Olivetti Corp. v. Ames Business Systems, Inc., 8526SC1129

CourtCourt of Appeal of North Carolina (US)
Citation81 N.C.App. 1,344 S.E.2d 82
Decision Date03 June 1986
Docket NumberNo. 8526SC1129,8526SC1129

Page 82

344 S.E.2d 82
81 N.C.App. 1

No. 8526SC1129.
Court of Appeals of North Carolina.
June 3, 1986.

[81 N.C.App. 14] Weinstein, Sturges, Odom, Groves, Bigger, Jonas & Campbell, P.A. by Hugh B. Campbell, Jr., Charlotte, for plaintiff.

Joe C. Young, Charlotte, for defendant.

WELLS, Judge.

Olivetti's Appeal

Olivetti first argues that the trial court erred in finding that it made material misrepresentations and that Ames' reliance on such misrepresentations was reasonable. It is well established that in a non-jury trial the trial court's findings of fact are conclusive if supported by competent evidence even though there is evidence to the contrary. Goldman v. Parkland, 277 N.C. 223, 176 S.E.2d 784 (1970). The trial court found that the following conduct constituted fraud: (1) Olivetti's conduct in August

Page 90

1979 in falsely telling Ames, when Olivetti announced the TES-701, that it had a five-year agreement with NBI for supply of the TES-701; (2) Olivetti's conduct in November 1980 when it intentionally misled Ames by falsely telling Ames that its relationship with NBI was all right, that it was negotiating with NBI for a continuation of the NBI agreement and that the NBI agreement provided for certain support for five years; and (3) Olivetti's conduct in the fall of 1981 in falsely telling Ames in connection with the sale by Olivetti to Ames of TES-701's and 351's that it was selling the 701's at a discounted price in order to lower its inventory so that it could purchase additional 701's from NBI pursuant to the NBI agreement.

The trial record shows that competent evidence was presented which supports the court's findings that the representations just described were made and that such representations were false. The findings of fact made by the court, which are extensive and supported by competent evidence in the record, clearly demonstrate the materiality of the misrepresentations made by Olivetti. Moreover, the magnitude of the damage suffered by Ames as a result of its reliance on Olivetti's misrepresentations further shows the materiality of those misrepresentations.

The court found that Ames reasonably relied on the false statements made by Olivetti in August 1979, November 1980 and the fall of 1981 regarding the status and terms of the NBI agreement[81 N.C.App. 15] and that Ames passed up an opportunity to become an NBI dealer in early 1981 in reliance upon Olivetti's misrepresentations. Competent evidence was presented which supports these findings. Olivetti argues, however, that Ames passed up the opportunity, if any, to become an NBI dealer in reliance upon the letter written by Kohart to Epley and that such reliance was unreasonable as a matter of law. We disagree. The evidence shows that Ames decided not to become an NBI dealer in early 1981 in reliance upon the prior misrepresentations made by Olivetti and that such reliance was reasonable. Since the findings in question are supported by competent evidence, they are binding upon us. See Goldman, supra.

Olivetti next argues that the court erred in its findings as to the amount of damages suffered by Ames. Of the damages awarded to Ames, Olivetti contests only that part awarded for lost profits. In determining that Ames was entitled to damages for lost profits in the amount of $401,000, the court reasoned as follows: Had it not been for Olivetti's misrepresentations, Ames would have become an NBI dealer in late 1980 or early 1981. If Ames had become an NBI dealer at that time, it is reasonable to assume that Ames' salesman, Jay Ozment, and Ames' serviceman, David Harrison, would have remained with Ames. Thus, Ames would have had the sales which Ozment produced for IPC, the NBI dealer for which Ozment went to work after leaving Ames; the service business which Ames lost to IPC; and the normal amount of service business from the additional sales. Ames' profits as an NBI dealer, based on the projections of Ames' president and owner, Wade Perry, would have been $77,000 in 1982, $121,000 in 1983 and $203,000 in 1984, for a total of $401,000 for the three-year period.

Olivetti argues that Ames is not entitled to damages for lost profits because it did not have a history of profits, that the court's finding that Ames could have become an NBI dealer has no support in the record, that the court did not use a proper measure to determine Ames' lost profits and that insufficient evidence was presented to support the award.

Olivetti's argument that Ames is precluded from recovering damages for lost profits because it did not have a history of profits is based on what is sometimes called the "new business rule." [81 N.C.App. 16] See Comment, Remedies--Lost Profits as Contract Damages for an Unestablished Business: The New Business Rule Becomes Outdated, 56 N.C.L. Rev. 693 (1978). Under this rule, recovery for lost profits is not allowed for injury to a new or unestablished business

Page 91

without a history of profits because evidence of expected profits from such a business is necessarily too speculative. Id. See also 22 Am.Jur.2d, Damages § 173 (1965); Dobbs, Handbook on the Law of Remedies § 3.3 (1973). In contrast, lost profits may be recovered for injury to an "old" or established business because its profit record provides a sufficient minimum basis for calculation of the damages with the degree of certainty required. See Dobbs, supra; 22 Am.Jur.2d, Damages § 173. It has been said that the name "new business rule" is somewhat misleading because the rule applies to any business without a history of profits in the period immediately preceding the period for which lost profits are sought to be recovered. Comment, supra. Thus, this rule could possibly be applied in the present case since Ames did not have a history of profits.

The "new business rule" has been criticized and there is an increasing trend in other jurisdictions either to create exceptions and mitigating sub-doctrines to the rule or simply to recognize that its rationale is not persuasive. See Comment, supra; Dobbs, supra. As noted by one authority:

Courts are now taking the position that the distinction between established businesses and new ones is a distinction that goes to the weight of the evidence and not a rule that automatically precludes recovery of profits by a new business. What is required is reasonable evidence, and that may at times be found in some fact other than the fact of past profit rates.

Dobbs, supra. Those jurisdictions which do not follow the "new business rule" hold that it is enough to merit recovery if the existence and amount of lost profits is shown with reasonable certainty. Comment, supra. See also 22 Am.Jur.2d, Damages § 173.

It appears from our research that North Carolina has never adopted the "new business rule." On the contrary, North Carolina apparently follows the view that recovery for lost profits is allowed for injury to a business, regardless of whether the business has a history of profits, as long as the loss of profits is shown [81 N.C.App. 17] with a reasonable degree of certainty. See Rannbury-Kobee Corp. v. Machine Co., 49 N.C.App. 413, 271 S.E.2d 554 (1980); Hightower,North Carolina: Law of Damages § 2-8 (1981). We agree that this view is by far the better and more equitable one. Accordingly, we reject Olivetti's argument that Ames is precluded from recovering damages for lost profits simply because it did not have a past record of profits.

In order to recover damages for lost profits, Ames had the burden of proving with a reasonable degree of certainty that it would have realized profits had it not been for Olivetti's wrongful conduct and the amount of those profits, and that its loss was the direct and necessary result of the wrongful conduct. See Hightower, supra; 22 Am.Jur.2d Damages §§ 171, 177. As with any damages, damages for lost profits may only be recovered if sufficient evidence is presented that the trier of fact can find with reasonable certainty the fact and amount of the damages. See Hightower, supra at § 7-1; 22 Am.Jur.2d, Damages § 172. Recovery for lost profits may not be based on speculation or guesswork but it will be enough if the evidence justifies an inference that the damages awarded are just and reasonable compensation for the injury suffered. See Hightower, supra at § 7-1. As one authority noted in discussing damages generally, courts seem to have striven for a balance that permits a claimant to recover even if his proof is incomplete as long as he has proven as much as he reasonably can and has proven something relevant to computation of damages. Dobbs, supra. It must be borne in mind that lost profits are to some extent uncertain and problematical. 22 Am.Jur.2d, Damages § 172. Absolute certainty is not required but the evidence must be sufficiently specific to permit the fact finder to arrive at a reasoned conclusion. Hightower, supra. See also Weyerhaeuser Co. v. Supply Co., 292 N.C. 557,

Page 92

234 S.E.2d 605 (1977). Courts state that less certainty is required to prove the amount of the lost profits than is required to show the fact that the profits were lost. 22 Am.Jur.2d, Damages § 172. See also Story Parchment Co. v. Paterson P. Paper Co., 282 U.S. 555, 51 S.Ct. 248, 75 L.Ed. 544 (1931).

The degree to which the evidence will succeed in establishing the reasonable certainty of lost profits depends in large part on the circumstances of the particular case. Note, The Requirement Of Certainty In The Proof Of Lost Profits, 64 Harv.L.Rev. 317 [81 N.C.App. 18] (1950). Consistent with this, it appears that the degree of acceptable uncertainty varies with the strength of the underlying substantive legal policy. Dobbs, supra; Comment, supra. See also Note, supra. "The more reprehensible a defendant's behavior, the more the law will feel justified in resolving doubts against him concerning the consequences of the behavior." Comment, supra...

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10 cases
  • Olivetti Corp. v. Ames Business Systems, Inc., 418PA86
    • United States
    • North Carolina United States State Supreme Court of North Carolina
    • 2 Junio 1987
    ...noting that "Olivetti contests only that part awarded for lost profits." (Emphasis added.) Olivetti Corp. v. Ames Business Systems, Inc., 81 N.C.App. 1, 15, 344 S.E.2d 82, 90 (1986). Therefore, pursuant to Rule 28(a), the question concerning the basis for the trial court's award of damages ......
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    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
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    ...in Bunting that the purpose of the statute is primarily consumer protection. 611 F.Supp. 691. In Olivetti Corp. v. Ames Business Systems, 81 N.C.App. 1, 344 S.E.2d 82, rev'd on other grounds 319 N.C. 534, 356 S.E.2d 578 (1987), the North Carolina Court of Appeals stated that "it is also cle......
  • Clark Material Handling Co. v. Toyota Material Handling United Statesa., Inc., DOCKET NO. 3:12-cv-00510-MOC-DSC
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    • United States District Courts. 4th Circuit. Western District of North Carolina
    • 3 Junio 2015
    ...the question of whether G.S. § 75-1.1 was unconstitutionally vague as applied to the defendant in Olivetti Corp. v. Ames Bus. Sys., Inc., 344 S.E.2d 82, 95 (N.C. Ct. App. 1986) aff'd in part, rev'd in part on other grounds, 356 S.E.2d 578 (N.C. 1987), and flatly rejected the defendant's voi......
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    ...July 26, 1996, order for further discussion.6 See generally Olivetti Corp. v. Ames Business Systems, Inc., 81 Page 203 N.C.App. 1, 344 S.E.2d 82 (1986), aff'd in part, rev'd in part, 319 N.C. 534, 356 S.E.2d 578 (1987); J.M. Westall & Co., Inc. v. Windswept View of Asheville, Inc., 97 N.C.A......
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1 books & journal articles
  • North Carolina. Practice Text
    • United States
    • ABA Antitrust Library State Antitrust Practice and Statutes (FIFTH). Volume II
    • 9 Diciembre 2014
    ...1996); J. M. Westall & Co. v. Windswept View of Asheville, Inc., 387 S.E.2d 67 (N.C. Ct. App. 1990); Olivetti Corp. v. Ames Bus. Sys., 344 S.E.2d 82 (N.C. Ct. App. 1986), aff’d in part, rev’d in part , 356 S.E.2d 578 (N.C. 1987). “After all, unfair trade practices involving only businesses ......

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