How important are company specific assumptions?

The following case discusses:

*Company specific economic damage assumptions

* Computational errors in the economic damage calculation

From Blog 702

Cummings v. Standard Register Co., 265 F.3d 56 (1st Cir. 2001). Plaintiff's economic expert testifies to lost wages in discrimination suit. Admissibility affirmed.

Defendant argues economist should have used company-specific data re plaintiff's compensation, but on cross-examination, expert offered reasons for using data he did. According to the court documents, the defendant did not show how expert's assumptions were incorrect or unreasonable. Defendant also highlights computational error exposed during expert's testimony, but trial court permitted defendant to argue that point to jury.

Still, where jury returned award closely matching expert's original erroneous estimate and in excess of his corrected one, probability of jury confusion warrants remittitur to damages not exceeding corrected estimate.

What should a defense attorney expect when they engage an economic expert in a injury, wrongful death or employment case?

So what do defense attorneys defending cases involving injury, death or employment use economic damage reports on lost compensation for? Here is some feedback that we have received from the defense attorneys that we have worked for.

If liability is clear in the case:

An economic damage report can keep the plaintiff’s expert ‘honest’. A rebuttal report helps ensure that the opposing expert is using reasonable, generally accepted, and realistic economic assumptions in the case. A rebutal expert report can also provide the mediator, arbitrator, or jury with an alternative view of the economic damages.

If liability is NOT clear in the case (or it is an employment discrimination case) :

In these types of cases, defense attorneys have numerous times expressed a concern to us about not wanting to appear as just quibbling over the amount of damages that should be paid. The concern that has been expressed to us is that introducing economic evidence from the defense side will just look like they are conceding liability and trying to figure out how much to pay.

However, some defense attorneys still feel that a rebuttal report can still be of use even in cases where the liability issue is still an issue. For instance, some defense attorneys will use the economic damage estimates provided by a rebuttal report to generate questions to cross examine the plaintiff’s economic expert at deposition or trial. Other, though rarely, will use the rebuttal report in their Daubert-type motion. Of course some attorneys believe that the downside to not engaging an economic expert, even given the risk, is to0 great and will name a testifying expert even when the question of who is at fault is still largely debatable.

By The Numbers 8.23.2004

According the most recent data on federal appellate decisions concerning Daubert challenges on Blog 702:


87.9% of the time a district court decision to allow an expert witness testimony is challenged, the appeals court affirms the decision.


84.1% of the time a district court's decison to exclude an expert witness' testimony is challenged, the appeals court affirms the decision.

Occupational Spotlight: CDL Certified Truck Drivers

Every occupation and every industry is different. Some times the differences matter when calculating the economic damages. This is especially true in cases involving the injury or death of an individual with a significant amount of occupational and industry experience.

In this piece we look at and discuss sites and information sources that provide information on:

- occupational and industry average wage increase
- average salary and job tenure
- employment outlooks.

Todays focus: CDL certified truckers:

Historical rates for tractor-trailer truck drivers can be found at:

http://stats.bls.gov/oes/oes_data.htm

Industry specific information for trucking can be found by O*NET-SOC codes at:
http://www.acinet.org/acinet/
.
Background information on CDL certification t:
http://www.fmcsa.dot.gov/safetyprogs/cdl.htm

Effectively presenting lost social security benefits to a jury

What is the most effective way to tell a jury about the losses that a plaintiff or a deceased person suffered to their social security retirement benefits? That is a question that our economists many times have to face in cases involving the death or serious injury of a wage earner. We have found:

*Many people, and hence potential jurors, do NOT know how social security benefits are actually calculated.

As a result we have found that it is very useful to explain briefly how social security benefits work. It is especially important to explain how the amount that is deducted from an employees check is matched by the company.

*If the social security benefits are relatively important, it will most likely be easier to explain the loss by simply setting up a table that shows the expected social security payouts and the dates the social security payments were scheduled to occur.

While this is not an overly involved calculation, it is important to recognize that the employee’s contribution will have to be taken out of the individual income loss schedule. This is to avoid double counting since the employee’s contribution is used to fund the social security retirement benefit that is shown in expected social security payout table. The employer’s contribution will also have to be taken out of any fringe benefit modifier that is used to value the individual’s fringe benefit package.

*If the social security benefits are relatively unimportant, it may be easier to explain the loss by just adding the value of the employer’s social security benefit into the fringe benefit loss. Fringe benefit losses are usually shown and valued contemporaneously with the loss of income estimates. Many economist use a fringe benefit multiplier that includes the employer social security match. .

What would Daubert say about those economic damages? 8.13.2004

Here is an interesting economic damage scenario posed by a couple of attorneys, that our economists were ask to comment on.

The situation

Suppose a pair of 10 yr old twins were tragically injured t the end of 4th grade on the exact same day in the exact say manner, but completely different accidents caused by completely different defendants. You are sought out to be hired by the Plaintiff attorney for Johnny who lives with his mom. His mom is a RN.

You are also sought to be hired by the defense attorney regarding Jimmy who lives with his dad who is a auto mechanic.

The cases will be heard by the same judge. Both kids are somewhat above average students, have modestly above average intelligence, and are very devoted to the parent they live with. They see little of the other parent.

On weekends, Johnny often goes to work with his mom at the hospital where she works, he loves doing this and is fascinated by all the technology. He has at times said he might become a nurse like his mom. On weekends Jimmy often goes to work with his dad at the shop, he loves to do this and likes all the technology. He has at times said he might become an auto mechanic like his dad.

Consider the following:

The plaintiff attorney asks if you would please portray to the jury, among other types of losses only the expected wage loss assuming Johnny were to become an RN, and no other career. In the town, such local wages start at about $40,000.

The Plaintiff attorney further asks that you consider the only the full time earnings' expectancy, as he believes in this jurisdiction "earnings capacity" is the standard, and asks you to compute full time wages to age 67. The attorney is confident he will get a motion in limine requiring the jury to disregard any unemployment, premature death, and withdrawal from the labor force statistics.

Bottom line is: you are asked to assume that he would work 45 years to age 67 after graduating from nursing school at age 22.

On the other hand, the defense attorney asks if you would please portray to his jury, among other types of losses, the expected wage loss assuming Jimmy were to become an auto mechanic, and no other career. Assume such wages start at $18,000 per year at age 18 after high school and average about 36,000 for auto mechanics in the local area.

In contrast to the plaintiff's attorney, the defense attorney further asks that you consider the only expected worklife years only, as he believes that the jury instructions regarding earnings capacity will fully allow a jury to consider unemployment, lack of labor market participation and premature death. Thus he wants you to consider worklife of (lets just say) 35 years from age 18.

You are told and have no reason to doubt that different judges have ruled differently on such "earnings capacity" motions in this jurisdiction, there is no governing case law, so whether a jury will be allowed to consider premature death, unemployment and withdrawal from the labor force statistics is a toss up. You will not know until trial. Further, you are led to believe that depending upon the strength of the arguments of either side, it is entirely possible that the judge may rule one way in one case and another way in the other case, basing his ruling on the strictly on the strength of the arguments presented in each case by the attorneys handling each case.

The Question: What do you do?

A. Do you agree with the plaintiff's request regarding the RN wages and full time work to 67?
B. Do you agree with the defendant's request regarding auto mechanic wages and worklife years?
C. Do you take both cases?

{'Answers' in the coming days}

Get great economic damage testimony...pump up your expert economist's ego!: What to tell your economic expert before the deposition.

For most economists, no matter how many cases they have testified in, the experience of providing testimony at a deposition is very stressful. In fact many economic experts would say that providing testimony at a deposition is even more stressful than providing testimony at trial. At depositions, opposing counsel are far more likely to ask questions that are nothing more than harassment (at least as seen by the witness). Many of the lines of questions that attorneys pursue in a deposition would bore the average juror senseless.

The bottom line however is that when witnesses are under stress, they are far more likely to make a mistake or make inaccurate statements. What can you, as the attorney defending the deposition, say and do with your economist to help your testifying expert not be as stressed (and provide the best testimony for your client)?

1. Do not let them be bullied by the opposing counsel.
Some attorneys will try everything from talking over the experts testimony to more subtle approaches to intimidate the witness such as standing over the expert while they review documents.

*Tell your economic expert witness :
Stay your ground. Finish your answers fully. If the opposing attorney attempts to cut you off; do not let them. Do not let them do the subtle things; cut if off before they get started. If the witness is not comfortable, many people are not, with the attorney approaching them or with the questioning attorney standing while the witness is seated, tell your economist to let the attorney asking the questions know that. It is more than ok, to say ' NO, I do not feel comfortable with you looking over my shoulder.' At any point if they feel uncomfortable, have them take a break. Sometimes this can be a great way to break the attorney's 'mo'! (Think about the effect of a well placed time out in sports.)

2. Do not let the opposing counsel tell the economic expert witness what their testimony is.
Attorneys will many times try to re-phrase the economic experts testimony in the way they want it to be stated. Almost always, the re-phrasing is inaccurate or a trick.

*Tell your economic expert witness:
Be on guard for any and all questions that involve the attorney rephrasing what you did in YOUR analysis. It is usually best to just re-phrase the attorneys questions no matter what. Remember, the attorney already knows the answer to the question in many depositions; they just want the economist to agree to some statement that helps their position.

3. Do not let the opposing counsel shake your confidence in your economic model.
Many attorneys will try to shake the economic expert's confidence by asking detailed questions on some particular area. For example, the attorney may go into great detail about the interest rate that was used in your economic expert's model and ask about alternative models that could have been used.

*Tell your economic expert witness:
The key thing to remember here is that no matter what the opposing attorney says or does, 99.9% of the time there is no one in the room who knows more about the economic damage model than the expert witness. This is especially important to new economic experts (it never hurts to tell the old salts this too). Assuming that the analysis is tight and correct, the economist should stick to their position. In most situations, the differences in the models are nothing more than differences in the assumptions and methodology. Tell them that, at least in your experience, that it is usually not grounds to kick a report simply because the opposing counsel does not like it!

4. Do not overreach ; even on items that you 'should' know.
Many attorneys will set up a hypothetical situation and then try to use the expert's testimony to show some 'flaw' in the economic expert's analysis. Depending on the skill of the attorney, the set up of the hypothetical situations can be very involved. Other times the attorney will ask the expert witness about something that they know that the expert has no knowledge of.

Tell you economic expert witness:
One thing: DO NOT BE AFRAID TO SAY ' I DO NOT KNOW'. They is nothing wrong with not knowing the answer. Even if it is an answer that the expert should know (at least in the eyes of the attorney asking the question). More times than not reaching and guessing on things that the expert does not know will make the situation worst. Also do NOT offer to get the attorney more information on some topic; if you do not know; then you do not know. Do not fall into the opposing counsel's hypothetical traps.

Can economic expert reports be ruled inadmissible because the report was not detailed enough?

As forensic economist we have seen expert reports that vary greatly in terms of the amount of detail. Some economic expert reports for example, only include a table of the plaintiffs economic damages. Other economic reports include every single article referenced in the report as well as a description of the methodology used to construct the report. Of course, most fall somewhere in between.

A recent post, at Blog 702, (http://daubertontheweb.com/blog702.html) suggests that contrary to the common wisdom, expert reports do NOT have to show all the details to be admissible. Here is the post below:

Wednesday, August 04, 2004
5th Circuit Says Forensic Expert's Report Need Not Specify Protocols

In an unpublished opinion, the Fifth Circuit has rejected a criminal defendant's complaint that the reports of the prosecution's forensic experts failed to disclose the protocols used in testing contraband substances.

The relevant paragraph from the opinion:
Ashlock's main critique of the government's forensic testimony centers on the experts' failure to disclose the protocols they followed in testing the substances they identified as contraband, rendering it impossible for anyone other than a chemist to examine the test results independently and reach a conclusion regarding the identity of the substances tested.

Nothing in Rule 702 requires an expert to provide this level of detail, however. Instead, Rule 702 simply dictates that the party presenting the expert testimony must show by a preponderance of the evidence that the testimony is reliable. See United States v. Fullwood, 342 F.3d 409, 412 (5th Cir. 2003). At trial, the government met this burden by eliciting testimony revealing that:
(1) each expert held a bachelor's degree in chemistry and had extensive on-the-job training in forensic chemistry;
(2) each of the tests performed by the experts was generally accepted in the field of forensic chemistry;
(3) each of the tests was performed in accordance with the standard procedures used in the laboratory; and
(4) each expert had his or her results reviewed by another chemist in the laboratory or by a laboratory administrator.

Based on this evidence, we hold that the district court did not abuse its discretion in admitting the government's expert-witness testimony under Rule 702.See United States v. Ashlock, No. 03-10615 (5th Cir. Aug. 3, 2004) (King, Barksdale, & Pickering, JJ.). It is sometimes contended, in civil litigation, that an expert's report should be stricken because it supplies insufficient detail to permit independent investigators to reproduce the expert's results.

That position is apparently so uncontroversially untrue, in the Fifth Circuit, that its rejection does not call for a published opinion. We note that under Fifth Circuit Rule 47.5.4, unpublished opinions issued after January 1, 1996, may be cited as persuasive authority.

Thanks Blog 702, more great work!

What can the defendant's decision to retain an economist tell you about their settlement position?

Published in Journal of Legal Economics, Volume 5, Number 2, Fall 1995 pp.57-65.

Based on this article, the authors analysis suggest that using a defense economist may suggest that the defendant is getting closer to settlement...

An excerpt for the article:

Defendants may use a defense economist for at least two reasons. First, defense attorneys may recognize that without a professional review of damage claims, they may be subject to malpractice suits for not making every effort to mitigate damages. Secondly, insurance companies, in an attempt to reduce the cost of claims, may become less willing to settle without first having a defense economist review the plaintiff’s demands...

ERISA financial incentives and economic damages: A question from a plaintiff's attorney

Question ask by a plaintiff's attorney concerning ERISA plans:

One thing that frequently comes up in the ERISA cases that I handle, is that the retirement plan structure provides company's with a strong financial incentive to terminate employees who are closer to retirement. I understand this in principle, but I need to know more about the details of how this works.

Specifically, it has been often stated to me that in defined benefit retirement plans (i.e. fixed pension benefits ) that calculate costs and contributions using the "projected unit credit" method are back loaded by design. That is, these plans, which are large majority of plans, because of the concepts of discounting and the time value of money, create a situation where a participants later years of pension contribution are more valuable to the employee (and more costly to the company) than the earlier years with the company.

Question: Is this correct, do defined benefit pension plans create this type of 'back loading' situation?

Answer:

Yes, many defined benefit plans do create a back loading situation where the later years of an employees participation in the plan is more cost to the company (and more valuable to the employee). This is because under many plans, the participant's projected future retirement benefit is allocated among each of his or hers years of participation in the plan.

Think of the following simplified example. In this example, the company will pay 1% of the person's salary upon retirement. That is for a person earning $30,000 they will pay $300 per year starting when the person retires at age 65. So a person who works 20 years and earns $30,000 a year will have retirement benefits of $6,000 a year. (Low numbers but the concepts are really close to many retirement plan formulas)

In this plan, the retirement promises made in later years are worth more than the promises made in the earlier years. Why is this? This is because the discounted value of the amount promised in the first year of the persons retirement is worth LESS than the retirement promises made in the later years. For example, since in the first year the person will not retire for many years, the company will have many years (say 20) before they have to actually pay the plan participant. As a result the company could earn many more years of interest before they have to pay out.

The bottom line is that the present value of the $300 retirement promise made in the first year of participation is about $$80 while the present value of the same retirement promise made in year 19 is about $270.