University of Vermont AAHS

Callahan v. Rafail

Delaware Superior Court
2001 WL 283012
March 16, 2001

Summary of Opinion

Plaintiff Callahan sued defendant Rafail for injures to plaintiff’s racehorse resulting from a motor vehicle accident in which the horse was being hauled in a horse trailer. The plaintiffs wished to introduce testimony as to the reduced earnings potential of the horse as a result of the injuries caused by defendants.

In this opinion, the trial court rejects a discounted earnings approach to damages as being too speculative and prohibits the expert from testifying about it. The correct measure of damages, this judge says, is the decrease in the fair market value of the horse as a result of the injuries, a much smaller figure.

Text of Opinion

Pending before the Court in the above-captioned matter is Defendant Clinton W. Rafail's ("Defendant") Motion for Partial Summary Judgment asking this Court to dismiss claims of Plaintiffs P. Gregory Callahan and Curtis E. Larrimore ("Plaintiffs") for loss of future income, income stream, or any damages beyond the market value of the damaged property at the time of the alleged tort.

FACTS

On January 23, 1998, Defendant allegedly lost control of his car after he hit a puddle of water, and his car collided with a horse trailer that was transporting a race horse owned by Plaintiffs. There were no injuries to either the humans or the horse reported at the scene. The horse, named "Silent Billy," raced two days after the accident and again on February 3 and 11, 1998. Because of concerns about his performance in those races, the Plaintiffs had Silent Billy examined by at least two veterinarians. According to Defendant's brief, the horse received a period of rest and was raced again on June 26, 1998 (where he placed second) and then raced nine times over the next three months. In September 1998, the Plaintiffs retired Silent Billy due to lameness. The Plaintiffs allege that Silent Billy was permanently injured as a result of the collision.

DISCUSSION

The Defendant seeks to preclude Plaintiffs from introducing evidence of profits lost as a result of Silent Billy's injuries. The Plaintiffs argue that these profits can be determined by a discounted cash flow analysis which uses information from Silent Billy's racing career to determine his expected future earnings. This analysis was prepared by Robert F. Minnehan, Ph.D., a "Consulting Economist and Statistician." Mr. Minnehan's Vita, supplied by Plaintiffs, shows that he has a Ph.D. in Business and Economics and currently owns two research and consulting firms. His analysis uses Silent Billy's racing experience and average gross winnings to find that Silent Billy had $30,000 of net winnings per year, which provides the "primary projection for Silent Billy's racing future." After factoring cost inflation for expenses and anticipating a racing performance drop, Mr. Minnehan concludes that for "the years 1998 through 2004, the discounted future, post-accident gain for Silent Billy's owners would be $36,955.... To restate this, if Silent Billy had not been injured in January 1998, and had been able to race seven more years, then the owners would have realized a future gain of $36,955 in discounted dollars ." He then computes that if Silent Billy had continued to win at the $50,000 level for two years, then averaged $40,000 a year in winnings for the years 2001 to 2004, the loss to the Plaintiffs would reach $109,938.

It is well-settled law that "a recovery for lost profits will be allowed only if their loss is capable of being proved, with a reasonable degree of certainty. No recovery can be had for loss of profits which are determined to be uncertain, contingent, conjectural, or speculative." 22 Am.Jur.2d Damages 625 (1988). In Zaleski v. Mart Associates, Del.Super., C.A. No. 82C-NO-11, Poppiti, J. (July 25, 1988) (Mem.Op.), the court considered a situation where a retail business was totally destroyed as a result of defendant's negligence, and stated:

I am satisfied that where a retail establishment has been totally destroyed as the result of the tortious conduct of another, the proper measure of damages is limited to the fair market value of the business, that is, the value of the business immediately before its destruction and its value immediately thereafter. Any other result would, in my view, violate the rule prohibiting speculative damages.

Thus the Court must decide whether Silent Billy's lost profits can be determined with certainty by using Mr. Minnehan's discounted cash flow analysis.

I believe that the discounted cash flow analysis is too speculative to be used to award lost profits to Plaintiffs. The amount of profits is based on the assumption that Silent Billy will continue to win at a certain level of earnings for six years. There are simply too many factors that may intervene to alter these levels or to preclude any future winnings. In Bradshaw v. Trover, Del.Super., C.A. No. 97C-01-028, Vaughn, J., (Apr. 30, 1999) (Mem.Op.), the Court allowed lost profits to be awarded for the one-year term of the contract in effect at the time of the tort, but refused to allow any evidence of profits beyond that year since the profits were too speculative. In doing so, it held that "if any condition existed independent of defendant's negligence which could have prevented plaintiffs from realizing profits from the ... contract, then lost profits would not be recoverable." The speculative nature of horse racing is reflected in Plaintiffs' presentation of two possible future earnings levels--that Silent Billy might continue to earn the $30,000 each year for five years, or perhaps could win $50,000 for two years and then $40,000 for the following three years. To ask the jury to speculate as to whether a race horse would earn $36,955 or $109,938 (the two possible total losses determined by the expert), clearly violates the rule against awarding lost profits that are not known with certainty. This Court should not allow the jury to award Plaintiff's lost future profits based on the discounted cash flow analysis.

Rather than allowing Plaintiffs to recover lost profits, this Court should instruct the jury that if it decides to award damages, they should be based on the difference in fair market value of Silent Billy before and after the incident. Animals are considered personal property, so "damages should be awarded on the basis of the difference in fair market value of the [horse] immediately before and immediately after the accident." Fehlhaber v. Indian Trails, Inc., D.Del., 286 F.Supp. 499, 505 (1968).

Defendant argues that since Plaintiffs bought Silent Billy several months before the accident for $17,000, this is his fair market value. However, determining the fair market value of a race horse is difficult. LeBlanc v. Underwriters at Lloyd's, London, La.App., 402 So.2d 292, 299 (1981). Courts have considered many factors in determining the value of a race horse. In Fehlhaber, supra, the court considered factors such as the racing record, amount of insurance, prior purchase offers, and stage of career in setting the market value for the horses prior to their injuries. 286 F.Supp. at 503-505. In LeBlanc, supra, after reviewing testimony concerning the horse's excellent physical appearance, the earnings of his mother, high intelligence for training, eagerness for racing, and high earnings potential, the court upheld a lower court's decision to award $35,000 for a horse that was bought four months earlier for $5,000. 402 So.2d, at 297. From these cases, it is apparent that there are many factors beyond the simple purchase price that affect the value of a race horse and that courts give the parties wide latitude in persuading the jury as to the most accurate fair market value.

CONCLUSION

I conclude that the Court should grant Defendant's motion and preclude Plaintiffs from recovering profits lost as a result of Silent Billy's injuries. Defendant's application to fix the market value at the purchase price of $17,000 is denied.

IT IS SO ORDERED.


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