Measuring Business Interruption Losses and Other Commercial Damages

Praise for Measuring Business Interruption Losses and Other Commercial Damages Second Edition
"This is a terrific tool for business litigators. Commercial damages is an increasingly important area in complex litigation and Dr. Gaughan explains the subject in thorough detail with his characteristic knack for making it understandable."
—Wayne W. Bost, Chair, Commercial Litigation Practice Group, Winstead PC
"This work belongs on every trial lawyer′s bookshelf! Dr. Gaughan′s Second Edition gives the experienced as well as the aspiring trial lawyer an updated, comprehensive, multidisciplinary approach to, and methodical framework for, measuring all types of commercial damages. You will consult this wonderful resource in analyzing, evaluating, and presenting the damages components of your next case!"
—John C. Maloney, Jr. Esq., Partner, Day Pitney LLP
"Dr. Gaughan′s Second Edition of his book on economic damages in the context of litigation has appeal to a wide variety of readers. At one extreme, this book is directed to an attorney seeking to obtain a grasp of how to use economists and accountants in litigation, and how to go about the process of finding such an expert. At the other extreme, practicing forensic economics and accountants can use this book both as a learning tool to develop new skills in forensic economics or as a permanent reference source in one′s library. I believe this book should be owned both by attorneys practicing in business litigation and by experts working for those attorneys."
—Robert R. Trout, PhD, CFA, Partner, Lit.Econ, LLP
"This book is the finest in the field. It covers the law, economics, finance, and accounting of commercial damages. I use and recommend it. Pat Gaughan′s first edition was the most comprehensive look at commercial damages for practicing experts available, and the Second Edition expands on what was already an indispensable te xt."
—Patrick L. Anderson, CEO, Anderson Economic Group LLC

Spis treści:
Preface.
1 Introduction.
Development Of The Field Of Litigation Economics.
Lost Profits Business Interruption Analysis Compared To Personal Injury And Employment Litigation.
Qualifications Of An Economic Expert.
Qualifications Of An Accounting Expert On Damages.
Interdisciplinary Nature Of Commercial Damages Analysis.
Difference Between Disciplines Of Economics And Finance.
Finding A Damages Expert.
Critically Reviewing A Potential Expert′s Curriculum Vitae.
Getting The Damages Expert On Board Early Enough.
Court′s Position On Experts On Economic Damages.
Standards For Admissibility Of Expert Testimony.
Expert Reports.
Defense Expert As A Testifying Expert, Not Just A Consultant.
Quantitative Research Evidence On The Benefits Of Calling A Defense Expert.
Treatment Of The Relevant Case Law.
Legal Damage Principles.
Other Types Of Damages Cases.
Summary.
References.
2 Economic Framework For The Lost Profits Estimation Process.
Foundation For Damages Testimony.
Role Of Assumptions In Damages Analysis.
Hearsay.
Approaches To Proving Damages.
Causality And Damages.
Using Demonstrative Evidence To Help The Client Understand Its Losses Or Lack Of Losses.
Causality And Loss Of Customers.
Graphical Sales Analysis And Causality.
Causality And The Special Case Of Damages Resulting From Adverse Publicity.
Length Of Loss Period: Business Interruption Case.
Length Of Loss Period: Plaintiff Goes Out Of Business.
Length Of Loss Period: Breach Of Contract.
Methodological Framework.
Summary.
References.
3 Economic Analysis In Business Interruption Loss Analysis.
Macroeconomic Analysis.
Definition Of A Recession.
Measuring Economic Growth And Performance.
Business Cycles And Economic Damages.
Using More Narrowly Defined Econo mic Aggregates.
Overstatement Of Inflation Statistics.
Regional Economic Trends.
International Economic Analysis.
Macroeconomic And Regional Economic Analysis And The Before And After Method.
Summary.
References.
4 Industry Analysis.
Sources Of Industry Data.
New North American Industry Classification System.
Retaining An Industry Expert.
Conducting An Industry Analysis.
Relating Industry Growth To The Plaintiff′s Growth.
Other Industry Factors.
Yardstick Approach And Industry Analysis.
Summary.
References.
5 Projecting Lost Revenues.
Projections Versus Forecasts: Economic Versus Accounting Terminology.
Using Graphical Analysis As An Aid In The Forecasting Process.
Methods Of Projecting Lost Revenues.
Curve–Fitting Methods And Econometric Models.
Understanding Regression Output And Diagnostics.
Common Problems Affecting Regression Models.
Case Study: How The Chow Test Can Be Misapplied.
Confidence In Forecasted Values.
Frequency Of The Use Of Econometrics Techniques In Commercial Litigation.
Seasonality And The Forecasting Process.
Capacity Constraints And Forecasts.
Sensibility Check For The Forecasted Values.
Projecting Lost Sales For A New Business.
Projecting Losses For An Unestablished Business.
Case Study: Lightning Lube, Inc. V. Witco.
Summary.
Appendix.
References.
6 Cost Analysis And Profitability.
Presentation Of Costs On The Company′s Financial Statements.
Measures Of Costs.
Profit Margins And Profitability.
Appropriate Measure Of Profitability For A Lost Profits Analysis.
Case Study: Cost Analysis In Business Interruption∗.
Burden Of Proof For Demonstrating Costs.
Fixed Versus Variable Costs.
Using Regression Analysis To Estimate Costs As Opposed To More Basic Methods.
Pitfalls Of Using Regression Analysis To Measure Incremental Costs.
Possible Nonlinear Nature Of Total Cos ts.
Limitations Of Using Unadjusted Accounting Data For Measuring Incremental Costs.
Treatment Of Overhead Costs.
Must A Plaintiff Be A Profitable Business To Recover Damages?
Mitigation Of Damages.
Cash Flows Versus Net Income: Effects On The Discounting Process.
Recasted Profits.
Case Study: Profits That Are Not Really Profits∗.
Firm–Specific Financial Analysis.
Cross–Sectional Versus Time Series Analysis.
Summary.
References.
7 Time Value Of Money Considerations.
Determination Of Interest Rates.
Types Of Interest Rates.
Financial Markets: Money Market Versus Capital Market.
Money Market Securities And Interest Rates.
Capital Market.
Real Versus Nominal Interest Rates.
Determinants Of Interest Rates.
Rejudgment Losses.
Components Of The Cost Of Capital.
Discounting Projected Future Profits.
Common Errors Made In Discounting By Damages “Experts”.
Summary.
References.
8 Business Valuations.
Legal Standard For Business Valuations In Business Interruption And Business Failure Lawsuits.
Lost Profits Versus Lost Business Value.
Business Valuation Framework.
Theoretical Value Of A Business.
Public Versus Private Companies.
Business Valuation Parameters.
Revenue Ruling 59–60 And Factors To Consider In Valuation.
Valuation Concepts.
Most Commonly Used Valuation Methods.
Case Study: Applying The Discounted Cash Flow Method Of Business Valuation.
Capitalization Of Earnings.
Comparable Multiples.
Case Study: Use Of Multiples To Determine Enterprise Value.
Adjustments And Discounts.
Summary.
References.
9 Intellectual Property.
Patents.
Computation Of Damages For Patent Infringement.
Legal Requirements Necessary To Prove Lost Profits.
Lost Profits Due To Price Erosion.
Lost Profits Due To Changing Cost Conditions.
Royalty Arrangements
Copyrights.
Measurement Of Damages