Page 53 - Acertaining Economic Damages Calculation

enced by the court in Del Monte Fresh Produce Co. v. Net Results, Inc. in which the Court of Appeals of
Florida rejected Net Results’ lost profits analysis as Net Results had failed to appropriately account for
the avoided costs, either through specific cost deductions or the application of a margin to lost sales:

Net Results provided no evidence regarding its overhead, its historical profit margins on such
contracts, or the costs of the professionals who worked (and would have been required to contin-
ue working, absent Del Monte's repudiation of the Agreement) on the Del Monte project. fn 70

The following cases highlight the inquiry that courts may engage in when presented with a practitioner’s
use of margin information that has been provided by the client or may represent financial performance
seen in the industry, or both. When margin information is used in a lost profits calculation, the courts
have inquired about the nature of the information (net versus gross) and the extent to which the practi-
tioner is informed about how such a margin was calculated as well as the appropriateness of applying
such a margin to the specific lost sales at issue.

Glattly v. Air Starter Components, Inc., 332 S.W.3d 620 (Tex. App. 2010)

Air Starter Components, Inc. (Air Starter) manufactured, repaired, refurbished, and sold air starters and
components used on diesel engines. Specialized Components, Inc. (Specialized) was sometimes used by
Air Starter as a "job shop" that made parts sold by Air Starter based on specifications and drawings pro-
vided by Air Starter. Subsequently, a machinist left Air Starter to join Specialized. This move was later
followed by an Air Starter salesperson, fn 71 assisting with Specialized’s move from a "job shop" to a full
air starter production shop selling directly to customers and competing with Air Starter.

Soon thereafter, Air Starter sued Specialized and its former employees alleging breach of contract, mis-
appropriation of trade secrets, and tortious interference with existing and prospective customer relation-
ships, among other claims. Other defendants were added during the proceedings, including James
Glattly (Glattly) who was one of the original shareholders of Specialized. At trial, the jury awarded
$168,036 in lost profits damages for the misappropriation of trade secrets and $600,000 in lost profits
damages for the tortious interference claims.

On appeal, in addition to liability issues raised by Specialized and the other defendants in the case, Spe-
cialized asserted that "Air Starter did not prove its damages for lost profits with reasonable certainty." In
analyzing the issue, the court quoted from other Texas opinions:

Recovery of lost profits must be predicated on one complete calculation. The plaintiff bears the
burden of providing evidence supporting a single complete calculation of lost profits, which may
often require certain credits and expenses. fn 72 [citations omitted]

fn 70 Del Monte Fresh Produce Co. v. Net Results, Inc., 77 So.3d 667, 674 (Fla. Dist. Ct. App. 2011).

fn 71 The former Air Starter salesperson was hired by ABCO Products, Inc. (ABCO), one of Specialized’s early customers, with the
understanding that he would also work on sales for Specialized. Apparently, after joining ABCO, the former Air Starter salesperson
"devoted virtually all his time to generating a potential customer list for Specialized." The salesperson ultimately joined Specialized as
a full-time employee prior to Specialized’s entry into the after-market air starter business.

fn 72 Glattly, 332 S.W.3d at 631.

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