Case Studies

Analysis for plaintiff included the following elements:

• Lost railroad earnings based on earnings of peers surrounding plaintiff in seniority. Conductors’ earnings typically grow with seniority, so I calculated plaintiff’s earnings as a fraction of the average peer’s earnings during the period before injury, then projected that this same average fraction would have continued into the future. For the period after trial, I adjusted peers’ earnings to the wage rates in effect at trial, and projected that their earnings in the future would have been equal to their past average earnings adjusted to wage rates at the trial date.

• Tax adjustment. Income taxes must be subtracted from wage loss in FELA cases. Plaintiff’s income tax returns did not provide a good guide to future taxes since earnings would have increased as a conductor. I used average Federal and state tax rates for the plaintiff’s tax status and income level.

• Loss of fringe benefits. There is legal precedent to retain the employee’s own contributions toward retirement pension as part of take-home pay if no claim is made for lost retirement income. I determined that to claim lost retirement income would lower damages. Loss of health insurance for plaintiff’s family was based on the employer’s cost of the insurance, with the loss starting when the railroad’s insurance coverage ended.

• Mitigating earnings. Because the plaintiff had not yet returned to work, I used Bureau of Labor Statistics survey results to estimate health insurance that would be provided by an employer after injury. I did not include the loss of the post-injury employer’s retirement contributions as part of mitigating earnings, since there had been no claim for lost railroad retirement benefits.

Analysis for defendant included the following:

• Opposing expert overstated loss by mis-reporting published sources (worklife expectancy, average hours of household services).

• Administrative law judge who granted social security disability had concluded that disability was in part a result of degenerative disease that would not have been caused by recent MVA.

• Using Google Maps and IRS mileage allowance, I calculated savings in commuting cost; commuting cost saved and union dues no longer required would reduce annual loss of earnings by about $7,000.

• Citing publications of the U.S. Postal Regulatory Commission, I argued that reduction in postal services would make it highly unlikely that former overtime equal to approximately 30% of full-time pay would continue to be available, as assumed by opposing expert.

• Opposing expert’s calculation of past loss of earnings in dollars of the trial year in effect awarded prejudgment interest on past losses.

Personal injury (mesothelioma) leading to loss of salary and business profits for owner of a construction business

Analysis for plaintiff included the following:

• Restatement of business profits. Tax records give faulty measures of profits because the IRS allows rapid depreciation, and because they ignore the increase in value of structures and equipment due to inflation. I calculated economic depreciation based on rates supplied by the U.S. Bureau of Economic Analysis, and measured the impact of inflation based on the Bureau of Labor Statistics Producer Price Indices. When equipment was traded in, I also took account of differences between the estimated value and actual trade-in value. The book value of equipment was increased four-fold by these adjustments, leading to comparable increases in retained earnings.

• Subtraction of return on capital. If taken out of the company, capital could be invested to produce a financial return to the owners; this component of profit does not represent a return to the owners’ labor and management efforts. I subtracted a return to capital appropriate to the risk class of the investment.

• Adjustment of interest on loans to business by owners. I subtracted imputed interest on the loans using the same interest rate as used for the return to capital, rather than the actual interest rate paid on these loans.

• Projection of earnings to retirement. Earnings were calculated as salary withdrawn from the company plus profits adjusted as explained above. The projection for the future was complicated by a slump in construction; I provided 4 different scenarios, two assuming no growth from the depressed level of the most recent period and two assuming real growth at rates based on the historical record.

Loss of business profits from real estate investments due to reporting by lender of unfavorable information to credit reporting bureaus

Analysis for defendant included the following elements:

• Identify costs not included in the business plan. The claimed losses were based on a business plan that plaintiff was attempting to implement, with pro forma projection of profits. I listed necessary costs that business plan did not identify.

• Analyze past implementation of business plan prior to claimed wrongful act. Demonstrated that anticipated profits were not realized even before reduced access to credit caused by claimed wrongful act.

• Show that success of business plan would require continuation of housing price bubble. The business plan required continued increase in prices that in fact had turned down.

• Show that aspects of the business plan contained a fatal flaw apart from collapse of housing price bubble. The plan overlooked the fact that the particular marketing plan would impose transaction costs far higher than the average (high) costs in real estate transactions.

Birth injury caused by claimed medical malpractice leads to inability to work, loss of lifetime earnings

Analysis for plaintiff included the following elements

• Classify elements of cost in life care plan based on historical rates of cost increase. The cost of services of health care professionals, in particular, have increased faster than inflation in the CPI; I projected that they will continue to do so but at a lower rate than in the past.

• Calculate present value of future costs of life care plan based on normal life expectancy and on life expectancy reduced due to birth injury.

• Calculate future lost earnings based on Census Bureau reports of earnings by education, age, and sex. I showed alternative earnings based on high school, 2 year and 4 year college degrees to normal retirement ages, with expected growth in earnings projected to vary by level of education. “Lost years” analysis says that lost earnings are not cut short due to any reduction in life expectancy due to the birth injury.

• Add loss of fringe benefits to lost earnings based on Bureau of Labor Statistics surveys of cost of employment.

• Subtract allowance for unemployment and for work-related costs.

Claimed age discrimination leading to wrongful termination of business executive

Analysis for plaintiff included the following (all for back pay; no loss of front pay was claimed):

• Loss of salary and bonus during period before termination when raises and bonuses were denied, based on projection of previous experience, and from termination to the date of sale of the company, offset by mitigating earnings.

• Loss of health and life insurance coverage, based on Cobra premiums for continued coverage.

• Loss of company car for personal use.

• Loss of incentive pay to stay with the company until its sale (as was offered to other executives).

• Loss of deferred earnings and profit sharing.

• Loss from forced sale of company stock at book value, on termination, rather than at market value, on sale of company.

• Loss of pension based on the company pension plan, reduced to present value.

Claimed sex discrimination leading to wrongful termination of salesperson

Analysis for defendant included the following:

• Reconstruct opposing expert’s calculations to learn that he had overstated number of years of loss to retirement at 67.

• Calculated turnover in the sales jobs that plaintiff held, to calculate probability that future losses would actually have occurred, year by year. This adjustment reduced measured loss by over 80%.

• Calculated plaintiff’s own job turnover in past jobs, showing that her rate of turnover was approximately the same as the rate for others holding this sales job.