Opinion ID: 769374
Heading Depth: 3
Heading Rank: 2

Heading: Reasonable Certainty of Lost Profits

Text: 45 Schonfeld contends that the existence of lost profits was sufficiently established by the evidence that Cox, Schonfeld, the Hilliards and the BBC all believed that profits from the Channel were reasonably certain. However, [t]he entrepreneur's 'cheerful prognostications' are not enough. 1 Dobbs Law of Remedies § 3.4. Further, Cox's profit projections for the international news channel were based on Cox's own existing cable operations. INN and the non-existent operating entity had no such established operations. Indeed, Schonfeld's expert, Curtis, admitted that if Cox's projected costs replaced those in INN's Business Plan, the Channel would be doomed as a lost venture. 46 In addition, the district court properly held that Curtis's projections based on INN's Business Plan are legally insufficient. These projections presume that: (1) an operating entity would have been formed and operated for 20 years; (2) an estimated $44 million in pre launch financing would have been raised; (3) the hypothetical sub scriber levels would have been reached; (4) carriage agreements would have been entered; (5) advertisers would have been found at the assumed rates; (6) all projected expenses would have proved correct; (7) marketing costs would have remained constant and expenditures would have been sufficient to attract and maintain subscriber interest; and (8) the type and amount of equity interest held by each investor, including INN, would have been determined in the manner alleged by Schonfeld. Curtis was unaware that some cable owners are paid to carry a channel and admitted that, if the Channel's operating entity had to pay for carriage, it would not survive. 47 Subject as they are to the changing whims and artistic tastes of the general public, claims for profits lost in unsuccessful entertainment ventures have received a chilly reception in the New York courts. See Kenford I, 67 N.Y.2d at 262 63, 493 N.E.2d at 236, 502 N.Y.S.2d at 133; Melvin Simensky, Determining Damages for Breach of Entertainment Agreements, 8 Ent. and Sports Law. 1, 12-13 (1990) (collecting cases). Curtis believes he adjusted his profit figures to take such factors into account by providing for a 25% variance on the projected cash flows of the operating entity. In his deposition, he stated that he chose the 25% variance based on his experience with the cable industry. However, Curtis failed to establish that this variance would adequately account for any inaccuracies in the revenue and expense assumptions discussed above as well as any changes in consumer demand for British-style news reporting. 48 Indeed, Curtis failed to account for the effects of any general market risks on the Channel's probability of success. These risks include: (1) the entry of competitors; (2) technological developments; (3) regulatory changes; or (4) general market movements. As the district court correctly noted, [f]ailure to control for adverse market conditions allows the false inference that plaintiff's venture was an assured success. Schonfeld, 62 F. Supp. 2d at 1074. Therefore, the court properly held that Schonfeld failed to establish a foundation for the existence of lost profits. 1 49 In addition, Grimes's testimony regarding likely profits based on his comparisons to existing cable channels was properly rejected. It rested on a foundation of sand. Schonfeld failed to establish the high degree of correlation between INN or the non-existent operating entity and the proffered firms (in terms of, inter alia, investors, management and cost structures) upon which the probative quality of this evidence depends. See, e.g., S & K Sales Co. v. Nike, Inc., 816 F.2d 843, 852 (2d Cir. 1987) (evidence concerning parent corporation admissible with respect to subsidiary); 3 Dobbs Law of Remedies at § 13.4(3) (profits of another entity are relevant if plaintiff's business bears a close comparison to the proposed business, the products or services involved are standardized, and the profits do not depend heavily on local or personal management skills). 50 Schonfeld contends that the district court ignored the wrongdoer rule which Schonfeld believes required that the burden of uncertainty as to the amount of damages be shifted to the Hilliards. The wrongdoer rule, however, is not that broad. It provides that, when the existence of damage is certain, and the only uncertainty is as to its amount, . . . the burden of uncertainty as to the amount of damage is upon the wrongdoer. Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918, 926 (2d Cir. 1977) (emphasis supplied). The rule does not apply here for the simple reason that the existence of lost profit damages cannot be established with the requisite certainty. See id.