After a sales executive leaves your company, you discover through a customer that the individual is now working for a competitor. Concerned, you analyze your sales database and discover the executive downloaded customer lists and pricing information just before he resigned. You believe you have a strong case against the former executive for breach of his noncompetition agreement and the executive and your competitor for violating common law causes of action and other statutory claims. This may be true, but time and again businesses fail to properly prove up their damages and ultimately leave the courthouse empty handed.
The basic principle regarding contract damages is to put the injured party in the same economic position it would have been in but for the breach. Similarly, actual damages for a tortious interference common law claim can be recovered to put a plaintiff in the same economic position it would have been had the interference not occurred. In a noncompetition case, Texas courts require a plaintiff to establish proximate causation and damages with evidence that rises above mere suspicion or speculation.
Businesses sometimes fail to appropriately link damages to the breach or other violation and do not introduce evidence of actual recoverable losses. For instance, introducing evidence of lost revenues or gross profits without drilling down to lost net profits caused by the illegal actions will be fatal. Likewise, failing to make proper assumptions or not considering relevant information will also risk your ability to recover damages. Engaging a qualified expert witness to prepare and testify to a damage calculation is important especially when company witnesses do not have experience performing such analysis or the required expertise.
In one case, a plaintiff claimed damages related to a stolen customer list. Even though a copy of the customer list had been stolen and there was expert testimony concerning the fair market value of the customer list, the plaintiff was unable to recover damages because it did not show that it had lost customers and business generated from the list. The plaintiff continued to use and generate income from the list and failed to offer evidence that it would lose the customers or future income.
Damages can be proven by showing historical profitability or the existence of future contracts from which lost profits ban be calculated. Under Texas law, although recovery for lost profits does not require that the loss be susceptible of exact calculation, such lost profits must be shown with reasonable certainty. Further, plaintiffs have the burden of providing evidence supporting a single complete calculation of lost profits. Finally, lost profit estimates or opinions must be based on objective facts, figures, or data from which the lost profits amount may be ascertained.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
