Page 14 - Calculating Lost Profits

Type of Damages fn 1 Methodology
Benefit-of-the-bargain (or "expec- The difference between the amount the plaintiff could be expected to
tation") have received and the amount the plaintiff received.
Reliance The amount required to restore the injured party to the economic po-
sition occupied before the injured party acted in reasonable reliance
on a promise.

Lost profits is a measure used in calculating expectation damages, generally in a forward-looking man-
ner. In contrast, reliance damages address the plaintiff’s investment to obtain the benefit, typically prior
to the time at which the analysis is performed, plus any out-of-pocket costs incurred by the plaintiff as a
result of the harm in question, as well as consideration of what has been obtained.

The practitioner may also seek a disgorgement of the wrongdoer’s profits, which is sometimes referred
to as restitution, unjust enrichment, or ill-gotten gains. This measure (which is sometimes referred to as
damages but more precisely is a monetary remedy, but not "damages") is focused on the benefit ob-
tained by the defendant. If the practitioner measures both the harm to the plaintiff and the benefit ob-
tained by the defendant, the practitioner should consider whether the two measurements overlap to avoid
"double-counting."

The following table provides examples to illustrate how a practitioner may implement these types of
damages (for purposes of the case study):

Remedy Example Methodology

Expectation damages Lost profits from the expected operation of the 11th location
Reliance damages Costs expended by Franchisee to evaluate the 11th location

Causation

To prevail in a civil lawsuit and be awarded damages, a plaintiff is generally expected to prove that

 a defendant perpetrated a wrongful act; fn 2

 subsequent to the wrongful act, the plaintiff experienced some economic harm, such as lost prof-
its as a result of lost sales; and

fn 1 It is not the objective of this section to provide an exhaustive discussion of the types of damages measures available to the plain-
tiff. The practitioner should consult with counsel and sources such as Black’s Law Dictionary for further information regarding these
and other measures of damages, and particularly, which measures are appropriate for the particular causes of action and venue.
fn 2 Although assertions of fraud are sometimes included within counsel’s presentation of allegedly wrongful acts, the damages expert
should not offer an opinion on the existence of fraud. Pursuant to Statement on Standards for Forensic Services No. 1, “[t]he ultimate
decision regarding the occurrence of fraud is determined by a trier of fact;” however, the damages expert “may provide expert opin-
ions relating to whether evidence is consistent with certain elements of fraud or other laws based on objective evaluation.”

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