The lesson in the Business Court’s first opinion of the year, Allen Smith Investment Properties, LLC v. Barbarry Properties, LLC, 2013 NCBC 1 is to be ready to present your calculation of damages at the summary judgment stage or to be prepared to have your claim dismissed.
The Plaintiffs in Allen Smith were suing their business partner for breach of fiduciary duty. They said that the Defendant’s decision to defer maintenance on an apartment complex that the parties co-owned had caused them damages in the form of lost profits.
The problem for Judge Murphy was the lack of any reasonably certain calculation of the claimed lost profits. The damages witness had said in his deposition that he was "still trying to figure out how to quantify losses" and that he didn’t think he could calculate the lost profits until "[t]he day before the trial." Op. ¶23.
Judge Murphy ruled that:
Although the parties conducted discovery for over a year, Plaintiffs could not provide sufficient evidence for the Court to determine the causation or amount of damages with reasonable certainty. Therefore, the Court concludes that [the Defendant] has met its burden of demonstrating Plaintiffs’ failure to provide adequate proof of damages to support their breach of fiduciary duty claim.
He also rejected the efforts of the Plaintiffs to present a new calculation of damages after the discovery period had ended. They tried this by way of an affidavit presented two months after discovery had closed. The Judge said that the Plaintiffs had presented no reason why the late-breaking damages calculation could not have been provided during the discovery period, and said that "[s]uch conduct goes directly against the purpose of Rule 26(e) in preventing ‘untimely, evasive, and incomplete responses.’" Op. ¶74.
It’s easy to lose sight of damages during discovery when you are focused on proving liability. Don’t let that happen to you or you may have your case dismissed.