Page 23 - Economic Damages Calculation

As stated in the Appeals Court decision:

As Rule 703 reflects, an expert must employ ‘those kinds of facts or data’ on which experts in
the field would reasonably rely, so [Plaintiff’s expert] could not have based his earnings projec-
tions on changes in the size of the white rhino population in Africa, but he did not go amiss in
basing them on Manpower's actual earnings over a sustained period immediately preceding the
interruption of the business and on the assessment of its managers as to its prospects going for-
ward. As we noted in Tuf's, these are the kinds of data that accountants normally rely on in calcu-
lating future earnings.

*** *** ***

In the end, each criticism that the district court had in assessing the reliability of [Plaintiff’s ex-
pert’s] testimony was a comment on the soundness of the factual underpinnings of his calcula-
tion. Indeed, one could envision the district court's rulings as a roadmap for [Defendant’s] cross-
examination of [Plaintiff’s expert]. But the district court supplanted that adversarial process with
its admissibility determination, leaving Manpower with no competent evidence to prove its busi-
ness interruption damages and ensuring summary judgment for [Defendant]. We conclude that
the district court set the bar too high and therefore abused its discretion in barring [Plaintiff’s ex-
pert’s] testimony about the business interruption loss. Accordingly, its judgment for ISOP on the
business interruption claim cannot stand. fn 7

The cases presented in this section identify the reluctance that some courts have shown in precluding
expert testimony in situations in which legitimate issues have been raised about the reliability of infor-
mation supplied by management to support the damage analysis. Yet, while the courts in these matters
were reluctant to strike the testimony of the proffered experts on damages, the decisions are clear that
experts must still be prepared to defend under cross examination the reasonableness and reliability of the
supporting information and methodology, recognizing that the trier of fact will decide what weight, if
any, to accord to the testimony.

Cases Not Allowing Reliance on Management

General Observations

As the foregoing cases demonstrate, certain courts have been willing to admit expert testimony in mat-
ters even when there were questions about the reliability of management-supplied information, and the
level of independent analysis applied. As noted in these matters, courts have concluded that evaluation
of the data and work was a matter for consideration by the trier of fact. However, this is not a universal
rule. An examination of other matters shows that courts have also been willing to preclude expert testi-
mony at the pre-trial stage when there are questions about the reliability of the information and the level
of testing and analysis applied by the expert to the underlying data. While seemingly inconsistent on the
surface, in either set of circumstances, courts are evaluating similar factors, signaling that damages ex-
perts need to consider the reasonableness and reliability of the information supplied by management.

fn 7 Id. at 809-10.

© 2020, Association of International Certified Professional Accountants 21