Page 37 - Economic Damages Calculation

Chapter 3

Causation Considerations

Causation and The Damages Expert

To prevail in a civil lawsuit, a plaintiff must be able to establish liability and show that a defendant per-
petrated a wrongful act. Similarly, a plaintiff must also demonstrate that, subsequent to the wrongful act,
it experienced some economic harm, such as a reduction in its sales or profits. Finally, a plaintiff must
prove that the defendant’s behavior was the proximate cause of the economic harm. The following deci-
sions are illustrative of these preconditions to the recovery of damages:

"[T]o recover for loss of goodwill, or future profits, the claimant must prove with reasonable cer-
tainty, inter alia, (1) the fact of a loss of goodwill, (2) the amount of that loss, and (3) the direct
causation of that loss by the defendant's breach." fn 1

"Plaintiffs must first show that defendant’s breach produced damage ‘inevitably and naturally,
not possibly or probably.’" fn 2

"A business can recover lost prospective profits regardless of whether it is established or has any
‘track record.’ The party must prove that (1) the defendant's action caused the damage and (2)
there is some standard by which the amount of damages may be adequately determined." fn 3

"A prerequisite to recovery under Section 4 of the Clayton Act, 15 U.S.C.S. Section 15, is a
showing by the plaintiff of a violation of the antitrust laws, the fact of damage, and some indica-
tion of the amount of damage. . . . [T]he required causal link must be proved as a matter of fact
and with a fair degree of certainty." fn 4

"To prove allegations of securities fraud under Rule 10b-5, a plaintiff must establish . . . loss
causation, i.e., a causal connection between the misrepresentation and the economic loss." fn 5

While the plaintiff’s burden to establish causation is clear, the damages expert’s role in establishing cau-
sation is less certain and may vary by both jurisdiction and the specific facts and circumstances of the
case. In many matters, the damages expert may, at least to some degree, assume that the plaintiff will
prove its liability case and also assume causation on the instruction of retaining counsel. This scenario is
particularly true when the issue of liability does not involve accounting, financial, or economic issues.

fn 1 Toltec Fabrics, Inc. v. August Inc., 29 F.3d 778, 781 (2d Cir. 1994).
fn 2 Franconia Assocs. v. United States, 61 Fed. Cl. 718, 747 (2004) (quoting Ramsey v. United States, 101 F. Supp. 353, 357 (Ct. Cl.
1951)).

fn 3 W.W. Gay Mech. Contractor, Inc. v. Wharfside Two, Ltd., 545 So. 2d 1348, 1351 (Fla. 1989).

fn 4 Alabama v. Blue Bird Body Co., 573 F.2d 309, 317 (5th Cir. 1978).

fn 5 Bricklayers & Trowel Trades Int'l Pension Fund v. Credit Suisse First Boston, 853 F. Supp. 2d 181, 184 (D. Mass. 2012).

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