Page 66 - Acertaining Economic Damages Calculation

with some adjustments, its expert relied upon onboard revenues generated by Royal Caribbean on its
traditional cruises as a benchmark.

These calculations were challenged by RCMP, who argued that Holland America and Carnival, the enti-
ties selected by RCMP to replace CCCM, achieved actual onboard revenues of appropriately $5 per-
person-per-day, whereas CCCM’s expert claimed lost onboard revenues of approximately $50 per-
person-per-day. RCMP contended that because Holland America and Carnival are "two of the best-
known powerhouses in the cruise industries," CCCM’s expert’s projections were inflated. CCCM’s ex-
pert defended his projection, arguing that Holland America and Carnival were each guaranteed a mini-
mum amount of onboard revenues and that because this guarantee eliminated any incentive to spend
money going after money each already had in hand, the cruise companies made no effort to generate
onboard revenues nor did they allocate any funds to market or promote onboard revenues.

Under the charter agreement between CCCM and the two cruise lines, however, CCCM would have
shared in any onboard revenues above the guaranteed minimums and, therefore, would have had every
incentive to generate additional revenues. Given these material differences in the terms of the charter
agreements, the court ruled that the actual onboard revenues generated by Holland America and Carni-
val could not be relied upon to determine reasonably anticipated income and, with a few adjustments,
accepted the plaintiff’s analysis, resulting in net onboard revenues of approximately $47 per day.

In this case, although the defendant’s expert attempted to use contemporaneous third-party data to im-
peach plaintiff’s expert by explaining why this data was not applicable and should not be considered, the
court was persuaded that plaintiff’s expert’s damage calculation was reliable.

Mid-America Tablewares, Inc. v. Mogi Trading Co., Ltd., 100 F.3d 1353 (7th Cir.1996)

Mid-America Tablewares (Mid-America) entered into an agreement with Mogi Trading Co., (Mogi) to
manufacture a new line of Thanksgiving-themed dinnerware that would complement Mid-America’s ex-
isting line of tablecloths and napkins. Mid-America was informed by the FDA that the dinnerware was
found to contain leachable lead in excess of allowable levels. At trial, the jury awarded Mid-America,
among other damages, lost profits of approximately $2.7 million pertaining to lost future sales of the
dinnerware over a period of 10 years. This award was challenged on appeal, including the assertion that
Mid-America’s expert did not calculate damages with reasonable certainty and should, therefore, have
been excluded.

Despite the fact that this was an entirely new line of dinnerware without any track record of success, the
7th Circuit found that Mid-America could present testimony supporting a claim of lost profits, which
would be allowed, provided that it could be proven with reasonable certainty. The jury’s award, howev-
er, was overturned because the court found that Mid-America’s expert ignored relevant market data,
which indicated that his projected lost sales were 20 times greater than other comparable products. Spe-
cifically, the expert assumed that the new line of dinnerware would have reached annual sales of $3 mil-
lion within 4 years of launch. Although there was evidence of other dinnerware patterns that had
achieved multi-million sales levels, there was no record of any similarly-themed holiday dinnerware
achieving annual sales of greater than $150,000. In addition, by assuming a damage period of 10 years,
Mid-America’s expert was found to have ignored market data that demonstrated only 3 lines of din-
nerware remained on the market for more than 5 years, and none of those lines ever achieved annual
sales of more than $150,000.

Although Mid-America’s expert relied, in part, on pre-litigation projections, which were substantiated as
being reasonable by Mid-America’s industry expert, by failing to consider existing market data that in-

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