In Texas, damages for lost profits are recoverable for what a business would have earned had a defendant's injurious conduct not occurred. The measure of damages for lost profits is net profits, not gross income. Miga v. Jensen, 96 S.W.3d 207, 213 (Tex. 2002). Net profits are calculated by deducting total expenses from total receipts. Turner v. PV Int'l, 765 S.W.2d 455, 456 (Tex.App.-Dallas 1988, writ denied).
Lost profit damages must be demonstrated by a claimant (i) with reasonable certainty and (ii) by competent evidence. ERI Consulting Engineers, Inc. v. Swinnea, 318 S.W.3d 867, 876 (Tex. 2010). A claimant must prove with reasonable certainty the profits that would have been yielded by the particular business activity, transaction or venture. See Texas Instruments, Inc. v. Teletron Energy Mgmt., 877 S.W.2d 276, 279 (Tex. 1994). The reasonable certainty requirement is a fact-intensive determination intended to be flexible enough to accommodate a myriad of circumstances in which claims for lost profits arise. Id.
A claimant does not have to prove lost profits by an exact calculation. ERI Consulting, 318 S.W.3d at 876. Lost profits estimates, however, as well as expert opinions concerning such estimates, must be based on objective facts, figures or data from which the lost profits amount may be ascertained. Id. New businesses may recover lost profits and a lack of prior profit history does not necessarily preclude recovery as long as some other objective data, such as future contracts, are used. Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 504-05 (Tex. 2001). A claimant, however, cannot recover profits that are largely speculative, such as profits from activities dependent upon uncertain market conditions, risky business opportunities, untested products, entry into unknown or unviable markets, or the future success of an unproven enterprise. See Teletron, 877 S.W.2d at 279; SBC Opers., Inc. v. Business Equation, Inc., 75 S.W.3d 462, 467 (Tex.App.-San Antonio 2001, pet. denied).
A claimant must prove lost profits by competent evidence. Lost profits can be proven by the testimony of an expert with sufficient industry experience necessary to review the underlying data, or by the testimony of the owner of the business. See ERI Consulting, 318 S.W.3d at 876.
Courts frequently hear expert testimony in determining whether lost profits are capable of proof by reasonable certainty. It is important that the expert choose an appropriate method to calculate lost profits, and be able to justify why the expert chose that method to the exclusion of alternative methods. Once a claimant chooses a particular method of calculating lost profits, the claimant must provide a complete calculation using only that method, not several methods. Holt Atherton Indus. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992). The expert's application of the methodology must result in a reasonable conclusion that is connected to the evidence in the record.
Friedman & Feiger's legal team has the knowledge and experience to develop and demonstrate your claim for lost profits with reasonable certainty and to coordinate with a damages expert to prepare an appropriate method to calculate and recover your damages.
