could be entered into verbally by the parties with just two letter providing some verification. The court found that the contract was sufficient.

The court found that there was sufficient consideration flowing between the parties, since Cardinal relied to their detriment on Circo=s promises and Circo was benefitted by advertising promulgated by Cardinal.

The court considered whether the contract was specific enough to allow Cardinal to cancel three trips and found that the contract allowed this and that Cardinal had provided sufficient notice.

The contention by Circo that it also had the right to cancel, although verified by Circo=s expert witness, was not validated by other evidence and was inappropriate according to the testimony of Cardinal=s expert witness, which the court found credible.

There was a lengthy consideration as to whether Cardinal had reasonably proven it damages, since it had not previously been in business and its later business failed. There was no history to justify this profit. The court looked to similar businesses, to the credentials of Cardinal=s principles and to the actual success which Cardinal had in running some trips by using an unknown Las Vegas hotel. The court found that no expert witness was required to prove the lost profits even though there was no evidence as to expenses which might not have been incurred.

Comments:

Note that the court was in Minnesota, which was probably more sympathetic to the Minnesota corporation than to the Nevada company. The description of the actions by the Nevada company sounds pretty heavy handed.

Note that many cases were cited from other states= jurisdictions.

Learn from the mistakes of Cardinal that contracts should be reduced to writing and provided with specific terms.

Be aware that a new business has a distinct disadvantage in trying to prove lost profits until it has a history of making profits. The court said that any other result would have allowed a wrongdoer to get away with causing damage just because the damaged company was a new business.

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