plaintiff’s business success as well as his business acumen, noting that he had “the experience and motivation to assess employee performance, to prevent malfeasance and to maximize growth. His injuries deprived him of far more than his ability to earn a manager’s salary. . . .” (Id., at pp. 1322-1323.) Taking the time to discuss all aspects of your client’s future earnings, rather than just looking at paycheck stubs or tax returns, will help you develop a broad theory of future earnings.
Breach of contract Damages flowing from a breach of
contract are typically established by both your client who establishes the breach and an expert who renders an opinion on the value of the goods or services lost. In the law of contracts, the theory is that the party injured by a breach should receive as nearly as possible the equivalent of the benefits of performance. (
Civ.Code, § 3300.) “The aim is to put the injured party in as good a position as he or she would have been had performance been rendered as promised [Citation.]” (Kashmiri v. Regents of University of California (2007) 156 Cal.App.4th 809, 848 [67 Cal.Rptr.3d 635].) Traditionally, damages for breach of
contract include those within the contem- plation of the parties when the contract was entered into or at least reasonably foreseeable by them at that time, but not consequential damages. (Erlich v. Menezes (1999) 21 Cal.4th 543, 550 [87 Cal.Rptr.2d 886] [holding that damages for emotional distress based on contractu- al breach are unavailable].) However, there is authority to support an argument that consequential (special) damages may be appropriate pursuant to Civil Code section 3283. For example, Williston, the authority
on contracts, states: “Indeed, in a resale situation, the buyer has been permitted to claim as consequential damages from the seller the amount of the buyer’s potential liability to its customer; if the buyer estab- lishes the probability that it will be sued by the customer, it is immaterial that the buyer has not yet been sued and made to
bear the loss, and recovery is measured by the probable liability of the buyer to the customer.” (24 Williston on Contracts (4th ed.2002) § 66:68, pp. 737-738, fns. omitted.) Other authorities note that a plaintiff may recover for future losses if there is an appropriate showing that those losses “will in fact be incurred in the future.” (2 Dobbs, The Law of Torts (2001) § 380, p. 1056; see 1 Dobbs, Law of Remedies (2d ed.1993) § 8.5; Rest.2d Torts, § 910.) The question of special damages
turns on notice and/or knowledge, i.e. if the circumstances were known or should have been known to the breaching party at the time he entered into the contract. (Brandon & Tibbs v. George Kevorkian Accountancy Corp. (1990) 226 Cal.App.3d 442 [227 Cal.Rptr. 40]; 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 815, p. 733.) Evidence of the parties’ expectations, performance as well as their respective knowledge can open the door to special damages for a breach of contract claim, allowing your expert to expand the damages opinion for the value of the contract, its significance to your client, the measure of loss the breach caused your client coupled with the breaching party’s knowledge of that potential loss.
Lost profits Lost profits are a category of special
damages, similar to contractual damages. In a business tort case, a plaintiff may recover consequential damages such as lost profits under Civil Code section 3343 even where no out-of-pocket loss is estab- lished. (Stout v. Turney (1978) 22 Cal.3d 718, 729-730 [150 Cal.Rptr. 637].) The lost profits must be reasonably anticipat- ed. (Hartman v. Shell Oil Co. (1977) 68 Cal.App.3d 240, 247 [137 Cal.Rptr. 244].) Even if an expert renders an opinion on the amount of lost profits based on past experience, if the future endeavor, busi- ness plan, or project is too uncertain or speculative, expert opinion may not be enough. (Lewis Jorge Construction Management, Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 960, 977 [22 Cal.Rptr.3d 340].) This typically arises
when a plaintiff’s company is relatively new.
For example, in Kids’ Universe v.
In2Labs (2002) 95 Cal.App.4th 870 [116 Cal.Rptr.2d 158], profits allegedly lost as result of defendant’s negligence in pre- venting plaintiffs from opening an Internet-based toy business were not recoverable because plaintiffs failed to raise factual question whether business would have realized net profits. (Id., at p. 882.) But the California Supreme Court has recently granted review on this issue in Sargon Enterprises, Inc. v. University of Southern California (2011) 2011 WL 437295. In Sargon, the appellate court reversed for a new trial on lost profits. Key to the decision was the conflict between traditional measurements of lost profits for an established company and the expert’s use of “economic and finan- cial data, market surveys and analyses, business records of similar enterprises, and the like.” (Ibid.) “The trial court’s rul- ing is tantamount to a flat prohibition on lost profits in any case involving a revolu- tionary breakthrough in an industry.” (Ibid.)
Recent publicity regarding Stanford
professor B.J. Fogg’s class on creating Facebook applications is on point: his class of 75 students created 31 applica- tions that were used by 16 million people – all in one semester. Be prepared to note the distinction of traditional methods of measuring lost profits and why such meth- ods may be inaccurate to measure your client’s lost profits in order to justify your expert’s approach to lost profits. Margaret P. Stevens is a sole practitioner
in Century City with a wide range of practice areas including business litigation, class actions, securities, intellectual property, pro- bate, product liability, employment, and person- al injury. After receiving outstanding achieve- ment awards during law school including Best National Oral Advocate from the American College of Trial Lawyers Award, she continued to distinguish herself as a SuperLawyers Rising Star 2004 - 2007. She currently serves as Treasurer for the Los Angeles County Bar Association. In her spare time, she is the principal clarinetist of the Los Angeles Lawyers Philharmonic.
JULY 2011 The Advocate Magazine — 39
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