Page 71 - Acertaining Economic Damages Calculation

The Haulers’ damages expert calculated lost profits suffered by the Haulers totaling $10.1 million for
the two-year waiting period. The trial court held a bench trial and entered a judgment awarding damages
of approximately $6.0 million to the Haulers, which was subsequently appealed by the county. Specifi-
cally, the county argued, in part, that the Haulers’ damages expert based his opinion on information pro-
vided to him from Haulers, for which he had no first-hand knowledge (that is, a database of customers
and unaudited profit and loss statements), and that his methodology was flawed.

Haulers’ expert used raw data from the Haulers’ "live" database of customers, which identified each cus-
tomer's name, address, the type of services provided, his or her monthly rate, and the start and end dates
of service. The expert verified the information by comparing the customers' addresses to a mapping pro-
gram to confirm that the addresses were actually located within the identified districts subject to the
county's trash program. Once the lost customers' properties had been confirmed, the expert was able to
identify the revenue associated with the lost services for each property based upon each lost customer's
monthly rate. Using Haulers’ historical profit and loss statements from the prior five years, the expert
was able to identify variable expenses, which he deducted from his projected lost revenues.

With some adjustments for items the trial court deemed to be too speculative, the trial court accepted the
Haulers’ expert’s general methodology and found his customer-by-customer analysis, which he validat-
ed using the mapping program, to be persuasive. The appellate court accepted the trial court’s opinion,
ruling that, through its expert’s testimony, Haulers established their amount of damages for lost profits
with reasonable certainty.

Great Lakes Bus. Trust v. M/T Orange Sun, 855 F. Supp. 2d 131 (S.D.N.Y. .(2012)

This case involved a backhoe excavator dredge vessel that struck a stationary ship, causing extensive
damages. Defendants conceded liability. Plaintiffs were unable to put the dredge to productive use while
it was under repair and consequently brought an action for consequential damages, which included loss
of use or lost profits damages.

Plaintiffs’ damages expert gathered materials and met with plaintiff’s personnel to confirm the accuracy
and reliability of his information before performing his analysis. He analyzed the history of the dredge
as well as the market for dredging services and concluded that the dredge had earned revenues in every
year and that both a national and international market for dredging services existed. He determined that
there was no need to reference lost contracts or other specific customer sales data in order to estimate
revenues the dredge would have earned during the time it was inoperable while undergoing repairs. He
believed that the dredge’s historic revenue trend, as well as the fact that the market for dredging services
was experiencing increased demand and reduced supply, were sufficient proof that, but for the defend-
ant’s conduct, the dredge would have received work and, therefore, earned revenue during the period of
repairs.

To calculate the amount of lost profits, the expert carried out a three-step process to find a daily contri-
bution margin. First, he calculated the total contribution margin (that is, revenue less variable costs) for
the two contracts on which the dredge was working at the time of the accident as well as the contract for
which the dredge worked after it was repaired. He then allocated the contribution margin to the individ-
ual pieces of equipment that were employed on the projects to get the amount specifically attributable to
the dredge. Finally, this contribution margin was divided by the total days that the dredge worked on
each project to find the average daily profit, which he applied to the 194-day repair period to arrive at
estimated of damages of approximately $10.5 million.

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