Quantifying damages in complex commercial litigation is often difficult. A case may involve numerous interconnected pieces with contingencies and unknowns thrown in to frustrate the court’s effort to establish a firm, fair, and reliable figure. Testimony by a forensic accountant, backed by a disciplined and professional analysis of the underlying evidence, is an effective way to prove damages with reasonable certainty. But the forensic accountant and the client’s attorneys must be aware of how courts evaluate whether the reasonable certainty standard has been met. Here are six important factors courts take into account:
- How confident is the court that the estimate is accurate?
To establish confidence in a plaintiff’s damage estimate, a court will look at a number of considerations. Is the claim supported by verifiable data? Does the business have a track record or is it relatively new? What sort of difficult-to-quantify risks are present in the business projections used to create the estimate? Courts will also consider the extent to which lost profits fall within a defined range.
- Did the injured party suffer at least some damage?
To make a case at all, the plaintiff must prove that it has suffered at least some damages, even if the damages can’t be quantified with absolute certainty. As part of this analysis, courts examine whether the causation of damages is clear. Courts will also ask whether damages can be quantified at all.
- What degree of blameworthiness or moral fault is on the part of the defendant?
Courts often take into account the degree to which the defendant’s behavior defied moral or ethical standards. Although a defendant’s wrongdoing often does not factor into a damage expert’s estimates, it can influence the court’s willingness to accept the plaintiff’s figures. This factor is influenced by the “wrongdoer” rule, which provides that a defendant who is found liable for difficult-to-quantify damages can’t use that difficulty as a defense.
- Did the plaintiff use the best available evidence to prove its damages?
The higher the quality of data used in the damages analysis, the more likely a court will accept the related calculations and results. High quality data can be independently tested and verified. Attempting to base an analysis on less than the best information opens the door to strong arguments from the defense.
- How much is at stake?
Cases involving high damages claims usually involve a significant amount of complexity and nuance. In such cases, a court may apply greater scrutiny to the data and methods used to calculate damages before awarding a substantial sum.
- Do alternative methods exist to compensate the injured party?
Where financial damages cannot be calculated with certainty, the court may ask if other methods of compensating the plaintiff might be available. Lost profits may or may not be the best measure of the plaintiff’s damages. For example, lost business value may be an alternative to relying upon less certain projections of future revenue.
“In coordination with our clients, we at HSNO examine each of the components that courts consider when evaluating our estimates and conclusions,” said HSNO Partner, Christopher Money. “Our top priority is to provide quality litigation support to our clients and that’s exactly what you can expect when you work with our team.”
To learn more about our services and how we can assist you in your next legal case, contact us today.