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MIAMI BUSINESS LITIGATION: DISPUTES OVER “LOST PROFITS”

Recovery of business losses for another party’s wrongful actions can often be insufficient without recovery of “lost profits.” Lost profits consist of the amount of profit a business would have earned, absent the breach of contract. Proof of lost profits must be based on evidence that is reasonably certain and not based on speculation. Proof of income and of the expenses of the business for a reasonable time before the breach occurred is often required. Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

To estimate the amount of profit which was lost arising from a breach of a duty or a contract, one must necessarily compare what actually happened with what hypothetically should have happened as asserted by the plaintiff claiming damages.  Lost profits are, by their nature, estimates and not subject to an exact calculation. As a result, Florida courts are wary of awarding lost profit damages unless the aggrieved business can show with evidence that the estimation of lost profits is not mere speculation.

In estimating damages, profits that are speculative or conjectural are not generally regarded as elements.  Such profits are rejected, not because there is anything in their nature per se which demands their rejection, but in obedience to the well-established common-law rule that all damages recovered for a breach of contract must be proven with certainty, and not left to speculation or conjecture.

Hodges v. Fries, 34 Fla. 63, 15 So. 682 (1894).

Florida businesses can prove lost profit damages with expert testimony supported by evidence of a businesses’ prior sales.  For example, in Katz Deli of Aventura, Inc. v. Waterways Plaza, LLC, 183 So. 3d 374 (Fla. 3d DCA 2013), Waterways Plaza, LLC (“Waterways”) was a landlord who rented space for a deli to the Katz Deli of Aventura, Inc. (“Katz Deli”).  During the tenancy the roof on the leased premises leaked.  Waterways refused to make the repairs necessary to fix the leak, which allowed mold to grow and a musty smell permeated the deli. The condition caused the eventual closure of the deli.  Katz Deli filed a lawsuit against Waterways for damages including lost profits. The appellate court held that “the inability to prove a precise damages amount will not prevent a plaintiff from recovering so long as it is clear that some loss resulting from the defendant’s actions is certain.”  Because Katz Deli was able to show that the leak was the cause of the harm incurred and provided evidence to support the calculation, the Katz Deli was awarded lost profits arising from the Waterway’s breach of the lease.  Particularly, “[t]he history of sales from these locations, along with the sales projections and unrebutted expert testimony calculating likely prospective profits, provided a sufficient yardstick by which to measure [the plaintiff’s] prospective profits” was sufficient evidence to support the lost profit calculation.  Id.

Similarly, in Nebula Glass Intern., Inc. v. Reichhold, Inc., 454 F.3d 1203 (11th Cir. 2006), the plaintiff was a glass laminating company that sued the manufacturer of resin, a component in the creation of laminated glass.  Unbeknownst to the glass laminating plaintiff, the resin manufacturer used inferior products for several years. The glass manufacturing plaintiff’s reputation in the community was devastated and the company needed to replace many of its customers defective glass.  The jury ultimately awarded $22.5 million which included $6,563,000 in lost profits.  The resin manufacturer appealed, asserting that the lost profits were too speculative.  Nebula Glass disagreed, finding that “[t]he lost profit damages in this case were not speculative simply because [plaintiff] did not present evidence of every customer’s reason for not buying [the] glass.” Id.  Nebula Glass found that the plaintiff proved its lost profits damages by providing testimony that showed that the plaintiff’s reputation was ruined, including testimony that other manufacturers ceased using the resin.  Importantly, the plaintiff had comprehensive projections for its income that incorporated a significant amount of customer data. “Although [the resin manufacturer] is surely correct that [the plaintiff’s expert’s] calculations involved estimating a number of variables that cannot be predicted with certainty, Florida law clearly does not require that the amount of lost profits be certain.”  Id.

Peter Mavrick is a Miami business litigation attorney who also practices business litigation in Fort Lauderdale and Palm Beach.  This article does not serve as a substitute for legal advice tailored to a particular situation.

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