There’s a fundamental understanding—or maybe a misunderstanding—of the role of a financial expert in litigation. Sometimes, an attorney or, more likely, a client will not realize that the role of a financial expert is not the same as that of a lawyer. We are there to advocate only for our position on the numbers. That said, we can help develop courtroom strategies for presenting those figures.

Financial experts are hired to educate the client, their attorney, and, ultimately, a judge or jury of the numbers. To the extent that the raw numbers, calculations, and analysis align with the client and the attorney’s arguments, great. But it doesn’t always happen that way.

Let’s take the damages. It is often the most critical element of a civil lawsuit. Whether our firm is working for the plaintiff or the defendant, we reach a conclusion while understanding that there is likely an acceptable range in which our conclusion could encompass. Financial experts walk a narrow path to arrive at a damaged conclusion by following acceptable practices and procedures to attain a “reasonable degree of professional certainty.” That flowery term results from inputs of financial information, procedures, and methodologies for an output that the expert can testify to in a deposition or at trial.

After a claim is filed, a plaintiff’s attorney and their client will come to us and describe the harmful action. The question becomes (and this is a key reason to hire an expert): How much was the client damaged? Together, we enter the “but-for world” in which we construct a financial situation or a financial model that puts the plaintiff back where they would be “but for” the defendant’s actions.

Financial experts like those at our firm help steer the attorney and the client into the appropriate calculation of future losses by looking to the past for guidance while understanding the plans for the future, in order to quantify the damages. It is rarely a simple, straightforward exercise.

A plaintiff may say that it loses $20,000 in revenue every business day, so the damages are an annualized $5.2 million. That is only part of the story. Yes, the company may lose that much revenue in 12 months, but damages theory and case law says that the plaintiff may have “avoided” some expenses that they would have otherwise incurred. Therefore, a more reasonable figure, one defensible in court, would be based on net profit.

Because dollar figures take time to calculate, a plaintiff should hire a financial expert as soon as possible after filing an initial lawsuit. As the court sets deadlines for proving damages, the plaintiff must collect financial documents, including those the defendant might have. A financial expert should sort through which ones the plaintiff has in hand and which are still needed. The plaintiff’s attorney can then make efforts to obtain those records.

Often, the process is akin to peeling back an onion. Each layer provides a deeper understanding of the financial situation: When the defendant produces a financial statement, where is backup information to support it? Other questions arise: What documents do we think exist? What else would we love to see if they do exist? And is there anything we have been given that leads us to believe better information exists?

Again, it’s more complicated. A plaintiff could request, and the defense could respond with 200 banker boxes full of papers with the unstated challenge, “Here, you figure it out.” A financial expert will have to separate the wheat from the chaff, which takes time, money, and interest that the defense hopes the plaintiff does not have.

The defense comes at the case differently. Often an insurance carrier paying the legal bills is involved. The big question for the financial expert is, “If the plaintiff is right and the defendant has some liability, what is the exposure?” To start, we never have an opinion as to liability. We begin with the assumption that the Plaintiff will prevail and that the Defendant has liability for some level of damages.

A financial expert will quantify that liability and provide a damages conclusion or dollar range. If those numbers are relatively small, the defense will likely try to settle before trial to save litigation expenses. In that instance, the financial expert may prepare a report, be deposed by opposing counsel, and be done.

If the stakes are much higher or the plaintiff insists on a trial, the financial expert becomes a court strategist as well as a numbers person.

Why? The expert might have experience in a particular court or before a specific judge that the attorney does not have. The attorney and financial expert may have seen whether the judge likes to see in terms of the presentation of financial information. They have seen whether the judge has an even-tempered, mild manner or a short fuse. If the latter, the expert will tell the legal team, “We have to present our financial points quickly, or the judge will remain annoyed for the rest of the trial.”

Similarly, an expert will know whether a particular judge prefers visual presentations. In that case, the defense (or plaintiff, for that matter) can best give testimony using charts and graphs on an easel or in a PowerPoint.

A different judge might disdain high-tech presentations. In that case, the financial facts will have to be presented in more conventional ways as if animated slides do not exist.”

Frequently, the legal team knows which judges are well-versed in complex civil matters, so the attorney can skip the basics and proceed directly to testimony on the issues. In a jury trial, a different strategy is needed. The information must be simplified because jurors will be unfamiliar with law and finance. A financial expert has the experience to prepare both presentations.

A successful financial expert will help the attorney show the client that the proposed resolution is fair and makes the most sense when viewed in totality. Having the lawsuit settled today allows the client to move on without further angst and expense. When the client insists on further litigation, the legal team can explain that any time you take anything to trial, you are at the whim of someone else making an ultimate decision.

Could the outcome be better for you? Sure. Could it be worse? Absolutely. Here are the numbers.


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