Page 16 - Calculating Lost Profits

As a practical matter, damages experts commonly address causation indirectly by demonstrating correla-
tion of two variables. For instance, a plaintiff may experience a loss, such as a decline in sales, that oc-
curred immediately after an alleged wrong. However, the plaintiff must generally present evidence
(through all sources, including testimony by a damages expert) sufficient enough to prove that the loss
in sales was attributable to the alleged wrongful act. This issue was addressed in a false advertising case
in the Northern District of Alabama, Snac Lite, LLC v. Nuts ‘N More. fn 7 In Snac Lite, the plaintiff al-
leged the defendant had falsely advertised the protein content in its nut butter product, which had caused
the plaintiff to experience lost sales and profits. As it related to damages, the court focused on two ques-
tions:

1. What evidence indicated that consumers chose the defendant’s products over the plaintiff’s
products?

2. What evidence indicated that consumers made their choice due to the false advertising at issue?

In this matter, the opinions of the plaintiff’s damages expert, a forensic practitioner, were excluded be-
cause, in the court’s words, "While [the Practitioner] assumed that a causal connection existed between
Defendant’s alleged false statements and Plaintiff’s damages, he provided no data to support such a con-
clusion. . . ." fn 8 The court explained that the plaintiff did not establish that its loss of sales was the result
of consumers purchasing the defendant’s products. The court expected that even if the consumers had
purchased the defendant’s products in the past, the plaintiff had to provide evidence that purchases of
the defendant’s products (instead of the plaintiff’s) were attributable to the defendant’s false advertising.
It should be noted, though, that this is a fact-specific issue, and plaintiffs are not necessarily obligated to
identify each lost customer or present evidence of each customer’s reason for not making a specific pur-
chase. fn 9 Moreover, as described previously, although it is the plaintiff’s burden to present evidence of
causation, it is not the responsibility of the plaintiff’s damages expert to present this evidence. For ex-
ample, a damages expert may refer to other experts, percipient witnesses, or documents that may address
causation.

Many courts have accepted the opinions of experts who assume causation and do not cite evidence or
analysis that support a causal link between the alleged wrongful acts and a damages calculation. None-
theless, practitioners’ work is strengthened by careful consideration of causation. The issue of causation
is addressed in greater detail in the AICPA practice aid Attaining Reasonable Certainty in Economic
Damages Calculations, chapter 3, "Causation Considerations."

Another frequent causation-related issue faced by practitioners is whether the practitioner "has adequate-
ly accounted for obvious alternative explanations." fn 10 However, it is noteworthy that Federal Rules of

fn 7 Snac Lite, LLC v. Nuts ‘N More, LLC, 2016 WL 6778268, No. 14-cv-01695.

fn 8 See footnote 7.

fn 9 See, for example, Syngenta Crop Protection, LLC v. Willowood, LLC, et al., Civ No. 1:15-cv-00274 (M.D.N.C.), "In addition,
Willowood has presented no authority in support of its assertion that the identity of the purchasers or the categories of customer are
relevant, let alone necessary, to a lost profits claim." See also, Nebula Glass Int'l., Inc. v. Reichhold, Inc., 454 F.3d 1203 (11th Cir.
2006), "The lost profit damages in this case were not speculative simply because [Plaintiff] did not present evidence of every custom-
er’s reason for not buying Safety Plus 1 glass."

fn 10 Federal Rules of Evidence 702

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