In Penn Vending Co. v. Ronald D. Savage, Inc., et al., download file,
plaintiff brought counts against defendants for alleged breach of contract and lost profits in the amount of $220,000. Most of the claim was denied based on the defense of illegality. Under the terms of the contract, Penn Vending, Co. was to supply and maintain certain entertainment equipment (coin operated music, pool tables, music, etc.) to Ron’s Place, a bar and restaurant operated by defendants, for a period of five years. Gross proceeds resulting from the collection and operation of the equipment were to be shared equally between the parties, and defendants were obligated to pay no monthly rental or service fees to plaintiff. The contract was cancelled in March of 2003 when the defendants established a substitute vendor relationship with Apple Vending, a competitor of Penn Vending, to supply and service the same types of machines.
The main issues in this case were whether the contract was enforceable due to illegality to the extent that some of the machines involved were illegal gambling machines, and whether plaintiff was in breach of the contract at the time Ronald D. Savage, Inc. terminated the contract, due to faulty service. Defendants argued plaintiff breached the contract first due to poor service in that the machines were not kept current, were not functional for several periods of time, and were not serviced in a timely and adequate manner. Based on that alleged breach by plaintiff, the defendants argued that they were entitled not to honor the agreement. The Superior Court, however, held that there was insufficient evidence in the record to demonstrate that defendants were deprived of the benefits for which they reasonably bargained, and instead ruled that plaintiff was in substantial compliance with the contract. The court awarded plaintiff $62,000 (instead of the $220,000 demanded), which represented lost future profits for the balance of the agreement term for all machines provided in the contract, with the exception of the poker machines. The Court held that plaintiff’s lost profit calculation with respect to these poker machines was too unreliable and speculative in nature to recover damages. Moreover, the Court held that in any event the poker machines constituted illegal video lottery machines under Delaware law, and therefore the lost profits that plaintiff sought with respect to these machines were unrecoverable.