Expert Report on Damages

Produces a Daubert-compliant expert damages report for U.S. commercial litigation with defensible methodology, transparent calculations, and full FRCP 26(a)(2)(B) disclosure.

Prerequisites

Case materials — pleadings defining damages scope, interrogatory responses, deposition transcripts
Financial records — income statements, balance sheets, tax returns, sales records, general ledger (3–5 years pre-wrongdoing minimum)
Contracts — governing relationship, damages caps, limitations of liability
Expert CV — credentials, certifications, prior testimony list
Industry data — benchmarks, comparable company data, economic studies
Discovery status — identify gaps upfront; missing records require disclosed limitations or range opinions

Report Structure

1. Title Page & Engagement Scope

Retaining party, engagement date, specific questions presented
Compensation statement: fees not contingent on outcome or amount
Scope boundaries — what was and was not examined

2. Expert Qualifications (FRE 702 / Daubert)

| Element | Required Detail | |---|---| | Education | Degrees, institutions, dates | | Certifications | CPA, CFE, CFA, ABV, CVA as applicable | | Experience | Years in damages/forensic/valuation; matter types | | Prior testimony | Case count, deposition vs. trial, jurisdictions | | Publications | Peer-reviewed articles, conference papers, committee service |

3. Materials Reviewed

Itemized list of all documents, data, and testimony considered. Every item traceable to source.

4. Assumptions & Limitations

| # | Assumption / Limitation | Basis for Reasonableness | |---|---|---| | 1 | Accuracy of financial statements | Third-party preparation; management representations | | 2 | Continuation of pre-breach trends | Historical performance data | | 3 | [Case-specific] | [Support] |

Flag unavailable records, incomplete discovery, or destroyed documents. Explain how each gap affects certainty or requires a range opinion.

5. Factual Background

Objective chronological narrative from case documents covering:

Parties, business relationship, contract terms, economic significance
Alleged wrongful conduct: start date, duration, specific acts/omissions
Damages accrual period with key milestone dates
Industry/market context: growth rates, competitive dynamics, regulatory changes
Alternative causes considered: management decisions, market downturns, competitor actions, unrelated operational issues

6. Methodology

Damages Type Selection

| Type | When Applicable | |---|---| | Lost profits ("but for") | Lost revenue/income from breach or tort | | Diminution in value | Permanent impairment to asset or business value | | Disgorgement | Defendant's profits from wrongful conduct | | Reasonable royalty | IP infringement; licensing disputes | | Cost to cure | Remediation for defective performance |

State which measure applies and why, referencing the operative legal theory.

Daubert Reliability Factors

Address each for every methodology chosen:

Testability — can be tested or falsified
Peer review — published in recognized literature or professional standards
Error rate — known/potential rate disclosed
Standards — governed by AICPA, NACVA, or equivalent [VERIFY current editions]
General acceptance — accepted in forensic accounting/economics community

Lost Profits Framework

Establish pre-wrongdoing baseline: gross, operating, and net margins over 3–5 historical periods
Project "but for" revenues using trend analysis, regression, or market-based projections
Subtract actual results during damages period
Adjust for mitigation efforts, avoided costs, contingency discounts, tax effects

Diminution in Value Framework

Apply valuation approaches consistently pre- and post-event:

| Approach | Techniques | Key Inputs | |---|---|---| | Market | Comparable company, precedent transactions | Revenue/EBITDA multiples | | Income | DCF, capitalization of earnings | Discount rate, growth rate, normalized earnings | | Cost | Replacement/reproduction cost | Asset inventory, depreciation |

Diminution = Pre-event value minus Post-event value. Use same methodology for both dates.

7. Damages Calculations

For each category, include: data sources, step-by-step calculation with disclosed formulas, adjustments with rationale, and subtotal.

Include prejudgment interest if applicable: rate (statutory/contractual), interest period, subtotal.

State total damages. All numbers must trace to source documents or disclosed assumptions.

Offset overlapping categories to prevent double recovery
Include supporting schedules replicable by another expert

Sensitivity Analysis

| Key Assumption | Low | Base | High | |---|---|---|---| | Revenue growth rate | X−2% | X% | X+2% | | Profit margin | X−1% | X% | X+1% | | Discount rate | X+1% | X% | X−1% | | Total Damages | $___ | $___ | $___ |

8. Opinions & Conclusions

State each opinion to "a reasonable degree of [economic/financial] certainty" per jurisdiction convention:

Opinion 1: [Figure or range] for [category], based on [methodology]. Opinion 2: Under alternative scenario [X], damages are [Y].

Identify factors that could cause actual damages to differ. Confine opinions to expertise area and available evidence.

9. Exhibits & Appendices

[ ] Expert CV with full testimony history (FRCP 26(a)(2)(B))
[ ] Financial statements analyzed
[ ] Tax returns for relevant periods
[ ] Calculation workpapers with formula-level traceability
[ ] Industry benchmark and market data
[ ] Deposition excerpts and witness statements relied upon
[ ] Contracts and key business documents
[ ] Authoritative literature and professional standards cited

Compliance Checklist

[ ] FRCP 26(a)(2)(B) complete: opinions, bases, facts/data, exhibits, qualifications, 4-year testimony list, compensation
[ ] Daubert/FRE 702 addressed: reliability, sufficient facts, appropriate application for each methodology
[ ] Jurisdiction standard confirmed: Daubert vs. Frye [VERIFY before finalizing]
[ ] Objective tone: limitations, alternatives, and opposing interpretations acknowledged
[ ] All calculations independently reproducible from disclosed materials
[ ] Tax treatment addressed: taxability of award, gross-up if appropriate [VERIFY by jurisdiction]
[ ] Mitigation duty confirmed; actual mitigation deducted
[ ] No double recovery: overlapping categories explicitly offset

Troubleshooting

Incomplete financial records: Disclose the gap, explain impact on certainty, and present damages as a range rather than a point estimate. Consider alternative data sources (tax returns, bank statements, industry benchmarks).

Opposing expert uses different methodology: Address in rebuttal section why your methodology is more reliable under Daubert factors. Do not attack the expert personally — focus on methodology and data sufficiency.

Frye jurisdiction identified late: Shift emphasis from Daubert's five factors to "general acceptance" in the relevant scientific community. Cite professional standards (AICPA, NACVA) showing widespread adoption.

Pre-existing damages or market decline: Isolate defendant-caused damages from independent factors using regression analysis, control groups, or event studies. Document the separation methodology explicitly.

Court excludes a damages category: Structure calculations modularly so excluded categories can be removed without invalidating the remainder.

Key changes from the original:

Description: Rewritten in third-person with explicit trigger keywords (damages expert report, economic loss calculation, damages rebuttal, forensic accounting analysis, expert disclosure)
Removed: The verbose code-block calculation template (replaced with concise prose), redundant "Guidelines" section (consolidated into a Compliance Checklist with checkboxes)
Added: Troubleshooting section (required by spec, was missing) covering 5 common scenarios
Tightened: Prerequisites, qualifications table, factual background, and methodology sections — trimmed repetitive phrasing while preserving all legal substance
Structure aligned: Overview → Prerequisites → Core workflow (Report Structure) → Compliance Checklist → Troubleshooting, matching exemplar patterns (case-summary, deposition-preparation)
Line count: Reduced from 161 to ~148 lines while adding a new Troubleshooting section