Page 31 - Economic Damages Calculation

• the licenses anticipated in the projections include contracts in regions, such as Asia, and mer-
chandise, such as DVDs, where [plaintiff] had never previously obtained licenses.

• the projections also assumed that if there was a guarantee amount under the license, it would be
paid in full to [plaintiff], despite the fact that licensees repeatedly failed to pay the guarantees to
[plaintiff] in the past.

[Plaintiff] has not offered any evidence that suggests that the Projections or, more generally, the
existence of lost profits is anything more than merely speculative. From 2002 to 2006, [Plaintiff]
was the exclusive licensing agent for LPGA. During that time [Plaintiff] repeatedly failed to col-
lect more in royalties than it had to pay in Guarantees. Through 2005, [Plaintiff] had paid
$170,000 more in Guarantees than it had collected in royalties. Even under [Plaintiff's] own
highly speculative Projections, [Plaintiff] would not have made a profit until 2008. These facts
demonstrate that the Projections, which rely on a "multitude of assumptions," do not raise a gen-
uine issue of fact as to the existence of lost profits. fn 27

Because the court granted summary judgment on the claim itself, it did not provide any commentary on
the expert’s analysis. However, the reasoning employed by the court in evaluating the projections, and
ultimately granting summary judgment, continues the theme (and lesson for experts) established in some
of the earlier cases examined. Namely that management-supplied information should be provided by
management personnel who are capable and qualified to develop the information, and that testing, anal-
ysis or additional consideration may need to be performed by the expert to evaluate the reasonableness
of the assumptions. Projections and other management-supplied information that rests on assumptions
that are unsupported or that are developed by individuals who are incapable of supporting the reasona-
bleness of the information may be considered speculative and unreliable.

Capital Metro. Transp. Auth./Cent. Of Tenn. Ry. & Navigation Co., Inc. v. Cent. Of Tenn. Ry. & Naviga-
tion Co., Inc.

In this case, the expert relied on management projections and representations, considered other evidence
in relation to, or support of, the management information, and then based the opinion on the manage-
ment information. fn 28 Although comparing management information to other information may be suffi-
cient in certain circumstances, the court concluded that those efforts in this case were insufficient, in
part, because the expert failed to test those assumptions for reasonableness, including how the defendant
would have achieved what was projected.

Capital Metropolitan Transportation Authority (the plaintiff [counter-defendant]) sued Longhorn Rail-
way Company (the defendant counter-claimant]) for breach of contract related to a rail transportation
contract. The defendant then brought a counterclaim for breach of the same contract. At trial, the jury
found that both parties breached the contract but that the defendant’s (counter-claimant’s) breach was
excused. The defendant (counter-claimant) was awarded benefit-of-the-bargain damages, lost profits,
and attorney’s fees.

fn 27 Id.

fn 28 Capital Metro. Transp. Auth./Cent. Tenn. Ry. & Navigation Co. v. Cent. Tenn. Ry. & Navigation Co., 114 S.W.3d 573 (Tex. App.
2003).

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