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Toshiba Machine Co.11/10/2005
mmodate the myriad circumstances in which claims for lost profits arise, 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. Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 279 (Tex. 1994); Szczepanik, 883 S.W.2d at 649; VingCard A.S., 59 S.W.3d at 863. In other words, "reasonable certainty" is not demonstrated when the profits claimed to be lost are largely speculative or a mere hope for success, as from an activity dependent on uncertain or changing market conditions, on chancy business opportunities, or on promotion of untested products or entry into unknown or unproven enterprises. Teletron Energy Mgmt., Inc., 877 S.W.2d at 279-80; VingCard A.S., 59 S.W.3d at 863. The mere assertion that contracts were lost does not demonstrate a reasonably certain objective determination of lost profits. Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 85 (Tex. 1992). Whether evidence is speculative or reasonably certain is a factual issue within the exclusive province of the jury to determine. VingCard A.S., 59 S.W.3d at 863. Reasonably certain lost profits may be proved by relying on such factors as (1) the experience of the business principals, (2) the nature of the business, (3) the nature of the market, (4) the nature of the client base, (5) the sales force, (6) the marketing plan, and (7) the company's track record of sales. Id. at 864. For example, when a business is already established and making a profit at the time the contract was breached or the tort committed, pre-existing profit, together with other facts and circumstances, may indicate with reasonable certainty the amount of profits lost. Teletron Energy Mgmt., Inc., 877 S.W.2d at 279; Anthony Equip. Corp. v. Irwin Steel Erectors, Inc., 115 S.W.3d 191, 204 (Tex. App.--Dallas 2003, pet. dism'd). Ray Gilbert, SPM's vice president of finance, was SPM's sole witness on damages. To begin our analysis, we will summarize Gilbert's testimony on the question of SPM's lost profits.
Gilbert broke SPM's lost profits into three components. First was the increased cost of producing the 344 fluid ends SPM made in part on the Toshiba machines. Gilbert testified that it took SPM 34,025 hours to produce the 344 fluid ends. From that he subtracted 12,040 hours, the time it would have taken to produce 344 fluid ends if the Toshiba machines could produce a fluid end in thirty-five hours. Gilbert then multiplied the remainder, 21,985 hours, by SPM's "shop rate" of $150 per hour, for a total of $3,297,750. Gilbert testified that $150 per hour was the industry standard shop rate; he also produced calculations to show that the shop rate was reasonably accurate for SPM.
Gilbert's second category of lost profits stemmed from the sales of 296 fluid ends SPM lost because it quoted prices too high or delivery times too long to suit its customers. Gilbert testified that SPM lost these sales "because the Toshibas didn't perform as represented and we had to quote longer deliveries and our prices were not competitive because instead of doing it in 35 hours, we were up closer to 100 hours." He personally contacted customers who cancelled orders or rejected SPM quotes to ascertain whether the cancellation or rejection was due to SPM's price or delivery time. Gilbert then multiplied the gross sales lost because of price or delivery time by SPM's 28.68% profit margin to compute SPM's net lost profits. Gilbert derived the profit margin from SPM's consolidated financial statements for the years 1994 through 2001. While Gilbert admitted that he did not know precisely what price or delivery time SPM would have had to quote to make the sales in question, he
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