Unbillable Hours

The court reversed a judgment awarding an law firm lost profits in an action against a litigation services company. Elrod, a litigation law firm, hired A-Legal to perform support services related to E-Discovery. Two days later, Elrod pulled the job when A-Legal doubled the price it previously quoted. Both parties sued each other for breach of contract. Elrod claimed damages from lost revenue and lost business opportunities due to the time its attorney’s and staff lost dealing with A-Legal’s breach. Elrod presented evidence of lost revenue, which it valued at $20,000, but the only specific evidence relating to a worker’s time lost dealing with the breach came from one attorney, Nassar. Nassar testified that her hourly rate is $325 and that she spent about eighty hours in total “dealing with the situation.” Elrod made no attempt to establish what expenses would have been attributable to Nassar’s billable hours or whether the firm lost any specific business or billing during that time. The trial court entered a judgment awarding $20,000 lost profits plus attorney’s fees.

On appeal, the court noted that the only calculation that can be made from Elrod’s evidence is potential gross revenue brought in by Nassar, not net profits, because Elrod presented no evidence to show any expenses related to that revenue or that she actually billed less time because of the breach than she would have otherwise. Thus, the evidence was legally insufficient to show lost profits, the only measure of damages presented, and the court reversed and rendered a take nothing judgment.

A-Delta Overnight Legal Reproduction Services Corp. v. David W. Elrod, PLLC, No. 05-11-00708-CV