Proving Damages

When a client has been wronged, attorneys often hear the line, “let’s sue.” Lawsuits are important and integral to our justice system. Litigation can sometimes be the most appropriate response to a dispute between two parties. However, before filing suit, it is crucial that the client and the attorney have substantial discussions about reasonable expectations and what a victory (or a loss) in a lawsuit can mean to the client’s bottom line. Part of these discussions must involve understanding how the client proves his or her damages and what level of evidence is required. A recent Tennessee appellate case reinforces this concept.
In Borla, the Plaintiff designed and manufactured automobile exhaust systems. Borla hired the Defendant to repair and refurbish several of its pipe bending machines. The facts are more complex than this short summary needs to explore. Essentially, the Plaintiff (manufacturer), claimed that the Defendant (repairer) breached a series of contracts which caused the Plaintiff to lose $1 Million in lost revenue in 2008, which would have equated to $486,166 in lost profits.
In an effort to prove its lost profits of $486,166, the Plaintiff offered the testimony of its chief financial officer. The Defendant, however, attacked this testimony with a hired damages expert who reviewed the Plaintiff’s losses in 2008 ($3.4 Million) and attributed these losses to factors such as “general sharp economic downturn, the initially inefficient operation of the new plant, and unrelated labor issues” – none of which had anything to do with the Defendant’s actions. Further, the Defendant’s expert opined that the damages estimate was “speculative and unfounded.”
At the end of the trial, the court found in the Plaintiff’s favor, but only in the amount of $11,839.98, a substantial difference from the $486,166 the Plaintiff tried to prove. Both the trial court and the court of appeals found that the Plaintiff failed to prove its lost profits with reasonable certainty or with sufficient evidence supporting its claim. The court of appeals noted, “the trial court quite rationally observed that [the Plaintiff] would have been well served to provide documentation of the lost or cancelled sales that it alleged were the cause of its financial losses in 2008.”
In other words, the Plaintiff simply didn’t put on sufficient evidence to support its claimed damages. The reader is left to speculate as to whether substantive discussions regarding expectation of damages at the commencement of the litigation may have led to a different result or at least a different presentation of evidence at trial.

Borla Performance Industries, Inc. v. Universal Tool and Engineering, Inc. No. E2014-00192-COA-R3-CV, 2015 WL 3381293 (Tenn. Ct. App. May 26, 2015).