Kw Plastics v. U.S. Can Co.

• Decision Date: 12 January 2001
• Docket Number: No. CIV. A. 99-D-286-N.,No. CIV. A. 99-D-878-N.,CIV. A. 99-D-286-N.,CIV. A. 99-D-878-N.
• Parties: KW PLASTICS, et al., Plaintiffs, v. UNITED STATES CAN CO., Defendant. United States Can Co., Plaintiff, v. N. Kenneth Campbell, et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

131 F.Supp.2d 1265

KW PLASTICS, et al., Plaintiffs, v. UNITED STATES CAN CO., Defendant.

United States Can Co., Plaintiff, v. N. Kenneth Campbell, et al., Defendants.

No. CIV. A. 99-D-286-N.

No. CIV. A. 99-D-878-N.

United States District Court, M.D. Alabama, Northern Division.

January 12, 2001.

COPYRIGHT MATERIAL OMITTED

Nicholas J. Cervera, Grady A. Reeves, Cervera, Ralph & Butts, Troy, AL, Ross B. Bricker, John F. Ward, Jr., Andrew A. Jacobson, Matt D. Basil, Jenner & Block, Chicago, IL, for Plaintiffs.

D. Frank Davis, Gerald P. Gillespy, Stephen J. Bumgarner, John E. Norris, Robert E. Battle, Burr & Foreman, Birmingham, AL, Richard F. Calhoun, Calhoun, Faulk, Watkins & Clower, Troy, AL, Anthony C. Valiulis, Rachel Feldstein, Deborah S. Bussert, Much, Shelist, Freed, Denenberg, Ament, Bell & Rubenstein, Chicago, IL, for Defendants.

ORDER

DE MENT, District Judge.

Before the court are U.S. Can's Supplemental Objections to KW's Damage Evidence, which were filed December 12, 2000. KW filed a Response on December 29, 2000, and U.S. Can issued a Reply on January 9, 2001. After careful consideration of the arguments of counsel, the evidence designated in support of the respective positions of the parties, and the relevant law, the court finds that the objections are due to be sustained in part and overruled in part.

I. INTRODUCTION

The court first turns to U.S. Can's argument that KW Plastics has failed to quantify its damages with the requisite certainty required by Alabama law. The court finds that U.S. Can's objections are due to be sustained in part and overruled in part.

The court then turns to the testimony proffered by KW's general manager, N. Kenneth Campbell, who will testify as to lost profits resulting from U.S. Can's alleged tortious interference with KW's prospective business relationships. These damages were allegedly caused by: (1) U.S. Can's attempt to enforce a non-compete agreement that the court has found to be essentially unenforceable under Illinois law; and (2) other impermissible activity. At this juncture, the court tentatively finds that the opinions that Campbell intends to express are not firmly grounded in personal knowledge. Moreover, the court tentatively finds that Campbell has not laid a sufficient foundation for expressing those opinions competently. Accordingly, U.S. Can's objection to Campbell's testimony is to be sustained conditionally, without prejudice for Campbell to testify at trial if he can cure these defects.

II. QUANTIFICATION OF DAMAGES

Alabama law recognizes the tort of intentional interference with prospective business relationships. The elements of a claim include: (1) the existence of a contract or business relation; (2) the defendant's knowledge of the contract or business relation; (3) intentional interference by the defendant with the contract or business relation; and (4) proximate damages. See Ex parte Alabama Department of Transportation, 764 So.2d 1263, 1270 (2000). "It is the right to do business in a fair setting that is protected." Utah Foam Prods., Inc. v. Polytec, Inc., 584 So.2d 1345, 1352-53 (Ala.1991).

In defining the scope of this cause of action, Alabama courts have relied on the Restatement (Second) of Torts. See, e.g., Ex parte ALDOT, 764 So.2d at 1270; Barber v. Business Prods. Center, Inc., 677 So.2d 223, 228 (1996); Gross v. Lowder Realty Better Homes & Gardens, 494 So.2d 590, 598 (Ala.1986) (Torbert, J., concurring and dissenting in part). The Restatement divides recoverable damages for tortious interference into three categories: (1) the pecuniary loss of the benefits of the contract or the prospective relation; (2) consequential losses for which the interference is a legal cause; and (3) emotional distress or actual harm to reputation if either is reasonably to be expected to result from the interference. See RESTATEMENT (SECOND) OF TORTS § 774A (1979).

Under Alabama law, a plaintiff seeking damages must provide sufficient evidence for the jury to estimate lost profits with reasonable certainty. See Oxford Furniture Companies v. Drexel Heritage Furnishings, Inc., 984 F.2d 1118, 1127-28 (11th Cir.1993) (applying Alabama law). A thorough discussion of this state's decision to adopt this standard and reject the "new business" rule would be tedious and unnecessary, although the court refers the parties to Super Valu Stores, Inc. v. Peterson, 506 So.2d 317, 326-33 (Ala.1987), which reads like a treatise on this point. Under the "reasonable certainty" requirement, "the loss of profits ... must be capable of ascertainment with reasonable, or sufficient, certainty, or there must be some basis on which a reasonable estimate of the amount of the profit can be made ...." See Hillcrest Center, Inc. v. Rone, 711 So.2d 901, 908 (Ala.1997) (quoting Mason & Dixon Lines, Inc. v. Byrd, 601 So.2d 68, 70 (Ala.1992)) (quoting Paris v. Buckner Feed Mill, Inc., 279 Ala. 148, 182 So.2d 880, 881 (1966)).¹

The Court has struggled in its attempts to define precisely what quantum of evidence a plaintiff must present to recover lost profits. On one hand, the Court has rejected the argument that damages cannot be proven without an expert witness, see Hillcrest Center, 711 So.2d at 907-08, and held that damages evaluations should not be policed in a manner that "would encourage breach of contract with new businesses," Super Valu Stores, 506 So.2d at 327, and held "that recovery will ensue despite the fact that damages cannot be calculated with mathematical certainty," Mason & Dixon, 601 So.2d at 70 (quoting Morgan v. South Central Bell Telephone Co., 466 So.2d 107, 116 (1985)), and held that the wrongdoer should not escape liability on the grounds that its misconduct has made it difficult for the innocent plaintiff to precisely determine its loss, see Super Valu Stores, 506 So.2d at 328.

On the other hand, the Court recognizes that not every damage estimate proffered by the plaintiff passes scrutiny. "[D]amages may not be determined by mere speculation or conjecture," Id. at 328 (quoting American Life Ins. Co. v. Shell, 265 Ala. 306, 90 So.2d 719, 722 (1956)), but "must be a matter of just and reasonable inference," and must be evinced by "probable and inferential, as well as direct and positive proof." Id. (quoting Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 51 S.Ct. 248, 75 L.Ed. 544 (1931)).

There is no one correct way for proving damages. Each case must be judged on its facts. In this case, therefore, the court must ultimately evaluate the facts once they have been received. Just as the Alabama Supreme Court has done in the past, the court may look for guidance from persuasive cases in other jurisdictions, as well as to the opinions of learned commentators, in determining whether Plaintiff has satisfied its burden. See, e.g., id. at 329-31 (other jurisdictions and treatise); Med Plus, 628 So.2d at 376 (treatises).

Several cases from other jurisdictions immediately surface. In one case, the Supreme Court of Texas held that largely speculative profits are unrecoverable. The court held that

[p]rofits which are largely speculative, as from an activity dependent on uncertain or changing market conditions, or on chancy business opportunities, or on promotion of untested products or entry into unknown or unviable markets, or on the success of a new and unproven enterprise, cannot be recovered. Factors like these and others which make a business venture risky in prospect preclude recovery of lost profits in retrospect.... The mere hope for success of an untried enterprise, even when that hope is realistic, is not enough for recovery of lost profits. When there are firmer reasons to expect a business to yield a profit, the enterprise is not prohibited from recovering merely because it is new.... The focus is on the experience of the persons involved in the enterprise and the nature of the business activity, and the relevant market.

Texas Instruments, Inc. v. Teletron Energy Management, Inc., 877 S.W.2d 276, 279-80 (1994). Similarly, an Ohio appellate court has held that "[w]here an employee of a company simply testifies that the damages amount to a certain sum, without explaining the breakdown of individual items, that testimony is nothing more than a conclusion." See Kinetico, Inc. v. Independent Ohio Nail, Co., 19 Ohio App.3d 26, 482 N.E.2d 1345, 1352 (1984); see also Frenchman & Sweet, Inc. v. Philco Discount Corp., 21 A.D.2d 180, 249 N.Y.S.2d 611, 614 (N.Y.App.Div.1964) ("[a]bsolute certainty of data upon which loss of future profits are to be estimated is not required but respondent must supply a more definite basis for computation.")

In addition to reviewing cases from within and without Alabama, the court finds further guidance from the writings of a leading commentator, whose works have been cited by the Court,² who has noted that profits may be proved through such evidence as: (1) a comparison of the experience of the plaintiff's own business before and after the interruption of its progress by the defendant's wrongful acts; (2) the plaintiff's subsequent experience after the wrongful interference with business has been eliminated; (3) the experience of comparable businesses engaged in the same activity; (4) the defendant's subsequent profit from enjoyment of a comparable opportunity; and (5) industry averages.³ See ROBERT DUNN, RECOVERY OF DAMAGES FOR LOST PROFITS §§ 5.5 to .17 at 391-423 (5th ed.1999).

The court presumes that the jury will properly assess damages when it is presented with sufficient evidence. The jury can fulfill its duties only if it receives all of the available, admissible damages evidence that the parties have to offer. See Hickox v. Vester Morgan, Inc., 439 So.2d 95, 101 (Ala.1983). Not every plaintiff in every case can prove damages with reasonable certainty. Some evidence, while admissible as relevant, nevertheless will be insufficient. See Med Plus, 628 So.2d at 376-77 (distinguishing between ...