California Supreme Court upholds trial court’s exclusion of expert testimony on speculative damages

by Michael Papuc
Attorney at Law
44 Montgomery St., Suite 2405
San Francisco, CA 94104
415-773-1755
Michael.Papuc@gmail.com


San Francisco Attorney Michael Papuc has been practicing business litigation in California since 1987. Attorney Michael Papuc represents small businesses in complex litigation matters. The following is a summary of a recent California Supreme court case which upheld the exclusion of expert witness testimony on the grounds that the testimony was about speculative damges.

In Sargon Enterprises, Inc. v. University of Sothern California (11/26/12) No. S191550, a small dental implant company sued USC, which contracted with dental implant company to perform clinical testing on a new implant the company developed and patented. The company sought lost profits of between $200 million and $1 billion. The company claimed that but for USC’s breach of contract, the company would have been a world-wide leader in the dental implant industry. At trial, the trial court excluded the dental implant company’s expert witness on the grounds that his testimony on damages would have been speculative. The California Supreme Court affirmed, stating:

"This case is like Parlour Enterprises, supra, 152 Cal.App.4th 281. Except for Skorheim's belief that, like the Big Six and unlike the rest of the smaller companies, Sargon was innovative, Sargon was dissimilar to all of the Big Six. As the trial court noted, "Sargon is not similar to the industry leaders by any relevant, objective business measure." Skorheim did not base his lost profits estimates on any objective evidence of "past volume of business" or any "other provable data relevant to the probable future sales." (Grupe v. Glick, supra, "26 Cal.2d at p. 692.) {Slip Opn. Page 38} Instead, as the trial court further noted, Skorheim's lost profit projections were "wildly beyond, by degrees of magnitude, anything Sargon had ever experienced in the past."
. . .

"An accountant might be able to determine with reasonable precision what Sargon's profits would have been if it had achieved a market share comparable to one of the Big Six. The problem here, however, is that the expert's testimony provided no logical basis to infer that Sargon would have achieved that market share. The lack of sound methodology in the expert's testimony for determining what the future would have brought supported the trial court's ruling."

 "...The trial court properly acted as a gatekeeper to exclude speculative expert testimony. Its ruling came within its discretion...."

The case was remanded to the trial court for further proceedsings consistent with this opinion.

 This case highlights the difficulty in calculating and presenting a damages claim on a new product which has not reached the market.