The rule is that, in a case in federal court in which state law provides the rule of decision, the federal court must predict how the state's highest court would decide the case, and decide it the same way.
Plaintiff brought a diversity suit for breach of contract, which was governed by Arkansas law because of a choice of law provision in the contract. The contract involved the licensing and sales by defendant of a board game invented by plaintiff. Plaintiff was not able to recover lost profits for defendant's alleged breach of its duty to promote the game. Plaintiff appealed the grant of summary judgment in defendant's favor. On appeal, summary judgment was affirmed.
Was the grant of summary judgment proper?
Although there was case law in Arkansas that implied that it was a state that applied the "new business rule," the best prediction was that Arkansas would not follow that case. Instead, the court applied the rule that a plaintiff must prove damages. Here, the number of copies of the game that would have been sold but for the alleged breach could not be determined; therefore, plaintiff's claim for damages was excessively speculative. Plaintiff pointed to no evidence from which lost royalties could be calculated, even to a rough approximation.