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

Proving Lost Profits as a Category of Damages in a Lawsuit

     
GENERAL RULE REGARDING PROOF OF LOST PROFITS   
  

The general rules regarding adequate evidence of lost profit damages are well known:

 

Recovery for lost profits does not require that the loss be susceptible of exact calculation. However, the injured party must do more than show that they suffered some lost profits. The amount of the loss must be shown by competent evidence with reasonable certainty. What constitutes reasonably certain evidence of lost profits is a fact intensive determination. As a minimum, opinions or estimates of lost profits must be 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 Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992) (citations omitted); see also ERI Consulting Eng'rs, Inc. v. Swinnea, 318 S.W.3d 867, 876 (Tex. 2010) (citing Holt Atherton). The injured party must do more than show it suffered “some” lost profits. Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 504 (Tex. 2001). Lost profits are damages for the loss of net income to a business and, broadly speaking, reflect income from lost business activity, less expenses that would have been attributable to that activity. Bowen v. Robinson, 227 S.W.3d 86, 96 (Tex. App.--Houston [1st Dist.] 2006, pet. denied). The calculation of lost profits must be based on net profits, not gross revenues. Holt Atherton, 835 S.W.2d at 83 n.1; Texaco, Inc. v. Phan, 137 S.W.3d 763, 771 (Tex. App.--Houston 2004, no pet.).

  

SOURCE: DALLAS COURT OF APPEALS – 05-10-00777-CV – 4/27/2012

 

In this appeal, [Appellant] asserts [Plaintiff] presented no evidence from which the jury could determine lost profits with any reasonable certainty. We agree. [Plaintiff] did not present any expert testimony regarding lost profits nor did it provide a damage model to the jury or otherwise inform the jury how it should determine lost profits, and our own review of the record does not reveal any objective facts, figures, or data from which lost profits could have been determined with reasonable certainty.

Tortious (not tortuous) Interference with Business Relations (prospective) and Lost-Profit Damages

BIZ TORTS 

Tortious Interference with Business Relations (in the future - as opposed to interfering with existing contract) The elements of tortious interference with prospective business relations are: (1) a reasonable probability that the plaintiff would have entered into a contractual relationship; (2) an independently tortious or unlawful act by the defendant that prevented the relationship from occurring; (3) the defendant did the act with a conscious desire to prevent the relationship from occurring or with knowledge that the interference was certain or substantially certain to occur as a result of his conduct; and (4) the plaintiff suffered actual harm or damage as a result of the interference. See Ash v. Hack Branch Distrib. Co., 54 S.W.3d 401, 414-15 (Tex. App.—Waco 2001, pet. denied). See also Finlan v. Dallas Indep. Sch. Dist., 90 S.W.3d 395, 412 (Tex. App.—Eastland 2002, pet. denied).

LOST PROFIT DAMAGES - HOW TO PROVE THEM

"Lost profits are damages for the loss of net income to a business measured by reasonable certainty." Miga v. Jensen, 96 S.W.3d 207, 213 (Tex. 2002). See also Bossier Chrysler Dodge II, Inc. v. Rauschenberg, 201 S.W.3d 787, 808 (Tex. App.—Waco 2006) rev'd in part, 238 S.W.3d 376 (Tex. 2007) (per curiam). "Net profits" is defined as "what remains in the conduct of a business after deducting from its total receipts all of the expenses incurred in carrying on the business." Turner v. PV Int'l Corp., 765 S.W.2d 455, 465 (Tex. App.—Dallas 1988, writ denied) (citing R. A. Corbett Transp., Inc. v. Oden, 678 S.W.2d 172, 176 (Tex. App.—Tyler 1984, no writ).

WHAT DEGREE OF PRECISION IS REQUIRED TO ESTABLISH LOSS OF PROFITS? 

 "Exact calculations" are not required to recover for lost profits. Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 504 (Tex. 2001). "At a minimum [however], opinions or lost-profit estimates must be based on objective facts, figures, or data from which the lost-profits amount may be ascertained." Id.

SOURCE: 10-07-00362-CV (Tenth Court of Appeals in Waco, TX) (Oct 28, 2009)