Damage Calculations For New Businesses or "Still Born" Companies2008-01-18 - New Businesses
Lately we have been asked if we have run across any instances where damage calculations have been made for entities that never really got started. Requests have come from clients who are involved in lender liability and contract disputes and litigation where the injured company or division was never able to get going. The key issues in the damage calculation often surround whether the injured company or entity was an actual functioning business or merely a good idea at the time of the wrongful action.
Damage calculations normally fall into three broad categories. Each of these categories requires a different approach to the estimation of the damages.
Our criteria for determining whether damages can be appropriately calculated for a Still Born company are:
In a case involving libel, the plaintiff was the only other competitor in the field. The defendant, the other player in the market, libeled the plaintiff orally and in writing. Plaintiff had demonstrated his ability to manufacture and sell the product. His records contained bonfide orders and cancellations due to the actions of the defendant. Our approach was measure the size of the market, the ability of each of the client to purchase the product and measure the market penetration each competitor could have achieved based on their respective cost structures. The case was settled in favor the plaintiff.
In a case involving breach of contract, the plaintiff had planned a new line of business, an extension of his existing business, based on assurance from the defendant to provide raw materials for exclusive resale. Plaintiff had demonstrated his ability to provide the service in his own market and sell the concept in other markets as a license arrangement. His records contained bonfide licensee commitments and cancellations due to the actions of the defendant. Our approach was measure the size of the market for the service, the ability of each of the licensee to penetrate his relevant geographical market and the expected profits that the licensee and plaintiff could have achieved based on their respective cost structures.