Page 70 - Economic Damages Calculation

In its decision, the court concluded that the plaintiffs’ automobile leasing business was "new and un-
tried" as it had been "in operation for seven months" before failing. fn 19 The court concluded that, alt-
hough the plaintiffs’ damages related to the new auto leasing business were not barred due to the new-
ness of the venture, the evidence proffered was not sufficient to rise above speculation. The court noted
that the plaintiffs’ "basis for his estimations and projections" was not established in the record, there
were errors in the choice of industry growth rates used in the plaintiffs’ calculations, and there was no
evidence to support an assumption the business would have made a profit in its first year of operation. fn
20

Clark v. Scott

In this case, the Supreme Court of Virginia considered the nature of the liability and damages owed in a
breach of contract action. fn 21 Although an accounting by a commissioner in chancery had found Scott
owed certain damages (including lost profits) as a result of her actions, Scott had successfully chal-
lenged a number of these conclusions, ultimately bringing the dispute before the Supreme Court of Vir-
ginia.

The underlying business involved a partnership into which the parties had entered, for the purpose of
opening a dental practice. Clark operated as a general dental practitioner for 19 years, while Scott fo-
cused on reconstructive surgery, including the provision of dental implants. In June 1990, 14 months af-
ter the partnership was formed, Clark sought dissolution of the partnership after alleging the working re-
lationship had "evaporated," including Scott failing to pay her share of expenses, prohibiting Clark from
entering the partnership’s premises to work, and removing partnership equipment and supplies after
Scott vacated the dental practice’s office.

The Supreme Court of Virginia reversed a number of trial court rulings, which had earlier reversed the
commissioner’s findings that had been favorable to Clark. However, in assessing Clark’s entitlement to
lost profits, the Supreme Court focused on the history of the partnership. In particular, the court noted
that the commissioner’s findings as to lost profits were based on performance in the last two months pri-
or to the breach — of a total of eight months of operation for the partnership. Additional evidence indi-
cated that "these final two months were substantially different from the ‘very light’ ... early months of
the [dental] practice ..." In particular, the Supreme Court found that the evidence relied upon by the
commissioner was insufficient as a matter of law to support a lost profits calculation.

This record fails to disclose evidence reasonably supporting a conclusion that the partnership's
dental practice achieved the status of an established business by January 1990. Therefore, since
the partnership's dental practice was a new enterprise lacking an established earning capacity, the
evidence does not permit a reasonably certain estimate that Clark's earnings in November and
December 1989 were a reliable indicator of the amount he would have earned between January
1990 and March 1991. fn 22

fn 19 Id.

fn 20 Id.

fn 21 Clark v. Scott, 520 S.E.2d 366 (Va. 1999).

fn 22 Clark v. Scott, 520 S.E.2d 366, 370 (Va. 1999).

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