Estimation of economic damages and lost profits of economic damages and lost profits

We prepare opinions on the value of the damages suffered and lost profits for the purposes of dispute resolution.

In particular:

• we carry out forecasts of lost profits;
• we calculate the present values of damages from losses suffered and lost profits;
• we estimate damages resulting from lost profits and lost business value;
• we analyze litigation documentation from the financial point of view and cooperate with law firms in the preparation of pleadings.

• on personal property - non-material damage (harm),
• on property - property damage.

Property damage includes:

• actual loss (damnum emergens),
• lost profits (lucrum cessans).

In the conduct of business, property damage may occur as a result of the tort of a third party:

• unlawful activity, including unauthorized use of intellectual property,
• violation of the provisions of the concluded contract,
• abuse of powers by company bodies (management board, supervisory board, proxy),
• abuse of powers by public administration bodies.

Key to estimating economic damages is the evaluation of three prerequisites:

• the occurrence of the event causing the damage;
• occurrence of damage - loss of property of the injured party;
• actual and objective cause-and-effect relationship between the event and the damage.

The estimation of economic damages is carried out using the differential method by comparing two states at the time of assessing the damage:

• the actual - potentially a worse state,
• the hypothetical one, which reasonably should occur in the situation if the event causing the damage had not occurred - potentially a better state.

To determine the hypothetical state - the state assuming that the damage-causing event had not occurred - there are four main forecasting methods:

• "before-and-after"

the hypothetical state is determined on the basis of normalized and/or average financial results of the injured party from the period before the damage occurrence, with the possibility of taking into account past upward or downward trends; the method is appropriate for entities that have been in business long enough;

• "but-for"

the hypothetical state is determined on the basis of a detailed financial forecast of the injured party; the forecast is based on a thorough analysis of actual data for the period before the injury and after the injury; the forecast may reflect historical data adjusted for the circumstances of the injury itself, market trends, reasonable plans and intentions of the injured party for dates close to the occurrence of the event leading to the injury;

• "yardstick"

a hypothetical condition is determined based on the performance/trends of companies and/or business lines for similar and/or comparable products; the analysis can be based on data from comparable companies, aggregate sector data or macroeconomic data.

• "market model"

the hypothetical state is based on an analysis of the injured party's market share prior to the loss-causing event, or on a reasonable analysis of the market share the injured party should have in the absence of the loss-causing tort.

A properly conducted economic damage estimation process should include:

• an analysis of the economic situation of the injured party before and after the event causing the damage;
• an examination of the circumstances under which the damage occurred, including the actions causing the damage;
• analysis of the causal relationship between the tortious act and the damage - the depletion of the property value of the injured party;
• determination of the nature of damage on the part of the injured party, including actual losses, costs incurred and lost profits;
• making assumptions and forecasting a hypothetical state appropriate to the situation;
• defining a damage estimation methodology appropriate to the specific scope of damage;
• calculating the value of economic damage on the basis of the assumptions made and preparing the valuation report.