Page 85 - Economic Damages Calculation

The Superior Court of Pennsylvania pointed to an earlier opinion in General Dynafab, Inc. v. Chelsea
Indus., Inc., fn 79 which found a business "could be taken out of the ‘new and untried’ category if it could
show a ‘significant interest’ in [its] product or service before the contract breach occurred." However,
the Superior Court noted that the Dynafab case did not alter the law in Pennsylvania, pursuant to which
new businesses face a heavier burden to prove lost profits.

[A] new business still has a heavier burden in proving that lost profits are sufficiently certain to
be recovered. The Dynafab court considered the "significant interest’ shown in a business"
[product or service] as one of many factors which are important in determining if the evidence of
lost profits is sufficient to allow it to be submitted to the jury for consideration. Dynafab does not
hold that proof of a "significant interest," by itself, is sufficient to support recovery of lost profits
damages. fn 80

At trial, the plaintiffs prepared projections for six years of sales. The bases for the plaintiffs’ estimations
and projections were not made in the record. The Superior Court also pointed to the absence of evidence
supporting the assumption that the business would have been profitable in the first year or grown at 10%
per year thereafter. The Superior Court ultimately concluded that although the lost profits calculations
for the plaintiffs’ new automobile leasing business were properly admitted into evidence, these were too
speculative to support an award of lost profits.

Even applying the so-called "significant interest" test of Kasemer, we find that while the evi-
dence of alleged lost profits was properly admitted into evidence, it was too speculative to sup-
port an award of anticipated lost profits. Furthermore, unlike the product in Kasemer, Cascade
had not leased cars at a profit before the business folded. fn 81

The court’s analysis of plaintiffs’ lost profits calculations focused on the absence of evidence in the rec-
ord that supported the plaintiffs’ calculations. Although the court seemed to support the potential rele-
vance of any "significant interest" in a new product or business, its ultimate analysis of the facts support-
ing a lost profits calculation for a new business indicated that this was just one factor the court consid-
ered.

Cases Highlighting the Use and Value of Expert Testimony

General Observations

Some readers may be surprised as to the title and substance of this section. However, while cases have
shown that expert testimony can aid in reaching the higher bar required to prove damages from a new
business, courts have shown reticence in evaluating the analytical steps undertaken and information con-
sidered by experts, as well as the qualifications of experts offering damages opinions. The cases de-
scribed in this section illustrate courts’ willingness to accept expert testimony to aid in proving damages
(for new businesses in particular) with reasonable certainty, but also express concern with the qualifica-
tions, preparation, and analysis of damages experts offering such opinions.

fn 79 447 A.2d 958 (Pa. Super. Ct. 1982).

fn 80 Id.

fn 81 Id. at 1261.

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