Follow-up to: historical v. current rates

This case suggest that current rates are more approriate:


BROOKE HARRINGTON, as Personal Representative of the Estate
of Gaylord William Thayer, Deceased, Plaintiffs, v. THE
UNITED STATES OF AMERICA, Defendant.

4-00-CV-90486

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
IOWA, CENTRAL DIVISION


2002 U.S. Dist. LEXIS 16185

August 28, 2002, Decided
August 28, 2002, Filed


B. Applicable Interest Rates

119. In order to calculate the value of damages due to loss of income and
support in the future, the future income from damages must be discounted, such
that if the money was awarded now, it could be invested in the safest possible
investment, United States Treasury bonds, and yield the income that was lost on
the future date it was expected. Both economists chose an interest rate based on
a calculation [*38] of average interest rates over a period of dating back to
the early 1950's in Dr. Mattila's case, and the early 1970's in Dr. Newkirk's
case. Both economists chose a single interest rate, based on a security of a
certain length. In Dr. Newkirk's case, he chose a 3-month Treasury bill, in Dr.
Mattila's case, a three-year Treasury bond.

120. The Court finds that in order to estimate the amount of money necessary to
yield future income over the course of several years in the safest possible
manner, using a single interest rate based on a Treasury security of a single
term-length is too imprecise. Someone investing money today in order to secure
income ten years from now would not buy a 3-month security or a three-year
security, because the purchase of a short-term security fails to account for a
change in market interest rates that could occur after the security's term
expires. Likewise, the safest investment to secure income one year from now is
not a three-year security, because a change in prevailing market interest rates
could change the value of the security when it is needed, before its term
expires. The safest investment to provide income one year from now is a one year
Treasury [*39] security, the safest investment to provide income five years
from now is a five year Treasury security, and so on. Consequently, the Court
discounted income for any given future year according to the interest rate
offered for a Treasury bond available on August 15, 2002 whose term expires in
the given year.

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."

Study: Tort reform increase the death rate of elderly, lower-income, and minorities

Using medical malpractice tort reforms and state-level data from 1980-2000, two Emory University Law Professors, PAUL H. RUBIN, JOANNA M. SHEPHERD, examine empirically whether tort reforms have disproportionate effects on different demographic groups. They find that the impact of tort reform varies substantially among demographic groups.

Their results suggest that women, children, and the elderly do not enjoy tort reform’s benefits as much as men and middle-aged people.

The research further suggest that these individuals may be harmed by tort reform

Source:

Rubin, Paul H. and Shepherd, Joanna M. (2008) "The Demographics of Tort Reform," Review of Law & Economics: Vol. 4 : Iss. 2, Article 3. Available at: http://www.bepress.com/rle/vol4/iss2/art3

Race is off-limits factor in wrongful death case

From: Federal Judge Blasts Use of Statistics on Race to Set Damages in Ferry Crash, Anthony Lin, New York Law Journal, October 15, 2008


A Brooklyn federal judge has slammed the use of statistics showing racial differences in life expectancy to determine damages for a catastrophically injured black man.James McMillan was rendered a quadriplegic in the 2003 crash of the New York City-operated Staten Island Ferry. Last month, Eastern District of New York Judge Jack B. Weinstein awarded McMillan damages of $18.3 million.

The city had sought to limit McMillan's damages on a number of grounds, arguing that his past criminal records as much as his race indicated a shorter life expectancy. But Weinstein indicated during trial he would issue a written decision further explaining his reasoning on the race issue.

Issuing that decision Tuesday, Weinstein said the consideration of statistical differences in life expectancy among races in determining damages would be discriminatory and unconstitutional. He noted that a wrongheaded insistence on immutable racial differences had been behind the U.S. Supreme Court's infamous decision in Plessy v. Ferguson, 163 U.S. 537 (1896), which upheld racial segregation under the doctrine of "separate but equal.""Statistical reliance on 'race' leads to such questions as whether Plessy would have been today categorized as 'African American' for life expectancy purposes,"

Weinstein wrote. "In a more recent example, 'racially' characterizing for statistical purposes in a negligence lawsuit the current Democrat Party presidential candidate, born of a 'White' American mother and an 'African' citizen of Kenya, would be considered absurd by most Americans."

The judge also said racial statistics should be rejected on scientific grounds, and he approvingly cited a number of well-known anthropologists who regard race as a social construct rather than a biological fact."Reliance on 'race'-based statistics in estimating life expectancy of individuals for purposes of calculating damages is not scientifically acceptable in our current heterogeneous population,"

Weinstein wrote in McMillan v. City of New York, 03 civ. 6049.Though the judge acknowledged a documented mortality gap between blacks and whites, he said the gap likely owed much to socioeconomic factors masked as "race."

He noted some studies indicating that blacks and whites of equivalent socioeconomic status enjoyed similar longevity.Weinstein said that courts had increasingly moved toward race- and gender-neutral calculations of damages, and observed that racial differences were ignored by Special Master Kenneth R. Feinberg in his administration of the federal September 11th Victim Compensation Fund.The Corporation Counsel's Office declined to comment on Weinstein's decision.

The economic value of a law degree

(From September 26, 2008, What is the NPV of a JD? , Posted by Karl Okamoto )

Is law school a good value? That’s the question I ask my students to figure out, hoping to teach them a bit about finance. Using crude numbers, the answer looks like a resounding “yes.” As they say in the investment business, it looks like a “three bagger.” Even if you have to put $230,000 in, you get over $700,00 back!

What crude numbers, you may ask? Well the Wall Street Journal reported recently the median salary for persons holding just a BA has slipped to $47,240, ... Labor Department numbers show the median salary for lawyers at $106,120.

... So, as I say to my students, think of your law degree as an annuity. It represents a payment stream that lasts for a career (say 40 years) that equals the spread between what you would have earned without your law degree versus what you can with it.

Using the median salary numbers, that spread is almost $60,000. Discounted at 8%, the annuity has a present value of over $700,000. The present value of three years of tuition (at $40,000 a year), books and foregone salary (at the median) is about $230,000. So, as your stockbroker used to say about Lehman bonds, a “no brainer!”

(Accounting for taxes:

The salary differential will face a high marginal tax rate. Let's say 50% (future federal upper income marginal tax rates - including social security payments, future state tax rates).

Present after-tax value of annuity: by your base numbers, over $350,000.
The median salary over the three years that is foregone to get a J.D. faces lower current average tax rates; let's say 25%.

This gives an after-tax NPV at 8% of about 98,000.
I believe that the $120,000 in tuition comes out of after tax dollars (I don't think folks get to carry-forward a tuition tax deduction until they're earning again). After-tax NPV at 8% of about $111,000.

Net after-tax NPV of decision to get JD then $140,000. (That's noticably less than the naive method of taking your $700,000, subtracting $230,000 to get $470,000 and then applying a 50% marginal tax rate to get $235,000.))

So what’s all the brouhaha about misleading students about the value of a law school education?
Well, here is where class gets fun.

According to the Department of Labor, the distribution of annual lawyer compensation in 2001 was:
first 10%, less than $45,000;
next 15%, $45-60,000;
next 50%, $61-137,000;
next 15%, 137-145,000;
and top 10%, over $145,000.

Now if you are standing in the ex ante position, i.e., where law school applicants stand, how do you decide what salary statistic to use in your present value model? Might it not be rational to use the “expected value” that comes from this distribution? You might immediately object that we need more data. True, while we can ballpark the first four quintiles, how do we come up with a value for the top 10% contingency? And if we already know (which I do not tell my students) that the “mean” salary was $92,000, isn’t that our answer? Mathematically, yes, but the exercise is revealing.

So much of one’s answer to the question of law school value depends on how you envision the top quintile. So the bi-modal distribution in starting salaries that Bill Henderson has identified has serious implications. The more skewed the distribution, the less helpful means and medians become.

None of my students assumed they would climb atop the Olympus of the AmLaw 100 (funny, I assume a few will). But they revealed a commonly-held notion of “average” incomes that far exceed what the numbers show us is realistic. It appears that my students, as a group, have a very similar notion of what lawyers make on average. Unfortunately, it happens to be more than what at least 90 percent of lawyer actually do earn.

Nuts and bolts of a wage and hour class settlement

Texas Lawyer Newspaper reports that the plaintiffs in a donning and doffing case (Vogt v. Texas Instruments Inc., No. 3:05-cv-02244 ) recovered $355,000 in allegedly unpaid overtime.

The newspaper's report is somewhat true....

According to the COMPROMISE AND SETTLEMENT AGREEMENT AND RELEASE filed with the court, the 71 plaintiffs actually recovered about $65,000, or about $650 each after taxes, in back wages.

The plaintiff's attorneys recovered $290,000 in attorney and court fees.


FYI, in the case the lead plaintiff Wilford Vogt claimed that Texas Instruments failed to pay him and other similarly situated employees overtime wages from November 2002 through 2005, alleging that they were not compensated for time spent changing in — and out of — protective gear. This practice allegedly took 32 to 42 minutes each shift and was necessary before entering — and after leaving — designated “clean” manufacturing rooms.

The plaintiffs said that they were only compensated for 11.5 hours of work on 12-hour shifts. Texas Instruments contended that it complies with the law, noting its generous pay policies, which reportedly exceed legal requirements.
TI.pdf

How an economic expert deposition should go...

In this economic expert deposition, the defendants are deposing a very seasoned economist in an age discrimination case. Overall the economist, Dr. Ken McCoin does a superb job at the deposition. Dr. McCoin is candid and open in his responses. When there are obvious things in which the economist should 'give in' on he does...

Part 1 Part 2

The depo is a good read for attorneys looking for good questions on economic damages calculations involving back and front pay. There are also good discussions on interest rates and other assumptions used in front pay and back pay calculations.

Side note: The defense attorney and the economist have a past professional history; they have worked together. Makes the reading very interesting.

Returns to college continue into later life..

Traditional wisdom suggests that individual wages will increase over a person's working life. However, the increase in wages will decrease over time. Traditionally, it has been shown that in later life the earnings profile actually slopes down. That is the person's wage will actually fall in later life.

New research contradicts this findings for college graduates.


Title: Cohort Analysis of US Age-Earnings Profiles
KOSEI FUKUDA Bulletin of Economic Research, Vol. 60, Issue 2, pp. 191-207, April 2008

Abstract: Aggregate data on US earnings, classified by period and by age, are decomposed into age, period and cohort effects, using the Bayesian cohort models, which were developed to overcome the identification problem in cohort analysis. The main findings, obtained by comparing college and high school graduates, are threefold.

First, the age effects show a downward trend for the age group of 45-49 onwards for high school graduates but do not show any such trend for college graduates.

Second, the period effects show a downward trend for high school graduates but reveal no such trend for college graduates.

Third, the cohort effects are negligible for both college and high school graduates.

Duty to find employment or comparable employment after employment termination?

What is the standard? Here are two attorneys with differing opinions:

Concerning a workers compensation claim:...In addition, you should start keeping a daily log, in a spiral bound notebook, of all the job searches you undercut after you have been fired. This is important because after you are fired, you have a duty to "mitigate" your damages. This means that you have a duty to go and look for other work. If you do not, you may be precluded from obtaining recovery of money damages for lost wages. This does not mean that you have to be successful, but you have to show that you have been diligent in seeking other employment.

In ADA case: Back Pay
This is the most common form of relief.
Includes the value of wages, salary, and fringe benefits the claimant would have received during the period of discrimination from the date of termination/failure to promote to the date of trial or settlement.
You have a duty to mitigate these damages by taking reasonable efforts to find comparable employment after you have been terminated.

Forced to exercise...

excercise stock options, that is. In short, are hypotheical losses from an early employee stock exercise an economic damage? There is at least one case, that says yes. Anyone know of any more cases?


See:

Stock Inflates Damage Award

The Tenth Circuit has affirmed a case where the measure of damages included the appreciation of stock, after the employee was forced to prematurely exercise stock options. Greene v. Safeway Stores, Inc. , Nos. 99-1215, 99-1228, 2000 WL 504738, at *1 (10th Cir. Apr 28, 2000).


At the time of Greene's termination, he had 250,000 fully vested Safeway stock options. The exercise price was $1 per share. Greene also had roughly 250,000 more options that had not yet vested. The subscription agreement required plaintiff to exercise his vested options within ninety-five days of his separation from Safeway. Had Greene not exercised the vested options within ninety-five days, they would have expired.

Greene exercised all of his vested opinions on December 21, 1993 and acquired Safeway stock with a market value in excess of $3,000,000. Greene's gain on the transaction was roughly $2,160,000. Greene immediately incurred a tax liability of roughly $850,000.
Greene testified at trial that, had he not been terminated, he would have refrained from exercising his stock options until the date he planned to retire. Greene also testified he sold all of the shares he acquired within a few months of exercising them because he needed to pay the Internal Revenue Service and because he was without income to cover his daily living expenses.

During the trial, Greene had an accountant testify that, had Greene exercised his vested options on January 31, 1996, instead of December 21, 1993, he would have reaped the benefit of increases in the market value price of Safeway stock for an incremental gain in excess of $3,000,000. The accountant also testified that, had Greene retired from Safeway in November 1995, as he had planned, options that had not yet vested at the time of Greene's termination would have vested and could have been exercised to purchase additional Safeway stock for a gain of more than $1,000,000.

The appellate court agreed that stock appreciation could be included in the damage award.

This decision demonstrates that substantially more than lost wages can easily be at risk should an employee wrongfully terminate an employee with options.

Backdoor to Duty to mitigate damages in employment termination case

In a whistleblower case over Pfizer Inc.’s alleged illegal marketing of human growth hormone Genotropin, a judge has denied Pfizer Inc.’s bid to force a former executive to turn over information as to whether he made adequate efforts to look for work after he was fired.

The defense argued that the plaintiff's sizable assets created a situation where the plaintiff did not have to work. Accordingly the defense argued that because of his assets, he had failed to mitigate his damages by finding employment. Pfizer's attorney wanted the court to order the plaintiff to turn over financial information.

The court denied the motion

See:

Excerpt From, Ex-Exec Can Shield Info In Pfizer Whistleblower Spat:

The plaintiff's economic expert has calculated the plaintiff's economic losses for the period after his termination at over $9 million. In an effort to determine whether Rost fulfilled his duty to mitigate his damages by making adequate efforts to look for work after he was fired, Pfizer had sought documents and deposition testimony that would reveal Rost's assets during the period after he left Pfizer.

The company said the existence of significant assets could explain Rost's "lackadaisical attitude toward finding meaningful employment.

Catching up after a job loss: The literature

What does the literature say about earnings losses after a job loss:

Generally, the evidence supports the conclusion that, on average, the earnings loss for an individual who losses a job will diminish slightly in time but the losses will last longer than 5 years.

(from listserv)

Most studies of displaced workers have found losses of roughly 5 to 25 percent (or, conversely, replacement rates of 75 to 95 percent).

At the lowend of the range of findings, David Shapiro and Steven Sandell ( The ReducedPay of Older Job Losers in The Problem Isn t Age: Workers and OlderAmericans, Praeger, 1983) found wage losses of about 4 percent.

At the high end of the range offindings, Louis Jacobsen, Robert LaLonde, and Daniel Sullivan ( EarningsLosses of Displaced Workers , AER, 1993) found earnings losses averaging about 25 percent.

Studies by Christopher Ruhm ( Are Workers Permanently Scarred by JobDisplacement? , AER, 1991) and Ann Huff Stevens ( Long Term Effects of JobDisplacement: Evidence from the Panel Study of Income Dynamics , NBERWorking Paper 5343, 1995) found earnings losses in the neighborhood of 15 percent.

Using PSID data, Stevens found that earnings lossesaveraged 6 to 12 percent seven plus years after displacement compared to about 15 percent one year after displacement.

****

Do Terminated Employees Catch Up? Evidence from the Displaced Workers Survey, David Macpherson and Michael Piette, Journal of Forensic Economics 16 (2), 2003, pp. 185-199. found that wage losses ranging from 10% to 40%.

- In addition, the authors found that more tenured persons and older persons tended to have larger wage losses

How far do economic damages go on in employment termination cases?

Economic damages in employment discrimination cases are different from damages in personal injury cases. In a nutshell, the economic damage calculation in employment termination cases needs to take into account that the terminated plaintiff may, and in all likelihood will, obtain alternative employment.

With re-employment income in mind, there are two components that are unique to employment termination cases. One component is the expected amount of time that the plaintiff would have been expected to work at the defendant had they not been wrongly terminated. The other component is the amount of time that it takes before the terminated individual is able to earn wages at their replacement employment that exceed the amount that they would have been expected to earn had they not been terminated.

These two factors generally determine how far economic damages will go into the future. Here are a couple of studies that have looked at these issues.

Duration of Employment, Robert Trout, http://nafe.net/JFE/j16_2_05.pdf and http://nafe.net/JFE/j08_2_06.pdf

Do Terminated Employees Catch Up? Evidence from the Displaced Workers Survey, David Macpherson and Michael Piette, Journal of Forensic Economics 16 (2), 2003, pp. 185-199.

Undocumented work is illegal work in Mississippi

"The Mississippi bill, SB 2988, ...will make it a felony for an undocumented worker to hold a job.

Anyone caught "shall be subject to imprisonment in the custody of the Department of Corrections for not less than one (1) year nor more than five (5) years, a fine of not less than one thousand dollars ($1000) nor more than ten thousand dollars ($10,000) or both." Anyone charged with the crime of working without papers will not be eligible for bail.

The law is set to become effective for large employers on July 1." David Bacon, Apr. 20, 2008.

What does this mean for damage claims (such as injury and wrongful death) brought by undocumented workers?

Calculating economic damages when death is imminent

Q: In a case where a person is diagnosed with a terminal condition, such as mesothelioma – and who has 12 to 24 months to live at the most. Would you treat this as a personal injury case or a wrongful death case?

[Note: The issue revolves around the fact that in personal injury cases, the economist would need to remove personal consumption from the damages. Personal consumption factors would make the final damages number anywhere from 10 to 40% lower in a PI case than a wrongful death case]

A: Here are some responses from a popular forensic economics list serv:

1. you don't have a choice. He is not dead. What you have is a 'lost years' case, assuming the defendant was the cause of his current condition.
2. Yes. Deduct consumption starting at when the docs say he is likely to die. Or give alternatives based on l. e. of both 12 and 24 months. ( Try to get a doc's opinion on how long he is likely to be able to work, perform household services, etc. If unable to get that, assume conservatively that he will be able to keep going until he dies
3. ....How one defines short is problematic, but the FE need not be concerned with this definition if GIVEN a probability of death within two years. As has been repeated on this list several times, one way to avoid a plaintiff bias in such a case is to run two separate but linked columns on your spreadsheet with a crossover to ascending and descending column for values during life and death in any given year....

Best employment interrogatory questions

Economic damages in employment termination cases

Getting information on the jobs that the individual worked at and applied for after the defendant terminated them; helps the labor economist work up the damages and determine what types of jobs may have been available to the plaintiff. In addition, the information is used to assess the plaintiffs attempts to pursue available job opportunities i.e. mitigate their damages.

Here are some questions that are helpful in getting that information

INTERROGATORY NO.1

Identify each employer for whom you worked with since last employed by the defendant

INTERROGATORY NO.2

If you are no longer employer by an employer identified in response to interrogatory no.1, state when the employment ended and why

INTERROGATORY No.3

State the job duties, wages and responsibilities that you had at each employer identified in Interrogatory No.1

INTERROGATORY No. 4

Describe and state how much earned from any self-employment since leaving the defendant

INTERROGATORY No.5

Identify anyone with whom you have sought employment since you were last employed by the defendant

INTERROGATORY No.6

State whether you rejected or declined in accepting any offer of employment since last employed with the defendant.

Once the information is received, we should check (at deposition or by interview):

* If the list of jobs that the plaintiff provided includes all the jobs or is it just a representative job list? This is important because now the list can be used to determine how many jobs the person applied for and if the number of jobs searched for are consistent with the number of jobs a typical person will apply for when they are looking for a job)

* For any jobs that were turned down make sure that the plaintiff has listed that reason and the wage that would have been received by the person

* List and make sure that no other jobs have been received since the interrogatory answers

* Get the plaintiff to list out all programs, training, and capabilities that they possess. For example, if the plaintiff is a computer support person, get the full list of Microsoft certifications, list of software that the person can support (for example the windows products line), details on the networking capabilities they have (for example can they set networks up (if so, what type LINUX, Novell, etc.) or do they focus on making sure the computers talk to the network) also make sure that questions are ask to see what level or types of classes the person is currently pursuing.

Majors and starting salaries

Wall Street Journal reports the average starting by major.

http://mungowitzend.blogspot.com/2008/04/4-with-bullet.html

Can economic damages from a commercial damage calculator be used in court?

According to Determining Economic Damages by Gerald Martin, probably not. See:


UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT
47 F.3d 292; 1995 U.S. App. LEXIS 2321; 41 Fed. R. Evid. Serv. (Callaghan) 351
December 16, 1994, Submitted : February 9, 1995, Filed

Appellee was a seaman who served as a Second Mate aboard the S/S Pomerol, an oil tanker owned and operated by the appellant. She filed the underlying action under the Jones Act, 46 U.S.C. §668, and general admiralty and maritime law to recover damages for injuries sustained in separate incidents aboard the ship. During the course of a six-day jury trial, appellee offered into evidence a “Future Damage Calculator” marketed and distributed by the “Lawyers and Judges Publishing Co.”

This exhibit is a slide rule-type device which has life expectancy and work life expectancy tables on [**2] one side, and a “present value” table on the other. See addendum. The exhibit was offered without being identified or sponsored by any witness.

The [**4] issues on appeal are whether it was error for the district court to admit the Future Damage Calculator into evidence, and if so, whether the error was prejudicial to the appellant requiring reversal. The abuse of discretion standard governs our review of a district court’s decision regarding the admissibility of evidence.

The record reveals no foundation being laid for the exhibit itself or its method of calculation. No evidence was presented as to what would constitute a “fair rate of interest.” In short the jury was given this tool to do with as they would. The appellant was not given an opportunity to challenge the author’s expertise or methods of calculation. The exhibit is all the more troubling because [*296] the name of the publisher, “Lawyers and Judges Publishing Co.,” suggests that the judiciary has vouched for it. The submission of this exhibit into evidence as something resembling expert testimony without foundation, qualification or instruction was an abuse of discretion.

For the reasons stated herein, we reverse the district court and remand this case for a new trial on the issue of damages.

Calculating damages in FLSA and wage and hour cases

Singer et. al v. City of Waco, Texas

Moral of the story: Audit your data, use the correct number of work period hours in regular rate calculations, and consider offsets

In this case the Court considers the issue of damages in wage and hour case involving the Waco fire department. In the case, the jury found that the City willfully acted (and in bad faith) when it failed to pay the Plaintiffs overtime due under FLSA.

Following the liability portion of the case, the 180 plaintiff WFD employees entered the damages phase of the trial. In the damages phrase both sides engaged economic damage experts to calculate the value of the unpaid overtime.

Although the The court awarded the plaintiff's a significant amount that including liquidated damages, the award was significantly less than the plaintiffs' expert opined. Specifically, the Court stated that:

• The summaries prepared by the defendant were more credible because they were double checked and audited.
• The Court was also clear (and provided very detailed damage tables) to make sure that the correct number of hours in a pay period were used (as required under FLSA for the calculation of the regular rate).
• To avoid unjust enrichment, The City should be able to count OT overpayments as an offset to the FLSA underpayments.
• In this case the offset was calculated as by, first determining the underpayments due under FLSA, assessing the liquidated damage requirement of FLSA, and then adding the amount underpayments due to the Texas Local Government Code. Only then should the overpayments made by the City during the four years prior to filing the lawsuit be offset against the total damages amount.

Bottom line: Good case to review when calculating damages in wage and hour cases


damage_calc_waco.pdf

Anatomy of a financial services wage and hour lawsuit

Are financial advisers, stock brokers and mortgage loan officers fall FLSA exempt employees? or non-exempt inside-sales employees? Why is there an issue?

There is an issue because financial services professionals (FP) arguably do not meet the conditions for any of the standard overtime exemptions.

For instance, many FPs such as stock brokers are alleged to be not eligible for an administrative OT exemption because they their primary duty involves the sales of financial products. However, the may not fit the sales exemption under FLSA or state labor law because the typical FP, like a stock broker, is not involved in outside or retail sales which the exemption typically applies to in other settings. Furthermore, many FP positions do not require a professional degree of any sort so the professional exemption is typically ruled out.

The DOL has issued some opinion letters on the issue. However they have not completed cleared up the issue. Click here for more of discussion of the recent DOL opinion letters.

Damages issues:

1. According, the misclassification claim opens up the defendant to both OT and possibly minimum wage violations. Many financial professionals work many hours and if they only received a minimum stipend then in a given period there may


2. Common to see allegations and class certification motions in federal and state court in a single case. The key difference is that the Federal court claims are opt-in. The opt-in requirement of Federal court cases mean that to be entitled to the remedy, the individuals must agree to be a part of the lawsuit. The damages accordingly start from the date in which the individual opts in to the lawsuit.

3. In opt-out cases, which tend to be state collective actions the employee must opt-out of the class. Damages then begin on the date the lawsuit is filed.

Measuring undocumented Mexican worker wages: Collecting information

For Mexican undocumented worker cases, specialized and more specific work life expectancy estimates for the injured or deceased worker can be constructed using the methodology in research such as: 'How Long Do Mexican Migrants Work in the U.S.?', Journal of Forensic Economics 19(2), 2006, pp.217-229.

However there is some data and information that must be collected about the deceased or injured undocumented worker that is not routinely collected in injury and death cases. The check list of items to collect in undocumented worker cases is below.


* Gender
* Age
* Maritial status
* Years of education (home + U.S)
* Does the worker have familiy in U.S.?
* Was the injured or deceased involved in sports or social organizations prior to the injury?
* Injured or deceased does not BOTH speak and read english
* Individual was earning more than minimum wage at time of injury
* Person is legalized or authorized worker
* City in U.S. in which they lived
* Date of migration
* Total years in U.S

Estimating economic damages based Mexican wages

Sources of Mexican wage information:

www.inegi.gob.mx: The Mexican version of the U.S. BLS gold standard for wage information. A wealth of information on salaries (salarios, ingreso, and -->Remuneraciones). Many of the statistics and wage information is provided in U.S. dollars. Tables showing the salary distribution (rangos de ingreso mensual) can also be found.

Information can also be found on the age distribution of Mexican workers. The age distribution is useful because it can help determine a reasonable Mexican work life. There are also statistics on the unemployment rate and the minimum wage for Mexican workers. The minimum wage varies by Mexican state.

(In some setting, the low end estimate of the loss of Mexican earnings capacity can be determined using the minimum wage)

Other sources:

Annuario Estadistico De Los Estados Unidos Mexicano

Instituto Nacional De Estadistica Geografia e Informatica

Life care planners in their own words

How do life care planners determine the cost of medical services and future medical care needs for injured plaintiffs? Here is an interesting exceprt from a life care planner deposition in Madison, Iowa.:



Page 1

13 Now, one of the things you indicate here is that
14 the current cost data represents the fair market value of
15 goods and services in the geographic domain where the
16 majority of care is anticipated. Is that where those
17 figures come from?
....
23 A. Right.
24 Q. -- represents the fair market place for goods and
25 services in a geographic domain where the majority of care

Page 2
1 is anticipated.
2 A. Yes, sir.
3 Q. Is that what was used here?
4 A. Well, actually, we used the Madison, Iowa and
5 surrounding area where we expected the majority of her
6 specialty care to be performed.
7 Q. And where -- where do I get that data from the
8 Madison, Iowa area regarding costs or services?
9 A. Those things in which it's tied to a geographic
10 factor, such as Physicians' Fee Reference, where we have
11 physicians' service and therapeutic services and
12 diagnostics are geographically adjusted. For my inpatient
13 hospitalizations, we're using 75th percentile for the
14 nation, because the nation is broken in 11 regions
15 throughout the United States and then bundled. And so
16 we're representing the 75th percentile; that's Solucient.
17 The Physicians' Fee Reference is what has the
18 geographical adjustments. So physicians' services,
19 surgeons' services, psychological services,
20 physical/occupational therapy services and all the
21 diagnostic services, anything that CPT code generated is
22 adjusted for the geographical factor.
23 Q. You said you use a 75th percentile?
24 A. Seventy-fifth percentile for both: the
25 professional services and hospitalization. I'll let you

Page 3
1 know, by the way, Solucient has been acquired this year by
2 Thomson. Thomson Healthcare Corp. If you're going to do
3 a research on it.
4 Q. Thomson Healthcare Corp?
5 A. Thomson Healthcare something; I'll have to go
6 back and get it. Just renewed our data with them and are
7 going through evaluating it again.

International prespective on economic damages

South Africa:

A prostitute who is suing her former employers on a charge of unfair dismissal.

...Here in Cape Town (prostitution is illegal as in against the law in South Africa) a woman sued for wrongful termination seeking past and future damages. She was a prostitute who was fired because her madam said she was too "picky" regarding whom she would "work" for. So they canned her.

However, Michael Bagraim [an attorney in South Africa] said the woman should have protection under the Labour Relations Act. "Every single person who is employed and receives a salary, even if they receive it by doing something illegal, is entitled to protection.

"The Labour Court should not judge based on the Criminal Procedures Act nor should the judgment be morally binding. "They will be governed by the constitution and if she wins, it will be a landmark ruling."

Discrimination damages vs.Retaliation damages

Is the defendant's economist failure to mitigate analysis under-estimating the plaintiff's losses in the employment termination case?

In employment termination cases one tactic of defense attorneys is to use labor economists and vocational experts to assess the plaintiffs ability to obtain replacement employment that pays as much or more than they recieved while employed with the defendant.

Typically, the analysis reveals that the damages for the indiviual plaintiff are cut off immediately or relatively soon after the date of trial. They will typically not go on until retirement.

In case where the plaintiff is claiming retaliation by the employer, the damage calculation by the defendant's economist may under estimate the damages. In these types of cases, the defendant's economist needs to examine not only the jobs that they can get but they also need to explore the jobs that the plaintiff may have been able to get had they not been retaliated against. In some instances, the allegations are that the defendant put the word out that the plaintiff is not a good worker and caused them to lose out on job opportunities.

As a consequence, one approriate measure of the damages may by the difference between the jobs that were foregone (as a result of the defendants actions) and current employment. These types of damages may be estimated to go further into the future.

Economic damages in wrongful termination cases

Damages in wrongful termination (WT) cases are different from those arising in personal injury and wrongful death cases. Generally, there a number of questions that arise in WT cases that are simply not present in PI and WD cases. In particular,

Has the plaintiff following the termination conducted an adequate job search for replacement employment?

- What did he/she do to search for a job?
- What does the average person do?
- Does it look like the plaintiff has stopped searching for replacement employment
- Becoming self employed may suggest that the plaintiff expects that self employment will be as lucrative as previous job position?

Are there openings in which he is qualified for?

What does labor market data such as BLS show? Monster?

What does the labor data shows about job openings in related occupational openings?

Are the claims for back pay and front pay supportable?

In terms of back pay or past damages, are there reliable estimates of loss? Are there tax returns? Does self employment picture suggest a higher income opportunities?

What does industry data say about unemployment time and economic damages?

What not to say in a deposition about your spouse...

Below is an excerpt from an economic expert's deposition in a wrongful death case. At this point in the depo, the economist is discussing the role of family income on the calculation of personal consumption.

Q. [By attorney] Did the issue of the amount of the deceased wife, was that relevant to any of your -- any of your calculations?

A. [By economist] It would have been. But I didn't get any idea of what her earnings were. If I had had some idea, it would have impacted (the analysis)... Normally, when people are living together, part of the spouse's income would be consumed by the decedent. In this case, though, they weren't living together.

And the extreme example of that would be if my wife died, economically I would be better off. She doesn't work. She wouldn't be consuming any of my income. That's the extreme view of it. But, again, I saw nothing in her (deceased's wife) deposition indicating how much she worked, how much she made, anything like that to where I could take that into account.

Damages to credit: Is it worth the work?

As posted before, one common complaint of plaintiffs in wrongful termination cases is that the loss of the job and income caused them to run up charges, become late on installment payments and ultimately ruin the person's credit.

While the situation could clearly happen, in many situations the actual damage, if it were measurable, would be limited. Why?

Reason 1: The individuals that would be more likely to be affected and have to run up credit to the limit are most likely lower wage earners.

Individuals who are higher wage earners would be more likely to have the resources to draw on that would help them ride out the somewhat temporary effects of a employment termination.

Reason 2: The higher interest cost paid by the plaintiff would be limited both in time and most likely by the income level of the plaintiff.

As mentioned in reason 1, the person who is most likely to be effected is more likely to have a lower level of income which would limit the person's ability to get credit in the first place. Furthermore, the damages in most instances would be limited to the difference between the before employment termination and after employment termination interest. In addition, the damages could be expected to be limited over time because the person's credit score and access to credit would increase as the person acquires replacement employment.

For instance, a person with $10k in debt, who paid 10% per year on that debt before the termination would pay $1,000 per year in interest. If the same person after the employment termination was forced to pay 15% interest rate, then they would pay $1,500 per year, or $500 more per year.

Is the $500 per year damage for say 5 to 7 more years worth the effort of proving up the loss?

Your call....

'Grossing up' the plaintiffs damages in employment cases, is it right?

From a legal standpoint maybe not, to some economists the answer is yes.

For some economists, whether or not a state allows consideration of income tax adjustments to arrive at earnings losses, the gross-up for excess taxes in employment lawsuits is a separate and necesary calculation. Recent IRS and court rulings cause a prevailing plaintiff not to be made whole if they win.

That is because the lump-sum award will be taxed at a relatively higher rate than would have been paid on the earnings year-by-year. Think: Of winning the taxes on winning the lottery

Several articles address the issue and present a simple (and mathematically correct) procedure & formula for calculing the gross-up.

Tyler J. Bowles, and W. Cris Lewis, “Taxation of Damage Awards: Current Law and Implications,” Litigation Economic Digest, Fall 1996, Volume 2, Number 1, pp. 73-77

Ben-Zion, Barry, "Neutralizing the Adverse Tax Consequences of a Lump-Sum Award in Employment Cases," Journal of Forensic Economics 13(3), 2000, pp. 233-244;

9/11 Judge puts damages first

(excerpt from NYT)

Little-noticed lawsuits brought against the airlines, security companies move toward trials.

In a reversal of the usual legal procedure, the Judge in some of the first 9-11 cases to go to trial has ordered six trials for damages to take place before any trial for liability.

Instead of focusing on the merits of the cases, the trials will focus instead on the victims' pain and suffering and on the grief of their surviving families. The plaintiffs acknowledge that the biggest difference between the two sides is over the value of pain and suffering. Economic losses are calculated by a mathematical model, and the margin for dispute is relatively small.

Question of the day: How do you handle personal consumption deductions for high wage earners?

In injury and death cases, personal consumption, or the amount the deceased would have consumed personally on services and personal upkeep products, must be taken out. This is well known. There is a lot of information on the spending patterns of lower income, middle income and even upper middle income individual earners. According the personal consumption for the deceased in an injury or wrongful death case involving these persons can be determined with a relatively high degree of certainty.

However for the top 1% or more ($200k or more a year) of earners there is little data available for the group. In short, social scientists know very little about the spending patterns of this group, so determining the personal consumption factor for the deceased in a case involving a very high wage earner is difficult.

Most tables of personal consumption factors does not have factors for income levels over $150,000. See for example the Patton Nelson tables, which are relied upon routinely in injury and wrongful death damage calculations.

For this group, one of two assumptions can be made. One, some economists just assume that earners with income greater than $150,000 have personal expenditure habits that are the same as the top earners in the available data.

The problem with this approach is that the statistical models that estimate personal consumption, show that personal consumption factor decreases as the income level increases.

According, other economists use the equations shown in the research papers to directly calculate the personal consumption factor for the deceased specific income. Using this approach for example would suggest about a 3.5% personal consumption factor for a person (with only a wife) earning $2.0 million a year. In contrast, the highest earners in the available data spend 10.0% on personal expenditures.

Which is correct?

Calculating lost earnings for undocumented Mexican workers

How do you do it?

Clearly undocumented workers are entitled economic damages when they become injured or killed while working in the U.S. No court or attorney denies this. The question is on which country's wages (home or U.S.) should the damages be calculated on. Generally this is a legal question, with an answer that is not clear to many.

Well in any event, here are some data sources for finding information on Mexican wages.

http://www.inegi.gob.mx/

The data stored at The National Institute of Statistic, Geography and Informática (INEGI) is very useful and covers information regarding wages and employment by occupation and industry. INEGI's basic objective is to coordinate the National Systems Statistical and of Geographic Information and to offer the public service of statistical and geographic information on the territory, the population and the economy of Mexico

http://www.inegi.gob.mx/est/contenidos/espanol/rutinas/ept.asp?t=man08&c=481

Has the average hourly wage for Mexican workers. It is about $2.60 an hour.

clickk here

Has information on the minimum wage in Mexico. The min. wage varies by region in Mexico tends to be around 0.60 an hour. The min. wage is useful for determining the value of some types of household services.

Some background on calculating economic damages in cases involving undocumented workers>>>> ( See : "How Long do Mexican Migrants Work in the U.S.?" (November 28, 2006). Available at SSRN: http://ssrn.com/abstract=949632 , for more information on how to calculate economic damages in cases involving undocumented Mexican workers.)

Undocumented Mexican workers have been and continue to be parties in a number of different types of legal cases such as those involving products liability, medical malpractice, labor disputes involving allegations of FLSA violations and employment discrimination. In some instances, the plaintiffs and/or their families have been awarded some relatively sizable economic damages for both past and future pay losses. In both the initial court proceedings and the appeals associated with a number of these cases, two main types of questions arise in the calculation of economic damages of undocumented Mexican migrant workers.

The first question involves the legality of awarding back pay or past damages to undocumented workers. It is frequently argued that the landmark U.S. Supreme Court ruling in Hoffman Plastics Compounds[1], voids undocumented workers claims to past or back pay losses. In the Hoffman case, the National Labor Relation Board (NLRB) found that four undocumented workers were wrongfully terminated because they engaged in union related activities and the NLRB subsequently awarded back pay to all the workers. In this case, the Board awarded back pay to one of the workers, Mr. Jose Castro from the date of his termination to the date that Hoffman Plastic Compounds first learned of his immigration status.

The Court’s majority found that the Immigration Reform and Control Act (1986) limited the Board’s ability to award back pay to undocumented workers because awarding “back pay to illegal aliens would unduly trench upon explicit statutory prohibitions critical to federal immigration policy, as expressed in IRCA”.

According to some legal observers, this Court ruling has had a significant chilling effect on cases, such as FLSA violation and employment cases, where a significant amount of the potential economic loss allegations involves lost back pay. Prior to Hoffman the EEOC explicitly included the protection of the rights of undocumented workers as one of their stated missions and offered guidance on the appropriateness of back pay to undocumented workers.

The EEOC stated that “…unauthorized workers who are subjected to unlawful employment discrimination are entitled to the same relief as other victims of discrimination…”[2] Accordingly there were some notable cases brought on behalf of undocumented workers such as the Title VII class suit EEOC v. Phase 2 Co.[3]

According to the suit, 10 Mexican workers, all of whom had an unknown immigration status, and a class of similarly situated individuals were called derogatory names and subjected to discriminatory working conditions on a daily basis. In the settlement of the case, the defendant agreed to pay a total of $750,000: $600,000 to the 10 charging parties and $150,000 to other workers perceived to be of Mexican national origin that worked on projects for the defendant and experienced national origin harassment or retaliation. After the Hoffman ruling the EEOC rescinded the agencies previous guidance concerning the appropriateness of back pay to undocumented workers.[4]

In other cases that concern the award of back pay to undocumented workers it has been argued, successfully in some instances, that Hoffman is not appropriate and therefore back pay should be awarded. For instance, in the New York state court case, Celi v. 42nd Street Development Project, Inc[5], it was argued Hoffman did not apply to a state court action and in addition the facts in the case were distinguishable from the Hoffman case. In this case, the Plaintiff fell through an opening in the basement floor while performing demolition work and filed a suit against the building’s owner and Management Company alleging negligence and violations of labor law.

The plaintiff was seeking approximately $26,000 in past lost earning and $900,000 in future lost earnings. In this particular case the state court judge agreed with the argument that Hoffman was not applicable to the state court action and allowed both back and front pay to be awarded to the injured undocumented worker.

The second question revolves around the base earnings by which to calculate the value of the undocumented workers alleged future lost earnings. In particular, across the country the case law is not completely clear on whether future earnings loss should be based on the wages that the undocumented worker could have earned in the U.S. or in the wages that they could have earned in their home country.

In some cases, courts have ruled that under certain conditions, such as when the deportation of the undocumented worker is imminent, economic damages should be based on the wages that the illegal worker would have been earned in their home country and not those that would have been earned in the U.S.

For instance, in tort claims California Rodriguez v. Kline (1986)[6] requires a hearing on the plaintiff’s immigration status in lost wage damage claims of illegal aliens. In this hearing if the plaintiff can not show that they have taken steps to correct their immigration status then Rodriguez requires that the plaintiff’s future earnings should be based on the wages that could have been earned in his or hers native country. For a more detailed discussion of the legal environment concerning the economic damages of illegal immigrants across the country see Bowles (2004).

In other instances, courts have ruled economic damages should be based on the wages the worker would have been able to earn in the U.S. in situations where the workers deportation was not imminent or where the employer knew that the worker was in the country illegally. For instance in a New Hampshire state court case, Mr. Wudson Rosa claimed he was injured while working at a Wal-Mart construction site when an aerial lift tipped over and fell on him.[7] Mr. Rosa sued the project's general contractor and two of its subcontractors.

In this case, The New Hampshire Supreme Court ultimately ruled that in general the lost earnings should be limited to the wages that could have been earned in the home country but there are some circumstances in which an illegal alien’s lost earning capacity can be measured by what he could have earned in the United States. These circumstances include instances where an “illegal alien can prove that his employer was aware or should have been aware of his illegal status but hired him -- or continued to employ him – nonetheless”.

In Texas, recent case law suggest that undocumented workers can pursue lost wage claims in state court since “…Texas law does not require citizenship or possession of immigration work authorization permits as a prerequisite to recovering damages for lost earnings capacity.”[8]
So in sum, courts have generally ruled that undocumented workers are entitled to sue for lost wages in U.S. courts but have been split on the legality of back pay and the base for front pay and future damage awards.

To date, while some courts have ruled that the wages of the home country are relevant to the calculations of future damages, the courts are generally silent on this issue. Consequently, the estimation of the U.S. work life expectancy is crucial in lawsuits involving the injury or death of undocumented workers.

[1] Hoffman Plastic v. NLRB, 535 US 137
[2] See EEOC Notice No. 915.002, Enforcement Guidance on Remedies Available to Undocumented Workers Under Federal Employment Discrimination Laws.
[3] EEOC v. Phase 2 Co., Civil Action No. 03-N-1911 (D. Colo. 2003)
[4] See EEOC Directives Transmittal - Notice of Rescission of No. 915.002, Enforcement Guidance on Remedies Available to Undocumented Workers Under Federal Employment Discrimination Laws, June 27, 2007.
[5] Celi v. 42nd Street Development Project, Inc. 5 Misc. 3d 1023 (A) (N.Y. Sup. Ct. 2004)
[6] Rodriguez v. Kline, 186 Cal. App. 3d 1145 (CA 1986)
[7] Rosa v. Partners in Progress, 868 A 2d 994 (NH, 2005)
[8] Tyson Foods, Inc. v. Guzman, 116 S.W. 3d 233 (TX, 2003)

Earnings losses in wrongful death cases: a review

What economic losses do economists calculate for the survivors in a wrongful death action? Here is a quick review.

Lost Earnings capacity: Lost base salary, bonuses, employee stock options, etc. that would have gone to the family.

Points to consider: (1) On employee stock options is the value of the option or the value of realized options in the past relevant? (2) Should amount the deceased would have consumed be deducted?

Loss of Household services: Replacement cost of household related services provided to the family

Points to consider: Remember the life expectancy of the person receiving the household services must be considered.

Loss of advice, counsel, guidance: replacement cost of services beyond housekeeping etc. Commonly uses the median of the wage of teachers and social workers to value

Points to consider: How to measure amount of time the person provided the service? Survey of survivors? Public survey?

Loss of household accompaniment services: Value of being around one another. Wages of vocational nurses is used to value in some instances.

Points to consider: Testimony from the family on activities and family togetherness is often critical in proving up these types of damages

Loss of value of life: Value of being alive. May use a number of approaches such as consumer behavior studies and risk/safe wage premiums to determine value of a single life.

Points to consider: People may be more risk averse then simple model; not clear who should get this value since the person who derived the value is now dead. Not all states allow

Loss of enjoyment of life: Reduced amount of value that the survivors now experience as a result of the death of the person. Uses same model as value of life in conjunction with a reduction multiplier factor.

Points to consider: Same as value of life

Faulty OT comp scheme causes firefighters to sue

FLSA requires overtime payment to non-exempt workers including firefighters. However, the threshold for determining when overtime should be paid is different for different types of jobs. Specifically, Section 207(k) of FLSA requires that firefighters and certain law enforcement employees meet a higher threshold than 40 hours a week before the employer has to pay overtime.

City governments that have been making OT payments, but in the wrong amounts, are finding that not abiding by the 207k exemption can be costly. In some instances, incorrect OT payments actually serve to increase the city's liability.

For instance, one mid-western city agreed to pay its firefighters OT (1.5x) for all hours worked over 155 hours in a 21 day period. The union agreed OT compensation scheme comported with the Section 207k exemption.

However, instead of actually calculating the OT payment for each and every firefighter, the city paid a blanket 5.5 hours premium to every firefighter regardless of the number of hours worked. Clearly for some firefighters, the city has underpaid the amount of OT.

In fact it is argued, that in those instances where the firefighter has worked more than 155 hours, the city, according to section 207k, has not actually paid any overtime at all to those workers. In these types of cases, it is argued that not only should the OT payment not be an offset in the damages calculation, but it should actually be included in the calculation of the indiviudal's base pay. In these instances, the payment of the OT premium, since it is not legally an overtime premium payment, actually serves to increase the city's liability.

Medical expenses - billed or amount recieved by the provider

When totaling medical expenses in an injury case, is the amount billed or the amount accepted by the provider as payment in full the relevant number?

(thanks to the popular forensic economist bulletin board for this posting idea...)

While most of the legal opinions out there say the billed amount is correct, there is at least one state court case allowing testimony for the amount accepted.

In at least on instance in Federal District Court case the trial court judge, allowed the defense to present testimony about the amount the defendant (the government) would pay through its various health insurance programs and how much the plaintiff would actually pay as copay. The defense's reasoning was that the US was ultimately paying for everything, assuming the plaintiff won the case and received all his expected copays.

As such, the defense reasoned it was not collateral source as it didn’t come from some third party. Since, under the defenses theory, it was not a collateral source, the amount paid by the defendant could be considered as an offset in th damages calculation. In the trial, the court allowed the US to bring in a claims adjuster from Medicare and from Tricare to explain just how much they would pay and which procedures would be covered. They allowed me to use those estimates in determining the loss.

What would Daubert say about those damages? 2.20.2007

From a popular listserv:

In the calculation of lost fringe benefits in a wrongful termination case I included the cost of medical insurance that the employer had been providing to the employee. The company’s medical plan covered the spouse of the employee so the cost of the benefit was significant. The attorney taking my deposition asked that if the plaintiff was able to secure medical benefits in a new job should those be taken into consideration as an offset to the loss of medical benefits at his prior place of employment and I said that yes I would have to take that into consideration but that to my knowledge he was not covered or was not eligible for coverage in any of the jobs he has had since his termination.

The plaintiff’s wife is self employed and on their income tax returns there is a Schedule C which shows her earnings. The income tax return also shows that she paid $6,000 in self employed health insurance. The attorneys question was that:

if the wife was paying for heath insurance and if the husband (plaintiff) was covered under that insurance shouldn’t that be treated as deduction against the loss of medical benefits from his prior employer (defendant)?

Also if the plaintiff was eligible for health insurance at another employer but did not elect to be covered because he could not afford the employee part of the cost should the defendant be given a credit for the medical insurance that was available but not elected by the plaintiff?

Thoughts?

Damage expert services will cost their own client millions

Source: http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1168263432906

Broward, Fla., Circuit Judge Leroy Moe ruled Monday that Motorola willfully violated court orders during a $10 billion trade secrets trial late last year. In violation of the judge's order Motorola placed experts on the stand who previously had read other witnesses' testimony. The ruling could expose the electronics giant to millions in fines, attorney fees and trial costs.

The plaintiffs, SPS Technologies, will get a new trial. SPS attorneys also asked Judge Moe to fine Motorola $118 million -- $100 million in sanctions, $11 million in attorney fees and $7 million in costs. The amount of attorney fees, costs and sanctions to be levied against Motorola will be determined in a later hearing.

Damages for the Holidays? Lost earnings exist when vacation/sick time used for injury recovery

The experts at Lost Compensation were recently contacted by an attorney seeking advice on whether or not he should take a case. The plaintiff was injured in a typical slip and fall incident. The plaintiff incurred damages due to medical expenses, but the attorney was unsure if he should take the case because he didn't believe lost wages were recoverable. While the plaintiff was unable to work during his recovery time, his absense from work was fully covered by the vacation and sick time he had accrued over his years as an employee.

After our brief discussion, the attorney learned that although the plaintiff did not have a loss of earnings visible in his pay statements, he did in fact have recoverable damages in that area. Vacation and sick time provided to an employee in a work agreement has a real, and usually easily measured, dollar amount value. The loss of vacation and sick time can be valued at the rate the employee would have been paid had that time been spent working. That time is part of the benefits of the employment agreement and when an individual is unable to utilize that time as he wished due to an injury that another is repsonsible for, the losses are recoverable.

Follow-up to Attorney Buzz...

Follow-up to the Buzz: Daily UCLA Taser video





Here is the actual UCLA taser event (from the UCLA student newspaper website) that has attorneys talking.

The Buzz: Attorneys debate claim for damages in UCLA taser incident

Things became heated today on a popular attorney listserve as opinions were expressed about the lawsuit and claim for damages expected to come out of UCLA police using a stun gun on the 23-year-old UCLA student of Iranian descent, Mostafa Tabatabainejad. A high-profile attorney has been hired to file a police brutality suit. Civil rights attorney Stephen Yagman, who frequently brings actions against law enforcement agencies, also plans to file a federal civil rights lawsuit on the student's behalf, accusing UCLA police of false arrest and "brutal excessive force."

Attorneys across the country are voicing their opposing opinions. Some made posts supporting a possible claim of damages including pain and suffering while others scoffed at a potential claim for damages and applauded the UCLA police for using what they deem to be appropriate force.

Are these losses economic losses?

Case background:

Plaintiff's lost their parents in a plane crash due to a airplane defect. The parents had a very large estate and as a result the estate taxes that the children had to pay when the deceased parent's assets were transferred to them amounted to several million dollars.

It is argued by the children's attorneys that had the parents not died the parents would have transferred the estates to the children over time and in a more tax advantageous way. According to the children the parents were in the process of doing that at the time they died.

Should the childern's estate tax bill be considered a loss in the economic damage calculation in the airplane products liability lawsuit?

Female editor wins major wrongful employment termination lawsuit

A federal jury in Manhattan ruled on Monday, October 23 in favor of former editor-in-chief of The Source, Kimberly Osorio, in her sexual harassment and gender discrimination suit against the magazine and its founders, David Mays and Raymond "Benzino" Scott.

The jury awarded her $400, 000 in lost back pay and front pay and a total of $15.1 million for the relatalition. The judge later lopped off nearly half of the $15.5 million verdict fired-editor Kimberly Osorio won.

The plaintiff's were represented by high profile New York plaintiff's attorney Kenneth Thompson of Thompson Wigdor & Gilly.

Claim for damages made by Chamber of Commerce President who has fought “frivolous” lawsuits

The West Virginia Trial Lawyers Association (WTLA) has expressed its displeasure with state Chamber of Commerce President Steve Roberts after filing a personal injury lawsuit related to an injury his daughter sustained when hit in the eye with a paintball by another child. Mr. Roberts is suing for damages related to medical bills, loss of income and travel expenses as well as a claim for non-economic damages.

"For years now, Steve Roberts has led the charge to restrict access to West Virginia's courts," said Jeff Jones, the WVTLA President. "Over and over, he has characterized lawsuits filed by injured workers, people hurt by dangerous products, and people who were being cheated by insurance companies as 'frivolous.' He claims that these victims were trying to hit the 'lawsuit lottery' jackpot."

Mr. Roberts claims the lawsuit has nothing to do with any of the restrictions for which the state Chamber lobbied.

Ensure that your economic expert's report will support your damages claim

We were recently contacted by a personal injury attorney who asked a question undoubtedly on many attorneys’ minds: “If you were to produce an economic damage report for my case, how do I know that your conclusions will be inline with the interests of my client?”

The short answer: You don’t. But by staying in communication with your expert and making a few simple requests, you should be able to predict if their report will support the claim of damages in your case.

First, discuss the basics of the case with the potential expert. Explain where you see the damages in your case and listen for any objections he or she may have to your logic. If the expert seems to agree with you idea that damages likely exist, ask if he or she would be willing to review minimal case documents prior to retaining him or her to confirm that you both agree there are damages in the case inline with your expectations. These documents may include the original petition and the plaintiff’s tax and benefits documents. Finally, if you choose to retain the expert, you may request that he or she stay in verbal communication with you as the damage analysis is being performed. Ask that you be contacted with initial damage estimates before the report is finalized. This should give you the final confirmation you need that the expert’s opinion will support your argument in the case.

Damages: Forget about your P’s and Q’s . . . Mind your commas!

As reported last week the New York Times, there was a surprising damages outcome in a dispute between Canada’s largest cable television provider, Rogers Communications of Toronto, and the phone company Bell Aliant. The suite was regarding the phone company’s attempt to cancel a contract governing Rogers Communications’ use of telephone poles. Rogers communications argued that five year pole contracts renew automatically for another five years unless given cancellation notice before the final year of the original contract.

The end of the dispute came down to a single sentence in the contract: “This agreement shall be effective from the date it is made and shall continue in force for a period of five (5) years from the date it is made, and thereafter for successive five (5) year terms, unless and until terminated by one year prior notice in writing by either party.”

The regulator believed the second comma meant that the part of the sentence describing the one-year notice for cancellation applied to both the five-year term as well as its renewal. Therefore, the phone company was allowed to escape the contract after as little as one year and did not have to pay damages of 1 million Canadian dollars (88,000 USD).

Front pay awards could be huge in paper discrimination suit

According to the Fort Worth Star-Telegramm (October 26, 2006) 18 fired workers recently sued the Dallas Morning News for age discrimination. According to the article, the suit, filed Tuesday at U.S. District Court in Dallas, alleges that The News had become a hostile environment for employees over 40, stereotyping them as unable to adapt to new technology or assume multiple job responsibilities.

The Star-Telegram reports that the former workers are seeking back and future wages and benefits, as well as civil penalties for violating the federal Employee Retirement Income Security Act, or ERISA. One plaintiff is also seeking $9,200 that the suit claims he was entitled to under the paper’s severance plan.

Plaintiffs' attorney Karen Shropshire of Dallas said that the case could take two years or more to work its way thru the courts.

Economic analysis: The economic damages, especially the front pay or future wages component, could potentially be large if the jury finds in favor of the workers. This is because jobs in the paper industry are relatively had to come by and larger paper publishers tend to pay better wages. In short the workers will more than likely have a relatively difficult time obtaining alternative employment and if they do it will probably be for less than they were previously making. This is one to watch

What are the economic damages?

The following is an interesting case in which our economists were asked to provide their expert opinions. We will follow up on how we responded in the coming days...

We were asked by a potential client in L.A. to see if we could help calculate economic damages in a case involving a retail buyer. The buyer was in the showroom of a vendor (i.e. customer/client) breast feeding her baby.

The vendor, her client, asked her to leave the main showroom. After a heated discussion, the vendor offered her the use of a conference room to breast feed. In time, the plaintiff lost the business of this vendor and, she feels, lost several other key accounts. She believes she was ultimately 'mommy tracked' at her job by her employer.

What are the economic damages?

New claim for hedonic damages?

On Tuesday, a federal judge in Columbus, Ohio delayed the execution of cult leader Jeffrey Lundgren on the basis that the lethal injection would cause the prisoner pain and suffering because he is overweight and diabetic. Similar lawsuits filed in Missouri, Delaware and New Jersey have led to the halting of other executions. Lundgren has joined four other inmates in a lawsuit that argues the way chemicals are administered in lethal injections makes is painful enough to be cruel and unusual punishment and in violation of the constitution.

An attorneys take on explaining economic damages to a jury

Often economic expert witness testimony gets bogged down in the actual calculation of a plaintiff's economic damages and fails to relay to the jury WHY economic damages should (or should not) be awarded in the first place.

South Carolina attorney David Swanner, at his blog South Carolina Trial Law Blog, talks about how he explains the WHY economic damages factor to a jury.

Attorney question of the day?

Q: Do employer stock option games (see previous post on this blog) effect the value of employee stock options for litigation purposes?

A: Yes they do.

One key component in the valuation model (Black Scholes or other) is the grant price. If the grant value changes then the value of employee stock option changes. The higher the grant price the lower the intrinsic value of the employee stock option for litigation purposes.

With that in mind, options on employee options, like back dating and spring loading that was discussed in the previous post, provide a unique challenge when valuing for litigation purposes. The solution can be as simple as changing the valuation date and vesting dates in the mathematical model or more involved. Most option on employees by employers are unique to that employer.

Measuring economic damages to a person's credit

In employment and personal injury suits it is not uncommon for the plaintiff, because of their injury or difficulties obtaining replacement employment, to have difficulties keeping current on their financial obligations. As a result a good number of people’s credit rating will be damaged as a result of the injury or lost of employment. As is well known, a damaged credit rating effects the cost of future credit arrangements - i.e. the injuried or terminated person will pay higher interest rates.

The economic damage to the person’s credit rating in many instances is clear but the method to measuring the economic damages related to the damaged credit is not. Here are some thoughts on estimating the economic damage to credit from some recent cases we have worked on.

What information do you need:

1. A current credit report from Experian or other major credit reporting agency
2. A current credit SCORE from major credit reporting agency. Many credit reports will have the Beacon or other score for purchase
3. Previous credit reports and credit scores (will mostly not have but will ask)
4. The financial terms for the financial agreements at issue. For instance, the interest rates on the credit cards that the person now has to pay a higher rate on.
5. Need an interview with the plaintiff - to describe and list each area of damage.

How to do actually measure the economic damage to the person’s credit (some ideas):

One way is to look at the potential loss in wealth attributed to the lowered credit rating:

Specifically, the issue is to measure the loss of "wealth" between two points in time and that is attributed to some event.

A few definitions:
Wealth = The net present value of the person's future earnings
Credit Worthiness = The "scoring" of the person's credit rating at each point in time. (People with excellent ratings will score in the mid-to high 700s or greater, and the other direction for those lacking credit worthiness.
Several credit scorings bureaus provide scoring or credit worthiness measures for the person at two different points in time.
Loss of Credit Worthiness = Merely measure the differential in scoring between the two points, e.g. a reduction from a composite scoring of 700 to 550 would represent a negative differential of 21.4%((700-550)/700).
Loss of "Wealth" = This is represented by applying the negative differential from above to the net present value of his/her future earnings, e.g.(21.4% x $1,000,000 = $214,000).

Part of the rationale is based on the concept that lacking creditworthiness precludes one from taking advantage of those financial decisions that are essential to wealth building. Examples include the inability to keep/buy a larger home, inability to acquire credit cards to use in basic business functions such as travel, inability to accumulate "excess" earnings that could be placed into investments suchas IRAs, etc.

These items tend to have a "snowball" or cumulative effect that is self-perpetuating and is an accelerating downward spiral.