Page 17 - Calculating Lost Profits

Evidence 702 does not explicitly obligate the expert to eliminate all other possible causes of loss. The
expert may consider a broad variety of data and information sources to assess whether another obvious
cause of the loss exists. The following table summarizes examples of evidence and considerations relat-
ed to causation and reliability in the development of revenue projections.

Sources of Evidence Possible Considerations and Questions
Pre-litigation projections What do the projections reflect for the alleged damage period?
How accurate were plaintiff’s prior projections?
Performance summaries for the business at Do these and other contemporaneous documents address per-
issue (for example, board of directors formance of the business during the damage period?
meeting materials)
Interviews or testimony of key personnel Did a significant change in personnel occur, including, for
example, the loss of a key executive or a restructuring? Did the
business plan, business model, or business environment
change for some unrelated reason?
Performance summaries for other similar Does the plaintiff have other similar business activities, includ-
businesses ing other business locations? How have those business activi-
ties performed as compared to the allegedly harmed business?
Industry or competitor data
How have other similar unaffected businesses performed dur-
ing the damage period?
Was there a new competitor or product that entered during the
damage period?
Overall economy considerations How did the economy perform, as a general matter, during the
damage period?

These considerations and others may be addressed through different forms of analysis and evidence. For
example, individuals can either be interviewed or provide deposition testimony. The damages expert
may also obtain such information in document discovery or in interrogatories, or through independent
research.

Although other factors may also have some effect on the plaintiff's sales and profits, it may not be prac-
ticable to determine the exact effect of all other possible influences, given that many of these are de min-
imis. It is preferable, however, to show that these other factors have been considered and, when appro-
priate, have been taken into account in a model (for example, they are equally likely to overstate or un-
derstate the calculation).

Reasonable Certainty

This requirement has been addressed extensively in the AICPA practice aid Attaining Reasonable Cer-
tainty in Economic Damages Calculations. To summarize the analysis and discussion contained therein,
there is not a one-size-fits-all definition of reasonable certainty. Rather, reasonable certainty is normally
a case-specific assessment of whether the calculation of damages was anchored in facts, makes use of
sound methodologies, and yields reasonable results. It is well established that once the fact of damages
has been proven, the amount of damages need not be proven with absolute certainty.

In practice, the issue of reasonable certainty is interwoven throughout a damages analysis. For example,
the damages expert should be reasonably certain of issues, including

 another obvious cause of the damages does not exist;

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