Measuring Business Interruption Losses and Other Commercial Damages 2017-02-18T13:10:31+00:00

Measuring Business Interruption Losses and Other Commercial Damages

John Wiley & Sons, 2003.

The Comprehensive Volume on Business Interruption

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Table of Contents

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 Economic Aggregates.
  • Overstatement of Inflation Statistics.
  • Regional Economic Trends.
  • International Economic Analysis.
  • Marcroeconomic and Regional Economic Analysis and the Before and After Method.
  • Summary.
  • References.

4. Industry Analysis

  • Introduction.
  • Sources of Industry Data.
  • Standard Industrial Classification Codes.
  • 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 Aide 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.
  • Using Break Point or Chow Tests to Determine Break Points.
  • 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 Statement.
  • 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.
  • Capacity Constraints and Fixed versus Variable 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.
  • Prejudgment 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 Standards for Business Valuations in Business Interruption Cases.
  • 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.
  • References.

9. Intellectual Property

  • Patents.
  • Computation of Damages for Patent Infringement.
  • Legal Requirements Necessary to Prove Lost Profits.
  • Lost Profits Due to Price Effects.
  • Lost Profits Due to Changing Cost Conditions.
  • Royalty Arrangements.
  • Copyrights.
  • Measurement of Damages for Copyright Infringement.
  • Trademarks.
  • Trade Secrets.
  • Summary.
  • References.

10. Securities-Related Damages

  • Key Securities Laws.
  • Damages in Securities Litigation.
  • Fraud-on-the-Market.
  • Comparable Index Approach.
  • Event Study Approach.
  • Mergers-Related Damages.
  • History of Mergers in the United States.
  • Churning.
  • Appendix A: Case Study: In Re Computer Associates, International, Inc.
  • Appendix B: Cases Setting Holding Periods.
  • References.

11. 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.

12. 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