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EZ Green Assocs., LLC v. Georgia-Pacific Corp.

Court of Appeals of Georgia

March 16, 2015

EZ GREEN ASSOCIATES, LLC
v.
GEORGIA-PACIFIC CORPORATION et al

Cert. applied for.

Contract. Fulton Superior Court. Before Judge Goger.

Stuart & Johnston, Andrew H. Stuart, Matthew A. Hood, for appellant.

King & Spalding, Elizabeth V. Tanis, Merritt E. McAlister, Xavier O. Carter, Goodwin Proctor, Joseph P. Rockers, for appellees.

DILLARD, Judge. Doyle, P. J., and Miller, J., concur.

OPINION

Page 274

Dillard, Judge.

This litigation arises from a contractual dispute between the parties regarding a proprietary system for applying grass seed.[1] EZ Green Associates, LLC (" EZ Green" ) brought this action for breach of contract and a covenant of fair dealing against Georgia-Pacific Corporation, its assignee, GP Cellulose, LLC (f/k/a Koch Cellulose, LLC), and BlueYellow, LLC, a GP Cellulose subsidiary (collectively " Georgia-Pacific" ). In a prior appeal, we reversed the trial court's grant of summary judgment in favor of Georgia-Pacific, finding that conflicts in the evidence required EZ Green's claims to be resolved by a jury.[2] Upon remand to the trial court, EZ Green proposed three methods for calculating its damages, and Georgia-Pacific filed a pretrial motion to [331 Ga.App. 184] exclude those methods. The trial court granted the motion as to the first two methods and granted it, in part, as to the third method. In this interlocutory appeal, EZ Green argues that the trial court erred in finding that it failed to present evidence that its track record of sales had been tainted by Georgia-Pacific's misconduct; by excluding the " commercially reasonable" benchmarks set forth in the contract for damages purposes; and by excluding Georgia-Pacific's own projections of expected sales. EZ Green also argues that the trial court's order contravenes public policy.[3] For the reasons set forth infra, we affirm.

The record reveals that EZ Green and Georgia-Pacific originally entered into an agreement in 2003 regarding the sale of a product developed by EZ Green, which the parties revised on April 30, 2004.[4] The contract provided that, for a period of five years, EZ Green would license its product to Georgia-Pacific, and in exchange, Georgia-Pacific agreed to make " commercially reasonable efforts" to market and sell the product. To that end, Section 7.3 (a) of the contract set forth specific benchmarks for the volume of sales that the parties expected to achieve each year. And if Georgia-Pacific achieved these goals, it would be deemed to have fulfilled its obligations under the agreement.[5]

Page 275

In 2006, a large national retailer agreed to test the product in its stores, but there was a substantial delay in placing the product with the retailer.[6] In 2005, before the product was sold in these stores, Georgia-Pacific compiled a PowerPoint presentation, detailing its sales projections with the large retailer, which were based on the amount of sales that EZ Green's product had previously generated in a smaller market. Eventually, the product was sold by the large retailer, but in the summer of 2007, executives from that retailer advised Georgia-Pacific that sales of the product were well below [331 Ga.App. 185] their expectations, and accordingly, EZ Green would have to requalify to have its product sold in their stores.

Subsequently, EZ Green sued Georgia-Pacific for breach of contract and the covenant of fair dealing, alleging that Georgia-Pacific breached the agreement by ceasing production of the product and by failing to market it.[7] Discovery ensued, and prior to trial, EZ Green supplemented its response to Georgia-Pacific's first set of interrogatories. In doing so, EZ Green proposed three methods for calculating damages in the event that the jury ruled in its favor. Specifically, EZ Green proposed to base its calculations on (1) the difference between the actual track record of performance and the anticipated amount of sales as measured by the benchmarks set forth in the contract; (2) the difference between the actual track record of sales and Georgia-Pacific's projections of expected sales as set forth in Georgia-Pacific's PowerPoint presentation; and (3) EZ Green's " tainted" track record of sales with the major retailer over an 18-month period.

In response, Georgia-Pacific filed a motion to exclude EZ Green's proposed calculation methods, arguing that they were not based on any actual track record of sales, as required by Georgia law. The trial court granted the motion as to the first two methods, finding that they were too speculative and unreliable, and that they failed to account for market realities. Further, the court granted the motion, in part, as to the third method, finding that EZ Green could use the method, but that it must reduce the amount of its lost royalties by any expenses that it would have incurred had the lost profits been realized.

EZ Green then filed a request for a certificate of immediate review, which the trial court granted. Thereafter, EZ Green filed in this Court an application for an interlocutory appeal, which we granted. This appeal follows.

At the outset, we note that a trial court's ruling on a motion in limine is reviewed only for an abuse of discretion.[8] Indeed, we have recognized that the admission or exclusion of evidence is " within the sound discretion of the trial court," but " the grant of a motion in limine excluding evidence is a judicial power which must be exercised with great care." [9] With these guiding principles in mind, we turn now to EZ Green's claims of error.

1. EZ Green first argues that the trial court erred in holding that it failed to present evidence that its track record of sales was " tainted" [331 Ga.App. 186] by Georgia-Pacific's misconduct. Further, EZ Green contends that, because Georgia-Pacific's breach was " so complete," it will never know the exact amount of its lost profits. This claim is without merit.

As an initial matter, we note that, although the parties briefed the issue below, the trial court did not address whether EZ Green's track record of sales was tainted by Georgia-Pacific's alleged wrongdoing. Instead, the trial court found that EZ Green " generically" made this allegation, without providing further explanation for why its actual sales figures were so unreliable that they should be disregarded entirely. On appeal, EZ Green challenges this finding, but fails to cite to any actual evidence in the record to show that the

Page 276

trial court erred in this regard.[10] Indeed, EZ Green summarily lists four ways in which Georgia-Pacific's conduct tainted its track record of sales, but then cites only to this Court's previous opinion reversing summary judgment and two pages of the contract. However, our prior opinion and the contract are not evidence of Georgia-Pacific's alleged misconduct. And because EZ Green fails to cite to any evidence in the record, which consists of 33 volumes and more than 7,000 pages,[11] to support its argument that it submitted sufficient evidence to show that Georgia-Pacific tainted its track record of sales, we are unable to review this claim of error.[12]

Furthermore, to the extent EZ Green argues that, if its track record of sales is found to have been tainted by Georgia-Pacific's wrongdoing, it should then be allowed to use projections of anticipated profits to calculate its damages, this argument is entirely unsupported. Indeed, EZ Green points us to no Georgia authority remotely suggesting that, if a defendant's conduct taints a plaintiff's track record of sales, we may disregard our long-standing precedent,[13] set forth in Division 2 infra, forbidding plaintiffs from [331 Ga.App. 187] proving lost profits by speculative or uncertain means.[14] As such, EZ Green is not exempt from the requirement that it must prove its damages to a reasonable degree of certainty.

Lastly, as to EZ Green's argument that Georgia-Pacific's breach was " so complete" that it will never know the exact amount of its damages, we note that the trial court did not find that EZ Green must prove the exact amount of its damages to a mathematical certainty. Instead, it found only that EZ Green must base its damages-calculation methods on its actual track record of sales, less any expenses it would have incurred had it realized those profits.[15] As such, EZ Green's argument bears no relation to the trial court's ruling, and therefore is of no consequence.

2. Next, EZ Green argues that the trial court erred by excluding the " commercially reasonable" benchmarks set forth in Section 7.3 (a) of the contract for damages purposes, as well as Georgia-Pacific's sales projections

Page 277

as contained in its 2005 PowerPoint presentation.[16] We disagree.

In Georgia, the general rule as to the recoverability of lost profits as an item of damages is that " the expected profits of a commercial venture are not recoverable as they are too speculative, remote, and uncertain." [17] Nevertheless, when the type of business and history of profits make " the calculation of profits reasonably ascertainable, lost profits may be recovered." [18] Thus, generally speaking, lost profits [331 Ga.App. 188] may be recovered by a business only if " the business has a proven track record of profitability." [19] And although the amount of damages need not be calculated with exact mathematical certainty,[20] a litigant must nonetheless establish lost profits with a reasonable degree of certainty.[21] And in the case sub judice, EZ Green's first and second proposed calculation methods simply do not satisfy this standard.

Here, the benchmarks set forth in Section 7.3 (a) of the agreement essentially establish a safe harbor for Georgia-Pacific by providing that, if the product met or exceeded a certain amount of anticipated sales each year, it would be deemed to have satisfied its contractual obligation to use commercially reasonable means to market and sell the product. Similarly, Georgia-Pacific's 2005 PowerPoint presentation set forth its anticipated sales figures for EZ Green's product after the product's placement with a major retailer. And before the trial court, EZ Green sought to use those sales projections to calculate an estimate of its lost profits due to Georgia-Pacific's alleged breach of the agreement.

But as previously noted, in Georgia, it is well settled that anticipated profits are too speculative and uncertain to be recoverable unless they are based on an actual track record of sales.[22] And [331 Ga.App. 189] this requirement is

Page 278

based on the rationale that

[t]he profits of a commercial business are dependent on so many hazards and chances, that unless the anticipated profits are capable of ascertainment, and the loss of them traceable directly to the defendant's wrongful act, they are too speculative to afford a basis for the computation of damages.[23]

Here, EZ Green's first two proposed calculation methods are based solely on anticipated or expected profits, not any actual track record of sales or history of profitability with the large retailer.[24] Indeed, the contract and PowerPoint presentation were both drafted before EZ Green made any sales with the major retailer, and they merely set forth the amount of sales that the parties anticipated would be achieved in the future. Under such circumstances, EZ Green's first two proposed calculation methods are simply too speculative, remote, and uncertain to be recoverable.[25] As such, the trial court did not err in excluding them.

3. Lastly, EZ Green argues that the trial court's order contravenes our state's public policy. Again, we disagree.

Specifically, EZ Green asserts that Georgia-Pacific's conduct in this case is " deplorable," and that if we affirm the trial court's order, the " lesson" from our opinion will be that large companies can breach [331 Ga.App. 190] contracts with impunity. It also contends that Georgia-Pacific should not be immune from recovery under Georgia law merely because the amount of lost profits is incapable of " exact calculation."

First, because EZ Green did not develop a cogent argument or cite to any authority to support its claim, we need not address it.[26] Nevertheless, as explained in Division 1 supra, neither the trial court nor this Court has indicated that EZ Green must prove the exact amount of its lost profits (i.e., to a " mathematical certainty" ), as it is only required to prove such profits with " reasonable certainty." [27] And in any event, we are not at liberty to disregard well-settled and binding precedent merely because EZ Green disagrees with the results of its straightforward application in this case. Stare decisis may

Page 279

not be " an inexorable command," [28] but the application of this venerable doctrine is " essential to the performance of a well-ordered system of jurisprudence," [29] and we see no compelling reason to revisit or revise this aspect of our jurisprudence.[30]

For all of the foregoing reasons, we affirm the trial court's grant of Georgia-Pacific's motion to exclude EZ Green's proposed methods of calculating damages.

Judgment affirmed.

Doyle, P. J., and Miller, J., concur.


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