Litigation Services Handbook, 2014 Cumulative Supplement: The Role of the Financial Expert, 5th Edition

CHAPTER 4A

CONVOLVING ASSUMPTIONS IN MEASURING DAMAGES

Roman L. Weil

CONTENTS

4A.1 Preface

4A.2 Assignment

4A.3 Conclusion

4A.4 Analysis

(a) Duplicate Compensation for Dr. Harwold

(b) Other Differences in Assumptions

(c) Base Salary

(d) Basis for Salary Growth

(e) Discount Rate for Future Earnings

4A.5 Summary Exhibits

4A.6 Addendum on Consulting

4A.7 Epilogue: Presentation to the Court

APPENDIX: EXHIBITS PROVIDED TO THE COURT

NOTES

4A.1 PREFACE

This chapter uses a wrongful discharge case to demonstrate how a financial expert can provide the court with a framework (spreadsheets) to make its own assumptions.¹ The dispute centered on reasonable assumptions for projecting lost compensation and extra costs incurred by the plaintiff. The report focused the court on the decisions it would have to make and showed how the spreadsheet model would turn those assumed parameters into a total present value amount. It was a rebuttal report prepared for the defendant, Far Western University, in response to a report prepared by A. Lawrence Milton, the financial expert for the plaintiff, Dr. Jack Harwold. (Note: I have changed the parties’ names, the circumstances, and the data presented in the case. The lawsuit occurred in 1998, when the risk-free and inflation rates differed from those of 2014, the publication date for this supplement.)

The report demonstrated several important considerations for financial experts:

• Don't wait until the court establishes liability to commence damages computations. ...