Page 70 - Calculating Lost Profits

Chapter 11

Mitigation

Overview

A plaintiff has a duty to mitigate its damages. Mitigation is an action taken by a plaintiff to lessen or
avoid loss from a wrongful act. The "mitigation-of-damages doctrine" is defined in Black’s Law Dic-
tionary as

The principle requiring a plaintiff, after an injury or breach of contract, to make reasonable ef-
forts to alleviate the effects of the injury or breach. If the defendant can show that the plaintiff
failed to mitigate damages, the plaintiff’s recovery may be reduced. fn 1

Mitigation may also be referenced in some jurisdictions as the "avoidable consequences doctrine" or the
"avoidability of damages theory." The concept is a legal principle: A plaintiff has an obligation to miti-
gate its damages and should take "reasonable, non-burdensome steps to avoid its loss." fn 2

Mitigation efforts may be "negative" when the plaintiff discontinues operations as the means of mini-
mizing its loss, or "affirmative" when the plaintiff’s mitigation is through replacements, repairs, or dis-
counts. fn 3

A defendant that argues that a plaintiff has failed to mitigate damages may attempt to show how the
plaintiff could have avoided damages in a reasonable manner without undue risk but did not do so. The
defendant generally has the duty to show that reasonable mitigation possibilities existed but were not
acted upon. The court’s application of the mitigation doctrine may "consider whether a reasonable per-
son, acting in light of the known facts and circumstances, would have taken steps to avoid certain dam-
ages." fn 4 Courts have found that mitigation does not extend to arrangements that would expose the
plaintiff to undue risk. fn 5 Courts have also found that a failure to mitigate does not necessarily bar re-
covery of damages but, rather, affects the amount of damages recoverable. fn 6

fn 1 Bryan A. Garner, Black’s Law Dictionary, Ninth Edition (2009), West Publishing Co., Thomas Reuters, United States of Ameri-
ca, p. 1093.

fn 2 Koby v. United States, 53 Fed. Cl. 493, 496-97 (2002).

fn 3 Lost Profits Damages "Mitigation of Damages in the Lost Profits Calculation," by Scott M. Bouchner and Richard A. Pollack, p.
347.

fn 4 Lost Profits Damages "Mitigation of Damages in the Lost Profits Calculation," by Scott M. Bouchner and Richard A. Pollack, p.
497.
fn 5 See footnote 4.

fn 6 Meineke Car Care Centers, Inc. v. RLB Holdings, LLC, Joe H. Bajjani, Michelle G. Bajjani, a/k/a Michelle Bajjani, U.S. Ct. of
App, Fourth Circuit, No. 09-2030 (April 14, 2011).

68 © 2020 Association of International Certified Professional Accountants