How to Use Forecasts to Establish Damages in Court Cases
Peterson, Robin T., The Journal of Business Forecasting Methods & Systems
The business forecaster, either corporate or academic, is in a unique position to assist attorneys in providing economic damages. In some cases, business clients have suffered losses or experienced declines in revenues and profits. In other cases, clients are employees who have incurred damages because they can no longer work and receive salaries. Both instances represent scenarios where streams of either past or future income has been lessened or eliminated. To claim for such damages, the law requires that their magnitude be estimated as precisely as humanly possible.
Forecasters can be of service for estimating the revenues that the client company or individual would have earned in the absence of the act which reduces the stream of income. (The act includes automobile accident, unfair trade practice, and illegal boycott). These estimates can be compared with the stream of income that the client actually earned, over the relevant time period. The difference between the two estimates, discounted for present value, measures monetary damages.
Courts will accept well-fomlulated forecasts as evidence. Further, juries (or judges when juries are not used) will accept the forecasts as admissible indicators of damage. But, these acceptances cannot be guaranteed, even if the forecast is conducted scientifically. This paper provides guidelines for those who strive to be successful in court cases.
GENERAL FORECASTING PROCEDURE
Forecasters should provide documentation that they are qualified to act as expert witnesses. A succinct and comprehensive vita is a necessity for this purpose. The vita should document degrees held, academic experience, industry experience, court experience, and special capabilities, such as familiarity with the industry to which the court case applies. If, for instance, the case involves a textile producer, experience in this industry, or manufacturing in general, may be well received as evidence of expertise. Past experience as an expert witness, arbitrator, or mediator also is often well received, as this signals expertise in the legal arena.
Generally, uncomplicated forecasting methods are preferable to those which are difficult to explain and cannot easily be grasped by the jury and judge. Included in the preferred methods are surveys, expert opinions, moving averages, and trends. It is important that the method(s) used have face validity. If the methods do not seem to be too logical or are too complicated to understand, juries and judges may be leery of them.
The forecaster should carefully explain the methods used, in language that is meaningful to the judge and jury. As far as possible, lengthy tables, complex graphic material, formulas, and complex calculation should be avoided.
It is tempting for someone who is academic to rely heavily upon transparencies for presentation. Often a better approach is to employ flip-charts--where the expert witness extemporaneously writes figures on a chart in a dramatic fashion, in order to induce an element of flair into the presentation.
When possible, it is useful to employ multiple forecasting methods, using each one as a control over the others. This process helps to develop confidence in the forecasted figures. Time series estimates, for example, can be validated through the use of survey forecasts. If the estimates are reasonably similar, confidence in the time series estimates is enhanced.
There are various practices which tend to enhance the courtroom behavior of the forecaster. Preparation and rehearsal are both must. It is necessary to be well-prepared for the testimony, so that the presentation can be made without relying on extensive notes. Reading text or notes can be boring and lead to inattention. Further, it can create the impression that the expert is not well prepared. Rather, an apparently extemporaneous mode is most impressive--even if it has been more or less completely memorized beforehand. …