April 29, 2011

Summary of April 27, 2011 conference report for civil cases

The following is our summary of the Supreme Court’s actions on petitions for review in civil cases from the Court’s conference on Wednesday, April 27, 2011. The summary includes those civil cases in which (1) review has been granted (not including grant-and-transfers), (2) review has been denied but one or more justices has voted for review, (3) the Court has ordered depublished an opinion of the Court of Appeal, or (4) the Court has denied a Court of Appeal’s publication request.

Review Granted

Sargon Enterprises v. University of Southern California, S191550—Review Granted—April 27, 2011

The question presented is whether the trial court erred “in excluding proffered expert opinion testimony regarding lost profits.” This is an action against a university for breach of an agreement pertaining to clinical trials of an innovative dental implant. The trial court excluded expert testimony of the plaintiff’s lost profits on the ground that such lost profits were speculative because the plaintiff’s expert’s opinions were not based on the plaintiff’s historical profits or those of a similar business. Instead, the expert used assumptions that, in the trial court’s view, had no reasonable factual foundation. In addition, the expert rendered an opinion the trial court viewed as outside his area of expertise.

In an unpublished opinion, Sargon Enterprises, Inc. v. University Of Southern California (2011) 2011 WL 437295, the Court of Appeal, Second District, Division One, reversed for a new trial on lost profits. The court explained: “We acknowledge the difficulty in determining lost profits when an established business is built upon the sale of an innovative, revolutionary, or world-changing product. The factor of innovation . . . is not easily converted into dollars and cents. But exactitude is not required. . . . [L]ost profits may be based on a comparison of similar companies; they need not be identical in all respects. [The excluded expert’s] opinion was based on ‘economic and financial data, market surveys and analyses, business records of similar enterprises, and the like.’ (Citation.) He also considered [the plaintiff’s] historical financial data. The trial court’s ruling is tantamount to a flat prohibition on lost profits in any case involving a revolutionary breakthrough in an industry.”

Justice Jeffrey W. Johnson dissented because, in his view, the trial court did not abuse its discretion in concluding the proposed expert testimony was speculative. In a passage that was likely instrumental in securing review, he wrote: “The case before us exposes the need for a clear statement from our Supreme Court to render guidance to trial and appellate courts as to the role of discretion in evidentiary rulings regarding the necessary measure of proof to establish lost profit damages. Where, as here, an expert testifies using a methodology not previously sanctioned by any court to calculate lost profits for an unestablished business, the trial court’s discretion to exclude evidence it deems speculative should not be disturbed on appeal.”

Review Denied (with dissenting justices)

None.

Depublished

None.

Court of Appeal Publication Request Denied

None.

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