A nutritional supplement company, whose business took a major hit in late 2014 and early 2015, was allowed, in its lawsuit against one of its vendors, to continue using its expert witness on damages and continue asserting its claim for lost profits, which allegedly amounted to more than $15 million. Although the plaintiff’s business was badly damaged, the U.S. District Court for the Middle District of Florida ruled that the plaintiff’s business was merely interrupted but not totally destroyed. Had it been completely destroyed, the law would not have allowed the plaintiff to seek lost profits damages.
The origin of the lawsuit was traced to a business deal gone awry. In this case, a maker of nutritional supplements planned to place promotional electrolyte sticks inside the post-race meal boxes handed out at the 2014 Marine Corps Marathon in Washington, DC. The sticks would then drive traffic to the company’s mobile fitness app, which would then in turn motivate users to purchase one of the company’s eight nutritional supplement products.
The company had a challenge: it did not make electrolyte sticks. To bring its plan to life, the company contracted with an Orlando-based business that made electrolyte sticks. Production problems meant that the stick supplier didn’t deliver in time for the Marine Corps Marathon in October. The company did make delivery in December, so the recipient planned to use the sticks at a marathon at Walt Disney World in the following January. However, after it received and verified a customer complaint about the sticks’ taste, it pulled all of the sticks and sued the stick supplier for breach of contract. The stick maker countersued for non-payment and wrongful rejection of the sticks.
The defendant sought to exclude the plaintiff’s expert witness, arguing that his report was unreliable and founded upon a flawed methodology. That expert concluded that the defendant’s delayed shipment cost the plaintiff more than $15.6 million in lost profits.
The court refused to exclude the plaintiff’s expert. One of the flaws with the expert’s report, the defendant had argued, was that the plaintiff’s business was completely destroyed in 2015 and that “a completely destroyed business may only recover the market value of the business as of the date of loss and may not recover lost profits.” The court rejected this argument. While the defendant was correct regarding what happens when a plaintiff’s business is completely destroyed, the plaintiff in this case had not been completely destroyed. Although it changed names, it retained the same key personnel and the business model, namely, “nutritional personalization technology.” This evidence was enough for the court to conclude that the plaintiff’s business was not completely destroyed but was merely interrupted. Since interrupted businesses (unlike completely destroyed ones) are allowed to recover lost profits, the plaintiff in this case was allowed to continue its pursuit of lost profits damages.
In your case for (or defense against) a breach of contract, there may be many millions of dollars on the line. That is but one reason among many why you need capable representation to handle your case. The Florida business litigation attorneys at Stok Folk + Kon have been representing plaintiffs and defendants in Florida commercial litigation cases for many years and have the skills and experience you need.
Contact us online or by calling (305) 935-4440 to schedule your consultation.
More blog posts:
Deposing Your Opponent’s Corporate Officers in Your Florida Commercial Litigation, Florida Business Lawyers Blog, Feb. 3, 2016
Florida Appeals Court Orders Recalculation of Prejudgment Interest in $70M Breach of Contract Case, Florida Business Lawyers Blog, Feb. 1, 2017