Page 61 - Economic Damages Calculation

Consequently, the court excluded the plaintiff’s expert’s initial, supplemental, and "revised" reports. The
findings expressed in this matter were similar to those expressed in the opinions of other federal appel-
late courts. fn 68

Schiller & Schmidt Inc. v. Wallace Computer Servs. Inc.

This case included, among other things, misappropriation of the plaintiff’s mailing list by the defendant.
fn 69 Both companies sold office supplies through catalogs. Employees who worked on behalf of the
plaintiff left their employment and formed a competing business, taking with them a mailing list used to
distribute catalogs to potential customers.

The plaintiff’s damages expert calculated damages of approximately $1.1 million, by identifying profits
made by the plaintiff on its catalog sales in the year preceding the theft and calculated the cumulative
annual difference in catalog related profits in each of the subsequent eight years, attributing all losses to
the theft of the mailing list. The defendant’s rebuttal expert argued that damages were unreliable in that
they failed to consider

• the highly competitive nature of the catalog business;

• the price reduction strategies of the plaintiff’s other competitors;

• the market entry of wholesale clubs and superstores;

• the loss of employees and their respective catalog expertise; and

• the fact that many of the plaintiff’s lost customers never purchased product from the defendant.

The court agreed with the defendant’s expert and reduced the plaintiff’s damages. Specifically, the court
identified $156,089 in sales lost in the first year of competition and assumed that only one third of these
sales, or $52,000, were caused by the defendant’s theft. Finally, the court calculated profits that would
have been earned on the $52,000 in lost sales, resulting in lost profits of approximately $16,000.

On appeal, however, even this $16,000 was reversed given that the plaintiff conceded that 95% of the
names had actually been purchased from list brokers and could have been obtained easily by the defend-
ant, which the defendant ultimately did. The Seventh Circuit ruled that any losses suffered by the plain-
tiff had nothing to do with the theft of its mailing list, but rather were attributable to the loss of its expe-
rienced employees, who had the right to lawfully compete against the plaintiff. In its opinion, the court
stated the following:

For years we have been saying, without much visible effect, that people who want damages have
to prove them, using methodologies that need not be intellectually sophisticated but must not in-
sult the intelligence. Post hoc ergo propter hoc [latin for ‘after this, therefore, because of this’]

fn 68 See, e.g., Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483 (8th Cir. 1992), and El Aguila Food Prod. Inc. v. Gruma Corp., 131 F.
App’x 450 (5th Cir. 2005), which are both discussed in the appendix.

fn 69 Schiller & Schmidt, Inc. v. Wallace Computer Servs. Inc., 1991 U.S. Dist. LEXIS 18653 (N.D. Ill. Apr. 26, 1991), aff'd in part sub
nom, Schiller & Schmidt, Inc. v. Nordisco Corp., 969 F.2d 410 (7th Cir. 1992).

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