Court Excludes Accounting Expert’s Testimony: Not All Foreseeable Damages Are Direct

In a high-stakes dispute over malfunctioning packaging machines, the court ruled that Bon Appetit’s $6 million claim for labor costs was not recoverable as direct damages.

Bon Appetit Danish and Bon Appetit Specialty Snacks (“Bon Appetit”) make delicious baked goods, delivering treats across Los Angeles and North America. To improve efficiency, they wanted automated packaging equipment that could wrap their donuts, breads, muffins, and cakes.

In September 2021, Bon Appetit asked Delta Systems & Automation (“Delta”) for a solution. Delta was known for designing and installing sophisticated packaging systems. They promised custom-made systems that would perfectly wrap Bon Appetit’s products in flexible plastic film.

Negotiations took place, and Delta agreed to strict requirements¹:

• Continuous Operation: Machines must run nonstop 24 hours a day, 6 days a week.

• Reliability: At least 97% efficiency.

• Versatility: Quick product changeovers in less than 10 minutes.

• Durability: Machines should handle dusty bakery conditions and temperatures ranging from 50°F to 100°F.

The total cost was over $4 million. Bon Appetit made down payments, expecting the new systems within nine months.

But from the start, things went wrong.²

Missed Visits and Broken Promises

Delta’s project manager, Thomas Cujak, initially refused to visit Bon Appetit’s factory. After pressure from Bon Appetit’s management, he finally visited—but seemed dismissive. Bon Appetit was concerned, reminding Delta that an earlier attempt to wrap donuts years ago had failed. Delta reassured them their technology had improved.

Despite promises, Delta repeatedly delayed. Bon Appetit’s team had to chase Delta for updates. Each update brought new excuses and pushed the delivery further.

Factory Acceptance Testing: A Recipe for Disaster

By late 2022, Bon Appetit was losing patience. They flew to Arkansas for the Factory Acceptance Test (FAT) on the donut-wrapping machine. Upon landing, a panicked call came from Delta’s manager, Cujak:

“Are your donuts always this sticky?”

Bon Appetit’s team rushed straight to Delta’s facility and found chaos. Delta had only started testing the donuts that day, despite having samples for months.

Nothing worked. The donuts jammed the machine. Delta’s equipment couldn’t handle Bon Appetit’s products. Frustrated but hopeful, Bon Appetit suggested testing the machine at their factory with fresh donuts.

On-site Testing: Another Bitter Letdown

When the machine arrived in Los Angeles, Bon Appetit staff carefully removed any donuts that didn’t meet specifications. Even with perfectly selected donuts, the machine failed again.

Delta claimed Bon Appetit’s donuts didn’t meet “industry standards,” shifting blame entirely. Angry and confused, Bon Appetit insisted on solutions.

Delta agreed to try again, promising fixes and returning weeks later. Yet, despite multiple visits, technicians, and adjustments, nothing improved.

Breaking Point and Lost Trust

Bon Appetit’s patience ran out. With major investments wasted and two other expensive systems yet to be tested, the company feared catastrophic losses. Bon Appetit decided they had no choice but to end the relationship. Delta’s sales president replied simply:

“I guess we will just have to let the lawyers figure this out.”

Now, Bon Appetit seeks at least $5 million in damages, accusing Delta of:

• Breaching their contract by failing to deliver functioning systems.

• Failing to honor express warranties about machine reliability and performance.

• Violating implied warranties, providing systems not fit for their intended use.

Delta’s Defense – It Wasn’t Us, It Was the Contract

Delta moved to dismiss and argued that Bon Appetit’s lawsuit ignored critical terms of their contracts.

The agreements included force majeure clauses—specifically stating that delays caused by supply chain issues or pandemic-related disruptions wouldn’t be Delta’s responsibility. Delta informed Bon Appetit about component shortages and the impact of COVID-19, yet Bon Appetit still expected the original timelines to be met.

“Out-of-Spec” Products and Cancelled Contracts

When Delta attempted to test the donut overwrapping system, the machinery malfunctioned. Delta’s project manager, Thomas Cujak, informed Bon Appetit that the donuts provided did not meet the agreed specifications. Delta even agreed to tweak its equipment to address the issues. However, before those adjustments could be completed, Bon Appetit cancelled all three contracts, despite Delta’s ongoing efforts to make things right.

The Economic Loss Rule and Warranty Limits

Delta’s Motion to Dismiss argued that Bon Appetit’s claims for fraud and misrepresentation were merely attempts to turn a contractual dispute into a tort claim—something not allowed under California law. They pointed to the Economic Loss Rule, which bars recovery for purely economic losses under tort law when a contract governs the relationship.

Moreover, Delta emphasized that the contracts explicitly limited liability for consequential damages like lost profits or business interruptions. Bon Appetit’s entire claim for damages revolves around these very elements—making the demands unenforceable under the agreement’s own terms.

The Expert Witness Behind Bon Appetit’s Case

Bon Appetit hired Joseph C. Wheat, a Senior Vice President at J.S. Held, a global consulting firm specializing in forensic analyses, to quantify the economic damages they claim to have suffered due to Delta Systems & Automation’s failure to deliver functional overwrapping machines.

Wheat is a Certified Public Accountant with over 20 years of experience as an expert witness in State and Federal Court matters. He based his analysis on the assumption that the overwrapping machines Delta promised would have significantly reduced labor costs for Bon Appetit’s production lines by automating the packaging process.

Big Savings, Big Claims

In his Expert Report, Wheat calculated Bon Appetit’s damages in six main areas: