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Lost Profits and Lost Business Value

November 22, 2010

Everett P. Harry, Courtroom Insight President, authored the lead article for the soon-to-be published, inaugural issue of “Dunn on Damages: THE ECONOMIC DAMAGES REPORT FOR LITIGATORS AND EXPERTS.”  The quarterly newsletter was conceived by Robert L. Dunn, a Courtroom Insight Strategic Advisor and nationally recognized legal expert on damages.

Mr. Harry’s article is titled “Lost Profits and Lost Business Value—Differing Damages Measures”, and addresses the on-going debate among damages experts about whether business valuation principles essentially constrain the amount of lost profits damages.  From the simplest perspective, for example, some experts argue that the lost profits or expectancy damages essentially cannot exceed the lost business value at the time of legal wrongdoing.

Mr. Harry concludes that lost business value and lost profits may be determined based upon quite different premises, at least under the applicable law, and result in materially varying damages amounts.  He illustrates his position by citing a recent decision—Anchor Savings Bank, FSB v. United States, United States Court of Appeals, March 10, 2010, 597 F.3d 1356.  This decision sustained lost profits damages far in excess of any lost business value.  As always, the choice of methodology for determining damages must be appropriate for and in harmony with the applicable law and case facts.

Mr. Harry’s article appears in its entirely in Mr. Dunn’s first-edition newsletter.  More information about the newsletter, including annual subscription pricing, is available at http://valuationproducts.com/dunn.html.

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