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August 24, 2020 in

Bloomberg Litigation – Breach of Contract

Bloomberg Litigation – Breach of Contract

Mike Bloomberg, a businessman, philanthropist, and former Mayor of New York boasted a total of $900 million raised for his presidential campaign, the most ever for a self-funded politician. Unfortunately for him and his many employees, his bid for the White House was short-lived as he dropped out of the 2020 Democratic presidential primary in early March.

mike bloomberg breach of contract violation watts guerra

The inability to gain democratic voter backing was Bloomberg’s ultimate demise, even after a strong social campaign that had him being accused of “purchasing” voters, which led to his endorsement of Joe Biden. Now all that remains of his campaign is a hefty lawsuit by former employees.

Bloomberg is now facing a lawsuit by four ex-organizers after they were laid off from their jobs as a result of Bloomberg’s failed presidential campaign. The lawsuit filed in federal court in the Southern District of New York claims a breach of contract by the Bloomberg campaign after Bloomberg prematurely dismissed employees, ultimately donating the remaining budget to the Democratic National Committee. Employees claim they were promised compensation and benefits through the election season in November 2020, regardless of whether Bloomberg won the nomination. The reliance on false promises by Bloomberg’s employees may provide them damages in a breach of contract claim.

What is a Contract and a Breach of Contract?

The Restatement 2nd of Contracts, which informs judges and attorneys of the principles of contract common law, lays out the definition of a contract in section 1, stating the key aspects of a contract: (1) a promise, (2) breach of which the law will remedy, or (3) performance recognized as a duty.[1] To prove a contract exists a party must prove that their contract includes an offer, acceptance, and consideration. Moreover, contracts can be made using a written or oral agreement, as long as the statute of frauds does not require the contract to be in writing.

A breach of contract occurs when there has been a violation of a contractual obligation, essentially meaning a promise has been broken as one party failed to fulfill their side of the agreement. One may breach a contract by anticipatory repudiation, which occurs before the performance of a contract has begun or by an actual breach.[2] A material breach may occur in circumstances depriving the injured party of a benefit he reasonably expected[3].

In layman’s terms, a breach of contract exists when a contract existed, it was broken, and a party has suffered a loss. Here, the ex-organizers allege a contract existed that promised them pay and benefits until November. As a result of their firing, the employees have suffered a loss of pay and benefits during a time when the number of unemployed workers is rising due to COVID-19. If such a contract does exist then the ex-organizers likely have a viable claim for a breach of contract.

Types of Damages for Breach of Contract

The purposes of damages for a breach of contract are to make the aggrieved party whole again. There are three types of damages to consider: expectancy, reliance, and restitution.

Expectancy damages are awarded to put the aggrieved party in as good a position as if the contract had been performed. Expectancy damages can be calculated by subtracting the value received from the value promised. For example, say you have a contract with a farmer for 100 oranges, valued at $100, and the farmer only delivers 75 oranges. Your expectancy damages would be $25. Here, if the court were to award expectancy damages they would take the value promised, compensation, and pay through November and subtract the value received, the compensation and benefits employees received from December to March when Bloomberg ran his campaign.

Bloomberg Breach of Contract by Watts Guerra

Next, are reliance damages which are used when a party cannot get expectancy damages. This occurs if lost profits are too uncertain or speculative or if you have a losing contract that even if it had been fulfilled, you would not make a profit. In these situations, you can still recover reliance damages because the other party’s breach took away the chance of you making the profit. For example, say you spent $5000 to put in a fence in a house in order to sell it to Y, who promised to pay you $5000 for the fence. Y then decides to not purchase the house and you have now spent $5000 because you relied on Y to purchase the house. By awarding you $5000 the court is putting you in the same position as if the promise had never been made.

Finally, restitution damages are meant to put the breaching party back in their pre-contract position. Restitution damages require a defendant to forfeit any benefit or gain they have obtained to the plaintiff. For example, suppose you agree to sell a painting to Y for $1000. If you sell the car to a different party than Y, you may be required to pay Y restitution damages.

There are several policy concerns underlying contract law. One that is important to all contracts is the expectancy policy. This is when a party makes a promise to another party, creating an expectation in the party that a promise was made to be fulfilled. The court system must balance the idea of rules versus justice in contract law as they determine the proper damages for those suffering from the consequences of a breach of contract.

What’s Next?

As of now, an amended complaint has been filed and the case is filed as three class-action lawsuits against Bloomberg from organizers of his campaign. Bloomberg has until June 1, 2020, to answer the complaint.[4]

In their complaint, the plaintiffs are seeking a trial by jury and upwards of $5 million in damages from Bloomberg.[5] After the initial lawsuit was filed, an amended complaint was subsequently filed. Bloomberg has until June 1, 2020, to answer the complaint.[6]

Mike Bloomberg was ranked 8th on Forbes 400 list of America’s billionaires in 2019 with a net worth of $53.4 billion[7] and has only seen that number increase in 2020 to $60.1 billion.[8] The plaintiffs suing Bloomberg accepted their jobs with the understanding from their interview that they would be employed through November 2020, have a $6,000 monthly salary, a relocation stipend, health benefits, and travel reimbursement. Whether or not Bloomberg will be held liable for breach of contract is ultimately up to the court and it will be interesting to see how this case unfolds.

Written by:

Kelsey Abbey
Law Clerk
WATTS GUERRA LLP
Four Dominion Drive, Bldg. Three, Suite 100
San Antonio, Texas 78257
Phone: (210) 447-0500

Frank Guerra
Board Certified – Personal Injury Law
Texas Board of Legal Specialization
WATTS GUERRA LLP
Four Dominion Drive, Bldg. Three, Suite 100
San Antonio, Texas 78257
Phone: (210) 447-0500

 

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[1] Restatement (Second) of Contracts § 1 (1981)
[2] Restatement (Second) of Contracts § 250
[3] Restatement (Second) of Contracts § 241
[4] https://bloomberg2020case.com
[5] https://www.dailymail.co.uk/news/article-8238497/Mike-Bloomberg-hit-class-action-lawsuit-former-campaign-organizer.html
[6] https://bloomberg2020case.com
[7] https://www.forbes.com/profile/michael-bloomberg/#72d74e241417