## Facts

- Topp Paper Company, LLC (Topp), a Florida-based label company, purchased a label-printing machine from ETI Converting Equipment (ETI), a Canadian equipment manufacturer, for more than $1 million.
- The parties’ contract included a limited 12-month repair-or-replacement warranty and a choice-of-law clause selecting Quebec law.
- After installation, the machine repeatedly malfunctioned, and Topp complained that it could not reliably run certain high-speed label jobs.
- About 21 months after installation, Topp sought a refund and attempted to return the machine.
- ETI refused to accept a return but replaced the machine’s coating head, after which the machine operated substantially better.
- Topp maintained that problems persisted—particularly labels sticking at higher speeds—and claimed it could not produce fast-application labels for high-volume customers (e.g., food, produce, packaging), harming its expected profits.
- ETI argued it had remedied the defects and relied on testimony from a Topp employee that Topp continued using the machine approximately eight hours per day.
- Topp sued in federal court in Florida seeking a refund and damages, including lost profits.
- ETI moved for summary judgment, arguing (among other things) that any breach was not “fundamental” (so rescission/refund was not available) and that Topp’s lost-profit theory was too speculative.

## Issues

1. Whether the evidence permitted summary judgment that ETI did not commit a fundamental breach of the parties’ contract (governed by Quebec law) that would justify rescission or a refund.
2. Whether Topp, as a relatively new business, could pursue lost-profit damages, and what proof Florida law requires to show lost profits with reasonable certainty.

## Decision

- On ETI’s summary-judgment motion, the court addressed both the contract-remedy dispute and Topp’s damages theories.
- The court held that lost-profit damages must be proven with a reasonable degree of certainty and may not rest on speculation or conjecture.
- The court rejected a projection-based approach that measured lost profits by comparing projected income to actual income, finding that method too speculative in the circumstances, particularly for a new business without a track record.
- The court indicated that Topp could pursue lost profits only if it could tie the claimed loss to non-speculative proof—such as identifiable customer contracts allegedly lost because the machine could not perform as promised—and provide a sound benchmark for calculating the amount.
- The court also considered ETI’s “no fundamental breach” position in light of evidence of repairs and continued use, while recognizing that factual disputes about performance and the machine’s ability to meet required production needs bore on liability and remedy.

## Legal Principles

- Lost profits are recoverable only when proven with a reasonable degree of certainty; damages that depend on speculation or conjecture are not recoverable.
- For an unproven or new business, lost profits are not automatically barred, but the plaintiff must show (1) causation (the defendant’s conduct caused the loss) and (2) a reliable benchmark (“yardstick”) for measuring the amount.
- A plaintiff may be able to prove lost profits without economic expert testimony if it can present concrete, non-speculative evidence (for example, actual customer contracts or orders lost because of the defendant’s conduct) and a reasonable method to compute net profits.
- Projection-only models—business plans, hoped-for sales growth, or projected-versus-actual revenue comparisons—are generally insufficient when they lack an objective basis and depend on assumptions rather than demonstrated market performance.
- When a contract includes a limited repair-or-replace warranty and the seller undertakes repairs, evidence of repair success and continued use can be relevant to whether the breach is “fundamental” and whether rescission/refund is an available remedy under the governing law.

## Conclusion

The court’s summary-judgment analysis centered on whether the alleged equipment problems supported a refund theory and, in any event, what damages Topp could seek; it required non-speculative proof of lost profits grounded in concrete evidence (such as lost contracts) and rejected profit claims based merely on projections, while treating disputed facts about performance, repair, and continued use as central to the breach-and-remedy questions.


Topp Paper Co. v. ETI Converting Equipment, 2013 WL 12101111 (2013)