Lost Profits

Profits lost due to breach of contract, intellectual property rights violations, torts, and even antitrust can do substantial damage to a business’s ability to generate profits and grow. Although it’s possible to recoup those lost profits through litigation, it can often be a difficult case to prove. Without an experienced forensic accounting team by your side, it may be challenging to make your case in court.

At Smolin, we analyze documents, transactions and statements to gather financial facts about the profits in question. We help plaintiffs identify the potential profits that they have lost and aggregate evidence to support their claims. For defendants, we scrutinize the plaintiffs’ damages requests and look for areas in which the claims may not be supported by facts.

We do all of this with the highest levels of integrity and honesty. We are well-trained and well-versed in litigation support. We know that the best expert witness is often the one who presents the facts objectively. We look for the facts and then help our clients and their attorneys present those facts in court.

Here are some of the ways in which we help our clients with lost profits litigation:

Before-and-After Evidence

Perhaps the simplest evidence to present in court is before-and-after comparisons. Profits are at one level, then an incident takes place that affects profitability. A contract may be breached, intellectual property may be violated, or a former employee could have violated a non-compete agreement. Whatever the incident may be, it has a negative impact on profitability and the records show it.

We analyze financial reports, sales records, and other transactions to compare the pre-incident profitability to the post-incident profitability. That information can then be used to draw a clear line between the incident in question and the damages being pursued by the plaintiff.

Yardstick Analysis

In some cases, it may difficult to assess the amount of lost profits using a before-and-after approach. Maybe the product or service was new. Maybe new processes were being employed that would have changed profitability.

In these cases, we will analyze the industry to find profitability proxies. We may be able to find similar companies and use their financial results as a baseline for how profitable the company in question may have been. We can also build forecasting models to predict how future profitability was affected based on a wide range of variables.

New Business

Perhaps the most difficult lost profits litigation involves new businesses. The incident happens before the business even gets off the ground, affecting it’s ability to earn a profit from the very onset.

What makes it so difficult is that the new business has no profit history to review. There is no before-and-after evidence available because there is no “before.” It could also be difficult if the new business is in a relatively new niche or industry, which means it may be difficult to come up with comparative industries for a yardstick analysis.

For new businesses, we’ll use an array of information and data to build profit forecasts. We may look at the company’s business plans, any client agreements they have, and the response to their marketing efforts. If they’ve received any outside loans or investment, we may look at the profitability assumptions that were used to underwrite those transactions.

We’ll combine all of these findings into a clear and cohesive presentation on the company’s lost profitability. Our clients and their legal teams can use that information in court or in negotiations to present an argument that is backed up by facts and data.

Lost Profits Defense

We also work with clients who face lost profits litigation. They may be unfairly targeted in lost profits litigation. Or they may face damages that are excessive in relation to the incident in question.

We work with defendants to review lost profits and claims and verify that they are in fact legitimate. Sometimes, a plaintiff may seek lost gross profits, even though damages must usually be stated in net terms. In other cases, a plaintiff may seek lost profits that are unrelated or only marginally related to the alleged incident.

We perform analysis and investigation to uncover the facts of the case. If we find that the plaintiffs’ claims aren’t in alignment with the alleged incident, we provide our client and their attorneys with the data they need to make their case.

Regardless of whether we’re supporting plaintiffs or defendants, we can assist however necessary. We work in the discovery phase to help uncover facts and new information and we can take the stand as expert witnesses. Our litigation support experts are all trained and experienced in providing testimony and know how to do so in a way that is objective and authoritative.

 

We would be happy to discuss your lost profits litigation with you and your legal team. Contact us today to learn how we can help you put your best case forward in court.