What would Daubert say about those damages?

In a recent personal injury case we reviewed two economists, one hired by the defense and one hired by the plaintiffs, presented expert reports on the economic losses that were suffered by a commercial real estate broker. The real estate broker was injured in car wreck and was out of work for nearly 3 years. The broker, who was independently employed (technically organized as a 'S' corporation) and worked out of his home. In the year before the accident, the broker showed taxable income, all from his commercial broker activities, of $371,290 on his IRS 1040 tax return.

Although both economists based their lost income projections on the plaintiff's most recent pre-injury income tax return, the economists arrived at radically different annual lost income estimates. In fact the plaintiffs' economist estimate of the broker's lost income was over 50% higher than the defense economist's estimate.

Upon closer inspection, the difference between the two economists boiled down to how the economists incorporated the equipment depreciation shown on the plaintiff's income tax return. (See INSERT LINK to tax return) The defense economist took the bottom line adjusted income tax shown on Line # of the broker's income tax return (and shown above). The plaintiff's economist took the bottom line income tax return number shown on Line # and added back in the depreciation amount shown on Line # of the tax return. The broker had total depreciation of about $155,000 in the year before his accident.

What would Daubert say about the two economist's economic damage estimates?

A. The defense's economist is correct in taking the bottom line income number as the lost income and not adjusting for depreciation.

B. The plaintiff's economist is correct for adding back in the depreciation into the lost income number to calculate the lost income number.

Check back in the coming days for the answer.