Page 45 - Acertaining Economic Damages Calculation

Swinnea and the other defendants appealed to the court of appeals, who ruled that the "evidence [was]
legally insufficient to support the damage awards," and reversed and rendered judgment in favor of
Swinnea. Before the Supreme Court of Texas, defendants argued that the forfeiture award was unsup-
ported by law, and the lost profits damages were "unsupported by legally sufficient evidence."

In analyzing the question of lost profits, the Supreme Court of Texas stated the following:

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 min-
imum, 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. fn 41 [citation omitted]

After concluding that the methodology relied upon by ERI was legally sufficient, the Supreme Court of
Texas then concluded that the lost profits damages awarded at trial could not be reconciled with the evi-
dence. However, the Supreme Court stated that "ERI proved lost profit damages," and "its entitlement to
recover them survives the trial court’s error in awarding too much." fn 42

Addressing defendants’ arguments regarding ERI’s failure to include all appropriate costs in its calcula-
tion related to overhead and "other unspecified expenses," the Supreme Court of Texas noted

it is not necessarily the case that a company will incur increased expense or overhead, especially
where — as evidence here suggests — a corporation was already profitable at the time damages
began, and evidence supports an inference that it could have performed profitable services using
only its existing resources. fn 43

Continuing, the court explained that

[t]his is not a manufacturing scenario, where production costs necessarily exist. Rather, ERI was
a consulting company, which wrote plans and specifications, solicited bids for projects, and
completed surveys. Evidence suggests that ERI would have been able to perform all of this ser-
vice work using its existing employees. fn 44

The court concluded that defendants had not established that ERI’s methodology and calculation "was
actually inadequate because of a necessary credit or additional expense." After resolving other issues
raised by defendants, the court remanded the case to the court of appeals for disposition consistent with
this opinion:

Unlike a situation where no evidence establishes any amount of lost profit damages with reason-
able certainty, the situation here requires a potential reduction, not a take-nothing judgment
against the plaintiff. Therefore, we reverse the court of appeals' judgment that ERI recover no
lost profit damages and remand the case to that court for further proceedings. Should the court of

fn 41 ERI Consulting Eng’rs, 318 S.W.3d at 876.

fn 42 Id. at 878.

fn 43 Id. at 879.

fn 44 Id.

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