law-lost-profit-damages
Lost Profits Damages
Recovery of Lost Profits
In a breach-of-contract case, damages are usually measured by the "benefit-of-the-bargain" standard,
intended to put the party seeking damages in as good a position as if the contract had been performed.
Bowen v. Robinson, 227 S.W.3d 86, 96 (Tex. App.--Houston [1st Dist.] 2006, pet. denied).
Benefit-of-the-bargain damages may include reasonably certain lost profits. Id. "Lost profits are damages
for the loss of net income to a business and, broadly speaking, reflect income from lost business activity,
less expenses that would have been attributable to that activity." Id. (citing Miga v. Jensen, 96 S.W.3d 207,
213 (Tex. 2002)). In other words, "[l]ost profits must be based on net profits, not gross revenues." Texaco,
Inc. v. Phan, 137 S.W.3d 763, 771 (Tex. App.--Houston [1st Dist.] 2004, no pet.).
Safeco Surety v. J.P. Southwest Concrete, Inc. (Tex.App.- Houston [1st Dist.] Apr. 2, 2009)(Alcala)
(effect of failure to disclose evidence, failure to plead properly, trial by consent, release as affirmative
defense, lost profit damages)
To recover lost profits, the party seeking them must prove them with reasonable certainty and
competent evidence. Bowen, 227 S.W.3d at 96. "Generally, lost profits are properly calculated by
deducting the costs of the injured party's performance supported by data from the actual contract
price." Id. (citing Cmty. Dev. Serv., Inc. v. Replacement Parts Mfg., Inc., 679 S.W.2d 721, 725
(Tex. App.--Houston [1st Dist.] 1984, no writ)). "However, a witness may also prove lost profits by
testifying as to what his profit would have been, based on his knowledge of the cost of
performance of each element of the contract and subtracting the total of such costs from the
contract price." Id. (quoting Cmty. Dev. Serv., Inc., 679 S.W.2d at 725). "What constitutes
reasonably certain evidence of lost profits is a fact intensive determination. At a minimum,
opinions or estimates of lost profits must be based on objective facts, figures, or data from which
the amount of lost profits can be ascertained." Id. at 97 (quoting Holt Atherton Indus., Inc. v. Heine,
835 S.W.2d 80, 84 (Tex. 1992)).
Evidence of Lost Profits
At trial, Pantle testified J.P. was seeking $58,000 in lost profits. The following testimony is the only
calculation Pantle provided:
Q: Okay. How did you arrive at the $58,000 lost profits?
A: I based it on the contract amount, the approved change orders that Walker did approve. Then I added
in the unchanged--the unsigned change orders. I came up with a total, subtracted it from what had already
been paid, came up with a balance and then put a 25 percent net markup on that.
Q: How--what do you mean by 25 percent?
A: On a job, on this particular job, I had a 25 percent--not gross--but net markup.
Q: And the $58,000 lost profits reflects that 25 percent flat figure?
A: Well, it--it's that and the change orders and such.
J.P. contends this evidence is "based on objective facts from which the amount of the lost profits can be
ascertained," citing Texaco, Inc. v. Phan as support. In Texaco, this Court found the affidavit testimony of
the owners of a gas station and convenience store was no evidence to support an award of lost profits.
Texaco, Inc, 137 S.W.3d at 772. The owners stated they had a profit margin of 30 percent, basing this
assertion on the prior 17 months of operation at their stores. Id. However, this Court noted that the owners
did not define "profit margin" or address expenses. Id. The bare assertion of a profit margin of a certain
percent, even one based on prior experience, was not sufficient evidence to support an award of lost
profits. Id. at 772-73.
Here, like the owners in Texaco, Pantle did not address J.P.'s expenses. See id. at 772. Pantle did not
testify what expenses J.P. would incur in performing the contract. Rather, he simply stated, "On a job, on
this particular job, I had a 25 percent--not gross--but net markup." Pantle did not "testify[] as to what his
profit would have been, based on his knowledge of the cost of performance of each element of the
contract and subtracting the total of such costs from the contract price." Bowen, 227 S.W.3d at 96. J.P.
failed to present "objective facts, figures, or data from which the amount of lost profits can be ascertained."
See id. at 97. We conclude the evidence is factually insufficient to support an award of lost profits. See id.;
Texaco, Inc, 137 S.W.3d at 772-73.
We sustain Walker's first issue to the extent that the trial court would have erred by including any amounts
for lost profits because the evidence did not show objective facts, figures, or data from which the amount
of lost profits could be ascertained. Further, any lost profits incurred before March 16, 2005 are not
properly included in the award.
B&W Supply, Inc. v. Beckman (Tex.App.- Houston [1st Dist.] Apr. 9, 2009)(Keyes)
(JNOV, breach of contract, excuse defense, lost profit damages, DTPA counterclaim)
REVERSE TC JUDGMENT AND RENDER JUDGMENT: Opinion by Justice Keyes