A growing opportunity for valuation experts is in the area of lost profits and other commercial damages. In an exclusive interview, Nancy Fannon (Meyers, Harrison & Pia) and Jonathan Dunitz (Verrill Dana) talk about this area of practice from the perspectives of the valuation expert and the attorney. They are the editors of the most extensive book in this area, The Comprehensive Guide to Lost Profits and Other Commercial Damages,which has just been released in a newly expanded and enhanced edition.
Unique area: What makes the valuation of lost profits and damages unique or different from other types of valuation assignments? “I think the most notable difference (compared to a non-litigation engagement) is the amount of evidence that you need to support a damage claim,” says Fannon. “This affects everything you do from the minute you take that first phone call to the end of the engagement. Also, the attorneys who handle these cases tend to be of a very high caliber, and financial experts really need to be conversant not only in the economics of damages, but also the law that guides the appropriate remedy associated with different actions.”
What advice would they give a BV practitioner who wants to get into this area? “From an attorney’s perspective, communication skills are imperative if you want to be a sought after expert in this area,” says Dunitz. “Being able to communicate effectively through testimony or through the report is critical. It doesn’t matter to me whether you know lost profits analysis backwards and forwards. If you can’t explain it to a jury or a judge or in your report it’s not going to be very useful. Because of my background I will likely understand what you’re doing—but it is even more important that the jury, judge, and client understand your opinion and how you got there.”
“From an expert’s perspective, you can’t get into this area until you understand the requirements,” adds Fannon. “You also have to understand how courts operate in terms of such things as the rules of evidence, civil procedure and document production. This is very critical in these types of cases. You also have to be prepared to testify. Also, you need to build your CV by, for example, writing, taking courses, and getting credentials. This increases your credibility to the court, which is critical to what we do.”
Case law is crucial: Both Fannon and Dunitz point out that, because lost profits and damages are jurisdictional, keeping up with the case law is very important. Therefore, the new edition of their book is now in two volumes, with the second volume containing fully updated case law, split out by jurisdiction (including by state).
You can read the full interview in the April issue of Business Valuation Update (subscription required). For information about the new edition of their book, The Comprehensive Guide to Lost Profits and Other Commercial Damages, click here.