Page 20 - Economic Damages Calculation

• the reliability and reasonableness of assumptions used to develop client projections; and

• the context or motive (or both) within which projections were prepared.

In considering these issues, the courts are following the guidance in FRE 702, which, among other
things, provides that an expert may testify to his or her opinion if the testimony is based upon sufficient
facts or data. In many respects, this requirement in FRE 702 is consistent with the professional standards
that govern the work performed by practitioners, including with respect to the requirement in Rule
1.300.001 of the AICPA’s Code of Professional Conduct and SSFS No. 1 that a practitioner obtain suf-
ficient relevant data to provide a reasonable basis for the conclusions reached.

Considering (1) case law; (2) federal rules of evidence; and (3) professional standards, some questions
surface for damages experts using management-supplied information while providing litigation consult-
ing services:

• Is management-supplied information "sufficient relevant data"?

• When can I rely on management-supplied information?

• How much reliance can I put on management-supplied information?

• What, if any, independent analysis is necessary to evaluate information provided by manage-
ment?

• Will I be allowed to testify if I rely on management-supplied information?

This chapter attempts to provide perspective on these questions through discussion of cases and how
courts have addressed damages experts’ reliance on management information. What may be inferred
from these cases is that damages experts should be prepared to explain how and why they relied on in-
formation provided, along with the bases supporting why the assumption or reliance is reasonable.

Cases Allowing Reliance on Client-Supplied Information

General Observations

As noted, expert reliance on management-supplied information is subject to frequent challenge, includ-
ing with respect to the reliability of the information, the level of testing and analysis required, and the
areas of expertise required to develop and evaluate management-supplied information. In a number of
matters in which damages experts were challenged on the use of management-supplied information,
courts have decided to allow the expert to testify, even when there were questions about the reliability of
the information and the extent of the procedures employed to evaluate what was provided. In doing so,
courts have concluded at times that the reliability of the data, and the extent and sufficiency of the expert
analysis, are issues that should be subjected to the adversarial process, with the trier of fact left to decide
how much weight to accord the testimony. In turn, courts have explicitly placed the burden on the expert
to support and defend the sufficiency and reliability of the information used before the trier of fact.

Amigo v. Spanish Broadcasting

In this matter, two radio personalities and their employer were sued for, among other relief, lost profits
after the personalities (hereinafter the "defendants") moved their popular Spanish language radio pro-

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