Page 39 - Economic Damage Calculations

est typically added to past losses to convert the value of past loss amounts to a judgment date value. fn 7
In addition, an ex post analysis typically involves consideration of information that has become known
in the period of time between the date of the damages event and the date of judgment. fn 8 The U.S. Su-
preme Court, in a patent case, referred to this approach as using the "book of wisdom." fn 9

When implementing the ex post approach, losses from the period between the damages event and trial
may be modeled with a lesser degree of risk than future expected results. The ex post approach has also
received acceptance in courts, frequently in torts such as patent infringement, eminent domain, and anti-
trust matters.

[C]ertainty is better than conjecture and injuries actually inflicted a better guide than opinion of
experts as to the market values just before and after. (RapidTransit Railroad Commissioners.,
197 N.Y. 81, 108, 90 N.E. 456, 465 [1909])

Experts should, however, be aware that both approaches are also susceptible to criticism. For example,
the ex post approach provides plaintiffs with a benefit in that plaintiffs have the choice of whether to file
suit against defendants, and with the benefit of hindsight, plaintiffs will not file suit in cases in which a
poor outcome has come to pass. fn 10 As a result, advocates of the ex ante approach suggest that because
the plaintiff has not had to bear risk from the date of the incident through the date of the trial, a reduction
in the damages figure is appropriate. fn 11

Alternatively, the ex ante approach typically results in a lower damages award to the extent that the dis-
count rate exceeds the prejudgment interest rate. These issues are illustrated in figures 6-1 and 6-2
(based on a December 2006 damages event and a June 2009 judgment date).

fn 7 This method is complicated in a scenario with multiple damages events.

fn 8 It may also be possible to blend the two methodologies, discounting back to the date of the damages event but using information
that became known later in time.

fn 9 Sinclair Ref. Co. v. Jenkins Petroleum Process Co., 289 U.S. 689, 698–99, 53 S. Ct. 736, 77 L. Ed. 1449 (1933).

[A]t times the only evidence available may be that supplied by testimony of experts as to the state of the art, the character of the
improvement, and the probable increase of the efficiency or savings of expense... This will generally be the case if the trial fol-
lows quickly after the issue of the patent. But a different situation is presented if years have gone by before the evidence is of-
fered. Experience is then available to correct uncertain prophecy. Here is a book of wisdom that courts may not neglect. We find
no rule of law that sets a clasp upon its pages, and forbids us to look within.

fn 10 See 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).

fn 11 Franklin M. Fisher and R. Craig Romaine, "Janis Joplin’s Yearbook and the Theory of Damages," Journal of Accounting, Audit-
ing and Finance (Winter 1990), 145–57.

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