Recently, the Fifth Circuit Court decision in Mansour v. Youtoo Media provided a clearer roadmap for compliance with the "reasonably certain" rule. Heretofore, many courts have rejected the concept that a new or startup company could recover lost profits damages.
The lack of historical financial performance subjects the lost profits calculation to higher scrutiny and standard. The expert witness needs some reasonably certain economic underpinning for his assumptions. Under the new modern business rule, the valuator must provide evidence of causation, foreseeability and reasonable certainty.
Reasonable certainty can be provided if projections have been provided to investors and lenders. Other factors to elucidate are:
- product is available
- workforce and management are knowledgeable
- extent of market and company share
- consumer demand
- IP protection
- uniqueness of business
- capital adequacy
We recently won a major trademark infringement case. Representing the defendant, we showed that the plaintiff's projections were unreasonable. Our defense included a detailed point by point refutation of plaintiff expert's economic and industry data. The plaintiff sought about $100 million in lost profits damages from trademark and website infringement, as well as customer migration to the defendant. Instead, our client won the entire case and even collected attorney's fees.