Opinion
No. 2D20-2725
07-08-2022
BASS VENTURE CORPORATION, a Florida corporation; and Bass Management Group, LLC, a Delaware limited liability company, doing business in Florida as Bass Venture Management Group, LLC, Appellants, v. DEVOM, LLC, a Florida limited liability company, Appellee.
David L. Levy, Largo, for Appellants. Shyamie Dixit and Robert L. Vessel of Dixit Law Firm, Tampa, for Appellee.
David L. Levy, Largo, for Appellants.
Shyamie Dixit and Robert L. Vessel of Dixit Law Firm, Tampa, for Appellee.
KHOUZAM, Judge.
Bass Venture Corporation and Bass Management Group, LLC (collectively, Bass), appeal a final judgment in favor of Devom, LLC, in a dispute regarding hotel signage. The judgment declares that Devom has a valid easement to display signage and that Bass violated that easement by unilaterally removing the signage. Due to the violation, the trial court ruled that Devom is entitled to install a new sign at its own expense, and also awarded Devom $75,000.00 in lost profits.
In this appeal, Bass does not challenge the ruling that it violated Devom's valid easement or the relief allowing Devom to install a new sign. Instead, Bass challenges only the lost profits award, contending that Devom's evidence was insufficient to support it. Because Devom adduced evidence of only its revenues, without offering any evidence of its expenses or any discernable basis for its projections, we agree and reverse the damages award.
BACKGROUND
The parties operate two competing hotels on adjacent properties on the same block. Although the hotels share road access, only Bass's hotel fronts the main road; someone entering from that side would have to proceed around Bass's hotel in order to reach Devom's hotel.
At the shared point of ingress and egress from the main road, a single monument displayed signage for both hotels. Because the monument was located on Bass's property, Devom had obtained a recorded easement giving it the perpetual right to install and maintain its own signage on the monument, which signage could not be modified without the consent of both parties.
Nonetheless, in March 2018 Bass removed the monument that displayed both hotels’ signage and replaced it with a new one identifying only its hotel, not Devom's. As a result, someone driving by the block on the main road would not see a sign for Devom's hotel, only Bass's. So Devom sued Bass, seeking a declaration of its rights under the easement, the replacement of the sign, and lost profits for the period that the sign was removed.
At the bench trial, to support its lost profits claim, Devom offered various financial documents from 2016-2017, including tax returns and profit-and-loss statements. It also submitted "statistical reports" from 2015-2018 setting forth its occupancy data and revenues—but not expenses or profits—for each year.
Devom's damages calculation began with tripling its average daily revenue, based on its principal's "estimate" that the missing sign prevented Devom from renting three rooms per day. That value was then multiplied by the number of days the sign was down. In all, Devom sought nearly $150,000 in lost profits from the March 2018 sign removal through the July 2020 trial.
Bass's counsel asserted that this evidence was insufficient to permit an award of lost profits under settled law requiring evidence of expenses or profits, not just revenues. In support, he pointed to Devom's principal's admission that when a room is not rented, the hotel's expenses are lower too, not just its revenues, because, for example, an unrented room uses less utilities and does not require cleaning services like a rented room does.
Acknowledging that Bass's argument in this regard was "well taken," the court declined to award Devom the claimed amount of its lost revenues. Instead, the court ruled without explanation that "at best, a 50 percent margin is available" for Devom, cutting Devom's demand in half and then "basically round[ing] that to a $75,000" award for the period the sign was removed. Bass's motion for rehearing, which again challenged Devom's failure to admit evidence of its expenses or profits for the relevant period of time, was denied. This appeal followed.
ANALYSIS
"The question of the methodology employed in calculating damages ... involves a question of law that we review de novo." ICMfg & Assocs. v. Bare Board Grp. , 238 So. 3d 326, 335 (Fla. 2d DCA 2017). "If the trial court employed the correct measure of damages, we review the damages award for support by competent, substantial evidence." Asset Mgmt. Holdings, LLC v. Assets Recovery Ctr. Invs., LLC , 238 So. 3d 908, 911 (Fla. 2d DCA 2018).
Generally, a business seeking to recover lost profits "must prove that 1) the defendant's action caused the damage and 2) there is some standard by which the amount of damages may be adequately determined." W.W. Gay Mech. Contractor, Inc. v. Wharfside Two, Ltd. , 545 So. 2d 1348, 1351 (Fla. 1989). In applying the second prong, Florida courts have held that "[e]vidence pertaining to loss of income or gross receipts, without specific evidence concerning expenses, is inadequate to prove lost profits." HCA Health Servs. of Fla., Inc. v. CyberKnife Ctr. of the Treasure Coast, LLC , 204 So. 3d 469, 472 (Fla. 4th DCA 2016) (citing E.T. Legg & Assocs. v. Shamrock Auto Rentals, Inc. , 386 So. 2d 1273, 1274 (Fla. 3d DCA 1980) ("As to the damages, the only evidence presented pertained to income or gross receipts, not profits, and testimony concerning expenses did not establish specific dollar amounts. The evidence was therefore inadequate to prove lost profits.")).
"Under Florida law, ‘an inability to establish the amount of lost profits with absolute exactness will not defeat recovery.’ " Del Monte Fresh Produce Co. v. Net Results, Inc. , 77 So. 3d 667, 675 (Fla. 3d DCA 2011) (quoting Nat'l Papaya Co. v. Domain Indus. , 592 F.2d 813, 818 (5th Cir. 1979) ). "However, the countervailing rules require ‘reasonable certainty’ in the proof of those damages and the assumptions underlying them." Id. (quoting Nat'l Papaya Co. , 592 F.2d at 822 ). "Damages cannot be based upon speculation or guesswork, but must have some reasonable basis in fact." Id. (quoting Smith v. Austin Dev. Co. , 538 So. 2d 128, 129 (Fla. 2d DCA 1989) ).
Here, the trial evidence was insufficient as a matter of law to support the award of lost profits because it addressed only revenues from the relevant period of time, not expenses —or, consequently, profits. The financial documentation adduced in support of the award consisted of (1) "statistical reports" of room occupancy and revenues from 2015-2018, (2) partnership tax returns from 2016-2017, and (3) profit-and-loss statements from 2016-2017. The only evidence addressing the period of time since the March 2018 sign removal at issue is the 2018 statistical report, which contains no information relating to expenses or profits, only revenues.
Indeed, at trial, Devom's principal expressly agreed that Devom's "damages are based on a loss of revenue not a loss of profit." In his words, "[t]he numbers that I'm providing for my losses are based on gross revenues, not net profits ." Even though he admitted that Devom's 2018 and 2019 tax returns had already been prepared at the time of the July 2020 trial, neither return was offered into evidence. And although Devom's principal also admitted that the hotel's expenses were lower when rooms were not rented, he declined to give specific figures when asked. Thus, Devom failed to satisfy the settled requirement of providing evidence of expenses to support the lost profits award. See HCA Health Servs. , 204 So. 3d at 472 ; E.T. Legg & Assocs., 386 So. 2d at 1274. Notably, this case starkly illustrates the reason for the requirement. Devom's principal candidly testified that the reason it was declining to provide evidence of its expenses was that "each year expenses can go up. I can have a water boiler go bad. My gross—my net profit is not directly related to my gross revenue."
Consistent with that explanation, Devom's tax returns that were admitted at trial reflected higher revenues but lower profits in 2017 than 2016. Devom's principal accordingly admitted that, comparing 2017 to 2016, Devom "generated more revenue but ... made less money." Absent comparable evidence from the period of time after the sign was removed, there is no way to tell whether that trend continued or not. Thus, evidence of revenue without corresponding evidence of expenses fails to answer the question of whether profits were lost.
In addition to the absence of any evidence of expenses during the relevant time period, the record also lacks support for at least two critical components of the damages calculation. First, Devom's principal never provided any basis for his foundational assumption that the hotel lost revenue from three rooms per day during the period the sign was removed. When pressed on the basis for the three-rooms estimate underpinning the entire damages calculation, he offered only his general experience as a hotelier and his belief that "if you don't have a sign on the road, whether you're a hotel, a McDonald's, a Starbucks, or lawyer, people unfortunately won't know you're there and they won't be able to come visit your establishment." Although Devom's principal admitted that the hotel was still able to be found online and by potential customers driving from another direction not impacted by the sign removal, he declined to provide any source for the three-rooms-per-day figure.
And second, there also is no record support for the trial court's ruling that "at best, a 50 percent margin is available for" Devom and thereby calculating the award by halving Devom's proposed damages figure then "basically round[ing] that to a $75,000" award. It is unclear how the trial court arrived at that finding, which does not appear to bear any relationship to any of the testimony or documentary evidence. Thus, the damages computation also lacks sufficient certainty regarding the underlying assumptions and the margin applied. See Del Monte , 77 So. 3d at 675.
Absent extraordinary circumstances, the appropriate remedy for a failure to admit sufficient evidence to support an award of lost profits is a reversal of the award. See, e.g. , Asset Mgmt. Holdings , 238 So. 3d at 912-13 (reversing lost profits award because "[t]he burden of proving damages rested solely with the plaintiff entities," who failed to carry it); see also Tracey v. Wells Fargo Bank, N.A. , 264 So. 3d 1152, 1164 (Fla. 2d DCA 2019) ("The general prohibition in such cases against ‘second bites at the apple’ is a sound one that is subject only to the exception of extraordinary circumstances.").
Because no extraordinary circumstances are apparent here, we accordingly reverse the lost profits award and remand with instructions for the trial court to enter judgment in favor of Bass on Devom's claim for lost profits. The final judgment is otherwise affirmed.
Affirmed in part, reversed in part, and remanded.
MORRIS, C.J., and ATKINSON, J., Concur.