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Lost Profit Claims for New Business Are Now Allowed in New Jersey

For decades new business owners have been precluded from alleging lost profit damages in New Jersey courts. The issue would arise when a lawsuit was filed and a new business owner would assert a claim for lost revenue due to someone else’s wrongdoing. Since a 1936 case entitled Weiss v. Building & Loan Associates our courts have held that a new business’s lost revenue claim was inherently too speculative to allow such a claim to proceed.

That has now changed and claims by new businesses for lost profit may now proceed as a result of a recent New Jersey Supreme Court decision involving proposed real estate development brought by the would be developer against its law firm and others. That claim, brought by Larry Schwartz and his LLC, alleged that the Defendants committed malpractice and other wrongs which destroyed his prospects of successfully developing several New Jersey properties. A trial court and an appeals court dismissed the plaintiff’s lost profit claims based on the 1936 decision. Bad news for the plaintiff.

However the New Jersey Supreme Court reversed and held that a “per se” ban on new business lost profit claims was no longer warranted. While the Court held that such claims must meet a high standard to prevail, they may proceed. It is now up to a trial court to determine whether the plaintiff has enough evidence to meet such a high standard of proof.

In environmental cases we see many examples of lost profit claims. Many environmental lawsuits involve new businesses and claims that the businesses could not open at all, or could not open in time because of environmental remediation negligence or because of contamination from neighboring properties. These claims are common.

Here is the point: new business lost profit claims are still not easy to prove – but if a plaintiff has very good evidence to prove the extent of lost profit, such claims may now proceed in New Jersey.

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