Reference Manual on Scientific Evidence Third Edition (2011) / Chapter Skim
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Reference Guide on Estimation of Economic Damages--Mark A. Allen, Robert E. Hall, and Victoria A. Lazear
Reference Guide on Estimation of Economic Damages--Mark A. Allen, Robert E. Hall, and Victoria A. Lazear
Pages 425-502
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From page 425... ...
The Standard General Approach to Quantification of Damages, 432 A. Isolating the Effect of the Harmful Act, 432 B. The Damages Quantum Prescribed by Law, 433 C. There Disagreement About What Legitimate Conduct of the Is Defendant Should Be Hypothesized in Projecting the Plaintiff 's Earnings but for the Harmful Event? 439 D. Does the Damages Analysis Consider All the Differences in the Plaintiff 's Situation in the But-For Scenario, or Does It Assume That Many Aspects Would Be the Same as in Actuality?
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From page 426... ...
464 D. the Parties Disputing Damages That May Exceed the Cost of Are Avoidance? 466 E. Are the Parties Disputing a Liquidated Damages Clause?
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From page 427... ...
Quantitative methods for validation, 485 C. Are the Parties Disputing the Handling of Missing Data? 485 X. Standards for Disclosing Data to Opposing Parties, 486 A. Use of Formats, 487 B. Data Dictionaries, 487 C. Resolution of Problems, 488 D. Special Masters and Neutral Experts, 489 XI.
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From page 428... ...
498 2. Are the parties disputing the calculation of marginal costs?
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From page 429... ...
Other topics include the role of inflation, issues relating to income taxes and stock options, adjustments for the time value of money, legal limitations on damages, damages for a new business, disaggregation of damages when there are multiple challenged acts, the role of random events occurring between the harmful act and trial, data for damages measurement, standards for disclosing data to opposing parties, special masters and neutral experts, liquidated damages, damages in class actions, and lost earnings.1 Our discussion follows the structure of the standard damages study, as shown in Figure 1. Damages quantification operates on the premise that the defendant is liable for damages from the defendant's harmful act.
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From page 430... ...
Earnings before trial, Actual Damages Prejudgment had the – earnings + interest = before harmful event before trial trial not occurred + Projected earnings after Projected Damages trial, had the – earnings – Discounting = after trial harmful event after trial not occurred Total Damages Figure 8-1.eps cation of financial discounting to future losses. The losses are the difference between the value the plaintiff would have received if the harmful event had not occurred and the value the plaintiff has or will receive, given the harmful event.
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From page 431... ...
In some cases, participation in original research and authorship of professional publications may add to the qualifications of an expert. However, relevant research and publications are not likely to be on the topic of damages measurement per se but rather on topics and methods encountered in damages analysis.
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From page 432... ...
A Isolating the Effect of the Harmful Act The first step in a damages study is the translation of the legal theory of the harmful event into an analysis of the economic impact of that event.
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From page 433... ...
1992) (defining expectation damages as damages that put the injured party in the same economic position the party would have enjoyed if the contract had been performed)
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From page 434... ...
In such cases, reliance damages may approach expectation damages. For a tort, reliance damages place the plaintiff in a position economically equivalent to the position absent the harmful act.10 For a breach of contract, measuring damages as the amount of compensation needed to place the plaintiff in the same position as if the contract had not been made in the first place will result in refunding the part of the plaintiff 's reliance investment that cannot be recovered in other ways.11 Thus, reliance damages may be appropriate when the plaintiff made an investment relying on the defendant's performance.
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From page 435... ...
But if the product causes personal injury or property damage (other than to the product itself) , then tort law and tort damages will likely control.15 are generally equivalent to expectation damages.
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From page 436... ...
Other courts have found that fraud is an exception to the economic loss doctrine, allowing fraud actions to proceed. A third approach allows a separate fraud action, but only if the fraud is "independent of " or "extraneous to" the contract promises.16 A plaintiff asserting fraud can generally recover either out-of-pocket costs or expectation damages,17 but courts today more commonly award expectation damages to place the plaintiff in the position it would have occupied had the fraudulent statement been true.18 In cases where the court interprets the fraudulent statement as an actual warranty, then the appropriate remedy is expectation damages.
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. 22. This assumes that the economic loss rule does not apply.
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From page 438... ...
Agent's damages study projects past earnings into the future at the rate of growth of the previous 3 years. Broker's study projects that earnings would have declined even without the breach because the real estate market has turned downward.
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From page 439... ...
Although disagreement over the alternative scenario in a damages study is generally a legal question, opposing experts may have been given different legal guidance and therefore made different economic assumptions, resulting in major differences in their damages estimates. Example: Defendant Copier Service's long-term contracts with customers are found to be unlawful because they create a barrier to entry that maintains Copier Service's monopoly power.
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From page 440... ...
The analysis of some types of harmful events requires consideration of effects, such as price erosion,24 that involve changes in the economic environment caused by the harmful event. For a business, the main elements of the economic environment that may be affected by the harmful event are the prices charged by rivals, the demand facing the seller, and the prices of inputs.
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From page 441... ...
1994) (finding that the plaintiff 's damages only consisted of lost profits before consideration of price erosion, prejudgment interest, and costs due to the presence of other competitors who would keep prices low)
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From page 442... ...
A clear statement about the plaintiff 's situation but for the harmful event is also helpful in avoiding double counting that can arise if a damages study confuses or combines reliance28 and expectation damages. Example: Marketer is the victim of defective products made by Manufacturer; Marketer's business fails as a result.
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From page 443... ...
Under the expectation principle, as applied in Manufacturer's damages study, Marketer is entitled to the profit on the extra sales it would have received had there been no product defects. Out-of-pocket expenses of starting the business would have no effect on expectation damages because they would be present in both the actual and the but-for cases and would offset each other in the comparison of actual and but-for value.
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From page 444... ...
Appraisers are experts whose task is to estimate the fair market value of real estate, equipment, and works of art. Experts who assess the value of businesses -- some of whom specialize as business valuation experts -- often perform similar functions based on the known market values of comparable businesses.
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From page 445... ...
Oil Company's damages study starts by calculating the ratio of sales value to gasoline sales for five nearby gas station businesses that have sold recently. The ratio is $0.26 per gallon of sales per year.
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From page 446... ...
The assets and liabilities approach starts with the accounting balance sheet of a company and adjusts assets and liabilities to approximate current market values. It then nets the assets and the liabilities to compute the net asset value of the firm.
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E Is One of the Parties Relying on Hypothetical Property in Its Damages Analysis?
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Note that this understatement arises when the publicly traded company itself stands to recover damages. Changes in market values have a different role in situations, such as fraud on the market, where the public company is the defendant.
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From page 449... ...
The difference between revenue and cost is cash flow, and the difference between but-for and actual cash flow is the loss of cash flow attributable to the harmful act.The expert then applies discount rates to each year's lost cash flow to determine damages.
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C Is There Disagreement About the Plaintiff's Actual Revenue After the Harmful Event?
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For example, an expert might project that revenues for a firm will rise at approximately 5% per year for the next 10 years -- 3% because of general inflation and 2% more because of the growth of the firm.34 Alternatively, the expert may project future losses in constant dollars without explicitly accounting for escalation for future inflation.35 The use of constant dollars avoids the problems of dealing with a shrinking unit of measurement. In the example just given, the expert might project that revenues will rise at 2% per year in constant dollars.
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From page 452... ...
A For future losses, a damages study calculates the amount of compensation needed at the time of trial to replace expected future lost income. The result is discounted future losses;36 it is also sometimes referred to as the present value of future losses.37 Discounting is conceptually separate from the adjustment for inflation considered in the preceding section.
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From page 453... ...
A real interest rate is an ordinary interest rate less an assumed rate of future inflation.38 In Table 1, the use of a 5% discount rate for discounting constant-dollar losses would be appropriate if the ordinary interest rate was 8% and the rate of inflation was 3%.39 Then the real interest rate would be 8% minus 3%, or 5%. The deduction of the inflation rate from the discount rate is the counterpart of the omission of escalation for inflation from the projection of future losses.
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From page 454... ...
The explicit projection of future losses and the discounting back to the time of trial are unnecessary. However, the parties may dispute whether the assumption that growth and discounting are exactly offsetting is realistic in view of projected rates of growth of losses and market interest rates at the time of trial.
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From page 455... ...
A state law provides that awards for personal injury are not taxable, even though the income lost as a result of the injury would have been taxable.Victim calculates damages as lost pretax earnings, but Driver calculates damages as lost earnings after tax.44 Driver argues that the nontaxable award would exceed actual economic loss if it were not adjusted for the taxation of the lost income. Comment: Under the principle that damages are to restore the plaintiff to the economic equivalent of the plaintiff 's position absent the harmful act, it may be recognized that the income to be replaced by the award would have been taxed.
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From page 456... ...
. In its damages analy sis, A states that the lost sales represent lost profits of $5,800,000: $10,000,000 less $4,000,000 in avoided production costs and $200,000 in avoided sales commissions.
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1997) (analyzing Michigan state law to determine the appropriate prejudgment interest award)
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From page 458... ...
: 6.3% Even where damages are calculated on a pretax basis, economic considerations suggest that the prejudgment interest rate should be on an after-tax basis: Had a taxpaying plaintiff actually received the lost earnings in the past and invested the earnings at the assumed rate, income tax would have been due on the interest. The plaintiff 's accumulated value would be the amount calculated by compounding past losses at the after-tax interest rate.
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The capitalization factor generally is obtained from the market values of comparable assets or businesses. For example, the expert might locate a comparable business traded in the stock market and compute the capitalization factor as 49. See, e.g., Cede & Co.
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Value of future lost earnings (line 1 times line 2) : $2,600,000 The capitalization factor approach might also be applied to revenue, cash flow, accounting profit, or other measures.
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From page 461... ...
In general, damages law holds that a plaintiff may not recover damages beyond an amount proven with reasonable certainty.52 This rule permits damages estimates that are not mathematically certain but excludes those that are speculative.53 Failure to prove damages to a reasonable certainty is a common defense. The determination of what constitutes speculation is increasingly a matter of law to be determined prior to trial in a Daubert proceeding.54 Courts and commentators have long recognized the difficulties in defining what constitutes reasonable certainty or speculation in a damages analysis.
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From page 462... ...
Under that approach, economic losses in our example should be calculated as the $2 billion economic loss assuming FDA approval times 90% plus the $1 billion economic loss times 10%, or (0.9) × ($2 billion)
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From page 463... ...
The expert for Vaccine Maker argues that damages are zero because it is more likely than not that any given child was not harmed. Comment: The class might not recover damages even though the average class member's economic loss is the expected value of $250,000.
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From page 464... ...
Repairman counters that, although he may be liable for the cost of proper repairs, the foreseeability rule bars a claim for lost profits because such damages were not a probable consequence reasonably foreseeable at the time of the agreement. Similar examples involve cases in which a package delivery firm or courier service is sued for remote consequential damages resulting from its failure to deliver a package.61 These limitations on damages are closely related to mitigation and the proper protection from losses resulting from the failure of agents or counterparties.
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From page 465... ...
For personal injuries, the issue of mitigation often arises because the defendant believes that the plaintiff 's failure to work after the injury is a withdrawal from the labor force or retirement rather than the result of the injury.64 For commercial torts, mitigation issues can be more subtle. Where the plaintiff believes that the harmful act destroyed a company, the defendant may argue that the company could have been put back together and earned profit, possibly in a different line of business.65 The defendant will then treat the hypothetical profits as an offset to damages.66 Alternatively, where the plaintiff continues to operate the business after the harmful act and includes subsequent losses in damages, the defendant may argue that the proper mitigation was to shut down after the harmful act.67 Example: Franchisee Soil Tester starts up a business based on Franchiser's propri etary technology, which Franchiser represents as meeting government standards.
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From page 466... ...
Board Maker's damages study is based on the difference between the contract price for the boards and the market price at the time of the breach. Comment: There is an implicit disagreement about Computer Maker's duty to mitigate by locating alternative sources for the boards not supplied by the defendant.
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In particular, the defendant may attack the amount of liquidated damages as an unenforceable penalty. The parties may disagree on whether the harmful event falls within the class intended by the contract provision.
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From page 468... ...
At one time, legal principles barred recovery because damages were too speculative, but today most courts will allow a new business to recover damages for lost profits if such damages can be proven with reasonable certainty.70 Whether a court will award damages for an injured startup if the plaintiff 's damages expert testifies that the likelihood was less than 50% that the company would have become profitable is still unresolved.
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From page 469... ...
The result is a stream of future lost profits before adjustment for general economic variables such as inflation, stock market fluctuations, or wage growth. Because the expert has adjusted for idiosyncratic factors, the remaining risks of lost profits for a new business are the same as those for a similar, existing business.
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From page 470... ...
Damages are the difference between the but-for and actual worlds, where the actual world reflects any mitigating factors. Estimating such damages also involves issues that are unique, such as calculating losses over a person's lifetime, valuing fringe benefits, estimating lost income in wrongful death cases, and calculating damages for economic losses other than lost wages.
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From page 471... ...
However, the standard and the life expectancy methods will usually generate the same estimate of losses only if the expert is assuming that the expected discounted income in each year is the same -- that is, that the expected increase in income is offset by the discount rate (see Section VI.D.3)
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(1) Defined benefit plan To determine the present value of the benefits received under a defined benefit plan, the calculation is simplified if the expert uses the life expectancy method to calculate the plaintiff 's losses.
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From page 473... ...
Rules for recovery vary widely by state. Generally, calculation of economic damages for wrongful death depends on whether the claimant is a relative of the decedent or is the estate.
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From page 474... ...
This issue may arise, for example, in medical malpractice cases in which a doctor fails to diagnose and treat a condition or where a surgeon fails to remove a medical device used during surgery. Some states allow such a recovery; others do not.76 A related issue is whether dependents in a wrongful death action may recover economic damages for support the decedent would have provided had the decedent lived -- that is, whether such damages can be recovered over the remainder of the decedent's expected lifetime, had he lived.
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From page 475... ...
There have been several cases where the jury has found partially for the plaintiff, but the jury lacked assistance from the damages experts on how the damages should be calculated for the combination of acts the jury found to be unlawful. Although the jury has attempted to resolve the issue, appeals courts have sometimes rejected damages found by juries without supporting expert testimony.78 77. In wrongful death actions, these expenses may be included in the deduction for the amount the decedent would have spent on himself.
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From page 476... ...
The sum of the two estimates is nearly double the damages from the combined use of both provisions. Thus, a request that the damages expert disaggregate damages for different combinations of challenged acts is far more than a request that the total damages estimate be broken down into components that add up to the damages attributable to the combination of all the challenged acts.
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From page 477... ...
Glove Maker argues that damages are zero because the lawful long-term contracts would have been enough to allow it to dominate the market. Comment: The appropriate damages analysis is based on a careful new comparison of the market with and without the discount program.
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From page 478... ...
When the corporation is entitled to damages for lost profits, the defendant may argue that the corporation intentionally operates its business without profit. The actual losers in such a case are the people who would have enjoyed the benefits from the nonprofit that would have been financed from the profits at issue.
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1. re the defendants disputing apportionment among themselves despite A full information about their roles in the harmful event?
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From page 480... ...
Random events occurring after the harmful event can affect the plaintiff 's actual loss. The effect might be either to amplify the economic loss from what might have been expected at the time of the harmful event or to reduce the loss.
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From page 481... ...
In that sense, Seller's fraud caused not only an immediate loss, as measured by Seller's damages analysis, but also a subsequent loss. Seller, however, did not cause the decline in property values.
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From page 482... ...
The automatic reading of scanned numerical documents into analytical software is close to impossible, because optical character recognition software is unreliable with numerical material and requires large amounts of human intervention, character by character. Much confusion exists between electronic character documents and scanned documents, because both are part of the PDF standard.
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From page 483... ...
In this situation, it may be prohibitive to interview every class member, and the damages expert will need to construct both a sampling plan and a survey instrument so that the results can be reliably used to estimate damages. The principles in constructing a sampling to collect data for analysis from a dataset apply to constructing a sample of individuals to be surveyed: The expert needs to have carefully considered how the information will be used to ensure that the data sample is large enough and contains sufficient information.
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From page 484... ...
Validation of data turns in part on commonsense indicators of accuracy and bias. The following is a list, in rough order of presumptive validity, of data sources often used in damages measurement: • Official government publications and databases, such as from the Census Bureau, the BLS, and the Bureau of Economic Analysis; • A company's audited financial statements and filings with the Securities and Exchange Commission; • A company's accounting records maintained in the normal course of business; • A company's operating reports prepared for management in the normal course of business; • A survey designed by the damages expert with assistance from survey professionals, conforming to established standards of survey design and execution; • A marketing research study conforming to established standards for these studies; • Industry reports and other materials prepared by unaffiliated organizations and consultants; • Newspaper articles; • A company's study of damages from the harmful event, prepared in the normal course of business; and • A company's study of damages, prepared for litigation.
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C Are the Parties Disputing the Handling of Missing Data?
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X Standards for Disclosing Data to Opposing Parties The usual procedure for disclosure of work performed by the damages expert in federal cases is to provide electronic data at the same time or soon after the delivery of the expert's Rule 26(a)
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From page 487... ...
In general, the formats used by damages experts include Access, Oracle, and other relational databases; Excel, SAS, and Stata datasets; and flat files containing uniformly formatted data in character form. It is critical that the data be provided as actual data files on computer media such as DVDs or data disks, not paper or electronic printouts or reports formatted for visual presentation.
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From page 488... ...
Some common accusations are • Failing to disclose the intermediate steps that were performed to generate the data used in the final calculations from the source data; • Disclosing data and other materials only on paper or as scanned images, not in electronically readable form; • Disclosing data as reports formatted as tables (although the expert may have originally received the data in this format) ; • Concealing the logic of an Excel spreadsheet by revealing only the cell values and not the formulas used to generate the values; • Failing to provide data dictionaries explaining the meaning of the underly ing data; and • Omitting calculations related to opinions other than the actual damages calculation.
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From page 489... ...
One aspect of this tightening of standards is the use of a damages model to limit the membership of the class to individuals who are known to have incurred losses from the harmful conduct. Whereas earlier standards for damages were mainly the assurance of a qualified expert that damages could be measured later in the proceeding, some courts now require the expert to present a more fully developed method for quantifying damages.85 Disputes about the practicality of damages measurement are more and more likely in proposed class actions.86 A court operating under the rule that class certification requires a fully developed damages quantification will need to grant discovery prior to class certification to support the class's damages analysis and the defendant's opposition.
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From page 490... ...
The class's damages expert used standard methods for valuing claims for lost earnings to calculate estimates for each class member. Because the settlement compromised a number of disputes about the law and about the facts underlying the layoffs, the total cash from the settlement was less than the sum of these estimates, and class members received a fraction of the amount indicated by the damages model.
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From page 491... ...
lost personal earnings and (2) lost profits for a business.
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From page 492... ...
A plaintiff who seeks compensation for lost earnings will normally estimate damages based on wages or salary; other cash compensation, such as commissions, overtime, and bonuses; and the value of fringe benefits. Employees in similar jobs whose earnings were not interrupted form a natural benchmark for earning growth between the harmful event and trial.
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From page 493... ...
Table 4. Plaintiff 's Estimate of Lost Personal Income Actual But-for But-for But-for But-for Social Total Probability Probability Social Total Probability Probability But-for Total Discount Discounted Actual Sec Actual of of Expected But-for Sec But-for of of Expected Lost Discount Rate Lost Age Earnings Benefits Income Surviving Working Income Earnings Benefits Income Surviving Working Income Income Rate Index Income 56-57 0 22,008 22,008 1.00 0.00 22,008 75,000 75,000 1.00 0.90 67,500 45,492 0.01 1.00 45,492 57-58 0 22,008 21,727 0.99 0.00 21,727 87,083 87,083 0.99 1.00 86,341 64,615 0.01 0.99 63,975 58-59 0 22,008 21,428 0.97 0.00 21,428 100,000 100,000 0.98 1.00 98,238 76,810 0.01 0.98 75,297 59-60 0 22,008 21,107 0.96 0.00 21,107 100,000 100,000 0.97 1.00 97,258 76,151 0.01 0.97 73,911 60-61 0 22,008 20,761 0.94 0.00 20,761 100,000 100,000 0.96 1.00 96,195 75,434 0.01 0.96 72,491 61-62 0 22,008 20,387 0.93 0.00 20,387 100,000 100,000 0.95 1.00 95,039 74,653 0.01 0.95 71,029 62-63 0 22,008 19,984 0.91 0.00 19,984 100,000 100,000 0.94 1.00 93,788 73,804 0.01 0.94 69,527 63-64 0 22,008 19,556 0.89 0.00 19,556 100,000 100,000 0.92 1.00 92,448 72,892 0.01 0.93 67,988 64-65 0 22,008 19,104 0.87 0.00 19,104 100,000 100,000 0.91 1.00 91,024 71,920 0.01 0.92 66,417 65-66 0 22,008 18,629 0.85 0.00 18,629 100,000 100,000 0.90 1.00 89,514 70,885 0.01 0.91 64,813 66-67 0 22,008 18,130 0.82 0.00 18,130 100,000 100,000 0.88 1.00 87,916 69,786 0.01 0.91 63,177 67-68 0 22,008 17,605 0.80 0.00 17,605 100,000 100,000 0.86 1.00 86,220 68,615 0.01 0.90 61,501 68-69 0 22,008 17,052 0.77 0.00 17,052 100,000 100,000 0.84 1.00 84,414 67,362 0.01 0.89 59,780 69-70 0 22,008 16,467 0.75 0.00 16,467 100,000 100,000 0.82 1.00 82,483 66,016 0.01 0.88 58,006 70-71 0 22,008 15,849 0.72 0.00 15,849 31,152 31,152 0.80 0.00 25,053 9,203 0.01 0.87 8,007 71-72 0 22,008 15,197 0.69 0.00 15,197 31,152 31,152 0.78 0.00 24,365 9,168 0.01 0.86 7,897 72-73 0 22,008 14,506 0.66 0.00 14,506 31,152 31,152 0.76 0.00 23,626 9,121 0.01 0.85 7,778 73-74 0 22,008 13,775 0.63 0.00 13,775 31,152 31,152 0.73 0.00 22,832 9,058 0.01 0.84 7,648 74-75 0 22,008 13,005 0.59 0.00 13,005 31,152 31,152 0.71 0.00 21,982 8,977 0.01 0.84 7,505 75-76 0 22,008 12,200 0.55 0.00 12,200 31,152 31,152 0.68 0.00 21,074 8,875 0.01 0.83 7,346 493 76-77 0 22,008 11,364 0.52 0.00 11,364 31,152 31,152 0.65 0.00 20,113 8,748 0.01 0.82 7,170 77-78 0 22,008 10,505 0.48 0.00 10,505 31,152 31,152 0.61 0.00 19,098 8,594 0.01 0.81 6,973 78-79 0 22,008 9,628 0.44 0.00 9,628 31,152 31,152 0.58 0.00 18,035 8,408 0.01 0.80 6,755 79-80 0 22,008 8,740 0.40 0.00 8,740 31,152 31,152 0.54 0.00 16,927 8,187 0.01 0.80 6,512 80-81 0 22,008 7,852 0.36 0.00 7,852 31,152 31,152 0.51 0.00 15,780 7,928 0.01 0.79 6,244 81-82 0 22,008 6,973 0.32 0.00 6,973 31,152 31,152 0.47 0.00 14,602 7,629 0.01 0.78 5,949 82-83 0 22,008 6,112 0.28 0.00 6,112 31,152 31,152 0.43 0.00 13,401 7,289 0.01 0.77 5,627 83-84 0 22,008 5,283 0.24 0.00 5,283 31,152 31,152 0.39 0.00 12,188 6,906 0.01 0.76 5,279 84-85 0 22,008 4,494 0.20 0.00 4,494 31,152 31,152 0.35 0.00 10,976 6,481 0.01 0.76 4,905 85-86 0 22,008 3,758 0.17 0.00 3,758 31,152 31,152 0.31 0.00 9,777 6,019 0.01 0.75 4,510 86-87 0 22,008 3,082 0.14 0.00 3,082 31,152 31,152 0.28 0.00 8,605 5,523 0.01 0.74 4,097 87-88 0 22,008 2,475 0.11 0.00 2,475 31,152 31,152 0.24 0.00 7,474 5,000 0.01 0.73 3,673 88-89 0 22,008 1,941 0.09 0.00 1,941 31,152 31,152 0.21 0.00 6,400 4,459 0.01 0.73 3,243 89-90 0 22,008 1,484 0.07 0.00 1,484 31,152 31,152 0.17 0.00 5,394 3,911 0.01 0.72 2,816 90-91 0 22,008 1,102 0.05 0.00 1,102 31,152 31,152 0.14 0.00 4,469 3,367 0.01 0.71 2,401 91-92 0 22,008 793 0.04 0.00 793 31,152 31,152 0.12 0.00 3,634 2,841 0.01 0.71 2,005 92-93 0 22,008 551 0.03 0.00 551 31,152 31,152 0.09 0.00 2,895 2,344 0.01 0.70 1,638 93-94 0 22,008 369 0.02 0.00 369 31,152 31,152 0.07 0.00 2,256 1,887 0.01 0.69 1,306 94-95 0 22,008 236 0.01 0.00 236 31,152 31,152 0.06 0.00 1,716 1,480 0.01 0.69 1,014 95-96 0 22,008 145 0.01 0.00 145 31,152 31,152 0.04 0.00 1,272 1,127 0.01 0.68 765 96-97 0 22,008 84 0.00 0.00 84 31,152 31,152 0.03 0.00 916 832 0.01 0.67 559 97-98 0 22,008 46 0.00 0.00 46 31,152 31,152 0.02 0.00 640 594 0.01 0.67 395 98-99 0 22,008 24 0.00 0.00 24 31,152 31,152 0.01 0.00 433 410 0.01 0.66 270 99-100 0 22,008 11 0.00 0.00 11 31,152 31,152 0.01 0.00 283 272 0.01 0.65 177 100 and over 0 22,008 0 0.00 0.00 0 31,152 31,152 0.00 0.00 0 0 0.01 0.65 0 Total Lost Personal Income 1,043,866
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From page 494... ...
Table 5. Defendant's Estimate of Lost Personal Income Actual But-for But-for But-for But-for Social Total Probability Probability Social Total Probability Probability But-for Total Discount Discounted Actual Sec Actual of of Expected But-for Sec But-for of of Expected Lost Discount Rate Lost Age Earnings Benefits Income Surviving Working Income Earnings Benefits Income Surviving Working Income Income Rate Index Income 56-57 0 0 0 1.00 0.00 0 75,000 75,000 1.00 0.80 60,000 60,000 0.05 1.00 60,000 57-58 75,000 0 74,361 0.99 1.00 74,361 75,000 75,000 0.99 1.00 74,361 0 0.05 0.95 0 58-59 75,000 0 73,678 0.98 1.00 73,678 75,000 75,000 0.98 1.00 73,678 0 0.05 0.91 0 59-60 75,000 0 72,944 0.97 1.00 72,944 75,000 75,000 0.97 1.00 72,944 0 0.05 0.86 0 60-61 75,000 0 72,146 0.96 1.00 72,146 75,000 75,000 0.96 1.00 72,146 0 0.05 0.82 0 61-62 75,000 0 71,280 0.95 1.00 71,280 75,000 75,000 0.95 1.00 71,280 0 0.05 0.78 0 62-63 75,000 0 70,341 0.94 1.00 70,341 75,000 75,000 0.94 1.00 70,341 0 0.05 0.75 0 63-64 75,000 0 69,336 0.92 1.00 69,336 75,000 75,000 0.92 1.00 69,336 0 0.05 0.71 0 64-65 75,000 0 68,268 0.91 1.00 68,268 75,000 75,000 0.91 1.00 68,268 0 0.05 0.68 0 65-66 75,000 0 67,135 0.90 1.00 67,135 75,000 75,000 0.90 1.00 67,135 0 0.05 0.64 0 66-67 75,000 0 65,937 0.88 1.00 65,937 75,000 75,000 0.88 1.00 65,937 0 0.05 0.61 0 67-68 75,000 0 64,665 0.86 1.00 64,665 75,000 75,000 0.86 1.00 64,665 0 0.05 0.58 0 68-69 75,000 0 63,310 0.84 1.00 63,310 75,000 75,000 0.84 1.00 63,310 0 0.05 0.56 0 69-70 75,000 0 61,863 0.82 1.00 61,863 75,000 75,000 0.82 1.00 61,863 0 0.05 0.53 0 70-71 0 30,864 24,821 0.80 0.00 24,821 31,152 31,152 0.80 0.00 25,053 232 0.05 0.51 117 71-72 0 30,864 24,140 0.78 0.00 24,140 31,152 31,152 0.78 0.00 24,365 225 0.05 0.48 108 72-73 0 30,864 23,408 0.76 0.00 23,408 31,152 31,152 0.76 0.00 23,626 218 0.05 0.46 100 73-74 0 30,864 22,621 0.73 0.00 22,621 31,152 31,152 0.73 0.00 22,832 211 0.05 0.44 92 74-75 0 30,864 21,779 0.71 0.00 21,779 31,152 31,152 0.71 0.00 21,982 203 0.05 0.42 84 75-76 0 30,864 20,879 0.68 0.00 20,879 31,152 31,152 0.68 0.00 21,074 195 0.05 0.40 77 494 76-77 0 30,864 19,927 0.65 0.00 19,927 31,152 31,152 0.65 0.00 20,113 186 0.05 0.38 70 77-78 0 30,864 18,922 0.61 0.00 18,922 31,152 31,152 0.61 0.00 19,098 177 0.05 0.36 63 78-79 0 30,864 17,868 0.58 0.00 17,868 31,152 31,152 0.58 0.00 18,035 167 0.05 0.34 57 79-80 0 30,864 16,771 0.54 0.00 16,771 31,152 31,152 0.54 0.00 16,927 156 0.05 0.33 51 80-81 0 30,864 15,634 0.51 0.00 15,634 31,152 31,152 0.51 0.00 15,780 146 0.05 0.31 45 81-82 0 30,864 14,467 0.47 0.00 14,467 31,152 31,152 0.47 0.00 14,602 135 0.05 0.30 40 82-83 0 30,864 13,277 0.43 0.00 13,277 31,152 31,152 0.43 0.00 13,401 124 0.05 0.28 35 83-84 0 30,864 12,076 0.39 0.00 12,076 31,152 31,152 0.39 0.00 12,188 113 0.05 0.27 30 84-85 0 30,864 10,874 0.35 0.00 10,874 31,152 31,152 0.35 0.00 10,976 101 0.05 0.26 26 85-86 0 30,864 9,686 0.31 0.00 9,686 31,152 31,152 0.31 0.00 9,777 90 0.05 0.24 22 86-87 0 30,864 8,525 0.28 0.00 8,525 31,152 31,152 0.28 0.00 8,605 80 0.05 0.23 18 87-88 0 30,864 7,405 0.24 0.00 7,405 31,152 31,152 0.24 0.00 7,474 69 0.05 0.22 15 88-89 0 30,864 6,341 0.21 0.00 6,341 31,152 31,152 0.21 0.00 6,400 59 0.05 0.21 12 89-90 0 30,864 5,344 0.17 0.00 5,344 31,152 31,152 0.17 0.00 5,394 50 0.05 0.20 10 90-91 0 30,864 4,428 0.14 0.00 4,428 31,152 31,152 0.14 0.00 4,469 41 0.05 0.19 8 91-92 0 30,864 3,600 0.12 0.00 3,600 31,152 31,152 0.12 0.00 3,634 34 0.05 0.18 6 92-93 0 30,864 2,868 0.09 0.00 2,868 31,152 31,152 0.09 0.00 2,895 27 0.05 0.17 5 93-94 0 30,864 2,235 0.07 0.00 2,235 31,152 31,152 0.07 0.00 2,256 21 0.05 0.16 3 94-95 0 30,864 1,700 0.06 0.00 1,700 31,152 31,152 0.06 0.00 1,716 16 0.05 0.16 2 95-96 0 30,864 1,260 0.04 0.00 1,260 31,152 31,152 0.04 0.00 1,272 12 0.05 0.15 2 96-97 0 30,864 908 0.03 0.00 908 31,152 31,152 0.03 0.00 916 8 0.05 0.14 1 97-98 0 30,864 634 0.02 0.00 634 31,152 31,152 0.02 0.00 640 6 0.05 0.14 1 98-99 0 30,864 429 0.01 0.00 429 31,152 31,152 0.01 0.00 433 4 0.05 0.13 1 99-100 0 30,864 280 0.01 0.00 280 31,152 31,152 0.01 0.00 283 3 0.05 0.12 0 100 + 0 30,864 0 0.00 0.00 0 31,152 31,152 0.00 0.00 0 0 0.05 0.12 0 Total Lost Personal Income 61,104
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From page 495... ...
Because personal lost earnings damages may accrue over the remainder of a plaintiff 's working life, the issues of predicting future inflation and discounting earnings to present value are likely to generate quantitatively important disagreements. As we noted in Section VI.D, projections of future compensation can be calculated in constant dollars or escalated terms.
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From page 496... ...
A damages analysis should be internally consistent. For example, the compensation paths for both but-for and actual earnings should be based on consistent assumptions about general economic conditions, about conditions in the local labor market for the plaintiff 's type of work, the age-earnings profile for the career path, and particularly about the plaintiff 's likely increased skills and earning capacity.
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From page 497... ...
Generally, an expert will likely be most involved in cases in which the plaintiff is seeking recovery for expectation, reliance, or restitution damages. Most damages studies will follow Figure 1 where earnings are the lost profits.
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From page 498... ...
Is there a dispute about projected revenues? Projecting lost revenues can be straightforward if the disrupted revenue stream occurs immediately following the bad act and the firm recovers relatively quickly.
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From page 499... ...
2. Are the parties disputing the calculation of marginal costs?
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From page 500... ...
I Disagreements about subsequent unexpected events are likely in cases involving lost profits. For example, the market for the plaintiff 's goods may have suffered a substantial contraction a year after the bad act, with plaintiff likely to be forced into bankruptcy even if the wrongful act had not occurred.
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From page 501... ...
The alternative is to make projections in constant dollars. expectation damages.
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From page 502... ...
reliance damages. Damages designed to reimburse a party for expenses incurred from reliance upon the promises of the other party.
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Key Terms
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