Measuring Business Interruption Losses and Other Commercial Damages, 2nd Edition

by Patrick A. Gaughan ( )

• ISBN13: 9780470526156
• ISBN10: 0470526157
• Format: eBook
• Copyright: 2009-07-01
• Publisher: Wiley

Summary

An updated explanation of the methodology for how lost profits should be measuredNow fully revised and updated, focused on commercial litigation and the many common types of cases, this is the only book in the field to explain the complicated process of measuring business interruption damages. The book features an easy to understand and apply, step-by-step process for how losses should be measured so as to be accurate and reliable and consistent with the relevant laws.With a new chapter on the economics of punitive damages, the new edition also explains detailed methods for measuring damages in contract litigation, intellectual property lawsuits, antitrust, and securities cases. This new Second Edition incorporates the latest developments in the fields of economics and accounting, while also integrating the most current changes in case law.Here's what you will find Each chapter includes new materials and updated content Added websites for sources of data Includes a website for updated tables that can be utilized by readers A section of the new cases involving Daubert challenges to economists Includes methods on how to do industry research A new section covering the equity risk premium and the various recent research studies, which set forth the debate on what the premium should beContaining exhibits, tables, and graphs, new cases involving Dauber, how to do industry research, equity risk premium, research studies on the marketability discount, anti-trust, punitive damages, and more, Measuring Business Interruption Losses and Other Commercial Damages, Second Edition incorporates the relevant literature and research that has come out in this field over the past four years.

Table of Contents

Preface

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

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

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 Economic Aggregates

Overstatement Of Inflation Statistics

Regional Economic Trends

International Economic Analysis

Macroeconomic And Regional Economic Analysis And The Before And After Method

Summary

References

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

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

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 Costs

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

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

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

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 For Copyright Infringement

Trademarks

Trade Secrets

Summary

References

Securities-Related Damages

Key Securities Laws

Damages In Securities Litigation

Fraud-On-The-Market

Comparable Index Approach

Event Study Approach

Broker Raiding Cases

Mergers-Related Damages

History Of Mergers In The United States

Client-Broker Claims

Churning

Case Study: In Re Computer Associates, International, Inc

Cases Setting Holding Periods

References

Antitrust

Antitrust Laws

Antitrust Enforcement

Economics Of Monopoly

Changing Pattern Of Antitrust Enforcement

Antitrust And The New Economy

Monopolization And Attempts At Monopolization

Market Power

Measures Of Market Concentration

Common Types Of Antitrust Cases

Summary

References

The Economics Of Punitive Damages

Evolving Position Of The U.S. Supreme Court On Punitive Damages

Frequency Of Punitive Damages

Frequency Of Punitive Damages And The Shadow Effect Of Punitive Damages

Purposes Of Punitive Damages

Punishment Of Corporations And Corporate Governance

Spillover Effects And Punishment Of Corporations

Deterrence Theory And The Changing Litigation Environment

Deterrence And Regulatory Processes

Typical Financial Measures Used In The Determination Of Punitive Damages

Net Worth

Market Capitalization

The Uncertain Litigation Environment

Summary

References

Index

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