State v. May

• Decision Date: 06 December 1996
• Docket Number: No. 95-435,95-435
• Citation: 689 A.2d 1075,166 Vt. 41
• Court: Vermont Supreme Court
• Parties: STATE of Vermont v. Norman F. MAY.

Page 1075

689 A.2d 1075

166 Vt. 41

STATE of Vermont v. Norman F. MAY.

No. 95-435.

Supreme Court of Vermont.

Dec. 6, 1996.

Pamela Hall Johnson, Chittenden County Deputy State's Attorney, and Frank D. Molander, Legal Intern, Burlington, for plaintiff-appellee.

Robert W. Katims of Hoff, Curtis, Pacht, Cassidy & Frame, P.C., Burlington, for defendant-appellant.

Before ALLEN, C.J., and GIBSON, DOOLEY, MORSE and JOHNSON, JJ.

JOHNSON, Justice.

Defendant, who was convicted of possession of stolen property, appeals the district court's restitution award for the victim's lost profits. Apart from the insurance deductible, we strike the award on the ground that it was not proved with reasonable certainty.

In July 1994, computer equipment valued at approximately $17,000 was stolen from a printing business. In May 1995, defendant pled no contest to possession of stolen property based on his possession of the equipment from September to November 1994. He was sentenced to a one-to-three-year suspended sentence, with special probation conditions requiring him to pay a fine of $1000 and setting a restitution hearing.

At the restitution hearing, the printing business's general manager testified as follows: (1) the business had to pay its graphic artist $10 per hour for 343.5 hours spent reentering information into the computer purchased to replace the stolen one; (2) the graphic artist was not available to work on other projects during those hours, resulting in lost profits of $3435, $10 for each of the 343.5 hours; (3) the business's insurance company reimbursed the business $10 per hour for the graphic artist's time, but not $10 per hour for the projected lost profits; (4) the business lost $10 per hour in profits for each of the 120 hours that the printing presses stood idle because project information had not yet been entered into the new computers; (5) the insurance company reimbursed the business $10 per hour for the press downtime, but not $10 per hour for the projected lost profits; (6) the business lost profits on three projects worth $5406 when the customers had the work done with other printers because of delays due to the theft; (7) the business had to discount one large project $3200 because of delays due to the theft; (8) the business spent $388 for a new security system; (9) the general manager spent twenty hours of his time, valued at $20 per hour, working with police gathering evidence and following up on leads; (10) the insurance company reimbursed the business approximately $24,000 for its losses, leaving outstanding losses of just over $13,000, mostly for lost profits; (11) the insurance deductible was $250.

The district court awarded the business (1) $3435 in lost profits associated with the graphic artist's time; (2) $1200 for lost profits associated with press downtime; (3) $2027 in lost profits associated with the three customers who took their projects to other printers; (4) $1200 in lost profits associated with the discounted project; and (5) $250 for the insurance deductible. The court refused to award restitution for the security system or for the time the general manager spent investigating the theft. On appeal, defendant argues that (1) the court exceeded its authority under the restitution statute by awarding unliquidated sums not easily ascertainable, and (2) the restitution order does not relate to the offense for which defendant was convicted.

"Restitution shall be considered in every case in which a victim of a crime has suffered a material loss or has incurred medical expenses." 13 V.S.A. § 7043(a). Restitution may include, among other things, cash compensation for damages to the victim's property. Id. § 7043(b)(2). In State v. Jarvis, 146 Vt. 636, 638-39, 509 A.2d 1005, 1006 (1986), where we held that restitution damages could not include compensation for pain and suffering, we construed § 7043 as follows:

[O]nly liquidated amounts which are easily ascertained and measured are recoverable under the legislative scheme. These amounts include, but are not necessarily limited to, hospital bills, property value, and lost employment income .... Damages that are not readily ascertainable, such as pain and suffering, emotional trauma, loss of earning capacity, and wrongful death awards are not proper subjects of restitution.

(Emphasis added.)

Aware of this holding, the State strives to fit the instant award within the term "lost employment income," and defendant argues with equal vigor that the award should be considered "loss of earning capacity." Neither party is correct. The district court did not reimburse the printing business either for its lost earnings or for its diminished capacity to obtain future earnings; rather, the award, as recognized by all concerned at the restitution hearing, was for lost profits and opportunities, a category of damages that does not fit neatly within either of the terms used in Jarvis.

Lost earnings or lost employment income, which usually refers to loss of wages due to an inability to perform a specific job, is generally easily ascertainable, while loss of earning capacity, which refers to diminished future capacity to earn a livelihood, is not. See Border Apparel-East, Inc. v. Guadian, 868 S.W.2d 894, 897 (Tex.Ct.App.1993). Lost profits, on the other hand, may or may not be easily ascertainable, and thus proof of actual loss is crucial. See D.L. Development, Inc. v. Nance, 894 S.W.2d 258, 261 (Mo.Ct.App.1995) (anticipated profits of established business are recoverable only when they are made reasonably certain by proof of actual facts, with present data for rational estimate of amount); Starnes v. First American Nat'l Bank, 723 S.W.2d 113, 119 (Tenn.Ct.App.1986) (loss of profits is recognized as item of damages depending on nature and extent of proof involved).

Accordingly, lost profits may be awarded as restitution damages. The key inquiry in the recovery of lost profits remains whether the damages can be easily ascertained and measured; mathematical certainty is not required, but there must be a reasonable basis for estimating the loss. State v. Kisor, 82 Wash.App. 175, 916 P.2d 978, 981 (1996) (restitution damages are easily ascertainable if evidence affords reasonable basis for estimating loss and does not subject trier of fact to mere speculation and conjecture); see State v. Ihde, 532 N.W.2d 827, 830 (Iowa.Ct.App.1995) (as in tort actions, courts should deny lost profits as restitution in criminal actions only when loss is speculative, contingent, conjectural, or uncertain); People v. Knowles, 92 Ill.App.3d 537, 47 Ill.Dec. 206, 208-09, 414 N.E.2d 1322, 1324-25 (1980) (as in civil actions, lost profits may be awarded as restitution in criminal actions if shown by clear evidence rather than speculation); State v. Jurado, 137 Or.App. 538, 905 P.2d 274, 275 (1995) (as in civil action, lost profits may be awarded as restitution in criminal action if proved with reasonable certainty).

The State argues that each component of the instant award is readily ascertainable because we need only multiply (1) 343.5 hours of graphic artist time by $10 per hour in lost profits, (2) 120 hours of press downtime by $10 per hour in lost profits, and (3) $8606 of lost or discounted projects by .375--the profit fraction expected from each project. This reasoning falls apart when one considers the uncertainty of the numbers supplied and calculated. At the restitution hearing, no accounting data was admitted as an exhibit to demonstrate the basis for the general manager's estimate of the business's lost profits. Regarding the graphic artist's time, the manager did not indicate how many of the 343.5 hours would have been dedicated to other projects that the business had turned away because of the theft. Indeed, on cross-examination, the manager conceded that he had no idea how many potential customers the business had lost as a result of the theft and no idea of the value of the projects that might have been lost. Cf. Jurado, 905 P.2d at 275 (although restitution award for lost profits was excessive because of failure to mitigate, damages were proven with reasonable certainty by video store, which presented evidence showing daily rental value of unreturned rental equipment and percentage of days equipment would have been rented).

Further, not only did the court award the business lost profits for all of the 343.5 hours without a sufficient showing of the loss, but it awarded the business a full $10 of profit for each hour of graphic artist time and press downtime even though the manager testified that the estimated $10 in "profit" did not take into account overhead and other costs, see Knowles, 47 Ill.Dec. at 209, 414 N.E.2d at 1325 (when lost profits are proved with sufficient certainty, amount recoverable is for net loss only), and even though the assistant state's attorney conceded at the hearing that the $10 in profit stemming from the loss of graphic artist time and press downtime should be reduced by one quarter. Moreover, the manager conceded that his estimate of a 37.5% profit margin on the business's lost projects was "very rough." Indeed, it appears that the manager first considered the profit percentage at the restitution hearing in response to the court's questioning; as noted, he presented no evidence in the way of accounting records to back up his "very rough" estimate. Compare State v. Young, 173 Ariz. 287, 842 P.2d 1300, 1302 (App.1992) (where defendant employee stole proceeds of merchandise sales from retail store, "lost profits" component of proceeds was part of "economic loss" recoverable as restitution; however, adding profit margin to cost of missing inventory would have been too speculative) with State v. Barrett, 177 Ariz. 46, 864 P.2d 1078, 1080-81 (App.1993) (evidence was insufficient to support restitution award compensating used car dealer who claimed that temporary loss of vehicle prevented him from selling vehicle at higher...