Florida appellate courts will scrutinize the method employed in calculating damages in business litigation, because this involves a pure question of law. Precedent from the Supreme Court of Florida in W.W. Gay Mech. Contractor, Inc. v. Wharfside Two, Ltd., 545 So.2d 1348 (Fla. 1989) held that, generally, a business seeking to recover lost profits “must prove that 1) the defendant’s action caused the damage and 2) there is some standard by which the amount of damages may be adequately determined.” In applying the second prong, Florida’s Fourth District Court of Appeal in HCA Health Servs. of Fla., Inc. v. Cyberknife Ctr. of the Treasure Coast, LLC, 204 So.3d 469 (Fla. 4th DCA 2016), held that “[e]vidence pertaining to loss of income or gross receipts, without specific evidence concerning expenses, is inadequate to prove lost profits.” Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.
Florida appellate courts have denied recover of lost profits where the proof at trial where the plaintiff merely presents prof of lost income or gross receipts, but not profits. In this vein, E.T. Legg & Assocs. v. Shamrock Auto Rentals, Inc., 386 So.2d 1273 (Fla. 3d DCA 1980), explained in pertinent part that, “[a]s to the damages, the only evidence presented pertained to income or gross receipts, not profits, and testimony concerning expenses did not establish specific dollar amounts. The evidence was therefore inadequate to prove lost profits.” Similarly, Florida’s Second District Court of Appeal in Bass Venture Corporation v. Devom, LLC, 342 So.3d 821 (Fla. 2d DCA 2022), explained that “the trial evidence was insufficient as a matter of law to support the award of lost profits because it addressed only revenues from the relevant time period, not expenses–or, consequently, profits.”
Florida law does not require a party to establish lost profits with “absolute exactness.” The failure to do so will not defeat recovery. Federal precedent from the United States Court of Appeals for the Fifth Circuit in Nat’l Papaya Co. v. Domain Indus., 592 F.2d 813 (5th Cir. 1979), has been persuasive authority in Florida appellate courts, including Florida’s Third District Court of Appeal in Del Monte Fresh Produce Co. v. Net Results, Inc., 77 So.3d 667 (Fla. 3d DCA 2011), holding that “an inability to establish the amount of lost profits with absolute exactness will not defeat recovery” and “the contervailing rules require ‘reasonable certainty’ in the proof of those damages and the assumptions underlying them.” In other words, “[d]amages cannot be based upon speculation or guesswork, but must have some reasonable basis in fact.” Smith v. Austin Dev. Co., 538 So.2d 128 (Fla. 2d DCA 1989).
The consequence of not satisfying the “reasonable certainty” standard can be severe. Absent extraordinary circumstances, the appropriate remedy for a failure to admit sufficient evidence to support an award of lost profits is a reversal of the plaintiff’s damage award. For example, Asset Mgmt. Holdings, LLC v. Assets Recovery Ctr. Invs., LLC, 238 So.3d 908 (Fla. 2d DCA 2018), explained that “[t]he burden of proving damages rested solely with the plaintiff entities,” who failed to carry it, resulting in denial of the damages sought. Tracey v. Wells Fargo Bank, N.A., 264 So.3d 1152 (Fla. 2d DCA 2019), explained that “[t]he general prohibition in such cases against ‘second bites at the apple’ is a sound one that is subject only to the exception of extraordinary circumstances.”
Peter Mavrick is a Fort Lauderdale business litigation lawyer. The Mavrick Law Firm represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.