Page 91 - Acertaining Economic Damages Calculation

Because of the nature of the damages claimed, plaintiffs' failure to present the testimony of [Au-
thor], whose opinion as to future sales of the business actually formed the basis of the claim of
lost profits, rendered [Expert’s] calculations speculative. fn 39

Given the preceding issues, the 10th Circuit affirmed the trial court’s directed verdict.

Under Rule 703 of the Federal Rules of Evidence, "An expert may base an opinion on facts or data in
the case that the expert has been made aware of or personally observed. If experts in the particular field
would reasonably rely on those kinds of facts or data in forming an opinion on the subject, they need not
be admissible for the opinion to be admitted." Similarly, a damages expert can generally rely upon the
opinions of other experts.

This case illustrates the importance of understanding how counsel intends to introduce facts or data that
will be relied upon by the damages expert. The projections contained in the market study appeared to be
the very type of information that would typically constitute expert testimony. With no expert to rely up-
on, no personal knowledge of the underlying projections, and no attempt to verify their reasonableness,
plaintiff’s expert was susceptible to exclusion.

Glenwood Sys., LLC v. Thirugnanam, 2012 WL 1865453 (C.D. Cal. May 21, 2012)

Glenwood Systems, LLC (Glenwood) was a national medical billing company. Two of its former soft-
ware engineers (the employees) left Glenwood and formed a new company, Augment U.S. Glenwood
filed a suit against employees for breach of an employment agreement, which contained a one-year non-
compete clause. Glenwood’s damages expert testified to lost profits ranging from $865,000 to $2.5 mil-
lion and unjust gains of approximately $1.18 million. Defendants sought to exclude the expert, claiming
that the expert’s opinions were based entirely on what he was told by Glenwood’s President and also as-
serting that the damages expert had no expertise in the medical billing industry.

The court found that plaintiff’s expert’s experience assisting clients with financial, economic, and ac-
counting issues across numerous industries made him sufficiently qualified to provide expert testimony.
With respect to defendant’s challenge that Glenwood’s expert relied exclusively upon information con-
veyed to him by Glenwood’s president, the court found that defendants did not challenge the expert’s
methods in reaching his opinions but, rather, disputed the facts he relied upon and, therefore, finding
these were issues for cross-examination, not for a Daubert hearing.

Although the court admitted all of Glenwood’s damages expert’s opinions that pertained to the calcula-
tion of damages, it excluded his causation opinion that defendants’ breach of the non-compete clause
caused plaintiff's sales to decline, which the court ruled invaded the province of the jury.

For a more comprehensive discussion of the use of client-supplied information in establishing reasona-
ble certainty, see chapter 2, “Client-Supplied Information,” of the AICPA Forensic and Valuation Ser-
vices practice aid, Attaining Reasonable Certainty in Economic Damages Calculations.

fn 39 TK-7 Corp., 993 F.2d at 731-33.

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