Pacific Controls Inc. v. Cummins Inc.

Background

Before trial, Pacific Controls Inc. and Cummins Inc. submitted several motions in limine, which are requests to decide in advance whether particular evidence may be presented at trial. The order addresses Cummins’s motion concerning damages allegedly based on a debt owed by Pacific Controls to Pacific Controls Dubai, Cummins’s motion concerning pre-contract damages, and refers to the parties’ other motions.

The only remaining claim was Pacific Controls’s breach-of-contract claim under Indiana law. Pacific Controls had previously sought pre-contract expenditures in connection with a fraud claim, but that fraud claim did not survive summary judgment. Pacific Controls then sought to present those expenditures as damages for breach of contract.

Debt and quasi-estoppel defense

Cummins argued that Pacific Controls should be barred from claiming a debt to Pacific Controls Dubai because Pacific Controls allegedly failed to disclose the debt to the Internal Revenue Service. Cummins relied on quasi-estoppel, an equitable doctrine that can prevent a party from accepting a benefit from a transaction or statute and later taking an inconsistent position to avoid a related obligation.

The court denied Cummins’s motion seeking to prevent Pacific Controls from recovering damages based on the alleged debt. The court stated that Cummins had the burden to establish the affirmative defense but had not shown that the doctrine applied under Indiana law. Although the court noted that the Second Circuit had applied the doctrine in a tax-related context, Cummins did not show that Pacific Controls had received any benefit from not reporting the alleged debt. The court explained that quasi-estoppel generally prevents a party from benefiting twice from inconsistent positions, and the record did not show that Pacific Controls had already received such a benefit.

The court also stated that the parties’ briefing did not identify specific tax-code provisions sufficient to determine what Pacific Controls was required to report or whether it violated those requirements. As a result, Cummins could not press the affirmative defense at trial.

Pre-contract damages

The court reaffirmed its preliminary ruling excluding evidence of pre-contract costs and expenditures. Under Indiana law, reliance damages must be caused by the breach and must flow directly and naturally from it. Reliance damages generally seek to place the injured party in the position it would have occupied if the contract had not been made.

The court reasoned that, if the Master Agreement had never been executed, Pacific Controls would already have incurred the millions of dollars it spent pursuing the contract. Awarding those pre-contract expenses in a breach-of-contract action would therefore place Pacific Controls in a better position than it would have occupied had the contract never been made.

The court rejected Pacific Controls’s reliance on two cases. It found that one involved damages incurred after an oral agreement had been entered, rather than before any agreement. It found the other distinguishable because the appellate decision in that case allowed only certain expenditures incurred after the parties agreed to a letter of intent. The court stated that there was no evidence here of a letter of intent or other binding agreement before the Master Agreement.

Other motions and disposition

The order states that Pacific Controls’s omnibus motion, Cummins’s motion to preclude Pacific Controls’s damages expert Chris Nazareth from testifying, and Cummins’s omnibus motion were resolved according to the court’s rulings on the record at the final pretrial conference. The clerk was asked to close the motions pending at ECF Nos. 169, 173, 175, 177, and 199. The order does not provide the individual dispositions of those other motions.