Page 46 - Acertaining Economic Damages Calculation

appeals fail to arrive at a disposition concerning remittitur, it may remand for a new trial on lost
profit damages, as we might have if the evidence did not seem conducive to remittitur. fn 45

In addressing the question of lost profit damages, the Supreme Court of Texas reconciled the evidence
regarding damages with the evidence needed to support the trial court’s award. In doing so, the court
considered the nature of the business in question when assessing whether overhead costs and other ex-
penses are an appropriate deduction as an avoided cost. Under the facts of this case, the court concluded
that such costs and expenses would not increase with the relevant lost sales and should not be included
in a lost profits calculation. This suggests to the practitioner that the nature of the lost sales and business
in question should be a consideration in identifying the relevant costs to include in a lost profits calcula-
tion. However, other courts have found the notion of avoided costs as applied to fixed costs and over-
head troubling, as can be seen in RKR Motors, Inc. v. Associated Uniform Rental Linen & Supply, Inc.,
995 So.2d 588 (Fla. Dist. Ct. App. 2008).

RKR Motors, Inc. v. Associated Uniform Rental Linen & Supply, Inc., 995 So.2d 588 (Fla. Dist. Ct. App.
2008)

RKR Motors, Inc., d/b/a Autohaus of Pompano (RKR Motors) and Associated Uniform Rental & Linen
Supply, Inc. (Associated Uniform) entered into three contracts in which Associated Uniform agreed to
rent and launder RKR Motors employee uniforms. After RKR Motors terminated the contracts, Associ-
ated Uniform filed a multi-count complaint, including a count for breach of contract. Prior to trial, RKR
Motors admitted liability by conceding that it had breached the contracts. RKR Motors and Associated
Uniform agreed that the liquidated damages based on the formula in the contract was approximately
$102,000, unless a computation of Associated Uniform’s lost profits was disproportionate to the liqui-
dated damage calculation.

At the bench trial, RKR Motors and Associated Uniform disagreed on the amount of the lost profits sus-
tained by Associated Uniform. Associated Uniform’s expert calculated lost profits of $82,444. RKR
Motors’ expert calculated lost profits of $10,437. Both experts agreed that expenses needed to be de-
ducted from any lost profits calculation but disagreed on the appropriate expenses to include in such a
calculation. The trial court found Associated Uniform’s expert’s methodology was appropriate as "it on-
ly took into account the extra overhead that Associated Uniform incurred in order to service RKR Mo-
tors’ contracts, over and above what it would have expended without servicing RKR Motors’ contracts."
The trial court explained its reasoning as follows:

Plaintiff [(Associated Uniform)] is in the business of renting uniforms and providing service on
those uniforms, regardless of obtaining the defendant’s account. As such, the costs that were ex-
pended for overhead would have been expended regardless, as Plaintiff was not seeking to ex-
pand their operations, nor was the payment to provide for expansion of operations by hiring more
employees and expanding production facilities. Further, Plaintiff did not expect to put an undue
burden on their operations since their overhead, salaries, rent and a number of other costs was
something that Plaintiff knew it already had. Since the overhead is already on-going and the sala-
ries are already being paid, the only extra overhead to incur in order to service the defendants ac-
count is contained within the valuation provided by Plaintiff’s expert, which is the amount Plain-

fn 45 Id. at 880.

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