464 P.3d 483
Or. Ct. App.2020Background
- Martinez and Horst co-founded Summa Group (50/50 ownership) and affiliated entities; Horst (with Knighton) diverted Summa Group funds into Summa Holdings without Martinez’s approval.
- Plaintiffs (Summa Group and Martinez) sued for multiple claims, including intentional interference with contract/economic relations/prospective advantage (IIER).
- After a bench trial the court found for Martinez on IIER and related claims and awarded $97,305 in lost-profits damages (Martinez’s 50% share of $194,609.82 in Summa Holdings’ 2012 total income).
- The trial court declined to deduct Summa Holdings’ listed expenses ($216,414.68) because it found defendants failed to prove those expenses’ legitimacy, and treated gross revenues as net profits.
- Knighton appealed, arguing (1) the court should have granted a directed verdict for insufficient damages evidence, and (2) the lost-profits award was legally erroneous because plaintiffs failed to prove net lost profits.
- The Court of Appeals affirmed denial of directed verdict but reversed and remanded the IIER damages ruling, holding plaintiffs bore the burden to prove net lost profits and the trial court improperly shifted that burden to defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court erred by denying Knighton’s motion for directed verdict on IIER (damages sufficiency) | Martinez contended there was sufficient disputed evidence of damages (e.g., $102,696 purported loan and other theories) to go to the factfinder. | Knighton argued no legally sufficient evidence of damages was presented, so directed verdict should be entered. | Denied: Court of Appeals held a reasonable-factfinder issue existed (disputed evidence about the $102,696 and other theories), so directed verdict denial was proper. |
| Whether the lost-profits award could be calculated from Summa Holdings’ gross revenues (without deducting expenses) | Martinez treated Summa Holdings’ 2012 total income as the appropriate measure of diverted profits and sought recovery (court awarded half to Martinez). | Knighton argued plaintiffs failed to prove net lost profits with reasonable certainty and the court erred by treating gross revenue as net profit, thereby shifting burden to defendants to disprove expenses. | Reversed and remanded: Court held plaintiff must prove net lost profits; trial court erred by using gross revenues because plaintiffs did not prove expenses, and cannot shift that burden to defendants. |
| Whether the trial court erred in denying Knighton’s post-judgment ORCP 71 motion | Knighton argued the post-judgment motion was warranted (alternative ground). | Plaintiffs defended denial. | Not reached: Court did not decide this assignment because reversal on damages made it unnecessary to resolve. |
Key Cases Cited
- Miller v. Columbia County, 282 Or. App. 348 (Or. App. 2016) (standard of review for directed verdict—legal error).
- Peterson v. McCavic, 249 Or. App. 343 (Or. App. 2011) (plaintiff bears burden to prove lost profits).
- Willamette Quarries v. Wodtli, 93 Or. App. 306 (Or. App. 1988) (lost-profits recovery requires proof that loss resulted from breach).
- Cruz Development, Inc. v. Yamalova, 174 Or. App. 494 (Or. App. 2001) (lost-profits awards require evidence of net profits, not merely gross revenue).
- City of Eugene v. Monaco, 171 Or. App. 681 (Or. App. 2000) (reasonable certainty standard for lost-profits awards is "reasonable probability," not absolute certainty).
- Porter v. Oba, Inc., 180 Or. App. 207 (Or. App. 2001) (elements of IIER claim).