Page 56 - Acertaining Economic Damages Calculation

Separately, the court also analyzed the evidence supporting Nationwide’s estimate of lost revenue, con-
cluding it was also supported by the evidence. Thus, the court found that there was legally sufficient ev-
idence to support the jury’s findings on damages and affirmed the trial court’s judgment.

Although Nationwide did not use an expert when calculating its lost profits, this case is instructive re-
garding the foundation that is often required when using margin information. In contrast to Glattly v. Air
Starter Components, Inc. in which the expert used margin information provided by the client with little
knowledge of how it was calculated, in this matter, Nationwide’s president provided information regard-
ing the expenses deducted from sales to arrive at the profit margin used in the lost profits calculation.
The court of appeals found this testimony sufficient to ensure that expenses were properly deducted in
the lost profits calculation before it.

When confronted with testimony regarding margin information, the cases highlighted in this section
show the court’s concern with ensuring that the margin used in a lost profits calculation appropriately
includes avoided expenses. Other cases have also shown that courts consider whether the margin used or
calculated is appropriate for the particular lost sales at issue (also pointed out in Glattly). In Sterling
Freight Lines v. Prairie Material Sales, 285 Ill. App. 3d 914 (Ill. App. Ct. 1996), the Appellate Court of
Illinois reversed a lost profits calculation on a number of grounds, providing instruction about the con-
siderations for the proper profit margin to use:

We note that the method the trial court originally used, determining a profit margin, is accepta-
ble, so long as the trial court limits its consideration only to that portion of plaintiff's business di-
rectly attributable to defendant under the exclusive hauling agreement, rather than considering
the profit margin for the whole of plaintiff's business. fn 81

The Appellate Court of Illinois was seemingly concerned that evidence at trial showed that plaintiff’s
business had begun to expand from the bulk cement hauling business at issue into hauling "liquid chem-
icals and edibles." Thus, there appears to have been concerns that the revenue and expenses for the com-
pany as a whole might have been different from the expenses associated with the lost sales at issue, indi-
cating that a company-wide profit margin may not have been appropriate to apply to the lost sales of a
distinct line of business under the facts of the case. In looking at this statement by the court, it seems ap-
propriate that the practitioner consider the context because it appears that the appellate court had little
information regarding the other lines of business for the company as a whole.

Other Relevant Considerations

Often, a practitioner will use financial and cost data provided by management, although industry or
comparable company information may also be obtained from external sources and used. This leads to
the possibility that the opposing party may question the appropriateness of the practitioner’s reliance on
such management-supplied cost data, seeking to exclude the practitioner’s opinions about lost profits. In
Advanced BodyCare Solutions, LLC v. Thione Int'l, Inc., 615 F.3d 1352 (11th Cir. 2010), Thione
brought claims against Advanced BodyCare for breach of contract under Georgia law. After being found
liable at trial and assessing damages, Advanced BodyCare appealed the district court’s denial of its mo-
tion in limine regarding Thione’s expert’s calculation of lost profits in which Advanced BodyCare ar-
gued that Thione’s expert simply used "projected revenue and cost data provided by [the company]."

fn 81 Sterling Freight Lines v. Prairie Material Sales, 285 Ill. App. 3d 914, 922 (Ill. App. Ct. 1996)

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