Page 26 - Acertaining Economic Damages Calculation

• The expert’s analysis averaged the revenue growth experienced by the other branches, such that
the comparison was not a comparison of one branch to another but, rather, the average revenue
growth of multiple branches. In the court’s view, this permitted the expert to avoid explaining
how another branch’s experience in any year, or over time, could be appropriately applied to In-
dianapolis, particularly because the yardstick branches showed wide variation in performance
from year to year.

• The expert performed no economic analysis of the Indianapolis market or any other market. Fur-
ther, although CDW defended the use of the average of the other CDW branches because these
branches were in the Midwest like the Indianapolis branch, none of these factors says anything
about whether market forces affected Indianapolis in even roughly the same manner as the other
branches.

In concluding, the district court cited the comments of the Fifth Circuit in Eleven Line, Inc. v. North
Texas State Soccer Ass’n, Inc., 213 F.3d 198, 208-09 (5th Cir. 2000):

One analytical problem and failure of [the plaintiff’s] proof lies in the fact that an average of un-
knowns in also an unknown. A... plaintiff who uses a yardstick method of determining lost prof-
its bears the burden to demonstrate the reasonable similarity of the business whose earning expe-
rience he would borrow. Here, the only evidence of comparability was that [the plaintiff] owned
the other indoor soccer arenas [the benchmarks]. No evidence was offered of the geographical
location, size or attractiveness of these facilities, the size and type of the soccer player market
that they served, the relative costs of operation, the amounts charged per team, or the number of
seasons run. To apply these arenas’ average ‘rates of return’ indiscriminately to [the plaintiff] is
like arguing that because McDonald’s franchises earn a certain average rate of return, a particu-
lar franchise will perform to the average. fn 18

Education Logistics, Inc. v. Laidlaw Transit, Inc., 2012 WL 761950 (D. Mont. March 8, 2012)

This matter arose out of an agreement whereby Laidlaw Transit, Inc. (Laidlaw) agreed to use its best ef-
forts to promote Education Logistics, Inc.’s (Edulog) bus routing software to its school district custom-
ers. Under the agreement, Laidlaw was required to pay royalties to Edulog for each bus on which the
software was installed. Edulog alleged that Laidlaw breached the royalty and best efforts obligations un-
der the agreement. Edulog hired an expert to analyze its lost profits damages arising from Laidlaw’s al-
leged failure to use its best efforts to promote the Edulog software. Laidlaw challenged the admissibility
of the testimony on lost profits, asserting that it was premised on unsupported assumptions and failed to
consider other possible causes that affected Edulog’s revenue growth for the software. The district court
agreed with Laidlaw and precluded the proffered testimony.

In doing so, the district court referenced Laidlaw’ reliance on the Ninth Circuit’s decision in McGlinchy
v. Shell Chem. Co., 845 F.2d 802 (9th Cir. 1988), which it compared to the instant matter. In
McGlinchy, the plaintiffs sued Shell Chemical Company for antitrust violations, breach of contract, and
related torts. The plaintiffs hired an expert witness to quantify lost profits, and the district court preclud-
ed the testimony because the expert took inconsistent positions in his report and at deposition regarding
the cause, if any, of the lost sales, used a "hopelessly flawed" before and after assessment that did not

fn 18 Id. at 825.

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