Page 55 - Acertaining Economic Damages Calculation

HHT Ltd. Co. v. Nationwide Recovery Sys. Ltd., 2013 WL 2395108 (Tex. App. May 31, 2013)

Nationwide Recovery Systems, LTD. (Nationwide) brought claims for tortious interference with an ex-
isting contract, conspiracy to tortiously interfere with existing contracts, and breach of an employment
contract against HHT Limited Company (HHT) and Michael Malone, Jr. (Malone). Malone had left Na-
tionwide to join HHT, which was a competitor in the commercial debt collection industry. After Malone
began working for HHT, Malone and HHT recruited other Nationwide employees to join. Subsequently,
the former Nationwide employees "began calling on customers they had previously done business with
[while at] Nationwide."

At trial, the jury found for Nationwide, awarding damages, which the trial court rendered judgment on
based on the jury’s verdict, while denying defendants’ motion for judgment notwithstanding the verdict
and motion for a new trial. On appeal, one of the issues raised by HTT and Nationwide’s former em-
ployee was that Nationwide’s damages estimate "was speculative because it [did] not account for ex-
penses."

In analyzing HHT’s arguments, the Court of Appeals of Texas stated the following:

Recovery of lost profits does not require that the loss be susceptible of exact calculation. Howev-
er, the injured party must do more than show that they suffered some lost profits. The loss must
be shown with reasonable certainty. At a minimum, opinions or estimates of lost profits must be
based on objective facts, figures, or data from which the amount of lost profits can be ascer-
tained. fn 78 [citations omitted]

Nationwide’s president had testified that the "industry norm for net profit" was 20%, while also testify-
ing that Nationwide had achieved a 26% net profit the prior year. In calculating its lost net profits, Na-
tionwide had applied a 20% net profit margin to its estimate of lost revenues. The court of appeals
pointed out that there was evidence of what the net profit margins represented:

[Nationwide’s president] explained that this figure is the revenue generated from collection ac-
counts after deducting expenses. Nationwide’s expenses include salaries, telephone, postage, and
rent. fn 79

After discussing the appropriateness of Nationwide’s president testifying to a businesses’ estimated
profit, the court reached a conclusion:

There is evidence that Nationwide deducted expenses by using the net profit margin as [Nation-
wide’s president] explained and Nationwide’s evidence shows it used a single complete calcula-
tion of lost profits. fn 80

fn 78 HHT Ltd., 2013 WL 2395108, at *2.

fn 79 Id.

fn 80 Id. at *3.

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