Page 72 - Acertaining Economic Damages Calculation

Because the dredge could not operate at full capacity in the months immediately following the repairs,
the expert used a similar methodology to calculate lost profits of approximately $1.2 million during this
start-up period.

The expert also considered a 10-year study on the profitability of Great Lakes’ assets prepared long be-
fore the dredge was damaged, which indicated that it had a 51% usage rate over the 10-year period. He
compared this information to more recent contracts for the Dredge, both before and after the allision,
which reflected a 92% usage rate. With the exception of a period in which the dredge was under repair,
it had been fully used in the most recent years. These facts and his determination that there was a reduc-
tion in competition and increased demand throughout the repair period supported his assumption that the
dredge would have been used at the 92% rate over the entire repair and start-up periods. The court ac-
cepted this testimony:

The court finds that the utilization rate for the Dredge before and after the [the damage to the
Dredge], combined with ample and uncontroverted evidence of robust market demand, as dis-
cussed above, easily meets the required degree of certainty... Here, the factually-supported finan-
cial data, fact testimony, and expert opinions, taken together, satisfy the "reasonable certainty"
standard. fn 8

In this case, the court agreed that it was not necessary to identify specific customers or contracts that
were lost in order to substantiate a claim for lost profits.

CSL, L.L.C. v. Imperial Bldg. Prods. Inc., 2006 WL 3526924 (N.D. Cal. Nov. 21, 2006)

CSL, LLC (CSL) is a distributor of fire logs that were claimed to reduce creosote from accumulating in
home chimneys. In 2003, CSL sued Imperial Building Products (Imperial) for false advertising and
trademark infringement in connection with Imperial’s Supersweep Fire Log, which Imperial also
claimed reduces creosote. Under a Final Judgment and Injunction, Imperial was prohibited from adver-
tising or using trademarks that assert that its fire logs reduce creosote from chimneys or were chimney-
cleaning logs. In 2006, the court issued a Cease and Desist order in connection with Imperial’s violation
of the injunction, and CSI sought sanctions against Imperial, claiming lost profits arising from Imperi-
al’s continued sale of products with the infringing advertising.

CSL’s damages expert segregated lost profits damages into three categories, including (a) sales to
Lowe’s Companies, Inc., (b) sales to Ace Hardware Corp., and (c) sales to other customers. To estimate
the lost sales to Lowe’s, CSL’s expert calculated the difference between the company’s actual 2006
sales and what he determined to be the projected sales but for Imperial’s false advertising and infringe-
ment. In support of an assumed 4.3% growth rate over 2005 sales to Lowe’s, CSL’s expert offered the
following support:

• The growth rate was less than half of the rate of growth experienced by CSL in its sales to
Lowe’s in the prior year.

• The growth rate was lower than the 10.7% growth in CSL’s sales to Ace Hardware and 10.6%
growth in sales to other customers.

fn 8 Great Lakes Bus. Trust, 855 F. Supp. 2d at 151.

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