Maximizing damages and settlements – Lesson 5

Excerpted from Determining Economic Damages by Gerald D. Martin

Checklist of topics

In this section, you will find a list of topics that should be covered when deposing the opposition’s economist. The topics are not phrased as questions, as each person will have his own preferred style. Instead, each item suggests an area that may be pursued. Of course, not all topics will be relevant to all cases, so you must pick and choose those that are appropriate. Also, the unique nature of some cases will dictate that you add topics not included here. Each topic is numbered and you will find that the numbers correspond to those in the following section 1483 where each topic is again covered but in greater detail so you will know just what you are looking for as you ask each of the questions in this section. At the deposition, you are merely discovering information that will be offered at trial.

How you conduct the deposition depends to some degree on whether you expect to settle or to go to trial. If you are rather confident that the case will be settled, then it may be better to strongly challenge and attack the economist at deposition. There is no point in holding back if you are not going to trial, and you may cause plaintiff’s attorney to see the weaknesses in his expert’s opinion.

When you are confident the case will go to trial rather than settle, it may be better not to challenge the expert. Instead, appear to accept everything he says. Do not point out any errors you note and do not restrict him to yes and no answers. At this stage, you want him to expand every answer and say as much as possible. The more you get into the record now, the more opportunity there is for you or your economist to find inconsistencies, errors, or illogical assumptions. Do not give him any warning of where you will attack, but make him commit himself to positions from which he cannot retreat at trial. Your questions should be thorough and if you are not given a direct answer, repeat the question. But do this in a manner that implies you are simply trying to understand the answer, not question it.

Before going to the individual topics, this is a good time to emphasize an excellent point made by attorney Carroll E. Dubuc, who has been quoted as saying “…it is as important to know how to corner an economist as it is to know when to do it. If you can pin the economist to his testimony in deposition and gather ammunition for the trial, you will have the advantage. If you destroy him at deposition, you will face a wiser and more formidable opponent at trial.”

The remainder of this section, as well as section 1483, has been updated in the 1999 revision to this book. Dr. Allyn B. Needham provides a fresh perspective to the questions and topics in sections 1482 and 1483 for the 2006 revision. Dr. Needham is a partner at Shipp, Needham & Durham, L.L.C. and has over 20 years of experience in the banking, finance, and insurance industries. He has also been an Adjunct Professor of Economics at Weatherford College and Texas Christian University. He is a past president of the Southwestern Society of Economists and actively participates in regional and national economic associations in the areas of forensic and sports economics. He also provides technical support to the Guide to Litigation Support Services published by Practitioners Publishing Company. Dr. Needham has written the remainder of this section and all of section 1483.

Checklist of Topics for Examining Opponent’s Expert

  1. Ask for a current curriculum vitae or resume of the expert.

  2. Ask for a detailed list of the economist’s writings that have been published and for handouts from panel or conference presentations, particularly those dealing with forensic economics. Ask him to identify those publications that appeared in refereed journals.

  3. Find out how many times the economist has been retained in civil lawsuits, how many times he has been deposed, and how many times he has testified at trial. Then get an estimate of how many times he has been retained by plaintiff and how many times by defendant. Ask for him to name some of the defense attorneys for whom he has worked and a list of his last 4-years’ depositions and testimonies. (This list is mandatory and will have already been provided in District Court cases.)

  4. Ask if he testifies as an expert in other areas (e.g. vocational rehabilitation)? If so, which expertise came first? How did he receive training to become an expert in his second field? This may be obvious from his curriculum vitae and may be skipped. But, in some cases, it may show a lack of general knowledge in the area of economics.

  5. Has his testimony ever been disallowed, disqualified or impeached? If so, get details as to why he was not allowed to testify or how he was impeached and the topic in question. Also ask whether he has ever been withdrawn by his attorney after being designated, and why.

  6. When retained, many economists submit a questionnaire or information form to the attorney to be filled in and returned. This form requests the information needed for an evaluation. Obtain a copy of the form.

  7. Next, be sure to get a copy of the answers provided on the questionnaire or information form listed in #6. Find out who answered the questions: the attorney, the plaintiff, or someone on the attorney’s staff.

  8. Go through the economist’s entire file and ask if there is any thing relating to the case that is not in the file. Have copies made of anything you do not already have. If there are documents on which the economist has made notes, copy those also.

  9. Get a list of all other sources he consulted. These will probably be government documents or studies that he does not keep in his file. Did he collect any data from the Internet? If so, what were the websites? What other sites did he review? Get a complete citation so that your economist may also obtain a copy or ask plaintiff’s economist to send you a copy.

  10. Learn whether he has received any verbal information from his attorney, the plaintiff, other experts, employers, co-workers or any other persons. Ask him to summarize all verbal information received. Ask for copies of any notes taken during personal interviews or telephone conversations. These may be hand-written or have been typed into a computer.

  11. Obtain a copy of his report, any summary of his evaluations, all correspondence, and any notes or worksheets. Also get copies any computer printouts he may have generated, including drafts or non-used calculations.

  12. If he used any abbreviations or symbols in his work, ask him to define them. Still better, ask him to make a two column list with the abbreviations and symbols on one side and their meanings opposite. The same applies to any formulas used in his calculations.

  13. Determine the life expectancy of the deceased or injured plaintiff, as well as the life expectancy of the spouse. Ask for the specific table reference to make this determination. Also ask if he knows of any medical or insurance company reports that have indicated a reduced life expectancy or age rating.

  14. Determine the worklife expectancy used by the economist, and the source document referred to for this determination. Did he calculate worklife expectancy based on the age of the plaintiff at the time of injury or at the trial date? Was an adjustment made for the probability of an earlier-than-average death and, if so, what was the adjustment and on what evidence was it based?

  15. If the worklife tables were not used, did he use some age, say 65 or 70 and/or then adjust for the probabilities of living, participating in the workforce and actually obtaining employment? If so, get the details of the adjustments and the source of his information.

  16. If the case involves a wrongful death, what deduction was made for personal consumption and what was the basis, or study, relied on for the deduction? Was the deduction adjusted as each child reaches age 18? Was the decedent’s income or the family income used to estimate the amount of personal consumption?

  17. What is the plaintiff’s income history and what was the source determining that history? Ask for 1040’s or W-2’s or check stubs. If a union member, ask if he obtained an earnings history from the union trust fund and get a copy of the union contract and trust fund printout.

  18. Other than earnings from employment, was any other income included in the loss? For example, did the plaintiff have a moonlighting job or was he self-employed? If so, how long would it have continued and what documentation does he have on the earnings form that job? Ask for a copy of the Schedule C from his tax return.

  19. Were any fringe (employer paid) benefits included in the loss? If so, what are they and how was their value determined? Did the fringe benefit calculation include paid vacation, sick pay, and/or paid holidays? If so, was the annual earnings adjusted so as not to double count?

  20. Was any loss included for the period following the worklife expectancy? If so, get the details of the nature of the loss and how the amount was determined.

  21. What growth rate in earnings was used and how was it determined? If based on historical growth rates, get a specific source for the history used. Was it the plaintiff’s own wage growth from his job or was it from the average as reported in some study or government document? Get a specific citation for the document or a copy from the economist? What past time period was used in determining the trend in wages? Why was that time period selected? What occupational categories were used as reference and what mathematical method was used to determine the growth rate?

  22. What discount rate was used to convert future losses to present value? What source was used to determine the discount rate? If an average historical rate was used, learn what specific security was examined. For example, was it 6-month Treasury Bills, long-term Treasury Bonds, or some other security? Also, if an average based on historical rates was used, find out what time period was used to determine the average rate. Was it the same time period used to calculate the growth rate? What mathematical method was used to determine the average? (Simple average, compound growth rate, geometric average.)

  23. Some economists do not use separate earnings rates and discount rates, but take the difference between the two. Or, they may use what is called “real” rates where inflation is deducted from both rates and the difference is again used. Learn what the basis was for determining growth rates and discount rates as an economist could not know the difference between them without knowing what the separate rates are. Find out what time period was used in making the comparison between the two.

  24. What date was used as the present value date? If not the scheduled trial date, ask if he plans to update his calculations to the trial date.

  25. When the plaintiff is injured and there is no vocational rehabilitation expert retained by plaintiff, the economist may use a degree of disability as a measure of earnings impairment. If this is done, determine exactly what source he used to estimate the degree of disability and what medical information he has to support his estimate. Ask how he determined what type of work the plaintiff is capable of performing in the future and what he assumed the plaintiff would actually do in the future.

  26. Take the plaintiff’s worklife estimate and ask the economist to calculate what the earnings would be in the last year the plaintiff would have worked in his pre-injury job. For example: If the plaintiff is assumed to have an additional 20 years of worklife remaining, ask what his actual earnings are estimated to be in 20 years. Then ask the same question regarding any mitigation income job the plaintiff may hold.

  27. Next, ask for the present (discounted) value of what the plaintiff would be earning in his last year of work in both pre- and post- injury jobs.

  28. Were any adjustments made to account for income tax? If so, which elements of loss were adjusted and what tax rates were used? Did he include state as well as federal taxes? Was the tax based on prior year tax returns or estimates using the current tax tables? Was the employee portion of social security and Medicare included in the tax rate?

  29. If a tax adjustment was made on expected earnings, was a tax adjustment also made on the interest earnings expected from investing any award made by the jury? How was that adjustment made?

  30. What was the source of information for any future medical expenses, and for how many years will those expenses continue? You may need to ask some detailed questions in this area, depending on the degree of injury and the level of future medical needs. For example, is the economist assuming 24-hour-a-day care by a registered nurse, and what is his basis for assuming the need for a registered nurse rather than, say, a licensed vocational nurse or a housekeeper? Another example would be a special van for a quadriplegic. How did he determine the cost of such a van and did he deduct what would have been spent on a car had the injury not occurred?

  31. Is any loss claimed for the loss of the value of services he or she provided to the home and family? How was this value determined and what source of information was used to determine the number of hours lost and the value of services per hour?

  32. Obtain a list of any other losses the economist may have included in his estimate, and determine his sources and method of calculation.

  33. Are there any other assumptions he has made that have not been discussed? Are there any other documents or sources of information that were referred to but not yet mentioned?

  34. Does the economist plan to use any visual or graphic displays at trial that are not now in his file? If so, arrange to get copies before trial.

  35. Make sure that all formulas and methods of calculation have been fully explained so your economist can understand just how the evaluation was made and be able to verify the arithmetic and logic.

  36. Find out whether the economist will have a calculator or laptop computer at trial and be able to make estimates based on hypotheticals you may give him. If he says he will not, then consider giving him the hypotheticals now and ask him to have answers ready at trial.

  37. Is the evaluation final or will it be changed before trial? If changes are anticipated, ensure that you will be sent copies of those changes and have the opportunity to continue the deposition at a later date. Try to commit the economist to agreeing that the estimates are final and no changes will be made.

  38. Does he plan to testify to the value of any general damages? Specifically, does he plan to discuss what has become known as hedonic damages, also called the loss of the value of the enjoyment of life? (If so, please refer to the article in the DRI monograph cited at the beginning of this section written by Dr. Havrilesky specifically relating to hedonic damages. Note that some economists refer to these as the Value of Life rather than hedonics.)

  39. What was he asked to do? It may be to rebut the plaintiff’s report or prepare a separate damage calculation. (To be asked when deposing the defense economist.)

  40. What damages did you calculate? If only critiquing the other expert’s report, probably none. If so, get him to admit that he does not know what damages there may be. (To be asked when deposing the defense economist.)

  41. How many times have you worked for this attorney? How many times for this firm? This may be his first time to work with this attorney, but he may have worked many times with this firm. The jury may perceive some bias if the number is large.

  42. When you criticize another expert’s work do you apply the same model and assumptions to your analysis that you use in preparing your own reports? Have you changed the methods and assumptions used in preparing your reports in the last twelve months?  Ask for copies of prior reports to determine if he is consistent in his approach.

  43. Is there more than one accepted method for calculating economic damages? Discount rates? Growth Rates? Worklife expectancy? The answer to all of these questions is yes.

  44. Does each accepted method involve assumptions? Is economic theory, as a whole, based on assumptions? Get him to admit that almost every economic model must use assumptions, so it is not unusual to make assumptions for economic calculations. It is unusual if he says there are no assumptions.

  45. What assumptions did you use in critiquing the other expert’s report? What was your data source? Where is your report different from the other report? These assumptions could be worklife or retirement date differences. It will almost certainly include a different growth and discount rate. You will need to determine the assumptions made by the opposing expert so that your economist may address these differences at trial.

 


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Calculating and Proving Economic Loss

Dr. Gerald Martin’s Determining Economic Damages provides authoritative and helpful guidance to damage assessment and proof, whether or not your case justifies retaining an economist.  You learn how to:

  • Determine past and future income losses.  Chapter 3

  • Compute the value of fringe benefits.  Chapter 4

  • Adjust for personal consumption.  Chapter 5

  • Measure the replacement value of household services.  Chapter 6

  • Compute life and worklife expectancy.  Chapter 7

  • Adjust for income taxes.  Chapter 8

  • Calculate the present value of future losses.  Chapter 12

  • Put everything together and calculate loss.  Chapter 13

  • Prepare your case and expert for trial.  Chapter 14

  • Depose and cross-examine the opposing expert.  Chapter 14

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