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Washed Up Laundry Costs Big
by Ron Davis

A tenant of a Texas shopping center has convinced a jury that the center’s owner owes him $222,000 for a breach of the noncompete terms of the tenant’s lease.

The shopping center, located in El Paso, had leased space to the tenant for the operation of a self-service laundry. The terms of that agreement included a provision barring the shopping center owner from leasing space in the center to a business similar to that of the tenant’s.

Several years after signing the lease, however, the shopping center owner rented space to another self-service laundry—at much higher rental rates. As a result of the competitor’s operation, the revenue of the original self-service laundry tenant dropped drastically, and eventually he ceased operations.

The tenant subsequently sued the shopping center owner for breach of contract. As evidence of the impact on his business from the competition, the tenant pointed to his history of profitability for five years prior to the closing of his business. He also presented spreadsheets of monthly income and expenses for a previous five-year period. Finally, he called on a local university economics professor, who testified that the laundry had suffered a $220,124 loss in net profits as a result of having to cease operations at the shopping center.

A jury then awarded the tenant $222,000 for lost profits. The shopping center owner appealed, claiming that the award did not take into consideration some important facts. Specifically, he said, the professor did not use objective data because they were provided by the tenant and contained “various suspicious discrepancies.”

A Texas appellate court, in agreeing to the award to the tenant, explained, “The record does not support the shopping center owner’s claim of legal insufficiency…. While there is no way to prove future profits with complete certainty, Texas courts have used a history of profitability in a business as evidence of future profits. The data may well have been self-serving because it was provided by the tenant. However, this is a challenge to the credibility of the evidence, which is the exclusive province of the trier of fact.” (The Ray Malooly Trust v. Juhl, 2004 WL 1375542 [Tex.App.-El Paso])

Decision: June 2004
Published: July 2004



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