Calculating lost profits in construction claims is topic of Feb. 7 webinar

The general rule in construction contract cases is to measure lost profits damages at the time of the breach, without considering subsequent events—including (in the latest cases) the collapse of the real estate market. Yet, some courts allow experts to factor post-breach economic conditions into their lost profits calculations, following the “Book of Wisdom” doctrine. The key question: when can an expert “unclasp” the rule of law to consider hindsight in determining construction damages?

Complicating the issue in a recent case was the nature of damages; i.e., the losses arose from contracts collateral to the broken one, and so didn’t even exist at the time of the breach. The plaintiffs had secured leases to build two residential apartment towers by 2006, but the landlord decided to get a better deal—and blocked their attempts to get financing. By the time the plaintiffs got a court order to demand compliance, the real estate market had bottomed-out and so had the deal. The plaintiffs sued for lost profits based on 2006 projections, and after the defendants lost a motion to exclude post-breach market conditions, they tried to “re-tool” their rebuttal expert. Instead of critiquing the methods and assumptions used by the plaintiffs’ lost profits expert, the defendants’ financial expert went after the underlying real estate projections, which the court said he was not qualified to do. Read the complete digest of CR-RSC Tower I, LLC v. RSC Tower I, LLC, 2011 Md. App. LEXIS 141 (Oct. 26, 2011) in the in February 2012 Business Valuation Update; the court’s decision is posted at BVLaw.

An up-to-date overview of construction damages: On Tuesday, February 7, join attorney George F. Burns (Bernstein Shur) for Lost Profits for Construction Claims. Part 7 of BVR’s Online Symposium on Litigation & Economic Damages will focus on the unique challenges posed by performing lost profits and economic damages analysis for claims in the construction industry, including how to account for evolving current market conditions. 

Sample new cases added to BVLaw in the last few weeks

Here’s a partial listing of digests and court documents added to the exclusive BVLaw database in the past few weeks.   BVLawreviews the hundreds of cases each month—in damages, family law, Tax Court, the Delaware Chancery and other commercial courts, and elsewhere—to analyze those decisions which depended on business valuation or financial analysis in their conclusions.

• Lucent Technologies, Inc. v. Microsoft Corp., 2011 U.S. Dist. LEXIS 130571 (Nov. 10, 2011)
  Federal district court reverses $70 million award based on expert’s failure to apportion damages between the patented and unpatented features of the accused product, finding that, at most, the evidence supported $26 million based on proper apportionment
                                     
  Experts:  Raymond Sims
  Judge:  Huff
  State/Jurisdiction: federal / California
  Court: U.S. district court
  Type of case: IP
  SIC code and industry: 7372 Prepackaged Software (software publishing) 
  
  
• In re Marriage of Rodenback, 2011 Ore. App. LEXIS 1500 (Nov. 9, 2011)
  Appellate court disavows day-of-trial valuation by expert that used the husband’s “off the cuff” forecasts, preferring value based on historical earnings, without consideration of the tax burden the husband would have to bear in making the equalization payment to the wife.
                                     
  Experts: [last names only] Gilbert (husband) and Sickler (wife)
  Judge:  Armstrong
  State/Jurisdiction:   Oregon
  Court: Court of Appeals
  Type of case:  marital dissolution
  SIC code and industry: 7371 Computer Programming Services
  
  
• Dataquill Ltd. v. High Tech Computer Corp. 2011 U.S. Dist. LEXIS 138565 (Dec. 1, 2011)
  Court excludes portions of expert’s damages analysis that fails to show economic comparability of patents-in-suit to prior licenses, but permits his calculations based on the entire market value rule upon adequate showing that the patented technology helped secure the defendant’s competitive market position.
                                     
  Experts: Joseph Gemini
  Judge:  Gonzalez
  State/Jurisdiction: federal/California  
  Court: U.S. District Court
  Type of case:  IP
  SIC code and industry:  7372 Prepackaged Software (software publishing)
  
  
• Spine Solutions, Inc. v. Medtronic Sofamor Danek, Inc, No. 2:07-02175-JPM-dkv (W.D. Tenn.)(Nov. 23, 2011)
  Court grants new trial on damages, based on Federal Circuit’s decision in Uniloc abolishing the 25% Rule in calculating reasonable royalty for patent infringement.
                                     
  Experts: unnamed
  Judge:  McCalla
  State/Jurisdiction: federal/ Tennessee  
  Court: U.S. District Court
  Type of case:  IP
  SIC code and industry: 3841 Surgical and Medical Instruments and Apparatus (except tranquilizer guns and operating room tables)
  
  
• In re Village at Camp Bowie I, L.P., 2011 Bankr. LEXIS 3033 (Aug. 4, 2011)
  Bankruptcy court finds “cramdown” interest rate equals at least 6.4%, based on current commercial lending “realities” as well as expert’s application of debtor-specific risk factors, including benefits of bankruptcy and single lender.
                                     
  Experts: Allyn Bryant Needham (debtor); Paul French (lender)
  Judge:  Lynn
  State/Jurisdiction: federal/New York  
  Court: U.S. Bankruptcy Court
  Type of case:  bankruptcy
  SIC code and industry: 6552 Land Subdividers and Developers, Except Cemeteries
  
  
• Beijing Tong Ren Tang (USA), Corp. v. TRT USA Corp., 2011 U.S. Dist. LEXIS 135471 (Nov. 23, 2011)
  Court vacates over $2 million in lost profits for new venture, finding the damages expert relied solely on “grandiose” and unrealistic business plans. 
                                     
  Experts: Victor Republicano
  Judge:  Whyte
  State/Jurisdiction: federal/California  
  Court: U.S. District Court
  Type of case:  contract
  SIC code and industry: 5122: Drugs, Drug Proprietaries, And Druggists' Sundries

Oracle calls an intellectual property “audible” in lawsuit against Google

Please forgive the football analogy, but in its lawsuit against Google, Oracle has offered to drop its patent charges against Google and rely only on copyright infringement, if the court will hear the copyright complaints quickly.

In a filing made January 17, Oracle lays out three proposals to move the case forward:

• Oracle initially asks that the court "sever and stay" the patent claims and set a trial date on the copyright claims soon, in winter or spring this year. During the time the copyright claims are at trial, Oracle could work on its third attempt at a damages estimate, one of the current holdups in the case. The court could then try the patent charges, writes Nancy Gohring of  infoworld.com.
• If the judge doesn't like that idea, Oracle asks the court to dismiss the patent charges without prejudice, thus allowing Oracle to proceed with the copyright claims and potentially file a new patent infringement case in the future, and
• If the court neither stays nor dismisses the patent claims, Oracle would ask for a trial date in the next few months on both the copyright and the patent claims.

Bloggers in the field have called the move “bold” and indicative of Oracle’s frustration over the lawsuit’s delays. BVLaw Alert agrees that the move is unusual, but with the possibility of bringing patentclaims later, perhaps going with your strongest play now is the best call, and the “audible” reference is apt after all.

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