Page 74 - Calculating Lost Profits

 The cost to mitigate as compared to the economic damages suffered by the plaintiff. If the cost to
mitigate is greater than the economic damage suffered as a result of the defendant’s breach, it
may not be possible or reasonable for the plaintiff to mitigate the damages in the contemplated
way.

 Technical barriers to mitigation. The plaintiff’s ability to mitigate may be affected by technolo-
gy constraints or opportunities.

 Market barriers to mitigation. The plaintiff’s marketing capabilities, taking into account its repu-
tation, product quality, and product features, may be affected by the defendant’s conduct and af-
fect the plaintiff’s ability to mitigate damages.

 Supply-oriented barriers to mitigation. The defendant’s breach may also have affected the plain-
tiff’s ability to obtain goods and services from its suppliers necessary for production to mitigate
the plaintiff’s losses.

 Timing issues affecting the mitigation of damages. The plaintiff’s knowledge of the event caus-
ing economic harm and the time required to implement a mitigation strategy may also affect mit-
igation.

Suggestions for Practitioners in Evaluating Mitigation in Lost Profits Claims

As described previously, practitioners should generally consider the mitigation efforts, if any, taken or
made by the plaintiff to lessen its damages, which may affect available remedies to the plaintiff. The
practitioner may describe attempts by the plaintiff to mitigate its losses to evaluate whether the plaintiff
has reasonably mitigated or attempted to mitigate its losses. Alternatively, the practitioner may illustrate
why the plaintiff’s losses should be adjusted for mitigation factors.

The practitioner may also assist counsel by suggesting deposition questions that relate to mitigation is-
sues. For example, lost profits in one division of a company may be offset by increased profits in anoth-
er division of a company, such as other American Kitchen locations having higher sales and profits as a
result of a failure to open an 11th location. The practitioner may recommend deposition questions and
other information relevant to these profits for support and analysis of a mitigating activity by the plain-
tiff. These might include internal discussions and consideration of mitigation efforts.

Finally, the practitioner may provide an analysis of affirmative mitigation opportunities to the plaintiff,
when the opportunities were not implemented. For example, the practitioner may illustrate repair or re-
placement costs that the plaintiff may have undertaken to minimize loss amounts. The practitioner may
also illustrate that the plaintiff did not attempt to market or discount its excess product after an alleged
breach to minimize loss amounts.

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