Page 74 - Economic Damages Calculation

Using Multiple Analyses to Establish Sufficiency of Analysis

Supporting a lost profits analysis with several bases for the opinion, including other expert opinions, of-
ten provides an expert with a higher likelihood that a court will find the opinion admissible. In Daimler-
Chrysler Motors Co. v. Manuel, fn 37 two experts, an economist and a CPA, testified on behalf of the
Manuel and related party defendants regarding lost profits. The matter arose after the defendants were
forced to delay by approximately one year the opening of a new South Arlington, Texas Chrysler-Jeep
dealership, until late 2002. The defendants contended that the Daimler-Chrysler Motors Co. (Chrysler)
had failed to use its "best efforts" to resolve a protest from a competing established Chrysler-Plymouth
dealer regarding the creation of Manuel’s South Arlington dealership. The "best efforts" term was incor-
porated into an August 1999 settlement and a new dealer contract covering Manuel’s new South Arling-
ton dealership, which resolved then existing disputes between the parties.

The defendants’ experts calculated lost profits for one year, November 2001 to November 2002. Using
data from Manuel’s Dodge dealership in Richardson, Texas, the two experts created a "yardstick" using
"Chrysler’s online manual" and profit and expense records from the dealership. fn 38 The quantity of cars
that would have been sold was estimated using a "planning potential" figure calculated by Chrysler. Ev-
idence indicated that Manuel historically operated at or near Chrysler’s expected "potential" in his other
dealerships. Additionally, the damages calculation included an owner’s salary and rent that the dealer-
ship would have paid to Manuel.

Chrysler argued that the defendants’ lost profits methodology was improper, but offered no alternative
analysis. The Court of Appeals of Texas concluded "[t]here is no one proper method for determining lost
profits as damages." fn 39 The Court of Appeals then accepted the "yardstick" method, stating "[t]he
‘yardstick’ method used by [Plaintiffs’ expert], consisting of a study of profits from business operations
that are closely comparable to that of a plaintiff, has been accepted for calculating lost profits and, in
particular, for new businesses." fn 40

Chrysler also challenged the underlying data upon which the plaintiffs’ experts relied. The Court of Ap-
peals applied the "reasonable certainty" standard to the "planning potential" data used to calculate the
quantity of "but for" car sales. The court clarified that "the rule regarding such proof is intended to be
"‘flexible enough to accommodate the myriad circumstances in which claims for lost profits arise.’" fn 41

Although Chrysler argued that the "planning potential" figure was unreliable, Chrysler personnel testi-
fied that it was the "best number" available and was based upon extensive market research. While the
defendants’ experts did not independently verify the numbers, they "accepted that Chrysler had properly
evaluated the market and the resulting anticipated sales." fn 42 The Court of Appeals also noted that

fn 37 362 S.W.3d 160 (Tex. Ct. App. 2012).

fn 38 Id. at 189.

fn 39 Id. at 190 (citations omitted).

fn 40 Id. (citations omitted).

fn 41 Id. at 191 (citing Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 279 (Tex. 1994)).

fn 42 Id. at 192.

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