Opinion ID: 1058054
Heading Depth: 2
Heading Rank: 4

Heading: Expert Witness Testimony on Damages

Text: CSI argues that the circuit court erred in denying CSI's motion to strike FOA's claim for certain tax penalties and interest damages because Reitberger's testimony regarding those matters was speculative and did not meet the standard of reasonable certainty. Specifically, CSI alleges that the penalties related to its failure to file W-2 forms had been assessed but had not been paid by FOA and might be reduced. CSI also asserts that testimony regarding the claimed tax penalties and interest for failure to file the last quarter 2005 and the first quarter 2006 federal Form 941 and payroll tax withholdings was speculative because, as of the date of the trial, no assessment had been made by the IRS for those liabilities. FOA responds that it proved its tax-related damages with reasonable certainty. Reitberger unequivocally testified concerning the penalties and interest the IRS had already assessed. He also testified that under applicable IRS regulations, FOA is now liable for and will be assessed additional specific interest and penalties. FOA, as the plaintiff below, bore the burden of proving with reasonable certainty the amount of damages and the cause from which they resulted; speculation and conjecture cannot form the basis of the recovery. Shepherd v. Davis, 265 Va. 108, 125, 574 S.E.2d 514, 524 (2003) (quoting Carr v. Citizens Bank & Trust Co., 228 Va. 644, 652, 325 S.E.2d 86, 90 (1985)); see also SunTrust Bank v. Farrar, 277 Va. 546, 555, 675 S.E.2d 187, 191 (2009) (damage calculations based on unsupported projections are improper). [E]xpert testimony . . . cannot be speculative or founded upon assumptions that have an insufficient factual basis. Blue Ridge Serv. Corp., 271 Va. at 213, 624 S.E.2d at 59 (quoting Tittsworth v. Robinson, 252 Va. 151, 154, 475 S.E.2d 261, 263 (1996)). In the context of a breach of contract, a plaintiff need not establish the specific amount of the loss or damage with absolute certainty. When it is certain that substantial damage has been caused by the breach of a contract, and the uncertainty is not whether there have been damages, but only an uncertainty as to their true amount, then there can rarely be any good reason for refusing all damages due to the breach merely because of that uncertainty. E.I. DuPont deNemours & Co. v. Universal Moulded Prods. Corp., 191 Va. 525, 570, 62 S.E.2d 233, 254 (1950) (internal quotation marks omitted). Proof of absolute certainty as to the amount of loss or damage is not essential when the existence of loss is established and the facts and circumstances proven are such as to permit of intelligent and probable estimate of the amount of damage or loss sustained. Id. at 572-73, 62 S.E.2d at 255. It is undisputed that CSI, while serving as FOA's management agent, failed to file necessary tax returns and to pay payroll taxes and prepared incorrect W-2 forms. Reitberger was qualified to testify as an expert on payroll administration and taxes. Reitberger calculated the amounts of the tax deposits required and the timing for filing the returns. He then used statutory rates for tax liability to determine what the penalties for failure to timely file the appropriate forms were. Reitberger's testimony regarding damages included the IRS's penalty assessment of $27,553 for CSI's failure to file W-2s, although FOA had not paid the assessment. However, a party that has incurred an obligation to pay a debt as a result of the wrongful or unlawful conduct of another, but that has not yet made payment on such debt, has suffered an actual loss. Sykes v. Brown, 156 Va. 881, 887, 159 S.E. 202, 204 (1931) (Payment of the expense of treatment is not essential to a recovery. If plaintiff is liable for the debt incurred, that is all that is necessary.); see also Virginia Farm Bureau Mut. Ins. Co. v. Hodges, 238 Va. 692, 696, 385 S.E.2d 612, 614 (1989) (An expense can only be `incurred' . . . when one has paid it or become legally obligated to pay it.). FOA was legally obligated to pay this assessment from the IRS. Although the possibility of abatement by the IRS prevented FOA from establishing the amount of the tax penalty with absolute certainty, the assessment from the IRS provides reasonable certainty as to the amount of that tax penalty and constitutes an intelligent and probable estimate of the amount of damage or loss sustained. See E.I. duPont deNemours, 191 Va. at 572-73, 62 S.E.2d at 255. The IRS has not assessed the claimed tax penalties and interest for CSI's failure to file the last quarter 2005 and first quarter 2006 federal Form 941 and to pay payroll tax withholdings. Where the wrongful act of the defendant is of such a nature as to constitute an entire breach of the contract, compensation therefor may be recovered at once for the whole loss. James v. Kibler, 94 Va. 165, 173, 26 S.E. 417, 418 (1896). Future damages are recoverable if they can be ascertained with certainty. Id. Reitberger's testimony satisfies the standard of reasonable certainty. Although the IRS had not yet issued an assessment for FOA's failure to file Form 941 and to pay payroll tax withholdings, Reitberger's estimates of those assessments were based on mandatory IRS guidelines and his experience and expertise concerning such matters. They constitute intelligent and probable estimates of the penalties the IRS will assess. The circuit court did not err in denying CSI's motion to strike damages concerning the disputed tax penalties and interest. There was evidence to support those damages in that FOA was already legally obligated to pay them or Reitberger established the amount of damages with reasonable certainty using calculations that were based upon statutory rates of tax liability.