The Arizona Supreme Court has recently clarified the threshold for claiming lost profit damages in cases involving failed business deals. In the case of McAlister et al. v. Loeb & Loeb, LLP, the plaintiffs, Roy McAlister and McAlister Technologies (MT), sought to hold the defendant, the law firm Loeb & Loeb, accountable for their claimed $100 million in losses. These losses, they alleged, were the result of the firm's unlawful interference with their intellectual property rights which, in turn, had disrupted potential licensing negotiations with several interested parties.
However, the court found that the plaintiffs did not, to firmly establish the certainty of any such deal occurring, let alone the profits that would've been derived from it. As highlighted by an official summary from the Arizona Supreme Court, a key factor in these cases is "that plaintiffs seeking lost profit damages from a failed business transaction must first demonstrate that the parties had agreed upon material terms such that the transaction was reasonably certain to occur."
One such prospective deal under scrutiny was with Donal O’Flynn. Evidence presented demonstrated that there were several unresolved terms, crucial enough to be considered 'material,' such as the initial payment amount and the schedule and size of O’Flynn's subsequent payments. "The evidence showed that McAlister and O’Flynn had not resolved several material terms, including the amount of O’Flynn’s initial payment and the amount and timing of O’Flynn’s subsequent annual payments," states the court summary. Given these inconsistencies, the court held that reaching an agreement was not only uncertain but also entered the realms of pure speculation.
As a result, the claim for lost profit damages by McAlister and MT was ultimately dismissed by the Supreme Court. The remaining trespass to chattel claim, which deals with the interference with another's property, was also dismissed due to the inability to prove any actual damages. This decision underlines the arduous task plaintiffs face in proving lost profits and serves as a stark reminder that not every business disappointment can justly translate to a legal victory. More details of the court's reasoning can be found on the official Arizona Supreme Court's opinion.
