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Determining causation: What’s the expert’s role?

April 18, 2013

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Attorneys often ask their damages experts to assume causation. But such instructions shouldn’t be necessary when working with an experienced damages expert. In fact, attempting to calculate damages without considering causation is asking for trouble. Damages and causation are inextricably linked, and an expert who fails to examine this relationship risks having his or her testimony excluded by the court.

Tracing damages to a defendant’s alleged misconduct is important in complex commercial litigation. Damages typically are measured by a plaintiff’s lost profits. But declining profits can be caused by many factors, such as increased competition and rising costs, product obsolescence, legal issues, economic and industry trends, and regulatory changes.

Here are two examples of how inexperienced “experts” failed to distinguish damages caused by the defendant’s acts from other types of business losses:

Concord Boat Corporation v. Brunswick Corporation. The U.S. Court of Appeals for the Eighth Circuit overturned a $133 million antitrust judgment because, among other things, the district court should have excluded testimony by the plaintiffs’ damages expert. The plaintiffs relied exclusively on one financial expert — an economics professor — to establish the defendant’s antitrust liability and calculate damages.

The appellate court found that the expert’s testimony should have been excluded as “mere speculation.” Moreover, his calculations didn’t account for market events that both parties agreed weren’t related to any anticompetitive conduct, including a major product recall by one of the defendant’s competitors.

Penn Mart Supermarkets, Inc. v. New Castle Shopping, LLC. The Delaware Chancery Court found that the plaintiff’s efforts to prove lost profits damages were inadequate. The plaintiff’s damages expert failed to account for three potential causes of the plaintiff’s lost sales, apart from the defendant’s breach: 1) increased competition, 2) the bankruptcy of the plaintiff’s primary supplier, and 3) a major construction project near the entrance to the plaintiff’s store.
Concord Boat Corporation v. Brunswick Corporation, 207 F.3d 1039 (8th Cir. 03/24/2000)
Penn Mart Supermarkets, Inc. v. New Castle Shopping, LLC, No. 20405-NC (Del. Ch. 2005)

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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