Opinion ID: 2617665
Heading Depth: 1
Heading Rank: 7

Heading: Canyon Country's Lost Business Profits

Text: Fifth, the insurers assert that there is no basis for the jury's award of lost profits for Canyon Country's grocery and trucking businesses. In Cook Assocs., Inc. v. Warnick, 664 P.2d 1161 (Utah 1983), this Court explained the necessary requirement for a damage award based on lost profits. We stated, Lost profits must be established with reasonable certainty... . [W]e have described this requirement in terms of proof of `sufficient certainty that reasonable minds might believe from a preponderance of the evidence that the damages were actually suffered.' Id. at 1165 (citations omitted). We held that proof must be sufficient as to (1) the fact of lost profits, (2) causation of lost profits, and (3) the amount of lost profits. Id. (citations omitted). We elaborated that the `pivotal question is not whether the plaintiff has proven an established earning record but whether he has proven the damages for lost profits with reasonable certainty, although the former is often relevant to the latter.' Id. at 1166 (quoting Clark v. International Harvester Co., 99 Idaho 326, 346-47, 581 P.2d 784, 804-05 (1978)). In addition to certainty, damages for lost profits must also be shown to have been a reasonably foreseeable consequence of the defendant's act. Id. at 1167. Although a business need not have been a going concern in order to permit lost profits recovery, we are not persuaded that lost profits for the trucking operation (for which the jury awarded over $73,000) were proven with sufficient certainty. Neither the fact of lost profits, their causation, nor the amount was proven adequately to sustain the award. At trial, Canyon Country presented evidence that only preliminary contacts had been made concerning a prospective trucking operation. Goodfellow testified that he had discussed hauling goods both to and from Phoenix, in addition to the goods he carried to Canyon Country as inventory. The most concrete of these discussions was with Goodfellow's uncle, Howard Hansen of Associated Grocers in Phoenix. Hansen had told Goodfellow that when the need arose to transport fresh produce from Utah to Phoenix, Goodfellow would be notified. The other hauling discussions Goodfellow had were even more tentative than those with Hansen. Tentative discussions about the possibility of future contracts are not adequate to establish the certainty with which lost profits must be shown. Additionally, Canyon Country failed to demonstrate that future profits, if any, were lost due to the insurers' failure to pay under the policy. There was no substantial evidence that the insurers' failure to make payment was causally connected to lost profits. Finally, the amount awarded for lost profits was speculative. No contracts had ever been entered into by Canyon Country, and the only evidence of an amount lost was given by Frank Stuart, a financial consultant. He estimated the average amount made per haul by independent truckers working for Associated Grocers and multiplied that figure by a theoretical number of potential customers. No other proof regarding the existence and number of these hypothetical customers was offered. Again, the amount of lost profits was not shown with sufficient certainty to allow recovery. We do not need to address the issue of foreseeability, as the jury award fails because of its speculative nature. We reverse the award for lost profits related to Canyon Country's prospective trucking business. Although there is not enough evidence in the record to support the trucking business lost profits award, we affirm the lost profits awarded for Canyon Country's grocery business. Evidence, although conflicting with that of the insurers, was presented at trial sufficient to prove the fact of lost profits, their causation, and the amount. Canyon Country's expert witness Stuart testified about a net profit forecast based on voluminous sources, including the store's books and records and evidence of actual profits of similar businesses. Although Canyon Country never made a profit during its short lifespan, [2] the jury apparently believed that, had the insurers paid the claim promptly, Canyon Country would have been able to continue and conduct business profitably. [N]ew businesses should be allowed to try to prove lost profits up to a reasonable level of certainty by other means, just as established businesses are permitted to do. Cook, 664 P.2d at 1166 (citations omitted). In a footnote, the Court in Cook explained that [a]lternative means of establishing the certainty of lost profits include expert testimony of profit potential, [and] evidence of the actual profits of similar businesses... . Id. at n. 4. While this Court may not have reached the same decision, the jurors chose to believe the evidence favorable to Canyon Country, and we will not substitute our judgment for theirs.