Economic damages consulting is an analysis of potential damages for plaintiffs or defendants that will provide them with a good estimate of the rewards and risks associated with pursuing economic damages in litigation.
Economic damages consulting services are useful in determining whether litigation should be pursued or whether the case should be settled.
In this article, I will explain the key components of economic damages analysis and the key services that DMA Economics provides. We will also look at an example of how economic damages consulting would be implemented for securities fraud matters.
Key Components of Economic Damage Analysis
The key components of economic damages analysis are:
- Determine the legal theory of damages for the particular litigation.
- Determine the appropriate data required to perform the analysis.
- Provide an initial estimate of economic damages given the legal theory and data availability.
Economic Damages Analysis and Consulting Practice Areas
DMA Economics provides economic damages analysis under the following litigation contexts:
- Breach of contract
- Tortious interference, for example, copyright infringement
- Breach of fiduciary duty
- Securities fraud
- False labeling or advertising
- Wrongful death or termination
10b-5 Securities Fraud Cases
One example of an area where DMA provides extensive economic damage consulting for either plaintiffs or defendants in securities fraud matters classified as 10b-5 securities fraud by the Securities and Exchange Commission (SEC).
10b-5 cases are related to public companies’ false disclosure or lack of disclosure of information. For example, a public company may not disclose failure to achieve a key patent or copyright until such information is later revealed by either the company or an external source, known as delayed disclosure or fraud-on-the-market.
In such matters, we first identify the disclosure or lack of disclosure issue and appropriate dates.
We then identify how the revelation of the undisclosed information statistically affects the value of the stock price on the date or dates it is eventually revealed. If statistically significant, these are known as abnormal returns and over a few days, cumulative abnormal returns or CARs.
Finally, we estimate how many shares would be affected by the delayed disclosure to calculate the total economic damages the class of shareholders impacted could be awarded in litigation.
Once all of these factors are quantified, defendants will have a clear understanding of the potential damages they may have to pay plaintiffs and plaintiffs can identify the potential reward they could obtain in litigation.
Such information is very useful for both plaintiffs and defendants in deciding whether to pursue the litigation or whether to settle as well as the amount to settle for.
- Guide to Economic Damages
- What are Economic Losses and Damages
- Lost Profit vs. Lost Business Value
- Daubert Challenges: Disqualifying Economic Damages Expert Witnesses
Retaining the Services of an Economic Damage Consultant
DMA Economics is a leader in providing damage calculations using rigorous analyses that are clearly communicated to triers-of-fact in litigation and to clients prior to litigation in an economic damages consulting role that will help them determine whether or not to pursue litigation or how to defend or settle the litigation.
For more information on how our economic damages expert witnesses can help you, contact us using the form on this page.