October 7, 2014—Consumers and businesses that want to pursue money damages as part of a legal dispute face increasing obstacles to quantifying the extent of financial harm, say experts at Nathan Associates.
This is especially true in class actions, said Russell L. Lamb, an expert witness and senior vice president for litigation consulting at Nathan Associates. Supreme Court rulings, most recently Comcast v Behrend in 2013, put a higher burden on experts than before, said Lamb, an economics Ph.D., in a roundtable with Corporate Disputes magazine (October–December 2014).
Lamb and Christopher Jackman, Nathan’s managing economist for litigation, provided insights into how professionals evaluate damages. Damages experts must use “sound economic principles and a scientific approach” and must be able to communicate clearly to a judge, jury, arbitration panel, or mediator why there are damages, said Lamb, who has testified in international arbitration and litigation as well as mediation in the United States. He has worked for clients in Australia, Canada, and the United Kingdom as well as the United States.
In the Comcast ruling, the majority of justices ruled that rigorous analysis must be performed to determine if the damages analysis from a plaintiff’s expert is consistent with the plaintiff’s theory of liability.
“This ruling altered the nature of damages analysis in that experts must now pay much closer attention to the facts and details of a case to ensure that their damages analysis can be commonly applied to all class members in a way that aligns with plaintiffs’ allegations,” Lamb said. The ruling, he added, “may have broader implications into other types of corporate disputes.”
The expert, Jackman said, “must undertake a more rigorous, and often time consuming, analysis of the data” in creating a damages model. The challenge is particularly great when the expert has to deal with data that are “incomplete or otherwise unreliable in one way or the other.”
Previously, the expert could make certain simplifying assumptions and proceed with the analysis, Jackman said. But decisions like Comcast “can significantly impact an expert’s ability to do so because of the heightened burden he or she faces in ensuring that his or her damages analysis is consistent with the allegations in the case.”
Lamb and Jackman said companies should consider engaging a damages expert in addition to legal counsel before pursuing a commercial dispute. The companies can then get a better idea of their prospects before spending considerable time and money pursuing their case. The analysis might show damages to be lower than the client anticipated—or higher.
The same principles of damage analysis that apply in litigation apply for arbitration and mediation, Lamb and Jackman said.