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Milner Hotels, Inc. v. Norfolk & Western Railway Co. | 822 F. Supp. 341 (1993)
Two wrongs don’t necessarily make a right. In Milner Hotels, Incorporated versus Norfolk and Western Railway Company, we’ll explore whether a breaching party can recover its lost profits from a subsequent breach by the party it wronged.
Norfolk and Western Railway contracted with Milner Hotels to house and feed its transient workers each month, with a sixty room minimum. Milner agreed to set aside almost all its rooms each month, to maintain sanitary conditions throughout the hotel, and to comply with laws and regulations for operating the hotel.
The contract could be terminated by either party with thirty days’ written notice. The contract could also be terminated if a party defaulted in its performance and failed to cure its default within thirty days.
Unfortunately, on March tenth, nineteen ninety-one, an electrical malfunction in a heater caused a fire at the hotel, resulting in extensive water and smoke damage throughout the property. Norfolk and Western moved out its employees and insisted on an inspection before they would return and resume renting.
On March fifteenth, a building inspection revealed crumbling friable asbestos at several locations in the hotel. Repair estimates to comply with code ranged from sixty to one hundred twenty thousand dollars. Before it would start the work, Milner asked the railroad for assurances that the railroad would reoccupy the building after the work was complete. The railroad refused and, on April ninth, mailed written notice that it was terminating the agreement, which Milner received on April eleventh. As a result, Milner decided not to complete the repairs and instead sold the hotel.
Milner sued Norfolk and Western for breach of contract in the Mercer County Circuit Court. The railroad removed the action to the United States District Court for the Southern District of West Virginia and moved for summary judgment.
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