You Must Prove Damages With Reasonable Certainty In Business Lawsuits

Determining if you have provable damages is often the first step in analyzing whether to pursue a business lawsuit as a shareholder, partner, or member of a limited liability company.  Likewise, if you have been sued as a result of a partnership or shareholder dispute, reviewing the exposure or possible damages you face is an important part of determining an appropriate litigation strategy.  The question that must be answered is, how will the plaintiff prove to a judge or jury that the damages allegedly sustained are real, quantifiable, and reasonably certain.

In Connecticut, the party that brings the lawsuit has to prove damages with reasonable certainty.  A plaintiff must put forth evidence to afford a judge or jury a sufficient basis for estimating the alleged damages with reasonable certainty.  In other words, there must be evidence for the court or jury to calculate damages.  You cannot simply state “I have lost money” or “I have damages.”  There must be proof beyond speculation or your own subjective belief.

On the other hand, Connecticut law does not require exactitude or precision.  There are no hard and fast rules as to the level of proof required, but it must rise to the level of reasonable certainty or a reasonable estimate.  The level of proof may differ depending on the case facts, and that type of damages at issue.

For example, lost business opportunities may be harder to prove for business attorneys than other types of damages.  A recent appellate court case highlighted some of the evidentiary issues with lost profits.  In System Pros, Inc v Kasica, two equal shareholders of a company went through a lawsuit involving dissolution of their corporation and a trial on other tortious conduct.  At the trial level, the plaintiff shareholder convinced a trial court that he had damages for lost earning opportunities due to wrongful conduct of the other shareholder defendant.  To support his case, he admitted in evidence a series of documents and calculations as to wages he would have earned as a consultant if he was not locked out of the business.  The trial judge was persuaded and awarded damages.

However, the appellate court reversed on the issue and found that the plaintiff did not prove that he would have been hired as a consultant for any specific opportunities.  The appellate court decided:

Although the plaintiff presented ample evidence regarding the nature of the opportunities for employment that were not communicated to him, his testimony as to whether he would in fact have secured such employment resorted to conjecture and subjective opinion, which cannot constitute the basis for an award of damages

The appellate court decided that plaintiff left the trial court to speculate as to the lost opportunities based on plaintiff’s own opinion and assumptions.   The appellate court determined there were too many unknowns as to whether plaintiff would have profited from the opportunities he claimed he was denied by the defendant. The court highlighted that plaintiff needed to establish not only that there were opportunities, but that he was qualified for the positions and would have obtained the positions.

The Systems Pros case serves to highlight the various levels of proof that may be required to recover damages in a shareholder lawsuit.  To summarize, to establish damages for a shareholder in a business lawsuit, an attorney will need to offer evidence at trial showing a reasonable estimate of damages beyond speculation and personal opinion.

The Standard of Proof in Connecticut for Civil Theft

In Stuart v. Stuart, to be officially released on June 22, 2010, the Connecticut Supreme Court clarified the standard of proof for civil theft cases in Connecticut (download decision here).  Prior to this ruling, there was some confusion amongst attorneys and trial courts as to the appropriate standard of proof for a civil theft claim under Connecticut General Statutes section 52-564.  

Connecticut’s civil theft statute states, in pertinent part:

Treble damages for theft. Any person who steals any property of another, or knowingly receives and conceals stolen property, shall pay the owner treble his damages.
 

To successfully allege civil theft, an attorney must plead and prove the elements of larceny under Connecticut General Statutes section 53a-119.  The key element that must be established is the taking or withholding of property with the intent  to deprive another person of the property.  Some examples of successful use of Connecticut’s civil theft statute:

  • Overdrawing on bank accounts
  • Theft of business or corporate property
  • Accepting insurance premium payments in excess of required amounts
  • Defrauding another of bank funds
  • Refusal to return deposit on purchase and sale agreement
  • Wrongful seizure of personal or business property
  • Stealing utilities
  • Depleting business accounts
  • Diverting account receivables

The takeaway from the Stuart case is that the cause of action for civil theft remains the same.  However, the Connecticut Supreme Court has clarified that an attorney only needs to establish proof of civil theft by a preponderance of the evidence.

Largest Jury Verdict In Connecticut History For Trade Secret Case

After an eight week jury trial in Waterbury Superior Court, an East Hartford based flooring solutions company,Dur-A-Flex, has been awarded 50.5 million dollars in damages for the misuse of its trade secrets by Laticrete International, a Bethany based multinational corporation.  Laticrete was a former purchaser of Dur-A-Flex’s colored sand products.  The jury found that the Laticrete misappropriated Dur-A-Flex’s trade secrets for the colored sand and awarded 43.7  million dollars in damages.  After the jury verdict, Judge Dennis Eveleigh awarded Dur-A-Flex more than 5 million dollars for attorney’s fees in a written decision (download here).   He also conditioned Laticrete’s future use of Dur-A-Flex’s technology on payment of royalty fees.

The case was brought back in 2006 on the Complex Litigation Docket in Waterbury  (Access court docket here). Dur-A-Flex was represented by Lawrence Rosenthal and Fletcher Thomson from Rogin Nassau’s Hartford office.  Laticrete was represented by Elizabeth Stewart from Murtha Cullina’s New Haven office.  

Dur-A-Flex supplied color sand to Laticrete for use in Laticrete’s grout products.  Laticrete was the only customer of Dur-A-Flex for the sand product.  Laticrete at some point stopped buying the colored sand from Dur-A-Flex and started making an identical sand product.  Dur-A-Flex claimed that Laticrete was, if fact, using Dur-A-Flex’s manufacturing process to make the sand.    The jury agreed with Dur-A-Flex and found that Laticrete violated Connecticut’s Uniform Trade Secrets Act. 

Attorney Rosenthal commented on the verdict and stated he was "certain that Dur-A-Flex had been significantly damaged by Laticrete’s improper and unauthorized use of its technology."  He believed the verdict was the largest ever for a trade secret case in Connecticut. 

I also believe this is the largest jury verdict in Connecticut history for a trade secret case.  Additionally, Connecticut case law is fairly sparse when it comes to significant trade secret cases.  I expect that the Dur-A-Flex case will impact trade secret law in Connecticut for years to come.  In particular, not only the amount of the award, but Judge Eveleigh’s written decision on awarding future royalties and attorney’s fees, which included a 10% contingency success fee.   Judge Eveleigh also issued a post-judgment order permitting Dur-A-Flex to attach the assets of Laticrete. It should be noted that Judge Eveleigh will become a justice of the Connecticut Supreme Court on June 1, 2010.   As such, I expect that his decision will carry more weight on these issues.