“Reasonable Certainty” Re-defined:
McAlister v. Loeb & Loeb, LLP
Arizona Supreme Court (2025)

Introduction

McAlister v. Loeb & Loeb, LLP is a pivotal 2025 decision from the Arizona Supreme Court refining the evidentiary threshold for lost-profit damages claimed from unconsummated, future business transactions—specifically, prospective patent-licensing deals. The Court affirmed summary judgment for the defendant law firm, holding that the plaintiffs failed to demonstrate lost profits with “reasonable certainty,” and clarified that:

• Agreement on all material terms is a prerequisite to treating a potential deal as “reasonably certain to occur.”
• Absent such certainty, lost-profit calculations—even if supported by expert opinion—are inherently speculative and inadmissible.

The decision also mooted an unsettled question—whether electronic interference with patent filings can constitute trespass to chattels—by ruling that, without any cognizable damages, the trespass claim failed as a matter of law.

Parties:

Summary of the Judgment

1. The Supreme Court vacated portions of the Court of Appeals’ memorandum that had revived a $5 million slice of plaintiffs’ lost-profit claim and their trespass-to-chattel count.
2. It affirmed the trial court’s exclusion of plaintiffs’ damages expert and its grant of summary judgment on all lost-profit theories.
3. Because damages are an essential element of trespass to chattel, that claim was dismissed as well; the Court expressly declined to decide whether electronic patent interference could ever satisfy the “intermeddling” element.
4. The only surviving cause of action (slander of title) was not before the Court on review and was remanded for further proceedings.

Detailed Analysis

A. Precedents Cited & Their Influence

• Harris Cattle Co. v. Paradise Motors (1968)
  Quoted for the rule that anticipated profits are recoverable when proven with reasonable certainty.
• McNutt Oil & Refin. Co. v. D’Ascoli (1955) & Gilmore v. Cohen (1963)
  Established the baseline Arizona requirement that lost profits cannot rest on speculation.
• Rancho Pescado, Inc. v. Northwestern Mutual Life Ins. (App. 1984)
  Abolished the categorical bar on new-business lost profits and adopted the modern “reasonable certainty” approach.
• Orme School v. Reeves (1990)
  Cited by the Court of Appeals for the proposition that summary judgment cannot hinge on credibility; the Supreme Court effectively limited that application by requiring objective evidence of agreed terms.
• Restatement (Second) of Contracts § 352 & Restatement (Second) of Torts § 912
  Used to underscore the heightened proof demands for untried or speculative enterprises.

B. Legal Reasoning

1. Two-Step “Reasonable Certainty” Test Articulated
   a) Certainty of Transaction – The plaintiff must first show that the underlying deal would likely have closed (agreement on all material terms).
   b) Certainty of Amount – Only then must the plaintiff establish the quantum of future profits with reliable data or methodology.
2. Application to the Facts
   • Depositions revealed unresolved disagreements over initial payment size ($5 M vs. $20 M), annual royalty amount ($15 M vs. $20 M), and timing (pre- vs. post-commercialization).
   • Because those material terms remained fluid, the Court found the transaction itself too speculative.
   • Expert Ron Epperson’s model, already excluded under Rule 702/403, could not resuscitate the claim—the Court echoed the trial judge’s critique that using a high discount rate “does not save the day.”
3. Trespass to Chattel
   No damages proved → prima facie case fails; Court avoided wading into digital-trespass theory.

C. Impact of the Decision

• Heightened Evidentiary Gatekeeping – Litigants in Arizona must now marshal objective proof that all essential deal terms were ironed out before a lost-profits theory based on a failed negotiation will survive summary judgment.
• New Businesses & Start-ups – The ruling tightens the path for emergent ventures to claim nine-figure opportunities scuttled by alleged wrongdoing absent term sheets, binding LOIs, or drafts showing consensus.
• Expert Testimony – Merely applying aggressive discounting cannot transform speculative top-line projections into admissible opinions; experts must integrate concrete cost structures, operational hurdles, and binding commitments.
• Digital Property Claims – Although undecided, the Court signaled skepticism toward trespass to chattel without demonstrable harm, a cautionary note for future cyber-interference cases.
• Procedural Strategy – Defendants facing large lost-profit claims can focus early discovery on “material term” disagreements to tee up dispositive motions.

Complex Concepts Simplified

Lost-Profit Damages

Money a plaintiff says it would have earned “but for” the defendant’s wrongful conduct.

Reasonable Certainty

A legal standard requiring proof that is more than speculative yet does not demand mathematical precision—think “probable and reliably shown,” not “merely possible.”

Material Terms

Deal provisions so essential that without agreement on them, no contract exists (e.g., price, quantity, timing).

Summary Judgment

A ruling entered before trial when no genuine dispute of material fact exists and one side is entitled to judgment as a matter of law.

Trespass to Chattel

A tort involving intentional interference with another’s personal property (chattel) that causes actual harm. Digital variants include unauthorized manipulation of data or systems.

Conclusion

McAlister v. Loeb & Loeb crystallizes Arizona’s modern stance on lost profits: aspirations and negotiations, no matter how earnest, cannot substitute for demonstrable meeting-of-the-minds evidence. The Court’s twin-prong requirement—show the deal would have closed and quantify profits with a solid methodology—sets a clear, strict benchmark, especially for nascent enterprises. Litigants should expect courts to scrutinize the factual underpinnings of prospective dealings in greater depth before allowing juries to hear nine-figure damage stories. Meanwhile, the door remains ajar (but still locked) on whether digital meddling with intellectual-property filings constitutes trespass to chattel—an issue poised for another day when actual damages can be shown.