Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Wednesday, March 6, 2013

Proving revenue loss and lost profits - expert testimony, evidence to aid quantification


LOST PROFITS - HOW DO YOU PROVE THAT?

Since how much a biz would have made $$$-wise [if such and such would not have happend] can hardly be known with perfect certainty, and is almost always somewhat speculative, it's not as simple as quantifying and accounting for lost monthly salary or hourly wages.

Lost profits "must be shown by competent evidence with reasonable certainty." Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex.1992). "The requirement of `reasonable certainty' in the proof of lost profits is intended to be flexible enough to accommodate the myriad circumstances in which claims for lost profits arise." Texas Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 279 (Tex. 1994).
 
Competent evidence consists of "opinions or estimates of lost profits . . . based on objective facts, figures, or data from which the amount of lost profits can be ascertained. Although supporting documentation may affect the weight of the evidence, it is not necessary to produce in court the documents supporting the opinions or estimates." Holt Atherton, 835 S.W.2d at 84 (citations omitted).

Conflicting evidence about the value of property generally falls into two categories: evidence of two distinct options or evidence of a range for value based on certain factors. See, e.g., Waterways on the Intercoastal, Ltd. v. State, 283 S.W.3d 36, 46 (Tex. App.-Houston [14th Dist.] 2009, no pet.); Pleasant v. Bradford, 260 S.W.3d 546, 559-60 (Tex. App.-Austin 2008, pet. denied). When the testimony supports a range for valuation rather than two distinct options, determination of an award within that range is left to the jury's discretion. Waterways, 283 S.W.3d at 46. If the determination is within that range, "a reviewing court is not permitted to speculate on how the jury actually arrived at its award." Drury Sw., Inc. v. Louie Ledeaux #1, Inc., 350 S.W.3d 287, 292 (Tex. App.-San Antonio 2011, pet. denied).

SOURCE: HOUSTON COURT OF APPEALS – No. 01-11-00650-CV – 1/24/2013

The testimony concerning the value of the lost profits was not based on a precise and fixed formula. Instead, Albrecht testified about the maximum Potter could have earned from the billboards. He also acknowledged other factors that could have impacted Potter's ability to reach that maximum, such as prolonged vacancies and not being able to reach as many customers.

None of CBS Outdoor's experts offered competing testimony about the lost profits that Potter could have realized. Instead, CBS Outdoor's experts' testimony consisted of critiques of the reliability of Potter's estimation of costs and Albrecht's estimation of lost revenue. The testimony of all of the experts involved established that the jury was presented with an inexact range for determining Potter's lost profits, not a precise set of competing fixed values. The jury's damage award does not exceed the range presented to the jury. Because the jury's damage award is within the permissible range, the amount awarded was within the jury's discretion, and we cannot speculate on how the jury reached its determination. See id. "[U]ncertainty as to the fact of legal damages is fatal to recovery, but uncertainty as to the amount will not defeat recovery." Sw. Battery Corp. v. Owen, 115 S.W.2d 1097, 1099 (Tex. 1938); see also ERI Consulting Engineers, Inc. v. Swinnea, 318 S.W.3d 867, 877 (Tex. 2010) (citing Sw. Battery and holding "discrepancy between two reasonably certain amounts will not defeat recovery"). Accordingly, we overrule CBS Outdoor's seventh issue.

Proof that one expert testified to the contrary of the opponent's expert is not proof that the opponent's methodology is flawed. Instead, conflicts between the experts' testimony are left to the jury to resolve. See Hous. Lighting & Power Co. v. Dickenson Indep. Sch. Dist., 641 S.W.2d 302, 310 (Tex. App.-Houston [14th Dist.] 1982, writ ref'd n.r.e.) (holding "Texas courts have held that use of any one particular approach as the sole standard from which to derive value is fundamentally wrong" and that it is the jury's duty to weigh conflicting expert testimony on value).

An expert's opinion must be disregarded when it is conclusory or speculative. See Coastal Transp. Co., Inc. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 232 (Tex. 2004) (holding conclusory or speculative expert testimony cannot support a judgment). "An expert's opinion might be unreliable, for example, if it is based on assumed facts that vary from the actual facts . . . or it might be conclusory because it is based on tests or data that do not support the conclusions reached." Whirlpool Corp. v. Camacho, 298 S.W.3d 631, 637 (Tex. 2009).

The Supreme Court of Texas held in Texas Instruments, "The fact that a business is new is but one consideration in applying the `reasonable certainty' test." Id. at 280. This does not mean that a new business cannot recover lost profits. Id. Instead, profits are only denied when "profits which might have been made from such businesses are not susceptible of being established by proof to that degree of certainty which the law demands." Id. The determination of lost profits in such a situation focuses on the experience of the persons involved in the enterprise, the nature of the business activity, and the relevant market. Id.

Nothing in Texas Instruments categorically denies using the revenue obtained on CBS Outdoor's billboards to determine the lost profits Potter would have received on those exact same billboards. To the contrary, as Potter points out, profits of one business can be used to estimate the lost profits of another similarly situated business. See Bright v. Addison, 171 S.W.3d 588, 603 (Tex. App.-Dallas 2005, pet. denied) (upholding trial court's consideration of "actual data from an existing business" to determine the lost profits of a similar business).

SOURCE: HOUSTON COURT OF APPEALS – No. 01-11-00650-CV – 1/24/2013