Attorneys considering a hedonic damage analysis

Further note on Dr. Stan Smith and hedonic damages...

If you are an attorney considering incorporating hedonic damages into your case, you may want to consider looking at Dr. Stan Smith's service and website http://www.smitheconomics.com

His group, Corporate Financial Group, Inc., offers hedonic damage analysis (as well as regular damage analyses). Like our economist at lostcompensation.com, Dr. Smith charges a flat rate for his services. According to their website, Dr. Stan Smith charges $3,765 for a hedonic damage analysis and $2,765 for a regular, i.e. lost wages, type analysis.

An excerpt from his website concerning his fees is below:

(From Dr. Stan Smith's website)

EVALUATION FEES: Loss evaluations and the accompanying services described above are provided on each separate business unit or person involved in a matter. In personal injury cases, these services and evaluations, whether written or oral, for all tangible losses such as lost earnings and benefits, medical costs, etc., are $2,765. Loss evaluations and services for all intangible (so-called hedonic) losses in injury or death, including loss of society and companionship, are also $2,765. Services and evaluations reflecting both tangible and intangible losses in combination are $3,765. While rare, if complexity arising in estimating losses involves any additional cost, you will be notified in advance. Complex commercial litigation fees are charged on an hourly basis.

Hedonic damages

Below is a wonderful summary of where hedonic damages are at the current time. It is a note from a listserv post by Stan Smith, Ph.D. Dr. Smith (http://www.smitheconomics.com) is one of the leading and most respected economist in the area of hedonic damages. Here is his post (Thanks Dr. Smith for the most insightful update!)

UPDATE ON HEDONIC DAMAGES IN THE COURTROOM (From Dr. Stan Smith):

New Jersey and Nevada continue to be states where testimony on the value of life in non-fatal injury cases is admitted a very high percentage of the time. The same is true in Arkansas for non-fatal as well as - note this - fatal injury cases. Arkansas is of the very few states that allow for the value of life of the decedent. Montana and Arizona have also allowed my testimony in non-fatal injury cases this year although the long record is mixed.

In the past, overall, half the states and about two thirds of the Federal Circuits have admitted my testimony on hedonic damages, but most of these states/circuits have a broad mix of admitting and denying economic testimony on the loss of enjoyment of life in non-fatal injury cases.

A very few states have ruled against it in Supreme Ct. cases, these are Nebraska, Mississippi (used to be for it, but now disallowed by statute now) and West Virginia to my recollection. No Federal appellate court has affirmed the denial it so far as I know, but one has affirmed the admission, an Ohio Federal appellate court, which said it met Daubert.

An appellate ruling stating that a trial judge did not abuse discretion in excluding hedonics is not a ruling against hedonics no more than the converse is a ruling for hedonics.

There are a few intermediate state courts have ruled against it, and a few for it based on Daubert, in a handful of states. An appellate court for Los Angeles comes to mind as having having ruled against it, for example.

It seems that since the term Hedonic Damages was incorporated into the 9/11 Victim Compensation Act passed by the Senate (the Airline Stabilization Act) as an element of damages approved for compensation, this has been somewhat persuasive to a number judges. Feinberg, in implementing the Act, set a rather low fixed sum on the value, at $250K, for reasons which I can understand, but do not necessarily agree with.

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Sample direct examination questions for your economic damages expert in a wrongful death case

New to personal injury or wrongful death litigation? Need some ideas on how to direct the examination of your economic expert in an injury or death case?

Below are some questions and answers from a direct examination of one of our economic experts.
(If you want the word version of the sample direct examination questions, click here)
(If you want the pdf version of the sample direct examination questions, click here)

Sample direct examination questions for your economic damages expert in a wrongful death case.

(Question and answer from ACTUAL trial in the following section)


Q: Can you introduce yourself to the jury?
A: Yes, my name is Sarah Ross and I am an economist.

Q: What does an economist do?
A: Economists perform a number of different types of analyses; but generally economists study the demand and supply of goods in various types of markets. These markets could be product markets, such the market for automobiles, or they can be labor markets and instead deal with the demand of employees by firms and the supply of labor by individuals to those firms. My focus and area of research is in the area of labor economics.

[The following could be generated as a result of a follow up question (what does a labor economist do?) or if the jury still appears to be into the testimony, may just be offered without a prompt]

As a labor economist, I deal with issues involving wages and employment levels and how those things are determined on a firm level. In cases such as this one, I am in part asked by attorneys to calculate the economic value of things such as lost earnings and fringe benefits that the deceased would have received over their lifetime had they lived thru normal life expectancy.

Q: Can you tell the jury a little about your educational background?
A: Yes, sure. I hold a Ph.D. in economics from the University of [NAME]. At the University of [name]I specialized in labor economics and applied statistics. I also hold a BA in economics from the University of [NAME]. During my undergraduate I also minored in military science and received a commission in the U.S. Army as a field artillery officer.

A: Can you tell the jury about your professional background? [Have you earned any special honors as a professional economist?]
Q: Yes. Currently I am the Director of [###] at [NAME]. [NAME] is a firm that provides economic and statistical analysis to the legal community. Prior to my current position, I was the principal economists and owner of [NAME],which has now merged with [NAME]. [NAME]was a firm that provided economic and statistical research to the government, business and legal community. I owned and operated the company for approximately 7 years. During this time I was also on the economics faculty at the University of [name]. I taught courses in economics, statistics and corporate finance at the University for about six years.

Q: What were you ask to do in this case?
A: Generally, In this case I was asked to calculate the economic losses that were suffered by the family of Mr. [name] as a result of his death. In general these losses include the lost earnings, lost fringe benefits, and lost household services that would have accured to Mr. [NAME]’s family had he lived thru his normal life expectancy.

Q: Are the things that you were asked to do here today things that you typically do as an economist? {How many times have you testified before?
A: Yes they are. {Over the last four years or so, I have testified between 55 and 65 times. Approximately 20 or so of those involved trial testimony like today.}
Q: Lets talk more about what you did in this case. First, in terms of the economic damages incurred by the estate of the deceased, what did you find in terms of dollars?
A: I found that the total economic loss to the family of Mr. [NAME]was approximately $650,000.

Q: To derive and calculate this number what were the areas that you reviewed?
A: From the family perspective, I looked at the loss of earnings and fringe benefits, such as insurance benefits that Mr. [NAME] would have contributed to the family (or his estate) had he lived thru his normal life expectancy. I also looked at the loss of household services for the family and estate. Household services would be what it would cost to replace the services that he provided to his family, such as taking care of the family car, as well as repairing or maintaining other items around the home.

Q: Generally, can you explain to the jury how you calculate economic damages in those areas? We can go over the specifics in a second, but can you give the jury a general idea of what is involved in the final calculation?
A: Yes, sure. The actual methodology used to calculate the damages in each area, that is earnings, fringe benefits, and lost household services, are basically the same. In calculating for example, lost earnings, the procedure in cases such as this one, is to first calculate the amount of earnings in each year that Mr. [NAME] could have earned had he lived thru his normal work life expectancy. This calculation involves determining the amount of earnings that Mr. [NAME] was capable of earning over a normal work life given factors such as his earnings history, education, job skills and other job related factors.

Once the correct earnings and worklife expectancy are calculated, the next step is to calculate how much that stream of lost income is worth in present day value terms. In otherwords, how much money would the family have to be paid right now, or as of the time of the report, to compensate them for the stream of Mr. [NAME]’s income that will be lost as a result of Mr. {NAME} death.

To calculate the present value, in essence, we have to discount money and income that would have been received in say 10 years, because the actual income would not have been earned for many years in to the future. So with this in mind we could put a smaller amount in an account today and have the expected income amount 10 years from now. The amount we have to put into the account today to meet the projected income payment 10 years from now is called the present day value. For people who are familiar with the Texas lottery, it is the same thing as taking the cash value versus taking an annuity over 2o years or so.

This same approach is used to calculate lost fringe benefits and loss of household services.

Q:Lets talk more about the earnings analysis. What were your findings?
A: In terms of the income that the family lost, income support that the family suffered as a result of Mr. [NAME] death, I calculate that he lost a total of $###,### in present day value terms.

Q: Can you explain to the jury how you would calculate this amount? Specifically can you explain the concept of present value and how it is used to calculate the economic value of the losses to the estate in this case?
A: [SEE ABOVE QUESTION ANSWER]

Q: How were the fringe benefits losses calculated?
A: Fringe benefits were calculated by getting the economic value of the employment benefits that Mr. [NAME] received. This calculation involved looking at and estimating how much, in terms of the person’s salary, the fringe benefits are worth. To estimate this number, this calculation is based on the U.S. government BLS employer cost data. It shows how much a typical employer pays to provide an employee benefits. Using Mr. [NAME] for example, his fringe benefits were worth ##% of his salary. So in dollar terms his fringe benefits were equal to $#,### per year.

Q: Can you explain what is meant by household services? How are household services calculated?
A: Yes, houseohold services are valued in the same manner as earnings and fringe benefits. The only and main difference is that the economic value of the services that Mr. [NAME] provided to his family has to be determined before hand. To do this, I estimated what it would cost the family to replace the household services that Mr. [NAME] provided, or could have provided, to his family had he lived a normal life. This value or what is commonly referred to as the replacement value, is determined by looking at how many hours a typical individual like Mr. [NAME] spends on household services and the average cost, as estimated by the hour wage of a person who is working in that job, for the household services.

One economist's personal experience providing economic expert witness testimony: A day by day blow [Day 3]

5.19.05 (Thursday)

It is go time today!

I woke up around 6:30 and got the case facts back into my head. After breakfast and working out, I head down to the courthouse. The courthouse was in an annex of the county courthouse. What this really means is it is a office building that is has been converted into a courtroom. The actual courtroom is small. It is a very intimate space to say the least. The gallery and courtroom furniture is old overflow furniture from the ‘real’ courthouse I would bet; it sure looks that way.

This is a particularly strange case; it is lunch time and I still do not know who the plaintiff’s attorney is or even what he looks like. This could be very interesting. Around, 12:30pm the court breaks for lunch and I finally get to meet the attorney who has retained me! At lunch we go over the questions he plans to ask. His approach is pretty standard and he likes, as I had been informed, to ask more open ended questions. I am much more relaxed after this brief interaction with the attorney.

I get on the stand (finally) at around 1:35pm. The judge is a young and newly appointed. She seems very pleasant. The jury seems to be quite alert. It is a very demographically diverse jury that actually appears to mirror the demographics in the city. Wow…

The direct, in my opinion, went really smooth. Good body language and posture on the stand. No excessive swaying in the chair (actually I caught myself a couple of times swaying too much!) I tried to make sure that I kept good eye contact with the jury. Depending on the courtroom, it can be hard to keep eye contact with jury without bouncing back and forward between the jury and the attorney asking the question. This can look weird in a ping pong ball sort of way so I try to avoid it!

Some courtrooms are set up really nice, so that it is very natural to make good eye contact; this one is not. To make eye contact with the jury you have to turn quite a bit. Generally in these situations, where the courtroom is set up in this manner, I will only turn to the jury if I am trying to explain something. Otherwise I will just answer yes or no and keep my focus on the attorney who is asking the question. Overall, the jury appeared to be attentive and were writing down numbers and taking notes. I did not notice any head shakers in the bunch; there appeared to be some that were into the testimony. One juror in the back seemed particularly bored.

[One thing, I want to make sure I do in this case is get some feedback from the attorney as to how it went. Unfortunately, this is hard to do, since a lot of times if the attorneys does not win, they really do not want to talk about it. Not to say I blame them given how much money is put into some of these cases.]

In general, the cross examination involved the defense attorney trying to undermine the assumptions that I used in my economic analysis. He had questions, about my salary assumptions, fringe benefits assumptions as well as household services assumptions.

For example, he asked a series of questions that had to do with the plaintiff’s supposedly decreased life and work expectancy. In this case, the defendants were arguing that because of the deceased’s medical conditions he had a deceased work and life expectancy. The plaintiffs, the ones who retained us, were not conceding this was true of course. Anyway, the defense attorney asks questions like, ‘If a medical doctor testified that Mr. [NAME] would only have another 10 years or so max to work and live, would you have any reason to dispute it?’

In this question, as in a couple of others, he was clearly trying to undermine the assumptions that I used in my economic damage analysis. The answer to this question and all the others were pretty much the same: ‘No I do not agree with you’. However toward the end of cross examination he started to phrase his questions a little differently so that, in theory at least, I would have to answer it in a yes/no type of way.

Of course the ‘yes’ would undermine my model. A ‘no’ would sound silly. The life expectancy question was one of those types of questions.

For the life expectancy question, I answered: ‘No I would not dispute it, but it would change my analysis in anyway whatsoever’. I answered the other tricky questions that he had for me in the same way. I was really surprised that the defense attorney let me answer it this way since it really was not responsive to his question; especially the last piece that I just threw in there. He was rather young or maybe he just did not want to quibble in front of the jury. Not sure which, but in other cases, the defense has not let me off so easy with stray remarks such as that.

In retrospect, probably a better more clever way that would have been more responsive to his tricky question (aka trickaration) would have been something like: ‘I really do not have an opinion on this because it does not effect my analysis in anyway at all and I did not consider it’. It is the last piece that I wanted to get out to the jury in any way possible; in this case the defense attorney let me get it to the jury real easy.

The thing that shocked me to heck was that he did not cross me on either taxes or the personal consumption deduction. These things are almost always brought up by the defense attorney even if you did take them out. For some defense attorneys, unless you have a deduction equal to 100% of the deceased income, there is always room to get a lower number!

I did not account for either taxes or personal consumption in the first report; it is not clear what he was thinking. [I was ready with a supplemental analysis that did incorporated these factors into the economic damage analysis] Either they were not concerned about the damages or they felt that they had the case on liability or he just missed it.

In my mind the testimony went real well. The only major hitch was the delayed return flight back home!

One economist's personal experience providing economic expert witness testimony: A day by day blow [Day 2]

5.18.05 (Wednesday)

Does not look like I will go today. The jury just got selected yesterday so it is unlikely that I will go today. In general most plaintiffs I have worked with like to use me toward the end. They typically will say that they ‘want to put a $ value on their case’ to the jury. However, I am a little nervous because I did get a chance to go over the testimony and the questions that the plaintiff’s attorney tends to ask.

Generally, I am told, the plaintiff’s attorney that I am working with has a loose easy going style. He tends to ask more general questions and just lets the economist go with it. (Some attorneys are different and ‘ask’ more pointed questions that you basically answer with a yes or no or at the most a very short (2-3 sentence) response.)

Dispatches from the court room

One economist's personal experience providing economic expert witness testimony: A day by day blow [Intro and Day 1]

Are you a young attorney who is the process of preparing the economic damage portion of an wrongful death case? If you are, you have probably noticed that there are a number of great resources out there to help you prepare. These resources include textbooks from publishers such as Lawyers and Judges and SEAK as well as many great CLE videos from state bars across the country, ATLA, DRI, and many other legal organizations.

However, what you may have found, or will find, is that some times, especially when preparing for directing expert witness testimony, you just need to know how things work in an actual courtroom situation. Below is diary of an anonymous economist, preparing for an anonymous trial, in an anonymous state. She is testifying on behalf of the plaintiffs which are estate of the deceased. Ok really, the economist is a lostcompensation.com contract economist testifying in a wrongful death case in Texas! (Some of the facts in the case have been changed to protect both the innocent and guilty parties in the case!)

It is rather long; but I hope it helps!

5.17.05 (Tuesday)

Flew into Houston, Texas in preparation of testifying in the case on Wednesday. As usual, I brought my entire case file which included all the documents that I had received concerning the case. I also carry with me a ‘support binder’. The support binder is a notebook binder that has all the support and back up for the numbers and assumptions that go into the analysis. That night I went over the all the case documents again and reviewed my expert report.

Now that I have the questions in my head that I think the plaintiff’s attorney is planning to ask me, what I do is prepare written answers to them. The written answers do become part of my file, but like all the other files I do not take them to court. Instead, I use the written answers to ‘rehearse’ my responses. In general this helps me to be more focused in the courtroom. Since, I already have some answers played out in my head, I can then focus on the more subtle parts of being an effective and convincing expert witness. The more subtle parts include watching my body language, speaking clearly, and trying to answer the cross examination questions (no matter how off the wall they may be) in the same profession tone and manner as was done in the direct examination.

Disfigurement and future economic wages

The question posed to our LostCompensation.Com Economist:

Does anybody have a reference to a study about appearance and wage?

The case involves a 12 year old whose face was badly disfigured in an automobile accident. He’s had all the surgery possible and apparently no more can be done.

Will this have an impact on his expected earnings (or earnings capacity)?

One possible reference:

Hamermesh and Biddle called "Beauty and the Labor Market" This issue has received a lot of press, along with the apparent evidence that fat women, but not fat men, earn less than women of normal weight. But this work is typically based on people's perceptions of attractiveness (other than the studies based on weight, of course).