December 03, 2012 Articles

Economic Damages and Financial Experts: What You Need to Know

A financial expert well-versed in assisting counsel with building a logical damages case can be the difference between a successful judgment and a disappointing result.

By David Majors and John Tira

An attorney’s strongest weapon during a civil trial for damages can be a qualified expert who can communicate the intricacies of computing damages clearly and convincingly to judge, jury, and counsel at trial. Without one, you could be jeopardizing your case and placing your clients at monetary risk.

Economic damages can take many forms, but perhaps the easiest way to illustrate them is through lost profits. Lost profits measure the present value of cash flows that would have been earned by the plaintiff but for the damaging event caused by the defendant. This loss in profits can occur over a distinct period of time or it can be assumed losses will continue into perpetuity.

The amount of lost profits is calculated as the difference between the but-for performance (the income that hypothetically should have been earned by the plaintiff) and the actual performance (the income actually earned by the plaintiff) during the damages period. In most cases, lost profits usually result from a breach of contract or a tort, but are certainly applicable to a variety of matters.

There is no doubt that securing a damages award requires the assistance of a qualified and skilled litigator. And while navigating the legal issues of a case can be a time-consuming affair, it is critical that an attorney recognize that a financial expert well-versed in assisting counsel with building a logical and supportable damages case can be the difference between a successful judgment and a disappointing result. The following are the typical steps in constructing a supportable case.

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