Opinion ID: 171119
Heading Depth: 1
Heading Rank: 5

Heading: Denial of judgment as a matter of law on Specialty's lost profits claim

Text: Pabst next contends that the district court erred when it denied Pabst's Rule 50(a) motion for a judgment as a matter of law on Speciality's lost profits damages claim. Pabst specifically argues that the court erred because Oklahoma's new business rule prohibits companies without an established track record from recovering lost profits damages. Specialty counters that Oklahoma would not apply a strict new business rule in this case because it is distinguishable from existing precedent. After reviewing Oklahoma case law, we agree that Oklahoma only requires a reasonably accurate estimate of future profits. [9] Thus, we conclude that the district court properly denied Pabst's Rule 50(a) motion. The general rule under Oklahoma law allows for the recovery of anticipated lost profits if the loss is capable of reasonably accurate measurement or estimate.  Digital Design Group, Inc. v. Info. Builders, Inc., 24 P.3d 834, 844 (Okla. 2001) (emphasis added); Florafax Int'l, Inc. v. GTE Mkt. Res., Inc., 933 P.2d 282, 292 (Okla.1997); see also Okla. Stat. tit. 23, § 21 (No damages can be recovered for a breach of contract, which are not clearly ascertainable in both their nature and origin.). The court in Florafax additionally explained that a plaintiff satisfies this burden by demonstrating with sufficient certainty that reasonable minds might believe from a preponderance of the evidence that such damages were actually suffered. 933 P.2d at 296. If the plaintiff satisfies this burden, then it is proper to let the jury decide what the loss is from the best evidence the nature of the case admits. Id. Pabst correctly asserts that in older cases, the Oklahoma Supreme Court limited the recovery of lost profit damages to established companies. See, e.g., Carpenters' Local 1686 v. Wallis, 205 Okla. 285, 237 P.2d 905, 908 (1951). We conclude, however, that those cases are distinguishable from the case at bar for two reasons. First, when those cases were decided, the general rule in Oklahoma prohibited the recovery of damages for any future profits regardless of whether the business at hand was well established. See Wallis, 237 P.2d at 908 (As a general rule, anticipated profits of a business are too remote and speculative to warrant a judgment for their loss.). At that time, this rule was consistent with the widespread requirement that plaintiffs prove expectation damages with certainty. See Bernadette J. Bollas, The New Business Rule and the Denial of Lost Profits, 48 Ohio St. L.J. 855, 856-57 (1987). The new business rule thus operated as an exception to this general rule, allowing established businesses to recover lost future profits if they could demonstrate those losses with certainty. See Wallis, 237 P.2d at 908 ([T]he exception to the rule is that the loss of profits from a tortious interruption of an established business may be recovered where it is made reasonably certain, by competent proof, what the amount of the loss actually is. . . .). In other words, due to the uncertain nature of their future profits, new business ventures were essentially barred from recovering damages for future lost profits. The current legal landscape suggests that the Oklahoma Supreme Court would not apply this strict new business rule to the case at bar because the now  applicable general rule points in the opposite direction. As discussed above, Oklahoma law now allows businesses to recover lost future profits so long as they can demonstrate that those loses are capable of reasonably accurate measurement or estimate. Digital Design Group, 24 P.3d at 844. Thus, because the general rule has changed, we conclude that the Oklahoma Supreme Court would allow for the recovery of reasonably estimated lost future profits, regardless of whether the business was well established. Second, the unique factual circumstances of the instant case suggest that the new business rule would not apply because the business venture at issue was generally established. The record indicates that Specialty had been in existence for two years prior to reaching the agreement with Pabst. Thus, it was not a new enterprise. In addition, the agreement dictated that Specialty would essentially step into the shoes of Marrs, an established business. Therefore, Specialty could (and did) rely on Marrs's experiences as a baseline in order to demonstrate with sufficient certainty that reasonable minds might believe from a preponderance of the evidence that such damages were actually suffered. Florafax, 933 P.2d at 296. In light of these distinctions, we conclude that Oklahoma law would allow for Specialty to recover damages for anticipated lost profits. We must analyze the evidence presented at trial, however, to determine if the district court properly denied Pabst's Rule 50(a) motion. To recover for anticipated lost profits, Specialty must demonstrate: 1) [that] the loss is within the contemplation of the parties at the time the contract was made, 2) [that] the loss flows directly or proximately from the breach . . . and 3) [that] the loss is capable of reasonably accurate measurement or estimate. Florafax, 933 P.2d at 292. The record unambiguously demonstrates that Specialty presented a legally sufficient evidentiary basis for the jury to award anticipated lost profits to Specialty. [10] First, there is no question that lost profit damages were within the contemplation of the parties when Pabst issued the appointment letter. This is not a circumstance where the lost profit damages depended upon a potentially unknown collateral contract. See, e.g., Ft. Smith & W.R. Co. v. Williams, 30 Okla. 726, 121 P. 275, 277 (1912) (holding that lost profit damages were permissible because the defendant railroad shipper was aware of the need to deliver equipment on time so that plaintiff could fulfill his contract to provide a merry-go-round at a two-day picnic). Instead, at the time Pabst and Specialty reached their agreement, Pabst was directly aware that Specialty would earn a profit by reselling beer purchased from Pabst to local wholesalers. Second, there is no doubt that the breach directly caused the loss and that the lost profits and diminution of value were capable of reasonably accurate estimate. Specialty's expert testified extensively regarding his calculations of both lost profits and diminution in value. The expert explained that he extensively tested the pro forma calculations of Specialty's projected profit and expenses during the twelve-month period the appointment letter from Pabst would have covered. The expert also testified that he analyzed Specialty's accounting records as part of his examination. Finally, the expert testified about the methods he used to calculate the diminution of value. In light of this evidence, Specialty provided the jury with a legally sufficient basis on which to award Specialty economic damages for both lost profits and diminution in value, and accordingly, the district court did not err when it denied Pabst's Rule 50(a) on this issue. [11]