Getting More Value from Your Damages Expert
- October 25, 2016
- Under Articles
- Expertise: Commercial Damages & Valuation - Labor & Employment Disputes
Getting More Value From Your Damages Expert
It is not uncommon for litigation attorneys to hold off on retaining damages experts for their cases until fact discovery has either ended or is nearly exhausted. By following such a practice (typically in the interests of minimizing costs), the damages expert is denied the opportunity to use the fact discovery and document production processes to procure the best available support for affirmative theories and/or rebuttal arguments. In these situations, the resulting work product and testimony for the damages case may not be as strong as it could have been; and this could prove pivotal should the case ultimately come down to a “battle of the experts.”
We acknowledge the conundrum here — experts always say they should be hired earlier, and attorneys owe their clients a duty to keep costs down. Further, as economists we understand that resources need to be deployed responsibly to maximize the value to the client. That said, in our experience we have found it’s not the timing of a damages expert’s retention that maximizes value to the client but the timing of his or her deployment in the dispute process. In fact, deployed deftly, early retention of a damages expert can result in lower actual costs (due to an earlier conclusion of the dispute) or lower perceived costs (due to a more favorable client outcome). The issue, therefore, is one of identifying and valuing the benefits associated with early retention.
When a damages expert is retained before, or early in, the discovery phase of a dispute, it affords the opportunity for a more robust analysis and, by extension, more defensible and persuasive opinions. The additional value afforded by early retention in this context speaks to the traditional role of damages experts as providing reports and testimony. Additionally, by retaining a damages expert early, he or she can provide the legal team with insights and tactics that would otherwise either not be available to them or would not be deployed in the most effective manner. Our primary objective in writing this article is to help counsel explore some of those available benefits.
A seasoned damages expert can potentially play multiple roles beyond the “usual” scope of damages analysis and testimony, which can help the legal team do the most for its clients. These may include:
1. Giving counsel an early sense of potential damages value/exposure. A review of information contained in the complaint and a sample of financial and transaction documents can inform a damages expert to advise attorneys as to (a) the range of potential economic value/exposure of a claim and (b) the key factual and economic drivers that should be addressed. Armed with these insights, attorneys and their clients can make a more informed decision to either pursue a settlement or, if emboldened to move forward with the litigation, position the case strategy to address key damages drivers.
2. Mapping out a tailored damages strategy. When damages experts assist counsel early on with developing the damages theory, it allows the legal team to craft their motions, document requests, interrogatories and deposition inquiries so as to maximize the gathering of (a) key data to be used in the damages calculations, (b) information to support or rebut damages assumptions, and (c) background context to facilitate a seamless integration of the damages expert’s testimony into the legal team’s presentation.
3. Increasing the “damages IQ” of the legal team. The legal team’s immersion in document review and other discovery efforts allows attorneys to become knowledgeable about the underlying industry. However, damages testimony is distilled from the application of theoretical principles that are assumed to apply across a range of commercial activities and behaviors. The bases of such theories, their applicability to the case at hand, and the sensitivity of key inputs when applied can result in a wide range of damages assessments. A damages expert can help the legal team understand relevant complex economic and financial concepts, damages theories, and technical jargon that may be used by the other party’s damages expert so that those cross-examining the expert can gain the upper hand in encounters in deposition or at trial.
4. Serving as a “devil’s advocate.” Damages experts understand the importance of anticipating, considering and preparing for inquiries from the other party’s counsel that challenge his or her opinions and their underlying bases. Such an appreciation, and the processes experts employ to address those challenges, can provide a valuable objective, detached counterpoint to the advocacy focus of the legal team. By having the damages expert serve as a “devil’s advocate,” the legal team can assess the strength of key supporting fact witnesses and industry experts who have limited litigation experience and minimize the risk of surprises that could diminish the strength of the damages case.
5. Helping counsel use fact witnesses to build the damages case. Damages expert can assist in the preparation of deposition outlines for key fact witnesses and 30(b)(6) deponents — ranging from a thematic list to a detailed script of questions with follow-ups — designed to solicit information that would otherwise be subject to assumption in a damages analysis. Additionally, having a damages expert attend depositions, either in-person or remotely, allows for just-in-time input of follow-up inquiries, course corrections and requests for documents that can help the attorney maximize the value gained from the deposition-taking exercise.
6. Aiding in settlement discussions. A damages expert retained early in a dispute can assist the legal team with drafting and stress-testing settlement offers. Experts can also join counsel in early-stage talks to identify areas of common ground (e.g., how to estimate a subset of damages claims) and reduce the scope of issues where the experts “agree to disagree.” Finally, being business professionals themselves, experts can provide the kind of outside-the-legal-box perspective that serves as the tipping point or barrier breaker and moves the parties to settlement.
We mentioned above that the practice of delaying retention of a damages expert can be the result of a well-intentioned effort to minimize the costs of litigation to the client. The purpose of this article is not to debate that point as a black-and-white issue. Instead, we suggest some ways in which the legal team and the client can derive additional, and perhaps not originally envisioned, benefits from utilizing a damages expert through early retention. Our goal is to recast the discussion of expert retention so that it is based not only on a consideration of incremental costs, but instead considers the broader value proposition that a litigation-savvy expert can offer.
In some situations the perceived value may be obvious and worth the investment. But in others, there may remain some uncertainty as to whether the value can be realized. In this latter circumstance, it may help to discuss the issue up front with the expert, and perhaps work with him or her to consider whether alternative compensation arrangements can be made to address any such concerns. While damages experts often cannot work on a contingency-fee basis, most are aware that (just as in the legal profession) clients may benefit from finding alternatives to the traditional, hourly fee-based compensation arrangement. In the hopes of encouraging the development of more fluid relationships between experts and counsel, we would in general encourage legal teams to keep this option open.
In summary, we believe that retaining a damages expert early on, and involving the damages expert throughout each phase of the dispute process, can result in not only a more defensible and persuasive damages presentation but also allow the legal team to provide its client with the strongest array of capabilities to generate a value-driven representation experience.
—By Rodney J. Bosco, David J. Ottenbreit and Henry A. Platt
Rodney Bosco and David Ottenbreit are damages experts with Gnarus Advisors LLC. They provide advisory and expert testimony services in adversarial settings and specialize in assessing the financial impact associated with commercial disputes and lost earnings claims, performing business and shareholder valuations, and conducting investigations involving quantitative analysis or empirical research.
Henry Platt is a partner in Saul Ewing LLP’s labor, employment and employee benefits practice. His practice focuses on labor and employment litigation, including discrimination, sexual harassment, employee raiding and defection, labor antitrust, business conspiracy, National Labor Relations Act and Labor-Management Relations Act claims, plant closings, mass layoffs, drug testing, workplace privacy, noncompete agreements, and collective bargaining.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.