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Sargon Enterprises, Inc. v. University of Southern California

Supreme Court of California

November 26, 2012, Filed

S191550

Opinion

 [***617]  [**1239]   CHIN, J.—A small dental implant company that had net profits of $ 101,000 in 1998 has sued a university for breach of a contract for the  [**1240]  university to clinically test a new implant the company had patented. The company seeks damages for lost profits beginning in 1998, ranging from $ 200 million to over $ 1 billion. It claims that, but for the university's breach of the contract, the company would have become a worldwide leader in the dental implant industry and made many millions of dollars a year in profit. Following an evidentiary hearing, the trial court excluded as speculative the proffered testimony of an expert to this effect. We must determine whether the court erred in doing so.

We conclude that the trial court has the duty to act as a “gatekeeper” to exclude  [****3] speculative expert testimony. Lost profits need not be proven with mathematical precision, but they must also not be unduly speculative. Here, the court acted within its discretion when it excluded opinion testimony that the company would have become extraordinarily successful had the university completed the clinical testing.

We reverse the judgment of the Court of Appeal, which had held the trial court erred in excluding the testimony.

I. Factual and Procedural History

Because neither party petitioned the Court of Appeal for rehearing, much of this summary of the factual and procedural history is taken from that court's majority opinion. (See Richmond v. Shasta Community Services Dist. (2004) 32 Cal.4th 409, 415 [9 Cal. Rptr. 3d 121, 83 P.3d 518]; Cal. Rules of Court, rule 8.500(c)(2).)

 [*754] 

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55 Cal. 4th 747 *; 288 P.3d 1237 **; 149 Cal. Rptr. 3d 614 ***; 2012 Cal. LEXIS 10713 ****

SARGON ENTERPRISES, INC., Plaintiff and Appellant, v. UNIVERSITY OF SOUTHERN CALIFORNIA et al., Defendants and Appellants.

Subsequent History: Reported at Sargon Enterprises, Inc. v. University of Southern California, 2012 Cal. LEXIS 11472 (Cal., Nov. 26, 2012)

On remand at Sargon Enterprises, Inc. v. University of Southern California, 215 Cal. App. 4th 1495, 156 Cal. Rptr. 3d 372, 2013 Cal. App. LEXIS 352 (Cal. App. 2d Dist., May 2, 2013)

Related proceeding at Sargon Enters. v. Browne George Ross Llp, 2017 Cal. App. LEXIS 830 (Cal. App. 2d Dist., Sept. 26, 2017)

Prior History:  [****1] Superior Court of Los Angeles County, No. BC209992, Terry A. Green, Judge. Court of Appeal, Second Appellate District, Division One, No. 202789, No. 205034.

Sargon Enterprises, Inc. v. University of Southern California, 2012 Cal. LEXIS 10285 (Cal., Oct. 1, 2012)

CORE TERMS

innovative, implant, lost profits, market share, trial court, speculative, Big, profits, damages, leaders, dental, expert testimony, products, smaller, comparable, percent, gatekeeping, projections, sales, expert opinion, calculated, estimates, driver, cases, clinical study, excluding, reasons, load, rank, reasonable certainty

Evidence, Admissibility, Expert Witnesses, Governments, Legislation, Interpretation, Expert Witnesses, Daubert Standard, Civil Procedure, Appeals, Standards of Review, Abuse of Discretion, Contracts Law, Measurement of Damages, Foreseeable Damages, Lost Profits, General Overview