Cost Behavior Analysis in Lost Profits Damages: Calculation Methods, Best Discovery Practices

The battle over lost profits damages in commercial litigation is contentious and can involve significant damages awards. Lost profits are often the most substantial aspect of the plaintiff's claim, one of the most challenging types of damages to prove, and are particularly susceptible to attack.

When an injured business loses revenues, that business also avoids costs required to generate those revenues. These avoided costs must be deducted from lost sales to determine lost profits damages. However, experts often disagree on how to calculate these costs.

Cost estimation is an integral part of a lost profits analysis. Attorneys must understand this cost analysis to determine what documents to request in discovery, as well as how to structure cross-examination questions for witnesses and experts to draw out the information essential for their expert to perform the required analysis.

Listen as our panel of distinguished experts guides litigators on understanding cost behavior analysis and its impact on calculating lost profits damages. Our panel will discuss common methods for determining avoided costs as well as what information attorneys must be gathering during discovery to aid experts in conducting a cost analysis.

1. Overview of cost behavior analysis
2. Impact of avoided costs on calculating lost profits damages
3. Standard methods for estimating avoided costs and lost profits damages
4. Best practices for attorneys to aid experts in cost analysis

The panel will review these and other relevant topics:

• What are "avoided costs"?
• How do avoided costs impact lost profits analysis?
• How do experts calculate lost profits damages?
• What information and data must be collected by attorneys during discovery to aid in lost profits calculation?