Opinion ID: 895225
Heading Depth: 1
Heading Rank: 4

Heading: Lost Profit Damages

Text: We turn next to the question of actual damages. Here, where the only actual damages that the trial court awarded were lost profit damages, the issue is whether ERI provided legally sufficient evidence of those lost profits. [3] The rule concerning adequate evidence of lost profit damages is well established: Recovery for lost profits does not require that the loss be susceptible of exact calculation. However, the injured party must do more than show that they suffered some lost profits. The amount of the loss must be shown by competent evidence with reasonable certainty. What constitutes reasonably certain evidence of lost profits is a fact intensive determination. As a minimum, opinions or estimates of lost profits must be based on objective facts, figures, or data from which the amount of lost profits can be ascertained. Although supporting documentation may affect the weight of the evidence, it is not necessary to produce in court the documents supporting the opinions or estimates. Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex.1992) (citations omitted). The trial court awarded $300,000 in lost profits constituting the loss of income from [ERI's and Snodgrass's] business relationship with Merico. Our legal sufficiency analysis thus reviews whether competent evidence establishes this amount with reasonable certainty. See id. Snodgrass testified that based on information from his in-house accountant, ERI's net profit margin on revenue from Merico was approximately 25%-30%. [4] As a long-time co-owner and then sole owner of ERIa small, profitable company Snodgrass was competent to testify as to ERI's estimated profit margin on the Merico account. Cf. Bowen v. Robinson, 227 S.W.3d 86, 97 (Tex.App.-Houston [1st Dist.] 2006, pet. denied) (Competent evidence of lost profits relating to property can be proved by the testimony of an expert or the owner of the property.). Swinnea directs us to no evidence contradicting this testimony concerning ERI's profit margin. [5] ERI also introduced evidenceincluding dozens of detailed invoicesindicating that from January 2000 through August 2001 (20 months), ERI averaged $19,833.10 in revenue per month from Merico. Later, from September 2001 through May 2004 (33 months), average revenue dropped to $1,792.59 per month. [6] Contrasting revenue from a time period immediately before the period at issue is an established method of proving revenue for a lost profit damages calculation. See Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 279 (Tex. 1994) (It is permissible to show the amount of business done by the plaintiff in a corresponding period of time not too remote, and the business during the time for which recovery is sought. (quoting Sw. Battery Corp. v. Owen, 131 Tex. 423, 115 S.W.2d 1097, 1098-99 (1938))). Thus, ERI's method for proving its lost profits in a reasonably certain amountestablishing its lost revenue with comparative evidence from a recent time period, and establishing its profit margin on that revenue by competent testimony of its ownerwas legally adequate under Holt Atherton. However, ERI's method does not support a calculation yielding the amount of damages awarded by the trial court. Even assuming a 30% profit margin on the work from Merico, Snodgrass's maximum profit margin estimate, the damages award would be only $178,601.05 for the 33-month period at issue when ERI's profits from Merico declined. [7] ERI's evidence thus fails to meet the minimum requirements for legal sufficiency that we set out in Holt Atherton regarding reasonable certainty as to the amount awarded by the trial courthere, $300,000. Up to this point, the court of appeals reached the same conclusions that we have. See 236 S.W.3d at 838-39 (reciting the same evidence and reaching the same conclusion regarding whether such evidence is legally sufficient to prove $300,000 of lost profit damages with reasonable certainty). Still, while the evidence does not prove $300,000 in lost profits, ERI's evidence is legally sufficient evidence to prove a lesser, ascertainable amount of lost profits with reasonable certainty. In this situation, such a discrepancy between two reasonably certain amounts will not defeat recovery by ERI. See Sw. Battery, 115 S.W.2d at 1099 ([U]ncertainty as to the fact of legal damages is fatal to recovery, but uncertainty as to the amount will not defeat recovery.); Tex. Instruments, 877 S.W.2d at 279 (explaining that Southwest Battery and subsequent cases required reasonable certainty as to the amount of lost profit damages); cf. Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. Nat'l Dev. & Research Corp., 299 S.W.3d 106, 109 (Tex.2009) (remanding to the court of appeals where there was some evidence of damages, but not enough to support the full amount awarded by the trial court). ERI proved lost profit damages; its entitlement to recover them survives the trial court's error in awarding too much. Accordingly, the appropriate remedy is to remand the case to the court of appeals to consider the possibility for remittitur on lost profit damages. See TEX.R.APP. P. 46.3, 46.5 (providing procedures for remittitur by courts of appeals). Swinnea argues that ERI's lost profits calculation is inadequate because it fails to apply certain credits or deduct certain expenses. First, Swinnea asserts that because ERI's lost profits were on the Merico account, which were in turn lost because of Swinnea's involvement with Air Quality Associates, we must offset any amount that ERI gained by doing business with Air Quality Associates. That is, where the two accounts were mutually exclusive, loss from one must be offset by gain from the other. This argument is unpersuasive in part because the exclusivity arose out of Merico's ultimatum to ERI about Air Quality Associatesus or themnot because it was otherwise impossible for ERI to pursue both business relationships simultaneously. The evidence shows that Merico came to give ERI its ultimatum because of Swinnea. Merico did not object to ERI's work with Air Quality Associatesa competitor of Merico's in asbestos abatementuntil it discovered that Swinnea and Power were involved with Air Quality Associates. Nothing suggests that ERI could not have profited from working both with Air Quality Associates (apart from Swinnea) and Merico. [8] Accordingly, because nothing indicates that ERI could not work with both companies, any profits from ERI's work with Air Quality Associates need not be offset against the lost profits from Merico caused by Swinnea's position with Air Quality Associates. Even assuming that Swinnea is correct that profits from Air Quality Associates must be credited against the lost profits figure, he can point to no evidence to support his assertion that ERI profited from work with Air Quality Associates as a substitute for Merico. The plaintiff bears the burden of providing evidence supporting a single complete calculation of lost profits, which may often require certain credits and expenses. See Holt Atherton, 835 S.W.2d at 85 (Recovery of lost profits must be predicated on one complete calculation.). However, the defendant properly bears the burden of providing at least some evidence suggesting that an otherwise complete lost profits calculation is in fact missing relevant credits. Cf. Brown v. Am. Transfer & Storage Co., 601 S.W.2d 931, 936 (Tex.1980) (The right of offset is an affirmative defense. The burden of pleading offset and of proving facts necessary to support it are on the party making the assertion.). Were this not so, every facially adequate calculation of lost profits would be susceptible to an unsubstantiated challenge that something is missing. That subtle distinction is crucial here because Swinnea directs us to nothing in the record proving that ERI profitedin any amountfrom working with Air Quality Associates as a substitute for Merico in asbestos abatement; and we can find none. [9] Rather, he simply asserts that ERI does not dispute that it developed a mutually successful relationship with Air Quality Associates. The only evidence in the record indicates that ERI continued to show an overall profit despite the decline in revenue from Merico, and that ERI worked with Air Quality Associates. No evidence shows whether any profits from working with Air Quality Associates contributed to ERI's overall profits, as a substitute for Merico or otherwise. [10] Swinnea also contests that overhead costs and other unspecified expenses were not included in ERI's evidence or calculation. However, it is not necessarily the case that a company will incur increased expense or overhead, especially whereas evidence here suggestsa corporation was already profitable at the time damages began, and evidence supports an inference that it could have performed profitable services using only its existing resources. See Tex. Instruments, 877 S.W.2d at 279 ([P]re-existing profit, together with other facts and circumstances, may indicate with reasonable certainty the amount of profits lost. (quoting Sw. Battery, 115 S.W.2d at 1099)). This is not a manufacturing scenario, where production costs necessarily exist. Rather, ERI was a consulting company, which wrote plans and specifications, solicited bids for projects, and completed surveys. Evidence suggests that ERI would have been able to perform all of this service work using its existing employees. Power, for instance, testified that he put in whatever hours it takes to get jobs done. Swinnea himself had begun contributing much less work to ERI, despite having been one of its most productive workers before. Had Swinnea continued to contribute at his prior level, that productivity would only have helped ERI complete additional projects. Furthermore, after Snodgrass fired Swinnea, ERI began to work with Merico again, while still working with Air Quality Associates, without expansion to ERI's staff. Accordingly, Swinnea has not met his burden to provide at least some evidence that ERI's otherwise complete lost profit damages calculation was actually inadequate because of a necessary credit or additional expense. Swinnea also challenges causation as to ERI's lost profit damages. However, evidence showed that at the end of October 2001, upon concluding a series of conversations about Swinnea's involvement with Air Quality Associates, Merico specifically indicated that it would no longer be working with ERI because of Swinnea's involvement. [11] Swinnea himself testified that his involvement with Air Quality Associates could harm the Merico relationship, and that a severance of ERI's relationship with Merico would negatively affect ERI's revenues. This evidence is legally sufficient to establish a straightforward link between Swinnea's breach of duty and the loss of profits to ERI. In sum, legally sufficient evidence does not exist to prove the trial court's lost profit damages award under the minimum requirements of Holt Atherton. However, this insufficiency does not extend to reasonable certainty as to any amount. Rather, competent evidence exists to establish some reasonably certain amount of lost profitsjust not the particular amount awarded by the trial court. Unlike a situation where no evidence establishes any amount of lost profit damages with reasonable certainty, the situation here requires a potential reduction, not a takenothing judgment against the plaintiff. Therefore, we reverse the court of appeals' judgment that ERI recover no lost profit damages and remand the case to that court for further proceedings. Should the court of appeals fail to arrive at a disposition concerning remittitur, it may remand for a new trial on lost profit damages, as we might have if the evidence did not seem conducive to remittitur. See Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 51 (Tex. 1998) ([B]ecause there is no legally sufficient evidence to support the entire amount of damages, but there is some evidence of the correct measure of damages, we reverse the judgment of the court of appeals and remand the cause for a new trial.). Two additional collateral issues remain: punitive damages and factual sufficiency. The trial court found clear and convincing evidence establishing that Swinnea willfully, maliciously, and intentionally caused injury to ERI and Snodgrass in committing fraud. Accordingly, exemplary damages may be recoverable. See TEX. CIV. PRAC. & REM.CODE § 41.003 (providing that exemplary damages are recoverable if clear and convincing evidence shows harm from fraud or malice). Thus, upon resolution of the actual damages (lost profits) question, it is now proper for the courts below to consider any remaining issues concerning the trial court's initial award of $1 million in punitive damages, which Swinnea has continued to contest. As for factual sufficiency of the lost profits award, however, we observe that there may be a question of whether Swinnea adequately briefed the issue to the court of appeals. The Texas Rules of Appellate Procedure require adequate briefing. See TEX.R.APP. P. 38.1(i) (The [Appellant's] brief must contain a clear and concise argument for the contentions made, with appropriate citations to authorities and to the record.); accord Redmon v. Griffith, 202 S.W.3d 225, 241 (Tex.App.-Tyler 2006, pet. denied) (In their brief, the [cross-appellants] have not presented much in the way of cogent argument, nor have they cited to any authority in support of their sole issue.... We hold that the [cross-appellants] have waived their sole issue by their failure to adequately brief it.); Murchison v. State, 93 S.W.3d 239, 254 (Tex.App.-Houston [14th Dist.] 2002, pet. ref'd) (holding that factual sufficiency point concerning criminal trial was waived because appellants' argument, record citations, and authorities do not address the point); Smith v. Tilton, 3 S.W.3d 77, 84 (Tex.App.-Dallas 1999, no pet.) (Points of error asserted on appeal but not briefed are waived.). On remand, the court of appeals should consider whether Swinnea adequately raised a factual sufficiency challenge.