The New Business Rule and Compensation for Lost Profits

Not so long ago, most American jurisdictions followed the “new business rule.” If a business did not have a history of profitable operations, it would have been denied recovery for lost profits. That has changed. The prevailing wisdom nowadays replaced a per se rule with a rule of evidence—damages must be proven with reasonable certainty, regardless of whether the claimant was a new business.

However, the prevailing wisdom is wrong. The damages for a new business ought not be viewed as merely a matter of whether the evidence is sufficient to surmount the “reasonable certainty” hurdle. The new business rule … Read more

The Lost Volume Seller, R.I.P.

One of the mysteries in life is how different jurisdictions can be faced with the same legal problem and manage to come up with the same wrong answer. Case in point. Both English and American contract law hold that if a buyer cancels an order (breaches) and the seller resells the item at the same price, the seller’s remedy need not be the contract/market differential (zero). Rather, they both say, if the seller could have sold this item and another as well, the seller could have made the profits on both items. The seller would be a “lost volume seller” … Read more

Porn Star Might Talk Despite Confidentiality Agreement

When Michael Cohen, President Donald Trump’s personal lawyer, acknowledged paying $130,000 of his own money to Stephanie Clifford (aka Stormy Daniels), the porn star who once claimed to have had an affair with Trump, Clifford’s lawyer announced that Cohen had breached their confidentiality agreement and therefore Clifford was now free to tell her story. Maybe. But simply acknowledging the existence of the agreement cannot be a breach. It is far from clear that Cohen’s statements about the agreement revealed enough to support the argument that he had breached.

But suppose we concede that Cohen had not breached. Must Clifford remain … Read more

The Islanders Contract Dispute

When the Los Angeles Clippers sold for $2 billion, owners of sports franchises had good reason to rethink the value of their teams. In particular, Charles Wang, owner of the New York Islanders, had cause to regret his not yet consummated sale to Andrew Barroway for only $420 million. He reneged on his commitment and apparently found another buyer for $548 million and Barroway sued.  I say “apparently” since the Complaint only says that Wang demanded the new price; it did not say that he had an offer at that price. Their agreement was memorialized in a 70-page document but … Read more