Page 75 - Economic Damages Calculation

Chrysler used a market research company in determining the "planning potential." The Court of Appeals
accepted the defendants’ experts’ reliance on the "planning potential."

The defendants’ experts used the profitability of the Manuel’s dealership in Richardson, Texas, to esti-
mate the impacted business’ profitability. The experts testified that the Richardson dealership was com-
parable to the South Arlington dealership for a number of reasons. Both dealerships would have been
under the Manuel’s "experienced ownership and management," both dealerships sold lines and marques
made by Chrysler, and the two dealerships had similar demographics. The experts explained that "they
chose a dealership owned and managed by [Manuel] because using other dealerships would inject too
many uncertainties and extraneous variables into the comparison." fn 43 Chrysler’s representative agreed
that "management by the dealer-principal is the most important factor in the profitability of a dealer-
ship." fn 44

Chrysler further argued that Dallas-Fort Worth was the biggest truck market in the world and, therefore,
gross profit per vehicle would be higher in that market as compared to the South Arlington market of the
dealership at issue. However, the defendants’ experts found that per-unit profitability was similar be-
tween the two dealerships. The defendants’ CPA expert further testified that he tested the damages mod-
el by comparing figures from it to gross profit per unit results for other area dealers doing business in
2001.

After weighing all of the evidence in the record, the Court of Appeals found that although "[e]ach of
[the] areas of contention was hotly disputed," it could not say "that the trial court abused its discretion in
admitting the expert testimony on this record." fn 45 Moreover, the Court of Appeals pointed to the fact
that the "actual damages" awarded by the trial court "were well within the range of Chrysler’s own [pre-
litigation] estimate of net profits [at the South Arlington dealership] as well as those of Manuel’s wit-
nesses."

Cases Addressing Assumptions and Substantial Similarity to the Matter at Hand

General Observations

As previously described, experts are typically familiar with the process of identifying and utilizing in-
formation and data from other businesses or contexts, and then extrapolating to the matter at hand. When
the expert engages in this form of analysis, it is often referred to as the yardstick method or a "compara-
bles" analysis (for example, in the context of a business valuation employing the market approach). Cas-
es addressing lost profits sought by new businesses demonstrate that several courts have approved of the
use of a yardstick to prove lost profits, so long as there is "a substantial similarity between the facts
forming the basis of the profit projections and the business opportunity that was destroyed." fn 46 It ap-
pears that at the heart of courts’ inquiry is a desire to ensure that the expert’s comparison is reasonable.

fn 43 Id.

fn 44 Id.

fn 45 Id. at 193.

fn 46 Kids' Universe v. In2Labs, 116 Cal. Rptr. 2d 158, 170 (Cal. Ct. App. 2002) (citations omitted).

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