Page 97 - Economic Damages Calculation

Court of New Jersey, Appellate Division, discussed the status of the new business rule in New Jersey, as
there were indications that the New Jersey Supreme Court may stop adhering to the new business rule.
In the RSB ruling, the appellate court stated, "In this light, we are constrained to conclude that New Jer-
sey continues to follow a minority of states that adhere to the new business rule." fn 126

While the United States Court of Appeals for the Third Circuit had predicted in 1990 that the New Jer-
sey Supreme Court would "'no longer follow a per se rule precluding all new businesses from recovering
any damages for lost profits,'" the RSB court recognized that "until the Supreme Court says otherwise,
the new business rule remains the law in" New Jersey. fn 127

A similar conflict between treatment of state law by federal and state courts can be seen in Georgia’s
treatment of the new business rule in Lowe’s Home Center, Inc. v. General Elec. Co. fn 128 In that matter,
the 11th Circuit assessed whether Lowe’s could recover lost profits for a store relocation that was pre-
vented from occurring — that is, whether the relocated store was considered a new business. Despite
Georgia’s apparent adherence to the stricter form of the new business rule, the district court looked to
the trend in other states to allow recovery where a chain or franchise was at issue.

Rather than deciding the matter, the 11th Circuit certified the question to the Georgia Supreme Court as
to whether any losses of a new business that was a chain or franchise were capable of "reasonably accu-
rate computation." Thereafter, in General Elec. Co. v. Lowe’s Home Ctrs., Inc., fn 129 the Supreme Court
of Georgia declined to answer the 11th Circuit’s question, deciding the matter on other grounds that pre-
cluded Lowe’s recovery.

Subsequently, the U.S. District Court in Kansas, faced with applying Georgia law, found that the Geor-
gia Supreme Court’s silence on the question of Georgia’s adherence to the new business rule in its Gen-
eral Elec. Co. v. Lowe’s Home Ctrs., Inc. opinion "provides little basis for concluding ... that Georgia no
longer follows the new business rule." fn 130

Conclusions

Calculating lost profits for a business with no or limited operational history, or history in a particular
field, location, or product, creates challenges for the expert faced with this task. This chapter has dis-
cussed different courts’ treatment of an expert’s analysis of lost profits when confronted with a plaintiff
seeking recovery for an injured "new business." While it is often helpful to analyze case law on these is-
sues, these decisions are the result of the specific facts and information elicited by the parties and ex-
perts. However, as can be seen in these cases, if the information and relevant analysis are available, a
court may be open to allowing recovery — even if the relevant state law adheres to a stronger form of
the new business rule.

fn 126 Id. at 611.

fn 127 Id. at 609, 612 (citations omitted).

fn 128 381 F.3d 1091 (11th Cir. 2004).

fn 129 S.E.2d 636 (Ga. 2005).

fn 130 Blair-Naughton, L.L.C. v. Diner Concepts, Inc., 568 F.Supp.2d 1261 (D. Kan. 2008).

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