The Witness Box

Commenting on expert evidence, economic damages, and interesting developments in injury, wrongful death, business torts, discrimination, and wage and hour lawsuits

Thursday, April 23, 2009

Historical v. Current Interest Rates

Should an economist use the lastest interest rates or historical rates in an economic damage analysis?

Madore v. Ingram Tank Ships (732 F.2d 475 5th Cir. 1984) states "If judgment is rendered for the wage-earner, the damage award is paid at a single moment, after judgment is rendered. It can then be invested, at that moment. The market rate then available, not the average rate that would have been paid had the money been invested in the past, determines what the award will yield."

Also in footnote 2 there is the statement "While several methods of computing the discount rate are permitted by Pfeifer, supra, none contemplates using an average of rates earned in the past." And further on in footnote 2 there is the statement: "Its (Pfeifer's) discussion makes clear that the term "market interest rate" is the rate available in the market at the time the suit is tried."

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