The BUSKLAW December Newsletter: On the Perils of Suing for Lost Profits - and Not Listening to the Judge!

In my experience, trial lawyers have big egos. That's okay because a courtroom isn't a place for the faint of heart, and effective oral advocacy demands a strong personality. But a problem arises if a trial lawyer - in front of a judge - combines their big ego with stubbornness, especially when a point of law is on the table. Then, like a frozen turkey dropped into hot oil, the attorney's case can blow up.

This is the scenario that played out in Kent County Judge Christopher Yates' decision in Amira Medical Staffing v Rachel Richardson, Heather Martin, and Doria Coston. Defendants Richardson, Martin, and Coston are described as "low-paid health care workers." Plaintiff Amira hired them to provide health services to a patient with a "traumatic brain injury." For some reason, the patient's mother decided to switch to another medical staffing agency, but these three nurses wanted to continue caring for their patient, so they left Amira and went to work for the new agency (with no pay increase). This would have been all well and good, except for the fact that the nurses signed a non-compete agreement with Amira, so Amira sued all three for violating their restrictive covenants. Unfortunately, the three nurses didn't hire a lawyer to defend them. In the words of Lev Grossman, that's where "the thick plottens."

In Michigan, when a defendant fails to respond to a civil lawsuit, the court schedules a hearing to determine the damages incurred, and the court then enters a default judgment. The three nurses didn't appear at this hearing, so Judge Yates, with input from Amira's attorney, discussed the proper damages under Michigan law.

Amira's attorney argued that her client was entitled to lost gross profits resulting from the Defendants' breach of their non-compete agreements, but Judge Yates disagreed, citing the well-established rule in Michigan that damages for breach of contract must be limited to lost net profits. But Amira's attorney adamantly disagreed with Judge Yates (but cited no supporting cases); according to the hearing transcript, she and Judge Yates went "around and around" on this point. 

In fact, Amira's lawyer was so sure that her client's lost gross profits were recoverable that she rejected Judge Yates' "gentle nudge" (in his words) that she produce proof of Amira's lost net profits. And because under Michigan law, a party incurring damages from a contract breach must prove them with reasonable certainty, Judge Yates could only decide that Amira was entitled to no damages. Yikes! Admittedly, Amira's damages calculated on lost net profits would have been substantially smaller than their lost gross profits. But is that a good reason to forego proving any damages? 

Still, Judge Yates threw Amira's counsel a bone. The non-compete agreements provided for attorney fees and court costs, so he found that the three nurses were jointly and severally liable to pay counsel the healthy sum of $25,959.40. (Why do I think that if and when collected, counsel will pay at least some of that money to Amira?)

Here's an old Chinese (or maybe Dutch) proverb. When you debate the law with a judge in their courtroom, it's best to have the law - and facts - on your side. If you "stick to your guns" on a losing proposition, especially after the judge cautions you against it, what will you tell your client when the requested relief is denied?  (And that the entirely avoidable reason for the denial can be found in a judicial opinion that anyone can access?)

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