Page 73 - Economic Damages Calculation

ture lost profits of a new business was an evidentiary inquiry. The Restatement (Second) of Torts pro-
vides the following in relevant part:

When the tortfeasor has prevented the beginning of a new business . . . all factors relevant to the
likelihood of the success or lack of success of the business or transaction that are reasonably
provable are to be considered, including general business conditions and the degree of success of
similar enterprises. fn 32

Thus, in allowing new businesses to recover future lost profits, courts focus on whether or not the expert
has provided the necessary evidence, with the quantum of evidence required different than that required
of an established business seeking recovery of lost profits. The Restatement (Second) of Contracts notes
this point, stating, "If the business is a new one or if it is a speculative one that is subject to great fluc-
tuations in volume, costs or prices, proof will be more difficult." fn 33

Similarly, in Independent Business Forms, Inc. v. A-M Graphics, Inc., fn 34 the Eighth Circuit (applying
Missouri Law) cited approvingly to one of its own earlier decisions when it found, "While the general
rule requiring proof of expected profits with reasonable certainty places a greater burden upon a newly
established business, it does not mean a new business can never recover lost profits." fn 35

In concluding that a new business may not be foreclosed from recovery based upon a characterization of
the business as "new," courts seem to recognize the potential data and tools available to a plaintiff seek-
ing recovery. In Kids' Universe et al. v. In2Labs, the Court of Appeal of California cited to the Restate-
ment (Second) of Contracts, noting that a plaintiff has available a variety of means to present a credible
calculation of its lost profits:

[I]f the business is a new one or if it is a speculative one . . .[,] damages may be established with
reasonable certainty with the aid of expert testimony, economic and financial data, market sur-
veys and analyses, business records of similar enterprises, and the like. fn 36

Consistent with this, calculations employing tools such as these frequently are accepted by courts in
evaluating claims of lost profits of new businesses. Specifically, courts are likely to look favorably on
empirical analysis that employs generally accepted approaches and methodologies.

Courts generally recognize that new businesses often do not have a history of profits or performance on
which to base a calculation of lost profits, but courts are often willing to admit other forms of evidence
to calculate lost profits of new businesses. That said, the expert can expect that courts are likely to apply
a more critical eye to any such analyses and the information on which the expert relies.

fn 32 Restatement (Second) of Torts Section 912 cmt. d (1979).

fn 33 Restatement (Second) of Contracts Section 352 cmt. b (1981).

fn 34 127 F.3d 698 (8th Cir. 1997).

fn 35 Id. at 703 (citations omitted).

fn 36 116 Cal. Rptr. 2d at 169 (quoting Restatement (Second) of Contracts, Section 352 cmt. b).

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