Tennessee Business Litigation Law Blog

Robert Chapman posts about a Mississippi case determining that a trial judge did not abuse his discretion in excluding an expert witness's testimony on lost profits. The Mississippi court's primary concern in Webb v. Braswell was that the both the lost profits themselves, and the expert testimony about them, were too speculative under Mississippi law. Specifically, the lost profits were on unplanted crops, which the court implied are inherently too speculative, and there was no proof that the business had ever been profitable in the past (to the contrary, it was apparently losing money). Because the existence of lost profits was too speculative, the trial judge did not abuse his discretion in excluding as unreliable the expert testimony of an agricultural economist as to the amount of lost profits.

For Tennessee's view on an economist's testimony as to lost profits, look to Waggoner Motors, Inc. v. Waverly Church of Christ. In Waggoner, Middle Section Court of Appeals Judge Koch went over Tennessee law on the degree of proof required for compensatory damages, including those for lost profits. Judge Koch also analyzed the requirements for expert testimony on lost profits, ultimately rejecting an economist's testimony because of flaws in the economist's methodology.

You can also take a look at this response to a motion to exclude an economist's testimony posted over at MedMalBlog.com.

The Middle Section Court of Appeals reemphasized that courts can make reasonable inferences to award damages without them being too speculative. Take a look at Dunn v. Matrix Exhibits, Inc. for an example of a court finding a rational way to calculate damages - in this case, the value of 5% of the equity of what appears to be a privately held company.

Last December, the California Supreme Court allowed punitive damages in a case that started as a breach of contract case. Much has been written about the opinion, wondering whether the case opens the floodgates to punitive damages for all sorts of business disputes. Taking a step back, the California opinion is fairly narrow in its holding. The California Supreme Court made clear that it only applies because the plaintiff's claims for intentional misrepresentation and fraud were independent of the breach of contract. (In addition to sending defective parts that breached the contract, the defendant sent along certificates misrepresenting that each batch conformed with the plaintiff's requirements for use in its helicopters). The opinion also requires that the defendant's conduct exposed the plaintiff to liability for "personal damages independent of the plaintiff's economic loss." (If a helicopter had crashed because of the defective parts, the plaintiff would have faced massive civil lawsuits and potential discipline from the FAA.)

There will be some shakedown as subsequent opinions determine what qualifies as (1) a misrepresentation that is independent from the breach of contract, and (2) exposing the plaintiff for personal damages separate from the economic loss.

C.R. Batts Const., LLC v. 101 Const. Co. is a good case for seeking pre-judgment interest. The law in Tennessee is generally that pre-judgment interest is available when liability is not disputed on reasonable grounds, and damages can be calculated by some proper accounting. In this breach of contract case, both sides agreed that the contract was for the defendant to buy rock at $20 per cubic yard. The two parties disagreed on the amount of rock that was actually delivered, and both sides had expert testimony in their favor. The Western Section Court of Appeals affirmed pre-judgment interest for the plaintiff. Once the trial court determined how much rock was delivered, the total money owed was a certain enough calculation to allow pre-judgment interest.

If you had to prove absolute certainty of both liability and total damages, you would effectively be proving a frivolous defense. Fortunately, that's not the law. Even if you have a few variables for the court to decide, if you have a definite formula to calculate the total damages (especially a contractual one), you still may be entitled to pre-judgment interest.