L. Schwartz and NJ 322, LLC v. N. Menas, Esq., Cooper Levenson, April, Niedelman & Wagenheim, P.A., B. Ingerman, and MBI Development Co, Inc., 2020 WL 6538396 (App. Div. Nov. 6, 2020)

Claims by a new business or venture for ascertainment of future probable profits are too remote, contingent, speculative to meet legal standard in New Jersey for reasonable certainty.

Since 1936, the vast majority of jurisdictions have rejected the New Business Rule as a per se rule of exclusion and, instead, allowed lost profits when they can be proved with reasonable certainty. However, in Schwartz, the plaintiffs’ lost profit claims were barred under the New Business Rule and the plaintiffs’ expert opinion was barred because it sought to estimate lost profits of a new fledgling business.

The Appellate Division held that, although the New Business Rule was anachronistic, the Rule is still the law in New Jersey and provides a defense in connection with claims asserted by start-up and fledgling companies for future lost profits. Simply put, prospective profits of a new business are too remote and speculative to meet the legal standard of reasonable certainty. Therefore, under the New Business Rule, speculative damages will not provide a cause of action for loss of profits.


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