Lost Profits – Not so Easy to Prove

One of the hardest types of damages to prove is lost profit damages.  People don’t always believe this, or want to hear this, but it is a hard damage to prove because another party will always combat such damages by claiming they are speculative. Even if you get such damages awarded at the trial level, there is risk that these damages will get reversed on appeal.

Typically, “a business seeking to recover lost profits must prove that 1) the defendant’s action caused the damage and 2) there is some standard by which the amount of damages must be adequately determined.”   Bass Venture Corp. v. Devom, LLC, 2022 WL 2541525, *2(  Fla. 2d DCA 2022) (internal quotations and citation omitted).

The second component is what makes these damages hard to recover because there needs to be a yardstick to measure the lost profits against.  Further, “Florida courts have held that [e]vidence pertaining to loss of income or gross receipts, without specific evidence concerning expenses, is inadequate to prove lost profits.” Bass Venture, supra, at *2 (internal quotations and citation omitted).

In Bass Venture, the appellate court reversed a loss profit damage award to the plaintiff.  At trial, the plaintiff only put on evidence of revenue, but not expenses.  Thus, there was no evidence of profits.  Indeed, at the trial, the plaintiff testified that it did not provide evidence of expenses because its expenses go up each year.  “The evidence of revenue without corresponding evidence of expenses fails to answer the question of whether profits were lost.”  Bass Venture, supra at *3.

This was not the only reason the lost profit damages award was reversed.  The point, though, is that while lost profits may be a legitimate damage, they are not easy to support while combatting the speculative nature of the defense.  It’s important to understand what you need to prove and work with an expert to assist in creating that yardstick and introducing the evidence that make this a supportable damages category.

 

Please contact David Adelstein at [email protected] or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.