     Case: 11-30452   Document: 00512087543   Page: 1   Date Filed: 12/18/2012




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                 Fifth Circuit

                                                                 FILED
                                                           December 18, 2012
                               No. 11-30452
                                                               Lyle W. Cayce
                                                                    Clerk
ARTHUR J. GALLAGHER & COMPANY; GALLAGHER BENEFITS
SERVICES, INCORPORATED,

                                        Plaintiffs – Appellees
v.

CLAYTON L. BABCOCK; DENISE J. ALEXI; MARIE G. HARDOUIN;
KRISTY COPELAND,

                                        Defendants – Appellants



CLAYTON L. BABCOCK,

                                        Plaintiff – Appellant
v.

ARTHUR J. GALLAGHER & COMPANY,

                                        Defendant – Appellee



                Appeal from the United States District Court
                   for the Eastern District of Louisiana



Before HIGGINBOTHAM, GARZA, and CLEMENT, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
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                                  No. 11-30452
      This diversity suit seeks money damages for breach of restrictive
employment agreements under Louisiana law, presenting issues of their scope
and the measure of damages.


                                        I
      Arthur J. Gallagher & Co. (“Gallagher”) provides insurance-related
services throughout the country. Its subsidiary, Gallagher Benefits Services, Inc.
(“GBSI”), handles Gallagher's employee-benefit insurance programs. In
November 2003, GBSI purchased Babcock Consulting, Inc., a business owned by
Louisiana insurance broker Clayton L. Babcock. Pursuant to the purchase
agreement, Babcock received $1.8 million in cash and stock, plus $980,000 in
“earn out,” a figure based on profits generated by the book of business that he
transferred.
      In addition to the purchase agreement, Babcock signed an employment
agreement. In it, he agreed—among other things—to work as a vice president
for GBSI in New Orleans. Denise J. Alexi and Marie G. Hardouin, two of
Babcock’s former employees, followed him to GBSI. In January 2005, Babcock
added Kristy Copeland to GBSI’s staff.
      As part of their agreements with GBSI, Babcock, Alexi, Hardouin, and
Copeland (collectively, “Defendants”) each agreed to restrictive covenants.
Babcock’s were contained in his purchase and employment agreements, the
others signed executive agreements limiting their non-GBSI employment.
Between December 2007 and January 2008, Defendants left GBSI for Ellsworth
Corporation, one of Gallagher's competitors. Thirteen of Gallagher’s Louisiana
clients—former clients of Babcock Consulting, Inc.—followed Defendants to
Ellsworth.
      Gallagher and GBSI (collectively, “Plaintiffs”) filed a civil suit for
injunctive relief and damages in the Eastern District of Louisiana and moved for

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                                       No. 11-30452
a preliminary injunction.1 Plaintiffs argued, among other things, that the
agreements signed by Defendants contained covenants not to compete. The
district court found the provisions unenforceable because they were
geographically overbroad—purporting to cover every parish in Louisiana. On
appeal, we disagreed, holding that the agreements were not per se overbroad
merely because they named every Louisiana parish.2 We vacated the district
court’s judgment and remanded for further proceedings, including a
consideration of the nature and scope of Gallagher’s business in Louisiana.
       On remand, the district court concluded that, while the purchase,
employment, and executive agreements contained valid and enforceable
non-competition and non-solicitation clauses, they reached beyond the
geographic scope of Gallagher’s relevant business—nine parishes should have
been covered, not every parish in Louisiana as claimed. The court therefore
limited the application of the restrictive covenants to the nine parishes where
Gallagher provided employee-benefit insurance services.3
       A two-day jury trial followed. After Plaintiffs stipulated that subsidiary
GBSI alone would receive damages and attorneys' fees, the court dismissed the
parent company as a plaintiff. It then granted judgment as a matter of law to
GBSI on the issue of breach of the non-competition provisions, entered a directed
verdict of liability against all four Defendants, and submitted the issue of
damages to a jury, which awarded $1.2 million in damages and $310,000 in
attorneys’ fees.



       1
        It also removed to federal court a declaratory judgment action filed by Babcock in
Louisiana state court.
       2
        Arthur J. Gallagher & Co. v. Babcock, 339 F. App’x. 384 (5th Cir. 2009), cert. denied,
130 S. Ct. 1092 (2010).
       3
        Arthur J. Gallagher & Co. v. Babcock, Nos. 08-290, 08-185, 2011 WL 121891 (E.D. La.
Jan. 10, 2011).

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                                           No. 11-30452
       Defendants appealed. They claim that the district court erred by (1)
finding that their contracts contained valid and enforceable non-competition
provisions; (2) directing a verdict of liability against them; and (3) admitting
certain testimony regarding Plaintiffs’ damages. They further contend that the
jury (4) awarded damages in an amount unsupported by the evidence; and (5)
erroneously, or at least excessively, awarded attorneys’ fees. Plaintiffs disagree,
and claim additional attorneys’ fees incurred in defending this appeal.
       We affirm the district court’s directed verdict on the breach of competition
agreement, but set aside the damages. We conclude that the district court
abused its discretion in admitting certain evidence on the issue of damages.4 We
must in turn vacate the award of attorneys’ fees, leaving the ultimate award to
be decided on remand.


                            II. The Restrictive Covenants
       Defendants argue that their employment agreements do not contain valid
and enforceable non-competition provisions, both because of (1) their language
and (2) their geographic scope. We are not persuaded.
       We review de novo the enforceability of a contract as a matter of law.5 In
Louisiana, the words of a contract “are to be construed using their plain,
ordinary and generally prevailing meaning, unless the words have acquired a
technical meaning,”6 and, “[w]hen [they] are clear and explicit and lead to no
absurd consequences,”7 no further search for intent is required.


       4
           We do not reach the contention that the award lacked evidentiary support.
       5
         Team Envtl. Servs., Inc. v. Addison, 2 F.3d 124, 126 (5th Cir. 1993); see also
Cadwallader v. Allstate Ins. Co., 848 So.2d 577, 580 (La. 2003) (“The determination of whether
a contract is clear or ambiguous is a question of law.”).
       6
           Cadwallader, 848 So.2d at 580 (citing LA. CIV. CODE ANN. art. 2047).
       7
           LA. CIV. CODE ANN. art. 2046.

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                                       No. 11-30452
      Restrictive covenants, such as non-competition and non-solicitation
agreements, are narrowly construed under Louisiana law.8 The governing
statute is La. R.S. 23:921, which provides in relevant part:
               A. (1) Every contract or agreement, or provision thereof,
               by which anyone is restrained from exercising a lawful
               profession, trade, or business of any kind, except as
               provided in this Section, shall be null and void.
               However, every contract or agreement, or provision
               thereof, which meets the exceptions as provided in this
               Section, shall be enforceable.
                                            ***
               C. Any person . . . who is employed as an agent,
               servant, or employee may agree with his employer to
               refrain from carrying on or engaging in a business
               similar to that of the employer and/or from soliciting
               customers of the employer within a specified parish or
               parishes, municipality or municipalities, or parts
               thereof, so long as the employer carries on a like
               business therein, not to exceed a period of two years
               from termination of employment.
      The Purchase Agreement by which Clayton Babcock sold the business book
of Babcock Consulting, Inc. to Gallagher includes Section 7(f), entitled “Non-
Competition,” which states:
               For a period of two years . . . after the date of the
               termination of his employment with Gallagher or any
               of its subsidiaries . . . Babcock will not, directly or
               indirectly, solicit, serve, sell to, divert, receive or
               otherwise handle insurance-related business with any
               individual, partnership, corporation or association that
               (a) is, or within the last two (2) years was, a client or
               customer of [Babcock Consulting] or (b) is a prospective
               client or customer of [Babcock Consulting] in those
               parishes and municipalities designated on Addendum
               II attached hereto.


      8
          See SWAT 24 Shreveport Bossier, Inc. v. Bond, 808 So.2d 294, 298 (La. 2001).

                                              5
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                                 No. 11-30452
     Babcock’s Employment Agreement, Section 8, entitled “Protection of
Corporation’s Business,” provides that Babcock:
           understands and agrees that for a period of two (2)
           years following the termination of this employment for
           any reason whatsoever, he will not, directly or
           indirectly, solicit, place, market, accept, aid, counsel or
           consult in the renewal, discontinuance, or replacement
           of any insurance (including self-insurance) by, or
           handle self-insurance programs, insurance claims, risk
           management services or other insurance administrative
           or service function for, any Corporation account for
           which he performed any of the foregoing functions
           during the two year period immediately preceding such
           termination in those parishes and municipalities
           designated on Addendum II attached hereto.

     The Executive Agreement signed by Alexi, Hardouin and Copeland,
Paragraph 14, entitled “Post-Employment Obligations of the Parties,” provides
that the employee:
           understands and agrees that for a period of two years
           following the termination of his employment for any
           reason whatsoever, he will not (i) directly or indirectly
           solicit, place, market, accept, aid, counsel or consult in
           the renewal, discontinuance or replacement of any
           insurance or reinsurance by, or handle self-insurance
           programs, insurance claims or other insurance
           administrative functions (“insurance services”) for, any
           Company account or actively solicited prospective
           accounts for which he performed any of the foregoing
           functions during the two-year period immediately
           preceding such termination or (ii) provide any employee
           benefit brokerage, consulting, or administrative
           services in the area of group insurance, defined benefit
           and defined contribution pension plans, individual life,
           disability and capital accumulation products, and all
           other employee benefit areas (“benefit services”) the
           Company is involved with, for any Company account or
           actively solicited prospective accounts for which he
           performed any of the foregoing functions within the

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                                       No. 11-30452
              Acquired Business Area during the two-year period
              immediately preceding such termination. . . . The term
              “Acquired Business Area” shall mean those parishes
              and municipalities designed on Exhibit A attached
              hereto.9

       Addendum II/Exhibit A, referenced in the agreements, listed all 64
parishes of the state of Louisiana.10
                                    1
       Defendants argue that the agreements only prohibit solicitation or,
alternatively, that combining non-competition and non-solicitation language
created a restriction not permitted by La. R.S. 23:921.
       The agreements unambiguously prohibit Defendants from competing
against Gallagher or soliciting its clients for two years after the termination of
their employment. Defendants agreed not to “solicit” certain of Gallagher’s
existing and prospective clients. And they agreed they would not “serve,” “sell
to,” “market,” “accept,” “aid,” “consult,” “place,” “counsel” or “consult” regarding
insurance-related services with customers (or prospective customers) of
Gallagher on whose accounts they had worked while employed by Gallagher. We
are not convinced that these other phrases are merely types of solicitation, as
Defendants contend. Nor do we believe that “solicit” is any more specific than
“accept,” “market,” or “counsel”; accordingly “solicit” does not control our
interpretation of those terms. Instead, these words all identify particular types
of competitive behavior. Furthermore, the titles of the sections of the contract
in which these provisions were contained—“Non-Competition,” “Protection of

       9
         The Agreements specify that they are between Gallagher and its subsidiaries,
divisions and affiliated and related companies, collectively referred to in the agreement as the
“Company.”
       10
         Although Exhibit A was not physically attached to Copeland’s agreement, she is
bound by its terms. See L & A Contracting Co. v. Ram Indus. Coatings, Inc., 762 So.2d 1223,
1234 (La. Ct. App. 2000) (“As a general rule of contract law, separate documents may be
incorporated into a contract by attachment or reference thereto.”).

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                                           No. 11-30452
Corporation’s Business,” and “Post-Employment Obligations”—signaled that the
provisions barred more than mere solicitation.
         Defendants further argue that, even if this language prohibits competition
and not just solicitation, the provisions are invalid because Louisiana courts do
not permit parties to combine non-competition and non-solicitation language.
This claim is without merit. It appears that Louisiana courts have never
invalidated a restrictive covenant governed by R.S. 23:921 on this basis.11 To the
contrary, they have upheld agreements using similar non-competition language,
even when combined with non-solicitation provisions.12
         In the alternative, Defendants argue that the particular manner in which
the agreements combine non-competition and non-solicitation provisions has
impermissibly created a new and broader kind of restriction than is allowed by
Louisiana law. Section 23:921 allows non-competition agreements that prohibit
a former employee from “carrying on or engaging in a business similar” to that
of the employer, and allows non-solicitation agreements that prohibit a former
employee from “soliciting customers of the employer.”13 The provisions in these
agreements, Defendants point out, created a hybrid restriction prohibiting
employees from, among other things, “accepting,” “handling” or “servicing”
certain of the employer’s current and prospective customers.                             This is
impermissible, they contend, because the Louisiana legislature has created an
all-or-nothing system: an employer can forego imposing non-competition


         11
         Courts have sometimes declined to enforce agreements with such language, but not
on the ground that the agreements’ mix of non-solicitation and non-competition language
rendered them vague and ambiguous. See Choice Prof’l Overnight Copy Serv., Inc. v. Galeas,
66 So.3d 1216, 1217–18 (La. Ct. App. 2011); Johnson Controls, Inc. v. Guidry, 724 F. Supp.2d
612, 616 (W.D. La. 2010).
         12
              See, e.g., Allied Bruce Terminix Co. v. Guillory, 649 So.2d 652, 652–53 (La. Ct. App.
1994).
         13
              La. R.S. 23:921(C).

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                                         No. 11-30452
restrictions on its employees, or can prohibit its employees from competing in the
same business as the employer for up to two years. It may not do anything else,
such as forbidding employees only from competing against the employer vis-a-vis
certain of the employer’s clients.
       This argument finds no support in Louisiana law. Louisiana does, of
course, restrict and narrowly construe non-competition agreements.14 As the
Louisiana Supreme Court has explained, this policy “is based upon an
underlying state desire to prevent an individual from contractually depriving
himself of the ability to support himself and consequently becoming a public
burden.”15 But over time, the Legislature has broadened the kinds of non-
competition agreements into which employers and employees may enter.16
       The provisions at issue here are less restrictive than allowed under state
law. Instead of preventing its former employees from engaging in a similar
business, Gallagher prohibits employees from competing for accounts on which
they actually worked while at Gallagher, a restriction perhaps uncommon, but
not unenforceable.
       Defendants’ position would require employers seeking the protection of
non-competition agreements always to impose the broadest available restrictions
on their employees’ future employment options, undermining the stated policy
of R.S. 23:921. Defendants provide no support for their contention that R.S.


       14
        Green Clinic, L.L.C. v. Finley, 30 So.3d 1094, 1097 (La. Ct. App. 2010) (“Noncompete
agreements are considered to be in derogation of the common right and must be strictly
construed against the party seeking their enforcement.”).
       15
            SWAT 24, 808 So.2d at 298.
       16
          See Green Clinic, 30 So.3d at 1097–98 (noting that the state legislature amended
Section 23:921 in response to the Louisiana Supreme Court’s overly narrow interpretation of
the statute in SWAT 24). The amendment became effective August 15, 2003, and therefore
applies to the contracts in this case.

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                                        No. 11-30452
23:921 defines the only possible type of non-competition clause, rather than the
outer limits of what employers and employees may restrict by contract.17
       Finally, Defendants claim the non-competition clauses are too ambiguous
to be enforced, pointing to language such as “prospective” customers and
“actively solicited prospective” accounts; categories, Defendants contend, that
suffer impermissibly ambiguous scopes.                  Because Defendants raise this
argument for the first time on appeal, it is forfeited. But even if considered, the
argument would fail. First, these agreements apply only to some “prospective”
customers, e.g., “actively solicited prospective accounts” on which certain
defendants actually worked. Second, Defendants overlook the agreements’
severability clauses. Regardless of whether restrictions on “prospective”
customers are enforceable, here, Defendants worked on thirteen existing
accounts. We therefore turn to the geographic scope of these non-competition
agreements.18

       17
          Defendants rely on inapposite cases. See, e.g., SWAT 24, 808 So.2d at 308; Choice
Prof’l Overnight Copy Serv., 66 So.3d at 1220–21; Vartech Sys., Inc. v. Hayden, 951 So.2d 247
(La. Ct. App. 2006); Guidry, 724 F. Supp.2d at 612.
       18
         Defendants also argue, for the first time on appeal, that Plaintiffs should be judicially
estopped from claiming that the agreements at issue contain non-competition provisions.
Defendants’ argument comes too late, see Nunez v. Allstate Ins. Co., 604 F.3d 840, 846 (5th Cir.
2010), and proves too little.
        Judicial estoppel is an equitable doctrine, invoked at the court’s discretion, that is
designed to protect the integrity of the judicial process by prohibiting parties from deliberately
changing positions according to the exigencies of the moment. New Hampshire v. Maine, 532
U.S. 742, 749–50 (2001). Louisiana and the Fifth Circuit apply this doctrine only if the party’s
position is clearly inconsistent with its position in a previous case, and if the court accepted
the party’s previous position. See Miller v. Conagra, Inc., 991 So.2d 445, 452 (La. 2008) (citing
In re Superior Crewboats, Inc., 374 F.3d 330, 335 (5th Cir. 2004)).
        Defendants argue that Gallagher’s position in Arthur J. Gallagher Risk Mgmt. Servs.,
Inc. v. Todd, 39 So.3d 856 (La. Ct. App. 2010), justifies estoppel. In Todd, a Gallagher
employee allegedly attempted to solicit clients away from Gallagher in violation of his
employment agreement. That agreement contained virtually identical language as the
executive agreements at issue in this case. On appeal in Todd, Defendants argue, Gallagher
claimed that the agreement prohibited solicitation rather than competition.

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                                       No. 11-30452
                                               2
       The district court found that the non-competition clauses, though
otherwise enforceable, were geographically overbroad as written. It therefore
relied on the agreements’ severability clauses, reducing the number of parishes
to which the non-competition provisions applied.
       Under Louisiana law, non-solicitation and non-competition clauses must
be limited to geographic areas in which the employer conducts “a like business,”
and the agreement must make this limitation clear by specifying the “parish or
parishes, municipality or municipalities, or parts thereof” in which the employer
operates.19 A court may, however, rely on a contractual severability clause to
excise the geographic areas in which an employer does not conduct such
business.20
       The agreements in this case incorporated the geographic limitations of
“Addendum II” and “Exhibit A,” which named all sixty-four of Louisiana’s
parishes.     Before the district court, Defendants contended this scope was
overbroad. They pointed out that Defendants worked for Gallagher subsidiary
GBSI, providing life and health insurance services as part of the company’s
employee-benefit program.           Gallagher provided life and health insurance


        We do not agree that Gallagher should be estopped from arguing that the provisions
at issue here contain non-competition agreements based on its position in Todd. First, in Todd,
Gallagher sought only to demonstrate that Todd had solicited its clients; competition was not
at issue. Second, and more importantly, the court did not adopt Gallagher’s argument that
the clause prohibited only solicitation (rather than both solicitation and competition). Its
decision was based on Gallagher’s failure to provide sufficient evidence showing that Todd had
engaged in active solicitation. Accordingly, judicial estoppel is not appropriate here.
       19
         La. R.S. 23:921(C); see also Aon Risk Servs. of La., Inc. v. Ryan, 807 So.2d 1058, 1060
(La. Ct. App. 2002); Team Envtl. Servs., Inc., 2 F.3d at 126.
       20
         See, e.g., Dixie Parking Serv., Inc. v. Hargrove, 691 So.2d 1316, 1320 (La. Ct. App.
1997) (discussing the Louisiana Supreme Court’s reversal of AMCOM of La., Inc. v. Battson,
666 So.2d 1227 (La. Ct. App. 1996)).

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                                          No. 11-30452
services in only nine parishes, so, the argument went, the agreement should
have been limited to those areas. Gallagher responded that specifying all sixty-
four parishes was proper because the company provides insurance services in
each one.
       The district court agreed with Defendants and eliminated the fifty-five
parishes in which Gallagher did not provide life and health insurance services.
This was not error. We have already made clear that these provisions were not
invalid merely because they attempted to reach every Louisiana parish.21
Similarly, Defendants may not defeat restrictions on competition in these nine
parishes by showing that the restrictions were not enforceable in other
parishes.22
       Defendants contend that Gallagher’s naming all sixty-four parishes was
so egregious that it renders the covenant invalid as to all sixty-four parishes
instead of just the fifty-five as noted by the district court. This argument is not
without force. But, at minimum, listing all sixty-four parishes, unlike claiming
a geographic scope of “anywhere the employer does business,” makes clear to
employees that they are being asked not to compete anywhere within the State
of Louisiana.23 And Defendants suggest no principled way to determine how
many stricken parishes is “too many” to leave valid, remaining parishes
unaffected. As do Louisiana’s courts, we decline to authorize such collateral
attacks.


       21
            Babcock, 339 F. App'x at 387.
       22
            Cf. Vartech Sys., Inc., 951 So. 2d at 258 and n.14.
       23
         Cf. Aon Risk Servs., 807 So.2d at 1062 (“By specifying the parishes, etc. and requiring
that the employer be doing business in them, the employee is not later caught in a position
where he finds that he has given up much more than he bargained should his employer greatly
expand the geographic range of his business after the agreement is executed.”).

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                                         No. 11-30452


                                  III. Directed Verdict
      We review de novo a district court’s grant of a directed verdict, applying
the same standard as the district court.24 A directed verdict is appropriate after
a party has been fully heard on an issue and the court finds that a reasonable
jury would not have a legally sufficient evidentiary basis to find for the party on
that issue.25 The facts are viewed, and all reasonable inferences made, in the
light most favorable to the non-movant.26
      The contracts, as we have explained, contained valid and enforceable non-
competition clauses prohibiting Defendants from providing insurance services
to clients on whose accounts they worked while at Gallagher. As Plaintiffs point
out, and Defendants do not contest, Defendants admitted at trial that they had
worked on the thirteen disputed client accounts while at Gallagher, and then
handled those same clients for Ellsworth in the same parishes in which they had
serviced them for Gallagher. Given this admission, a reasonable jury could not
have found in favor of Defendants on the issue of breach. We affirm the district
court’s directed verdict.


                                  IV. Proof of Damages
      Defendants next challenge the jury’s award of $1.2 million dollars in
damages. They argue that the district court abused its discretion by admitting
the evidence proffered by John Caraher, Gallagher’s chief financial officer.




      24
           See Becker v. PaineWebber, Inc., 962 F.2d 524, 526 (5th Cir. 1992).
      25
           FED. R. CIV. P. 50(a)(1); Brumfield v. Hollins, 551 F.3d 322, 331 (5th Cir. 2008).
      26
           Turner v. Purina Mills, Inc., 989 F.2d 1419, 1421 (5th Cir. 1993).

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                                           No. 11-30452
Caraher provided the jury with two different estimates of GBSI’s “lost profits”
resulting from the breach.
         Admissibility lies within the sound discretion of the district court, whose
evidentiary rulings we review only for an abuse of discretion.27 Expert opinion
evidence must be based on reliable principles and methods, and assist the trier
of fact.28
         Under R.S. 23:921, an employer is entitled “to recover damages for the loss
sustained and the profit of which he has been deprived” as a result of a former
employee’s breach of a non-competition or non-solicitation agreement.29 To
measure lost profits, the trier of fact should consider net loss, or gross profit
minus expenses.30 Such damages may not be based on speculation or conjecture,
but must be proven with “reasonable certainty.”31 “In cases where direct evidence
is not available to establish the exact extent of loss caused by a breach of
contract, resort to customary or foreseeable profit as a measure of damages is
proper.”32 The ultimate goal of such compensatory damages is “to put the
plaintiff in the same economic position it would have been in had the contract




         27
              Jon-T Chemicals, Inc. v. Freeport Chemical Co., 704 F.2d 1412, 1417 (5th Cir. 1983).
         28
              FED. R. EVID. 702.
         29
              La. R.S. 23:921(H). This language mirrors that of LA. CIV. CODE ANN. art. 1995.
         30
          La. Smoked Prods., Inc. v. Savoie Sausage & Food Prods., Inc., 673 So.2d 248, 254
(La. Ct. App. 1996), aff’d in part, 696 So.2d 1373 (La. 1997).
         31
              Simpson v. Restructure Petroleum Mktg. Servs., Inc., 830 So.2d 480, 484 (La. Ct. App.
2002).
         32
              White Haute, LLC v. Mayo, 38 So.3d 944, 952 (La. Ct. App. 2010).

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                                        No. 11-30452
been fulfilled as planned.”33 The plaintiff has the burden of proving damage and
its amount.34
      The jury heard evidence on the issue of damages from John Caraher,
Gallagher’s chief financial officer and a CPA. The court admitted his testimony,
stating:
                I’m going to qualify the witness as an expert in the field
                of accounting. To the extent that he valued the
                business, he can testify as a fact witness subject to
                cross-examination. The jury can determine whether or
                not the methodology he used in calculating the value of
                this business on behalf of his employer was valid or not.

      Caraher testified that GBSI sustained losses between $1,301,343 and
$2,876,000 as a result of Defendants’ breach of contract. In estimating these
losses, Caraher relied on formulas similar to those he uses when valuing a
business that Gallagher is considering buying, on the basis that the value of a
business is tied directly to the profits it will generate. He presented two
calculations to the jury for purposes of estimating the lost profits.
      Caraher calculated GBSI’s lost profits based on what the fair selling price
of GBSI’s partial book of business would have been had Babcock sought to re-
purchase the client relationships GBSI lost as a result of Defendants’ breach.
To do this, Caraher looked at the average annual profits earned by Babcock’s
group for the three years preceding Defendants’ departure, then subtracted the
profits earned from the clients that remained with GBSI after Defendants’
departure. The remainder was the annual average profits earned by GBSI from
the lost clients. Caraher multiplied that number by 6.5, the approximate



      33
           Crawford v. Am. Nat’l Petroleum Co., 805 So.2d 371, 381 (La. Ct. App. 2001).
      34
           Jackson v. Lare, 779 So.2d 808, 814 (La. Ct. App. 2000).

                                              15
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                                  No. 11-30452
number of years any particular client remains with GBSI. The final number was
$2,699,552.
      Caraher also estimated lost profits by calculating what the expected
investment return was for GBSI when it entered into its purchase agreement
with Babcock in 2003. To do this, Caraher looked at the profit margins GBSI
expected over ten, thirteen, and fifteen years based on the new book of business
it acquired from Babcock Consulting, since GBSI generally retains clients for ten
to fifteen years following a merger. The calculation assumed that profits from
existing clients would diminish gradually over time as those clients left GBSI.
From the resulting number, Caraher subtracted profits actually made by GBSI
from the purchase agreement until January 1, 2008, since the Defendants were
still employed at Gallagher during that time. Caraher also subtracted expected
profits on business retained by GBSI after Defendants left. In projecting what
profits GBSI would have made after 2008 had Defendants not breached their
contracts, Caraher used GBSI’s New Orleans office’s 2007 profit margin of
38.9%. The final estimation was that over the fifteen-year period, GBSI would
suffer $2,876,008 in lost profits, over the thirteen-year period $1,952,015 in lost
profits, and over the ten-year period $1,301,343 in lost profits.
      The jury ultimately awarded $1.2 million in damages. The jury
interrogatory did not ask the jury to identify which of those damages arose from
clients GBSI lost to others than Defendants. Rather, the jury was asked: “What
amount, if any, do you find will fairly and adequately compensate the plaintiff,
Gallagher Benefits Services, Inc., for the total damages it suffered[?]” The
amount of the award indicates that the jury likely adopted the ten-year
calculation in Caraher’s second calculation and made some downward
adjustments. The parties’ arguments, appropriately, focus on this second
calculation.

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                                         No. 11-30452
       At least two of Defendants’ contentions are without merit. First,
Defendants claim that Caraher should have based his calculation of lost profits
on the amount of net profits actually earned by Ellsworth on the thirteen clients
who followed Defendants from GBSI to Ellsworth, rather than on the amount of
profits GBSI expected to earn from those clients. But the amount of profits lost
by Plaintiffs does not need to equal the amount of profits gained by Defendants.
If Plaintiffs would have obtained greater profits (in the absence of a breach) than
the Defendants actually did (as a result of the breach), Plaintiffs are entitled to
those larger profits.35 Louisiana courts, moreover, permit projections of future
profits to be used as evidence of lost profits, so long as there is a reasonable basis
for making those projections, such as the business’s past performance.36 Courts
recognize that there remains an inherent degree of speculation in such
projections, but that they are not so speculative or conjectural as to be
inadmissible when calculating the damages owed by the party whose failure to
perform was the cause of the damages’ speculative nature.37
       Second, Defendants claim Caraher erred by calculating lost profits based
on the New Orleans’s office’s 2007 profit margin of 38.9%, rather than on its
much lower 2008 profit margin of 13.1%. They likewise claim Caraher erred by
using GBSI’s historical retention rates, instead of the retention rates actually
experienced in the New Orleans office after Defendants left in 2008. These
arguments are also unavailing. Plaintiffs explain that Caraher did not use the

       35
            See, e.g., Woodward v. Steed, 715 So.2d 629, 631 (La. Ct. App. 1998).
       36
         See, e.g., Smith v. Shirley, 815 So.2d 980, 986–87 (La. Ct. App. 2002); A&W Sheet
Metal, Inc. v. Berg Mech., Inc., 653 So.2d 158, 163 (La. Ct. App. 1995); but see Mayo, 38 So.3d
at 952–53 (disallowing an award for lost future profits where the plaintiff presented no
evidence of the business’s past performance).
       37
         See ScenicLand Const. Co. v. St. Francis Med. Ctr., Inc., 936 So.2d 247, 252–53 (La.
Ct. App. 2006); Weeks v. T.L. James & Co., 626 So.2d 420, 426 (La. Ct. App. 1993).

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                                       No. 11-30452
13.1% profit margin or the post-2008 retention rate because Defendants’ breach
almost certainly deflated those numbers. Those numbers, in other words, likely
do not reflect what GBSI would have earned if Defendants had not breached.
       Defendants’ next argument, however, exposes a critical flaw in Caraher’s
methodology. Caraher estimated the profits that GBSI would have made from
Babcock’s book of business. He then subtracted the profits that GBSI expected
to make from clients that GBSI retained. This calculation reduced the lost-profit
projection to clients who left GBSI after the breach. The problem is that the
group of clients who chose to leave is not the same as the group of clients who
followed Defendants to Ellsworth. Of the nineteen clients who left GBSI, only
thirteen followed Defendants.38
       Plaintiffs contend that Defendants’ breach caused the six remaining
clients to depart, and that Defendants are therefore responsible for GBSI’s loss
of their business. Plaintiffs hypothesize, for example, that the specter of
litigation attending Defendants’ breach spooked their otherwise loyal customers.
This is too speculative and conjectural to support an award of damages. Caraher
testified that GBSI expects to lose clients every year, and provided no specific
evidence regarding why these six clients decided to go to a new broker after
Defendants’ departure.39 Defendants did not breach their agreements by leaving
GBSI, but by accepting work from clients who departed along with them.


       38
         Defendants preserved this error by objecting after their voir dire of Caraher. See FED.
R. EVID. 103(a)(1)(B) (noting that ground for objection need not be stated if apparent from
context). Although Defendants allowed Caraher's report to be labeled a joint exhibit and did
not object at trial to its admission, they did not "introduc[e the] evidence" at issue here. Cf.
Ohler v. United States, 529 U.S. 753, 755 (2000) (noting that, in general, “a party introducing
evidence cannot complain on appeal that the evidence was erroneously admitted”).
       39
          This decision may, for example, have been made for reasons completely unrelated to
Defendants' departure, or because they did not have a business relationship with or confidence
in the staff remaining at GBSI after Defendants’ departure.

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                                       No. 11-30452
Because Defendants are not responsible for GBSI’s other lost clients, we hold
that the district court abused its discretion by permitting Caraher to testify
about an irrelevant theory of damages. We therefore vacate the $1.2 million
damages award and remand to the district court for further proceedings.40
Defendants argue the jury’s award was unsupported by the evidence proffered
or, in the alternative, excessive. Because we vacate the award due to the error
in admitting a critical portion of Caraher’s testimony, we do not consider this
issue.


                                  V. Attorneys’ Fees
         Having vacated the damages award, we likewise vacate the award of
attorneys’ fees for reassessment. Plaintiffs-appellees seek an order requiring
Defendants to pay all of the attorneys’ fees that Plaintiffs incurred in defending
this appeal. Because Plaintiffs were only partially successful in their defense of
the judgment below, we decline to award fees at this juncture. We leave to the
district court on remand the matter of whether such fees ought be awarded and
their amount.


                                            ***
         We AFFIRM the judgment insofar as it directs a verdict against the
Defendants. We VACATE the awards of damages and attorneys’ fees and
REMAND this case to the district court for further proceedings.




         40
        Defendants also argue that they may not be held liable for losses sustained after the
non-competition provisions expired; i.e., for losses sustained more than two years after their
departure. We need not, however, and do not resolve that issue now.

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