In March 2014, the New York Court of Appeals issued a 4-3 decision in Biotronik, A.G. v. Conor Medsys. Ireland, 22 N.Y.3d 799 (2014), that—according to the dissent and considerable commentary—threatened to upend previously settled New York damages law. By holding that lost profits on third-party transactions are not always consequential damages, Biotronik seemed to call into question the scope of many contractual limitations of liability. Three years later, however, no sea change in the New York law of lost profit damages appears to have occurred.

'Biotronik' Itself

The facts in Biotronik were as follows: Biotronik, a distributor of medical devices, entered into an exclusive distribution agreement with Conor Medsystems, a manufacturer of coronary stents. The agreement barred recovery of consequential damages. Conor recalled its stent, and Biotronik sued for breach of contract, seeking the lost profits from the stents' resale. Conor moved for summary judgment on damages, contending that any lost profits from the resale constituted unrecoverable consequential damages.

The trial court concluded that the lost profits were consequential, as did a unanimous First Department panel. Lost profits, the First Department held, “only constitute general damages where the nonbreaching party seeks to recover money owed directly by the breaching party under the parties' contract.” Biotronik, A.G. v. Conor Medsys. Ireland, 95 A.D.3d 724, 726 (1st Dep't 2012).

The Court of Appeals disagreed. It concluded that the “bright-line rule” applied by the First Department “violates the case-specific approach we have used to distinguish general damages from consequential damages.” Biotronik, 22 N.Y.3d at 808. It rejected the idea that “lost resale profits can never be general damages simply because they involve a third-party transaction.” Id. Instead, lost profits, including those from third-party transactions, may constitute general damages where the “non-breaching party bargained for such profits and they are 'the direct and immediate fruits of the contract.'” Id. at 806.