Builders and Contractors Exchange
Weekly Bulletin: 12 dec 2006
Proof of damages - The burden remains on the beholder
By: Michael L. Sterling
In June of this year, the Supreme Court of Virginia handed down the Saks Fifth Ave., et al., v. James Ltd., 272 Va. 177, 630 S.E.2d 304 (2006) opinion. James Ltd. is a high-end men’s clothing retailer in Tyson’s Corner, Virginia. In this case, James Ltd. sued Saks and James’ former employees who went to work at Saks’ men’s department in the same shopping mall. While working at James, the employees had signed a non-compete agreement in which they agreed not to use customer contact information obtained while working at James should they go to work for a competitor. In an attempt to prove its damages, James offered the expert testimony of a forensic accountant, who calculated James’ damages as if they stemmed entirely from the employees’ resignation, although the employees were both at-will and legally entitled to resign at any time.
The Court held that James bore the burden of proving with reasonable certainty the amount of damages and the cause from which they resulted; the Court noted that speculation and conjecture cannot form the basis of the recovery. When an established business, such as James, is injured, interrupted, or destroyed, the measure of damages is the diminution in value of the business by reason of the wrongful act, measured by the usual loss of profits from the business. A plaintiff must prove two primary factors relating to damages. First, the plaintiff must prove a causal connection between the defendant’s wrong doing and the damages asserted. Second, the plaintiff must prove the amount of those damages by using a proper method and factual foundation for calculating damages.
In Saks, the Court held that in light of the fact that the employees who left James were at-will employees, the forensic accountant’s “but for” analysis of damages (what James’ profits would have been had the employee remained and not left to sell for Saks) failed to prove causation to a reasonable degree of certainty. Under the accountant’s analysis, the damages to James were the same had the employee retired or gone to work for the competitor. Accordingly, the plaintiff’s failure to prove that the employees’ malfeasance caused the plaintiff’s damages resulted in a defense verdict.
If this article brings up any questions or you need help drafting an employment contract of your own or reviewing a proposal by someone else, you should contact a qualified employment attorney.
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This article is meant to bring awareness to this topic and is not intended to be used as legal advice.