A case before the Court of Appeals in New York involved a commercial dispute between two New York companies that sell and monitor home and commercial security camera and alarm systems. The district court found the defendants had violated the Lanham Act and committed tortious interference with a contract by attempting to poach customers from the plaintiff.

On appeal, the defendants did not challenge the finding of liability. Instead they challenged the district court’s decision to award the plaintiff compensatory damages.

The parties in this case are all in the business of installing, maintaining and monitoring security cameras and alarm systems. The individual defendants previously worked at a now defunct competitor of the plaintiff several years after the individual defendants had departed from their positions. The plaintiff purchased all of the assets of the defunct company. The assets most relevant to this case were customer accounts, contracts previously owned by the defunct company, as well as their licensing and branding materials.

In the months after the plaintiff closed on the asset acquisition, the plaintiff began to receive an unusual number of cancellation notices from the defunct company’s customers. Many of the cancellation notices mentioned that they were taking their business to the defendant. In all, nine former customers terminated their contracts with the plaintiff and took their business to the defendant.

The plaintiff traced the account cancellations to allegedly misleading sales pitches that the individual defendants were making to former customers about the nature of the transaction between the defunct company and the plaintiff. The plaintiff sued, alleging a variety of claims under the Defend Trade Secrets Act, 18 U.S.C. Section 1836, et seq.; the Lanham Act, 15 U.S.C. Section 1125(a); and New York state law. After a bench trial, the district court dismissed a number of the claims, but entered judgment for the plaintiff on a claim under the Lanham Act and a state law tortious interference with contract claim.

The plaintiff sought $521,743 in compensatory damages, which they alleged was equivalent to the 12-year value of the 69 customer accounts the individual defendants acquired for the defendant. The district court, however, found that 56 of those 69 customer accounts were subject to a “holdback provision” in the plaintiff and defunct company’s acquisition agreement and should not be calculated as part of the damages. The district court thus awarded the plaintiff only $91,036 in compensatory damages, which represented the estimated 12-year revenue of the 13 customer accounts that were not subject to the holdback provision.

The defendants’ primary arguments on appeal revolve around the district court’s decision to use a 12-year estimate for the potential length of the contracts. The figure came from testimony of the plaintiff’s general manager who had been involved in negotiating the acquisition and transitioning the newly-acquired accounts to the plaintiff thereafter.

On appeal from a judgment after a bench trial, the court reviewed the district court’s findings of fact for clear error and its conclusion of law. Although the amount of recoverable damages is a question of fact, the measure of damages upon which the factual computation is based is a question of law.

The court concluded that the plaintiff’s general manager testimony was sufficient for the plaintiff to meet its burden with regard to damages and affirm the judgment of the district court in its entirety. Although a plaintiff bears the burden of establishing lost revenue, the defendant must prove all elements of cost or deduction claimed. Under New York state law, “a plaintiff in a tortious interference with contract case is entitled to damages in the amount of the full pecuniary loss of the benefits of the contract, ad . . . ‘the elements of damages, including consequential damages, are those recognized under the more liberal rules applicable to tort actions.’”

The plaintiff met its burden. Making estimates of future profit loss “necessarily requires some improvisation, and the party who has caused the loss may not insist on theoretical perfection.”  The burden is on the defendants as the wrongdoers to establish any uncertainty as to damages.  The burden of uncertainty as to the amount of damage is upon the wrongdoer. The defendants do not identify, nor could the court find any evidence presented at trial regarding plaintiff’s costs related to the acquired customer accounts, which defendants could have easily developed.  Thus, the court found no error.