In unusual business tort case, court exhibits flexibility in terms of calculating damages

West Plains, L.L.C. v. Retzlaff Grain Co., 2017 U.S. App. LEXIS 16600 (Aug. 30, 2017) (West Plains II); West Plains, L.L.C. v. Retzlaff Grain Co., 2016 U.S. Dist. LEXIS 86344 (May 9, 2016)

The 8th Circuit recently upheld a sizable damages award in an unusual business tort case litigated under Nebraska law. The defendants had orchestrated the transfer of the plaintiff’s business to the defendant’s competing business. In a twist, none of the defendants were bound by noncompete or employment agreements. Another noteworthy aspect in terms of determining economic damages was that the court allowed expert testimony regarding the loss of value even though the plaintiff did not fail completely upon the wrongdoing.

In March 2012, the seller sold his business, including a small but profitable freight logistics brokerage, to the plaintiff. By October 2012, the seller was working with some of the plaintiff’s key employees to set up a new company that competed directly with the plaintiff. The defendant employees secretly moved the plaintiff’s biggest accounts over to the new company before the employees’ coordinated departure from the plaintiff. In early February 2013, the 10 employees resigned en masse.

The plaintiff quickly sued and obtained a two-month preliminary injunction. However, the plaintiff experienced fallout from the loss of key employees and clients even as the plaintiff tried to mitigate the damage by hiring new employees and taking steps to retain the existing customers. In October 2013, the new management of the plaintiff’s freight company decided to expand the business into other industry sectors.

The plaintiff sued for economic damages.The jury found the defendants liable of tortious interference with prospective business relations, breach of the duty of loyalty, and conspiracy.

The plaintiff’s damages expert was able to show that, in the months following the employees’ mass resignation, the plaintiff’s business was “effectively a total loss.” The defendants unsuccessfully challenged the $1.5 million award in post-trial motions and on appeal.