Litigation Support & Expert Witnessing Flashcards

In a lost profits claim, a newly formed business with no operating history faces which traditional legal obstacle?

Answer: The new business rule

Under the new business rule, profits of an unestablished business were traditionally considered too speculative to recover, though many courts now allow recovery if they are shown with reasonable certainty.

An expert measures lost profits by comparing the plaintiff's results to similar businesses that were not affected by the wrongful act. Which method is this?

Answer: Yardstick method

The yardstick (benchmark) method uses comparable businesses or industry data to estimate what the plaintiff would have earned.

When calculating lost profits, which costs should generally be subtracted from lost revenues?

Answer: Incremental costs that would have been incurred to earn the lost revenue

Lost profits equal lost revenues minus the avoided or incremental costs the plaintiff would have incurred to earn them.

A plaintiff could have reduced its losses by finding substitute customers but did not try. Which doctrine may reduce the damages award?

Answer: Duty to mitigate damages

Plaintiffs must make reasonable efforts to mitigate, and damages that could reasonably have been avoided are generally not recoverable.

When discounting future lost profits to present value, which discount rate is generally most appropriate?

Answer: A risk-adjusted rate reflecting the uncertainty of the projected cash flows

Future lost profits are typically discounted at a rate that reflects the risk of achieving those projected earnings.

In a fraud case, which damages measure awards the difference between the value as represented and the actual value received?

Answer: Benefit-of-the-bargain measure

Benefit-of-the-bargain damages give the plaintiff the value they would have had if the representations had been true.

Damages are typically measured as the difference between which two scenarios?

Answer: The but-for scenario and the actual scenario

Economic damages compare what would have happened but for the wrongful act with what actually happened.