An Arbitrator’s Guide to Evaluating an Expert Witness’ Damages Calculation

A projection of lost profits will almost always require some form of expert opinion.  With that said, one lesson that I have learned through the years is to never assume that just because someone holds a license, they know what they are doing!

Although there are several areas in the calculation process that lend itself to an arbitrator’s questioning when determining whether an expert’s opinion is reasonable, beginning with the expert’s opinion itself seems like the most likely starting point.  The arbitrator can consider whether the opinion was within the scope of the expert’s competency.  There have been cases where the expert provided an opinion outside the expert’s qualification.  

A global approach can start with an observation as to whether there is too great an analytical gap between the expert’s opinion and the data provided or work performed.  An expert may provide an opinion that is not supported by the documents and financial information previously presented. Thus, the expert’s opinion was not consistent with the work performed.

Case examples of expert opinions that were challenged included: (i) forecasted revenues utilized in the lost profits’ calculation that, when compared to historic data, lacked economic reality; and utilizing a critical component to formulate the expert’s opinion that was based solely upon the Claimant/business owner’s testimony.   

Be diligent in your analysis and questioning of all the experts.