The Comprehensive Guide to Lost Profits Damages for Experts & Attorneys, 2011 Edition

In the 2011 edition, of "The Comprehensive Guide to Lost Profits Damages, For Experts & Attorneys", Nancy Fannon, ASA, MCBA, CPA, ABV brings together the comprehensive body of knowledge on lost profits damages and delivers the definitive resource for financial experts and attorneys alike. Fannon and other leading experts provide thorough analysis of current case law and valuation methodology related to the calculation of damages.

This book is about financial evidence: how to gather it, interpret it, and tell its story in a lawsuit or litigation setting. This is the task that the attorney typically retains the financial expert to accomplish. This comprehensive guide endeavors to bring together the financial expert's knowledge of accepted methods and procedures with the attorney's knowledge of legal issues and insights. This includes a summary of the applicable rules of civil procedure and of evidence, as well as the rich and continually expanding case law that interprets what prior courts have accepted as evidence for lost profits claims - and what the courts have rejected and why. This guide contains representational analyses as well as excerpts and abstracts of case law on lost profits damages. However, like any authoritative text, it is a tool and not a substitute for the professional's knowledge of a particular case, the potential impact of local rules regarding discovery, and the jurisdictional nuances that may affect the lost profits calculations.

In addition to standards, methodology, discount rates, and evidentiary matters, this second edition brings extensive analysis of additional concepts that are important for lost profit and financial damage calculations. These new materials include an insightful, in-depth look at the case law relating to reasonable certainty, by Professor Robert Lloyd. It also includes comprehensive materials on motions to exclude experts in lost profits damages cases, both by issue and by jurisdiction, with materials contributed by Professor Lloyd and Jonathan Dunitz, Esq.

Additional new topics include damages for early stage companies, by Neil Beaton, ASA, CFA, ABV, and Tyler Farmer, Esq., and benefit of the bargain damages by Jeffrey Litvik, Esq. and Kevin Shannon, Esq. The guide also features a significantly expanded section on patent damages, contributed by Rick Bero, CPA/ABV, CVA, CLP, CFF, and by new contributors William Marsdsen, Esq. and Tim Devlin, Esq. Finally, Daniel Gelb, Esq. and Richard Gelb, Esq. have added their expertise by contributing a chapter on electronic evidence.

This edition also updates all chapters for lost profits case law over the past year, and provides abstracts of many of the cases discussed throughout the text.

Section A: Context of Lost Profit Litigation

Chapter 1: Context of the Lost Profits Damages Claim
- Jonathan M. Dunitz, Esq.
- Common Elements of Lost Profits Damages Cases

Chapter 2: Professional Standards for Experts
- Michael Crain
- Certified Public Accountants
- Economists and Other Financial Experts (Non-CPAs)
- Conclusion
- Appendix A: Links to ethical guidelines published by member organizations
- Appendix B: Links to requirements for certifications, by organization . 20
- Appendix C: Decision Tree to Determine the Application of Professional Standards
- Appendix D: Comparison of AICPA Professional Standards and Federal Rule of Evidence 702

Chapter 3: The Process: A Brief Introduction to the U.S. Court Systems from Filing to Appeal
- Jonathan M. Dunitz, Esq.
- Discovery
- The Rules of Evidence
- Appendix A: Federal Rules of Evidence Pertaining to Expert Testimony
- Appendix B: Federal Rules of Civil Procedure Pertaining to Expert Testimony
- Appendix C

Chapter 4: Spoliation of Evidence
- Jonathan M. Dunitz, Esq.
- Experts and Spoliation
- Draft Reports
- Electronically Stored Information
- Summary

Chapter 5: A Guide to Electronic Discovery and Evidence
- Daniel K. Gelb, Esq. and Richard M. Gelb, Esq.
- What is ESI and where does it reside?
- Under what circumstances must ESI be preserved and what protocol should be followed for doing so?
- How should ESI be produced?
- How should ESI be managed during litigation?
- What is required for ESI to be admitted into evidence at trial?
- How can financial experts assist with e-discovery?

Chapter 6: Selecting and Working with Financial Experts
- William J. Marsden Jr., Esq. and Timothy Devlin, Esq.
- Selecting an expert
- Preparing your expert
- Using your expert at trial
- Opposing experts

Chapter 7: Motions to Exclude Financial Experts
- Jonathan M. Dunitz, Esq.
- Factors to Consider
- Exclusion of Experts by Jurisdiction

Chapter 8: Motions to Exclude Expert Testimony
- Robert M. Lloyd, Esq.
- Expert Qualifications
- Methodology
- The Data
- Assumptions
- Failure to Deal with Inconsistent Facts
- Conclusion
- Appendix A: Anchoring and the Expert Witness Testimony:
- Do Countervailing Forces Offset Anchoring Effects of Expert Witness Testimony?
- Appendix B: Excerpts from the Reference Manual on Scientific Evidence
- Section B: Lost Profits Calculations and Issues

Chapter 9: Lost Profits Calculations—Methods and Procedures
- James O'Brien and Robert P. Gray
- Lost Profits - Defined
- General Issues
- Reasonable Certainty Standard
- Reasonableness of expert input and assumptions
- Causation, Burden of Proof, and Other Possible Causes of the Loss
- Limitations on the Period of Recovery
- Damages Calculation
- Sample Lost Profits Analyses
- Lost Profit Calculations in a “But-For” World
- Consideration of Mitigation
- Summary

Chapter 10: The Reasonable Certainty Requirement in Lost Profits Litigation: What It Really Means
- Robert M. Lloyd, Esq.
- Balancing the competing concerns
- The factors courts consider
- Replacing Rules with a Standard

Chapter 11: Calculating Damages for Early-Stage Companies
- Neil J. Beaton and Tyler L. Farmer
- Legal requirements: the basic parameters
- Methods for proving lost profits for new businesses

Chapter 12: Establishing Evidence in Lost Profits Cases
- Tom Burrage
- Establishing a Reliable Foundation for the Claim
- Data and Information Generally Available From the Parties
- Market and Demand for Plaintiff's Product
- Industry and Economic Data
- Adequate Consideration of all Available Data

Chapter 13: Use of Forensic Evidence in a Lost Profits Case
- Michael Kaplan and Rebekah A. Smith
- Indicators that Forensic Evidence is Needed
- Admissibility of Forensic Evidence
- Cases Demonstrating the Use of Forensic Evidence

Chapter 14: Lost Profit versus Lost Business
- Thomas Burrage
- Considerations in Making the Claim for Lost Business or Lost Profits
- Comparison of Lost Profits versus the Lost Value of a Business
- Can Plaintiffs Recover both Lost Profits and Lost Value?
- Comparative Summary of Lost Profits vs. Lost Business Claims

Chapter 15: Discounting Lost Profits in Damage Measurements
- By Michael A. Crain
- Objective of Compensatory Damages: Making the Plaintiff Whole
- Interest rates, Rates of Return, and Discount Rates
- Conclusion

Chapter 16: Discounting Damages: Case Law
- Robert M. Lloyd, Esq.
- Cases Allowing a Risk-Free Rate
- Cases Requiring a Risk-Adjusted Rate
- Cases Allowing a Reinvestment Rate
- Other Opinions Discussing the Discount Rate
- Alternatives to Challenging the Discount Rate
- Conclusion

Chapter 17: Issues and Controversies in Lost Profits Damages
- Nancy J. Fannon
- Lost Profits Damages 101
- Issues and controversies in damage claims
- Summary
- Section C: Special Topics

Chapter 18: Intellectual Property Overview
- Michael Crain
- Overview: Comparing IP valuation to IP damages measurements
- Summary

Chapter 19: Patent Infringement Damages: Lost Profits and Royalties
- Richard F. Bero
- Federal Law Governing Patent Infringement
- The Patented Technology at Issue
- Lost Profits in Patent Infringement Cases
- The “but for” causation
- The Panduit factors
- The two-supplier market
- Panduit factor 1: demand
- The entire market value rule – lost profits
- Panduit factor 2: acceptable non-infringing substitutes
- Panduit factor 3: capacity
- Panduit factor 4: calculating the amount of lost profits
- Market Share Damages
- Price Erosion
- Convoyed Sales
- Other lost profits concepts
- Royalty Damages
- Established royalties
- Reasonable Royalties
- The hypothetical negotiation
- Form of the reasonable royalty
- The entire market value rule - royalties
- The Georgia-Pacific factors
- The quantitative Georgia-Pacific factors
- The qualitative Georgia-Pacific factors
- Post-Verdict Royalties
- Limitations on Damages
- Damages Against the U.S. Government Under §1498
- Prejudgment Interest

Chapter 20: Successfully Using Experts in Patent Infringement Cases
- William J. Marsden Jr., Esq. and Timothy Devlin, Esq.
- A primer for attorneys on patent damages
- Reasonable royalty damages
- Ongoing royalties and mandatory licenses
- Additional types of damages and limitations
- Recent updates
- Case-based examples
- Conclusion

Chapter 21: Lost Profits in Trademark and Copyright Cases
- By Rick Hoffman
- Trademark Litigation and Damages Measurement
- Calculating Damages in Trademark Cases

Chapter 22: Lost Profits for Physician Practices
- By Mark Dietrich
- Basic Factors to Consider
- In-depth Look at Special Issues in Identifying Damages
- Conclusion
- Glossary of Terms

Chapter 23: Lost Profits Issues Unique to the Government Contracts Industry
- By Patrick A. McGeehin and Daniel E. Johnson, Esq.
- Government Contracting Types
- Government Contract Cost Analysis
- Application of Government Contract principles to Lost Profits Disputes
- Conclusion

Chapter 24: Lost Profits for Automobile Dealerships
- By Timothy W. York
- Franchise Relationships
- Lost Profits Considerations
- Understanding the Dealership Business
- Relevant Resources
- General bibliography

Chapter 25: Construction Claims
- Colin A. Johns and Greg A. McKinnon
- Claim Pricing Methodologies
- Claims for Delay
- Disruption
- Acceleration
- Typical Causes of Construction Claims
- Summary

Chapter 26: Benefit of the Bargain Damages
- By Jeff Litvak, Kenneth Mathieu, and Kevin Shannon, Esq.
- Post-Closing Adjustments to the Purchase Price
- Determination of Damages
- Pitfalls to Avoid in Assessing Damages
- Process for Resolving Disputes
- Case Study
- Insights and Observations regarding Merger and Acquisition Disputes
- Conclusion
- Appendix: Case Law Abstracts

Nancy J. Fannon, ASA, CPA-ABV, MCBA is a nationally known author in the area of economic damages and corporate valuation. She has published three texts on valuation and damages, and has participated as a co-author or technical reviewer of numerous others. In addition to the annual update of this Guide, her next text, expected to be published in 2011, is entitled “The Effect of Taxes on Value in the Private Capital Markets.”

Ms. Fannon is the owner of Fannon Valuation Group, a business valuation and litigation support services firm located in Portland, Maine. She frequently serves as a an expert witness or a financial consultant in matters involving complex corporate litigation for public and private companies, and testifies or consults on matters involving economic damages, unjust enrichment/disgorgement, post-acquisition disputes, shareholder disputes, and other damages.
Ms. Fannon is a frequent speaker at national and regional financial expert and legal conferences.

She is on the editorial boards of three valuation and economic analysis publications, and serves as co-chair of a joint industry standard-setting board. In 2007, she was inducted into the AICPA's “Hall of Fame”, awarded for substantial contributions to the advancement of the business valuation profession.

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