Opinion ID: 291382
Heading Depth: 2
Heading Rank: 4

Heading: Lost Sales

Text: 32 The largest items of damage found by the master were Radiant's losses of net profits. 14 Switzer, understandably, makes a furious attack on both the lost sales and rate of profit figures. Turning to the first element, the lost sales figure, Switzer gives five reasons why the master's determination thereof is unsupportable. They are: 1) Radiant did not meet its burden of proof; 2) Switzer did not cause Radiant to lose sales; 3) lost sales should not have been computed for certain years; 4) it was error to use gross instead of net sales; and 5) Radiant's experts made estimates which are beyond redemption. 33 1. The Burden of Proof. Obviously a case such as this does not admit of precise proof. Radiant was attempting to prove sales it did not make. To be sure a finding may not rest on guess or speculation, Bigelow v. R.K.O. Radio Pictures, Inc., 327 U.S. 251, 66 S.Ct. 574, 90 L.Ed. 652 (1946); Assoc. Press v. Taft-Ingalls Corp., 340 F.2d 753 (6th Cir.), cert. denied, 382 U.S. 820, 86 S.Ct. 47, 15 L.Ed.2d 66 (1965). On the contrary, a plaintiff must prove the amount of damages by a preponderance of the evidence. Such proof need not be direct but may, instead, be circumstantial, Keough v. Chicago & N.W. Ry., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922), even to the point of estimates based upon assumptions, provided that the assumptions rest upon an adequate base, Herman Schwabe, Inc. v. United States Shoe Machinery Corp., 297 F.2d 906 (2d Cir.), cert. denied, 369 U.S. 865, 82 S.Ct. 1031, 8 L.Ed.2d 85 (1962). Damages may not be awarded on the basis of conjecture and speculation and the admitted fact of damage is insufficient to prove the amount of damage, Clapper v. Original Tractor Cab Co., 165 F.Supp. 565 (S.D. Ind.1958), rev'd on another issue, 270 F.2d 616 (7th Cir. 1958), cert. denied, 361 U.S. 967, 80 S.Ct. 588, 4 L.Ed.2d 547 (1960). A plaintiff may not shift the burden of proving the amount of damage simply because a defendant by his own wrong has precluded a more precise computation of damages. Assoc. Press v. Taft-Ingalls Corp., supra 340 F.2d at 769. 34 It must nevertheless be kept in mind that a treble damage plaintiff seeking recovery for market exclusion cannot provide detailed, concrete, and precise proof, Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969). The fact finder may act on probability and inference. Any other rule would only induce the wrongdoer to inflict more grievous injury, thus immunizing himself from liability by causing the amount of damages to be uncertain, Bigelow v. R.K.O. Radio Pictures, Inc., 327 U.S. 251, 66 S.Ct. 574, 90 L.Ed. 652 (1946). The law has not set down any mechanical test or formula as regards the required proof, Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962), lest the rigid statement of the rule provide the very means to escape its sanction. Rather the courts have been liberal in designing rules of proof with respect to the amount of damages when the fact of damage, as here, is clearly established, Howard Industries, Inc. v. Rae Motor Corp., 293 F.2d 116 (7th Cir. 1961). Even though we may not agree with each step in the master's reasoning process, we must affirm, Edgewood American Legion Post No. 448 v. United States of America, 246 F.2d 1 (7th Cir. 1957), unless the findings are beyond the pale of sane judgment. Cf. Adventures in Good Eating, Inc. v. Best Places to Eat, Inc., 131 F.2d 809 (7th Cir. 1942). A finding is not clearly erroneous unless the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. United States of America v. United States Gypsum Co., 333 U.S. 364, 369, 68 S.Ct. 525, 529, 92 L.Ed. 746 (1948). 35 A perusal of the relevant portions of the record firmly convinces us that the master's findings are not clearly erroneous. That there are conflicts in the evidence and wide room for argument shows only that permissible conclusions were drawn. [A] choice between two permissible views of the weight of [the] evidence is not `clearly erroneous'. United States of America v. Yellow Cab Co., 338 U.S. 338, 342, 70 S.Ct. 177, 94 L.Ed. 150 (1949). The evidence offered by Radiant, while not conclusive, was the best attainable under the circumstances and clearly sufficient. Switzer, under the guise of questions of law, argues about the weight of the evidence. 36 2. The Cause of Radiant's Loss. Switzer contends that the master erred in determining lost sales because the loss was due, not to Switzer's acts, but Radiant's own massive product problems. As regards the first product category, silk screen colors, the record shows that Radiant limited its market, did not offer silk screen until the third year of the damage period, had no intent to enter the silk screen market, produced a defective product which had to be withdrawn, finally produced acceptable silk screen but it was inferior to Switzer's, and later achieved product equality with Switzer but only by infringing the latter's patent. 37 With respect to the second product category, coated paper, the record shows that Radiant was without competition for the first three years of the damage period, lost part of the market due to a third party competitor which had a better product and distribution system complemented by lower prices, recaptured some of the market only by infringing on patents, and strained its production facilities to the breaking point, resulting in customer complaints and order cancellations for late delivery which further deteriorated its distribution network. 38 If the master allowed Radiant damages for losses which were not caused by Switzer, reversal is required. Causation between an anti-trust violation and damage sustained, must be shown. 15 39 This, however, is only Switzer's side of the story. The master also heard Radiant's tale of woe. He concluded, in effect, that Radiant demonstrated power to grow when unmolested by Switzer's periodic anti-trust activity; Switzer's unlawful acts deprived Radiant of market experience which further damaged them by instilling a reasonable fear of pursuing aggressive market policies, and that Radiant was required to allocate a large measure of both its economic and human resources to the fight for survival rather than the struggle to improve. 40 Switzer's argument on this point has three basic flaws. It attempts to view the evidence from the point of view most favorable to it. Next, it has tried to work a radical separation between the two product categories involved. Finally, it urges a restrictive view of causation which traces Radiant's product problems only to the very immediate, albeit plausible, origins. The master, however, traced Radiant's debility back to its roots. Switzer may not thus lawlessly clip [Radiant's] wings and escape liability    on the plea that [Radiant] could not fly. L. P. Larson, Jr., Co. v. William Wrigley, Jr., Co., 20 F.2d 830, 831, (7th Cir. 1927), rev'd on other grounds, 277 U.S. 97, 48 S.Ct. 449, 72 L.Ed. 800 (1928). Otherwise the more flagrant    the invasion of another's rights, the more certain and complete would be the invader's immunity. Id. at 832. The master was correct in determining that Radiant's lost sales were caused by Switzer. 41 3. Computation for Certain Years. The master computed Radiant's lost sales on silk screen and coated paper from 1 January 1949. Switzer argues that a prior adjudication by the district court in this case bars recovery for lost paper sales prior to 5 June 1952, and for lost silk screen sales before 9 February 1953. The original decision before us in 1961 establishing liability found that Radiant had been injured in certain enumerated respects and possibly in others. 16 Among the enumerations were findings that Radiant was injured in the sale of its coated paper after 5 June 1952 and injured in the sale of its silk screen after 9 February 1953. 17 The question presented is whether these findings constitute definitive holdings that Radiant sustained no lost sales of those items before the respective dates. 42 Before entry of these findings, Radiant requested the district court to find that its normal growth was forestalled by Switzer commencing on 1 January 1949. The request was rejected. On appeal, Radiant complained of the court's finding 29 on the ground that it did not specifically indicate that Switzer had forestalled its normal growth. We rejected the plea, pointing out that the decree did not purport it limit the scope of inquiry at the damage hearing and concluded that [s]ince [Radiant] is not restricted in the scope of its proof before the master, it has no cause to complain that finding 29 might have been more specifically cast. Switzer Bros., Inc. v. Locklin, 297 F.2d 39, 49 (7th Cir. 1961), cert. denied, 369 U.S. 851, 82 S.Ct. 934, 935, 8 L.Ed.2d 9 (1962). 43 The master correctly reasoned that if finding 29 did not purport to limit the scope of inquiry as to the amount of damages, and that if he was to report on the amount of damages incurred, and if Radiant's complaint that finding 29 was not specific enough and was meritless because it was not restricted in the scope of its proof, then no final adjudication precluded the finding of lost sales from 1 January 1949. We agree with the district court — Switzer's interpretation of the findings seems strained. 44 4. The Use of Gross Sales. In determining Radiant's lost sales, the master used gross sales for the first six years of the damage period, switching to net sales for the last two years. Net sales would have excluded six types of items — credits, returns, allowances, products other than daylight fluorescent products, government sales, and foreign sales. The reasons advanced to show reversible error are that the parties agreed to put sales on a net basis, authority, both legal 18 and accounting, condemns the use of gross sales figures, and the use of gross sales had a compounding effect which increased the judgment by $275,328. 45 Switzer's citation to the record does not support the assertion that the parties agreed or stipulated to put sales on a net basis. Nor is its legal authority in point. Switzer's cited cases condemn an award of damages for loss of gross as opposed to net profits. To the extent that any reference is made to gross versus net sales, the only directive is that gross earnings must be related to net profits. See Garcia Mountain States Telephone & Telegraph Co., 315 F.2d 166 (10th Cir. 1963). Radiant's net profits were related to its gross sales. Moreover, some cases explicitly recognize the appropriateness of considering gross sales in determining a loss of net profits, see A. C. Becken Co. v. Gemex Corp., 199 F.Supp. 544 (N.D.Ill. 1961), aff'd, 314 F.2d 839 (7th Cir.), cert. denied, 375 U.S. 816, 84 S.Ct. 49, 11 L.Ed.2d 51 (1963) [lost profits]; L. P. Larson, Jr., Co. v. William Wrigley, Jr., Co., 20 F.2d 830 (7th Cir. 1927), rev'd on other grounds, 277 U.S. 97, 48 S.Ct. 449, 72 L.Ed. 800 (1928) [accounting]. The master did no more than that. His determination was that Switzer's net sales point was, per se, without merit. In other words, he considered the argument as going to the weight of the evidence. The master later scaled down the rate of return figure in a deliberate attempt to give Switzer's net sales point some effect. In this respect, as indeed throughout his report, the master took an extremely conservative approach, giving Switzer the benefit of any doubt. No just cause for complaint has been shown. The master's findings were within the range of permissible judgment. Edgewood American Legion Post No. 448 v. United States of America, 246 F.2d 1 (7th Cir. 1957); Adventures in Good Eating, Inc. v. Best Places to Eat, Inc., 131 F.2d 809 (7th Cir. 1942). 46 5. The Expert Testimony. Switzer next presents us with elaborate calculations and citation to the record to show that Radiant's experts were not qualified to project lost sales, that their factors were arbitrary, that certain grievously incorrect assumptions were made which even the master implicitly rejected unawares, that the figures are absurd because they indicate that Radiant's damage was inversely related to the time of the antitrust violations, that Radiant's contemporary appraisal of the situation radically conflicts with the master's findings, that the master took his pick of the evidence without rhyme or reason, that he even went so far as to fill gaps in the evidence by relying on his own expertise to pick figures out of the air because he assumed that he was obligated to find damages and, finally, the award indicates that for certain years Radiant would have had more sales than Switzer but for the latter's wrongful acts. 47 In any proceeding as long and as involved as this one, it is possible to pick away at the details and find numerous flaws and inconsistencies. Switzer has zealously explored every one. But in appellate review, our function is broader. We look to the entire record. 48 The damage award was for loss incurred for the years 1949 through 1956. The master found that but for the Switzers' unlawful activity, Radiant would have had gross sales of $68,000 in 1949. Lost sales were estimated to be $40,900. Radiant's actual 1950 gross sales, using 1949 equipment, were $85,200. Total but for 1949 gross sales were only 29% of Switzer's actual 1949 sales. And in 1951, while still using 1949 equipment, Radiant's actual gross was 52% of Switzer's net sales. 49 For 1950 the master found total Radiant gross but for sales of $351,000, lost sales being $258,400. Radiant's actual 1952 gross, using 1949 equipment, was $404,400. Moreover, Radiant's 1950 but for sales were 72% of Switzer's actual 1950 sales, even though two years later Radiant's actual gross sales were a full 88% of Switzer's actual net sales for the same year. 50 Radiant was determined to have lost sales of $173,600 in 1951, total but for sales being $525,000. The record shows that Radiant's actual production was 95% of the master's estimate. Total but for sales were approximately 90% of Switzer's net for 1951. Radiant's actual 1951 sales were up over 350% from 1950. Comparison of the 1950 and 1951 but for sales shows an upturn of only 50%. 51 For 1952 the master concluded that Radiant lost sales of $295,600. Total sales (estimated lost sales plus actual sales) were $700,000. Radiant's actual gross sales for 1952 were up 32% from the previous year. The master's determination represented a 33% increase on an estimated basis. Yet Radiant made a rapid surge in 1952, second quarter actual gross sales being 138.1% of Switzer's actual net. This was up 71% from the first quarter. Radiant's sales plummeted at this point, due in part to Switzer's initiation of the patent suit. The $700,000 figure is 152% of Switzer's 1952 Actual net sales. In view of the rapidity with which Radiant was overtaking Switzer, $700,000 is a reasonable extrapolation from the available data. 52 Radiant's 1953 lost sales were estimated to be $330,900, total but for sales being $660,000. The but for figure is 142% of Switzer's actual net for the same period, a 10% decline from the 1952 ratio. 53 For 1954, by which time Switzer abandoned its wrongful activity, the master gave Radiant total but for sales of $678,000. Lost sales were $339,300. The effects of Switzer's unlawful activity were not dissipated immediately upon its cessation, but were residual. The master's 1954 estimate shows a 3% growth from 1953. Radiant's actual growth was 3%. 54 For the second year after Switzer halted its anti-trust actions, 1955, the master gave Radiant lost sales of $343,500. Total but for sales were $757,200. Radiant's actual average quarterly net sales for 1955 were still below Radiant's net sales for the second quarter of 1952. The effects of Switzer's prior unlawful acts were still making themselves known. The master's 1955 figure is conservative. 55 The 1956 figures are lost sales of $184,000 and total but for sales of $730,300. The master concluded that Radiant's sales would have dropped in 1956, as his figures show. Yet Radiant's actual sales, both gross and net, rose. 56 The use of this comparative data was permissible. Bigelow v. R.K.O. Radio Pictures, 327 U.S. 251, 66 S.Ct. 574, 90 L.Ed. 652 (1946). A scrutiny of the total picture as revealed by the record shows that not only was the master's determination within the range of proper judgment, it was quite conservative.