United States: SJC Issues Decision Concerning Recovery Of Lost Profits Damages In Commercial Litigation

In a noteworthy recent decision addressing the parameters of damages in commercial litigation, the Massachusetts Supreme Judicial Court (SJC) affirmed an order excluding expert testimony concerning future lost profits damages relating to "yet-to-be conceived future products." In LightLab Imaging, Inc. v. Axsun Technologies, Inc., SJC-11374 (July 28, 2014), the SJC held that the trial court was well within its discretion to exclude an expert economist's testimony in support of a plaintiff's claim for future lost profits based on a "hypothetical new product" and extending more than twenty years beyond the term of the contract at issue. In so doing, the SJC took the opportunity to reiterate that a court's role as "gatekeeper" does not end upon the expert's invocation of a generally-accepted methodology. Rather, a court must still evaluate the reliability of the offered testimony, including, in the context of lost profit damages, the projections and assumptions underlying it. Where the underlying forecasts are based on assumptions that are too speculative as a matter of law, such testimony is appropriately excluded.

LightLab Imaging involved a commercial dispute over optical coherence tomography (OCT) systems used to image human coronary arteries. The plaintiff and one of the defendants were parties to a supply agreement, pursuant to which the defendant was to supply lasers for use in the plaintiff's OCT systems exclusively through April 2014, with non-exclusive supply rights for two years thereafter. During the course of the supply agreement, the second defendant – one of the plaintiff's competitors who had not yet entered the OCT market – acquired the first defendant and, through due diligence, received access to certain of the plaintiff's alleged trade secrets. The plaintiff sued both companies, alleging that the defendants' conduct interfered with a joint development relationship that would have led to future innovations of the lasers being supplied to the plaintiff and stripped the plaintiff of its "first-mover advantage" in the OCT market. The case proceeded to trial in three phases: liability, damages, and injunctive relief. In the liability phase, the defendants were found liable for misappropriation of trade secrets, breach of contract, and tortious interference with contract.

The plaintiff's primary damages claim was for future lost profits, including alleged profits running twenty years past the expiration of the supply agreement (through 2034), and for "future generation" OCT products that had not yet been designed, or even conceived of. In support of the claim, the plaintiff offered the expert testimony of an economist, who estimated that the plaintiff would suffer millions of dollars in lost profits due to alleged loss of the first-mover advantage in the OCT market. The expert economist purportedly based his calculation on the discounted cash flow (DCF) method, a generally-accepted and fairly common method used to calculate lost profits.

The trial court excluded the portion of the expert's testimony concerning lost profit damages after the April 2014 expiration of the supply agreement and for any future generation OCT products, holding first that the expert's methodology did not satisfy the requirements set forth in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) and Commonwealth v. Lanigan, 419 Mass. 15 (1994), and second, that the expert's testimony was "too speculative and conjectural as a matter of law." In response to the ruling, the plaintiff determined that it was unable to proceed with evidence of lost profits at trial, and the parties stipulated to non-lost profits damages in the amount of $200,000.

On direct appellate review, the SJC affirmed the trial court's exclusion of the expert testimony on both grounds. First, the SJC affirmed the court's ruling that the proffered testimony failed to satisfy the Daubert-Lanigan test, and in doing so, rejected the plaintiff's argument that a court's gatekeeping inquiry should end once the court determines that the expert's methodology is generally accepted. Instead, relying on its earlier decision in Lanigan, the SJC reinforced that a court must assess both the validity of the underlying methodology and "'whether that...methodology properly can be applied to the facts in issue.'" Here, although the plaintiff's expert utilized a generally-accepted methodology, DCF, the trial court properly held that that methodology failed to support any quantification of the first-mover advantage.

Second, the SJC separately held that the trial court did not abuse its discretion in determining that the expert's opinion was too speculative as a matter of law because the forecasts that the expert plugged into his DCF model were based on "as-yet undeveloped products" for which the plaintiff had not obtained the regulatory approval necessary to bring those products to market, and where the plaintiff neither had a history of profitable sales nor had conducted any market research that would support its forecasted lost sales and profits.

LightLab Imaging clarifies the standard that governs the admissibility of expert testimony concerning future lost profit damages in commercial litigation. Plaintiffs should be cognizant that courts will closely scrutinize proffered expert testimony, even when it is based on a generally-accepted and common methodology, and defense counsel should be prepared to challenge such testimony when it is based on speculative or unsupported assumptions.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.