Page 30 - Economic Damage Calculations

plaintiff would have held the asset or the expected economic gain but for the defendant’s alleged
interference.

 Expert-gathered research information. The expert’s findings from market or product research,
for example, may influence the expert’s conclusions about the plaintiff’s opportunity to have ac-
tually earned the but for economic income.

 Company versus project-specific considerations. The cash flow amounts may be related to a spe-
cific project that has different elements from the company as a whole, such as when a company
plans to expand its business into a different area in which it has little or no experience. fn 5 Alter-
natively, in some situations a specific project may be less risky than the company as a whole.

 Attorney-client’s legal guidance. The attorney-client may provide an assessment of the relevant
law and pertinent legal cases, which may be reflected in the approach adopted by the expert to
compute damages.

In addition, asymmetry of information or the application of different assumptions relative to these factors
may cause two experts to quantify economic damages differently.

Standards and Burden

Damages are awarded when the plaintiff successfully proves its case with respect to liability and a num-
ber of legal principles. These legal principles have been extensively described in case law and relevant
literature, and include the elements discussed in the following sections, among others. fn 6

Causation

The plaintiff’s damages are to be proximately caused by the defendant’s act. The plaintiff carries the
burden to prove that but for the wrongful conduct of the defendant, the plaintiff would likely have real-
ized the lost profits or other economic income. Experts may be asked to assume causation or opine upon
causation. If an expert assumes causation, the expert should understand the causation theory and be able
to explain how the computed economic damages are attributable to the alleged cause. For matters in fed-
eral court, experts should be familiar with the 2000 comments to Rule 702 of the Federal Rules of Evi-
dence that specifically identify as one test of reliability "[w]hether the expert has adequately accounted
for obvious alternative explanations" for the plaintiff’s damages. fn 7

Reasonable Certainty

Damages are to be proven with reasonable certainty and without undue conjecture or speculation. How-
ever, mathematical precision or absolute certainty is not generally required for damages measurement.

fn 5 James M. Patell, Roman L. Weil, and Mark A. Wolfson, "Accumulating Damages in Litigation: The Roles of Uncertainty and
Interest Rates," The Journal of Legal Studies 11 (1982), 341–64; and Franklin M. Fisher and R. Craig Romaine, "Janis Joplin’s Year-
book and the Theory of Damages," Journal of Accounting, Auditing and Finance (Winter 1990), 145–57.

fn 6 See the appendix, "Resource and Reference List," in this practice aid for a list of publications, cases, and resources.

fn 7 Cornell University Law School "Federal Rules of Evidence," https://www.law.cornell.edu/rules/fre/rule_702 .

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