Page 93 - Economic Damages Calculation

the specific product, with a proven record of operation and management, a history of profit and
loss, with two current operations in the general area, etc. fn 110

The court’s comments regarding "uncertain variables" might not be best read as referring to the actual
inputs in a damages model. Rather, these comments may refer to the nature of the bases supporting such
model inputs or variables that give courts comfort that a calculation is not based upon mere speculation
and meets the reasonable certainty threshold. Although the Supreme Court in this case pointed to certain
unique aspects of franchised operations, the plaintiff’s knowledge and experience with the business in
question seemed to be an important fact that enhanced the court’s comfort with the damages calculation.

Cell, Inc. v. Ranson Investors

In Cell, Inc. v. Ranson Investors, Cell, Inc. (Cell) brought a breach of contract action against the defend-
ants (a limited partnership and individuals) related to a lease agreement for a grocery store. fn 111 The de-
fendants had agreed to lease space at a to-be-constructed shopping center to the plaintiff for the purpose
of operating a grocery store. Despite the agreement, the defendants agreed to lease the same grocery
store location to a third party, Roger Barnhart. Ultimately, the shopping center was constructed by an-
other party and Mr. Barnhart opened a grocery store in the exact location the defendants had promised to
Cell. As a result, the plaintiff was unable to open and operate the grocery store in the location covered
by the original lease agreement.

Cell filed suit against the defendants for breach of contract — claiming damages for lost profits — based
on the 20-year lease term specified in the contract to operate a grocery store. At trial, the plaintiff pre-
sented evidence of lost profits for only the initial 10 years of the lease. The court ultimately limited the
potential damages period to 7 years, and the jury awarded the plaintiff over $510,000. Cell’s expert
based his analysis on information that included market data, the consumer price index for retail food,
and the actual operating results of the grocery store operated by Mr. Barnhart at the location in question.

In hearing an appeal of the jury award, the Supreme Court of Appeals (of West Virginia) noted that, at
the time, "The nationwide trend has been away from a per se rule against the award of lost profits to new
businesses and towards a rule that requires a strong evidentiary basis for proving lost profits of a new
business before a court will grant them." fn 112 The court observed that most jurisdictions believe that
concerns as to speculative damage awards "can be addressed by requiring a high level of proof," and ex-
pressly adopted the position that new businesses were not barred from recovering lost profits. fn 113

Although the court noted that Cell’s expert linked the operating results from Mr. Barnhart’s actual loca-
tion to the market surveys, the Supreme Court of Appeals ultimately found that the evidence was "too
speculative to support [the] jury award" and remanded the decision to the trial court. fn 114 Among the

fn 110 Id. at 401–02.

fn 111 Cell, Inc. v. Ranson Investors, 427 S.E.2d 44 (W. Va. 1992).

fn 112 Id. at 449.

fn 113 Id.

fn 114 Id. at 450.

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