Damages Flashcards
Define Damages
according to Black’s Law Dictionary
the sum of money a person wronged is entitled to receive from the wrongdoer as compensation for the wrong.
What is the objective of determining damages
The objective is to make the plaintiff whole for any losses sustained as a result of the defendant’s alleged actions.
Calculating Economic Damages in a Business Situation
calculate the results of what would have happened, but for the alleged act, yielding profits that would have been earned, or the value of what would have been obtained, by the plaintiff in the absence of the defendant’s actions.
The three (3) key components of economic damages:
a) lost revenues;
b) growth rates; and
c) avoided costs.
What are “avoided costs?”
Any costs that would have been incurred in connection with generating the lost revenues, but were not incurred.
Common types of economic damages include:
lost profits; lost business value; lost cash flow; out of pocket expenses; extra costs; unjust enrichment; and mitigation.
Five (5) common methods for calculating “but for” profits:
the before and after method; the yardstick method; calculation based on terms of contract; an accounting of the defendant's profits (disgorgement); and Lost profits vs. Lost Business Value.
The Before and After Method
This method compares the plaintiff’s performance before and after the defendant’s actions.
The Yardstick Method
This method uses a “yardstick” to estimate what the revenues and profits of the plaintiff would have been.
Examples of “yardsticks”
a) performance of plaintiff at different location;
b) plaintiff’s actual performance against past budgeted results;
c) actual experience of a similar business unaffected by the defendant;
d) comparable experience by nonparties;
e) industry average experience; and
f) pre-litigation projections.
What is mitigation?
A plaintiff is obligated to take steps to mitigate its damages by taking reasonable and appropriate steps to overcome the damage.
Is mitigation recoverable as damages?
Yes.
