Categorization of award proves critical
The jury found in favor of the plaintiffs. Because the verdict forms related to each cause of action, however, they awarded $283,812 on the misrepresentation claim and $480,000 on the concealment claim, representing out-of-pocket costs and lost assets. Notably, the jury noted “$0” damages on the form for lost value and lost profits. The defendants appealed the $480,000 award, arguing that there was insufficient evidence that it “represented a lost asset, i.e. something [the plaintiffs] purchased but did not receive” (emphasis in original).
On appeal, the plaintiffs attempted to categorize the $480,000 asset as goodwill, which was listed in the Bill of Sale. But the Court of Appeals dismissed this theory. Even though the Bill of Sale allocated $311,000 of the purchase price to goodwill, the plaintiffs and their expert agreed that these values were “only for tax purposes” and did not reflect true value.
The plaintiffs also attempted to tie the award to the annual revenue foregone from the trucking contract—which was approximately $480,000¾or the projected annual profit they anticipated from that account ($120,000). But again, the court was not convinced. Such a determination would be “pure conjecture,” it said, because the plaintiffs neglected to present any evidence that goodwill could be valued by “multiplying anticipated profits of a single account by a number of years or by determining one year of gross revenues for that account.”
The plaintiffs’ failure to present evidence from which the jury could determine the value of goodwill—whether unrealized or not—was fatal, and the court reversed the entire damages portion of the award.
Quick Pick Express, LLC v. Quick Pick Express, Inc., 2008 WL 1799751 (California) (April 22, 2008) (unpublished)
