Author: Wade

Lost profits are among the most hotly contested — and most frequently excluded — categories of commercial damages. Courts do not demand mathematical certainty, but they do demand more than speculation. Here is what judges look for when deciding whether a lost-profits opinion earns its way to the jury.

Reasonable Certainty, Not Speculation

The governing standard in most jurisdictions is “reasonable certainty”: the plaintiff must show the fact of damages with reasonable certainty, and the amount with as much certainty as the nature of the case permits. A new business with no track record faces a steeper climb than an established company with years of financials — but neither is automatically barred. The expert’s job is to build the bridge from evidence to number.

The “But-For” World Must Be Credible

Lost profits measure the difference between what happened and what would have happened absent the wrongful act. Courts expect that counterfactual to be grounded in reality: the company’s own history, comparable businesses, industry data, and contemporaneous projections. A “but-for” scenario that assumes perfection — no competition, no downturns, no missteps — invites skepticism and exclusion.

Separate the Breach from the Noise

Judges look closely at causation. If revenues fell during a recession, or costs rose for reasons unrelated to the defendant’s conduct, the analysis must account for it. An expert who attributes every dollar of decline to the breach — without addressing alternative explanations — hands opposing counsel an easy cross-examination.

Methodology Must Be Reliable

Under Daubert, the method matters as much as the conclusion. Accepted approaches — before-and-after comparisons, yardstick analyses, discounted cash flow projections — are all admissible when applied reliably to sufficient facts. What fails is the black box: numbers without disclosed data, assumptions without support, and conclusions that shift with advocacy.

Proving lost profits is an exercise in disciplined storytelling: credible facts, reliable methods, and a clear explanation of how the evidence leads to the number. Do that, and the opinion stands.

Mediation often turns on a single question: whose number can the mediator — and the other side — believe? Your damages expert shapes that answer. Before mediation, make sure you can ask these questions and get satisfying answers.

What Are Your Key Assumptions?

Every damages model rests on assumptions: growth rates, discount rates, work-life expectancy, the “but-for” world. Ask your expert to name the three assumptions that move the number most — and what happens to the bottom line if each one shifts. If the opinion collapses under modest changes, you need to know that before the mediator does.

Where Does Your Data Come From?

Reliable opinions rest on recognized data sources: Bureau of Labor Statistics earnings figures, published life tables, audited financials. Press on anything that looks like an unsupported assertion. An expert who can cite the source for every input is an expert who will survive a tough mediation — and a Daubert challenge.

Can You Explain This to a Jury?

Ask for the two-minute version. If the expert cannot explain the damages theory in plain language to you, the mediator and a jury will fare no better. Clarity is not dumbing down — it is the mark of someone who truly understands the economics.

What Would Change Your Number?

An expert who has considered what could prove them wrong is a credible expert. Ask what evidence would move the opinion up or down, and how the analysis handles the opposing expert’s approach. The answers reveal preparation — or the lack of it.

The expert you bring to mediation is the expert you may bring to trial. Choose one whose work you can defend as your own.

In a wrongful death case, the economic loss often stretches decades into the future — a lifetime of earnings that will never be realized. To present that loss to a court, the economist must convert future dollars into present value. The tool for that conversion is the discount rate — and small differences in the rate can move an award by hundreds of thousands of dollars.

The Math Is Powerful

Consider $1 million in lost earnings projected 20 years from now. At a 1% real discount rate, its present value is roughly $820,000. At 3%, it falls to about $554,000. Same loss, same facts — a difference of more than $260,000 driven entirely by the rate. When losses span 30 or 40 years, the gap widens further.

What Courts Expect

Courts do not accept a discount rate pulled from thin air. The rate should be grounded in evidence: yields on relatively safe investments, expressed in real (inflation-adjusted) terms, and consistent with the jurisdiction’s legal framework. Some jurisdictions prescribe or constrain the rate; others leave it to expert testimony — but in every case, the expert must explain why the chosen rate fits the facts.

Why Sensitivity Analysis Matters

Because the award is so sensitive to the rate, a careful expert tests alternative rates and shows how the bottom line changes. That transparency does two things: it demonstrates that the opinion is not fragile, and it gives counsel a clear picture of where the real exposure lies — information that is invaluable at mediation.

The discount rate is one of the few inputs in a damages model that can honestly be described as outcome-determinative. Treat it with the care it deserves: grounded in data, explained in plain language, and tested against alternatives.