[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JUNE 30, 2006
THOMAS K. KAHN
No. 04-14228
CLERK
________________________
D. C. Docket No. 02-60703-CV-WPD
NEBULA GLASS INTERNATIONAL, INC.,
a Florida corporation
d.b.a. Glasslam N.G.I., Inc.,
Plaintiff-Appellee,
versus
REICHHOLD, INC.,
a foreign corporation,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(June 30, 2006)
Before BIRCH and MARCUS, Circuit Judges, and NANGLE*, District Judge.
*
Honorable John F. Nangle, United States District Judge for the Eastern District of
Missouri, sitting by designation.
MARCUS, Circuit Judge:
In this contract action, Reichhold, Inc. appeals from the entry of final
judgment in the amount of $22.5 million in favor of the plaintiff, Nebula Glass
International, Inc. d.b.a. Glasslam N.G.I., Inc. ("Glasslam"). A jury found that
Reichhold supplied Glasslam with a defective product (resin), which constituted a
breach of contract, breach of express warranty, and breach of implied warranty.
On appeal, Reichhold argues that the district court erred in denying its Rule 50
motion for judgment as a matter of law on Glasslam's claims for certain future
glass replacement damages and for lost profit damages. After thorough review, we
are satisfied that a sufficient evidential foundation supports the jury's substantial
award, and, therefore, affirm.
I. Facts
A. Background
The essential facts are these: the appellant, Reichhold, is a chemical
company that manufactures, among other products, resin for use in making
laminated glass. Appellee Glasslam supplies glass laminating resin and licenses a
patented process for making an impact-resistant laminated glass product called
Safety Plus 1. Safety Plus 1 is manufactured essentially by sandwiching resin and
a thin film between two pieces of glass. The edges of the film are anchored to the
2
window frame. This configuration allows the glass to withstand high-velocity
impact from flying objects, such as may occur during a hurricane. However,
ultraviolet (UV) light causes the film and resin to degrade. To prevent this
degradation a UV absorbing compound must be added to the resin.
Beginning in 1996, Glasslam contracted with Reichhold to manufacture
resins containing a certain amount (.2 percent) of Tinuvin 328, a UV absorbing
compound. Contrary to the agreement between the two parties, however,
Reichhold included only one-half of the required Tinuvin 328 in the resin, and
later replaced Tinuvin 328 altogether, using instead another UV absorber, Uvinul,
which blocks less UV light than Tinuvin 328. Glasslam used some of the
defective resin and sold some to its customers, who used it to manufacture
Glasslam's patented Safety Plus 1 laminated glass. Reichhold supplied Glasslam
with defective resin for five years.
In early 2000, Custom Glass, one of the customers Glasslam supplied with
Reichhold's resin, complained that the resin was discoloring and the glass was
delaminating. Then, in the summer of 2001, Norman Foxworth of Dependable
Glass, another customer, reported that the Reichhold resin supplied by Glasslam
did not appear to be blocking UV light properly. When Glasslam asked Reichhold
whether it was using .2 percent Tinuvin 328 to manufacture the resin, Reichhold
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falsely replied in the affirmative. Eventually, Glasslam discovered that Reichhold
was not manufacturing the glass according to the detailed specifications they had
agreed upon.
Not surprisingly, Glasslam filed suit on April 5, 2002, in Broward County
Circuit Court, seeking damages for the defective resin it purchased from
Reichhold. Glasslam's Amended Complaint asserted five claims: breach of
contract (Count I); breach of express warranty (Count II); breach of implied
warranty (Count III); breach of implied warranty of fitness for a particular purpose
(Count IV); and fraud (Count V). Based on diversity of citizenship (28 U.S.C. §
1332), Reichhold removed the cause to the United States District Court for the
Southern District of Florida, on May 22, 2002. On December 3, 2002, the district
court dismissed with prejudice Counts IV (breach of warranty of fitness for a
particular purpose) and V (fraud). The remaining claims were tried to a jury.
Among others, Glasslam presented expert testimony from Dr. George
Frederick Willard, Jr., an organic chemist the plaintiff retained to analyze the
Reichhold resin. Based on his review and analysis, Dr. Willard testified that the
resin Reichhold supplied to Glasslam "is basically bad resin" that suffered from
two fundamental defects: first, it was "undercooked," meaning "the chemical
reaction in the reactor ha[dn't] been . . . cooked to completion"; and, second, it
4
contained either too little Tinuvin or a different UV absorber altogether. He
testified that glass constructed with the defective resin will fail in the following
ways: the resin will yellow; the edges of glass panes will deteriorate; the glass will
become less resistant to impact from wind-blown projectiles; and the two pieces of
glass will separate (delaminate) when the resin, which binds the glass together,
begins to break down.
Dr. Willard also testified on direct examination as to the time frame within
which all of the defective resin would fail:
Q: In your opinion, because of the photochemical reactions
[caused by Reichhold's non-conforming UV-absorbing
additive] and because of the fact that the resin was
undercooked . . . how long will it take this resin to fail, to
become degraded, destroyed or discolored?
A: Well, if you are talking about a clear glass and you are talking
about maybe a beachfront property in the Bahamas, I would
estimate about a year. . . . If you are talking about a colored
glass like a brown or a gray, and it was on a north facing
building somewhere not on the beach, maybe under a canopy, it
could go much longer, maybe five years before you would
notice it.
The problem is you can -- you have to define what a "failure"
is. What is a "failure"? To some people the appearance of a
yellow color is a failure because you can see it.
....
My concern is, though, long before you maybe see some real
manifestation of the problem like the yellowness and the
deterioration, that resin is in there changing. It's changing
every day. It's trying to separate. If you can imagine, these
5
small molecules are migrating, believe it or not, through that
matrix of higher molecular weight materials. They are
collecting at the glass surface and at the PET surface, the film
surface. So I can't guarantee you how long that impact
performance is going to last.
....
Q: What do you think is the parameters -- because there are so
many different things like dryness and latitude and sun and
whether its shaded -- what do you think the -- you said one
year. What do you think the outside parameter is?
A: About five years.
The jury returned a verdict in Glasslam's favor on all claims, and awarded
Glasslam the following damages:
Out-of-pocket damages $1,271,379.00
Unpaid customer claims $14,665,621.00
Lost Profits $6,563,000.00
TOTAL DAMAGES $22,500,000.00
On appeal, Reichhold does not challenge the jury's finding of liability, but
instead asserts that some of the damages -- $12.3 million of the unpaid customer
claims damages attributable to replacement costs for glass installed in Pensacola
Christian College and all lost profit damages -- were speculative and therefore
unrecoverable.
B. Costs for Replacing Pensacola Christian College's Glass
6
Before trial, Reichhold moved for partial summary judgment as to
Glasslam's claims for future glass-replacement damages. Because Glasslam's
initial disclosures made pursuant to Fed. R. Civ. P. 26 and its answers to
interrogatories identified only nine customers that had actually experienced resin-
related glass problems, Reichhold argued that any damages derived from future
claims made by any other customers would be speculative and, therefore, not
compensable. The district court partially granted Reichhold's motion as to
speculative damages, which it defined as any future replacement claims unrelated
to any of the specific customer complaints Glasslam identified in its answers.
Notably, in its answers, Glasslam identified "Norman Foxworth, Dependable
Glass Works, Covington, LA 70434" as a complaining customer, and explained
that "Dependable Glass Works experienced problems with resin sold by Glasslam
and manufactured by Reichhold." Glasslam's answer also explained that "there
are unknown damages at a college in Pensacola in which $5.9 million was spent
on laminated glass and installation."
At trial, Glasslam called Foxworth of Dependable Glass, who testified that
he installed Safety Plus 1 glass in two Pensacola Christian College buildings. He
explained that the glass had already begun to fail: "It had been installed about four
or five months and we had a -- small amount of pieces -- three or four -- maybe ten
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-- I am not sure of the number of the pieces of glass we needed to replace. And we
provided the glass and replaced them." Foxworth also said that, six months later,
Pensacola Christian College "call[ed] and said . . . they had some more glass that
was going bad." Then, two weeks before the trial, Foxworth received yet another
complaint from the college regarding defects in "nine [additional] pieces of glass
in Furman Dining Hall . . . scattered all over the building . . . like a checkerboard."
According to Foxworth, the glass exhibited "deterioration of the resin and the
interlayer." Reichhold's own glass expert also testified that he observed some
delamination when he inspected glass installed in the college's auditorium.
Foxworth testified that the replacement cost would be $300,000 for
defective glass in the college's dining hall and $12 million for defective glass in
the auditorium. Although Foxworth had not yet made a claim for replacement of
the Pensacola Christian College glass, he testified that making a claim appeared
inevitable:
Q: Have you made a claim -- well, you don't like the word
"claim"--have you talked with Steve Howes [Glasslam's owner]
about Furman Dining Hall?
A: I have not.
....
Q: Have you made a claim on Glasslam for that $12 million for
replacement?
8
A: As of this moment I have not, but I have counseling that we
have to -- we are reviewing. From the information that I am
receiving in the last three to four weeks, it appears I have no
choice unless Glasslam can assure me how I am going to get
the money to replace the glass.
Q: The $12,000,000?
A: Yes, sir. The $300,000 plus the $12,000,000.
At the close of Glasslam's case, Reichhold moved for judgment as a matter
of law pursuant to Rule 50, urging that the jury should not be allowed to award
any damages for replacement of the Pensacola Christian College glass. Reichhold
explained that the district court had already granted partial summary judgment
barring recovery "as to potential claims for exposure for faulty glass," and argued
that this ruling necessarily barred Glasslam from recovering for any damages other
than the "specific complaints" alleged in Plaintiff's Answers to Interrogatories.
The district court said that the issue could be addressed through jury instructions
and that Reichhold could move to correct any judgment that was not supported by
the evidence. At the close of all evidence, the court denied Reichhold's renewed
Rule 50 motion.
During the charging conference, Reichhold again raised its concern about
Glasslam's claim for damages related to replacement of the college's glass:
9
THE COURT: Didn't I rule on that? Didn't I say that speculative
claims that haven't even been made are out of the lawsuit? But I don't
think I excluded legitimate claims that were made that just haven't
been paid yet by Glasslam.
MR. LOTTERHOS [Reichhold's Attorney]: But, your honor, the
claims are not legitimate and Glasslam has no obligation to pay them
unless there has been a judgment against Glasslam. For instance, if
you were to hand them $12,000,000 for Pensacola Christian College,
the college--right now that there is only nine panes of glass that are
delaminated in that college. Suppose none of them ever delaminate . .
..
THE COURT: And I think you should be able to argue that to the
jury that they shouldn't give any money for Pensacola College. But if
the jury sees otherwise, if the jury sees that this claim is a legitimate
claim and it's just a question of time before Glasslam is going to have
to pay it, then it seems to me that non-speculative future damages are
legitimate.
Ultimately, the district court gave the following jury instruction, proposed
by Glasslam, and over Reichhold's objection: "Glasslam may only seek to recover
damages for those specific claims which have been presented to you during this
trial. You should not consider at this time any damages for future claims which
have not been specifically presented in this trial." After deliberation, the jury
awarded Glasslam damages for the college's glass.
In post-trial motions, Reichhold again asserted that damages for
replacement of the college's glass were impermissibly speculative and precluded
10
by the district court's partial summary judgment. Again, the district court denied
these motions.
C. Lost Profit Damages
At trial, Glasslam also presented evidence in support of its claim that
Reichhold's defective resin caused Glasslam to lose profits. Glasslam's owner,
Steve Howes, testified that Glasslam's reputation was significantly and discernibly
damaged because of the many problems associated with Reichhold's non-
conforming resin. He explained that his main product, the Safety-Plus 1 window
system, was taken out of production because of Reichhold's resin and the
buildings with the defective glass were offered by his competitors as a rationale
for rejecting Glasslam's product:
Q: Has it effected your business?
A: It's effected our reputation something terrible.
....
[M]ost of the fabricators of the Safety Plus product have ceased
manufacturing it because of all the failures they have had. And there
are many, many buildings throughout the state of Florida that have
the product in them that my competitor salesmen use as exhibits
against me.
Jackson Memorial Hospital has become a very, very famous building
in the glass industry. And Glasslam's reputation in the hurricane
business is bad. It's hard to explain just how bad.
11
Howes further explained that Glasslam experienced a rapid rate of revenue growth
in the years after the patented Safety Plus 1 window system hit the market, but,
notably, after word spread of the problems caused by Reichhold's defective resin,
the sales of Safety Plus 1 dropped to "almost zero," and Glasslam "lost most of . .
. [its] customers."
Glasslam also introduced the testimony of two different glass fabricators --
Roger Warwick and Victor Prieto -- who stopped purchasing Glasslam glass after
experiencing problems associated with delamination and discoloration. Both
testified that their companies began purchasing Glasslam glass in 1996, but
stopped doing so in 2001, after the glass it had installed began to delaminate or
discolor.
Finally, Glasslam offered the testimony of Ronald Patella, an accounting
and business valuation expert who opined that the company's lost profits
attributable to decreased Safety Plus 1 revenue, past and future, amounted to
$7,621,000.
At the close of the presentation of all of the evidence, Reichhold moved for
judgment as a matter of law under Rule 50 on Glasslam's lost profits claim,
asserting that Glasslam failed to prove causation or the amount of lost profits with
reasonable certainty. Reichhold argued that Glasslam's expert improperly
12
calculated lost profit damages by including in his calculations customers who
stopped doing business with Glasslam for reasons unrelated to the non-conforming
resin, customers who continued to purchase from Glasslam despite having resin
problems, and customers who never experienced a problem with the resin. Again,
the district court denied this motion as well as Reichhold's renewed post-trial Rule
50 motion on the claim for lost profits.
II. Glass Replacement Damages
Reichhold claims the district court erred by denying its Rule 50 motion for
judgment as a matter of law as to damages for Glasslam's lost profit and
replacement of the college's glass. Fed. R. Civ. P. 50 provides a vehicle for
defendants to challenge the sufficiency of a plaintiff's evidence at and after the
close of the case:
(a)(1) If during a trial by jury a party has been fully heard on an issue
and there is no legally sufficient evidentiary basis for a reasonable
jury to find for that party on that issue, the court may determine the
issue against that party and may grant a motion for judgment as a
matter of law against that party with respect to a claim or defense that
cannot under the controlling law be maintained or defeated without a
favorable finding on that issue.
Fed. R. Civ. P. 50(a) (emphasis added). "We review a Rule 50 motion de novo
and apply the same standard as the district court." Telecom Technical Servs. Inc.
v. Rolm Co., 388 F.3d 820, 830 (11th Cir. 2004). "In doing so, we draw all
13
inferences in favor of the non-moving party," and "affirm the jury verdict unless
there is no legal basis upon which the jury could have found for [the plaintiff]." Id.
"Although we look at the evidence in the light most favorable to the non-moving
party, the non-movant must put forth more than a mere scintilla of evidence
suggesting that reasonable minds could reach differing verdicts." Campbell v.
Rainbow City, Ala., 434 F.3d 1306, 1312 (11th Cir. 2006) (internal quotation
marks omitted) (quoting Abel v. Dubberly, 210 F.3d 1334, 1337 (11th Cir. 2000)).
Elsewhere, we have explained that "[t]he court should deny [a motion for
judgment as a matter of law] if the plaintiff presents enough evidence to create a
substantial conflict in the evidence on an essential element of the plaintiff's case."
Pickett v. Tyson Fresh Meats, Inc., 420 F.3d 1272, 1278 (11th Cir. 2005); Bogle v.
Orange County Bd. of County Comm'rs, 162 F.3d 653, 659 (11th Cir.1998) ("[I]n
order to survive a defendant's motion for judgment as a matter of law . . . the
plaintiff must present evidence that would permit a reasonable jury to find in the
plaintiff's favor on each and every element of the claim.").
Reichhold's appeal of the $12.3 million in damages awarded for future
replacement of the college's glass offers two errors made by the district court: first,
the court improvidently reversed its own partial summary judgment order and
prejudiced Reichhold when, late in the trial, it allowed Glasslam to seek damages
14
for replacement of the Pensacola Christian College glass; and, second, Reichhold
says the replacement damages sought for the college's glass were speculative and,
therefore, improper as a matter of law. We are unpersuaded.
Reichhold's first argument fails because the district court's trial ruling
reasonably construed its own summary judgment order as having allowed recovery
of damages for future replacement of the Pensacola Christian College's glass, and
this determination was well within the district court's discretion.
The relevant portion of the district court's April 27, 2004 order granting
partial summary judgment as to speculative damages claims provided:
Although the Court does not treat the possibility of safety risks
lightly, Glasslam has failed to come forward with affirmative
evidence supporting any potential damages claims. Other than the
specific complaints identified in Glasslam's Answers to
Interrogatories (provided by Reichhold), Glasslam has not provided
any evidence of other claims it will have to address in the future.
....
Accordingly, the Court finds that Glasslam's claims for potential
exposure for faulty glass could only be deemed conjectural or
hypothetical at best. Glasslam has not set forth any evidence
demonstrating any type of actual or imminent injury with respect to
potential claims. . . . Accordingly, Reichhold's Motion for Summary
Judgment on this issue is granted as to potential claims for exposure
for faulty glass.
(emphasis added).
The order distinguishes between speculative claims -- those based on
replacement of glass for which Glasslam received no complaints and produced no
15
evidence indicating that the glass would have to be replaced -- and permissible,
non-speculative claims -- those based on replacement of glass for which Glasslam
had received specific complaints and identified those complaints in its
interrogatory answers. It seems evident to us that the district court's partial
summary judgment order barred the former but not the latter.
Glasslam's claim for replacement of the college's glass falls into the latter
category of claims not barred by the partial summary judgment order. Glasslam's
interrogatory answers identified a specific complaint received from "Norman
Foxworth, Dependable Glass Works, Covington, LA 70434," and explained that
"Dependable Glass Works experienced problems with resin sold by Glasslam and
manufactured by Reichhold." Glasslam's interrogatory answers also specifically
identified "unknown damages at a college in Pensacola in which $5.9 million was
spent on laminated glass and installation." These references to problems
encountered at Pensacola Christian College are specific enough to bring the claim
within the ambit of non-speculative future replacement claims as defined by the
district court.
When Reichhold raised the same argument before the district court, the
court construed its partial summary judgment order in the same way:
THE COURT: Didn't I rule on that? Didn't I say that speculative
claims that haven't even been made are out of the lawsuit? But I don't
16
think I excluded legitimate claims that were made that just haven't
been paid yet by Glasslam.
....
[I]t's just a question of time before Glasslam is going to have to pay
it, then it seems to me that non-speculative future damages are
legitimate.
(emphasis added). When a district court interprets its own order, we are obliged to
review that interpretation for abuse of discretion and accord its interpretation
deference so long as it is reasonable. Cave v. Singletary, 84 F.3d 1350, 1354-55
(11th Cir. 1996); Commercial Union Ins. Co. v. Sepco Corp., 918 F.2d 920, 924
(11th Cir.1990). See also In re Chicago, Rock Island and Pac. R.R. Co., 865 F.2d
807, 810-11 (7th Cir. 1988) (“The district court is in the best position to interpret
its own orders.”). Here, Reichhold has shown, at most, only that the summary
judgment order may have been ambiguous. But identifying a potential ambiguity
does not render the district court's construction of its own order unreasonable.
Indeed, the district court's interpretation was altogether reasonable. There was no
abuse of discretion in allowing Glasslam to present the claim for replacement of
the college's glass to the jury.
Reichhold also argues that the replacement damages for the college's glass
were speculative because the evidence was insufficient to establish that Glasslam
would ever have to replace the college's windows, and if no replacement is ever
required, this damage award would amount to a windfall recovery for Glasslam.
17
We disagree. The record evidence presented at trial, when construed in a light
most favorable to Glasslam, was sufficient to enable the jury to find it was
reasonably certain Glasslam would have to replace the glass at the college.
We are Erie-bound by Florida law in deciding this diversity case, Erie R.R.
Co. v. Tompkins, 304 U.S. 64 (1938), and the Florida Supreme Court's recent
decision in Auto-Owners Ins. Co. v. Tompkins, 651 So. 2d 89 (Fla. 1995), is a
useful starting point. There, the plaintiff was injured in a motor-vehicle accident.
Id. at 90. Liability was admitted, so only the question of damages went to the jury.
The Florida Supreme Court explained that future economic damages were
recoverable if they were established with reasonable certainty. Id. at 90-91.
“Under the certainty rule, which applies in both contract and tort actions, recovery
is denied where the fact of damages and the extent of damages cannot be
established within a reasonable degree of certainty.” Miller v. Allstate Ins. Co.,
573 So. 2d 24, 27-28 (Fla. 3d DCA 1990) (emphasis added) (citing Restatement
(Second) of Contracts § 352 (1981); Restatement (Second) of Torts § 912 (1982);
McCall v. Sherbill, 68 So. 2d 362 (Fla. 1953); accord Richard A. Lord, Williston
on Contracts § 64:8 ("The amount of damages must be established with
reasonable, not absolute, certainty. . . . It is sufficient if a reasonable basis for
18
computation of damages is afforded, even though the result will only be
approximate." (footnotes omitted)).
Reichhold argues nonetheless that two contingencies make the replacement
damages for the Pensacola Christian College's glass wholly speculative: (1) the
college's glass had not yet failed, and may never do so; and (2) Dependable Glass,
the contractor that manufactured and installed the college's glass with the
defective resin Glasslam supplied, had not yet made, and may never make a
replacement claim. We disagree, because Glasslam presented sufficient evidence
at trial that, if construed in a light most favorable to Glasslam, established with
reasonable certainty both that the College's glass will fail and that Dependable
Glass will seek replacement costs.
As we have already noted, Glasslam introduced the testimony of Dr.
Willard, an organic chemist, who explained that the resin Reichhold supplied to
Glasslam was defective because it was "undercooked," meaning "the chemical
reaction in the reactor ha[dn't] been . . . cooked to completion," and that it
contained either too little Tinuvin or a different UV absorber altogether. Willard
also testified that all of the glass containing the defective resin -- which includes
the College's glass -- would fail one to five years after installation. Moreover,
Norman Foxworth of Dependable Glass explained that the college's glass began to
19
fail less than one year after it was installed, and that it failed on at least three
separate occasions. Finally, Reichhold's own glass expert testified that he
observed delaminating glass when he inspected the college.
Although it is a close question, after thorough review we are satisfied the
evidence was sufficient to allow the jury to find that the college's glass was
reasonably certain to fail within five years of installation. And, once the jury
reached this conclusion, there was sufficient additional evidence from which the
jury could also find that Pensacola Christian College and/or Dependable Glass
were reasonably certain to seek replacement costs from Glasslam. Indeed,
Foxworth's testimony left little doubt on this point when he explained that "it
appears I have no choice [but to file a claim for replacement of the college's glass]
unless Glasslam can assure me how I am going to get the money to replace the
glass." Foxworth further testified that the college had already required him to
replace pieces of faulty glass on three separate occasions. Moreover, common
sense alone strongly suggests (and the jury could find) that Dependable Glass
would seek compensation for $12.3 million in replacement costs. Reichhold
points to no evidence undermining this inference. Under Florida law, future
damages need only be reasonably certain, not absolutely certain. See Tomkins, 651
So. 2d at 91; Miller, 573 So. 2d at 27-28. The possibility that the college and
20
Dependable Glass would fail to seek recovery from Glasslam for replacement of
the defective glass is, indeed, remote. At all events, there was sufficient evidence
that Glasslam was reasonably certain to incur damages for replacing the college's
glass. The district court properly denied Reichhold's motion for judgment as a
matter of law.
III. Lost Profit Damages
Reichhold also argues that the district court erred in denying its Rule 50
motion on Glasslam's claim for lost profit damages. Reichhold says it is entitled
to judgment as a matter of law for two independent reasons: (1) Glasslam failed to
prove causation with reasonable certainty; and (2) Glasslam failed to provide an
adequate standard for determining the amount of lost profit damages. Again, we
remain unpersuaded.
It is settled under Florida law that lost profit damages, like all damages,
cannot be speculative and must be proved with reasonable certainty. See, e.g.,
W.W. Gay Mech. Contractor, Inc. v. Wharfside Two, Ltd., 545 So. 2d 1348, 1350-
51 (Fla. 1989); Twyman v. Roell, 166 So. 215, 218 (Fla. 1936). And since
proving lost profits invariably includes some element of prediction about how the
market would have behaved but for the defendant's tortious act or breach, Florida
courts have often noted that proving lost profits damages is difficult, but by no
21
means impossible. See, e.g., W.W. Gay, 545 So. 2d at 1350-51; Twyman, 166 So.
at 217-18; Aldon Indus., Inc. v. Don Myers & Assocs., Inc., 517 F.2d 188, 191
(5th Cir. 1975).
In W.W. Gay, the Florida Supreme Court explained the standard for proving
lost profits this way:
The two seminal Florida cases on recovery of prospective profits are
Twyman v. Roell, 123 Fla. 2, 166 So. 215 (1936), and New
Amsterdam Casualty Co. v. Utility Battery Manufacturing Co., 122
Fla. 718, 166 So. 856 (1935). In New Amsterdam this Court held that
prospective business profits are generally too speculative and
dependent on changing circumstances to be recovered. New
Amsterdam provided an exception allowing the plaintiff to show the
amount of his loss by competent proof. However, this exception only
applied to the interruption of an established business. Twyman, on the
other hand, did not limit recovery to established businesses. There,
the Court stated that, if there is a “yardstick” by which prospective
profits can be measured, they will be allowed if proven. 123 Fla. at 6,
166 So. at 217. The Court provided further that the “uncertainty
which defeats recovery in such cases” is the cause of the damage
rather than the amount. “If from proximate estimates of witnesses a
satisfactory conclusion can be reached, it is sufficient if there is such
certainty as satisfies the mind of a prudent and impartial person.” Id.
at 7-8, 166 So. at 218.
We follow the holding in Twyman. A business can recover lost
prospective profits regardless of whether it is established or has any
“track record.” The party must prove that 1) the defendant's action
caused the damage and 2) there is some standard by which the amount
of damages may be adequately determined.
22
545 So. 2d at 1350-51 (emphasis added); see also Sostchin v. Doll Enters., Inc.,
847 So. 2d 1123, 1127-28 (Fla. 3d DCA 2003); HGI Assocs., Inc. v. Wetmore
Printing Co., 427 F.3d 867, 878-79 (11th Cir. 2005).
Reichhold says Glasslam failed to prove causation. Reichhold cites to
Aldon Industries, Inc. v. Don Myers & Associates, Inc., 517 F.2d 188, 193 (5th
Cir. 1975), for the proposition that a dealer may not recover lost profits caused by
manufacturer's defective product unless the dealer has become so identified with
the defective product that in the eyes of third parties it and not the manufacturer is
held responsible for the defects. According to Reichhold, Glasslam failed to prove
that it had become so identified with Reichhold's resin that Glasslam (not
Reichhold) was perceived as being responsible for the defect. Glasslam, however,
introduced sufficient testimony to show that third parties held Glasslam
responsible for Safety Plus 1's failure. Howes testified that the defective resin
badly damaged Glasslam's reputation, that most fabricators of the product had
stopped making it, and that his competitors used the resin's defects against him.
Howes also said that Glasslam experienced an extraordinarily sharp drop in its
sales of the product after the problems concerning the defective resin became
evident. This evidence, if credited, was sufficient to clear Aldon's hurdle.
23
Reichhold nevertheless argues that Glasslam did not offer enough evidence
that the defective resin actually caused Glasslam to lose profits, but instead merely
assumed causation. Reichhold points to evidence that some customers stopped
buying from Glasslam for reasons unrelated to the problems associated with
Reichhold's defective resin, and that most of the customers never reported
experiencing any problem with the resin. Glasslam counters that evidence of each
individual customer's motivation is not required because Glasslam's evidence,
taken as a whole, sufficiently proved causation. We agree.
The Florida Supreme Court's decision in W.W. Gay, 545 So. 2d at 1349, is
instructive on this point. There, investors formed a company, Wharfside Two, to
build and operate a hotel, and hired W.W. Gay to construct the hotel's water
system. Before and after the hotel opened, observers noticed a petroleum-like odor
in the hotel's water system that Gay was unable to correct. Wharfside sought lost
profit damages from Gay, arguing that Gay caused the odor problems that, in turn,
reduced the number of guests at the hotel. The trial court refused to allow expert
testimony concerning lost profits as being too speculative. Id. On appeal, the
Florida Supreme Court reversed, holding:
We reject the contention that the causal connection between
foul-smelling water and lost revenues was too tenuous. There was
competent and substantial evidence that the odor was a cause of
reduced occupancy. This evidence was supported by studies prepared
24
by reputable economic analysts and provided a sufficient standard to
support the experts' testimony concerning lost profits. The expert
testimony, when combined with the economic studies, was clearly
sufficient to raise a jury question. Accordingly, the trial court erred by
excluding testimony on lost profits.
Id. at 1351. In dissent, Judge McDonald raised virtually the same argument
Reichhold asserts here, but failed to convince the majority of the court:
In my view Wharfside utterly failed to prove any connection between
foul-smelling water and reduced occupancy rates. I do agree that two
managers opined that this was a cause of lost revenues, but there was
no factual foundation for their opinions. The proof falls far short of
satisfying the mind of a prudent and impartial person that the odor
was a cause of an occupancy rate less than that which had been
projected. No one testified that prospective guests declined to come to
or to return to the hotel because of the odor from the water.
Id. (emphasis added).
We are guided by W.W. Gay in concluding that lost profit damages may be
proven in these circumstances without testimony regarding each customer's
purchasing decisions. The lost profit damages in this case were not speculative
simply because Glassslam did not present evidence of every customer's reason for
not buying Safety Plus 1 glass. Under W.W. Gay, so particularized a form of proof
is not required. Id. at 1351. The combination of direct and circumstantial evidence
presented at trial was sufficient to establish causation with reasonable certainty.
Howes testified that the defects in Safety Plus 1 glass became widely known, to the
detriment of Glasslam's reputation. He testified unambiguously that as word spread
25
in the glass industry that Safety Plus 1 windows contained defective resin, his sales
declined to "almost zero." Howes explained that prominent examples of the
product's failures, like the glass installed in Jackson Memorial Hospital, were used
by competitors to sell their products instead of his. He added that "most of the
fabricators of the Safety Plus product have ceased manufacturing it because of all
the failures they had." Glasslam also introduced the testimony of two individual
glass fabricators -- Roger Warwick and Victor Prieto -- who stopped purchasing
Safety Plus 1 product after glass they installed began to delaminate and discolor.
In addition to the direct evidence on causation, Glasslam introduced
circumstantial evidence too. From its inception in 1998 through 2000, Safety Plus
1 revenue grew at an annual rate of 27.5 percent per year, but beginning in 2001 --
at precisely the same time Warwick and Prieto stopped buying Safety Plus 1
because of glass failure -- Glasslam's sales of Safety Plus 1 decreased. All of the
evidence, taken in the light most favorable to Glasslam, allowed the jury to find
with reasonable certainty that Reichhold's defective resin caused Glasslam's Safety
Plus 1 revenue and profits to decline.
The cases Reichhold cites do not advance its argument. Reichhold's reliance
upon Brough v. Imperial Sterling Ltd., 297 F.3d 1172 (11th Cir. 2002) is
misplaced. There, Brough sued Imperial Sterling Ltd (ISL) for breach of a contract
26
to pay commission for sale of real estate. The jury awarded future profit damages
to Brough based on evidence that certain properties would be sold after trial but
before Brough's contract would have expired. On appeal, a panel of this Court held
that "the jury's award of $2,585,000 for 'future commissions on other Florida
properties' was based on speculation that ISL would sell its property," and was,
therefore, impermissible because "it was unclear at the time of the trial whether ISL
would have sold its Florida property before November 1, 2002, when Brough's
contract expired." Id. at 1177.
Brough differs substantially from the instant case in important ways.
Brough's entire case depended on proving how a single company would behave in
the future based on that company's actions in the past. Glasslam's case included
testimony about a large group of consumers' actual purchasing decisions for three
years, and extrapolating that trend forward. A far larger sample size means
Glasslam's projection, unlike the plaintiff's in Brough, is not susceptible to the
randomness of an individual company's whim. Glasslam's case is more like W.W.
Gay than Brough.1
1
Similarly distinguishable is Douglass Fertilizers & Chemical, Inc. v. McClung
Landscaping, Inc., 459 So. 2d 335, 337 (Fla. 5th DCA 1984). There, the court held that
plaintiff's "claim for lost profits . . . is . . . too remote. McClung sought to recover for loss of
future business with Cardinal, not business that it actually had with the developer. McClung had
no future contract binding Cardinal to buy further shipments of sod. No future price was
established or agreed upon." Id. Glasslam's lost profit claim did not depend on any obligation by
27
Moreover, Glasslam's case for future profits rests on the inferences that one
may reasonably draw from direct evidence that some customers refrained from
buying Safety Plus 1 after the defects became known, coupled with the
demonstrable fact that its profits were trending sharply upward for the three years
before the resin problems surfaced, and plunged sharply at precisely the time when
the defects became known in the relevant community. And as Glasslam's expert
made clear at trial, his projections of lost profits assumed an upward trend in
revenues without differentiating between sales to existing and new customers.
Neither the past profits nor projected future profits was premised on the speculation
that "none of Plaintiff's customers would have changed their business practices,"
nor that "all these customers would refuse to do business with Plaintiff in the
future." Reichhold's argument--that the jury could only award damages for future
lost profits if they speculated that the exact same customers would continue buying
the exact same amount of product--is simply wrong.2
its customers, but rather on the common-sense notion that a large group of sophisticated
commercial purchasers would not, without cause, collectively reject a product they had been
using. Nor does Glasslam's claim depend, as McClung's did, on predicting the behavior of a
single customer.
2
The other cases Reichhold relies on are also inapposite. Reichhold cites to Dictiomatic,
Inc. v. U.S. Fidelity & Guaranty. Co., 958 F. Supp. 594, 604 (S.D. Fla. 1997), for the proposition
that a proper analysis of lost profits cannot rest on too many variables. There, the court rejected
Dictiomatic's claim for lost profits because evidence showed Dictiomatic experienced "income
losses throughout its entire period of operation immediately prior to the hurricane, and further
that there is inadequate proof that Dictiomatic would have achieved profitability during the
28
Finally, Reichhold argues that the amount of lost profit damages was not
adequately proven. In lost profit cases, Florida's courts have clearly held that once
causation is proven with reasonable certainty, uncertainty as to the precise amount
of the lost profits will not defeat recovery so long as there is a reasonable yardstick
period of business interruption or immediately thereafter." Id. Here, in contrast, the evidence
showed substantial profits in the three years leading up to Reichhold's breach. Projecting future
profits based on the continuation of a substantial existing trend is far different from projecting
profits that contradict an existing trend.
Royal Typewriter Co. v. Xerographic Supplies Corp., 719 F.2d 1092, 1105-06 (11th Cir.
1983), is likewise unavailing. There, the plaintiff, a copy machine dealer, sued the manufacturer
alleging breach of contract and warranty based on the machines' failure to perform in accordance
with the manufacturer's performance assumptions regarding the potential profitability and tax
advantages of a hypothetical dealer. The plaintiff's proof of damages consisted of a "Special
Analysis" that compared the plaintiff's actual earnings with an estimate of what it would have
earned had it leased all of its copiers and otherwise operated its business on the basis of the
manufacturer's performance assumptions. A panel of this Court held that there was no evidence
that the plaintiff ever operated its business in accordance with the [performance assumptions]."
Id. We concluded that "the hypothetical firm in this study was not sufficiently comparable to
plaintiff's business operation . . . . " Id. Unlike the facts presented in this case, the plaintiff in
Royal Typewriter had no track record of profitability on which to base projected profits, but
attempted to model the business's profits based entirely on a hypothesis. Here, in sharp contrast,
Glasslam used three years of actual profit figures to project future profits.
In Sostchin v. Doll Enters., Inc., 847 So. 2d 1123, 1127 (Fla. 3d DCA 2003), the court
rejected as speculative the plaintiff's future lost profit damages. The court found, in particular, that
the plaintiff's expert used gross profits without deducting costs, and used a single year's profit figures
to extrapolate forward six and one half years. "Using this small slice of time to define the trend for
the entire six and a half year remainder of the lease term, the expert projected that, but for the fire,
the profitability of the business would have continued to escalate dramatically." Id.
Last, in Brevard County Fair Ass'n, Inc. v. Cocoa Expo, Inc., 832 So. 2d 147, 153 (Fla. 5th
DCA 2002), the court rejected a jury's verdict awarding lost profits because "the evidence showed
that the [plaintiff] had not earned profits for a reasonable time before the dispute, and as such, lost
profits were not established by a reasonable degree of certainty." This, of course, differs markedly
from the instant case where profits in the years leading up to the breach were well documented.
29
by which to estimate the damages. As the Florida Supreme Court in W.W. Gay
explained, "the 'uncertainty which defeats recovery in such cases' is the cause of the
damage rather than the amount. 'If from proximate estimates of witnesses a
satisfactory conclusion can be reached, it is sufficient if there is such certainty as
satisfies the mind of a prudent and impartial person.'" 545 So. 2d at
1350-51(quoting Twyman, 166 So. at 218). Thus, lost profit damages are
recoverable if there is "some standard by which the amount of damages may be
adequately determined." W.W. Gay, 545 So. 2d at 1350-51; accord Sostchin v. Doll
Enters., Inc., 847 So. 2d 1123, 1128 (Fla. 3d DCA 2003); HGI Assocs., Inc. v.
Wetmore Printing Co., 427 F.3d 867, 877-80 (11th Cir. 2005).
Glasslam's accounting and valuation expert, Ronald Patella, testified that the
company's total lost profits, past and future, were $7,621,000. He explained his
methodology this way:
Glasslam . . . ha[s] many product lines. There is only one product line
that we are concerned with here . . . Safety Plus 1. . . . So what I had
to do was look at the financial statements and the revenues prior to
the damages, which would be 1998 through 2000, look at the level of
revenues, their growth rate, and from that I projected into the future
how much estimated revenues would be.
In quantifying the amount of revenue Safety Plus 1 would have produced but for
the defective resin, Patella projected continued growth in revenue by extrapolating
30
forward the company's established historical growth rate for the same product.
Patella projected the lost profits from 2001 through 2006, but did not project any
future lost profits beyond 2006 because he assumed that "by the end of 2006 . . .
[Glasslam] would be in the same position with Safety Plus 2 as they would have
been with Safety Plus 1. So that's when the damages stopped. They were not out-
of-pocket anything any more."
From 1998 to 2000, the average yearly rate of revenue growth from the
Safety Plus 1 product was 27.5%. Again, based on that historical rate of growth,
and an expanding market caused by the widespread enactment of building codes in
Florida and elsewhere requiring impact-resistant glass, Patella projected that Safety
Plus 1 revenue would have increased 30.0% in 2001, 35.0% in 2002, 40.0% in
2003, 25.0% in 2004, 20.0% in 2005 and 15.0% in 2006. The projected average
rate of revenue growth over the six year period was 27.5%, which equals the rate of
growth Safety Plus 1 actually experienced before Reichhold's breach.
Thus Patella projected Glasslam's Safety Plus 1 revenue would have
increased at a rate of 27.5%, while assuming a correlative increase in variable
production costs. By calculating total projected Safety Plus 1 revenue, less total
projected production costs (fixed and variable), Patella arrived at a gross lost profit
figure. For the years from 2003 to 2006 Mr. Patella also deducted from the gross
31
lost profit figure the amount of net income Glasslam earned on the Safety Plus 2
product, which Glasslam developed to mitigate its damages and replace Safety Plus
1. That deduction reduced Glasslam's gross lost profits from $15.2 million to $7.6
million.
Patella performed his calculations in 2004, therefore the net lost profit
figure breaks down into two categories: past lost profits and future lost profits.
Patella calculated past lost profits by comparing the actual 2001- 2003 Safety Plus
1 revenue against his projections of what profits would have been during those
years but for Reichhold's breach. But for the years 2004 to 2006, no actual revenue
numbers were available, so Patella projected forward actual, post-breach Safety
Plus 1 revenue and compared it with the projected "but for breach" revenues based
on pre-breach revenue trends.
Patella's detailed calculations and methodology provided an adequate
yardstick for the jury to award lost profit damages. Although Reichhold is surely
correct that Patella's calculations involved estimating a number of variables that
cannot be predicted with certainty, Florida law clearly does not require that the
amount of lost profits be certain. Again, the law does require a reasonable standard
32
for calculation, and we are satisfied that Mr. Patella's testimony provided the jury
with a reasonable standard. See W.W. Gay, 545 So. 2d at 1351.3
Accordingly, we affirm in all respects the district court's denial of
Reichhold's Rule 50 motion for judgment as a matter of law.
AFFIRMED.
3
Reichhold's other objections to the damages calculations are no more compelling, and
are largely a reprise of its causation arguments that the lost profit calculation: (1) included
customers who never personally experienced problems with Reichhold's resin; (2) included
customers who stopped doing business for reasons unrelated to Reichhold's resin; and (3) failed
to attribute specific amounts of lost profits to specific customers.
Reichhold cites no authority for any of this, and we remain unpersuaded. First, lost
profits are not limited to customers who personally experienced the failure. See W.W. Gay, 545
So. 2d at 1351(holding that expert testimony and economic studies showing loss of prospective
customers were sufficient to raise a jury question as to lost profits, even in the absence of any
testimony by individual customers). Second, the lost profit calculation was based on an
aggregate trend of revenue growth, not on predictions about individual customers' purchase
decisions. The method used did not assume that Glasslam would keep the same customers from
2001 to 2006, but assumed simply that Glasslam would continue to gain more business than it
lost, as it had from 1996 to 2000. Thus, Glasslam's calculations are not invalidated by evidence
that some customers stopped buying Safety Plus 1 for reasons unrelated to Reichhold's resin.
Third, Reichhold is simply wrong in its unsupported assertion that lost profits must be
attributable to the loss of specific customers.
Finally, Reichhold argues that Glasslam "admittedly was not seeking damages for
'overseas' customers," and, therefore, it was improper for Glasslam's lost profit calculations to
include sales to overseas customers. But Reichhold cites no order or stipulation excluding
damages for lost profits from overseas customers, and bases this claim on a single line of
ambiguous testimony by Howes on cross examination. Even if we were inclined to assign any
merit to Reichhold's argument, we would still be unmoved because Reichhold failed to raise this
argument in its Rule 50(a) or 50(b) motions. "By well settled convention, appellate courts
generally will not consider an issue or theory that was not raised in the district court." F.D.I.C. v.
Verex Assurance., Inc., 3 F.3d 391, 395 (11th Cir. 1993); see also Ford v. United States, 989
F.2d 450, 453 (11th Cir.1993).
33