Page 80 - Economic Damages Calculation

In rejecting an application of the per se new business rule, the court noted that the relevant focus is on
"whether the plaintiff has adduced evidence that provides a basis from which the jury could with ‘rea-
sonable certainty’ calculate the amount of lost profits," not whether a business is characterized as "new"
or "unestablished." fn 58 Turning to the question of whether Peterson’s future lost profits had been proven
with reasonable certainty, the court pointed to the fact that Peterson’s damages were fundamentally
based on SuperValu Stores’ own projections of profits for a new store "from the application of a scien-
tific methodology" SuperValu Stores’ used for many years. fn 59 The court further pointed out that this
methodology had been used by SuperValu Stores to accurately predict store performance and was a pro-
jection that was produced in the normal course of business operations. Finally, the court pointed to Su-
perValu Stores’ own description of its projections, which made it possible for it "to make accurate fore-
casts for any site, for any type of supermarket, in any part of the country" and that its own analysis of the
proposed grocery store location caused SuperValu Stores to state it "look[ed] like a winner." fn 60

Parlour Enters., Inc., v. Kirin Grp. Inc.

In this case, the plaintiffs sued the defendants after the defendants terminated a franchise agreement that
granted the plaintiffs the right to develop Farrell’s Ice Cream Parlour locations. fn 61 As part of the fran-
chise agreement, the parties entered into an Area Development Agreement (ADA) that required the
plaintiffs to open a minimum number of Farrell’s Ice Cream Parlour locations within a certain time peri-
od. The plaintiffs ultimately opened just one location during the required timeframe and the defendants
subsequently terminated the ADA. At the time of this termination, the plaintiffs had plans developed for
three additional Farrell’s Ice Cream Parlour stores in specific locations.

In the context of the plaintiffs’ claim that they had been wrongfully terminated, the plaintiffs’ expert
provided a damages analysis covering lost profits, lost franchise fees, and "consequential expenses."
Projections prepared by the plaintiffs formed the starting point for the expert’s analysis, although the ex-
pert was unaware of who had prepared them or whether such individuals had appropriate training and
expertise. In building a damages model, the expert allowed for a ramp-up time in store performance,
such that the projections provided by the plaintiffs were not used until after the first two years of the
damages model.

Additionally, the expert considered market data related to "a couple of dozen ice cream parlors" and a
300-restaurant chain, Friendly’s, that included both an "ice cream component and [a] food component,"
to benchmark the projections on which his analysis was significantly based. Finally, the expert consid-
ered the only two existing Farrell’s locations owned by plaintiffs. fn 62 For one of those locations, he
spoke to Parlour’s principals about its revenues, expenses, and profits. For the other location, the expert
obtained profit and loss statements for the "Family Fun Center" that was home to this Farrell’s location

fn 58 Id. at 330.

fn 59 Id.

fn 60 Id. at 331.

fn 61 Parlour Enters., Inc., v. Kirin Grp. Inc., 57 Cal.Rptr.3d 187 (Cal. Ct. App. 2007).

fn 62 Parlour Enters., Inc. v. Kirin Grp. Inc., 57 Cal. Rptr. 3d 187, 191 (Cal. Ct. App. 2007).

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