Page 54 - Acertaining Economic Damages Calculation

While addressing Air Starter’s expert’s quantification of the lost sales attributed to Specialized’s bad
acts, the court also considered Air Starter’s expert’s use of margin information to measure deductible
costs. Air Starter’s expert had relied on profit margin information provided by Air Starter’s president
and owner. The court noted that this profit margin figure was "not... tied to a particular product or a par-
ticular customer" and was "an average profit margin for all of Air Starter’s sales." fn 73 Furthermore, the
court noted that there was "[n]o other evidence... presented to support the profit margin" relied upon by
Air Starter’s expert. fn 74

Ultimately, the court ruled that the evidence presented by Air Starter’s expert was "insufficient to show
any amount of reasonably certain lost profits" for the jury award of damages under both the misappro-
priation of trade secrets and tortious interference claims. fn 75 Thus, the court reversed the trial court’s
award of damages on both claims and "render[ed] judgment that Air Starter take nothing on its claims."
In doing so, the court seemingly was troubled by Air Starter’s expert’s reliance on assumptions (includ-
ing the margin information) provided by Air Starter when there lacked independent investigation into
the appropriateness of such assumptions:

[Air Starter’s expert] did no independent work to verify the reasonableness or reliability of the
assumptions provided by [Air Starter], and no other evidence was offered in support of those as-
sumptions. fn 76

The court also noted in its analysis that Specialized’s expert had testified that

[Air Starter’s expert’s] testimony concerning lost profits was flawed because she had relied sole-
ly on Heck's assumptions. He stated this was "unusual" for a certified public accountant charged
with doing this type of work. fn 77

This case highlights the need to understand any data or assumptions relied upon by a practitioner and
whether these are consistent with the facts of the matter at hand. The preceding discussion focused on
Air Starter’s expert’s reliance on margin information provided by the client. The expert’s failure to en-
gage in any investigation of the margin information, including whether it was appropriate to apply a
company-wide margin to the specific lost sales at issue, was deemed inadequate by the court. It should
also be noted that the court was as troubled, if not more so, by other aspects of Air Starter’s lost profits
calculation. The court also found that the expert’s failure to investigate the reasonableness of assump-
tions concerning lost sales resulted in the expert’s opinion being at odds with the facts available to the
expert. This opinion should be read with these additional points in mind.

fn 73 Id. at 632, 633.

fn 74 Id. at 632.

fn 75 Id. at 635.

fn 76 Id.

fn 77 Id.

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